Encyclocom Education Pty Ltd v Horizoneducom Pte Ltd

1. In this Judgment:

2. The Plaintiff EE is a company incorporated in the state of Delaware in the United States of America. Its principal business is the production and marketing of educational digital video content primarily for schools in the Asia Pacific region.

3.The Defendant Horizon is a company incorporated in Singapore. Its principal business is information technology education and training. In particular, Horizon markets and distributes materials from educational material developers like EE, Encyclopaedia Britannica and Discovery Channel.

4. Prior to mid 1999, Horizon had entered into an agreement between Electronic Education, a division of Pearson Education Inc (‘Pearson’) who were the licensors of EMG video content. The EMG content is primarily for educational purposes. Under that agreement, Horizon was appointed the exclusive distributor of EMG content in Singapore. Horizon then entered into a contract with the National Library Board (‘NLB’) to supply NLB with three bundles of EMG content which could be accessed within NLB’s physical premises only.

5. Subsequently, by a proposal dated 16 September 1999, Horizon (which was then known as Educom Pte Ltd) proposed to NLB a contract for the supply of EMG content for access from within and outside of library sites. The proposal covered seven bundles of video clips of EMG content. The first three bundles had been supplied to NLB under the earlier contract I have mentioned and would continue to be supplied under the proposal. Another four bundles were also to be supplied under the proposal. The supply to NLB would be for a 12 month subscription period. The proposal was accepted on 17 September 1999. This contract was referred to in the litigation as ‘the NLB contract’ and I will use that description as well.

6. Subsequently, Horizon also made a proposal dated 24 September 1999 to the Ministry of Education (‘MOE’) to supply video clips for access by schools through a digital media repository (‘DMR’). This proposal was accepted by MOE (although the evidence did not indicate the date of acceptance). This contract was referred to as the ‘MOE/DMR contract’ and I will refer to it as ‘the MOE contract’.

7. At the time when Horizon entered into the NLB contract and the MOE contract, it was allowed to distribute and market EMG content in Singapore through its agreement with Pearson. However, by an agreement dated 8 November 1999, Pearson granted EE an exclusive licence to distribute the EMG content. Accordingly by a Distribution Agreement (‘DA’) also dated 8 November 1999, EE appointed Horizon as the sole and exclusive distributor of EMG content in Singapore. Under the DA, Horizon would pay to EE 55% of the gross proceeds it received from licensees of EMG content.

8. Subsequent to the DA, EE set up a Singapore company known as Encyclocom Education (Singapore) Pte Ltd to allow Horizon to make payment to a Singapore entity. EE also set up KC in Singapore to develop internet based technology solutions. KC was also the Professional Management Services agent for EE in Singapore.

9. As is obvious, by the date of the DA, Horizon had already entered into the NLB contract and the MOE contract. The main disputes regarding the DA were in respect of the NLB contract and the MOE contract and I will deal with the latter first. Before I do so, I would mention that the provisions in the DA are referred to therein as ‘sections’ and not ‘clauses’. Although the parties used the latter description, I will use the former in my Judgment. As for the provisions in the NLB and MOE contracts, I will use ‘clauses’. The people who gave evidence were:

[10] EE alleged that under section 2.5 DA, Horizon had agreed not to distribute or otherwise make available any competitive educational programming product without EE’s consent. Furthermore, under clause 3.1(n) DA, Horizon was not to engage in any action or activity that would place Horizon in a position of divided loyalty or conflict of interest with respect to Horizon’s obligations to EE.

[11] According to EE, Horizon had offered to MOE Encyclopedia Britannica (‘EB’) video content under the MOE contract and EB content was a competitive product. This was a material breach and EE accordingly terminated the DA as it was allegedly entitled to do. It then sought damages from Horizon.

[12] Horizon’s position was as follows:

(a) EB content was not a competitive product.

(b) Secondly, Horizon had offered but had not actually entered into a contract with MOE.

(c) Thirdly, there was, in any event, an exception in section 2.5 DA which allowed Horizon to distribute certain competitive products listed in Exhibit C of the DA. EB was listed in Exhibit C.

(d) Fourthly, the offer of EB to MOE was not under the MOE contract.

(e) Fifthly, even if the offer of EB content was in material breach of the DA and EE was entitled to terminate it, EE had not complied with the termination provisions of the DA and hence its purported termination was not valid.

(f) Sixthly, Horizon alleged that EE’s conduct in purporting to terminate the DA constituted a repudiation of the DA and it was Horizon which had accepted the repudiation and thereby terminated the DA. Accordingly, Horizon was counterclaiming damages from EE.

[13] As regards Horizon’s reliance on the exception in clause 2.5 DA, EE took the position that while Horizon was permitted, generally, to distribute certain competitive products, including EB content, Horizon was not allowed to do so under the MOE contract because that contract was exclusively for EMG content. In turn, Horizon disputed that the MOE contract was exclusively for EMG content.

[14] Section 2.5 DA stated:

The ‘Programming’ referred to the EMG content and I will refer to the last sentence of section 2.5 as ‘the Exception’.

[15] As regards Exhibit C to the DA, it was not disputed that EB was listed therein and hence constituted an exclusion from the non-competitive provision. Therefore, it is obvious to me that the parties had agreed that EB was a competitive product and the assertion by Horizon otherwise must fail.

