NEC Asia Pte Ltd (now known as NEC Asia Pacific Pte Ltd) v Picket & Rail Asia Pacific Pte Ltd and others

• Jurisdiction: Singapore
• Judge: Belinda Ang Saw Ean J
• Judgment Date: 10 December 2010
• Neutral Citation: [2010] SGHC 359
• Plaintiff Counsel: Francis Goh and Geraldine Ow (Harry Elias Partnership LLP)
• Docket Number: Suit No 536 of 2009
• Date: 10 December 2010
• Hearing Date: 26 July 2010,20 July 2010,19 July 2010,22 July 2010,23 July 2010,15 September 2010,21 July 2010
• Subject Matter: Contract,Sale of Goods
• Published date: 16 December 2010
• Citation: [2010] SGHC 359
• Defendant Counsel: Navinder Singh (Navin & Co LLP)
• Court: High Court (Singapore)
• Year: 2010

Belinda Ang Saw Ean J: Introduction

In this action, the plaintiff, NEC Asia Pte Ltd (now known as NEC Asia Pacific Pte Ltd) (“NEC”) claims against the first defendant, Picket & Rail Asia Pacific Pte Ltd (“D1”) and/or the third defendant, Faisal Alsagoff (“D3”), the sum of US$ 1,402,380.30 being the price of 2390 units of Mitsubishi High End Projectors (“projectors”). The alternative claim of S$1,917,054 (being the Singapore dollar equivalent of US$1,402,380.30) is for the amount of the dishonoured cheque issued by the second defendant, Digital Network Pte Ltd (“D2”), in favour of NEC as payee in purported payment of the price of the projectors.

D1 is in liquidation and the action against D1 is stayed as a consequence. Chan Seng Onn J had earlier on 29 June 2010 refused NEC’s application for leave to continue with its claims against D1. Hence, the action before me is against D3 personally and D2. I should mention that NEC is no longer pursuing its claim for Goods & Services Tax (“GST”) against D3, a position NEC confirmed at the trial through its counsel, Mr Francis Goh.

The dispute NEC’s arguments

NEC’s pleaded case is that in February 2008, NEC agreed with D1 to supply 2300 projectors at a unit price of US$658.20 and aggregate price of US$1,513,860 (“the February order”). The February order was subsequently varied in June 2008 by D1’s letter dated 18 June 2008 whereby the number of projectors to be supplied was revised upwards to 2390 projectors, and the price was adjusted downwards to US$586.77 per unit (“the June order”). The aggregate price of the June order was US$1,402,380.30. NEC purchased the projectors from Mitsubishi Asia Pte Ltd (“MEA”), and delivery of the projectors was made in June 2008 directly to KUB Telekomunikasi Sdn Bhd (“KUB”), the end purchaser in Malaysia, whose vendor, HTI Industries Sdn Bhd (“HTI”) had issued a purchase order for the projectors to D1. NEC pleaded that the delivery in June 2008 was made with the knowledge of D1 and D3 who, in any event, never objected to the delivery at the material time. Furthermore, D3 had in a letter dated 12 August 2008, typed on the letterhead of Comat Academy Sdn Bhd (“Comat”), thanked NEC for its prompt delivery and acknowledged that the customer KUB had received the projectors.

As the projectors had been delivered, NEC asked D1 for payment on 18 June 2008. D3 informed NEC that D1’s finance director was not in the office to sign the cheque. NEC acceded to D3’s request to collect the cheque at a later date. On 21 June 2008, NEC received D2’s cheque for the sum of S$1,917,054 (which was the Singapore dollar equivalent of US$1,402,380.30) post-dated to 8 August 2008. NEC’s Vice-President Enterprise Business Group, Job Chan Siang Hong (Job”) explained that D1 was not charged GST.¹ Hence, the figure of S$1,917,054 was without the GST component. D2’s cheque signed by D3 was for payment of 2390 projectors but payment was stopped by D3 who had refused to pay for the projectors. NEC presented D2’s cheque for payment but it was dishonoured. NEC sued for payment on 22 June 2009.

HTI was the parent company of Comat. At all material times, D3 was a shareholder and director of HTI. He was also a director of Comat. D3 was also the sole shareholder and director of D1 as well as the sole shareholder and a director of D2 from 6 September 1996 to 24 August 2008.

NEC’s main argument against D3 is that the latter used the companies controlled by him interchangeably, including D1 and D2 to contract, to acknowledge receipt of the projectors and to make payment. D3 was the key person in the transaction with NEC and he had treated D1 as his alter ego. As such, D3 cannot rely on the doctrine of separate legal personality of a company to escape from his personal liability to pay NEC for the projectors. The claim against D2 is for the amount of the dishonoured cheque.

D3 and D2’s arguments

D3 and D2 do not dispute that the projectors were delivered to KUB, and that KUB had paid HTI for the projectors. It was also not disputed that after the projectors were delivered, HTI e-mailed its purchase order to D1. The e-mail also explained that D1 as purchaser would be required to issue its purchase order to NEC.

