Piallo GmbH v Yafriro International Pte Ltd

• Jurisdiction: Singapore
• Judge: Belinda Ang Saw Ean J
• Judgment Date: 26 November 2013
• Neutral Citation: [2013] SGHC 260
• Court: High Court (Singapore)
• Hearing Date: 30 August 2013
• Docket Number: Suit No 354 of 2013 (Registrar’s Appeal No 222 of 2013)
• Plaintiff Counsel: Peter Doraisamy and Nur Rafizah Binte Mohamed Abdul Gaffoor (Selvam LLC)
• Defendant Counsel: Sim Chong and Loo Chieh Ling Kate (JLC Advisors LLP)
• Subject Matter: Arbitration,Stay of court proceedings
• Published date: 11 December 2013

Belinda Ang Saw Ean J:

The plaintiff, Piallo GmbH (“Piallo”), sued the defendant, Yafriro International Pte Ltd (“Yafriro”), on several dishonoured cheques on 19 April 2013. Yafriro successfully applied before an assistant registrar to stay the proceedings in favour of arbitration pursuant to s 6(1) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”) (see [2013] SGHCR 20). Piallo appealed vide Registrar’s Appeal No 222 of 2013. I dismissed the appeal on 30 August 2013, and now give the reasons for my decision.

The facts

Piallo, an Austrian company, manufactures timepieces, jewellery and accessories under the “deLaCour” brand. On 17 September 2008, it entered into a five-year distributorship agreement with Yafriro (“Distributorship Agreement”), under which the latter had the exclusive right to market, distribute and sell all collections of deLaCour watches, jewellery and accessories (“deLaCour products”) in various Asian markets for a period of five years. Article 20 of the Distributorship Agreement (“Art 20”) contained the following arbitration provision:

Article 20 Arbitration / Governing Law

20.1 Any dispute arising out of or in connection with the present contract shall be finally settled under the rules of Arbitration of the ICC Paris by one arbitrator appointed in accordance with said Rules. 20.2 The seat of arbitration is Geneva. 20.3 This contract is governed by the laws of the [sic] Switzerland. 20.4 The language of arbitration is English.

Piallo terminated the Distributorship Agreement with immediate effect before the end of the 5-year term. It was, however, unclear as to when the termination notice was given. According to Yafriro’s former lawyers, Rajah & Tann (“R&T”), the purported termination was on or about 30 October 2012.¹ However, Piallo’s termination letter of November 2012 was undated. In that November 2012 letter, Piallo cited non-compliance with the terms of the Distributorship Agreement as a reason for early termination, but Piallo stated that it would continue a working relationship with Yafriro and, as such, it would send 15 to 20 watches every month to the latter.

R&T’s letter of 4 April 2013 to Piallo’s lawyers, Selvam LLC (“the April letter”) most conveniently summarises Yafriro’s version of the events that developed after Piallo’s purported termination of the Distributorship Agreement. R&T’s narrative touched on how, when and why 15 post-dated cheques (“Cheques”) totalling a sum of S$680,198 (Singapore dollar equivalent of CHF511,210) were issued and handed over to Piallo despite Yafriro’s contentions that Piallo had breached the Distributorship Agreement in several respects. The dates of the post-dated Cheques ranged from 10 January to 30 April 2013. Paragraph 4 of the April letter reads as follows:²

Further, and without prejudice to the above, our clients had issued the cheques even before they had received all the time pieces which they ordered because they were misled by your clients into doing so. Your clients purported to wrongfully terminate the Agreement on or about 30 October 2012, which greatly aggrieved our clients. Our respective clients then engaged in negotiations in an attempt to resolve the disputes between them amicably. In the course of these negotiations, our clients indicated that, while they would insist on their exclusive right to market, distribute and sell the DE LACOUR products for the remaining term of the Agreement, they might be prepared to accept a non-exclusive distributorship arrangement after the termination of the Agreement on 17 September 2013. This was on condition that the DE LACOUR products would be ordered from, and be directly supplied by your clients to our clients, without the involvement of any intermediary. Further, the payment arrangements between our respective clients would remain the same as per the usual practice. Your clients’ Mr Alfred Terzibachian confirmed to our clients that your clients are agreeable to such an arrangement, and invited our clients to make payment of the then latest batch of time pieces by way of post-dated cheques (so that these could be presented to your clients’ bankers to free up further credit lines). As our clients were misled to believe that your clients would continue to honour their obligations for the remaining term of the Agreement and there was a consensus on the arrangement moving forward, our clients obliged and issued the post-dated cheques. However, shortly after our clients did so, your clients reneged on their position and informed our clients that, with immediate effect, all further orders for the DE LACOUR products would have to be placed through a new distributor and that payment would have to be made to the new distributor on an immediate basis (i.e. with no credit terms). In the circumstances, our clients were perfectly entitled to countermand payment on these cheques, which would not have been issued but for your clients’ misrepresentations and/or deceit.

