Nagase Singapore Pte Ltd v Ching Kai Huat and Others

• Judge: Judith Prakash J
• Judgment Date: 04 May 2007
• Neutral Citation: [2007] SGHC 61
• Defendant Counsel: Lim Kim Hong (Kim & Co),Jagjit Singh and Gurdip Singh (Gurdip & Gill),Kannan Ramesh and Siraj Omar (Tan Kok Quan Partnership)
• Published date: 09 May 2007
• Subject Matter: Sale of services,Supplier overcharging company,First quotation not shown to superiors,Warehousing services supplier changing charging practice to company's detriment,First employee non-executive director of division,Whether had duty to help superior negotiate contracts,Third quotation shown to superiors,Pleadings,Whether first and second employee responsible for overcharging and failure to stop payment to supplier,Whether employees conspired with supplier,Supplier charging higher rates in respect of different kind of cargo,Whether non-director employees owed company fiduciary duties,Scope of duties,Third quotation negotiated by manager with poorer terms for company than second quotation,Lawful and unlawful,Second employee telling subordinate to approve such charging in invoices,Employees’ duties,Overcharging,Employment Law,Tort,Both first and second employee middle managers,Whether had specific duty to verify and approve invoices received, negotiate contracts and ensure proper system of verification of warehouse contents,Bare denials and pregnant negatives,Charges now separately billed,Supplier previously included manpower and machinery charges in lump sum fee,Plaintiff not object earlier to bare denials,Second employee senior manager in customer service department,Whether above acts constituting overcharging,Manager negotiating two quotations on behalf of company,Supplier using gross weight as charging basis instead of net weight,First employee agreeing to such charging with supplier,Whether such acts constituting breach of duties,Supplemental agreement not shown to superiors or enforced,Commercial Transactions,Civil Procedure,Certain breaches of duties by employees enabling overcharging,Whether positive defences can be raised,Breach of duties,Supplier billing for cargo not in warehouse,Second employee instructing subordinate not to verify invoices,Conspiracy,Second quotation containing different terms from first quotation but still accepted -Manager negotiating supplemental agreement to main agreement granting rebate to company
• Year: 2007
• Court: High Court (Singapore)
• Citation: [2007] SGHC 61
• Plaintiff Counsel: Philip Lam (Lam & Co)

4 May 2007 Judgment reserved.

Judith Prakash J

Background

1 One of the businesses carried on by the plaintiff, Nagase Singapore Pte Ltd, is the buying and selling of plastics and chemicals. For this purpose, the plaintiff requires the use of a warehouse and supporting logistics services. This action arose out of the plaintiff’s employment of the second defendant, David’s Logistics Pte Ltd (“ D Logistics”), to provide such services for the plaintiff’s GE Plastics Division (“the division”), so called because it dealt in plastic products manufactured by a company called GE Plastics. The plaintiff has alleged that D Logistics overcharged it and that it together with its majority shareholder and director, the first defendant (Ching Kai Huat, David) (“DC”), and the third and fourth defendants who were employees of the plaintiff, conspired to injure the plaintiff. The plaintiff also alleged that the third defendant, Clement Yip (“CY”), and the fourth defendant, Mary Ting Chi Fong (“MT”) were in breach of the duties that they owed the plaintiff.

2 The plaintiff first got to know DC when he was working for a company called Visa Freight Pte Ltd (“Visa Freight”). Visa Freight supplied storage services (both the actual warehousing space and the manpower to move and store the goods) to the plaintiff from 1992 until it ceased business in 1999. The plaintiff then suggested to DC that he should set up his own business and supply it with similar services. That suggestion led to the incorporation of D Logistics. The plaintiff rented a warehouse and, from 1999, D Logistics provided the staff required to operate the warehouse and store the plaintiff’s goods. D Logistics also monitored the stock levels in the warehouse. For these services, the plaintiff paid D Logistics a lump sum fee of $42,000 per month.

3 In the meantime, in February 1995, MT started to work for the plaintiff. She proved to be a good employee and received several promotions. In April 2000, she was promoted to be the plaintiff’s customer service manager and in April 2002, she was given a further promotion to the post of senior manager of the division. MT’s superior was CY who had joined the plaintiff in 1988. He too was promoted several times. In July 2001, CY became a director of the division. This designation was an administrative one only and CY was not appointed a director of the plaintiff company.

4 In mid 2001, the plaintiff decided that it no longer wanted to pay warehouse rental and that it would be cheaper if it went back to obtaining total warehousing services from a contractor. Pursuant to this decision, CY had a discussion with DC on the proposed change. It was accepted that CY had the authority to make, on behalf of the plaintiff, a new warehousing contract with D Logistics. On 2 July 2001, D Logistics sent the plaintiff a quotation (“the first quotation”) containing its rates for providing both the warehouse and the warehousing services to the plaintiff. CY did not accept the first quotation. Two weeks later, on 16 July 2001, D Logistics sent the plaintiff a second quotation (“second quotation”). This was subsequently signed by both DC and CY on behalf of their respective companies and therefore became the basis of what the parties subsequently referred to as the first agreement. At the same time, CY and DC signed what was called a supplementary agreement. This supplementary agreement provided that the plaintiff would be entitled to a ten percent rebate on the total storage charges each month. About a year later, on 1 July 2002, D Logistics sent the plaintiff a third quotation (“third quotation”) which effected changes to the previously agreed rates. This was accepted by CY and as a result the plaintiff and D Logistics entered into what the parties subsequently referred to as the second agreement.

