Fu Yuan Foodstuff Manufacturer Pte Ltd v Methodist Welfare Services

• Judge: Chan Sek Keong CJ
• Judgment Date: 02 June 2009
• Neutral Citation: [2009] SGCA 23
• Citation: [2009] SGCA 23
• Defendant Counsel: Ang Cheng Ann Alfonso (A Ang, Seah & Hoe)
• Published date: 05 June 2009
• Plaintiff Counsel: S Magintharan and Liew Boon Kwee (S Magin & Co)
• Date: 02 June 2009
• Docket Number: Civil Appeal No 169 of 2008
• Court: Court of Appeal (Singapore)
• Subject Matter: Breach,Discharge,Contract,Whether breach required to be repudiatory before termination clause might be relied on,Caterer using foreign workers employed by different entity,Termination clause in catering contract permitting termination without notice upon breach of certain contractual clauses,Whether breach of clause requiring compliance with Singapore's employment laws

2 June 2009

Andrew Phang Boon Leong JA (delivering the grounds of decision of the court):

1 This appeal centred on whether the respondent, Methodist Welfare Services, was entitled to terminate the services of the appellant caterer without notice under a termination clause in the contract made between the parties on the ground that the appellant had breached the employment laws of Singapore by unlawfully deploying six Chinese nationals to work at the respondent’s nursing home. The trial judge (“the Judge”) found in favour of the respondent in Fu Yuan Foodstuff Manufacturer Pte Ltd v Methodist Welfare Services [2008] SGHC 179 (“the Judgment”). We dismissed the appeal against the Judge’s decision and now give the detailed grounds for our decision.

Factual background

2 The appellant is a food catering company whose directors and shareholders comprised Mr Tay Ann Siang (“Mr Tay”) and his wife, Mdm Sally Lai Guek Ling (“Mdm Lai”). Mr Tay was also the sole proprietor of another food-related business registered on 12 November 2006 known as “Ann Siang”.

3 The respondent is a society established in 1981 to undertake social work for the Methodist Church in Singapore. It, inter alia, ran Bethany Methodist Nursing Home (“the Home”), which caters for the destitute and persons of very low income who are in need of long-term nursing care. These persons are, in the main, elderly folk who suffer from chronic illnesses, many of whom have special dietary needs.

4 After an open tender exercise conducted in August 2006, the respondent awarded the appellant a contract to provide in-house catering services at the Home from 1 December 2006 to 30 November 2008. This was followed by a formal agreement dated 22 November 2006 setting out the terms of the contract (“the Agreement”). Prior to the provision of the in-house catering services by the appellant, the catering at the Home had been undertaken by the Methodist Co-operative Society (“MCS”). MCS had also taken part in the August 2006 tender but its pricing was higher than the appellant’s.

5 The relevant part of the termination clause of the Agreement provided that:^{[note: 1]}

3.1 [The respondent] may terminate [the] Agreement at anytime by giving the [appellant] two (2) month’s notice in writing.

3.2 [The respondent] may terminate [the] Agreement without notice should the [appellant] breach any item under Clauses 1.4, 2.3 and 2.7[.]

6 Clauses 1.4 and 2.7, which are also relevant to this appeal, provided as follows:^{[note: 2]}

1.4 The [appellant] shall not transfer or assign [the Agreement] directly or indirectly to any person whatsoever.

2.7 Licensing Compliance

2.7.1 The [appellant] shall obtain the necessary licenses for operations and submit copies to the Director for reference.

2.7.2 The [appellant] shall comply with all Singapore laws and regulations, especially with regard to food establishments and employment of staff.

7 Soon after the appellant commenced providing services at the Home, numerous complaints were made by the respondent’s staff to Mdm Lai concerning various unhygienic practices of the appellant’s staff as well as the quality of the food being served. However, these complaints were not sufficient, even if established, to have entitled the respondent to terminate the Agreement.

