T2 Networks Pte Ltd v Nasioncom Sdn Bhd

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 09 November 2007
• Neutral Citation: [2007] SGHC 193
• Docket Number: Suit No 484 of 2005
• Date: 09 November 2007
• Year: 2007
• Published date: 13 November 2007
• Plaintiff Counsel: Anthony Lee and Pua Lee Siang (Bih Li & Lee)
• Citation: [2007] SGHC 193
• Defendant Counsel: Jeremiah Herman, Mark Seah and Mar Seow Hwei (Rodyk & Davidson)
• Court: High Court (Singapore)
• Subject Matter: Contract,Waiver,Scope of doctrine of waiver by estoppel,Waiver by estoppel,Remedies,Consideration,Certainty of contractual terms,Contractual terms,Whether clause was a penalty clause,Agreed damages clause,Past consideration

9 November 2007 Judgment reserved.

Judith Prakash J:

Introduction

1 The plaintiff, T2 Networks Pte Ltd (“T2”), is a company incorporated in Singapore that carries on the business of providing international telecommunication services and internet access and network services to bulk-users. The defendant, Nasioncom Sdn Bhd (“NC”), is a company incorporated in Malaysia which provides telecommunication services, including broadband internet access, to corporations and home users in Malaysia.

2 T2’s claim against NC arose out of various agreements for the provision of services to NC. It claimed the sum of US$418,446.11 being the balance due for services rendered and various other sums arising by reason of the termination of the contracts between NC and T2. T2 also claimed the repayment of a loan of US$18,000 made to NC.

3 NC put in a defence and a counterclaim. The counterclaim was not only against T2 but also against two individuals namely, Lim Kai Shan (“KS Lim”) and Wang Wei who were two of the shareholders and directors of T2. The main defence was that there was a settlement agreement that precluded T2 from suing on its original claim. The counterclaim was based on an alleged provision in the settlement agreement to the effect that KS Lim and Wang Wei would procure the transfer of 51% of the issued shares in T2 to NC. There were two other defences put forward by NC. These were that T2 was not entitled to claim certain sums arising out of the termination of the contracts and, in the alternative, NC was entitled to set off against the sums claimed by T2, loans made by it to T2 for the purchase of equipment and advances granted to T2 for the purpose of its business. T2 denied that its claims had been settled or that it was liable to NC for the amounts claimed by the latter. KS Lim and Wang Wei denied having agreed to transfer shares in T2 to NC.

Background

4 The two main protagonists in the series of events that led up to this case are KS Lim and Dato Chee Kok Wing (“Dato Chee”). Dato Chee was at all material times the person who ran NC, a company that he had founded. Between 2003 and 2006, he held the title of group managing director. KS Lim had trained as a mechanical engineer and subsequently went to work for a telecommunications service provider named Telix Network Pte Ltd.

5 KS Lim was introduced to Dato Chee some time in 2002. NC was then interested in exploring ways to control the costs of its operations. KS Lim informed Dato Chee that he was experienced in the telecommunications industry and subsequently recommended changes to improve NC’s network and reduce its costs. NC was impressed and employed KS Lim as a consultant from mid-March 2003 and Wang Wei as a technical consultant from April 2003.

6 As of 2003, NC, as a network facilities and service provider in Malaysia, had existing contracts with other service providers for the purpose of routing NC’s international voice traffic and internet access services. In April or May 2003, KS Lim proposed to Dato Chee that a company be set up in Singapore to route NC’s international voice traffic and internet access out of Malaysia. This proposal was accepted and it resulted in the incorporation of T2.

7 The respective accounts of KS Lim and Dato Chee on the setting up of T2 differ somewhat. Dato Chee maintained that KS Lim said that in exchange for NC’s support in setting up T2 by giving it loans for purchase of equipment as well as for the operation of the network in Singapore, KS Lim through T2 would provide NC with services that were efficient, reliable, at more competitive rates and therefore cheaper, and of high quality. He allegedly told Dato Chee that there would be a 20% reduction in the costs of the traffic and that T2 would only charge NC the carriers’ costs plus a margin of five percent. He also said that NC would have a beneficial interest in the shares of the Singapore company to the extent of 60% thereof. It was important to Dato Chee that NC would have a controlling state in T2 since NC would have to advance substantial sum of money to T2 to fund its start up.

8 KS Lim on the other hand said that he saw a business opportunity to tap into the telecommunication market in Malaysia by being one of the service providers of NC using the cheaper services available in Singapore. He made a business proposal to Dato Chee along these lines and this proposal was evaluated by NC which concluded that the pricing was attractive enough to justify the termination of its existing service with its existing service provider. He did not make any of the representations that Dato Chee had referred to and alleged that NC’s decision to support T2 was not based on such representations.

