EBS Flow Control Ltd v Greene, Tweed & Co Pte Ltd [2024] SGHC 147

Background

From 2016 to 2020, the Claimant (“EBS”) and the Defendant (“GT”) entered into yearly distributorship agreements (“2016 DA”, “2017 DA”, “2018 DA”, “2019 DA”, and “2020 DA”, collectively “DAs”), whereby GT sold industrial products and materials to EBS for EBS to sell in China.

This dispute turns on the proper construction of the 2020 DA.

The 2020 DA was entered into on 12 August 2020, and was expressly made effective for one year. On 29 June 2021 (ie, 44 days before the 2020 DA was due to expire) GT sent a notice (“the GT Notice”) to EBS informing them of its intention “not to renew or extend the [2020 DA]” after 12 August 2021. When the 2020 DA purportedly expired on 12 August 2021, EBS still held about US$2.8m worth of products. After 12 August 2021, GT delivered products worth about US$2.8m to EBS – on the basis that they were “pursuant to purchase orders that EBS had submitted, and which GT had accepted prior to the expiry of the 2020 DA on 12 August 2021”. This ultimately left EBS with an inventory of products worth approximately US$5.6m (“the Leftover Inventory”), which EBS claimed it was unable to sell given that its distributorship rights had been terminated.

On 19 January 2024, EBS brought this application, claiming that:

(a) GT wrongfully terminated the 2020 DA by failing to comply with an express term of the 2020 DA to provide 90 days’ notice of its intention not to renew and/or allow the 2020 DA to expire; and

(b) GT is in breach of an implied term of the 2020 DA that GT is obliged to buyback the Leftover Inventory upon termination of the 2020 DA (the “Implied Term”).

GT brought a counterclaim for unpaid invoices in respect of products sold to EBS amounting to US$182,087.20.

Issues to be determined

The issues are:

(a) Whether GT wrongfully terminated the 2020 DA?

(b) Whether the Implied Term exists?

(c) Whether GT’s counterclaim should be allowed?

Wrongful termination

The 2020 DA contains the following clause (the “2020 Term Clause”):

The GT Notice states:

It is not in dispute that the GT Notice was issued 44 days before the 2020 DA was due to expire on 12 August 2021.

Parties’ interpretation of the 2020 Term Clause

EBS’ interpretation

EBS argues that the 2020 Term Clause obliges GT to provide EBS with at least 90 days’ notice of its intention not to renew the 2020 DA and/or to allow it to expire, and GT’s failure to give such notice had the effect of automatically renewing the 2020 DA for another year. GT’s Notice therefore amounted to a wrongful termination of the 2020 DA.

In support of this interpretation, EBS raises the following:

(a) The plain reading of the 2020 Term Clause states that a party is required to give 90 days’ written notice to inform the other party of its “intention not to renew and/or allow the [2020 DA] to expire”, and this must mean that parties intended for the automatic renewal of the 2020 DA if such notice is not given.

(b) The 2020 Term Clause does not allow for early termination of the 2020 DA before the expiry of its one-year term. In other words, even if notice is given at the start of the contract, parties would still only be able to terminate the agreement at the end of the one-year term. EBS argues that this makes commercial sense given the significant capital outlay involved in its labour, marketing, and operational costs – it would not make sense to allow premature termination, as that would undermine EBS’ return on investment.

(c) If there is any ambiguity in the 2020 Term Clause, any reasonable doubt in its interpretation should be resolved against GT under the contra proferentum rule.

GT’s interpretation

GT’s interpretation is that the 2020 DA was only effective for one year and expired on 12 August 2021 without any requirement for notice. In other words, there is no automatic renewal, and the notice was only relevant if a party wished to terminate the 2020 DA prematurely (ie, before its one-year term was up).

In support of this interpretation, GT refers to:

(a) The plain wording of the 2020 Term Clause, where the first sentence provides that the 2020 DA was to “remain in effect for one (1) year”. The second sentence of the 2020 Term Clause which provides that if a party wished for the 2020 DA to be terminated “[d]uring this period” (ie, before the one-year mark), that party would have to provide 90 days written notice.

(b) The presence of an express automatic renewal clause in the 2019 DA, which was subsequently removed in the 2020 DA, evinced the parties’ intention to remove automatic renewal of the 2020 DA.

(c) Each year, parties entered a fresh DA on new terms, which suggests that none of them were automatically renewed. Parties had to negotiate and enter a new contract every year.

