Fornet Enterprise Co Ltd v Howell Universal Pte Ltd and Others

• Jurisdiction: Singapore
• Judge: Andrew Ang J
• Judgment Date: 02 March 2006
• Neutral Citation: [2006] SGHC 33
• Docket Number: Suit No 60 of 2003
• Date: 02 March 2006
• Published date: 03 March 2006
• Year: 2006
• Plaintiff Counsel: Lim Tong Chuan and Awyong Leong Hwee (Loo and Partners)
• Citation: [2006] SGHC 33
• Defendant Counsel: Lim Chong Boon (PKWA Law Practice LLC)
• Court: High Court (Singapore)
• Subject Matter: Plaintiff claiming agreement with defendants constituted partly orally, partly in writing and partly based upon course of past dealings between parties,Parties,Breach,Contractual terms,Whether relationship between plaintiff and defendants under alleged agreement one of mercantile agency or partnership or joint venture,Whether defendants parties to alleged agreement,Contract,Whether defendants liable in conversion for failing to remit to plaintiff proceeds of sale collected,Conversion,Tort,Whether defendants involved in conspiracy to injure plaintiff and conspiracy by unlawful means,Plaintiff suing defendants for breach of alleged agreement,Conspiracy,Whether defendants breaching alleged agreement by failing to exercise due care and diligence, acting contrary to plaintiff's interests and failing to remit certain monies to plaintiff

2 March 2006 Judgment reserved.

Andrew Ang J:

1 The plaintiff is a finance company incorporated in Taiwan whose main business activities are in the leasing or financing of motor cars, trucks, construction tractors and equipment.

2 The first defendant (formerly known as “Funai International Pte Ltd”) was incorporated in Singapore in 1995 as a joint venture between a Hong Kong company and the third defendant. After the first defendant suffered major losses in 1999, the Hong Kong company divested their interest in the first defendant in March 2001, transferring their shares therein to the third defendant.

3 The first defendant was in the business of import and export of “Funai” electrical goods such as television sets, video players and computer monitors (“the Products”).

4 The second defendant is also a Singapore company and, at the material time, carried on the business of buying and selling electronic consumer products. It is substantially owned by the third defendant.

5 The suit by the plaintiff was originally against eight defendants but before the trial the plaintiff discontinued its claims against the fourth, fifth, sixth, seventh and eighth defendants without giving any reason for so doing.

6 The plaintiff’s case as pleaded is that by an agreement on or about 2 November 1997 it appointed the first and/or second and/or third defendants (hereinafter in its alternative combinations called “the Defendants”) to be its mercantile agent(s) to trade in electronic goods. Alternatively, the plaintiff pleaded that the nature of its relationship with the Defendants was that of a partnership or a joint venture.

7 According to the plaintiff, the agreement was partly oral, partly in writing and partly based upon a course of past dealings between the parties. In so far as the agreement was oral, the plaintiff said that it was made at a meeting on 2 November 1997 at the first defendant’s premises in Singapore between the third defendant and representatives of the plaintiff. (It is in contention between the parties whether the third defendant was attending the meeting as a director of the first defendant and/or of the second defendant and/or in his personal capacity. We shall return to this later.)

8 In so far as the agreement was in writing, the plaintiff’s pleaded case as set out in para 6 of the statement of claim is that it was:

contained in or [was] to be inferred from the following documents or one of them:

6.1 the minutes of meeting on 2 November 1997; and

6.2 the undated draft Business Agent Contract.

(It is important to note that unlike the minutes which were confirmed by the signatures of the plaintiff’s representatives and the third defendant, the Business Agent Contract was never signed.) In so far as the agreement was based on a course of past dealings, the plaintiff said that the relevant transactions were those (during a trial period) between January and October 1997.

9 In essence, the plaintiff contended that under the agreement their only obligation was to provide funding and the Defendants were to buy and sell goods on their behalf for which the plaintiff would pay the Defendants a commission of 40% of the net profits.

10 The plaintiff alleged that the Defendants breached the agreement in that, amongst other things, they:

(a) did not exercise due care and diligence, purchasing excessive quantities of goods when the market was depressed or purchasing the goods at higher than the prevailing market prices;

(b) acted contrary to the interests of the plaintiff, buying from or selling to the Defendants or the third defendant’s associated or related companies on terms unfavourable to the plaintiff;

(c) did not remit to the plaintiff the sale proceeds which they had collected;

(d) did not ensure that transactions would be done at a minimum of 4% profit; and

(e) failed to disclose to the plaintiff the identities of the sellers or purchasers.

The plaintiff also alleged that having received and retained sale proceeds which they ought to have remitted to the plaintiff, the Defendants were liable in conversion. Finally, the statement of claim also includes allegations, in the alternative, that the eight defendants conspired to cause the plaintiff economic loss by lawful or unlawful means.

