Grossner Jens v Raffles Holdings Ltd

• Jurisdiction: Singapore
• Judge: Tan Lee Meng J
• Judgment Date: 28 November 2003
• Neutral Citation: [2003] SGHC 290
• Docket Number: Suit No 1371 of 2002
• Date: 28 November 2003
• Year: 2003
• Published date: 17 December 2003
• Plaintiff Counsel: C R Rajah SC (instructed) and Sean Lim (Hin Tat Augustine and Partners)
• Citation: [2003] SGHC 290
• Defendant Counsel: K Shanmugam SC, Stanley Lai, Mak Wei Munn and Edmund Eng (Allen and Gledhill)
• Court: High Court (Singapore)
• Subject Matter: No agreement reached on material terms,Quantum meruit,Formation,Whether plaintiff entitled to claim reasonable sum on basis of restitutionary quantum meruit,Contract,Whether there was concluded contract,Certainty of terms,Implied contracts

1. The plaintiff, Jens Grossner (“JG”), who is in the business of hotel brokerage and has his own firm, JG Immobilien, claimed that he is entitled to be remunerated by the defendants, Raffles Holdings Ltd (“Raffles”), a Singapore company that owns a chain of hotels and resorts around the world, for brokering the sale of Swissotel to the latter. Raffles contended that they had no binding contract with JG for brokerage services and added that even if they had a binding contract with him, he is not entitled to any remuneration because they did not acquire Swissotel as a result of his services.

A. Background

2. JG’s business relationship with Raffles began when he represented the owners of the Zoofenster hotel in Berlin, Germany, during unsuccessful negotiations for an operating lease. Subsequently, he offered to help Raffles acquire two hotels in Paris and a hotel in Zurich. His efforts proved fruitless as the sale of the said hotels did not materialise.

3. In late 1999, JG informed Raffles’ senior vice-president, Mr Anthony Yip, that SAirRelations AG (“SAir”) were interested in selling Swissotel Holding AG (“Swissotel”), which owned and operated a chain of hotels around the world. He claimed that he and his business associate, Mr Peter Buhrer, who used to provide consultancy services to the SAir group of companies, were in a position to broker a sale of Swissotel to Raffles.

4. On 31 January 2000, JG wrote to Raffles to propose a brokerage arrangement for the acquisition of Swissotel. In his letter, he stated as follows:

As already explained to you, “swissotel” is officially not on the market and the matter has to be treated strictly confidential….

On the basis of a confirmation letter by RAFFLES, we will undertake the process of informative resp. mediative activities and get in contact with “SAir” in Switzerland….

We do not collect any fees before the conclusion of a contract. Only when a conclusion comes to pass as a result of our activities do you have to pay the broker’s commission named hereunder:

For our informative respectively mediative activities concerning “swissotel”, you i.e. RAFFLES is to pay commission in the amount of 1.0% of the transaction-volume plus the value added tax (VAT), if applicable, deserved and due upon conclusion of a contract.

(emphasis added)

5. Raffles did not accept the terms of remuneration proposed by JG. On 14 February 2000, Ms Emily Lim, Raffles’ business development manager, replied to JG’s letter as follows:

Further to your letter of 31 Jan 00 as well as our subsequent conversation, we wish to recap our agreement for JG Immobilien to assist us, acting on our instructions, in the acquisition of the Swissotel Group for which JG Immobilien’s success-based fee is at the lower of 1% of the transaction price or a capped amount, which is to be agreed when you establish an indicative price from the owners.

Please also provide us a scope of services which will be provided by JG Immobilien as well as your proposal on how best to take this deal forward.

(emphasis added)

6. JG did not inform Raffles about the scope of the services to be provided by him and his company. Neither did he inform Raffles about the indicative price for Swissotel. As a result, the capped amount of commission, which was essential for the purpose of determining the remuneration to which JG was entitled for arranging the sale of Swissotel to Raffles, was never agreed upon.

7. On 30 March 2000, JG sent Raffles some non-confidential information regarding the profit and turnover figures of Swissotel and its subsidiary, Gate Gourmet, that was freely available to the public. On 6 April 2000, Raffles asked JG to answer a number of questions regarding Swissotel and reminded him to state the indicative price for Swissotel. JG did not answer Raffles’ questions. He also did not provide any information on the indicative price for Swissotel.