(d) The “Initial Order” and “Initial Stock” clauses in the 2020 DA which only refer to two six-month periods without providing for any subsequent periods. This reflects parties’ intention that the 2020 DA would only be in effect for a total of 12-months.

(e) Parties’ correspondence after GT’s Notice suggested that EBS themselves recognised the 2020 DA would terminate at the end of the one-year mark.

I note that the GT Notice did not purport to terminate the 2020 DA or give notice of an intention to terminate. Consistent with GT’s arguments, the GT Notice stated that the 2020 DA would expire at the end of its one-year term.

The law

The law on the interpretation of terms was summarised by the Court of Appeal (Yap Son On v Ding Pei Zhen [2017] 1 SLR 219 (“Yap Son On”) at [30]):

In ascertaining the objective intentions of the parties, “the courts must remain ever vigilant to ensure that, in interpreting a contract, extrinsic evidence is only employed to illuminate the contractual language and not as a pretext to contradict or vary it” (Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR(R) 1029 (“Zurich Insurance”) at [122]). However, if, in light of the relevant extrinsic material, “the plain language of the contract becomes ambiguous (ie, it takes on another plausible meaning) or absurd, the court will be entitled to put on the contractual term in question an interpretation which is different from that demanded by its plain language” (Zurich Insurance at [130]) – with the caveat that the meaning must still be one which “the words are reasonably adequate to convey” (see Zurich Insurance at [122]). Whether the interpretation amounts to: (a) “contradiction or variation” of the plain language; or (b) merely adopting an interpretation which is “different from that demanded by its plain language” but still within a meaning which “the words are reasonably adequate to convey” – is ultimately a question of “degree” (Zurich Insurance at [122]).

The contextual approach to contractual interpretation proceeds in two broad steps (see Zurich Insurance at [124]):

(a) the first step requires consideration of whether the extrinsic evidence sought to be adduced in aid of interpretation is admissible; and

(b) the second step is the task of interpretation itself, which involves ascertaining the meaning of expressions used in a contract, taking into account the admissible evidence.

The admissibility of extrinsic evidence

The starting point for the admissibility of extrinsic evidence in aid of interpretation is ss 93 and 94 of the Evidence Act 1893 (“EA”) which provides:

In light of the “Entire Agreement” clause in the 2020 DA which reduced the agreement to the “form of a document”, ss 93 and 94 of the EA apply. This includes s 94(f), which allows for the admission of extrinsic evidence to aid in the exercise of the interpretation (as distinguished from the contradiction, variation, addition or subtraction) of the expressions used by the parties (see Yap Son On at [41]; Zurich Insurance at [132(c)]).

However, the general admissibility of extrinsic evidence under s 94(f) EA is subject to the following restrictions:

(a) the three general requirements that the extrinsic evidence sought to be admitted must be: (a) relevant; (b) reasonably available to all the contracting parties at the time of the contract; and (c) relate to a clear or obvious context (Zurich Insurance at [125] and [132(d]); and

(b) section 95 EA which acts as an absolute bar to the admissibility of extrinsic evidence in the case of patent ambiguity (see Sembcorp Marine Ltd v PPL Holdings Pte Ltd and another and another appeal [2013] 4 SLR 193 (“Sembcorp Marine”) at [65(c)]).

The Zurich Insurance requirements

The three Zurich Insurance requirements are (Yap Son On at [53]; Zurich Insurance at [125]):

(a) First, the evidence had to be relevant. Evidence is relevant if it would affect the way in which the language of the document would have been understood by a reasonable man.

(b) Second, it must be reasonably available to all parties at the time of contracting. Given that a contract is a bilateral (or multilateral) agreement involving one or more parties, its terms can only be interpreted by reference to material which all the parties to the agreement would reasonably have had access to. In this connection, the availability of the material is measured with reference to the situation in which the parties were at the time of the contract.

(c) Third, it must relate to a clear or obvious context. Evidence relates to a clear or obvious context if it would allow the court to objectively ascertain a clearly defined or definable intention held by both parties with respect to how the contractual term in question should be interpreted.