According to Piallo, the Cheques were intended to be partial payment of deLaCour products supplied to Yafriro, and as at 21 December 2012, the total amount invoiced was CHF570,333.45 for the deLaCour products supplied between May and December 2012.³ Yafriro on its part acknowledged that it owed some money to Piallo, but it further countered that Piallo had separately breached the terms of the Distributorship Agreement, brief particulars of which were referred to in R&T’s letter of 8 March 2013 to Selvam LLC.⁴ The brief details of the alleged breaches are set out in [56] below.

Yafriro subsequently countermanded the Cheques. On 8 January 2013, before the date of the earliest post-dated cheque, Yafriro’s managing director, Mr Hew Kim Choong (“Mr Hew”) wrote:⁵

Please be informed that Yafriro will proceed to terminate the following cheques that were handed over to you:

Date	Cheque Number	Amount SGD
10 January 2013	UOB 104329	34,666
15 January 2013	BOC 322187	19,000
24 January 2013	UOB 636489	124,000
24 January 2013	UOB 724666	22,500
30 January 2013	BOC 322193	38,400
10 February 2013	UOB 104330	34,666
15 February 2013	BOC 322188	19,000
24 February 2013	UOB 724667	112,500
28 February 2013	BOC 322194	38,400
10 March 2013	UOB 104331	34,666
15 March 2013	BOC 322189	19,000
20 March 2013	BOC 322191	62,000
30 March 2013	BOC 322200	38,400
15 April 2013	BOC 322190	19,000
30 April 2013	BOC 322192	64,000

In replacement, Yafriro will make transfer of CHF50,000 within the last week of each month, starting from January 2013, as payment against outstanding amounts due.

I had personally agreed to the substantial payment schedule through series of post dated cheques over a very short period of time to support our partnership and deLaCour’s arrangement of financial facilities with banks. Unfortunately, your unexpected and premature alteration to our existing Exclusive Distribution [sic] Agreement signed on 17th September 2008 had resulted in significant damage to the sales of the brand in Yafriro as well as our credibility to our customers, making the payment schedule highly impossible.

Due to the current situation, I am obliged to make the necessary changes.

Piallo’s director, Mr Alfred Terzibachian, replied to Mr Hew in an e-mail dated 10 January 2013:⁶

As I have always mentioned during all my visits, we always said that we want to continue to work with you even though:

• Your purchases have decreased during the last 3 years: • 2010: 1450700 • 2011: 1124600 (-22%) • 2012: 687000 (-39%) • You never paid us on time and as per today you still owe us CHF 598413.--. (87% of 2012 purchases). This brought us to an untenable situation in 2012 which obliged us to sell all your cheques to our bank as I mentioned to you yesterday.

…

And to show you once more our interest to continue working with you, we have been renegotiating your cheques this whole morning with our banks. They confirmed that they cannot cancel January and February cheques but they are ready to return the cheques of March and April against new cheques as following to settle your debts:

• March 20th: CHF 50000 • April 20th: CHF 50000 • May 20th: CHF 50000 • June 20th: CHF 50000 • July 20th: CHF 44503,45.—

Total : CHF 244503,45

As soon as we receive your new cheques the old ones dated march and april will be returned (6 cheques). I hope that our efforts are appreciated in order to maintain our commercial relationship and friendship.

…

[emphasis in bold in original]

Piallo’s letter revealed that the Cheques were “sold” to its bankers. It is also apparent from an e-mail dated 31 January 2013, this time from Piallo’s financial controller, that Piallo’s bankers had presented some of the Cheques to Yafriro’s banks for payment as they became due but were unable to get payment—no doubt due to the fact that all the Cheques had been countermanded earlier. Notably, Piallo presented all but three of the remaining Cheques for payment notwithstanding Yafriro’s countermand. There was no presentation of Cheques numbered “BOC 322200”, “BOC 322190” and “BOC 322192”, and Piallo’s stance is that Yafriro’s countermand amounted to a waiver or dispensation of presentation for payment.

Piallo sued Yafriro on the dishonoured Cheques on 19 April 2013.

Application to stay the proceedings

On 9 May 2013, Yafriro filed an application to stay the proceedings in favour of arbitration under...