Goldrich Venture Pte Ltd and another v Halcyon Offshore Pte Ltd

• Jurisdiction: Singapore
• Judge: Steven Chong J
• Judgment Date: 21 April 2015
• Neutral Citation: [2015] SGHC 103
• Plaintiff Counsel: Sim Chong (Instructed), Glenn Knight Jeyasingam and Susan Jacob (Glenn Knight)
• Docket Number: Suit No 452 of 2012/W
• Date: 21 April 2015
• Hearing Date: 14 January 2015,08 January 2015,09 January 2015,06 February 2015,13 January 2015
• Subject Matter: Contract,Misrepresentation,Fraudulent
• Published date: 22 April 2015
• Citation: [2015] SGHC 103
• Defendant Counsel: Chan Kah Keen Melvin, Tan Pei Qian Rachel and Tan Tho Eng (Chen Daorong) (TSMP Law Corporation)
• Court: High Court (Singapore)
• Year: 2015

Steven Chong J: Introduction

This suit concerns several alleged representations made between February 2008 and October 2008 by one Choo Swee Leng Michael (“Mr Choo”), who was purportedly an agent of the defendant at the material time, to one Lee Chiang Theng (“Mr Lee”), who was the promoter of the two plaintiff-companies. According to the plaintiffs, Mr Choo had represented that, upon the payment of a service fee to the defendant, each of the foreign workers recruited by the plaintiffs would be deployed to work at the defendant’s shipyard. At the material time, the defendant was registered as a “sponsoring shipyard”. The plaintiffs assert that, in reliance on these representations, they became the defendant’s “resident contractors”, recruited some 618 foreign workers to work in the defendant’s shipyard, and paid service fees totalling more than $2m (the bulk of which was allegedly paid in cash) to the defendant. The designation of the plaintiffs as resident contractors and the defendant’s status as their sponsoring shipyard are central to this suit and will be elaborated below.

Throughout the duration of their stay, none of the workers was ever gainfully deployed for any work at the shipyard.¹ Despite the stark contrast between the alleged representations and the reality on the ground, there was not a single written communication from the plaintiffs to the defendant complaining about the defendant’s abject failure to assign any work. In the meantime, the plaintiffs failed to pay the monthly salaries of the foreign workers.

This unsatisfactory state of affairs came to the notice of the Ministry of Manpower (“MOM”) when 60 of these foreign workers assembled at the MOM to seek redress. Ironically, it appears that it was Mr Lee, the sole registered director of the plaintiffs, who made the transport arrangements that allowed the foreign workers to proceed to the MOM. Investigations revealed that the foreign workers were housed in unacceptable accommodation. In 2010, Mr Lee was prosecuted and convicted for failing to provide acceptable accommodation and for failing to pay the salaries of the foreign workers on time. He was sentenced to four weeks’ imprisonment and a fine of $36,000² and his appeal in Magistrate’s Appeal No 344 of 2010 (“MA 344/2010”) was dismissed (see Lee Chiang Theng v Public Prosecutor and other matters [2012] 1 SLR 751 (“Lee Chiang Theng v PP”)). At the trial of this action, the defendant relied heavily on the evidence adduced by Mr Lee in his criminal case to contradict Mr Lee’s evidence and/or undermine the plaintiffs’ case.

On 31 May 2012, the plaintiffs commenced the present suit claiming an aggregate sum of $4,985,212.³ The plaintiffs brought two alternative claims, the first in contract and the second in fraudulent misrepresentation. The defendant counterclaimed for damages arising from the loss of its status as a sponsoring shipyard. Perhaps in recognition of the weaknesses in their case, the plaintiffs abandoned their breach of contract claim on the first day of the trial and proceeded to pursue the claim solely in fraudulent misrepresentation. Following suit, the defendant withdrew its counterclaim on the third day of trial. Both decisions have costs consequences which will be dealt with below. One of the interesting threshold legal issues which emerged from this case is the question whether a representation is actionable by a party who purportedly relied on it even though that party had not been incorporated at the time when the representation was made. Although the threshold issue found favour with the plaintiffs, their claim nonetheless suffers from many shortcomings which, ultimately, proved fatal to their case.

I begin first with the facts.

