Encyclocom Education Pty Ltd v Horizoneducom Pte Ltd

• Jurisdiction: Singapore
• Judge: Woo Bih Li J
• Judgment Date: 13 February 2003
• Neutral Citation: [2003] SGHC 23
• Citation: [2003] SGHC 23
• Defendant Counsel: Lim Vanessa (Wong Partnership),Vijayendran Gregory (Wong Partnership)
• Published date: 01 October 2003
• Plaintiff Counsel: Narayanan Nicholas (J Koh & Co),Prakash P Mulani (J Koh & Co)
• Date: 13 February 2003
• Docket Number: Suit No 1247 of 2001
• Court: High Court (Singapore)
• Subject Matter: Whether notice of termination was valid,Plaintiff's pleadings failed to plead material facts,Defendant offering a competing product to customers who were already using the plaintiff's products,Whether this was a breach of the agreement,Breach,Whether this was a breach,Whether this constituted a breach of their obligation to diligently and actively promote the plaintiffs' products,Contract,Civil Procedure,Defendant failed to supply quarterly forecasts and updates to the plaintiff and failed to remove the plaintiff's products from the defendant's customers' servers after the termination of the contract,Pleadings,Defendant failed to submit a marketing plan to their customer,If plaintiff allowed to rely on material facts not pleaded, whether defendant should also be allowed to do likewise

Introduction

1. In this Judgment:

(a) ‘AB’ means Agreed Bundle

(b) ‘AEIC’ means Affidavit of Evidence-in-chief

(c) ‘DCS’ means Defendant’s Closing Submission

(d) ‘DRS’ means Defendant’s Reply Submission

(e) ‘EE’ means the Plaintiff Encyclocom Education Pty Ltd

(f) ‘Horizon’ means the Defendant Horizoneducom Pte Ltd. Its name was previously Educom Pte Ltd

(g) ‘HPIQ’ means Horizon PlanetIQ Pte Ltd, a subsidiary of Horizon

(h) ‘KC’ means Knowledge Connect Pte Ltd, a Singapore company set up by EE

(i) ‘NE’ means Notes of Evidence

(j) ‘PCS’ means Plaintiff’s Closing Submission

(k) ‘PRS’ means Plaintiff’s Reply Submission

(l) ‘Postkid’ means Postkid.com Pte Ltd, a subsidiary of Horizon.

2. The Plaintiff EE is a company incorporated in the state of Delaware in the United States of America. Its principal business is the production and marketing of educational digital video content primarily for schools in the Asia Pacific region.

3.The Defendant Horizon is a company incorporated in Singapore. Its principal business is information technology education and training. In particular, Horizon markets and distributes materials from educational material developers like EE, Encyclopaedia Britannica and Discovery Channel.

4. Prior to mid 1999, Horizon had entered into an agreement between Electronic Education, a division of Pearson Education Inc (‘Pearson’) who were the licensors of EMG video content. The EMG content is primarily for educational purposes. Under that agreement, Horizon was appointed the exclusive distributor of EMG content in Singapore. Horizon then entered into a contract with the National Library Board (‘NLB’) to supply NLB with three bundles of EMG content which could be accessed within NLB’s physical premises only.

5. Subsequently, by a proposal dated 16 September 1999, Horizon (which was then known as Educom Pte Ltd) proposed to NLB a contract for the supply of EMG content for access from within and outside of library sites. The proposal covered seven bundles of video clips of EMG content. The first three bundles had been supplied to NLB under the earlier contract I have mentioned and would continue to be supplied under the proposal. Another four bundles were also to be supplied under the proposal. The supply to NLB would be for a 12 month subscription period. The proposal was accepted on 17 September 1999. This contract was referred to in the litigation as ‘the NLB contract’ and I will use that description as well.

6. Subsequently, Horizon also made a proposal dated 24 September 1999 to the Ministry of Education (‘MOE’) to supply video clips for access by schools through a digital media repository (‘DMR’). This proposal was accepted by MOE (although the evidence did not indicate the date of acceptance). This contract was referred to as the ‘MOE/DMR contract’ and I will refer to it as ‘the MOE contract’.

7. At the time when Horizon entered into the NLB contract and the MOE contract, it was allowed to distribute and market EMG content in Singapore through its agreement with Pearson. However, by an agreement dated 8 November 1999, Pearson granted EE an exclusive licence to distribute the EMG content. Accordingly by a Distribution Agreement (‘DA’) also dated 8 November 1999, EE appointed Horizon as the sole and exclusive distributor of EMG content in Singapore. Under the DA, Horizon would pay to EE 55% of the gross proceeds it received from licensees of EMG content.

8. Subsequent to the DA, EE set up a Singapore company known as Encyclocom Education (Singapore) Pte Ltd to allow Horizon to make payment to a Singapore entity. EE also set up KC in Singapore to develop internet based technology solutions. KC was also the Professional Management Services agent for EE in Singapore.

