Fu Yuan Foodstuff Manufacturer Pte Ltd v Methodist Welfare Services

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 20 October 2008
• Neutral Citation: [2008] SGHC 179
• Court: High Court (Singapore)
• Published date: 21 October 2008
• Year: 2008
• Plaintiff Counsel: S Magintharan (Netto & Magin LLC)
• Defendant Counsel: Ang Cheng Ann Alfonso (A Ang, Seah & Hoe)
• Subject Matter: Contract
• Citation: [2008] SGHC 179

20 October 2008 Judgment reserved.

Judith Prakash J:

Background

1 The plaintiff is a company in the food business and its activities include the provision of in-house catering for various establishments. The shareholders and directors of the plaintiff are Mr Tay Ann Siang and his wife, Ms Lai Guek Ling, also known as Sally Lai. Mr Tay was also the sole proprietor of a business called Ann Siang which was registered as a sole proprietorship on 12 November 2006.

2 The defendant is a society that was set up in 1981 to do social work for the Methodist Church in Singapore. The defendant operates twelve service centres including a nursing home, a home for the destitute and five family services centres. The nursing home, Bethany Methodist Nursing Home (the “Home”), was set up in September 2001. The Home has 271 beds and caters to destitute and very low income persons who are in need of long-term nursing care. There is a day care centre attached to the Home which caters to frail elderly persons who require supervision. About 90 per cent of the patients who live in the Home are above sixty years of age. They suffer from all types of chronic illnesses and many have special dietary needs.

3 The Home does not have the manpower to cater for the food needs of the patients and the catering is therefore outsourced to specialist food caterers. These caterers use the Home’s kitchen facilities to prepare food for its patients and staff.

4 In 2006, the caterer for the Home was the Methodist Co-operative Society Ltd (“MCS”) which was operating under a contract that was due to expire in November 2006. Thus in August 2006, the defendant invited tenders for the Home’s in-house catering service. Eight bids were received. The lowest tender came from the plaintiff.

5 On 31 October 2006, the plaintiff was notified that it was successful in its bid. Consequently, on 22 November 2006, the plaintiff and the defendant entered into a written contract (“the Agreement”) for the catering services to be provided by the plaintiff to the Home. The Agreement was for a period of two years from 1 December 2006 up to 30 November 2008.

6 The plaintiff commenced provision of services under the Agreement on schedule on 1 December 2006. On 30 August 2007, some nine months later, the defendant served notice of termination on the plaintiff terminating the Agreement with immediate effect. The plaintiff, alleging that such termination was wrongful, commenced this action for damages for breach of contract in October 2007.

The claim and the defence

7 In its statement of claim, the plaintiff claimed the sum of $469,767.79, as particularised below:

a.	Loss of profit on the agreement for remaining 15 mths @25,000.00 x 15 mths:	$375,000.00
b.	Arrears of service fee for the month of August 2007:	$54,182.82
c.	Deposit made but not returned	$36,000.00
d.	Value of supplies handed to Defendants but not reimbursed:	$4,585.12
	Total:	$469,767.94

The statement of claim also included an alternative prayer for damages to be assessed.

8 After the writ was served however, the defendant paid the amounts set out in items (b), (c) and (d) of para 7. At the trial, therefore, the only remaining claim was the claim for damages for wrongful repudiation of the contract which had been quantified in the sum of $375,000.

9 The defendant’s stand as pleaded in its defence was that it was entitled to summarily terminate the Agreement for breach on the part the plaintiff. The following particulars of breach were given:

a. The plaintiff had breached clause 2.7 of the Agreement in that it had failed to comply with the law of Singapore governing the employment of staff. Sometime on or about the 21 August 2007, the plaintiff inspected the kitchen and discovered that there were 6 Chinese nationals working in it. Of the 6 Chinese nationals, 5 held long term social passes and 1 was on work permit. It was subsequently ascertained from the Ministry of Manpower that the Chinese workers were not permitted to work in the Home’s kitchen as they did not have the relevant work permits.

b. The plaintiff had breached clause 2 of the Agreement in that it failed to comply with the menu requirements of the Agreement in that the plaintiff failed to provide a 28-day menu cycle and the special lunch menu on Wednesday and failed to serve food in consistent quantities and quality at all times.

c. The plaintiff breached clauses 2.3 and 2.5 of the Agreement in that it failed to meet the requisite standards of hygiene, sanitation and maintenance in that it had:

(i) Failed to maintain and repair all kitchen equipment in a satisfactory condition;

(ii) Used a floor squeegee to clean the kitchen table used for food preparation;

(iii) Failed to clean the cutlery and had served inmates of the Home with cups stained with food from previous meals; and

(iv) Failed to ensure that the food preparation areas were clean.

d. The plaintiff also breached the Agreement in that it failed to ensure that the food was properly prepared because:

(i) The plaintiff failed to prepare therapeutic diets according to instructions given by the defendant;

(ii) The plaintiff served food which was rancid and fruit which was rotten; and

(iii) On 10 August 2007, monosodium glutamate, instead of sugar was used in the MILO drinks which were consumed by the inmates of the Home.

e. The plaintiff also breached the Agreement in that one of its directors, Tay Ann Siang had tendered for a contract to cook and supply meals to the Singapore Flying College from the Home’s kitchen.

