Kool Team Marketing v Pacific Sunwear Pte Ltd

• Jurisdiction: Singapore
• Judge: Lee Seiu Kin JC
• Judgment Date: 06 May 1999
• Neutral Citation: [1999] SGHC 120
• Docket Number: Suit No 309 of 1998
• Date: 06 May 1999
• Year: 1999
• Published date: 19 September 2003
• Plaintiff Counsel: Hee Teng Fong and Joseph Chai (Hee Teng Fong & Co)
• Citation: [1999] SGHC 120
• Defendant Counsel: Wilfed Yeo and Christina Seah (Wilfed Yeo & Co)
• Court: High Court (Singapore)
• Subject Matter: Contract,Test of repudiation,Discharge,Breach amounting to repudiation

: The dispute

The defendants are a company that, at the material time, dealt with a range of beachwear and accessories under the name `Ocean Pacific` as well a range of clothing under the name `Gotcha`. They would license franchisees to sell these products at retail outlets at various shopping centres. The exact terms of the franchise agreement may vary in each case, but generally the defendants would provide assistance in the form of advertising and promotion, financing, renovation and business advice.

The plaintiffs, a firm, was one of the franchisees of the defendants in both Ocean Pacific and Gotcha products. The business relationship between the parties began with a franchise for an Ocean Pacific shop at Shaw Leisure Gallery (`Shaw-OP`) at 100 Beach Road [num ]02-57. This commenced operation sometime in December 1989. By June 1997, when the dispute between the parties came to a head, the plaintiffs had the following franchises and concessionaire from the defendants:

(i) Ocean Pacific shop at Wisma Atria [num ]B1-51 (`Wisma-OP`);

(ii) Gotcha shop at Wisma Atria [num ]B1-09 (`Wisma-Gotcha`);

(iii) Ocean Pacific shop at Junction 8, [num ]01-26 (`Junction-OP`);

(iv) Ocean Pacific concessionaire at Takashimaya Department Store (`Takashimaya-OP`).

In the case of the Takashimaya-OP concessionaire the plaintiffs were only responsible for the supply of sales personnel to man the counters displaying Ocean Pacific products at Takashimaya Department Store. The defendants were responsible for all other costs in connection with this outlet, including licence fees to Takashimaya Department Store and the supply of stock. The plaintiffs were paid a fixed percentage of gross sales, in this case, 20%.

By way of their solicitors` letter dated 30 June 1997 to the defendants` solicitors, the plaintiffs stated in part as follows:

We have been instructed by our clients that your clients have, in breach of the franchise agreement, stopped all supplies of `Ocean Pacific` products to them since 19 June 1997. As such, we have been instructed by our clients to accept your clients` repudiation of the franchise agreement with full reservation of their rights to claim against your clients for all damages suffered.`

The letter went on to request that the defendants conduct a joint `stock-take` at the Wisma-OP, Wisma-Gotcha and Junction-OP outlets on the same day and offered to return possession of those three outlets to the defendants on 1 July 1997. This letter was received by the defendants` solicitors at about 3pm on 30 June 1997. At about 4pm that same afternoon the plaintiffs received a letter of the same date from the defendants giving the plaintiffs three months` notice of termination of `the Franchise Agreement`. Thereafter the parties, quite sensibly, negotiated an early re-possession of the premises and by 9 July, they had agreed on the quantity and value of the stock remaining. The defendants made an interim payment to the plaintiffs, done without prejudice, in respect of such stocks as well as refunds for deposits and renovation costs.

On 5 March 1998 the plaintiffs filed the writ of summons in this action. They claimed that there was a contract between the parties, in relation to the Ocean Pacific and Gotcha products, which was made partly orally, partly in writing and partly by conduct or course of dealing. The plaintiffs claimed that the defendants had breached the contract by abruptly stopping the supply of Ocean Pacific and Gotcha products to the plaintiffs. On 30 June 1997, the plaintiffs accepted the breach and terminated the contract. The plaintiffs claim the following in damages:

(a) loss of three months` profit in lieu of notice in respect of Wisma-OP and Junction-OP;

(b) loss of profit in the period 19 to 30 June 1997 in respect of Wisma-OP and Junction-OP due to shortage of stocks caused by the plaintiffs` refusal to supply them;

(c) loss of three months` profit in lieu of notice in respect of the Takashimaya-OP concessionaire;

(d) compensation paid to the staff at Takashimaya-OP for early termination; and

(e) losses incurred in operating the Wisma-Gotcha shop from February to June1997 as a result of the defendants` wrongful refusal to take over the shop.

In addition, the plaintiffs also claim the following from the defendants as money due under the contract, or as money had and received:

(a) renovation costs at Wisma-OP, Junction-OP, Wisma-Gotcha and a previous outlet at Clarke Quay which were advanced by the plaintiffs in the first instance;

(b) payments made by the plaintiffs to the defendants for advertising costs to which the defendants were not entitled; and

(c) a 3% incentive payment owed by the defendants to the plaintiffs.