D3 advanced several reasons for D1’s refusal to pay for the projectors.

First, there was no contractual relationship between NEC and D1 or D3. The contract for the supply of projectors was between MEA and Comat. Second, if there was a contract with NEC, it was between NEC and Comat. D3’s position is that the order in June 2008 was meant to be an entirely new contract between NEC and Comat, and not a variation of the order in February 2008. Third, even if, the contract was between NEC and D1, D3’s case is that there were no orders from the Malaysian companies in February 2008, and therefore the documents generated and signed in relation to the alleged February order were “invalid”. The projectors were never delivered to D1 in February 2008, and NEC’s recognition of the February order as a completed transaction was an “illegal” attempt by NEC to increase its revenue for the fiscal year ended 31 March 2008. NEC also backdated documents in respect of the June order so as to tie in that order with the revenues booked in March 2008 for the earlier February order. In the circumstances, NEC should not be allowed to enforce an illegal contract. Four, if the contract was between NEC and D1, NEC’s claim for payment of US$1,402,380.30 should be disallowed as it had breached the contract in several ways: (a) delivered the projectors without D1’s prior instructions, (b) failed to satisfy the User Acceptance Test (“UAT”), and (c) failed to send invoices for the projectors to D1. Five, even if there was a valid contract between D1 and NEC, and this contract had been duly performed by NEC, D1 was the party responsible to make payment to NEC, and not D3 personally.

D2’s defence, not surprisingly, overlaps significantly with D3’s, and the first four arguments raised by D3 above at [9] apply with equal force to D2’s defence.

The Defence pleaded other matters which are, in my view, peripheral, irrelevant and, at times, misconceived. I therefore say no more and will quickly move on to what I see are the main issues in dispute.

The supply of projectors and identity of the contracting parties Overview

It is helpful to begin by providing the material facts to the dispute which is best done by identifying the various individuals and companies that are involved. I shall make findings of fact in the course of the narrative below. It will be evident from the narrative and evidence before me that there is no basis, and hence no merit in D3’s contention that the contractual relationship for the supply of projectors was between either MEA and Comat, or NEC and Comat. The four-party “pass-through deal”, which is explained below, was acknowledged by D3 in his affidavit evidence-in chief and during cross-examination where he accepted that the pass-through deal was between NEC and D1.² For the reasons explained below, for there to be a pass-through deal between MEA and NEC, D1’s involvement was critical. From this perspective, there had to be a contractual relationship between NEC and D1 rather than with any Malaysian entity. On a related note, it is not disputed that some of the documentation relating to four-party pass-through transaction had been backdated. They are all found in the Agreed Bundle where the authenticity of the documents had been agreed. It is too late for D3 to take issue with a document’s authenticity on grounds of backdating or signature.

Analysis of the material facts and conclusions

It all began in January 2008. At that time, NEC’s sales manager, Shawn Chia Lai Poh (“Shawn”), met D3, Faisal Alsagoff, in MEA’s offices at Alexandra Road. Michael Woo (“Michael”), the General Manager of the Visual Imaging Division of MEA made the introductions. D3 was introduced as a director of HTI and Comat. On that occasion, Shawn heard about the PPSMI (Learning Programme for Science, Math and English) project. D3 explained that HTI and Comat would be tendering for the PPSMI project through two bidding parties. The plan was for HTI to manage KUB as one bidding party. The other bidding party, MIMOS (a Malaysian government-linked company), would be managed by Comat. According to D3, the PPSMI project would involve, inter alia, the supply of Mitsubishi projectors. Shawn was told by Michael that for NEC to participate in the supply of Mitsubishi projectors, Comat would have to be persuaded that NEC could add value to the PPSMI deal. Michael agreed to “pass the deal” through NEC provided the latter accepted (a) transfer of title to the projectors, (b) assumed timely payment of the projectors to MEA, and (c) issued a performance bond to either KUB or MIMOS (both were the Malaysian purchasing party acting on behalf of either HTI or Comat) depending on whether KUB or MIMOS were the purchasers. NEC agreed to Michael’s stipulations. However, it later transpired that NEC Singapore was not in a position to contract directly with Malaysian entities – HTI and Comat were Malaysian companies. I understand that there is NEC Malaysia and NEC Singapore, and each NEC entity is responsible for its respective geographical markets. As such, NEC Singapore was obliged by its corporate policy to conduct business with entities in Singapore. This corporate “impediment” highlighted the importance of D1 in the commercial scheme/arrangement that was put in place in relation to the supply of the projectors for PPSMI project by MEA, NEC, D1, and HTI/Comat.

Specifically, D1, a Singapore company was, and I so find, interposed in the supply of the projectors. Evidentially, I find that D1 was an important and an indispensible link in MEA’s contract to supply its projectors to NEC, and down the line from NEC to D1 and D1 to either Comat or HTI depending on which Malaysian...