8 The appellant began deploying foreign workers at the Home from 1 March 2007, when two Chinese nationals began work as assistant cooks. On 15 June 2007, another Chinese national commenced work at the Home as a kitchen helper. Finally, on 6 August 2007, three more Chinese nationals commenced work at the Home as assistant cook, kitchen helper and dish-washer respectively. Of these six foreign workers, three were employed by Ann Siang (“Ann Siang workers”), and three were employed by the appellant.

9 The appellant maintained in the court below that the respondent was fully informed and aware of the legal status of all six foreign workers and that it had been required to (and did) submit copies of all the workers’ passports, work permits and employment passes to the respondent. On the other hand, Ms Cindy Loh (“Ms Loh”), a senior administrative assistant at the Home, testified on behalf of the respondent that she had to chase Mdm Lai for copies of the work permits and employment passes of the foreign workers and even then they were submitted in a piecemeal fashion.

10 In any event, it was apparent that the respondent was confused as to the precise status of the foreign workers. It initially made enquiries with the Ministry of Manpower (“MOM”) on 22 August 2007 on the basis that all six workers held only long-term social passes and had no work permits or employment passes. However, subsequent consultations with MOM revealed that this was not the case – five of the workers had employment passes and one had a work permit. According to the respondent, it was informed by MOM on 24 August 2007 that all six of the foreign workers could not work at the Home because their designated workplace was 36 Regent Street.

11 Subsequently, on 27 August 2007, the respondent wrote to the appellant stating that all six foreign workers were not allowed to work in the Home and instructed that they be removed from the Home immediately. Later that same day, Ms Yip Moh Han (“Ms Yip”), the executive director of the Home, also wrote to MOM’s director of the foreign workforce policy department inquiring about the employment status of the six foreign workers and explaining the sequence of events from the Home’s perspective. Ms Yip received MOM’s written reply on 29 August 2007 stating that the six foreign workers should not be deployed at any address except that stated on their work permit cards, ie, 36 Regent Street. Additionally, MOM wrote that three of the foreign workers were not allowed to work at the Home because they were employed by Ann Siang and were not the appellant’s authorised employees.

12 In the meantime, the respondent had been in talks with MCS. On 29 August 2007, MCS wrote to the Home, agreeing to take over the catering contract at the Home.

13 On 30 August 2007, the respondent issued a letter of termination to the appellant. The ground given for the termination of the Agreement was the “illegal deployment of 6 foreign workers in the kitchen at [the Home]”.^{[note: 3]} The letter also stated that the appellant had failed to comply with cl 2.7.2 of the Agreement and that the Agreement would be terminated with immediate effect under cl 3.2. That very evening, MCS took over the kitchen at the Home.

14 Dissatisfied, the appellant sued the respondent for wrongful termination of the Agreement, arguing that the respondent was in repudiatory breach of the Agreement because it had evinced an intention no longer to be bound by it, having, inter alia, awarded the catering contract to MCS even before it had terminated the Agreement.

The decision of the court below

15 The Judge held that the appellant had breached cl 2.7.2 of the Agreement. She found that the appellant had failed to furnish the respondent with full documentation relating to its workers, thus causing the respondent to believe that the workers were not entitled to work in Singapore at all (at [34] of the Judgment). Although the three foreign workers employed by the appellant were legally permitted to work in the Home because their employment passes did not specify any particular location at which they had to work, the three Ann Siang workers were not entitled to work for any one other than Ann Siang (at [35]–[36]). The Judge did not accept the argument that Ann Siang and the appellant were in a joint venture or any other legal relationship which permitted Ann Siang’s foreign workers to work in the Home without being in breach of the conditions of their employment passes requiring them to work only for their stated employer (at [39]–[40]).

16 As to whether this breach justified immediate termination of the Agreement, the Judge held that, based on the English Court of Appeal decision in Rice v Great Yarmouth Borough Council [2003] TCLR 1 (“Rice”), cl 3.2 of the Agreement could not be applied literally to permit the respondent to terminate the Agreement without notice on any and every breach of cll 1.4, 2.3 and 2.7. Rather, the breach by the appellant had to be repudiatory in nature before the respondent had a right to terminate the Agreement (at [53] of the Judgment). On the facts, the Judge found (at [55]) that the breach of cl 2.7.2, which required the appellant to comply with...