Gateway 21 Consultants Pte Ltd v Gateway 21 Pte Ltd

Kan Ting Chiu J:

[1] This matter arose out of the sale of a business engaged in providing corporate secretariat, business advisory and courier services. The vendor of the business is the plaintiff in the original action and the respondent in the appeal. The purchaser is the defendant in the original action and the appellant in this appeal. I shall refer to the vendor as the respondent and the purchaser as the appellant.

[2] The conditions of the sale were incorporated in an agreement dated 5 October 2004 (“the sale agreement”). The consideration for the sale of the business was agreed to be $200,000, and the date for the transfer of the business was set at 1 January 2005. The purchase price was to be paid in instalments, with the last instalment to be paid on 31 December 2006.

[3] The respondent’s action against the appellant was for $110,000 of the agreed purchase price which was not paid. The appellant denied that it was liable to make the payment, and counterclaimed against the respondent for a refund of $68,062.11 due from the payment of $90,000 it had paid to the respondent, $29,898.97, being the amount the respondent billed before 1 January 2005, the date of transfer under the sale agreement, and another sum of $29,552.63 for payments billed and received by the respondent in 2005, and for damages for breach of contract for competing against the appellant.

[4] The claims and the counterclaim went on for hearing before a District Judge (“DJ”). The respondent’s claim was allowed and the appellant’s claims for the sums of $68,062.11 and $29,898.97 were disallowed while the claim for $29,552.63 was allowed. The appellant has appealed against the DJ’s decision. The respondent has not appealed against it.

[5] The foremost issue between the parties is the GAT. Clause 3.1 of the sale agreement set out the schedule of payment and specified that payment was:

[6] The GAT was referred to in the sale agreement again in cl 13.5, inter alia that:

[7] The major grievance of the appellant was that the GAT was not achieved. It complained that there were shortfalls in the GAT for the two years:

[8] The effect of the aforementioned clauses was an issue at the trial. The DJ found that there was no actionable agreement on the GAT. He declared that:

[9] In my view, however, he had failed to give effect to the clear and unequivocal meaning of cl 3.1 and cl 13.5, and was wrong in ruling that the provisions were not enforceable.

[10] It was clear that the agreement on the GAT was intended to be enforceable because the sale agreement had gone further to make it clear that a failure to meet the GAT would bring on consequences. Clause 3.2 provided that:

[11] The sale agreement made provision for the ascertainment of the actual annual turnovers attained. Clause 3.8 provided that:

[12] The appellant did not go through that process and pleaded in its defence that:

[13] The letter of 18 October 2005 is an important document because it showed that the appellant believed that it can rely on its estimated GAT shortfall to regulate the contractual obligations. In the letter, the appellant had set out the estimated shortfall in the GAT:

and it went on to inform the respondent that:

[14] This part of the letter also showed that the appellant did not repudiate the agreement as the respondent had maintained, and was seeking only to suspend payment of the instalment payments, and had not decided to stop payments. That raises a question whether the respondent can sue for full payment of the purchase price which was due on 31 December 2006 when it commenced action in July 2006. However, no issue was raised, and this question was not addressed by counsel or the DJ at the trial, or counsel at the appeal.

[15] In the Defence and Counterclaim, the GAT shortfall based on ‘actual turnover’ was set out in para 32 as:

The two shortfall figures added up to a total of $178,062.11. On this basis the appellant claimed $68,062.11, as the amount due to it after setting off the $110,000 of the unpaid purchase price. In the evidence adduced at the trial, this head of claim was quantified at $72,679.11 and the difference in the sum claimed was not explained by the appellant.

[16] The appellant had obviously overlooked that under cl 3.8 it had to forward to the respondent copies of the invoices, bank deposits and credit notes and correspondence with the clientele. In addition to that it had made its claim against the respondent for the shortfall in the GAT in August 2006, before the period for computing the annual turnover for the year 2006 was completed, but no issue was taken by the respondent.

[17] The appellant’s complaint and claim over the GAT is misconceived and unproven.

[18] This claim was pleaded as being for payments received and retained retainer fees in 2004. The appellant’s case as presented was based solely on the invoices issued by the respondent to the clients in the year 2004 for services to be rendered in 2005.

[19] The DJ dismissed this claim, and in his Grounds of Decision, he explained:

The reasoning is hard to understand because there was no issue over the invoices in question that the appellant was relying on. They were issued by the respondent, which had not disputed the truth of its own invoices. If this was the only basis on which the claim can be determined, I would have allowed the appeal.

[20] In the event, there are other matters which impacted on the claim. Firstly, there is a clause in the sale agreement that catered for such payments. This is cl 6.1, which provided that:

[21] Secondly, the claim referred only to invoices issued by the respondent; there was no evidence that the respondent had received or retained any payment under any of the invoices that could be paid over to the appellant.

[22] I affirmed the dismissal of this claim on these alternative grounds.

[23] The appellant claimed that the respondent had breached other clauses of the agreement. Clause 3.6 and cl 14 provided that the respondent and the two shareholders of the respondent were not to compete against the appellant after the transfer of the business.

[24] The DJ did not address this claim in his Grounds of Decision at all. Inexplicably, the appellant confined its appeal to the parts of the DJ’s decision which:

and did not refer to the DJ’s failure to rule on this claim, and this was not part of the appeal that was presented.