5 In early 2003, the plaintiff found out that D Logistics had been overcharging it. The plaintiff stopped payment to D Logistics and, on 26 June 2003, terminated its services. In July 2003, the plaintiff commenced this action against D Logistics and DC and claimed a refund of the amount by which it alleged it had been overcharged. D Logistics put in a counterclaim for the sum of $191,837.22 being the sum of its bills for the period from April to June 2003. In April 2004, the plaintiff amended its claim and brought in CY and MT as additional defendants.

6 In the meantime, on 9 July 2003, Mr Masamichi Kan, the plaintiff’s managing director, had lodged a police report against CY and MT alleging that they had received kickbacks from DC. The police investigated the complaint but in March 2005, they informed the plaintiff that they had decided to take no further action on it.

The plaintiff’s claims

7 I will set out the main claims made by the plaintiff for clarity and I will then go on to consider the arguments and evidence in relation to each of these claims. This judgment contains my main findings on the claims but, as indicated below, further submissions are needed on two issues.

8 In respect of its case against CY and MT in their position as its employees, the plaintiff pleaded that CY and MT owed the following duties to it:

(a) Equitable/implied contractual duties:

(i) a duty of fidelity to act faithfully in the plaintiff’s best interests;

(ii) a duty to take care in the performance of their jobs.

(b) An express contractual duty to maintain the confidentiality of the plaintiff’s trade secrets.

(c) Fiduciary duties:

(i) a duty to act in good faith and in the plaintiff’s best interests;

(ii) a duty not to act for a collateral purpose;

(iii) a duty not to place themselves in a position of actual or potential conflict of interest.

9 The above duties were, allegedly, breached by the following actions:

(a) Acceptance of the second quotation and more particularly because:

(i) CY and MT concealed the first quotation from the plaintiff;

(ii) CY and MT either told DC and D Logistics that CY would accept less favourable terms than the first quotation or they let DC and D Logistics know of less favourable terms which CY was prepared to accept;

(iii) CY agreed to the second quotation, resulting in the first agreement, despite those terms being less favourable than those of the first quotation without comparing and contrasting the second quotation with other parties’ quotations.

(b) In relation to the supplementary agreement:

(i) CY and MT concealed the supplementary agreement from the plaintiff; and

(ii) CY and MT neglected to enforce the supplementary agreement.

(c) Acceptance of the third quotation and more particularly because:

(i) CY and MT told DC and D Logistics that the plaintiff was willing to accept less favourable terms; and

(ii) CY accepted the third quotation, despite the third quotation having less favourable terms than the second quotation, without comparing the third quotation with other quotations.

(d) Overcharging as particularised in [12] below.

10 As regards its contractual claim against D Logistics, the plaintiff pleaded that D Logistics wrongfully overcharged it by:

(a) calculating “truncated” weeks as whole weeks;

(b) claiming manpower and equipment costs as miscellaneous charges;

(c) inflating the tonnage volume in D Logistics’ invoices;

(d) inflating the unit price for storage;

(e) inflating the number of packages and charging for both tonnage and packaging.

11 Alternatively, the plaintiff pleaded that D Logistics owed an implied contractual duty to the plaintiff to take care in the preparation of its invoices and bills so that D Logistics would not overcharge the plaintiff.

12 The plaintiff asserted that CY and MT breached their duties stated at [8] in relation to the overcharging effected by D Logistics in that:

(a) CY and MT failed to check whether the amounts of stock D Logistics invoiced corresponded with the amounts reported to the plaintiff or with the amounts stated in D Logistics’ own stock balance reports; and

(b) MT instructed her subordinate Sarah Ng not to verify the data for goods removed from the warehouse and Sarah Ng then passed this information on to her successor, Tan Mui Theng;

and thereby they had (i) procured that the plaintiff paid D Logistics the overcharged amounts or (ii) neglected to take any steps to prevent the plaintiff from paying those amounts.

13 The plaintiff pleaded that all the defendants conspired to injure it by the following unlawful means:

(a) CY and MT’s breach of their duties to the plaintiff; and

(b) DC and D Logistics’ unlawful interference with the plaintiff’s business, with reference to the following events:

(i) acceptance of the second quotation;

(ii) concealment of the supplementary agreement;

(iii) acceptance of the third quotation; and

(iv) overcharging.

14 In the alternative, the plaintiff pleaded, with reference to the same events, that the defendants conspired by lawful means to injure it.

Breach of duties

What duties did CY and MT owe to the plaintiff?

15 CY and MT did not dispute that they each owed the plaintiff a duty to act in its best interests in the course of their employment and that they had a general duty to take care in the performance of their jobs. They did dispute, however, the scope of their duty of care and also that they owed fiduciary duties to the plaintiff as the plaintiff asserted. One other dispute was over the plaintiff’s allegation that CY and MT were in breach of their duty of confidentiality to it. I need not deal with this dispute as, although it was pleaded, no submissions were made on it by the plaintiff and the allegation therefore appears to have been dropped.

16 Turning to the duty to take care in the performance of their respective jobs, the plaintiff said that this duty required both CY and MT to do the following:

(a) in respect of the agreements:

(i) compare and contrast quotations from several parties before agreeing to any one on the plaintiff’s behalf;

(ii) secure the best possible quote for the plaintiff;

(iii) not to disclose to suppliers...