Naughty G Pte Ltd v Fortune Marketing Pte Ltd

• Jurisdiction: Singapore
• Judge: Chan Seng Onn J
• Judgment Date: 03 September 2018
• Neutral Citation: [2018] SGHC 190
• Defendant Counsel: Nedumaran Muthukrishnan (M Nedumaran & Co)
• Date: 03 September 2018
• Docket Number: Suit No 478 of 2014
• Hearing Date: 17 January 2018,12 September 2017,21 July 2017,18 July 2017,02 August 2017,20 July 2017,19 July 2017
• Plaintiff Counsel: Deborah Barker SC, Hewage Ushan Premaratne, Shalini d/o Mogan (KhattarWong LLP)
• Published date: 15 September 2018
• Court: High Court (Singapore)
• Citation: [2018] SGHC 190
• Year: 2018

Chan Seng Onn J: Introduction

The plaintiff is a Singapore incorporated company in the business of import, wholesale and retail of supplement drinks, energy drinks, other beverages and snack foods (“Products”). The Products include, but are not limited to, drinks which are marketed under the name “Naughty G”.

The defendant is a Singapore incorporated company in the business of general wholesale trade and the import and export of food & beverage products.

This suit arises out of an oral agreement between the plaintiff and defendant. While the existence of the agreement is not in dispute, the nature and scope of the oral agreement is hotly contested between the parties. Both parties allege breaches of the oral agreement and a failure to pay various debts owed. The parties also dispute the circumstances pertaining to the termination of the oral agreement.

The plaintiff claims that a proper set-off and accounting of all the debts owed between the plaintiff and the defendant will show that the defendant owes the plaintiff a net amount of $141,386.02.¹ The defendant disputes this and claims that it is the plaintiff that has failed to pay for invoiced sums amounting to $291,032.28.²

This discrepancy arises because over the course of their relationship, the plaintiff and defendant developed a practice of issuing invoices/credit notes to the other party in respect of various debts owed and agreed to a “contra arrangement” where they would set-off their debts owed to each other as opposed to paying each other directly. Unfortunately, the parties could not agree on the debts, and their respective invoices/credit notes reflected their difference in opinion on the correct amount that was owed. This disagreement stems partly from a disagreement as to liability for the debts and partly as to the quantification of the debts.

As a result, a significant portion of the trial focused on whether certain debts were correctly represented in individual invoices/credit notes issued by either the plaintiff or the defendant. The invoices and credit notes could have been properly grouped into discrete issues in the interest of clarity and to facilitate proper examination, but unfortunately, because the parties were often at cross purposes when scoping the issues, this was not done in an adequate manner.

The trial was heard over six days. The defendant called one witness to give evidence at trial: Mr Ramu Chidambaram (“Ramu”). Ramu is the sole director of the defendant. Initially, the plaintiff intended to call two witnesses to give evidence at trial: Mr Abraham Isaac (“Abraham”) and Mr David Isaac (“David”). Abraham is David’s father, and both are directors of the plaintiff. For reasons that will become apparent, Abraham eventually did not turn up at trial. I will discuss the implications of this in due course.

The trial has been bifurcated between liability and quantum. Therefore, this judgment will focus on issues of liability including the issue of the net amount of debt owed. The issues relating to the quantification such as the assessment of damages arising from breaches of the Agreement will be dealt with in a subsequent hearing before the Registrar.

Background Facts The parties

The plaintiff has three directors and shareholders, Abraham, David and Mr Jeremy Isaac. The plaintiff also employs an accountant, Ms Chow Pooi Yen (“Pooi Yen”). Abraham, David and Pooi Yen were the three representatives of the plaintiff that dealt with the defendant.

The defendant has two shareholders, Ramu and his wife. Ramu is the sole director of the defendant. The defendant employs a manager, Mr Mahipal Reddy (“Mahipal”). Ramu and Mahipal were the two representatives of the defendant that dealt with the plaintiff.

Background to the dispute

The plaintiff’s business model involves ordering the Products from overseas manufacturers. These manufacturers deliver the Products to the plaintiff in Australia or Singapore. The plaintiff then supplies the Products to retailers.³

Prior to 2013, the plaintiff was engaged in supplying the Products to several major retailers in Singapore. These major retailers included supermarket chains such as NTUC Fairprice, Cold Storage, Giant and Shop N Save as well as convenience stores chains such as 7-Eleven and Cheers. The brands behind these chains are under the ownership of two companies: NTUC Co-operative Ltd (“NTUC”) (which owns NTUC Fairprice and Cheers) and Dairy Farm International Holdings Limited (“Dairy Farm”) (which owns Cold Storage, Giant, Shop N Save and 7-Eleven). Aside from these major retailers, the plaintiff also supplied the Products to other retailers such as Sheng Siong Supermarket Pte Ltd.

