Supercars Lorinser Pte Ltd and another v Benzline Auto Pte Ltd

• Jurisdiction: Singapore
• Judge: Aedit Abdullah JC
• Judgment Date: 23 December 2016
• Neutral Citation: [2016] SGHC 281
• Citation: [2016] SGHC 281
• Court: High Court (Singapore)
• Published date: 13 January 2018
• Docket Number: Suit No 957 of 2014
• Plaintiff Counsel: Ho May Kim and Harry Zheng (Selvam LLC)
• Defendant Counsel: Leslie Yeo (Sterling Law Corporation)
• Subject Matter: Contract,formation,Restitution,change of position,failure of consideration,total failure of consideration
• Hearing Date: 17 May 2016,11 May 2016,22 June 2016,10 May 2016,19 May 2016,18 May 2016

Aedit Abdullah JC: Introduction

This case concerned the claim for repayment of a sum of money paid ahead of the entry by the parties into an exclusive dealership agreement concerning modified cars. The Plaintiffs claimed back the money for failure of basis as the agreement was not in fact entered into. The Defendant claimed that the money was paid for a specific order of cars separately from the exclusive dealership agreement. It also brought a counterclaim for amounts payable to them under the contract, which I set out at [9] below. On the evidence before me, I found for the Plaintiffs for failure of basis. I also dismissed the Defendant’s counterclaim. The Defendant has now appealed.

Background

The 1st Plaintiff was incorporated by the 2nd Plaintiff, a company in the business of selling cars, with a view to conducting the sub-distribution of Mercedes Benz vehicles modified by Sportservice Lorinser Sportliche Autoausrustung GmbH (“Lorinser”). The Defendant, Benzline Auto Pte Limited, held the master dealer rights in Singapore for the cars modified by Lorinser. Before 2013, such cars brought into Singapore were regarded as parallel imports, which meant they did not come with service warranties from the authorised dealer for Mercedes Benz, and thus the Defendant had to provide warranty services itself. The Defendant did not actively pursue sales.

However in 2013, Lorinser was in discussions with the manufacturer of Mercedes Benz to extend the warranties in Singapore to Lorinser modified Mercedes Benz cars. This made the Lorinser cars more attractive, and made its sales attractive as well.

The Plaintiffs’ director, Mr Chua Yeow Kang (“Marcus Chua”), came to know of the opportunity this presented through the Defendant’s then sales manager, Mr Chong Ban Cheong (“George Chong”). Discussions ensued primarily between Marcus Chua on the one hand, and the Defendant’s director, Mr Ng Seng Keong (“Kevin Ng”). At times, the principal of Lorinser, Mr Marcus Lorinser, and Lorinser’s sales manager, Mr Evangelos Hatzikoitsis (“Evan”), were also involved either in face to face or email discussions with the Defendant and Plaintiffs. However, neither person from Lorinser were called as witnesses.

The parties discussed entering an agreement for the exclusive distribution of the Lorinser cars. There was however at trial, controversy as to which of the Plaintiffs was to be party to the agreement, with the Defendant denying knowledge of the existence of the 1st Plaintiff. There was also some discussion about the distribution of cars in the region, particularly in Thailand. The Plaintiffs deny anything was agreed involving them in respect of Thailand; the Defendant included losses from Thailand as part of their counterclaim.

While the discussions and negotiations as to the exclusive distribution agreement were going on, Lorinser sought through the Defendant, and on occasion in direct communications with Marcus Chua orders for Lorinser cars. There was some evidence that the target or the allocation for Singapore was about 100 cars. The purpose of the orders was in dispute: the Plaintiffs argued that this was only for planning, and was linked to the agreement being completed; the Defendant on the other hand argued that that these were firm orders.

On 22 January 2014, a payment of $300,000 was made by Mr Yu Ming Yong (“Yu”), a shareholder and adviser to the Plaintiffs, to the Defendant. The circumstances under which this payment was made was disputed. The Plaintiffs said that this payment was dependent on the exclusive dealership being entered into; the Defendant contended that this was payment for an order of 30 cars made separately from the distributorship agreement.

Thereafter, discussions about the exclusive dealership agreement continued. While a draft was sent as early as 24 January 2014, there was no agreement reached. Eventually, by May 2014, the relationship between the parties had deteriorated: the Plaintiffs said that the Defendant had approached Regal Motors Pte Ltd (“Regal”) or an associated entity be appointed the exclusive dealer. The Plaintiffs thus sought the repayment of the $300,000.

The Defendant counterclaimed for the costs of the 30 cars it said were ordered, the loss of commission on cars that were to be sold in Singapore as well as Thailand, the cost of a sales order for Lorinser parts made by the Plaintiffs, and specific performance of the 30 cars ordered (with allowance for cars already sold).

