The Stansfield Group Pte Ltd v Consumers' Association of Singapore

• Jurisdiction: Singapore
• Judgment Date: 18 May 2011
• Date: 18 May 2011
• Docket Number: Suit No 743 of 2007
• Court: High Court (Singapore)

The Stansfield Group Pte Ltd (trading as Stansfield College) and another

Plaintiff

and

Consumers' Association of Singapore and another

Defendant

[2011] SGHC 122

Judith Prakash J

Suit No 743 of 2007

High Court

Contract—Breach—Schools claiming wrongful suspension of Case Trust membership and insurance facilities—Whether suspension of Case Trust membership and insurance facilities was breach of contract

Tort—Inducement of breach of contract—Schools claiming that Consumers' Association of Singapore and NTUC Income Insurance Co-operative Limited induced each other to breach contractual obligations owed to plaintiffs—Whether there was inducement of breach of contract by either party

The first plaintiff, The Stansfield Group Pte Ltd, owned two private educational organisations (‘PEOs’) , viz, Stansfield College (‘Stansfield’) and Singapore Institute of Commerce (‘SIC’) , which offered tertiary education to local and foreign students. Subsequently, the first plaintiff transferred SIC to the second plaintiff, SIC College of Business and Technology Pte Ltd, and Stansfield to one of its subsidiary companies, Stansfield College Group Pte Ltd. Stansfield and SIC will be referred to as ‘the schools’.

The first defendant, Consumers' Association of Singapore (‘CASE’) , administered an accreditation scheme for private education businesses called Case Trust for Education. All PEOs in Singapore that enrolled foreign students required a valid Case Trust for Education membership. To obtain the said membership, PEOs had to satisfy a Student Protection Scheme (‘the Scheme’) devised to protect foreign students from losing tuition fees paid to a PEO by reason of insolvency or premature closing of such PEO. To participate in the Scheme, PEOs must either deposit no less than 70% of each foreign student's tuition fees in an escrow arrangement with a participating bank or take out an insurance policy for not less than 70% of the tuition fees paid by that student.

The plaintiffs chose the latter option and applied to the second defendant, NTUC Income Insurance Co-operative Limited (‘Income’) , for insurance cover in late 2004. Income issued master insurance policies for both Stansfield and SIC. On 25 August 2005, Stansfield became an accredited member of Case Trust for Education, and SIC acquired the same status the next day.

Subsequently, there were rumours regarding the plaintiff's poor financial status. CASE conducted investigations on the schools and informed Income about this. It was not disputed that Stansfield had not insured 229 students while SIC had not insured 250 students. Furthermore, Stansfield had not made any online insurance application for eight months (from March to October 2006) whilst SIC had not done so for the six months between May 2006 and October 2006. This was unusual in view of the size and scale of the plaintiffs' organisation.

On 20 October 2006, Income froze the plaintiffs' insurance facilities pending CASE's investigation. On 14 November 2006, CASE wrote to the schools about the discrepancy and asked for an explanation. The schools' explanation was that the discrepancy was an administrative oversight on the plaintiff's part and a letter was written to CASE to explain the same. CASE did not accept the explanation and suspended the plaintiffs' membership on 20 November 2006.

Thereafter, the plaintiffs took steps to rectify the discrepancies and identified the foreign students who had no insurance cover. On 10 December 2006, the plaintiffs' representatives met representatives from CASE and Income and resolved the outstanding issues. Income lifted the suspension of the insurance facilities shortly thereafter and CASE followed suit the same day.

The plaintiffs, who alleged that they suffered adverse consequences due to the suspension of their membership and the unavailability of the insurance facilities, sued both CASE and Income in contract and tort.

Held, granting the application in part:

(1) CASE did not breach its obligation under cl 10 of the Code of Practice for Case Trust Members (‘the Code’) , which governed ‘sanctions’ for a breach of the Code, and provided that Case Trust had to give a member an opportunity to be heard when it became aware of its breach. This was because the suspensions were not sanctions. The suspensions were temporary in nature and removed as soon as the necessity for their existence was removed: at [77] to [101].

(2) However, if cl 10 applied, CASE was in breach of its obligation to allow the plaintiffs to be heard. The provision of one working day to render an explanation was an insufficient opportunity for the schools to answer the allegations made.

(3) The rules of natural justice did not apply to the circumstances that faced CASE when Income suspended the schools' insurance facilities. CASE was entitled to immediately suspend the schools and hear representations later. As the administrator of Case Trust, it had the ability to take interim measures such as suspending members at short notice, to effectively ensure the Scheme was adhered to: at [112] to [122].