[16] As for section 3.1(n) DA, I am of the view that it does not assist EE because it was subject to section 2.5. It stated:

[17] As regards Horizon’s position that it had only offered EB content and had not actually entered into a contract with MOE for it, I am of the view that this distinction is not valid. Under section 2.5, Horizon had agreed not to distribute or ‘otherwise make available’ any competitive product and the making of the offer was the making available of the EB content to MOE. Besides, I do not think that it would be realistic to restrict section 2.5 to concluded contracts only.

[18] I come now to Horizon’s reliance on the Exception and its contention that its offer to MOE was not made under the MOE contract but some other contract.

[19] EE had learned that Horizon had made an oral offer of EB content to MOE and raised this with Horizon. However, Horizon initially denied that such an offer had been made. It was only subsequently that Horizon admitted the existence of the offer and belatedly that Horizon sought to suggest that the offer was made to MOE under another contract.

[20] The person who made the offer was Teo Swee Teong, who was a Senior Vice-President in charge of sales of HPIQ. He had initially denied in writing (dated 16 May 2001) the existence of the offer under the MOE contract. At that time the focus of his denial was not so much that the offer was not made under the MOE contract but that there was no offer of EB content at all.

[21] However, it is a general principle of interpretation that the subsequent conduct of either party should not be considered in construing a contract (see Lewison on The Interpretation of Contracts, Second Ed, 1997 at p 63, para 2.11, James Miller and Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583 and Schules (L.) A.G. v Wickman Machine Tool Sales Ltd [1974] AC 235).

[22] As for EE’s position that the MOE contract was for EMG content exclusively, there was nothing in the MOE contract which expressly said this. However, EE relied on various provisions to establish its position.

[23] For example, the first paragraph of clause 2.2 of Horizon’s proposal to MOE stated:

[24] Part of clause 2.3 stated:

[25] The opening part of clause 3 stated:

[26] On the other hand, Horizon relied on the second paragraph of clause 2.2 which stated:

[27] According to Roland Ong, this paragraph illustrated that the EMG content was to be used as a startup only and Horizon could subsequently offer other video content to MOE. Roland Ong also said that the price schedule for MOE was based on the number of minutes used and not on whose video content was used.

[29] However, it does not necessarily follow that because the MOE contract was exclusively for EMG content, Horizon was precluded from offering EB content to MOE. The prohibition against offering competitive products is in the DA and not in the MOE contract. The DA itself had the Exception. It seems to me that if EE had wanted to prohibit Horizon from offering EB content for the same contract or to the same licensee, this should have been expressly stated in the DA. Supposing Horizon had initially offered both EMG and EB content in a package to MOE for the DMR project, would Horizon have been in breach of the DA? I would not have thought so. Furthermore, the nature of the business was such that licensees like MOE were likely to want educational media content (whether it be on video or other means) from different publishers, whether immediately or eventually. This is reinforced by clause 2.2 of the MOE contract which stipulated that the EMG video clips were supplied as startup resources for the DMR project. By allowing the Exception without more, EE had, in my view, allowed Horizon to offer EB content for the same contract and to the same licensee. It would make no difference whether EB content was offered contemporaneously with the initial proposal for EMG content or subsequently. It would also make no difference whether EB content was offered as a variation to the MOE contract or as another separate contract to MOE.

[30] Accordingly, I am of the view that there was no breach, let alone a material breach, by Horizon in respect of this claim. However, I will also address the issue as to whether the purported termination of the DA by EE was validly executed, assuming that there was such a material breach by Horizon.

[31] The provisions of the DA on termination and notice were section 7.1 and 8.1.

[32] Section 7.1 stated:

[33] Section 8.1 stated:

[34] According to para 11 of Mr Vasu’s AEIC, Horizon had failed to pay the licence fees due to EE on invoices issued by Horizon under the NLB contract and by a notice dated 10 April 2000, EE had issued a Notice of Material Breach and Intention to Terminate Agreement. However the actual document (AB 242) shows that that was not the heading of the notice nor its intention. It was simply a Notice of Termination (instead of a Notice of Intention to Terminate) and purported to terminate the DA because of Horizon’s failure to pay EE in accordance with clause 4.1(a) DA. Thereafter, Horizon eventually made full payment by 29 May 2000 (after deducting a sum which EE agreed to on an ex gratia basis) and the parties carried on with the DA.

[35] However, Horizon again failed to pay EE on invoices issued by Horizon under the NLB contract. As a result, EE issued another notice, dated 15 February 2001, to Horizon with the heading ‘Notice of Material Breach and Intention to Terminate Agreement’. This notice stated that unless Horizon cured or corrected the material breaches identified within 12 days of the notice, EE would thereafter terminate the DA. According to para 22 of Mr Vasu’s AEIC, Horizon made payment to EE on or around March 2001 but the paragraph did not stipulate whether the payment was made before or after the expiry of the 12 days after 15 February 2001.

[36] According to para 42 to 43 of Mr Vasu’s AEIC, the MOE contract was exclusively for EMG content and Horizon was in breach of the DA by offering EB content to MOE under the MOE contract. I have dealt with these allegations above.

[37] Paragraph 44 of Mr Vasu’s AEIC continued to say that as a result of this material breach, EE issued a Notice of Material Breach and Intention to Terminate Agreement on 9 April 2001. However, there were two documents from EE to Horizon each dated 9 April 2001.

