PT Panasonic Gobel Indonesia v Stratech Systems Ltd

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 10 October 2008
• Neutral Citation: [2008] SGHC 172
• Docket Number: Suit No 34 of 2007
• Date: 10 October 2008
• Year: 2008
• Published date: 15 October 2008
• Plaintiff Counsel: Tan Chuan Thye, Lau Wai Ming, Gitta S Juwita, Shum Wai Keong (Wong & Leow LLC)
• Citation: [2008] SGHC 172
• Defendant Counsel: M P Kanisan and Hariprasad Ratnagopal (M P Kanisan & Partners)
• Court: High Court (Singapore)
• Subject Matter: Whether "entire agreement" clauses merged promises or assurances made in negotiations such that they had no contractual force save in so far as were reflected in Services Agreement,Civil Procedure,"Entire agreement" clauses in contract,Failing to plead relief sought from court,Plaintiff seeking repayment of all moneys paid under Services Agreement due to total failure of consideration,Rules of construction,Contract,Pleadings,Contractual terms,Whether pleading all facts necessary to establish foundation of such relief sufficient,Pre-contractual expressions of intentions and abilities by defendant not included as contractual terms in Services Agreement

10 October 2008 Judgment reserved.

Judith Prakash J:

Introduction

1 The plaintiff, PT Panasonic Gobel Indonesia (“Panasonic”), is a company incorporated in Indonesia. It is the exclusive distributor of the Panasonic and Technics brands in Indonesia and is part of the Matsushita Electric Industrial Co., Ltd group of companies based in Japan. Currently, it has 13 branch offices and 21 service stations spread throughout the Indonesian archipelago.

2 The defendant, Stratech Systems Limited (“Stratech”), is a public company incorporated in Singapore and listed on the main board of the Singapore Exchange. It is in the business of providing consultancy and professional services relating to information technology (IT).

3 Panasonic and Stratech first came into contact some time in mid-2000 when Panasonic was looking for a company in the IT business which could revamp Panasonic’s then existing information management systems. Following several meetings and presentations, Panasonic engaged Stratech to carry out a consultancy study. This was completed in December 2000 and in November 2001 Stratech and Panasonic entered into a contract (the “Services Agreement”). This was backdated to 29 June 2001. Under the Services Agreement, Stratech agreed to provide certain defined services to Panasonic.

4 In this action, Panasonic claims that it is entitled to recover damages from Stratech on two alternative bases. These are:

(a) that it had been induced to enter into the Services Agreement with Stratech by certain misrepresentations made by Stratech before the conclusion of the Services Agreement; and

(b) that Stratech had breached its obligations under the Services Agreement in that it had failed to complete the provision, customisation and implementation of the information management system that it was supposed to provide to Panasonic; that it had failed to ensure that its system met the specifications set out in the Services Agreement; and that it had also breached clause 3.1 of the Services Agreement.

5 Apart from putting forward a defence to the claim, Stratech has also filed a counterclaim. It alleges that Panasonic was in breach of its own obligations under the Services Agreement and as a result Stratech’s Implementation Schedule was delayed. In consequence, Stratech incurred loss and damage in that it had to pay for additional staff time costs, staff standby costs and additional material costs. Stratech claimed damages for these breaches.

Background

6 In 2000, Panasonic was not satisfied with the two computer systems, SIMAG and SPC 2000 (which it called the “Legacy System”) which it used to manage its data. Under the Legacy System, it was not possible to electronically transfer data from one programme to another and manual re-entry was required. This situation was not satisfactory because Panasonic’s head office was in Jakarta and its branches were spread over a large geographical area and, therefore, it took time to transfer data from these branches to the head office and vice versa. Panasonic was looking for an electronic business (“e-Business”) solution to this problem.

7 In mid 2000, Mr Rinaldi Sjarif, then Panasonic’s Director of Sales Operations and Services, met Dr David Chew, the founder of Stratech and its Executive Chairman. Having heard a description of Panasonic’s business, Dr Chew informed Mr Sjarif that an Enterprise Resource Planning (“ERP”) system would assist Panasonic. According to Mr Sjarif, Dr Chew recommended that Panasonic use a system known as the J.D. Edwards OneWorld Xe System (the “JDE system”) which he said was an open source system suitable for Panasonic’s use.

8 Shortly thereafter Stratech gave a presentation to the plaintiff on the problems faced by companies with their business processes and how e-Business solutions, built on the fundamentals of an ERP system, could resolve these problems. According to Mr Sjarif, Stratech informed Panasonic that it would only need 8 months to carry out business analysis, customisation, implementation and testing of the JDE system.

