The Stansfield Group Pte Ltd (trading as Stansfield College and another v Consumers' Association of Singapore and another

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 18 May 2011
• Neutral Citation: [2011] SGHC 122
• Date: 2011
• Docket Number: Suit No 743 of 2007
• Published date: 07 July 2011
• Plaintiff Counsel: Gregory Vijayendran, Prakash Pillai, Sheik Umar, Sheela Kumari Devi and Charmaine Neo (Rajah & Tann LLP)
• Hearing Date: 18 January 2010,02 December 2009,11 May 2010,23 December 2010,19 January 2010,24 May 2010,15 January 2010,23 November 2009,03 December 2009,25 November 2009,30 March 2010,10 May 2010,27 August 2010,29 March 2010,20 November 2009,26 August 2010,24 November 2009,25 May 2010,26 November 2009,01 December 2009,30 November 2009
• Defendant Counsel: Cavinder Bull SC and Woo Shu Yan (Drew & Napier LLC),Lok Vi Ming SC and Koh Kia Jeng (Rodyk & Davidson LLP)
• Court: High Court (Singapore)
• Subject Matter: Contract

Judith Prakash J: Introduction

The first plaintiff is The Stansfield Group Pte Ltd. Until 3 January 2007, the first plaintiff was the owner of two private educational organisations (“PEOs”), viz Stansfield College (“Stansfield”) and Singapore Institute of Commerce (“SIC”), which offered tertiary education to local and foreign students. On 3 January 2007, the first plaintiff transferred SIC to the second plaintiff, SIC College of Business and Technology Pte Ltd. On 5 April 2008, the first plaintiff transferred Stansfield to one of its subsidiary companies, Stansfield College Group Pte Ltd. I will hereafter sometimes refer to Stansfield and SIC collectively as “the schools”.

The first defendant, Consumers’ Association of Singapore (“CASE”), is a society registered with the Registry of Societies. Its principal aim is the protection of the interests of consumers.

The second defendant is NTUC Income Insurance Co-operative Limited (“Income”). It is a co-operative society registered with the Registry of Co-operative Societies and is in the insurance business.

The plaintiffs have made claims against both defendants in tort and contract. As against CASE, their claim is for the following: a declaration that the Notices of Suspension of Case Trust Membership dated 20 November 2006 issued by CASE to the schools were unlawful and void; the sum of $107,523.84 as special damages; and damages to be assessed. As against Income, their claim is for the same amount of $107,523.84 as special damages and also for damages to be assessed.

The facts General background

One of CASE’s functions is to administer various accreditation schemes with the objective of encouraging businesses in the service and retail industries in Singapore to be more consumer-friendly and to adopt fair business practices. One such accreditation scheme is directed at the private education business and is known as CaseTrust for Education.

CaseTrust for Education was developed as part of the “Education Excellence Framework” launched by the Economic Development Board in September 2004 which was aimed at developing Singapore as a world class education hub. One important purpose of the Education Excellence Framework was to ensure that the welfare of foreign students in Singapore was protected so as to attract them to Singapore. From 1 September 2005, all PEOs in Singapore that wished to enrol foreign students had to possess a valid CaseTrust for Education membership. To ensure that this requirement was met, from that date, the Immigration and Checkpoints Authority (“ICA”) did not issue student passes to foreign students who enrolled in PEOs that were not members of CaseTrust for Education.

One of the key requirements for a PEO that wishes to acquire membership in CaseTrust for Education is that it has in place arrangements that satisfy the Student Protection Scheme (the “Scheme”). The Scheme was devised to protect foreign students against losing their tuition fees paid to a PEO by reason of the insolvency or premature closure of such PEO. There are two methods of protecting student fees under the Scheme. PEOs participating in the Scheme must either: deposit no less than 70% of each foreign student’s tuition fees in an escrow arrangement with a participating bank (“the escrow option”); or take out an insurance policy from a participating insurer to provide each foreign student with insurance coverage for no less than 70% of the tuition fees paid by the student (“the insurance option”).

At all material times, Income participated in the Scheme by providing insurance cover under the insurance option. It was the only insurer in Singapore to do so.

The first plaintiff decided to choose for the insurance option. It applied to Income for cover in late 2004. At the time of application, the first plaintiff provided Income with its audited financial statements and other information. Income then commissioned Dun & Bradstreet (Singapore) Pte Ltd (“Dun & Bradstreet”) to perform financial due diligence on the first plaintiff to determine its financial stability and assess the commercial risks of insuring Stansfield’s and SIC’s students. In late November 2004, the first plaintiff’s financial condition was found to be fair. On 1 December 2004, Income issued two separate master insurance policies, one for each of Stansfield and SIC, viz policies number 1000000021 and 1000000022 (each an “SPS policy”). The aggregate maximum insurable limit under these policies was initially $5m. It was later increased to $8m based partly on the security of two banker’s guarantees which the first plaintiff provided to Income.