9 T2 was incorporated on 14 May 2003. It had an authorised capital of $100,000 and a paid-up capital of $100. At the time of incorporation, the shareholders of T2 were KS Lim (45%), Wang Wei (45%) and one Eddie Lam Siew Keong (“Eddie Lam”) (10%). These three gentlemen were also the only directors of T2. None of them was NC’s nominee. On 18 November 2003, however, the directors of T2 passed a resolution appointing one Ms Liew Yueh Chyn (“Kris Liew”) as a director of the company. It was not disputed that Kris Liew was NC’s nominee. At that time she was an employee of NC and worked as Dato Chee’s personal assistant. She was also made a joint signatory in respect of the bank account that T2 had in Singapore. Ms Liew left the board some time in late 2004 and on 10 December 2004, one Lam Siew Sing (“Damien Lam”) was appointed as a director of T2. He was Ms Liew’s replacement.

10 It is convenient to mention here another person who played a somewhat mysterious role in the affairs of T2. He was present at an important meeting and his name was mentioned frequently in the correspondence and the evidence. His name is Wilson Lee and KS Lim described him as an “old friend”. Wilson Lee was not an officer or employee of T2. KS Lim asserted that Eddie Lam relied on Wilson Lee’s advice and that was why Wilson Lee was consulted about decisions involving T2. Dato Chee, on the other hand, said that it was Wilson Lee who was the beneficial owner of shares in T2 and that Eddie Lam was just a proxy for Wilson Lee. Damien Lam, however, asserted that Wilson Lee’s wife, one Doris Tai, was a shareholder of T2 and that in all matters dealing with T2 he had dealt only with KS Lim and Wilson Lee (whom he believed to have some sort of interest in T2) and that he believed KS Lim represented Wang Wei and Eddie Lam.

11 In September 2003, NC sent a draft shareholders’ agreement to KS Lim. Thereafter, there was an exchange of e-mail correspondence between KS Lim and one of NC’s employees attempting to fix a discussion about the terms of the draft. By the end of September 2003, the draft had not been finalised or agreed. Discussion on the draft seems to have lapsed thereafter. According to KS Lim, the discussions were exploratory ones relating to the possibility of NC making a capital investment in T2. No concrete plans were made and no agreement was reached.

12 T2 started operations and, from 13 October 2003, it rendered international voice routing (VOIP) services to NC. In May 2004, T2 set up internet access services for the use of NC. At that time, there were no written agreements between T2 and NC regarding the terms on which these services were being provided. Draft documents for both the VOIP services and the internet services had been provided by T2 to NC and the terms had been discussed but the documents were not signed. It was only in October 2004 that written contracts were entered into in respect of these services. The contracts were as follows:

(a) an agreement to provide internet protocol transit services and international private leased line services dated 1 October 2004 (“1^st Agreement”). Under the 1^st Agreement, T2 was to provide NC with a leased line for the purpose of internet access; and

(b) an agreement to provide VOIP services dated 11 October 2004 (“2^nd Agreement”). Under the 2^nd Agreement, NC was to direct its voice international telecommunication traffic minutes to T2 who was then to route the same to the specified destination.

13 Difficulties in the relationship between T2 and NC arose in late 2004 as a result of the delayed payment of bills by NC. By an e-mail to NC’s chief executive officer on 25 November 2004, KS Lim informed NC that its payments were being made very late and, considering that the payment for September 2004 was still outstanding, KS Lim would not be able to hold off the carriers from whom T2 itself obtained these services. He warned that there would be a decrease in capacity in the following week if no payment was made to the carriers and that there might be a disruption in the services provided if nothing was done about this matter. Thereafter, T2 was continually asking for payment to be made promptly.

14 On 13 January 2005, NC paid T2 RM200,000 (or US$52,287.58) for the invoices due in October 2004. About two weeks later, KS Lim sent an e-mail to Dato Chee in which he stated that the outstanding amount was around US$300,000 and asked for payment. NC responded by stating that it was only able to pay a further RM200,000. T2 kept on pressing NC to make not only that payment but to settle the outstanding invoices in full. There was also a lot of correspondence between Damien Lam and KS Lim in relation to the affairs of T2. In one of these exchanges, in early February 2005, Damien Lam put various questions about the operations of T2 to KS Lim and asked him what the position was regarding the execution of a transfer in respect of 51% of the shares in T2. KS Lim’s reply was “This will be completed after we finalised all the contract (sic) and agreements”. KS Lim also took the opportunity to reiterate T2’s position by stating “You have to understand we are a vendor of NC. From NC they only see us as T2. If they do not pay us [we] are not able to pay the carriers and...