Ng Siew Lan v The Laundry Club Pte Ltd

• Jurisdiction: Singapore
• Judge: Lim Wee Ming
• Judgment Date: 02 February 2021
• Neutral Citation: [2021] SGDC 20
• Court: District Court (Singapore)
• Docket Number: District Court Suit No 321 of 2018, District Court Appeal No 37 of 2020
• Published date: 09 February 2021
• Year: 2021
• Hearing Date: 16 November 2020,01 October 2019,13 July 2020
• Plaintiff Counsel: Mr A Shahiran Anis bin Mohamed Ibrahim (M/s Asia Law Corporation)
• Defendant Counsel: Ms Lim Poh Choo (M/s Alan Shankar & Lim LLC)
• Subject Matter: Contract,Contractual terms,Breach
• Citation: [2021] SGDC 20

District Judge Lim Wee Ming: Introduction

The plaintiff’s claim against the defendant is for wrongful termination of a laundry franchise agreement. The defendant has a counterclaim against the plaintiff for failing to meet the gross sales target and for failing to comply with the requirements under the franchise agreement.

I dismissed both the plaintiff’s claim and the defendant’s counterclaim. The plaintiff has appealed against my decision. There is no appeal by the defendant.

Facts

The plaintiff and the defendant entered into a franchise agreement dated 26 February 2016 (“the Franchise Agreement”), whereby the defendant agreed to franchise to the plaintiff, the defendant’s laundry business at Upper Thomson Road (“the Premises”).

Less than a year into the agreement, the defendant was unhappy about mistakes made by the plaintiff in operating the shop and her extended closure of the shop over Chinese New Year. In a letter dated 24 January 2017 to the defendant, the plaintiff raised these concerns to the defendant.¹

The tagging and other mistakes

Despite that letter, the mistakes continued. On 6 March 2017, the defendant sent a further letter to the plaintiff,² listing down the following mistakes that had been consistently made by the plaintiff: Tagging mistakes. Failing to pre-check laundry for pre-existing tears, damaged fabric and missing buttons. Failing to indicate description and brand. Illegibility of handwriting. Failing to inform customers of potential risk of damage.

According to the defendant’s director, Lee Kee Yang, shortly thereafter, the plaintiff told him that “she wanted to terminate the Franchise Agreement due to her poor health”.³

From June to September 2017, the parties negotiated for the early termination of the Franchise Agreement. The defendant sent a draft early termination agreement to the plaintiff, but this was not accepted by the plaintiff.

Termination of the Franchise Agreement

Subsequently, the plaintiff received a letter dated 14 October 2017 from the defendant’s solicitors, M/s Alan Shankar & Lim LLC stating: That the plaintiff had failed to follow the proper procedure when tagging and carrying out preliminary checks on customers’ clothes, and failing to indicate the description and brand of the items sent to the outlet, in breach of clause 5(e) of the Franchise Agreement which stipulates that the plaintiff is to “operate the Business strictly in accordance with the provisions of the Operating Manual and to conform in all respect[s] and at all times with the System as modified from time to time”. Pursuant to clause 12 of the Franchise Agreement, the plaintiff was given notice to terminate the Franchise Agreement and that the plaintiff’s “last day as [the defendant’s] franchisee at the Premises is 20 October 2017” (emphasis in original).⁴

Clause 12(a)(i) of the Franchise Agreement provides that the defendant may terminate the Franchise Agreement by:

… giving the [plaintiff] seven (7) days prior written [notice] if the Franchisee has failed to make any payment under this Agreement … or breaches or is unable to perform any of its duties or obligations under this Agreement or the Operating Manual, and this Agreement shall terminate upon the expiry of such notice period …

On 1 November 2017, the defendant re-entered and took over possession of the Premises.

In a letter dated 19 January 2018 from the plaintiff’s solicitors to the defendant,⁵ the plaintiff stated: That she viewed the defendant’s actions as repudiating the Franchise Agreement and that the plaintiff elected to rescind the Franchise Agreement. That the plaintiff would commence legal proceedings for a refund of monies paid under the Franchise Agreement and for losses incurred from repudiation of the Franchise Agreement.

Thereafter, the plaintiff commenced the action herein against the defendant. The defendant filed a counterclaim against the plaintiff for breach of the Franchise Agreement in failing to follow proper procedures in tagging and carrying out preliminary checks on customers’ clothes, and failing to indicate the description and brands of the items sent to the plaintiff’s outlet.⁶

Almost a year later, the defendant amended its counterclaim to: Include an additional claim against the defendant for failing to meet the gross sales target of $15,000 per month set out in the Franchise Agreement.⁷ The defendant quantified this claim in the sum of $59,376.74. Quantify its claim against the plaintiff for failing to follow proper procedures in the sum of $900, for the loss of a customer’s wedding jacket.

