Econ Piling Pte Ltd v NCC International AB

• Jurisdiction: Singapore
• Judge: Chan Seng Onn J
• Judgment Date: 25 February 2008
• Neutral Citation: [2008] SGHC 26
• Plaintiff Counsel: Tan Hsuan Boon (Wee Swee Teow & Co)
• Published date: 29 February 2008
• Court: High Court (Singapore)
• Defendant Counsel: Balachandran s/o Ponnampalam (Robert Wang & Woo LLC)
• Subject Matter: Partnership,Contract

25 February 2008

Chan Seng Onn J:

Introduction

1 The plaintiff, Econ Piling Pte. Ltd. (“Econ”), (formerly known as Econ Corporation Limited) is a company incorporated in Singapore. The defendant, NCC International Aktiebolag (“NCC”), is a company incorporated in Solna, Sweden. Both companies are in the business of construction.

2 The main issue in dispute before me is whether Econ and NCC (“the parties”) entered into a partnership, and if so, then whether they subsequently agreed to dissolve the partnership. NCC contends that there is no partnership and there is no agreement to dissolve the partnership. Econ asserts to the contrary that the partnership exists and the partners have reached an agreement to dissolve the partnership.

The legal principles involved

3 Before going into the facts, it will be useful to state the relevant legal principles to be applied to determine the issues in dispute.

Existence of partnership to be inferred from all the circumstances of the case

4 The Court of Appeal in Chua Ka Seng v Boonchai Sompolpong [1993] 1 SLR 482 held that whether a partnership existed is to be determined by taking all the circumstances together, not attaching undue weight to any one of them, but drawing an inference from the whole. In Miller Freeman Exhibitions Pte Ltd v Singapore Industrial Automation Association & Anor [2000] 4 SLR 137, the Court of Appeal accepted that all the surrounding circumstances should be taken into account in the determination of the existence of a partnership. One of the factors which the Court of Appeal considered relevant (at [34]) was “[t]he label used by the parties, particularly in the legal documents.” Other relevant factors include the parties’ conduct and, in particular, the way in which they have dealt with each other and with third parties, and whether those dealings with third parties are conducted with the knowledge or authority of the other alleged partners: see para 7-23 of Lindley & Banks on Partnership (Sweet & Maxwell, 18^th Ed, 2002) (“Lindley & Banks”). While all these factors are relevant, they are by no means conclusive in determining the issue which is one of mixed fact and law.

5 Hence, the true nature of the business relationship has to be objectively inferred from all the relevant facts and surrounding circumstances, including the manner in which the parties in that business relationship have conducted their business affairs with each other and with third parties.

Objective test to ascertain whether agreement is reached

6 The central issue in the case of Tribune Investment Trust Inc v Soosan Trading Co Ltd [2000] 3 SLR 405 (“Tribune Investment”) was whether or not the parties had entered into a valid contract of sale and purchase. The parties did not sign any formal written agreement. The Court of Appeal held at [39] and [40] that:

The existence of any contract must thus be culled from the written correspondence and contemporaneous conduct of the parties at the material time…..Indeed the task of inferring an assent and of extracting the precise moment, if at all there was one, at which a meeting of the minds between the parties may be said to have been reached is one of obvious difficulty, particularly in a case where there has been protracted negotiations and a considerable exchange of written correspondence between the parties. Nevertheless, the function of the court is to try as far as practical experience allows, to ensure that the reasonable expectations of honest men are not disappointed. To this end, it is also trite law that the test of agreement or of inferring consensus ad idem is objective. Thus, the language used by one party, whatever his real intention may be, is to be construed in the sense in which it would reasonably be understood by the other.

7 In Projection Pte Ltd v The Tai Ping Insurance Co Ltd [2001] 2 SLR 399 (“Projection v The Tai Ping”), the central issue before the Court of Appeal was whether the parties, who were involved in continuing negotiations over a period of time, had reached a compromise agreement. The Court of Appeal held (at [15]) that “[i]t is settled law that in determining whether the parties have reached agreement, the court applies the objective test.” The Court of Appeal agreed (at [16]) with the following observations expressed by Lord Denning MR:

…I do not much like the analysis in the text-books of inquiring whether there was an offer and acceptance, or a counter-offer, and so forth. I prefer to examine the whole of the documents in the case and decide from them whether the parties did reach an agreement upon all material terms in such circumstances that the proper inference is that they agreed to be bound by those terms from that time onwards. (in Port Sudan Cotton Co v Govindaswamy Chettiar & Sons [1977] 2 Lloyd’s Rep 5 at p 10)

The better way is to look at all the documents passing between the parties and glean from them, or from the conduct of the parties, whether they have reached agreement on all material points, even though there may be differences between the forms and conditions printed on the back of them.” (in Butler Machine Tool Co v Ex-Cell-O Corporation (England) [1979] 1 All ER 965 at p 968.)