In this regard, although there is no absolute prohibition against evidence of prior negotiations or subsequent conduct, such evidence is likely to be inadmissible for non-compliance with the Zurich Insurance requirements (Zurich Insurance at [132(d)]; Sembcorp Marine at [75]; Xia Zhengyan v Geng Changqing [2015] 3 SLR 732 (“Xia Zhengyan”) at [62] and [73]). However, a distinction should be drawn between evidence of “prior negotiations” and “antecedent contracts”. The Court of Appeal stated (MAE Engineering Ltd v Fire-Stop Marketing Services Pte Ltd [2005] 1 SLR(R) 379 (“MAE Engineering”) at [24]):

Here, GT sought to rely on two main groups of extrinsic evidence: (a) the previous editions of the DAs between 2016 to 2019; and (b) correspondence between the parties after GT’s Notice of termination.

The previous editions of the DAs satisfy the Zurich Insurance requirements. First, they are relevant as they provide historical context to the evolution of the term clauses from 2016 to 2020. Second, they were reasonably available to all parties at the time of contracting. The parties to the 2020 DA and the previous editions of the DA are identical, and the evidence suggests that the 2020 DA was adapted from the previous editions. For instance, a number of clauses in the 2020 DA contain references to “Section” numbers, which are absent in the 2020 DA itself but found in all previous editions of the DAs. Third, they relate to a clear or obvious context as they shed light on how the same parties had phrased the term clause in the past when they provided for automatic renewal. Moreover, they constitute “antecedent agreements” which are “objective fact[s] that the court should take into account as part of the ‘factual matrix’ in which the parties made their contract” (MAE Engineering at [24]).

However, the correspondence does not satisfy the Zurich Insurance requirements, as it was not reasonably available at the time of contracting.

The s 95 EA prohibition

Beyond the Zurich Insurance requirements, s 95 EA prohibits the admissibility of extrinsic evidence where there is patent ambiguity on the face of the clause itself:

In such cases, extrinsic evidence is not admissible in spite of s 94(f) EA because, “admission of such evidence would not be interpreting a contract, but making a new one” (Zurich Insurance at [76]). “On account of the inherent ambiguity or imperfection in the language or the deficiency or inconsistency of the words used, the intention of the maker of the document becomes a matter of pure speculation and the document fails” (Zurich Insurance at [76], citing Sudipto Sarkar & V R Manohar, Sarkar’s Law of Evidence (Wadhwa & Co, 16th Ed, 2007) at p 1552).

Neither party argued that s 95 EA applied in this case to exclude any extrinsic evidence. In any event, I note that “[t]he operation of s 95 is … extremely narrow” (Zurich Insurance at [76]), and there is no patent ambiguity in the 2020 Term Clause which warrants its application.

The plain language of the 2020 Term Clause

The first sentence of the 2020 Term Clause is clear and there can be no argument as to what it means:

The parties clearly intended for the 2020 DA to expire at the end of one year on 12 August 2021. The issue is whether the second sentence of the Term Clause qualified this by extending or renewing that one-year term or providing a mechanism for doing so. Given the clear and unambiguous language in the first sentence, the qualification, if any, should be clear as well.

The second sentence bears re-stating:

I make the following observations.

First, on its plain language, the second sentence is intended to give the parties a right or mechanism to terminate the 2020 DA during the one-year term, and not to renew or extend it.

Second, that right to terminate is in respect of “this Agreement”, which must be the 2020 DA with a one-year period. There is no reference to any renewed or extended agreement.

Third, there is no express right to renew or automatic renewal.

Fourth, the phrases “During this period” and “terminate this Agreement” suggest that parties intended to confer a right to terminate the 2020 DA before its expiry. However, what then to make of the phrase “of its intention not to renew and/or allow the Agreement to expire”? If the intention is to allow the parties to terminate the 2020 DA prematurely, then that phrase is redundant. GT’s counsel suggested that it may be superfluous. But if the notice expressly states that the issuer does not intend to renew the 2020 DA and/or intends to allow it to expire, it would be inconsistent that the parties then intended for that same notice to terminate the 2020 DA before its term expires. Further, there are other clauses in the 2020 DA which expressly deal with when it may be terminated prematurely, namely the clauses dealing with the parties’ breach, change of ownership, or insolvency of EBS.

Given this, I find that the second sentence does not give either party the right to terminate the 2020 DA prematurely. That does not mean that failure to give the 90-day notice automatically renews the 2020 DA. The second sentence is, at best, ambiguous and does not qualify the clear meaning and effect of the first sentence.

