Win Line (UK) Ltd v Masterpart (Singapore) Pte Ltd and Another

CourtHigh Court (Singapore)
Judgment Date16 April 1999
Docket NumberSuit No 191 of 1997
Date16 April 1999
Win Line (UK) Ltd
Masterpart (Singapore) Pte Ltd and another

[1999] SGHC 94

Judith Prakash J

Suit No 191 of 1997

High Court

Agency–Principal–Undisclosed–Test for whether relationship of principal and agent existing–Companies–Incorporation of companies–Lifting corporate veil–Whether subsidiary could be regarded as alter ego of parent company–Whether corporate veil could be lifted for group of companies forming single economic unit–Whether companies having no common shareholders or directors could be treated as being single economic unit and thus single legal unit–Damages–Assessment–Quantum of damages for breach of charterparty–Mitigation–Vessel engaged under substitute charter–Method of assessment of damages

The first defendant (“Masterpart”) had two directors who were also employees of the second defendant (“D & M”). Masterpart had a separate registered address from D & M but shared the same office premises. The two companies then entered into a “parallel supply” agreement whereby Masterpart did business with D & M's financial backing and also business which D & M could not do. In return, D & M paid 0.1% of its annual turnover to Masterpart as consideration for the business done on its behalf.

Masterpart chartered a vessel owned by the plaintiff (“Win Line”). The charter contract listed Masterpart as one of the group companies of D & M. While the vessel was waiting to be loaded, Masterpart encountered problems and informed Win Line that it was not interested in the vessel. Win Line accepted this as repudiation of the charter contract and it then looked for alternative employment for the vessel. It sued both defendants for losses suffered due to the long detention of the vessel and the breach of the charterparty. It alleged that (a) Masterpart was only the nominal charterer and was a sham and/or the alter ego of D & M, (b) both companies were at all material times run as a single corporate entity and were therefore jointly liable for the breach, and (c) D & M was the undisclosed principal of Masterpart in the charterparty.

The issues before the court were whether Win Line's suit against D & M could be maintained, and the quantum of damages Win Line was entitled to.

Held, allowing the claim against Masterpart and dismissing the claim against D & M:

(1) The agency relationship could only be established by the consent of the principal and the agent. Consent was deemed if they agreed to what amounted in law to such a relationship, even if they did not recognise it themselves and even if they professed to disclaim it. However, consent had to be given either expressly or impliedly through words and conduct. Masterpart's contention that the agency relationship was a sham was illogical as the relationship depended on the existence of two separate legal entities. If despite appearances the two separate entities involved were actually one and the same, then no question of agency could arise. Hence, if Masterpart was a façade, it could not have been an agent: at [22] and [23].

(2) Even if Masterpart could be considered to be D & M's agent in relation to the parallel supply contracts, it did not mean that the same relationship existed in respect of the charterparty. The conduct of both parties showed that they were acting independently of each other, and as principals in their own right. The charterparty named Masterpart as the charterer and although it was described as one of the group companies of D & M, Masterpart did not act as agent for D & M as its undisclosed principal: at [27] and [28].

(3) D & M was not the beneficial owner of Masterpart. Masterpart had more than a nominal paid-up capital and had independent shareholders and officers who were capable of being traders and conducting business in their own right, even though they were employees of D & M. There was no legal or evidential basis to regard D & M as the alter ego of Masterpart and liable to Win Line on the charterparty: at [40] and [42].

(4) The corporate veil could be lifted if it was established that the corporate structure or transactions were a sham in that the acts done or documents executed by the parties were intended to appear to third parties that legal rights and obligations were created which were not the actual legal rights and obligations the parties intended to create: at [38].

(5) The concept of the group as a single economic entity did not justify any departure from the rule that each company in a group of companies was a separate legal entity possessed of separate legal rights and liabilities. Even where a company was a subsidiary of another, it could not be presumed that the subsidiary was the parent company's alter ego: at [43].

(6) Win Line could not sue D & M for the damages sustained by the breach of contract between them and Masterpart. Firstly, Masterpart and D & M were not a single economic unit as both had no common shareholders or directors. Secondly, D & M exercised no corporate financial control over Masterpart. Thirdly, the contracts undertaken by Masterpart with third parties were effected by its own directors. Fourthly, both companies had a mutually beneficial but economically separate business relationship: at [45].