(4) CASE did not act unreasonably by suspending the plaintiffs. The breach was serious and the explanation given by the schools was vague. There was also nothing unreasonable when its executive unilaterally commenced an investigation into the schools' compliance with the scheme as it was her responsibility to conduct checks on whether Case Trust members had complied with the requirements.

(5) CASE was not liable to the plaintiffs in tort. It did not wrongfully and recklessly induce a breach by Income of its obligations to the plaintiffs. The contractual relationship between the plaintiff and CASE did not result in the proximity required for the imposition of the alleged duties in tort. In any event, for policy considerations, no such duties should be imposed on CASE.

(6) Income was in breach of cl 6.3 of the SPS policies, which required that notice be given to a PEO when its Maximum Insurable Limit was decreased, when it suspended the school's insurance facilities on 20 October 2006. However, when it gave the schools notice of the same on 20 November 2007, this cured the breach of cl 6.3. Thereafter there was no further breach of the clause.

(7) The plaintiffs could not establish any duty of good faith on Income's part that had to be adhered to by Income in deciding whether or not to exercise its rights under the SPS policies. Income had an unfettered right to withdraw the Maximum Insurable Limit.

(8) Income did not wrongfully and recklessly induce CASE to breach its contractual obligations to the plaintiffs. There was no element of pressure, persuasion or procurement on the part of Income directed towards CASE's contractual relations with the first plaintiff.

(9) There was no evidence of any substantial damage suffered by the first plaintiff by reason of the suspension on 20 October 2006. No one was aware that the insurance facilities were suspended on 20 October 2006 and no students withdrew because of that. The Case Trust suspension therefore had nothing to do with Income's earlier breach and by the time it came into existence, that earlier breach had been cured.

Haron bin Mundir v Singapore Amateur Athletic Association [1991] 2 SLR (R) 494; [1992] 1 SLR 18 (refd)

John v Rees [1970] Ch 345 (refd)

Paul Wallis Furnell v Whangarei High Schools Board [1973] AC 660 (refd)

R v Life Assurance Unit Trust Regulatory Organisation Ltd, ex parte Ross [1993] QB 17 (refd)

Suisse Security Bank & Trust Ltd v Governor of the Central Bank of The Bahamas [2006] 1 WLR 1660 (refd)

Gregory Vijayendran, Prakash Pillai, Sheik Umar, Sheela Kumari Devi and Charmaine Neo (Rajah & Tann LLP) for the plaintiffs

Cavinder Bull SC and Woo Shu Yan (Drew & Napier LLC) for the first defendant

Lok Vi Ming SC and Koh Kia Jeng (Rodyk & Davidson LLP) for the second defendant.

Judgment reserved.

Judith Prakash J

[Editorial note: Paragraphs 1 to 206 are summarised in the headnote while paras 77 to 101, 112 to 122 and 131 to 132 (summarised in the headnote at holdings (1) and (3) ) are reported below in full. The ‘Case (s) referred to’ in the headnote lists the cases which are referred to in the paragraphs reported below.

The complete text of the judgment (unreported version) is available on Law Net.]

...

First category of issues: was CASE in breach of the Code of Practice or the CASE-PEO agreements?

77 The issues set out in [74 (a) ] to [74 (c) ] above can be considered together because they deal with the legal implications of the Code of Practice and the CASE-PEO agreement.

78 The provisions of cl 10.1 and 10.2 of the Code of Practice are set out in [12] above. The heading above both provisions is ‘Sanctions for breach of this Code’. To paraphrase the provisions, cl 10.1 provides that when Case Trust becomes aware that a breach of the Code or of the terms and conditions of membership has taken place, it will provide an opportunity for the member to answer the allegations. Under cl 10.2, if Case Trust concludes after an independent investigation that a breach of the Code has occurred, it may impose appropriate penalties including warnings, fines and expulsion or a combination of the same.

79 CASE has denied that it was in breach of cl 10 or the CASE-PEO agreement. It says the following:

(a) cl 10 is not applicable because the suspensions were not a sanction or a penalty;

(b) cl 10 is not applicable as Stansfield and SIC were in breach of the CASE-PEO agreement and not the Code of Practice;

(c) the CASE-PEO agreement is qualified by an implied term that CASE may suspend members without an opportunity to be heard as an interim measure or due to extenuating circumstances; and

(d) in any event, CASE did not breach cl 10 as it gave Stansfield and SIC an opportunity to be heard and carried out an independent investigation.

80 Before I go on to discuss the issues...