The extrinsic evidence

The term clauses in the previous DAs make clear that parties did not intend an automatic renewal mechanism in the 2020 DA. The term clause in the 2016 DA (“2016 Term Clause”) provides:

Similarly, the term clause in the 2017 DA (“2017 Term Clause”) provides:

Finally, the term clause in the 2019 DA (“2019 Term Clause”) provides:

The only DA (besides the 2020 DA) where parties did not provide expressly for automatic renewal was the 2018 DA (“2018 Term Clause”):

In short, the parties expressly provided for automatic renewals in the 2016 and 2017 Terms Clauses, removed it in the 2018 Term Clause, reintroduced it in the 2019 Term Clause and removed it again in the 2020 Term Clause. This is strong evidence that the parties applied their minds to the issue of renewals and included express language in the Term Clauses when they intended automatic renewals.

The objective interpretation is that parties did not intend for the 2020 DA to be automatically renewed.

Finally, EBS relies on the contra proferentum rule which allows the court to resolve any ambiguity against the person seeking to rely on the term or the person who proposed the term for inclusion in the contract (LTT Global Consultants v BMC Academy Pte Ltd [2011] 3 SLR 903 (“LTT Global”) at [56]–[57], endorsed in General Hotel Management (Singapore) Pte Ltd and another v The Wave Studio Pte Ltd and others [2023] 1 SLR 1317 at [47]). However, the courts have declined to apply the contra proferentum rule where the contract was “bilaterally negotiated” (LTT Global at [58]–[59]; Leong Hin Chuee v Citra Group Pte Ltd and others [2015] SGHC 30 at [103]–[104]).

This was not a case of a standard form contract which EBS had no choice but to take or leave (LTT Global at [59]). Although the DAs are on GT’s letterhead, each of them contains several differences. It was not EBS’ evidence that these were unilateral changes imposed by GT which they had no choice but to accept.

GT’s counsel highlighted a handwritten note signed by the Managing Director of EBS, Mr Sun, on a page in the 2018 DA dealing with EBS’ “Downstream Sales Target for FY19”:

This handwritten note suggests that parties engaged in some discussions on the terms of the 2018 DA, which suggests negotiations. Even if I put aside the evidence of negotiations, the burden lies on EBS to demonstrate the application of the contra proferentum rule and it has failed to meet that burden. In any event, given the extrinsic evidence, the parties clearly did not intend for the 2020 DA to be automatically renewed, and the contra proferentum rule does not assist EBS.

The result is that the 2020 DA was effective for one year and terminated upon its expiry. It was not automatically renewed. If follows that GT was not in breach by issuing the GT Notice or otherwise.

For completeness, I do not accept GT’s arguments at [13(c)] and [13(d)] above – that parties entered into yearly agreements and provided stock orders for 6-month periods is neutral to whether parties intended an automatic renewal.

Implied term to buyback

For the reasons below, I reject EBS’ case that the 2020 DA contains the Implied Term.

The law

The implication of terms in fact involves a three-step process (Sembcorp Marine at [101]):

(a) First, ascertain how the gap in the contract arises. Implication will be considered only if the court discerns that the gap arose because the parties did not contemplate the gap.

(b) Second, the court considers whether it is necessary in the business or commercial sense to imply a term to give the contract efficacy.

(c) Third, the court considers the specific term to be implied. This must be one which the parties, having regard to the need for business efficacy, would have responded “Oh, of course!” had the proposed term been put to them at the time of the contract. If it is not possible to find such a clear response, then, the gap persists, and the consequences of that gap ensue.

Whether there was a gap

GT argues that the Implied Term fails on the first threshold requirement as the issue is specifically dealt with in cl 16(m) of GT’s standard Terms & Conditions of Sale (“T&Cs”), which provides:

GT’s position is that the T&Cs were incorporated into the 2020 DA by way of its “Terms and Conditions” clause:

EBS claims that the T&Cs were not incorporated into the 2020 DA because it was not given a copy of the T&Cs and it was unable to access it on GT’s website via the given Uniform Resource Locator (“URL”). In any event, EBS argues that cl 16(m) is invalid or unenforceable as it is an onerous clause which GT failed to draw to its attention, and separately, that it contravenes the Unfair Contract Terms Act 1977 (“UCTA”).