[38] The first document was a Notice of Breach of Contract and Claim for Compensation in which EE claimed, inter alia, compensation of $66,000 for Horizon’s breach for offering a competitor’s product to MOE under the MOE contract and sought the payment within 12 days. This notice in turn stated in the last sentence, ‘We enclose formal notice under the contract accordingly.’ The formal notice was the second document also dated 9 April 2001.

[39] The formal notice had the heading ‘Notice of Material Breach and Intention to Terminate Agreement’. In this notice, EE complained about the promotion of a competitor’s product and asked Horizon to cure or correct this material breach also within 12 days but did not seek compensation.

[40] According to para 45 of Mr Vasu’s AEIC, there was no response from Horizon to the 9 April 2001 notices and no action taken by Horizon. He said that on 11 May 2001, EE again issued a Notice of Material Breach and Intention to Terminate Agreement on the same grounds. However, there were again two notices each dated 11 May 2001. As in the case of the notices dated 9 April 2001, the first document dated 11 May 2001 had the heading ‘Notice of Breach of Contract and Claim for Compensation’ which claimed, inter alia, $66,000 for the breach in offering a competitor’s product and the second document dated 11 May 2001 was again headed ‘Notice of Material Breach and Intention to Terminate Agreement’ and asked Horizon to cure and correct the material breach of promoting a competitor’s product within 12 days.

[41] At the hearing, EE focussed on the second document dated 11 May 2001 to terminate the DA. I will refer to it as ‘the May Notice’. The material parts thereof stated:

[42] EE’s pleaded position in para 12 of its Amended Statement of Claim was:

[43] As regards the validity of the May Notice, Horizon’s position was that it was invalid because (a) it was not sent to the designated address as stipulated in section 8.1 DA and (b) the DA could only be validly terminated if Horizon had failed to correct or cure the material breach and EE had sent another written notice to Horizon that the material breach had not been corrected or cured within 12 days of the first notice (paras 17 and 18 of the Amended Defence and Counterclaim and para 68 of DCS). There was also the usual general denial in para 36 of the Amended Defence and Counterclaim.

[44] Horizon also pleaded that EE was in repudiatory breach of the DA and that Horizon had accepted this breach by its solicitors’ letter dated 8 October 2001. I will come back to this allegation later.

[45] As regards Horizon’s assertion that the May Notice was sent to the wrong address, EE did not dispute this but suggested, during the trial, that in any event Horizon had received the May Notice. EE’s reason as to why the Notice was sent to Block 998 #06-12/15 Toa Payoh North instead of to Block 1008 Toa Payoh North #05-01 was that EE’s representatives had attended meetings at the former, which was the address of a subsidiary of Horizon.

[46] It was not seriously disputed that Horizon had received the May Notice . It was enclosed with the Notice of Breach of Contract and Claim for Compensation also dated 11 May 2001, and, Teo Swee Teong did respond to the Claim for Compensation in his letter dated 16 May 2001 (AB 417 and 418). It was in this response that he denied offering any competitive product to MOE under the MOE contract. The response was on HPIQ’s letterhead with the address of Block 998 #06-12/15 Toa Payoh North. In these circumstances, there might have been a waiver by Horizon of the wrong address but EE did not plead a waiver. In the circumstances, I am of the view that the May Notice was invalid by reason of its failure to comply with section 8.1 DA.

[47] In any event, EE faced other obstacles regarding the validity of its termination. One of the other obstacles is the point that there should have been a second notice i.e the May Notice itself could not and did not constitute the termination. EE disagreed. I have set out section 7.1 DA in para 32 above. It seems to me that although section 7.1 was not well drafted, two notices are required under it.

[48] The first is to notify the defaulting party that it has committed a material breach of an obligation in the DA. The second is to notify the defaulting party that the material breach has not been cured or corrected within 12 days of the first notice and to terminate the DA. If the provision is construed literally, it would mean that the DA is terminated upon the giving of the first and only notice, even before 12 days have expired, and that termination will be effective so long as the breach was not subsequently cured or corrected within the 12 days. This would be like a termination subject to a condition subsequent. I do not think that that was the intention of the parties which, in my view, was the opposite i.e that the defaulting party should first be given a chance to cure or correct the material breach by the giving of a warning notice to it. Thereafter, if the breach is not cured or corrected within 12 days, then the aggrieved party has the right, but is not obliged, to terminate the DA. However, this would require a second notice to be given to terminate the DA.

[49] Furthermore, if no second notice is required, one would not know immediately after the 12 days whether the aggrieved party was taking the position that the material breach had been cured or corrected or not. In addition, if no second notice was required, then the DA would have been terminated by one of the earlier notices already, for example, by the formal notice dated 9 April 2001 and not by the May Notice.

[50] As for the May Notice itself, it stated that unless Horizon cured or corrected the material breach within 12 days of the date of the notice, EE ‘will thereafter terminate the distribution agreement’ (emphasis added and see para 41 above). This suggested that an active step would be taken by EE to terminate the DA. In addition, the heading of the Notice was ‘Notice of Material Breach and Intention to Terminate Agreement’ (emphasis added). In my view, the Notice was only a warning of EE’s intention to terminate. It did not constitute the termination itself. I would add that I have considered the May Notice not to aid me in construing section 7.1 DA but to determine whether it even purported to be the termination notice.

[51] I also do not think that it was the intention of the parties for the DA to be terminated automatically immediately after the expiry of 12 days from the May Notice because, again, the defaulting party would not know whether the aggrieved party was treating the breach has having been cured or not after 12 days. Also again, the terms of the May Notice suggested that a second notice would be given to terminate rather than an automatic termination after the expiry of 12 days, without more.