8 In a similar vein, VK Rajah JC stated in Midlink Development Pte Ltd v The Stansfield Group Pte Ltd [2004] 4 SLR 258 (“Midlink Development”) at [48] that:

Acceptance in a contractual setting must be ascertained objectively. Acceptance can be signified orally, in writing or by conduct. When there is a history of negotiations and discussions, the court will look at the whole continuum of facts in concluding whether a contract exists.

9 The legal principles are reasonably clear and neither counsel has taken any issue with them. Where they differ is in the conclusions to be drawn from the application of those principles to the facts. I will now set out the background and the relevant facts chronologically as far as possible. It is also more convenient for me to analyse the facts and state my findings along the way, rather than leave that to the end after all the facts have been presented.

Formation of joint venture

10 Econ and NCC entered into a joint venture agreement dated 13 May 2002 (“the JVA”) to jointly tender, and if successful, to participate in a joint venture to construct and complete the civil works for Contract No. 822 of the Land Transport Authority (“LTA”). This LTA contract (“the Contract”) is for the construction and completion of the MRT stations at MacPherson and Upper Paya Lebar, and the tunnels at this section of the Circle Line.

11 Clause 5.1 of the JVA states that the participating interest of NCC and Econ shall be 45% and 55% respectively. Under the JVA, there is to be a management board, comprising 4 members (with each party appointing 2 members), to exercise overall control and administration of the joint venture. “Joint Venture” is defined in the agreement to mean the association of the parties entering into the JVA. Clause 25.1 makes clear that the JVA does not constitute a partnership or other form of company between the parties under any applicable law. Notwithstanding the fact that the tender will provide for the joint and several liability of the parties to LTA for the performance of the Contract, clause 25.1 provides that as between themselves, each party shall at all times be acting as an independent business entity in the ordinary course of business.

12 However, it is important to note that clause 25.1 does not preclude the parties to the joint venture from subsequently agreeing to operate as a partnership. Hence, I do not think that NCC can rely on this clause to argue that no partnership could ever come into existence between the parties. As I will explain later, I am of the view that the parties entered into a partnership after they secured the Contract.

Award of the Contract

13 LTA awarded the Contract to the joint venture on 1 August 2002 for a contract sum of $338,601,511.06 on the basis that “the partners of the joint venture shall be jointly and severally liable to the Authority for the punctual, true and faithful performance and observance of the Contract.”

Registration of the partnership as “ECON-NCC J.V.”

14 Two weeks after the award, NCC and Econ registered a partnership called “ECON-NCC J.V.” with the then Registry of Companies and Businesses (“ROC”), whose functions have been taken over by the Accounting and Corporate Regulatory Authority of Singapore (“ACRA”), to undertake “Mixed Construction Activities and Infrastructure Engineering Services”. No 10B Circuit Link Singapore 378962 is the registered place of business of the partnership. The registration number given for the partnership is 52975539D. NCC and Econ are the registered owners. The registered commencement date of the partnership is 13 August 2002 and the registration date is 14 August 2002.

15 Mr Per Nielsen (“Nielsen”), a director of NCC, had signed an application form to register the business with the ROC under the Business Registration Act (Cap 32, 2001 Rev Ed) declaring on behalf of NCC that the statements made in the application form were true and correct. I note at this juncture that there is no affidavit from Nielsen to state that he did not know what he was signing or that he did not understand that he was in fact applying for the partnership to be registered on behalf of NCC. Instead, the financial controller of ECON-NCC J.V. and NCC, Mr Christer Andersson (“Andersson”), filed an affidavit on 19 November 2007 on behalf of NCC to assert (at paragraph 26) that Mr Per Rosengren (“Rosengren”), the only key senior staff in Singapore at the material time in 2002, did not seem to have been informed of the significance of the registration and it appears that he did not appreciate the nature of the registration. Hence, when ECON-NCC J.V. was registered, NCC was not aware of the effect of such registration and NCC thought that such registration was a procedural requirement...