Sometime in 2005, the schools applied for membership in CaseTrust for Education and were assessed by CASE’s independent assessors to determine their eligibility. During the assessment, both schools were required to furnish evidence of their participation in the Scheme. They did so by providing CASE with copies of the SPS policies. On 25 August 2005, Stansfield became an accredited member of CaseTrust for Education and SIC acquired the same status the next day.

Documentation relating to CaseTrust for Education

Various agreements and documents were presented to me as governing the relationship between CASE (as the administrator of CaseTrust for Education) and the schools (as member PEOs of CaseTrust for Education).

First, there is The Code of Practice for CaseTrust Members (“the Code of Practice”). This is a generic code that sets out the good business practices expected of members of CaseTrust. It applies generally to CaseTrust members across all industries and is not specifically designed for members of CaseTrust for Education. It does not contain any specific reference to CaseTrust for Education or the Scheme. Clause 10 of the Code of Practice sets out the sanctions that may be imposed by CASE in the event that a PEO breaches the Code or other terms and conditions of membership: 10 SANCTIONS FOR BREACH OF THIS CODE 10.1 Where CaseTrust becomes aware that a breach of this code or other terms and conditions of membership has taken place, CaseTrust will provide an opportunity for the member to answer the allegations. 10.2 If CaseTrust concludes after its independent investigation that a breach of this code has occurred, it may impose such penalties as may be specified or as may be appropriate in the circumstance, including but not limited to warnings, fines and/or expulsion or a combination of such. Expulsion if required, may be brought to the public’s attention through the media and will involve the immediate withdrawal of all the rights and privileges of a member. In this regard members will render full co-operation to the CaseTrust Secretariat in its investigation including access to information related to its investigation through documents and interviews with staff.

Second, a CaseTrust Information and Application Kit (“the Info-Kit”) was sent to the schools in 2005 when they were applying for membership in CaseTrust. The Info-Kit was also available on CASE’s website. It provides general information, forms and checklists on CaseTrust for Education and sets out the terms and conditions governing membership. It also sets out the criteria that any PEO has to meet if it wishes to become an accredited member of CaseTrust for Education.

The Info-Kit explains the importance of the Scheme to CaseTrust for Education. It states (at para 9 of Chapter 2) that a PEO that achieves CaseTrust for Education will have in place the Scheme to protect the student’s tuition fees in the event that the PEO is unable to continue operations due to adverse situations such as insolvency. The two methods of protection prescribed by the Scheme are set out in para 12 of Chapter 3 and the insurance option is explained at para 16 as follows:

The Student Tuition Fee Insurance indemnifies students for their tuition fees paid in advance to the PEO for the following events:

a. When circumstances listed in Paragraph 11 occur [ie the PEO cannot continue operations due to insolvency or regulatory closure], or

b. Upon death or total permanent disability of the student.

The Info-Kit states that a PEO must enter into an escrow arrangement or an insurance agreement under the Scheme in order to qualify for membership of CaseTrust for Education. Under “C. Practices and Systems” criterion C15 of the Info-Kit states:

Student Protect Scheme

C15. The PEO must have a Student Protection Scheme in the form of a Student Tuition Fee Account (Escrow) (Refer to Annex B for Master Escrow Agreement that PEOs and students would have to comply with) or a Student Tuition Fee Insurance (Refer to Annex C for Master Insurance Policy that PEOs would have to comply with and students would need to be signed up and be insured). Criterion C15 appears as part of a checklist intended to facilitate assessment of PEOs who are applying for accreditation The applicant PEO has to indicate in a box next to criterion C15 whether or not it has a Student Tuition Fee Account (Escrow) endorsed by CASE or whether it has a Student Tuition Fee Insurance endorsed by CASE.

The Info-Kit explains to PEOs the consequences of a breach of the terms and conditions of membership. Chapter 7 of the Info-Kit states, inter alia: 44. Members are required to maintain the CaseTrust standards as stated, among other things, in the Assessment Criteria provided. The criteria may be revised from time to time and the Members must be so bound by such. 47. In order to uphold the standards, which may be updated from time to time, set by CaseTrust, all members shall adhere to the Code of Practice and abide by penalties imposed upon breach/infringement of the Code of Practice. 49. The Applicant has been made aware of the CaseTrust Department’s empowerment to deal with breach/ infringement of the Code of Practice. Members who commit a breach/infringement shall be...