[52] In addition, the Amended Statement of Claim did not even plead that Horizon had failed to cure or correct the alleged material breach within 12 days of the May Notice. Neither was there any evidence that Horizon had continued to make the offer to MOE after receipt of the May Notice.

[53] EE then sought to support its termination of the DA by relying on other alleged breaches by Horizon. This was pleaded in para 21 of its Defence to Counterclaim but Mr Gregory Vijayendran, Counsel for Horizon, argued that these other breaches must be pleaded in the Amended Statement of Claim. I note that, even assuming that the other breaches need not be pleaded in the Amended Statement of Claim and might appropriately be pleaded in EE’s Reply, they were not pleaded in the Reply but in the Defence to Counterclaim only.

[54] More importantly, the plea did not assert that the breaches were material. It also did not assert that a notice under section 7.1 DA had been sent in respect of any of these breaches or that Horizon had failed to correct or cure the breaches 12 days after such a notice.

[55] Accordingly, the cases of Boston Deep Sea Fishing Ice Co and British and Benningtons Ltd v North Western Cachar Tea Company, Limited [1923] AC 48 and The Milhalis Angelos [1977] 1 QB 165 do not assist EE. They are not cases in which a warning notice must first be given to the defaulting party.

[56] Mr Prakash Mulani, Counsel for EE, also relied on Siti & Anor v Lee Kay Li [1996] 3 SLR 310. However, the Court of Appeal’s decision there was not in the context of the question as to whether a second notice had to be given in order to terminate the contract. In that case, the vendor’s solicitors (in the sale and purchase of a property) had first issued a 21 day notice (under the relevant Conditions of Sale of the Singapore Law Society) on 15 September 1995 and then purported to terminate the sale agreement by a second letter dated 7 October 1995. The Court of Appeal found that the first notice dated 15 September 1995 was not valid but as the purchasers were, in any event, still in repudiatory breach, the vendor was entitled to terminate the agreement and had done so by virtue of the 7 October 1995 letter. Those are not the facts in the case before me. There is no second notice of termination and there is no suggestion by EE that Horizon had repudiated the DA nor is this pleaded by EE, unlike the Originating Summons in the Siti case in which the vendor had sought a declaration that the purchasers had repudiated the agreement (see p 315 at I of the law report).

[57] EE had another argument. In para 28 PRS, it submitted that in any event it did give notice of termination of the DA (after 12 days from 11 May 2001) through EE’s letter dated 15 June 2001 and its solicitors’ letter dated 14 September 2001. However, only its solicitors’ letter was pleaded in its Reply, at para 11. Paragraph 11 asserted:

[58] In my view, this plea is not enough. Even if EE’s solicitors had confirmed the termination, that would not suffice if the purported termination was invalid as there would be nothing to confirm. It would be different if para 11 had asserted that the solicitors’ letter of 14 September 2001 constituted the notice of termination, if a notice of termination after the May Notice was required. However, that was not what was pleaded.

[59] In any event, EE’s solicitors’ letter of 14 September 2001 did not in substance constitute a termination of the DA. The material part of it stated:

In my view, that letter was sent on the basis that the DA had already been terminated.

[60] I now come back to Horizon’s assertion that it was EE who had repudiated the DA and Horizon had accepted EE’s repudiation. It was not disputed that if EE was not entitled to terminate the DA or had failed to terminate it validly, it was in repudiatory breach. Horizon asserted that it had accepted the repudiation by its solicitors’ letter dated 8 October 2001. I am of the view that it was entitled to do so and the provisions of section 7.1 DA requiring a warning notice to be given first do not apply to a termination based on repudiation. In the circumstances, I find that EE was in repudiatory breach and that breach was accepted by a letter dated 8 October 2001 from Horizon’s solicitors to EE’s solicitors.

[61] I would add that if Horizon had been in material breach by offering EB content to MOE, then the May Notice would have been validly sent as a warning notice although it did not constitute the termination notice. In that scenario, Horizon would be precluded from relying on the May Notice as constituting a repudiation. As that is the only act which Horizon has pleaded as constituting a repudiatory breach on the part of EE (in para 15 of its Amended Defence and Counterclaim), it may not rely on the subsequent correspondence of EE or its solicitors to constitute repudiation. Accordingly, I would then have concluded that Horizon too did not validly terminate the DA but both sides are estopped from denying the termination. In that scenario, I would not have awarded damages to either side for the termination of the DA.

[62] The second main dispute arises from the NLB contract. Under the NLB contract, Horizon supplied seven bundles of EMG content to NLB. The subscription period for Bundles 1 to 3 expired on 14 July 2000 and for Bundles 4 to 7 on 19 December 2000. Furthermore, under clause 1.8 of the NLB contract:

[63] It was not in dispute that the reference to specific courses meant courses conducted by Horizon under its Journalist Explorer Scientist Indiana (‘JESI’) programme. Paragraph 12 of Dr Lubna Alsagoff’s AEIC elaborated on JESI as follows:

[64] EE claimed that Horizon was obliged under section 3.1(i) to diligently and actively promote the EMG content and, in the context of the NLB contract, Horizon had failed to discharge this obligation as a result of which NLB did not renew the NLB contract. In the course of the hearing and in submission, this claim focussed on Horizon’s alleged omission to provide a marketing plan that would ensure that the minimum target of 25,000 log-ons was achieved and Horizon’s alleged failure to include EMG content in JESI courses.