Plaintiffs’ Cases

According to the Plaintiffs, the $300,000 was paid on the basis that the Defendant would appoint the Plaintiffs as the exclusive authorised sub-dealer of Lorinser cars. Similarly, the planning orders and the orders that were made for the 30 cars in total were also made on that basis. As it was the contract was not concluded. Thus the $300,000 should be returned.

The Defendants were aware that the 2nd Plaintiffs would set up a new company to handle the Lorinser sub-dealership: ie, the 1st Plaintiff. The Defendant’s director and sole witness had actually agreed, that the $300,000 was a pre-contractual deposit on the basis that Supercars would be appointed exclusive sub-dealers. There was total failure of consideration as no contract was in fact entered into. Here, there was no contract concluded as the Plaintiffs were not appointed exclusive sub-dealers, and in fact Regal was instead so appointed. The Defendant failed to appoint the Plaintiffs as the exclusive sub dealer and had in fact decided not to appoint the Plaintiff by May 2014. There was only a sample contract exchanged in January 2014. Negotiations continued into April and May that year. But by that month, the Defendant had chosen not to deal with the Plaintiffs, and decided not to appoint the Plaintiffs as the sub-dealer. Terms were still being negotiated. While the Defendant argued that the $300,000 was non-refundable, this was on the basis of a term in the sales order that was not accepted nor agreed to by the Plaintiffs.

The Defendant’s counterclaim should be dismissed as no loss or damage was actually suffered. The 30 cars were in fact sold on to Regal. In addition, the claim on a sales order dated 2 April 2014 was a claim that overlapped with the claim in respect of the 30 cars. That sales order was not in any event accepted by the Plaintiffs, and contained various errors. The evidence from Kevin Ng was also that the Defendant had confirmed the second and third orders on their own. In any event, the orders made by Supercars were on the basis of their appointment as exclusive sub-dealers.

As for the counterclaim for the balance purchase price, this was not supported by the evidence at all. The orders were conditional on the appointment of the Plaintiff as the exclusive sub-dealer; this did not come to pass, so the orders were not binding on the Plaintiffs. Regal had also taken the 30 car orders over, so the Defendants avoided loss. In cross-examination, Kevin Ng accepted that he had sold the 30 cars and thus did not have a claim against the Plaintiffs. No evidence was in any event adduced to show its loss. Only one of the various invoices was addressed to the Plaintiffs; the rest were addressed to Regal. No proper documents were adduced that would show any liability by the Plaintiffs. No evidence was shown either that the Defendants had paid on the invoices sent to them. What was more, the counterclaim was only made one year after the Plaintiffs sought the return of their $300,000.

The Defendants had also erred in claiming both expectation and reliance loss: they had to choose one or the other: either the loss of commission or the costs incurred because of the breach.

There was also no evidence that there was a binding agreement under which the Plaintiffs had agreed to sell cars in Thailand. There was no such agreement. The documentary evidence showed that there was none: Lorinser told the 1st Plaintiff that the planning orders given were only for the Singapore market, and that the 1st Plaintiff should focus on that market only.

In any event, the planning order was not binding; it was subject to the sub-dealership contract would be entered. It was a term of the sub-dealership. The evidence was also that the planning order was merely a guideline.

Nothing was agreed in respect of the Thai market. Neither should specific performance be ordered. The Defendant had entered into an exclusive sub-dealership agreement with Regal. Cars could not then be ordered by and delivered to the Plaintiffs. It was also argued that Kevin Ng had not given credible testimony. He was not a disinterested witness. His testimony suffered from various inconsistencies and evasiveness. He had also changed his testimony from what was in his affidavit.

The various arguments put forward by the Defendant portrayed the evidence wrongly and gave a misleading impression.

Defendant’s Case

The Defendants submissions primarily recounted the evidence given.

The Defendant argued that the sub-dealership and the purchase of the cars were separate. The number of cars that the Plaintiffs could commit to was a pre-requisite to the appointment as a sub-dealer. This was Yu’s understanding as shown in his evidence. Marcus Chua had actually discussed the matter with Yu and accepted that an order for 100 cars was acceptable for the year. The Plaintiff’s position that there was an oral agreement to appoint was not supported by the evidence. The reliance on an oral agreement was at odds with the Plaintiff’s case that a written agreement was being pursued. The payment of the $300,000 was made as a calculated risk by Yu, who chose to pay because of the urgency of the situation. Marcus Chua also chose to proceed without a signed agreement. Additionally, the existence of the 1st plaintiff was never raised to the Defendant. The evidence of George Chong should be disregarded as he had own agenda. As they had paid the...