Background Parties

The first plaintiff, Goldrich Venture Pte Ltd (“Goldrich”), was incorporated on 3 November 2007 as “P.A. San Venture Pte Ltd”.⁴ It changed its name to Goldrich Venture Pte Ltd on 11 July 2008. Its principal activities include the repair of vessels and the provision of dormitory services.⁵ It was registered as a resident contractor of the defendant on 11 March 2008.⁶

The second plaintiff, Gates Offshore Pte Ltd (“Gates”), was incorporated on 21 May 2008.⁷ Similarly, its principal activities include the repair of vessels and the provision of dormitory services. The second plaintiff was registered as a resident contractor of the defendant on 30 June 2008. Mr Lee was the sole director of both plaintiffs at the material time.⁸

The defendant, Halcyon Offshore Pte Ltd (“Halcyon”), was incorporated on 10 May 2007.⁹ It provides steel works and vessel outfitting services as well as equipment for ship operations.¹⁰ At the material time, it was the holding company of several subsidiaries (“the subsidiaries”) through which most of the work in the shipyard was carried out.¹¹ It was granted the status of sponsoring shipyard on 3 March 2008.¹² Mr Ong San Khon (“Mr Ong”) was, at all material times, employed as the defendant’s Chief Executive Officer (“CEO”).¹³

The Marine Industry Sponsorship Scheme

Lying at the heart of this suit is the MOM’s policy as regards the allocation of work permits in the marine industry, which I will refer to as the “Marine Industry Sponsorship Scheme”. At the outset of the trial, the defendant indicated its intention to adduce oral evidence on this through an officer from MOM and filed Summons No 5709 of 2014 seeking leave to dispense with the preparation of an affidavit of evidence-in-chief in respect of the MOM officer. I granted leave subject to the condition that the defendant provide the plaintiffs with a list of the questions to be posed to the MOM officer. However, on the fourth day of the trial, the defendant decided that it no longer intended to call the MOM officer.¹⁴

The witnesses for both parties gave evidence as to the nature and scope of the Marine Industry Sponsorship Scheme at the material time, which was also an issue that was argued before V K Rajah JA in MA 344/2010. Save for one important point (which I will flag later), the parties are ad idem as to the salient features of the scheme. Given that, it will suffice if I reproduce Rajah JA’s succinct summary, which may be found at [24] of Lee Chiang Theng v PP:

… the MOM divided the marine companies in Singapore into two broad groups, viz, (a) shipyards and (b) contractors. These groups were further sub-divided into: (a) Sponsoring Shipyards and non-sponsoring shipyards and (b) Resident Contractors and common contractors. The work permit requirements and controls for foreign worker allocation would vary depending on which group the company fell into. The MOM had a pooled quota system which allowed a Sponsoring Shipyard to combine with Resident Contractors in the hiring of foreign work permit holders. From the perspective of the Sponsoring Shipyard, the benefits of this system are first, that the number of local workers for the Sponsoring Shipyard is consolidated and the number of foreign work permits allowed is a percentage of this combined figure, and second, that no further proof of contracts is required before the MOM issues the work permits. This allowed the Sponsoring Shipyard and its respective Resident Contractors great flexibility in using the same pool of foreign work permit holders for different projects with a fast turn-around time. The Resident Contractor can only be registered with one Sponsoring Shipyard and its foreign workers can only be deployed to that Sponsoring Shipyard. …

The reference to a “pooled quota system” requires some elaboration. The MOM limited the total number of foreign workers that a company could hire. This limit was calculated with reference to the number of local workers that the entity had in its workforce. The ratio of local to foreign workers was known as the “dependency ratio” and it was expressed as a percentage which, at that time, was 83.3% (ie, foreign workers could only comprise a maximum of 83.3% of a marine company’s workforce).¹⁵ In the main, shipyards would have more local workers on its payroll than contractors would. Thus, the MOM’s Marine Industry Sponsoring Scheme was designed to allow resident contractors to leverage on the sponsoring shipyard’s larger foreign worker entitlement (which it had by virtue of its larger local workforce) by allowing the work permit quotas for the sponsoring shipyard and that of its resident contractors to be aggregated. This enlarged pool of work permits would then be allocated by the sponsoring shipyard to its resident contractors as the shipyard saw fit.¹⁶ Thus, the relationship between sponsoring shipyard and its resident contractors is somewhat symbiotic. The former benefits from having a ready stable of contractors who could supply it with the requisite foreign workers for its projects; the latter benefits because it is able to take advantage of the pooled quota of work permits, allowing it to hire more foreign workers than it would otherwise have been able to.

Undisputed facts The defendant becomes a sponsoring shipyard

Sometime in 2007, the defendant acquired a shipyard located at Pandan Crescent.¹⁷ Following that, the defendant proceeded to acquire several companies, all of which had an established presence in the marine industry at the time of their acquisition.¹⁸ Because the defendant was structured as a holding company,¹⁹ each of its subsidiaries functioned autonomously by sourcing for projects, negotiating their terms with the clients, and carrying out the requisite works under the projects.²⁰ At the material time, the defendant’s primary business lay in investment holding and the provision of management services to its subsidiaries and it did not have any projects of its own.²¹

Sometime between the end of 2007 and the first quarter of 2008, Mr Ong met Mr Choo,²² who was employed by Manifield Agency Enterprises Pte Ltd (“Manifield”) as a labour consultant.²³ Mr Ong consulted Mr Choo on the...