9. As is obvious, by the date of the DA, Horizon had already entered into the NLB contract and the MOE contract. The main disputes regarding the DA were in respect of the NLB contract and the MOE contract and I will deal with the latter first. Before I do so, I would mention that the provisions in the DA are referred to therein as ‘sections’ and not ‘clauses’. Although the parties used the latter description, I will use the former in my Judgment. As for the provisions in the NLB and MOE contracts, I will use ‘clauses’. The people who gave evidence were:

For EE

PW1 Aravind s/o K. Vasu

PW2 Wong Poo Mun

PW3 Sundararajan Vijayan

For Horizon

DW1 Ong Toon Wah, also known as Roland Ong

DW2 Chin Tiong Pheng, also known as Jonathan Chin

DW3 Dr Lubna Alsagoff

DW4 Goh Cho Tong, also known as Joseph Goh

DW5 Chong Cheong Keong

DW6 Teo Swee Teong

The MOE Contract

Whether there was a material breach by Horizon

10 EE alleged that under section 2.5 DA, Horizon had agreed not to distribute or otherwise make available any competitive educational programming product without EE’s consent. Furthermore, under clause 3.1(n) DA, Horizon was not to engage in any action or activity that would place Horizon in a position of divided loyalty or conflict of interest with respect to Horizon’s obligations to EE.

11 According to EE, Horizon had offered to MOE Encyclopedia Britannica (‘EB’) video content under the MOE contract and EB content was a competitive product. This was a material breach and EE accordingly terminated the DA as it was allegedly entitled to do. It then sought damages from Horizon.

12 Horizon’s position was as follows:

(a) EB content was not a competitive product.

(b) Secondly, Horizon had offered but had not actually entered into a contract with MOE.

(c) Thirdly, there was, in any event, an exception in section 2.5 DA which allowed Horizon to distribute certain competitive products listed in Exhibit C of the DA. EB was listed in Exhibit C.

(d) Fourthly, the offer of EB to MOE was not under the MOE contract.

(e) Fifthly, even if the offer of EB content was in material breach of the DA and EE was entitled to terminate it, EE had not complied with the termination provisions of the DA and hence its purported termination was not valid.

(f) Sixthly, Horizon alleged that EE’s conduct in purporting to terminate the DA constituted a repudiation of the DA and it was Horizon which had accepted the repudiation and thereby terminated the DA. Accordingly, Horizon was counterclaiming damages from EE.

13 As regards Horizon’s reliance on the exception in clause 2.5 DA, EE took the position that while Horizon was permitted, generally, to distribute certain competitive products, including EB content, Horizon was not allowed to do so under the MOE contract because that contract was exclusively for EMG content. In turn, Horizon disputed that the MOE contract was exclusively for EMG content.

14 Section 2.5 DA stated:

‘2.5 No Distribution of Competing Products. In consideration of the rights granted to Educom [meaning Horizon] in this Agreement, Educom agrees that, during the Term, it will not (directly or indirectly, whether through any parent, subsidiary, affiliate (any company which controls, is controlled by or is under common control with Educom) licensee or otherwise) without EE’s written consent, which consent shall not be unreasonable withheld, distribute or otherwise make available any educational programming product which in EE’s reasonable opinion is competitive with the Programming because when looked at as a whole offers the same or substantially similar functions, features and intended use as Programming (a "Competitive Product"). Without limiting the foregoing, Educom may distribute or otherwise make available the Competitive Products owned, designed or manufactured as designated on Exhibit C attached hereto and incorporated herein by reference.’

[Emphasis added.]

The ‘Programming’ referred to the EMG content and I will refer to the last sentence of section 2.5 as ‘the Exception’.

15 As regards Exhibit C to the DA, it was not disputed that EB was listed therein and hence constituted an exclusion from the non-competitive provision. Therefore, it is obvious to me that the parties had agreed that EB was a competitive product and the assertion by Horizon otherwise must fail.

16 As for section 3.1(n) DA, I am of the view that it does not assist EE because it was subject to section 2.5. It stated:

‘3.1 Educom’s duties. In addition to Educom’s other obligations hereunder, Educom’s duties shall include, but not be limited to, the following, which shall be undertaken at Educom’s sole expense:

(n) Subject to Section 2.5, avoiding all circumstances and not engaging in any action or activity that would place Educom in a position of divided loyalty or conflict of interest with respect to Educom’s obligations to EE; and;’

[Emphasis added.]

17 As regards Horizon’s position that it had only offered EB content and had not actually entered into a contract with MOE for it, I am of the view that this distinction is not valid. Under section 2.5, Horizon had agreed not to distribute or ‘otherwise make available’ any competitive product and the making of the offer was the making available of the EB content to MOE. Besides, I do not think that it would be realistic to restrict section 2.5 to concluded contracts only.

18 I come now to Horizon’s reliance on the Exception and its contention that its offer to MOE was not made under the MOE contract but some other contract.

19 EE had learned that Horizon had made an oral offer of EB content to MOE and raised this with Horizon. However, Horizon initially denied that such an offer had been made. It was only subsequently that Horizon admitted the existence of the offer and belatedly that Horizon sought to suggest that the offer was made to MOE under another contract.

20 The person who made the offer was Teo Swee Teong, who was a Senior Vice-President in charge of sales of HPIQ. He had initially denied in writing (dated 16 May 2001) the existence of the offer under the MOE contract. At that time the focus of his denial was not so much that the offer was not made under the MOE contract but that there was no offer of EB...