The defendants say that it was the plaintiffs who were in breach of contract. The plaintiffs had failed to pay for the goods on time and for this reason the defendants stopped supplying goods to them. The defendants say that the plaintiffs had wrongfully repudiated the contract on 30 June 1997 by ceasing operation of the Wisma-OP and Junction-OP outlets. The defendants also say that on that day the plaintiffs had abandoned the Takashimaya-OP concessionaire. The defendants say that they sent their letter of 30 June 1997 giving three months` notice and for this reason the plaintiffs could not have understood the defendants as evincing the intention that they were no longer to be bound by the contract. The defendants denied that they were liable for the other claims, viz renovation costs, payments for advertising costs and the 3% incentive payments. The defendants counterclaimed against the plaintiffs for loss of revenue in respect of the Wisma-OP and Junction-OP outlets for the period 19 to 30 June 1997 and for loss of goodwill due to the plaintiffs` cessation of business.

The 1989 agreement

The relationship between the parties started in 1989. Woo Sook Yin (`Woo`) and Kim Kher Kiong (`Kim`) were actors with the then Singapore Broadcasting Corporation. In 1989 the defendants sponsored the attire in television serials featuring Woo and Kim. At that time, the Managing Director of the defendants was one Tony Lim Kian Nam (`Lim`). It was through this sponsorship that Woo and Kim got to know Lim. Around August 1989 Lim invited Woo and Kim to take up a franchise selling OP products. He believed that their celebrity status would be a marketing advantage. After some discussion they agreed to take it up. A written agreement was entered into (`the 1989 agreement`) after Woo and Kim registered the plaintiffs as a business in November 1989.

The 1989 agreement provides for the plaintiffs to operate a store at Shaw Leisure Gallery. The material terms are as follows:

(i) the period of the agreement was from 1 December 1989 to 30 November 1990, with an option to extend it for one year subject to negotiations, for which the plaintiffs must give three months` notice;

(ii) the defendants may terminate the agreement with three months` notice;

(iii) the defendants are to pay for all interior fixtures and decorations which shall remain their property. Any damage thereto is to be made good by the plaintiffs, subject to normal wear and tear;

(iv) the plaintiffs are to sell only the defendants` goods and carry a minimum stock of $45,000;

(v) all wages incurred for operating the store are to be borne by the plaintiffs;

(vi) the plaintiffs are to pay a deposit of $15,215.40, and are to pay in advance the following monthly charges, which are subject to change:

Store rental: $4,503.00

Service charge: $474.00

Advertising charge: $94.80

Total: $5,071.80

(vii) payment for stocks supplied shall be made within 90 days. The plaintiffs receive a discount of 50% off the sale price on normal items and 30% on sale items;

(viii) if the plaintiffs terminate the agreement, all items are to be sold back to the defendants at 90% of their invoice value;

(ix) all advertising are to be borne by the defendants;

(x) the plaintiffs agree to take part in all promotions by the defendants and to pay their share of the cost thereof;

(xi) if the plaintiffs` sales for the year exceeds the target of $180,000, the defendants would give an incentive of an additional 3% discount for sales beyond that value.

The defendants commenced operation of the Shaw-OP shop sometime in December 1990. After the first year of operation, the plaintiffs continued the franchise. The renewal was made orally and the parties agree that the new contract was subject to any variations agreed upon between the parties. It is the nature of the variations that they disagree on. The plaintiffs operated the Shaw-OP shop until sometime in 1993.

Subsequent shops

In August 1991, the defendants commenced operation of the Wisma-OP shop by themselves. After several months, they decided to offer this shop unit to the plaintiffs. Woo accepted the offer and began operating the Wisma-OP shop from around June 1992.

Sometime in 1992, Woo indicated to one of the defendants` directors, Lee Poh Seah (`Lee`), that the plaintiffs would like to look for an additional shop on their own. Lee agreed and around the end of 1992, Woo entered into an agreement to lease a shop at Clarke Quay (`Clarke Quay-OP`). After renovation was completed, the Clarke Quay-OP shop opened for business. The plaintiffs operated this shop until sometime in 1996.

Around January 1995, one of the defendants` franchisees surrendered two shops, one at 302 Tiong Bahru [num ]01-36, and the other was the Junction-OP shop. Lee offered them to the plaintiffs who took them up. However the Tiong Bahru shop was returned to the defendants after a few months.

Sometime in 1995 the defendants entered into an agreement to operate a concessionaire at Takashimaya Department Store. They operated it for several months. Woo complained to Lee that this concessionaire affected the business of her Wisma-OP shop due to its proximity. In view of this the...