Issues

The key issues are as follows: In relation to the plaintiff’s claim: Whether the defendant had wrongfully terminated the Franchise Agreement through its notice of termination dated 14 October 2017. If so, the losses if any, proven by the plaintiff. In relation to the defendant’s counterclaim: Whether the plaintiff was required to fulfil the gross sales target. Whether the defendant has proven its claim of $900 against the plaintiff, for the loss of the customer’s wedding jacket.

Plaintiff’s claim

The plaintiff claims that the defendant had wrongfully terminated the Franchise Agreement and claims the following from the defendant: Refund of various sums paid to the defendant under the Franchise Agreement. Loss of earnings as a result of the wrongful termination.

Whether the defendant wrongfully terminated the Franchise Agreement

The plaintiff’s claim against the defendant is on the basis that the defendant had acted in repudiatory breach of the Franchise Agreement between the parties, by terminating the Franchise Agreement in the letter dated 14 October 2017. Under that letter, the defendant claimed that the plaintiff had breached clause 5(e) of the Franchise Agreement, by failing to follow the proper procedure when tagging and carrying out preliminary checks on customer’s clothes, and failing to indicate the description and brands of items sent to the outlet.

The plaintiff’s position is that the defendant had failed to give the plaintiff the requisite seven days’ prior written notice, stipulated under clause 12(a)(i) of the Franchise Agreement as the aforesaid letter was dated 14 October 2017, but the letter stated that the plaintiff’s “last day as [the defendant’s] franchisee … is 20 October 2017”, six days after the aforesaid letter, rather than the seven days stipulated under clause 12(a)(i).

The defendant’s position is that the day of the notice itself should be counted in computing whether the seven days had lapsed.

In Engineering Construction Pte Ltd v Attorney-General and another [1997] 2 SLR (R) 392, the High Court held at [48], that a period of “seven days from the date of the notice” as specified in the notice of 18 April 1992 would end on 25 April 1992. Accordingly, under clause 12(a)(i) of the Franchise Agreement, the seven days’ notice dated 14 October 2017, expires on 21 October 2017.

The defendant has raised the argument that clause 12(a) does not require the defendant to calculate and inform the plaintiff of her last day.⁸ However, the defendant has done so in this case. Furthermore, the defendant’s Defence and Counterclaim (Amendment No 2) at [12] and [13], expressly states that the plaintiff’s last day was 20 October 2017. In providing that the plaintiff’s last day was 20 October 2017 in its termination letter of 14 October 2017, the defendant terminated the Franchise Agreement prematurely, prior to the expiry of the seven days required under clause 12(a)(i) of the Franchise Agreement.

In the premises, I found that the defendant had wrongfully terminated the Franchise Agreement on 20 October 2017, prior to the expiry of the seven days’ notice stipulated under clause 12(a)(i) of the Franchise Agreement.

The plaintiff has the following two heads of claim against the defendant:⁹ Refund of all monies paid by the plaintiff, pursuant to Schedule III of the Franchise Agreement amounting to $33,320 (wrongly referred to by the plaintiff in her Statement of Claim (Amendment No 1) at [12(a)] as Schedule II) (“the Refund Claim”). Loss of earnings from the repudiation of the Franchise Agreement, amounting to $7,700 per month for a period of 16 months from November 2017 to February 2019, amounting to $123,200 (“the Loss of Earnings Claim”).

The Refund Claim

For the Refund Claim, the breakdown of the sum of $33,320 was not provided in the plaintiff’s statement of claim, but was provided by the defendant in its defence.¹⁰ The breakdown of the Refund Claim is as follows: Franchise Fee of $20,000. Processing Fee of $1,000. Security Deposit of $9,240. Admin Fee of $3,080.

With respect to the Franchise Fee of $20,000, the plaintiff is not entitled to a refund as clause 17(a)(i) of the Franchise Agreement, expressly provides that the Franchise Fee is non-refundable.¹¹

With respect to the Processing Fee of $1,000, the defendant’s position is that this sum was never paid and has a counterclaim for this sum. The plaintiff does not state in her affidavit of evidence-in-chief that this sum was paid. No evidence has been adduced from the plaintiff that this sum was paid. In contrast, the defendant’s Lee Kee Yang states in his affidavit of evidence-in-chief that “As for the $1,000.00 processing fee purportedly paid by the Plaintiff … the Plaintiff did not pay the sum of $1,000.00 to the Defendants at all.”¹²

In any event, the description “Processing Fee”, suggests that this is a fee imposed by the defendant for processing the Franchise Agreement. In the premises, this claim was rejected.

With respect to the Security Deposit of $9,240, the defendant’s position is that pursuant to clause 17(a)(iii) of the Franchise Agreement, the plaintiff is not entitled to the refund of the Security Deposit due to her breaches of the Franchise Agreement.¹³ The clause provides that the...