[65] However, Mr Vijayendran contended that these allegations were not specifically pleaded in the Amended Statement of Claim or in the particulars thereof.

[66] In response, Mr Mulani submitted that:

[67] In my view, leaving aside a typographical error regarding the section number stated in para 19(a), para 19(a) was vague and inadequate, even when read together with para 17 of the Amended Statement of Claim. For example, did it mean one or some or all of the permutations below:

[68] Indeed, the further and better particulars supplied of para 19(a) made matters worse for EE. They stated:

[69] I am of the view that EE should have obtained the information it needed through pre-action proceedings before it launched its claim on the NLB contract. Its Amended Statement of Claim read with the particulars supplied do not allow it to rely on the failure by Horizon to provide the marketing plan for 25,000 log-ons. I am also of the view that such pleadings cannot be overcome by Mr Mulani’s argument that, throughout the hearing, there was no objection by Horizon that this allegation was not pleaded.

[70] However, assuming that EE’s pleadings allow it to rely on this allegation, I note that EE was in turn taking the position that certain difficulties raised by Horizon in the marketing of the EMG content were never pleaded in Horizon’s Amended Defence and Counterclaim. However, there was a general denial in para 27 of Horizon’s Amended Defence and Counterclaim although its particulars in turn did not include the difficulties which it subsequently sought to rely on. In my view, if EE is to be allowed to rely on its allegations about the absence of a marketing plan to ensure 25,000 log-ons and the failure to incorporate EMG content into JESI courses, notwithstanding the state of its pleadings, it is only fair to allow Horizon to rely on the unpleaded difficulties it allegedly faced in the marketing of the EMG content.

[71] I am also not persuaded by Mr Mulani’s argument that as the unpleaded difficulties were not specifically pleaded, the late inclusion of evidence thereon prejudiced EE because it did not have an opportunity to address the same during the hearing (para 63 of PCS). The unpleaded difficulties were stated in AEICs of witnesses for Horizon and Mr Mulani and EE had had sight of the AEICs before the trial commenced. Various witnesses for Horizon were cross-examined by Mr Mulani on the unpleaded difficulties. Mr Mulani did not, during the hearing, assert that EE did not have an opportunity to present evidence to counter Horizon’s evidence. Neither did he seek an adjournment of the hearing. It seems to me that such a suggestion is belatedly made now because EE has realised that it failed to provide contrary evidence to counter the evidence of Horizon on these alleged difficulties.

[72] However, at the outset, I would say that I do not accept Horizon’s pleaded allegation that the failure to obtain a renewal of the NLB contract was because of EE’s own failure to provide an increase in video content by 10%. This increase was applicable only if the NLB contract was in fact renewed.

[73] Secondly, as regards Horizon’s pleaded allegation that there was a global downturn in internet and broadband applications during the material period, this is relevant in the context of causation but not whether Horizon had discharged its obligation to promote the EMG content diligently and actively. In any event, the evidence adduced by Horizon on this point was vague and unpersuasive. Whether the public was receptive to the Media-On-Demand service of educational material is another matter.

[74] On another point, Horizon’s Roland Ong sought, during the trial, to suggest that NLB was not obliged to renew the NLB contract on the same terms if the 25,000 log-ons of at least one minute each had been achieved. However, this point was already conceded in Horizon’s pleadings.

[75] Paragraphs 17 and 18 of the Amended Statement of Claim stated:

[76] In response, paras 25 and 26 of the Amended Defence stated:

[77] Besides, the material part of clause 1.8 of Horizon’s proposal (which proposal was accepted by NLB) stated:

[78] In my view, NLB would have been obliged to renew the NLB contract for another 12 months if the 25,000 log-ons had been achieved.

[79] On the law, Mr Mulani relied, inter ali, on Atmospheric Diving Systems Inc v International Hard Suits Inc & Can-Dive Services Ltd 53 CPR [3d] 459 and B Davis Ltd v Tooth & Co Ltd [1937] 4 All ER 118. However, the applicable terms and the facts in those cases were different from those before me and were not of much assistance to me.

[80] On his part, Mr Vijayendran referred, inter alia, to Richard Christou’s Drafting Commercial Agreements (2 Ed, 1998) at para 8.2 which states:

[81] Clause 3.1 of Precedent 1 states:

[82] As regards oral evidence, Horizon’s Dr Lubna Alsagoff said in her AEIC:

[83] However, I accept that as regards Horizon’s efforts made from early 2001 to promote the EMG content, such efforts were made after the NLB contract had expired on 19 December 2000. By then, the 25,000 log-ons had not been achieved and NLB was not obliged to renew the contract.

[84] During cross-examination, Dr Alsagoff elaborated that she did try to incorporate the EMG content in workshops when they were conducted at library sites, but not at workshops conducted at school sites because they had difficulty accessing NLB video content from the schools (NE 219 to 221).

[85] When it was suggested to her during cross-examination that one way of incorporating EMG content into the workshops generally was to refer to EMG content as a resource material, her evidence was that any reference to resource material should be to material which was easily available. The ones that were exhibited in p 78 of her AEIC were available from the Internet (NE 225 to 226).