Sometime in January 2013, Ramu and Abraham were in discussions relating to the entry into some form of business relationship. Pursuant to this, there was an inspection of the plaintiff’s inventory in Singapore located inside a warehouse leased by the plaintiff called Ruby Warehouse Complex (“Ruby Warehouse”).⁴

On 1 February 2013, the plaintiff and defendant entered into an oral agreement (“the Agreement”). As highlighted, the precise nature of the Agreement is hotly contested. However, certain facts were not disputed: The Agreement included a handover of all the plaintiff’s stock in Singapore to the defendant and the defendant would take over the plaintiff’s accounts with retailers in Singapore and sell the Products to these retailers. The defendant would also take over the operation of Ruby Warehouse and agreed to pay rent for the use of Ruby Warehouse.⁵ The plaintiff and defendant agreed on a handover price to be paid by the defendant to the plaintiff. The original sum was set at $440,875.25. This was to be paid in 3 instalments, with the first instalment being $200,000. I shall refer to this as the “Instalment Scheme”. The defendant paid the plaintiff a sum of $200,000 on 1 February 2013.⁶ It is not disputed that the number of instalments to be paid was subsequently varied to four instalments. The defendant initially agreed to purchase a van with the registration number GW6982Y, a lorry with the registration number YL7388B and a forklift truck with a model number FB25EX-5 (“Three Vehicles”).⁷ However, the parties eventually could not agree on a price. On 6 February 2013, the parties completed a stock take of the inventory balance at Ruby Warehouse.⁸ The stock take generated a “stock handover list” which was signed by Mahipal on behalf of the defendant. After the stock take, the total amount due under the Instalment Scheme was mutually varied to $420,621.24. The stock handover list included 1750 cartons of a product called Naughty G Sugar Free and 1750 cartons of a product called Naughty G Jasmine Green Tea that was given free of charge.⁹ Sometime in February 2013, the defendant duly took over the operation of Ruby Warehouse.

In order for the defendant to sell the Products directly to retail chains under the control of NTUC and Dairy Farm, the defendant would need to set up accounts with these retailers and transfer certain product identification codes called Stock Keeping Units (“SKUs”) from the plaintiff’s account to the defendant’s account. Each SKU would correspond to one particular product sold by the defendant or plaintiff to a retailer. Since it would take some time for the accounts to be set up and for the SKUs to be transferred, the plaintiff agreed to collect money from the retailers on behalf of the defendant in the interim.¹⁰ In practice, the plaintiff would receive orders and collect payment from the retailers, and the defendant would operate Ruby Warehouse and deliver the Products to the retailers.

Unfortunately, the parties’ relationship deteriorated rapidly. By 1 April 2013, when the third instalment in the Instalment Scheme was due to be paid, the defendant refused to pay any money, on the basis that taking into account all the debts that were due on both sides, the plaintiff owed the defendant more money.¹¹ The plaintiff took the opposite position, and was of the view that it was the defendant that owed the plaintiff more money at the point. By this time the “contra arrangement” (see [5] above) was in full force, and neither party would pay each other. This was due to a wide array of disputes, some of which I set out below for context: The defendant alleged that some of the stock it was sold was defective, either because they were unmerchantable or close to expiry. The parties could not agree on which party should bear the cost of certain rebates, allowances and promotional charges (“Promotional Charges”) that the retailers imposed. The retailers would either invoice a seller directly for the Promotional Charges, or deduct the charges from the sales collection they would pay out to the seller. Since the plaintiff was the party with the SKUs for the Products for the period of February to April 2013, it was the plaintiff that was invoiced by the retailers, and the sales collections collected by the plaintiff were also correspondingly reduced by the retailers. The parties also could not agree on whether the plaintiff should pay the defendant the sales collections collected on behalf of the defendant the moment the Products were sold to the retailers, or only after the plaintiff had collected money from the retailers.

On 9 April 2013, plaintiff sent an email to the defendant titled “amended written agreement”, which enclosed a draft written contract (“9 April Draft”).¹² However, the 9 April Draft was never signed. Nevertheless, the parties do not dispute that the 9 April Draft accurately reflects the terms of the Agreement, save for the terms disputed in a letter sent by the defendant’s solicitors on 12 July 2013 (“Kalamohan Letter”).¹³

The defendant did not pay rent for the use of Ruby Warehouse for similar reasons as its refusal to pay money under the Instalment Scheme (see [16] above). The plaintiff repeatedly...