FY Group Singapore Pte Ltd v Wine Impression Singapore Pte Ltd

• Jurisdiction: Singapore
• Judge: Lim Wen Juin
• Judgment Date: 15 December 2020
• Neutral Citation: [2020] SGDC 288
• Court: District Court (Singapore)
• Docket Number: District Court Summons No 3031 of 2020 in District Court Suit No 1566 of 2020
• Published date: 29 December 2020
• Year: 2020
• Hearing Date: 15 December 2020,11 December 2020
• Plaintiff Counsel: Tan Thye Hoe Timothy and Koh Wen Yin, Vanesse (AsiaLegal LLC)
• Defendant Counsel: Lee Ping and Tan Kai Xin Sheryl (Shook Lin & Bok LLP)
• Subject Matter: Civil Procedure,Summary judgment,Contract,Duress,Economic,Misrepresentation
• Citation: [2020] SGDC 288

Deputy Registrar Lim Wen Juin:

This is the plaintiff’s application for summary judgment. The plaintiff’s claim in the underlying action arises out of a written settlement agreement dated 27 February 2020 (the “Settlement Agreement”) under which the defendant agreed to pay the plaintiff approximately $196,000, partly in cash and partly in goods. The plaintiff claims $133,609.37 in this action and in this application on the basis that this is the amount that remains unpaid after the defendant returned goods worth about $62,500.

The defendant alleges that the Settlement Agreement is void on two distinct grounds. One is that it entered into it under economic duress. The other is that it was induced to enter into it by misrepresentations made by the plaintiff. In addition the defendant contends that it is entitled to set off various sums that the plaintiff owes to it, and the defendant has also asserted counterclaims against the plaintiff alleging broadly that the plaintiff breached various implied contractual duties owed to it. It argues that the set-off and counterclaims furnish further independent reason why the plaintiff should not be allowed summary judgment on its claim.

Factual background

It is not disputed that the Settlement Agreement arose in the context of a joint venture between the plaintiff and two individuals, namely Lin Sitong, referred to by all parties as “Nikki”, and See Ching Hour, referred to as “Vincent”. The key individual behind the plaintiff is its sole director and shareholder Zhang Keke, referred to as “Keira”. The business of the joint venture comprised the wholesale of liquor, soft drinks and beverages, and the defendant was the corporate vehicle for the business. As part of the joint venture all three parties held shares in the defendant. Nikki and Vincent each held 30% of these shares, and the remaining 40% was held by the plaintiff through Keira’s brother as its nominee. Nikki was at all times the sole director of the defendant.

The joint venture was recorded in a written memorandum of agreement dated 30 May 2019 (the “MOA”). I should observe that whereas the plaintiff is FY Group Singapore Pte Ltd the corporate party to the MOA is named “FY Group Pte Ltd”, but parties have throughout this action and application proceeded on the uncontroverted premise that the plaintiff was the corporate participant in the joint venture and so I proceed likewise. Under the MOA each party had their own defined roles and responsibilities. The plaintiff was responsible for “Finance, Human Resource, Operation, Logistic & Inventory”, while Nikki and Vincent took charge of sales and marketing.

It is not disputed that the joint venture between the parties did not survive beyond 27 February 2020, which was the day on which two written agreements were signed. One was the Settlement Agreement. It was signed by Nikki and Vincent on the defendant’s behalf and by Keira on the plaintiff’s behalf – although Keira signed on behalf of “FY GROUP PTE LTD”, once more I proceed on the common basis that the plaintiff was the corporate party to the Settlement Agreement as it was to the MOA.

The Settlement Agreement consists of three numbered paragraphs under the sentence, “We agreed on below settlement based on the attached Balance Sheet dated 26th Feb, 2020”. It is mostly typewritten but contains substantial handwritten amendments and additions against which parties countersigned. The first paragraph says, “Other Creditor - FY Group Pte Ltd $13,341.69: WIS will pay to FY GROUP PTE LTD by end of March, 2020”. The words “by end of March, 2020” are handwritten and in substitution of the typewritten word “immediately” that was struck out. The second paragraph states, “Trade Creditors-FYG $171,496.46: WIS will pay FY GROUP PTE LTD $100,000.00 within three months, $30,000.00 will be paid by end of March, $30,000.00 will be paid by end of April, and the balance of $40,000.00 will be paid by end of May, 2020” – the year and the comma immediately preceding it are handwritten – and continues, “The balance of $71,496.46, FY GROUP PTE LTD will take the equivalent value of the goods from the stocks”. The third paragraph is entirely handwritten and provides, “Stock – FYG $11,286.27: FY Group Pte Ltd will take the equivalent value of the goods from the stocks”. There is no dispute that “FYG” refers to the plaintiff and “WIS” refers to the defendant.