It should be noted that in its closing submissions the defendant no longer pursued the allegation in sub para (e) above.

10 The issues that arise out of the pleadings are as follows:

a. whether the plaintiff was in breach of any or all of the contractual provisions relied on by the defendant;

b. if so, whether such breach entitled the defendant to summarily terminate the plaintiff’s engagement under the Agreement;

c. if the defendant was not entitled to terminate the plaintiff, on what basis should the plaintiff’s damages be assessed.

Contractual provisions

11 The termination provisions of the Agreement are found in cl 3 thereof:

3. TERMINATION

3.1 MWS [ie the defendant] may terminate the Agreement at anytime by giving the Contractor [ie the plaintiff] two (2) months’ notice in writing.

3.2 MWS may terminate the Agreement without notice should the Contractor breach any item under Clauses 1.4, 2.3 and 2.7.

12 The Clauses referred to in cl 3.2 of the Agreement read as follows:

1.4 The Contractor shall not transfer or assign this Contract directly or indirectly to any person whatsoever.

2.3 Hygiene & Sanitation

2.3.1 The Contractor shall ensure that [a] high standard of hygiene and cleanliness is maintained at all times in the procurement, handling, preparation, distribution and storage of food.

2.3.2 The Contractor shall ensure that all food supplies procured, regardless cooked, uncooked, bottled or canned, meet the highest standards of hygiene.

2.3.3 The Contractor shall ensure that all food are stored and prepared to meet the highest standards of hygiene.

2.7 Licensing Compliance

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

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

13 There are some other relevant clauses as well. These are cl 2.2.2, cl 2.2.5 and cl 2.2.6 which provide as follows:

2.2.2 The Contractor shall draw up the 28-day menu and the special menu, together with recipes for every dish. The menu shall include varieties [sic] and meet nutritional requirements.

2.2.5 The Contractor shall ensure that Residents and Staff are served food in consistent quantities and quality at all times.

2.2.6 Bethany is entitled to impose a penalty charge and/or charge the Contractor for costs incurred in providing meals to Residents and/or Staff should the Contractor fail to:

- provide the menu;

- provide meals of acceptable quality;

- meet the meal schedule;

- provide the meals in sufficient quantities; or

- meet hygiene and sanitation standards.

Was the plaintiff in breach of cl 2.7 of the Agreement?

14 On 30 August 2007, the defendant through the Executive Director of the Home, Ms Yip Moh Han, terminated the Agreement with immediate effect. The ground given for the termination was that due to the “illegal deployment of 6 foreign workers in the kitchen [of the Home]” the defendant had failed to comply with cl 2.7 of the Agreement.

15 The events leading up to the termination were explained by Ms Yip in her affidavit of evidence in chief as follows. Sometime on 21 August 2007, the staff of the Home conducted an inspection of the kitchen and noticed an unusually large number of Chinese nationals in the kitchen. There were six Chinese nationals working in the kitchen of whom five held long term social passes and the sixth held a work permit. The particulars of the Chinese nationals given by Ms Yip were:

Name	Fin No
Han Zhichen	G 5852297 Q
Shi Min	G 5829845 Q
Ren Shanglai	G 8078969 L
Liu ZengFeng	G 5930630 N
Liu Yuan Yin	G 5930392 W
Zeng Ye Feng	G 5929600 R

16 On 24 August 2007, Ms Yip collected the passes of all six Chinese nationals from the plaintiff and made enquiries with the Ministry of Manpower (“MOM”) and the Immigration and Checkpoint Authority (“ICA”) on the status of these persons. Ms Yip said that the MOM told her that those foreign workers could not work at the Home and that they could only work at the place designated in the work permit which was 36 Regent Street (ie the plaintiff’s registered address).

17 On 27 August 2007, Ms Yip wrote to the Director of Foreign Workforce Policy, MOM, explaining what had happened at the Home and asking for information on the status of the foreign workers. On the same day, she wrote to Sally...