8. JG arranged one meeting for representatives of SAir and Raffles on 22 May 2000. SAir’s representatives included Mr Wolfgang Werle, the president and chief executive officer of the company, and Mr Jurg Foster, the chief financial officer of SAir, while Raffles was represented by their then president and chief executive officer, Mr Richard Helfer, and Mr Yip. There is a dispute as to what was discussed at this meeting. JG and Mr Buhrer claimed that the proposed sale of Swissotel to Raffles was discussed at the meeting, However, Raffles’ representatives asserted that this subject was not discussed and that the meeting was not very fruitful as it concerned other matters, such as the joint marketing of the Swissotel and Raffles brands in Asia and Europe and the procurement of airline food and related supplies. At the end of the meeting, SAir proposed that Raffles liaise directly with them with respect to the proposed areas of co-operation. Raffles pointed out that as the question of a sale did not appear to be on SAir’s agenda at that time, there was no further role for JG to play in the matter.

9. Mr Helfer testified that upon his return to Singapore, he broached the subject of an acquisition of “all or a portion of the Owner’s interest in Swissotel” when he sent a draft confidentiality agreement on 29 May 2000 to SAir’s Mr Werle for his comments. No reply was received by Raffles but both parties continued from time to time to discuss ways of collaborating in the hotel business.

10. At the end of 2000, Raffles received information that SAir were considering the sale of Swissotel. Around January 2001, Swissotel was officially put up for sale. A private sale to Raffles was not on the cards as SAir appointed Credit Suisse First Boston (“CSFB”) to handle a competitive bidding exercise for prospective purchasers of Swissotel. By a fax dated 22 February 2001, CSFB invited Raffles to submit a bid for the purchase of Swissotel. In their fax, CSFB explained that the bidding process was divided into two phases. The first was the indicative offer stage and the second was the negotiation phase. CSFB explained that on the basis of the indicative offers received by them, a final decision will be made as to whether the sale of any or all of the business would be taken. If a decision was taken to proceed with the sale, “certain prospective purchaser(s) will be invited to proceed further into the next phase of the sale”.

11. After being invited by CSFB to bid for Swissotel, Raffles appointed their own merchant bankers, Morgan Guarantee, to study the bid documents and prepare a bid proposal for Swissotel. Raffles’ proposal for the acquisition of Swissotel was submitted to CSFB on 28 February 2001. In due course, Raffles were identified as the “preferred bidder” and were invited to enter into negotiations, which culminated in the sale to them of Swissotel. The acquisition of Swissotel by Raffles was completed in June 2001.

12 After learning that Raffles had succeeded in acquiring Swissotel, JG claimed credit for having brokered the sale and demanded from Raffles a commission for the sale. Raffles contended that he was not entitled to any commission and offered him an ex gratia payment in the form of an “introduction fee”. The amount offered to JG was DM80,000 to DM100,000. This offer was rejected by him.

13 In November 2002, JG commenced the present proceedings to claim from Raffles a commission of 1% of the purchase price of Swissotel. Raffles furnished two reasons why JG’s claim ought to be dismissed. First, they contended that although they had discussed the question of brokerage services regarding the acquisition of Swissotel with JG, the proposed brokerage contract was not finalised. There was no binding contract because important terms, namely the scope of brokerage services to be performed by JG and his remuneration, had not been agreed upon. Secondly, it was asserted that even if there was a contract, JG did not earn any commission because he did not succeed in brokering the sale of Swissotel to Raffles, which had to bid for Swissotel in the competitive bidding exercise conducted by CSFB.

B. Whether there was a concluded contract

14. Raffles’ assertion that they had no binding contract with JG will first be considered. Depending on circumstances, negotiating parties may enter into a binding contract even though there are a few terms which have yet to be agreed upon. This was recently reiterated by the Court of Appeal in The Rainbow Spring [2003] 3 SLR 363. However, the position is very different where important terms have not been agreed upon for as Maugham LJ put it in Foley v Classique Coaches Ltd [1934] 2 KB 1, 13, “unless all the material terms of the contract are agreed there is no binding obligation”. In the present case, the parties did not reach agreement on crucial terms such as the remuneration for JG if he succeeds in brokering the sale of Swissotel to Raffles and the scope of the services to be rendered by JG.

15. When JG offered on 31 January 2000 to broker the sale of Swissotel to Raffles, the latter made it clear in their reply of 14 February 2000 that they required him to state the scope of services which will be provided. Despite being reminded to do so, JG did not furnish the required information. Without such information on the scope of his services, it is difficult to know what were his obligations under the proposed contract.

16. More importantly, the parties did not reach agreement on the remuneration package for JG. Raffles, which had rejected JG’s proposal for payment of a commission of 1% of the purchase price, wanted the commission to be capped and for this purpose, JG was requested to provide information to Raffles regarding the indicative price for Swissotel. JG failed to provide the required information. The reason for this could be that he did not know what the indicative price was. As the commission payable to JG was never sorted out, why JG claimed 1% of the sale price as his commission cannot be fathomed. After all, when cross-examined, he...