In short, under the Settlement Agreement the defendant was obliged to pay the plaintiff $113,341.69 in cash in three instalments at the end of the months of March, April and May 2020, and the plaintiff was also entitled to take from the defendant goods worth $82,755.73. While the defendant’s position is that the Settlement Agreement is void, I do not understand this interpretation of the Settlement Agreement, assuming its validity, to be a contested issue.

The other agreement dated 27 February 2020 was a shareholders’ agreement (the “Shareholders’ Agreement”) signed by Nikki, Vincent and Keira on behalf of her brother. The Shareholders’ Agreement is entirely typewritten and consists of two numbered paragraphs under the sentence, “We agreed on below settlement based on the attached Balance Sheet dated 26th Feb, 2020”. The undisputed gist of the Shareholders’ Agreement was that Nikki and Vincent would purchase the plaintiff’s 40% shareholding in the defendant held through Keira’s brother. The purchase price was $16,924.12 on the express agreed understanding that the “company net worth” of the defendant was $42,310.31, It appears not to be disputed that Nikki and Vincent paid this sum of $16,942.12 to Keira. All parties – that is, Nikki, Vincent and Keira and, by attribution, both the plaintiff and the defendant – have taken the common position in this action and application that Nikki and Vincent are at present the only shareholders of the defendant with each holding 50% of those shares. It will become apparent later that I regard this as a crucial fact.

It is evident on the face of the Settlement Agreement and the Shareholders’ Agreement that both of them were based on the same “Balance Sheet dated 26th Feb, 2020”. It is apparent from the evidence that this “Balance Sheet” was sent by Keira to Nikki and Vincent over WeChat at 11.30pm on 26 February 2020, the night before the two agreements were signed, and that this was done in response to Nikki’s request at 9.11pm on 25 February 2020 that Keira send to her and Vincent “the last and more accurate p&l and BS tomorrow”. It is also apparent that the Balance Sheet stated the “TOTAL NET WORTH” of the defendant as $42,310.31, which was the exact amount of the “company net worth” stated in the Shareholders’ Agreement, making it clear beyond doubt that the Balance Sheet was indeed the basis for the valuation of the defendant’s net worth and the plaintiff’s 40% shareholding in the defendant for purposes of the Shareholders’ Agreement.

It is the Balance Sheet that gives rise to the defendant’s defence of misrepresentation. The defendant pleads that, in order to induce it to enter into the Settlement Agreement, the plaintiff “represented to the Defendant that the Defendant’s Balance Sheet reflected a true and accurate account of the Defendant’s financial state of affairs”, but this was untrue because the Balance Sheet was incorrect. The defendant pleads that at this juncture the best particulars it can provide of the inaccuracy of the Balance Sheet are that the plaintiff was not entitled to charge it “any management support fees and/or salary of its staff”, meaning that the liabilities owed by the defendant to the plaintiff as reflected in the Balance Sheet are “inflated”. The defendant says that its ability to furnish better particulars is hampered by the plaintiff’s refusal to provide it with documents that would allow it to verify the figures in the Balance Sheet, the plaintiff having possession of these documents by virtue of its responsibility for the defendant’s finances as set out in the MOA.

As for the defendant’s defence of economic duress, the essential complaint put forward by Nikki and Vincent on its behalf is that the plaintiff actively obstructed the defendant’s business endeavours from 7 February 2020. According to Nikki and Vincent, events were set in motion when Keira informed them at a meeting on 21 January 2020 that she wished to have the plaintiff withdraw from the “loss-making” joint venture. Thereafter, on 6 February 2020 one John Liow sent an e-mail on the plaintiff’s behalf addressed to Nikki, Vincent and others stating that he was giving “official notification” of the “[c]omplete stoppage & discontinuation of [the defendant’s] business operations from 7th February 2020 (Friday 1400 pm)”, and that there “shall be no sales transactions and deliveries of any stock/goods to the trade”.

The defendant’s case is that having unilaterally decided in this way to “freeze” the defendant’s operations the plaintiff (a) prevented all movement of the defendant’s stock of goods kept in the plaintiff’s warehouse, for instance, when Nikki and Vincent wanted to retrieve the defendant’s goods from the warehouse the plaintiff “instructed its warehouse staff not to listen to any instructions” from them, (b) “refused to pay any of the Defendant’s vendors’ and suppliers’ invoices”, (c) helped itself to the defendant’s funds without Nikki’s consent in purported repayment of debts that it alleged were owed by the defendant, (d) tried to exert control over goods of the defendant stored at a third party’s warehouse, and (e) terminated the employment of all the defendant’s employees. Nikki and Vincent say that this led to them being “chased by frustrated customers” of the defendant who wanted to know “whether and when they would receive their stocks” pursuant to existing contracts of supply. They say that this had “extremely damaging consequences on the Defendant” and caused “much stress and anxiety” to...