11 The three defendants denied any and all liability to the plaintiff. The cumulative effect of the three defendants’ respective pleaded cases is as follows:

(a) On 2 November 1997, the plaintiff and the first defendant entered into an agreement for a joint venture using Fornet Corporation Pte Ltd as the joint-venture vehicle (“JV Company”). The agreement was partly oral and partly in writing. In so far as it was oral, it was made at the same meeting of 2 November 1997 referred to by the plaintiff. In so far as it was in writing, it was contained in the minutes of the said meeting. That much was common ground between the parties. (However, unlike the plaintiff, the first defendant did not regard the unsigned draft Business Agent Contract as part of the agreement between them. Neither did it agree that any of the terms of the agreement was derived from the course of past dealings during the trial period.)

(b) The second and third defendants deny that they entered into any agreement with the plaintiff.

(c) The plaintiff bought and sold the goods on its own.

(d) The Defendants did not commit any breach of the agreement.

(e) The plaintiff did not suffer any loss.

(f) The Defendants did not receive or keep any sale proceeds belonging to the plaintiff.

(g) There was no conspiracy.

Lest there be confusion, I should add that each of the second and third defendants also entered alternative pleas to the effect that even if there was an agreement between itself/himself and the plaintiff, it/he did not commit any of the breaches alleged by the plaintiff. For this reason, despite the primary defence that only the first defendant was party to the agreement, in many instances in the judgment I have referred to the defendants collectively as “the three defendants” where similar contentions were made by them.

12 The first defendant also counterclaimed against the plaintiff for damages for breach of the agreement in that the plaintiff did not arrange for or provide credit facilities of US$60m to the JV Company as agreed and that instead of using the JV Company to trade, the plaintiff itself traded in the Products.

13 The following questions arise:

(a) Who were the parties to the agreement?

(b) What were the terms of the agreement?

(c) Whether the Defendants breached the agreement?

(d) Whether the Defendants were liable in conversion?

(e) Whether there was a conspiracy to injure the plaintiff?

14 Before answering these questions, a few prefatory remarks would be in order. The plaintiff’s case is an arduous one for several reasons. Firstly, it was unsure who the proper defendants should be. Secondly, it was unsure whether the relationship was one of mercantile agency, partnership or joint venture, the latter two being pleaded as alternatives to the first. (As I see it, the alternative pleadings in regard to the relationship were brought about by uncertainty as to what the court would eventually find to be the terms of the agreement between the parties.) The third uncertainty, ie, as to the terms of the agreement arose from the fact that, as pleaded, the agreement was a composite one, made up of terms orally agreed at the meeting of 2 November 1997, written terms set out in the minutes and the Business Agent Contract and finally, terms to be inferred from past dealings between the plaintiff and the Defendants during the trial period. In this connection, I note that although para 8 of the statement of claim set out the alleged terms of the agreement both express and implied, there was no attempt to identify which terms were express and which implied. It goes without saying that so far as the contractual claims are concerned, the burden of proof is on the plaintiff to satisfy the court on a balance of probabilities who the parties to the agreement were, what the terms of the agreement were and whether the Defendants breached the agreement.

Who were the parties to the agreement?

15 Before determining who the parties to the agreement were, I should mention, if only to dismiss, an attempt by the plaintiff’s second witness, Chen Wu-Hui (“Chen”), to assert that the agreement actually took place in 1996 and that the plaintiff was also suing in respect of transactions that took place before 2 November 1997.

16 The pleadings on both sides aver that the agreement took place on 2 November 1997. It was not open to Chen to contend otherwise. This was not a case where the parties began to act on the terms of an agreement before the contract between them was actually concluded on the understanding that, once concluded, the contract would have retrospective effect so as to apply to transactions that took place before its conclusion.

17 As noted, the three defendants’ position is that the first defendant alone entered into the agreement with the plaintiff on 2 November 1997 orally and as contained in the minutes of the meeting on that day between representatives of the plaintiff and the third defendant in his capacity as director of the first defendant. The minutes were captioned “Funai Int’l Pte. Ltd. & Fornet Enterprise Co., Ltd. Records of Singapore Business Meeting”. The “Participants” at the meeting were recorded as follows:

FUNAI PTE LTD. Mr Wu Zhengyi

FORNET ENTERPRISE CO., LTD.

Managing Director Lin Hongxi, Managing Director Liao Guodong,

Special Assistant Lin Hongbin, General Manager Chen Wuhui,

Assistant Manager Zhang Lianzhang, Mr Li Bingtao

The “Venue” was “Funai Int’l Pte Ltd. (Singapore) Conference Room”. Although para 1 required “Mr Wu Zhengyi” to reveal all business operations in the market and not to be involved in the market “in the event such that all risks and rights [were] controlled and managed by Fornet Enterprise Co Ltd”,...