Whether the T&Cs were validly incorporated into the 2020 DA

GT relies on the High Court decision of Press Automation Technology Pte Ltd v Trans-Link Exhibition Forwarding Pte Ltd [2003] 1 SLR(R) 712 (“Press Automation”) to argue that it does not have to give EBS a copy of the T&Cs or even a working link to its website which contained the T&Cs. According to Prakash J (as she then was) in Press Automation (at [39]):

In this regard, while there is no, or no admissible, evidence that the T&Cs could at the relevant time be accessed via the URL provided in the 2020 DA, GT gave evidence of the T&Cs which was in effect at the time of the 2020 DA. It is undisputed that EBS could have asked for a copy of the T&Cs, but did not.

The “Terms and Conditions” clause does not provide that the T&Cs would be incorporated only if they could be accessed via the URL. It only provides where the “then current” T&Cs could be found. There was nothing to stop EBS from asking for a copy. There is no evidence that they even attempted to access the T&Cs via the URL when they executed any of the DAs. Indeed, in Mr Sun’s affidavit filed on 19 January 2024, he said “I am also unable to locate a copy of the [T&Cs] on the [sic] GT’s website [emphasis added]” – which suggests that he only attempted to access the URL at the time he filed his affidavit.

EBS argued that I should decline to accept Press Automation and instead follow Blu-Sky Solutions Limited v Be Caring Limited [2021] EWHC 2619 (Comm) (“Blu-Sky”). In that case, the English High Court held that in order for an onerous clause to be incorporated, it first had to be brought to the attention of the other party (at [108]–[112]).

At the close of the hearing, I directed parties to address me on whether I was bound by the Court of Appeal decision of Bintai Kindenko Pte Ltd v Samsung C&T Corporation & another [2019] SGCA 39 which upheld the incorporation rule espoused by Prakash J in Press Automation (at [61]). EBS agreed that I was bound and accepts that I may not depart from Press Automation. I therefore find that the T&Cs were validly incorporated into the 2020 DA as it is a signed contract with an explicit incorporating clause.

In any event, I would have found that Blue-Sky did not apply on the facts. The subject clause in Blu-Sky was found to be onerous as it imposed an additional “administration charge” on the counter-party which was “out of all proportion to any reasonable estimate of its loss resulting from a cancellation” (at [109]). In contrast, cl 16(m) does not impose any obligation on EBS. It simply gives GT the option of buying back any goods shipped to EBS on or before the effective termination date. Further, EBS’ argument assumes cl 16(m) relieves GT of an obligation to buyback the Leftover Inventory when that obligation is the subject of the Implied Term it seeks to introduce. As I further explain below (at [62]), cl 16(m) does not leave EBS in an “impossible situation” as EBS claims, nor is it “particularly onerous”.

Whether cl 16(m) is invalid under the UCTA

EBS claims that s 7(3) of the UCTA bars the unreasonable restriction of a party’s liability through a contractual term. However, s 7(1) specifies that s 7(3) only applies to “contract terms excluding or restricting liability for breach of obligation arising by implication of law from the nature of the contract [emphasis added]”. In this regard, EBS’ argument fails as cl 16(m) does not exclude or restrict GT’s liability for breach. Like its argument that cl 16(m) is onerous, EBS’ argument presupposes that GT is under an obligation to buyback in the first place. Without first proving the existence of the Implied Term, GT is under no obligation to buyback the Leftover Inventory, and is not in breach of the 2020 DA if it refuses to do so.

Whether cl 16(m) proves that there is no gap

I therefore find that cl 16(m) was incorporated into the 2020 DA and is enforceable. However, I also find that cl 16(m) does not apply on the facts. Clause 16(m) applies “[u]pon any termination of the Distributorship by either party and for any reason [emphasis added]”. This suggests that it only applies to a situation of premature termination and not expiry (as in this case). Further, cl 16(m) is contained in GT’s standard terms, and any doubt as to its interpretation should be read against GT under the contra proferentum rule. Clause 16(m) also only applies to products shipped to EBS “on or before” the 2020 DA expired – this only covers half the Leftover Inventory (see [3] above).

Nonetheless, I agree with GT that cl 16(m) indicates that parties had applied their minds to the issue of GT buying back the Leftover Inventory. The fact that parties agreed to give GT a discretion to buyback in the circumstances covered under cl 16(m) suggests that there is no obligation on GT to buyback at all. Further, it appears logical for parties to only address the buyback issue in the event of a premature termination. In that event, EBS may be left with inventory which it may not have time to sell off before termination. Despite this, the parties agreed that GT would not have an obligation to buyback. In the case where the 2020 DA expires, EBS would know when that would happen and can make plans to deal with, or limit, their inventory before then. Clause 16(m) therefore leaves less room for this court to find in favour of the Implied Term.