9 On 28 October 2000, Stratech provided a formal pitch to Panasonic entitled: “Transforming PT National Panasonic Gobel into a Digital Enterprise – Proposal for a Consultancy Study Leading to a Phase 1 Implementation E-Business Project” (the “Pitch document”). In the Pitch document, Stratech recommended that the Legacy System should be replaced with an ERP system. It suggested that there be a consultancy study to determine the actual cost and scope of the first project. On the face of it, Stratech was confident that the consultancy study would confirm that an ERP system was the solution for Panasonic:

“We expect the needs analysis to confirm that the first project shall be to implement an ERP system for [Panasonic]. The ERP system will establish the enterprise-wide integrated information and application e-platform on which other key e-Business systems and services will be designed and built.”

10 The Pitch document also described how an ERP system would “[attempt] to integrate all departments and functions across a company onto a single computer system that can serve all those different departments’ particular needs” and “[automate] the tasks involved in performing a business process” such that the process “moves like a bolt of lightning through the organisation”.

11 Of Stratech, the Pitch document represented, amongst others, that it was “well-positioned to be [Panasonic’s] e-Business strategy and technology partner” and that it had “the knowledge and experience of its staff” that would include “relevant experiences to address the needs of [Panasonic]”.

12 Panasonic accepted Stratech’s recommendation that there be an independent consultancy study and paid Stratech the sum of $100,000 as the consultancy fee. A month later, Stratech issued its “Enterprise Resource Planning Consultancy Phase – Section 1: Schedule and Action Plan” dated 19 December 2000 (the “Consultancy Schedule”), which set out the process and timelines under which the consultancy study was to take place. According to the Consultancy Schedule, the initial phase of the consultancy study was for Panasonic to provide written answers to the questionnaires supplied by Stratech. This was to be followed with two on-site review phases by Stratech’s personnel during which the accuracy and expectations of Stratech’s draft proposal was to be ascertained. During this time, Stratech’s personnel would be reviewing Panasonic’s business processes.

13 Consequent upon the consultancy study, Stratech issued a document entitled “Enterprise Resource Planning Consultancy Phase – Section 2: Study Result & Solution Proposal” (the “Solutions document”) on 1 February 2001. The Solutions document stated that it was the result of intensive independent study and discussion with various groups in Stratech. It also confirmed that the selection of the JDE system for Panasonic was correct because of the ease of integration with external systems and the availability of an internet access option. In the Solutions document, Stratech also stated that it would be able to customise the JDE system to meet Panasonic’s requirements. On 6 April 2001, Stratech made a presentation to Panasonic in which it summarised its findings and recommendations as set out in the Solutions document. During the presentation, Stratech gave Panasonic some slides and explanatory material (the “Presentation document”).

14 According to Mr Sjarif, as Panasonic at that time had no reason to doubt what Stratech said, it agreed to proceed on the basis of the Proposal. A second proposal was provided to Panasonic towards the end of May 2001. At that time Stratech proposed that the parties should enter into a formal contract, the Services Agreement, and a draft of the same was sent to Mr Sjarif for his review. Between May and November 2001, the parties negotiated the terms of the Services Agreement. The original proposal was for the JDE system to deal only with Panasonic’s finance and distribution requirements, but, as a result of discussions in August 2001, it was subsequently agreed that modules for Panasonic’s human resources and customer service management processes should be provided as well. To the best of Mr Sjarif’s recollection, the Services Agreement was eventually signed sometime in November 2001 but it was backdated to 29 June 2001.

15 Eventually, the contract between the parties was evidenced by three documents:

(1) the Services Agreement which sets out the substantive terms of the contract and which provides for the implementation of two modules of the JDE system;

(2) a Quotation, dated 16 November 2001, (the “Quotation”) which provides for the addition of two further modules of the JDE system; and

(3) a revised project schedule, dated 12 June 2002, which extended the deadline for Stratech’s implementation of the JDE system up to October 2002.

Under the Services Agreement, as amended by the Quotation, Stratech was to provide, customise and implement four modules of the JDE system: Finance and Distribution (“F&D module”), Purchase Sales & Inventory (“PSI module”), Customer Service Management (“CSM module”) and Human Resource Management (“HRM module”). The price payable by Panasonic for the F&D and PSI modules totalled $1,988,000 and the price payable for the other two modules came to $788,000. It can be seen that Stratech would be earning a substantial amount in respect of its services to Panasonic.

16 The provision, customisation and implementation of the JDE system were originally scheduled to commence on 19 November 2001 and to be completed in 41 weeks ie by August 2002. In June 2002, however, Stratech asked for an extension of two months in which to complete the project. The parties had a meeting on 12 June 2002 during which this extension was discussed. According to the minutes of the meeting produced by Stratech, Panasonic was informed that Stratech required the extension because of the scope of...