[86] It was then suggested to Dr Alsagoff that as EMG content was available on library servers, Horizon could cite EMG content as a resource material and indicate that such content was available on library servers. Dr Alsagoff agreed that this could be done but elaborated at NE 226 to 229:

[87] Mr Goh Cho Tong, also known as Joseph Goh, also gave evidence for Horizon. He had joined HPIQ in or around January 2000 and was working as a Content Sourcing Person for Horizon B Band Pte Ltd, a company associated with Horizon. He performed a similar role in HPIQ and in December 2000, he was assigned to do sales. Although he was still an employee of HPIQ at the time the draft of his AEIC was prepared, he had ceased to be such an employee by the time he signed his AEIC.

[88] In paras 23 to 30 of his AEIC, he said:

[89] At paras 34 and 35, 37 and 40 to 57 of his AEIC, Mr Goh also said:

[90] Although the representatives from NLB whose names were mentioned by Joseph Goh were not called by Horizon to give evidence, Mr Mulani did not actually challenge Mr Goh’s evidence which I have cited above, although he challenged other aspects of his evidence.

[91] Mr Chin Tiong Pheng, also known as Jonathan Chin, also gave evidence for Horizon. He was the Vice-President (Corporate Learning) of HPIQ. He joined Horizon I-Tech Pte Ltd as a Project Manager sometime in mid-2000. Thereafter, sometime in January 2001, he joined HPIQ as an Assistant Vice-President (On-Line Operations) (according to his AEIC). From the beginning in mid-2000, he was involved in supporting the operational aspect of the business. On 30 May 2001, he was an E-Learning Consultant with HPIQ and on 1 October 2001, he was Vice President, Corporate Learning, HPIQ. I need not mention his subsequent designation.

I92 In his AEIC, he said:

[93] Mr Chin’s evidence was largely unchallenged.

[94] Although Mr Chin’s evidence and Mr Goh’s evidence also contained some of the difficulties faced by Horizon, which were not specifically pleaded, EE’s Amended Statement of Claim and further and better particulars in respect of this claim were themselves vague, as I have elaborated. Also, these allegations were nevertheless found in Mr Chin’s and Mr Goh’s AEICs and, as I have said, EE did not complain at the hearing that they were prejudiced or did not have the opportunity to present their own evidence to address these allegations.

[95] Coming to EE, its evidence on the NLB contract came, again, primarily from Mr Vasu. He joined Horizon in August 1996. At all material times from 1998 up to January or February 2000, he was employed by Horizon as a Sales Director. He then left Horizon and later in April 2000, he joined KC as a Business Development Manager. Mr Vasu stressed that the DA was entered into after the NLB contract. He was suggesting that EE had relied not only on the existence, but, the particular provision of the NLB contract for automatic renewal if 25,000 log-ons were achieved (AEIC para 9, 28 and 33). However, as at the date the DA was entered into i.e 8 November 1999, Mr Vasu was in the employ of Horizon and not EE. Although he had participated in the negotiations for the DA, he was doing so as representative of Horizon and not EE and could not speak for EE (NE 48 to 50). I will say more about this later.

[96] Paragraph 29 of Mr Vasu’s AEIC said that the mechanics of incorporating the EMG content into Horizon’s JESI programme was ‘demonstrably easy’. In paras 30 to 32 of his AEIC, he said:

[97] However, in cross-examination, Mr Vasu said he could not be sure how long it would take to achieve the 28,000 log-ons mentioned in para 30 of his AEIC. It is telling that he said, at NE 30:

The question at NE 30 regarding 28,000 log-ons was the result of a typographical error originating from Mr Vasu’s AEIC para 30. Both should have referred to 25,000 log-ons. However, the thrust of Mr Vasu’s evidence remained the same i.e even with his suggestion, he could not be certain how long it would have taken to achieve the minimum number of log-ons.

[98] Mr Vasu also accepted that even before EMG content was available, Horizon had problems in running workshops (at libraries of NLB) called Wired Scientist and Wired Writer because of problems of scheduling times to ensure that NLB libraries and librarians would be available (NE 11).

[99] I set out below relevant extracts of Mr Vasu’ evidence.

[100] At NE 11:

[101] At NE 13:

[102] At NE 15 and 16:

[103] At NE 18:

[104] At NE 23 and 24:

[105] At NE 33 to 36:

[106] At NE 52:

[107] I move on to the documentary evidence before the commencement of litigation.

[108] As I have mentioned (in para 34 above), the first notice sent by EE to Horizon was dated 10 April 2000.

[109] By a letter dated 12 June 2000, Horizon’s Roland Ong wrote to EE to say:

[110] On 22 September 2000, there was a meeting between representatives of Horizon and EE. A draft of the minutes of the meeting had been prepared (AB 383 and 384) and its contents were not disputed during the trial.

[111] The pertinent parts of the minutes stated:

[112] According to Mr Vasu, NLB’s dissatisfaction was with the lack of usage of the EMG content and not the content itself (NE 81).

[113] In a letter dated 18 October 2000 from KC to Horizon (AB 290 to 291), KC complained about the lack of feedback regarding sales activities for the EMG content. The letter was signed by Paul Philpott, Business Development. In the fifth paragraph of the letter, KC also wanted to know the marketing strategy of Horizon for NLB and schools. This letter was sent near the expiry of the NLB contract on 19 December 2000 and appears to be the first documentary evidence from KC or EE about the marketing efforts of Horizon.