In any event, even if cl 16(m) was not incorporated into the 2020 DA or is unenforceable, I find against the Implied Term as the other conditions for implication are not met.

Whether it is necessary for business efficacy

The Implied Term is not necessary for business efficacy. The law is clear that the standard for the implication of terms remains one of necessity, not reasonableness (Sembcorp Marine at [82]). The court will only imply a term “in order that a minimum of efficacy should be secured for the transaction [emphasis added]” (Sembcorp Marine at [86], citing The Moorcock (1889) 14 PD 64 at 69). This has also been described as a term without which an “honest business could not [otherwise] be carried on” or a term that is the “least onerous” one that could be implied (Sembcorp Marine at [87]).

The Implied Term does not meet this standard. Mr Sun asserted on affidavit that “EBS has not been able to sell the inventory without a ‘letter of authorization’ from GT”, without explaining why. There is nothing in the 2020 DA prohibiting EBS from selling the Leftover Inventory even after the 2020 DA has expired, and Counsel for GT confirmed that EBS is free to sell the Leftover Inventory if they wish. At the hearing, counsel for EBS accepted that there was no legal impediment to EBS selling the Leftover Inventory and clarified that the restriction was a practical one as buyers in China would not want to accept the goods without a letter of authorisation from GT which guarantees that the goods are genuine. In my view, this does not make the Implied Term necessary. There is nothing to stop EBS from selling off the Leftover Inventory at a discounted price and/or by giving their customers an indemnity as the genuineness of the products.

Further, while the Implied Term would obviously be beneficial to EBS, it makes little to no sense for GT as it entails GT accepting significant commercial risk. The 2020 DA entitles EBS to on-sell the products it purchases from GT at a price it (EBS) deems appropriate (within certain limits). The Implied Term would incentivise EBS to order more goods than it may be able to sell or sell at a profit, without taking on significant risk as GT would be obliged to buyback what EBS cannot sell. In other words, EBS enjoys the upside if the market moves in its favour, and GT bears the downside if it does not. It is difficult to imagine GT agreeing to such an outcome.

Whether parties would clearly respond “Oh, of course!”

I also find that the parties would not have clearly responded with “Oh, of course!” if an officious bystander had suggested the Implied Term to them at the time of contracting.

First, there are various express provisions in the 2020 DA which are inconsistent with the Implied Term:

(a) The “Fulfilment of Orders” clause obliges GT to fulfil orders and deliver products even after the 2020 DA is terminated. It provides that:

In essence, EBS may, after the 2020 DA expires, receive products it had ordered prior to the expiry date. It would be absurd to suggest that GT, having been compelled to fulfil those orders, would then be obliged to buyback the same. Although parties did not address me on the phrase “subject to… Section 3 above”, that would not have affected my analysis. There is no “Section 3” in the 2020 DA. In all likelihood, it is a remnant from the previous 2019 edition of the DA which contained numbered clauses. Section 3 of the 2019 DA expressly limits the circumstances in which EBS may return products to GT, which aligns with the view that parties would not have agreed to a free-standing and unrestricted obligation on the part of GT to buyback the Leftover Inventory.

(b) The “Minimum Product Purchase” clause which provides:

The intention behind this clause is to ensure GT a minimum level of sales. If GT was obliged to buyback all inventory from EBS upon termination, that may defeat GT’s right under this clause. EBS argued that this clause only allows GT to terminate the 2020 DA in the event EBS fails to meet the minimum purchase amount. Further, they highlight instances in past years where GT did not terminate the DA even though EBS failed to achieve the sales targets in those years. However, the fact that GT chose to overlook those years does not undermine the underlying intention of the clause – which is to ensure GT a minimum level of sales that it can enforce if it wishes. More importantly, EBS’ arguments do not address the inconsistency between EBS’ obligation to purchase a minimum amount of products, while at the same time imposing a contrary obligation on GT to buyback the Leftover Inventory, which may end up with EBS not meeting its minimum purchase obligation. For completeness, I accept that this clause is not inconsistent with GT being obliged to buyback anything above the minimum amount, but that is not EBS’ case.

(c) The “Initial Order” and “Initial Stock” clauses contemplate that EBS would only be holding stock for the first and second six-month period of the DA and not at its expiry:

While parties are entitled to place and fulfil orders at other times, the 2020 DA appears to contemplate that EBS would only order what is necessary for it to sell during the term of the 2020 DA, which would render the Implied Term unnecessary.

For completeness, the following clauses GT argues are inconsistent with the Implied Term, are not necessarily so:

(a) the “Return of Materials” clause deals with documents or other materials containing proprietary information;

(b) the “Return of Products” clause deals with defective goods and discontinued products; and

(c) the “Independent Contractors” clause deals with the nature of the relationship between the parties.

None of them are relevant to the Implied Term as they deal with specific matters unrelated to the Leftover Inventory.

Second, the Implied Term does not specify a reasonable timeframe within which EBS may compel GT to buyback the Leftover Inventory. This is clearly something which GT would not have agreed to. The market for GT’s products may be volatile, in that the products may fall in price or become outdated. In this regard, the Implied Term as advanced by EBS does not deal with when the Leftover Inventory was first purchased from GT. GT would not likely have given EBS the unconditional right to compel it to buyback the Leftover Inventory when the 2020 DA expired.

Further, even if the Implied Term exists, to be workable, it must require EBS to exercise its right to compel GT to buyback the Leftover Inventory within a reasonable time. It was only in or around January 2022 that EBS first raised the issue with GT to buyback the Leftover Inventory, but crucially, it did not demand that GT did so or assert the existence of the Implied Term. Instead, EBS only requested that GT consider buying back the Leftover Inventory. In two emails Mr Sun sent to GT in early 2022, he makes the following requests: “now the agreement terminated, I think GT should but [sic] these inventory back or let your new distributor to buy back [emphasis added]” and “I hope GT can take these inventories back and pay to EBS [emphasis added]” . Importantly, even though GT asked EBS on 22 February 2022 for a list of the Leftover Inventory so that GT could consider EBS’s request, EBS did not provide the list for close to one and a half years. EBS first purported to exercise its (alleged) right to demand a buyback on 19 January 2024, by filing these proceedings. This was more than two and a half years since the 2020 DA expired on 12 August 2021. In the circumstances, even if the Implied Term exists, I find that EBS had failed to exercise it within a reasonable time.

For the above reasons, I dismiss EBS’ claims.

GT’s counterclaim

Save for the defence of set-off, EBS does not dispute GT’s counterclaim of US$182,087.20 (excluding interest). However, at the hearing, EBS belatedly argued that the interest GT is claiming on the unpaid invoices are unenforceable penalties.

I do not accept that argument. The interest rates are provided in cl 2 of the T&Cs, which were validly incorporated into the 2020 DA (see [55] above):

There are two interest rates at play: (a) 2% per annum for every thirty (30) days the Buyer’s account is overdue; and (b) 1.5% per month from the due date until payment in full. These rates are compounded monthly.

The burden falls squarely on EBS to show that these interest rates are an unenforceable penalty (CLAAS Medical Centre Pte Ltd v Ng Boon Ching [2010] 2 SLR 386 at [63]). However, they failed to adduce any evidence to this end, despite being aware of the interests claimed. In GT’s affidavit filed on 27 February 2024, they brought a counterclaim for “US$$182,087.20, plus applicable interest [emphasis added]”. This was specified with reference tocl 2 of the T&Cs in GT’s written submissions filed on 30 April 2024. EBS could have applied to file a supplemental affidavit to address the interests claimed but chose to only raise the issue belatedly at the hearing on 24 May 2024. Without any evidence, EBS’ claim that the interest rates are an unenforceable penalty must fail.

In the circumstances, I allow GT’s counterclaim in full, with interest at the stipulated contractual rate.

Conclusion

In summary:

(a) GT did not wrongfully terminate the 2020 DA, as it came to an end upon the expiry of its one-year term.

(b) There is no Implied Term for GT to buyback the Leftover Inventory upon the termination of the 2020 DA.

(c) I allow GT’s counterclaim of US$182,087.20 plus interest at the rate of 2% per annum, plus interest at the rate of 1.5% per month, both compounded monthly, on:

(i) the sum of US$4,585.40 from 23 October 2021 to the date of payment;

(ii) the sum of US$1,200 from 13 November 2021 to the date of payment;

(iii) the sum of US$2,250 from 15 November 2021 to the date of payment;

(iv) the sum of US$93,720.20 from 23 January 2022 to the date of payment; and

(v) the sum of US$80,331.60 from 4 February 2022 to the date of payment.