(7) In respect of the quantum of damages to be awarded to Masterpart, the primary measure of damage in the circumstances of the case was the net freight lost by reason of the cancellation of the charter. In this regard, the following had to be ascertained: (a) the time it would have taken the vessel to perform its charter for Masterpart and whether there was any overlap between the end of this period and the period when the vessel was engaged under the substitute charter, (b) Win Line's net revenue under the charterparty, and (c) the net revenue Win Line earned during the overlapping period, on the assumption that an overlap existed during the period of the original charter and that of the substituted one: at [52].

Adams v Cape Industries plc [1990] Ch 433 (folld)

Aron Salomon (Pauper) v A Salomon and Company, Limited [1897] AC 22 (folld)

Concordie C, The [1985] 2 Lloyd's Rep 55 (folld)

DHN Food Distributors v London Borough of Tower Hamlets [1976] 1 WLR 852; [1976] 3 All ER 462 (refd)

Garnac Grain Company Incorporated v H M F Faure & Fairclough Ltd [1968] AC 1130 (folld)

Noel Bay, The [1989] 1 Lloyd's Rep 361 (folld)

Rialto, The [1998] 1 WLR 294; [1998] 1 Lloyd's Rep 322 (refd)

Liew Teck Huat and Michael Puhaindran (Niru & Co) for the plaintiff

Kelvin Fong (Lim & Lim) for the first defendant

Tan Teng Muan and Parhana Moreta (Mallal & Namazie) for the second defendant.

Judgment reserved.

Judith Prakash J

1 The plaintiffs owned a cargo vessel called Winco Mariner. This vessel was chartered by the first defendants (“Masterpart”) on 17 October 1996 to carry a cargo of parboiled rice from Kandla in the state of Gujarat, India to Colombo, Sri Lanka.

2 The vessel arrived in Kandla, a port situated in the Gulf of Kachchh on the west coast of India, on 18 October 1996 and tendered notice of readiness to the charterers. No cargo was loaded then or thereafter. On 28 November 1996, the plaintiffs were informed that Masterpart was no longer interested in the vessel. The plaintiffs accepted this as repudiation of the charter contract and looked for alternative employment, which they were able to secure within two weeks. The plaintiffs alleged, however, that they had suffered loss arising from the long detention of the vessel at Kandla and the breach of the charterparty. They therefore decided to sue.

3 This action was commenced in January 1997. It was brought not only against Masterpart but also against the second defendants (“D&M”) who the plaintiffs alleged should be responsible for Masterpart's default. They had three alternative bases for this allegation:

(a) First, although the charterparty was entered into by Masterpart, Masterpart was only the nominal charterer and was a sham and/or a mere façade and/or the alter ego of D&M.

(b) Masterpart and D&M were at all material times run as a single corporate entity and therefore must be jointly liable for the breach.

(c) Masterpart entered the charterparty as an agent of D&M and therefore D&M was the undisclosed principal in the transaction.

4 Masterpart did not deny that it had wrongfully repudiated the charter. At the beginning, it sought to rely on the arbitration clause in the charterparty contract to argue that the court had no jurisdiction to hear the plaintiffs' claim but subsequently it admitted the breach of contract and fought the action solely on the issue of quantum. D&M took the stand which it maintained throughout that it was not a party to the charter contract and that it had been wrongly sued. It was supported in this position by Masterpart who said that it alone should be held responsible for any damages arising from the breach.

5 Itherefore have two main issues to decide:

(a) whether the plaintiffs' suit against D&M can be maintained on any of the pleaded bases; and

(b) the quantum of damages to which the plaintiffs are entitled.

I will deal first with the issue of D&M's liability, if any.

D&M's position

The factual background

6 In 1991, Mr Vinod Kumar Ramgopal Didwania (“VK”) bought over D&M and gave it its present name. VK increased the paid-up capital of D&M to $5m and took up 4,999,999 of the five million issued shares. The other share was held by his wife, Mrs Nidhi Vinod Didwania. Initially, VK was also a director of the company but in early 1992, VK resigned his directorship as he was facing criminal proceedings. Mrs Didwania became a director of the company in January 1993 and in February, VK was convicted on a guilty plea and was fined. Thereafter, VK did not resume his directorship of D&M but was employed by it as a “consultant” though he described his job as being to control the sales, purchases and financing of the...

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