[114] After this letter, there must have been an exchange of e-mail and/or meetings because Mr Philpott then wrote again to Horizon on 5 December 2000 (AB 313). The opening sentence said:

The letter then went on to seek information such as the subscription fee and subscription period for Bundles 1 to 3 and Bundles 4 to 7.

[115] By 5 December 2000, Mr Vasu had already joined EE. In cross-examination, he sought to explain away the opening sentence in Mr Philpott’s letter of 5 December 2000. At NE 71 his evidence was:

Mr Vasu then accepted that Mr Philpott was a business development manager and finance administrator in KC but explained that his remark about Mr Philpott being a lower order staff was relative to the position which Roland Ong held (NE 73). At that time, Mr Ong was President of Horizon’s E-Learning group.

[116] Two months later, EE sent the second notice of Material Breach and Intention to Terminate Agreement dated 15 February 2001 which I have referred to above. As I have mentioned, that notice was for non-payment by Horizon and not for Horizon’s failure to promote the EMG content diligently or actively.

[117] By a letter dated 29 March 2001, KC wrote to Horizon to express its concern, inter alia,

It also said that Horizon’s continuous changes in personnel were quite disturbing.

[118] EE then sent the third set of notices dated 9 April 2001. Besides mentioning the offering of a competitive product to MOE under the MOE contract, the first notice dated 9 April 2001 also said that EE understood from NLB that Horizon had failed to deliver on the NLB contract.

[119] However, NLB’s Michael Loh then sent a letter dated 12 April 2001 to Joseph Goh of HPIQ (AB 398). The material part of the letter said:

[120] Strangely, another letter dated 2 May 2001 was also sent by NLB’s Michael Loh to Joseph Goh of HPIQ in identical terms (AB 399). This suggests that these two letters from Michael Loh may have been procured by Horizon but nothing more can be said thereon as Michael Loh did not give evidence.

[121] Mr Vasu’s evidence regarding the letter from Michael Loh was (NE 82):

[122] Then on 11 May 2001, EE sent the fourth set of notices dated 11 May 2001 comprising two notices, one of which was the May Notice. The first notice dated 11 May 2001 again mentioned Horizon’s failure to deliver according to the NLB contract but, again, this alleged breach was not the reason given to terminate the DA.

[123] Having considered the evidence, I am of the view that:

[124] I am of the view that the failure by Horizon to provide the marketing plan to ensure 25,000 log-ons is not necessarily a breach of Horizon’s obligation to EE. On the evidence before me, I am not persuaded that EE has established such a breach. It would not make sense to provide a marketing plan when the logistical and technical problems had not been resolved. Furthermore, it was not feasible to market EMG content only. That is why the marketing was done in relation to Media-On-Demand services generally. Also, when Horizon proposed a plan, albeit after the expiry of the NLB contract, to secure a renewal, that plan was also not to promote EMG content only (see para 35 of Joseph Goh’s AEIC). Neither was Horizon’s inability to use more of EMG content for JESI courses the result of a breach by Horizon in view of the logistical and technical problems Horizon had faced. Besides, as Joseph Goh had said, the whole Media-On-Demand idea did not take off, the EMG content was not cheap and the EMG content was not the only content for which the contract was not renewed (see his AEIC paras 41 to 46 again).

[125] I now come to the other claims of EE against Horizon.

[126] Section 3.1(l) stated:

[127] I am satisfied from the evidence that Horizon failed to provide quarterly forecasts and reports either in writing or orally. KC had to chase for the forecasts and reports and it was only when KC chased that Horizon or HPIQ would respond by having meetings with KC. Even then, details were not forthcoming and KC had to continue chasing for more information. I find that Horizon has failed to make out its position that it had orally given the information. For example, the exchange of e-mail from Kelly Chua and various representatives of Horizon from 27 March to 2 May 2001 (AB 416 to 412) showed that she was still chasing for information but the representatives of Horizon were passing the buck from one person to another. Eventually, Teo Swee Teong came up with the belated allegation that he had given instructions to withhold information to KC because he had heard that KC was also going to schools to offer EMG content (NE 329). I am of the view that this was an untruthful allegation because it was made so late in the day and there was no real evidence that KC was going direct to schools to offer EMG content.

[128] On the other hand, there was evidence that Horizon had withheld information of sales of EMG content to, at least, two schools i.e Serangoon Garden Technical School (‘SGTS’) and Yishun Town Secondary School (‘YTSS’). Even after EE/KC had discovered these sales, Horizon continued to deny these sales as a result of which EE eventually applied and obtained summary judgment against Horizon for EE’s share of the licence fees paid by these two schools.

[129] However, as the forecasts and reports are no longer material because the DA has been terminated, I will award EE nominal damages of $1,000 only for this claim. In addition, I will order an accounting by Horizon, details of which will be set out below.

[130] EE also complained that after the expiry of the NLB contract on 19 December 2000, Horizon had left the EMG content on NLB servers for some time until September 2001. Relying on section 4.1(d) DA, EE alleged that Horizon was not entitled to do that and claimed damages.

[131] Section 4.1(d) DA stated:

EE’s position was that in view of section 4.1(d), Horizon needed its consent in respect of the price of the EMG content before distributing it (para 41 of PCS).

[132] Mr Mulani also submitted that Horizon’s reason, that it was part of its marketing plan to leave the EMG content on the NLB servers, was weak as such a marketing strategy would be relevant if one is enticing non-existing clients to purchase the EMG content. By leaving the EMG content on NLB servers, there was no incentive for NLB to renew the contract as they could use the EMG content for free.

[133] On the other hand, it was Horizon’s position that it had not withdrawn the EMG content because it was still trying to persuade NLB to renew the contract. Mr Vijayendran submitted that this was a common marketing industry practice and consistent with the best marketing efforts to maintain goodwill (para 112 of DCS). He also submitted that NLB’s Mike Loh (not Low) had requested (in an e-mail) as late as September 2001 (Defendants’ Bundle p 59) that:

However, as I have said, no evidence was given by Mike Loh.

[134] As regards section 4.1(d) DA, I do not think it is applicable. Although it was pleaded, its breach was not pleaded (see para 19(b) and 20(b) and (d) of the Amended Statement of Claim).

[135] Secondly, section 4.1(d) DA would have been applicable only if Horizon was charging a price to a licensee for use of the EMG content. However, Horizon did not charge NLB for the period when the EMG content was left in NLB’s servers after the expiry of the NLB contract.

[136] It may be that it was implied in the DA that Horizon was to remove EMG content immediately or within a reasonable time after the expiry of a licence but that also was not pleaded by EE. What it had pleaded was that Horizon had failed to remove the EMG content without pleading Horizon’s duty to remove.

[137] In any event, I will also deal with the substance of EE’s complaint on this issue.

[138] In my view, it was part of good marketing strategy and goodwill to let the EMG content remain while Horizon was trying to secure a renewal of the NLB contract. If Horizon had succeeded, EE would have shared in the pie.

[139] However, Horizon was not entitled to act unilaterally, even though its motive may make commercial sense, and even if NLB had really wanted the EMG content to remain pending negotiations for the renewal, Horizon was not entitled to let the EMG content remain on NLB’s servers especially after EE had sent a notice dated 11 May 2001 claiming compensation for leaving EMG content on NLB’s servers after expiry of the NLB contract (AB 401). This was one of the fourth (set of) notices dated 11 May 2001 which I have referred to.

[140] On damages, para 20(d) of the Amended Statement of Claim asserted that EE had suffered loss of profit and/or subscription fees for the period when the EMG content was made available after the expiry of the NLB contract. However, there was no evidence to suggest that the EMG content left on NLB’s servers was the only copy of EMG content that EE had. EE surely must have the master tape or disc from which EMG content can be made easily available to any other interested party who was minded to pay a license fee for the same. There was also no evidence to suggest that if the EMG content had not been left on NLB’s servers, Horizon or EE would have been able to secure a contract from another party.

[141] Indeed, in para 44 PCS, EE sought to present its claim for damages in a different manner. Paragraph 44 PCS stated:

[142] In my view, this was a different approach from that in para 20(d) of the Amended Statement of Claim because para 44 PCS focussed not on subscription fees that EE could have earned from a third party but was based on the premise that the NLB contract was renewed or should have been renewed. Yet EE had been complaining when the very purpose of leaving the EMG content on NLB’s servers was to try and secure the renewal.

[143] Secondly, the claim as asserted in para 44 PCS is special damages which were not pleaded in the Amended Statement of Claim.

[144] Most importantly, as Horizon did not secure the renewal, I do not see why EE should be allowed its claim under para 44 PCS, as though such renewal had been obtained.

[145] It seems to me that EE was trying to have two bites at the cherry. First, by claiming US$338,250 for Horizon’s alleged failure to market the EMG content diligently and actively and, alternatively, by claiming US$338,250 or US$302,500 (the latter being for 12 months for Bundles 1 to 3, and 10 months for Bundles 4 to 7 up to September 2001) for Horizon’s failure to remove the EMG content after the expiry of the NLB contract. At most, I may have granted nominal damages of $1,000 to EE for this claim but, even then, I have decided not to do so in view of the state of its pleadings.

[146] Section 2.3 DA stated:

[147] EE’s claim in respect of section 2.3 DA was set out in para 14(d), (e) and (f) and 20(e) of the Amended Statement of Claim. EE claimed that it discovered that the EMG content that was made available on a server in SGTS contained a logo belonging to Postkid, a subsidiary of Horizon, and that EE had never been informed that Postkid was supplying the EMG content to end users or was being given access to EMG content. In so doing, Horizon had allowed Postkid to infringe on EE’s intellectual property rights or allowed Postkid to pass off EMG content as its own in breach of section 2.3 DA. EE claimed that this had caused it damage to its reputation and goodwill.

[148] From the evidence, I am satisfied that at the material time EE knew that Horizon was using Postkid to market the EMG content, although EE was not told about the sale to SGTS. At that time, EE had not sought to draw a distinction between marketing and handling the EMG content and it is too late for EE to say that Horizon should not have allowed Postkid to handle the EMG content.

[149] However, Horizon went too far when it allowed Postkid to use its own logo on EMG content. That was an infringement of EE’s intellectual property rights.

[150] On the other hand, EE has not established any damage to its reputation and goodwill and I am not inclined to make any order for assessment of damages. It may be that Horizon and/or Postkid were trying to appropriate EE’s reputation and goodwill but that is a different matter. In any event, as I have said, I will be ordering Horizon to give an accounting of sales of EMG content.

[151] In my view, Horizon did not act bona fide in various respects. For example:

[152] However, the burden was and is on EE to establish its claims. In view of what I have decided, I order that: