Goldrich Venture Pte Ltd and another v Halcyon Offshore Pte Ltd

1. Steven Chong J:

2. Introduction

3. [1]

   [1] This suit concerns several alleged representations made between February 2008 and October 2008 by one Choo Swee Leng Michael (“Mr Choo”), who was purportedly an agent of the defendant at the material time, to one Lee Chiang Theng (“Mr Lee”), who was the promoter of the two plaintiff-companies. According to the plaintiffs, Mr Choo had represented that, upon the payment of a service fee to the defendant, each of the foreign workers recruited by the plaintiffs would be deployed to work at the defendant’s shipyard. At the material time, the defendant was registered as a “sponsoring shipyard”. The plaintiffs assert that, in reliance on these representations, they became the defendant’s “resident contractors”, recruited some 618 foreign workers to work in the defendant’s shipyard, and paid service fees totalling more than $2m (the bulk of which was allegedly paid in cash) to the defendant. The designation of the plaintiffs as resident contractors and the defendant’s status as their sponsoring shipyard are central to this suit and will be elaborated below.

4. [2]

   [2] Throughout the duration of their stay, none of the workers was ever gainfully deployed for any work at the shipyard. Despite the stark contrast between the alleged representations and the reality on the ground, there was not a single written communication from the plaintiffs to the defendant complaining about the defendant’s abject failure to assign any work. In the meantime, the plaintiffs failed to pay the monthly salaries of the foreign workers.

5. [3]

   [3] This unsatisfactory state of affairs came to the notice of the Ministry of Manpower (“MOM”) when 60 of these foreign workers assembled at the MOM to seek redress. Ironically, it appears that it was Mr Lee, the sole registered director of the plaintiffs, who made the transport arrangements that allowed the foreign workers to proceed to the MOM. Investigations revealed that the foreign workers were housed in unacceptable accommodation. In 2010, Mr Lee was prosecuted and convicted for failing to provide acceptable accommodation and for failing to pay the salaries of the foreign workers on time. He was sentenced to four weeks’ imprisonment and a fine of $36,000 and his appeal in Magistrate’s Appeal No 344 of 2010 (“MA 344/2010”) was dismissed (see Lee Chiang Theng v Public Prosecutor and other matters [2012] 1 SLR 751 (“Lee Chiang Theng v PP”)). At the trial of this action, the defendant relied heavily on the evidence adduced by Mr Lee in his criminal case to contradict Mr Lee’s evidence and/or undermine the plaintiffs’ case.

6. [5]

   [5] I begin first with the facts.

7. Background

8. Parties

9. [6]

   [6] The first plaintiff, Goldrich Venture Pte Ltd (“Goldrich”), was incorporated on 3 November 2007 as “P.A. San Venture Pte Ltd”. It changed its name to Goldrich Venture Pte Ltd on 11 July 2008. Its principal activities include the repair of vessels and the provision of dormitory services. It was registered as a resident contractor of the defendant on 11 March 2008.

10. [7]

    [7] The second plaintiff, Gates Offshore Pte Ltd (“Gates”), was incorporated on 21 May 2008. Similarly, its principal activities include the repair of vessels and the provision of dormitory services. The second plaintiff was registered as a resident contractor of the defendant on 30 June 2008. Mr Lee was the sole director of both plaintiffs at the material time.

11. [8]

    [8] The defendant, Halcyon Offshore Pte Ltd (“Halcyon”), was incorporated on 10 May 2007. It provides steel works and vessel outfitting services as well as equipment for ship operations. At the material time, it was the holding company of several subsidiaries (“the subsidiaries”) through which most of the work in the shipyard was carried out. It was granted the status of sponsoring shipyard on 3 March 2008. Mr Ong San Khon (“Mr Ong”) was, at all material times, employed as the defendant’s Chief Executive Officer (“CEO”).

12. The Marine Industry Sponsorship Scheme

13. [9]

    [9] Lying at the heart of this suit is the MOM’s policy as regards the allocation of work permits in the marine industry, which I will refer to as the “Marine Industry Sponsorship Scheme”. At the outset of the trial, the defendant indicated its intention to adduce oral evidence on this through an officer from MOM and filed Summons No 5709 of 2014 seeking leave to dispense with the preparation of an affidavit of evidence-in-chief in respect of the MOM officer. I granted leave subject to the condition that the defendant provide the plaintiffs with a list of the questions to be posed to the MOM officer. However, on the fourth day of the trial, the defendant decided that it no longer intended to call the MOM officer.

14. [10]

    [10] The witnesses for both parties gave evidence as to the nature and scope of the Marine Industry Sponsorship Scheme at the material time, which was also an issue that was argued before V K Rajah JA in MA 344/2010. Save for one important point (which I will flag later), the parties are ad idem as to the salient features of the scheme. Given that, it will suffice if I reproduce Rajah JA’s succinct summary, which may be found at [24] of Lee Chiang Theng v PP:

15. [11]

    [11] The reference to a “pooled quota system” requires some elaboration. The MOM limited the total number of foreign workers that a company could hire. This limit was calculated with reference to the number of local workers that the entity had in its workforce. The ratio of local to foreign workers was known as the “dependency ratio” and it was expressed as a percentage which, at that time, was 83.3% (ie, foreign workers could only comprise a maximum of 83.3% of a marine company’s workforce). In the main, shipyards would have more local workers on its payroll than contractors would. Thus, the MOM’s Marine Industry Sponsoring Scheme was designed to allow resident contractors to leverage on the sponsoring shipyard’s larger foreign worker entitlement (which it had by virtue of its larger local workforce) by allowing the work permit quotas for the sponsoring shipyard and that of its resident contractors to be aggregated. This enlarged pool of work permits would then be allocated by the sponsoring shipyard to its resident contractors as the shipyard saw fit. Thus, the relationship between sponsoring shipyard and its resident contractors is somewhat symbiotic. The former benefits from having a ready stable of contractors who could supply it with the requisite foreign workers for its projects; the latter benefits because it is able to take advantage of the pooled quota of work permits, allowing it to hire more foreign workers than it would otherwise have been able to.

16. Undisputed facts

17. The defendant becomes a sponsoring shipyard

18. [12]

    [12] Sometime in 2007, the defendant acquired a shipyard located at Pandan Crescent. Following that, the defendant proceeded to acquire several companies, all of which had an established presence in the marine industry at the time of their acquisition. Because the defendant was structured as a holding company, each of its subsidiaries functioned autonomously by sourcing for projects, negotiating their terms with the clients, and carrying out the requisite works under the projects. At the material time, the defendant’s primary business lay in investment holding and the provision of management services to its subsidiaries and it did not have any projects of its own.

19. [13]

    [13] Sometime between the end of 2007 and the first quarter of 2008, Mr Ong met Mr Choo, who was employed by Manifield Agency Enterprises Pte Ltd (“Manifield”) as a labour consultant. Mr Ong consulted Mr Choo on the difficulties the defendant faced in recruiting adequate labour for its projects. After assessing the defendant’s finances and its business requirements, Mr Choo recommended that the defendant apply to be classified as a sponsoring shipyard under the Marine Industry Sponsorship Scheme.

20. [14]

    [14] On 20 February 2008, the defendant wrote to the MOM seeking to be classified as a sponsoring shipyard. In its letter, the defendant cited, as the primary basis for its application, that “[the defendant] and our stable of subsidiaries, a list of which is attached herewith, have achieved a group turnover of $78 million for the year ended 2007.” On 3 March 2008, the MOM informed the defendant that its application was successful. On 4 March 2008, the defendant wrote to the MOM to request that six companies – including the first plaintiff – be registered as its resident contractors.

21. The plaintiffs become the defendant’s resident contractors

22. [15]

    [15] On 11 March 2008, the MOM informed the defendant that the nominated companies had been registered as its resident contractors (“the MOM 11 March Approval Letter”).

23. [16]

    [16] On 13 March 2008, the first plaintiff and the defendant concluded an agreement for the supply of labour (“Goldrich Labour Supply Agreement”). The Goldrich Labour Supply Agreement, which was to last for a period of 12 months, provided that, should the defendant require workers for its projects, it could issue a request to the first plaintiff who would then supply the requisite number of workers “expeditiously” at agreed rates. For present purposes, it is pertinent to note that the Goldrich Labour Supply Agreement did not contain any assurance that the defendant would issue requests for workers nor did it oblige the defendant to use the workers from the first plaintiff in preference to the workers from other contractors.

24. [17]

    [17] On 21 May 2008, the second plaintiff was incorporated. At the time of its incorporation, the second plaintiff had two shareholders: Mr Lee (with a 30% shareholding) and Mdm Kiang Wan Nee (“Mdm Kiang”), who was the wife of Mr Choo at that time (with a 70% shareholding). On 30 June 2008, the second plaintiff was appointed one of the defendant’s resident contractors. On 2 July 2008, the defendant and the second plaintiff concluded an agreement for the supply of labour (“the Gates Labour Supply Agreement”). The Gates Labour Supply Agreement also did not contain any assurance that the defendant would issue requests for workers nor did it oblige the defendant to use the workers from the first plaintiff in preference to the workers from other contractors.

25. The defendant loses its status as a sponsoring shipyard and the GOFF Invoices

26. [18]

    [18] Between March 2008 and December 2008, the plaintiffs recruited a total of 618 foreign workers. The In-Principle-Approvals (“IPA”) for all the work permits of the workers were issued through the defendant’s Work Permit Online (“WPOL”) account. Throughout that time, none of the workers were deployed on projects in the defendant’s shipyard. A small number were sent for “on-job training” in other shipyards on an ad hoc basis but the workers were not paid for the work done during these training sessions. There is also no documentary evidence that any purchase orders were issued in respect of these deployments or that the plaintiffs derived any income from these placements. However, the plaintiffs continued to incur expenses in the upkeep of the workers.

27. [19]

    [19] Sometime before 16 October 2008, the defendant was informed that its status as a sponsoring shipyard was being re-evaluated due to a drop in its local workforce. The defendant held a meeting with the MOM during which it requested that the MOM reconsider its decision. On 20 November 2008, the defendant received a letter from the MOM stating that it had considered the defendant’s representations but had still arrived at the conclusion that the defendant was no longer eligible to be classified as a sponsoring shipyard “due to the drop in [its] local workforce.” The MOM also informed the defendant of its right of appeal, which it had to exercise before 12 December 2008. On 14 December 2008, the defendant appealed against the MOM’s decision.

28. [20]

    [20] Between 9 October 2008 and 10 December 2008, a total of eight invoices were issued by the second plaintiff for work allegedly carried out for three of the defendant’s subsidiaries: Jack Tat Engineering Pte Ltd, Marine Equipments Pte Ltd, and Anvil Engineering Pte Ltd (“the GOFF Invoices”). While both parties agree that the GOFF Invoices were in fact issued, they disagree on whether the plaintiffs had in fact provided any services in respect of the works listed in the GOFF Invoices.

29. [21]

    [21] On 7 January 2009, the MOM wrote to inform the defendant that its appeal was unsuccessful. On 8 January 2009, the MOM wrote to the plaintiffs to inform them that, following the defendant’s loss of its status as a sponsoring shipyard, they had been reclassified as common contractors.

30. The Gates Fabrication Agreement

31. [22]

    [22] On 26 November 2008, Mr Lee received a call from Ms Chai Jian Yi (“Ms Chai”), a manager at the Work Permit Processing Team of the MOM. Ms Chai requested that the second plaintiff submit the contracts which it had concluded with the defendant. On 1 December 2008, following Mr Lee’s conversation with Ms Chai, the second plaintiff and the defendant concluded a “Fabrication, Assembly and Installation Service Agreement” (“the Gates Fabrication Agreement”). Unlike the earlier Gates Labour Supply Agreement, which was an agreement for the supply of labour, the Gates Fabrication Agreement was a contract for services. Under the terms of the Gates Fabrication Agreement, the second plaintiff would, upon receiving purchase orders from the defendant’s subsidiaries, perform the stipulated tasks which include the fabrication, assembly, and installation of exploration and survey equipment. However, like the Goldrich and Gates Labour Supply Agreements before it, the Gates Fabrication Agreement did not contain any assurance that purchase orders would be issued.

32. [23]

    [23] On 15 December 2008, the second plaintiff sent a letter to the MOM exhibiting a set of photographs purportedly showing foreign workers employed by the plaintiffs at work at the defendant’s shipyard (“the 15 December letter”). These photographs, which were taken after the conclusion of the Gates Fabrication Agreement, appear to have been taken expressly for the purpose of giving the MOM the impression that the plaintiffs’ workers were gainfully employed. At para 2 of the letter, the second plaintiff stated:

33. MOM investigates and Mr Lee is prosecuted

34. [24]

    [24] Sometime in December 2008, Mr Lee met Mr Ong for the first time. During this meeting, Mr Lee apprised Mr Ong of the financial troubles that the plaintiffs were facing and requested (a) that the plaintiffs’ workers be deployed and (b) for financial assistance. However, no loans were extended to the plaintiffs following that meeting.

35. [25]

    [25] After this meeting, the plaintiffs informed the foreign workers that they would soon have to be repatriated and made arrangements for the foreign workers to proceed to the MOM to seek assistance. The MOM soon commenced investigations into the plaintiffs which revealed that Mr Lee had committed numerous violations of the Employment of Foreign Manpower Act (Cap 91A, as amended by the Employment of Foreign Workers (Amendment) Act 2007). Mr Lee pleaded guilty to 33 charges and was sentenced to an aggregate sentence of four weeks’ imprisonment and a fine of $36,000 and the appeal was subsequently dismissed (see [3] above; Public Prosecutor v Lee Chiang Theng [2010] SGDC 446).

36. [26]

    [26] Between July 2010 and May 2011 (whilst the criminal proceedings were going on), Mr Lee sent numerous letters (in his capacity as the sole director of the plaintiffs) to the defendant requesting compensation for losses sustained. However, the defendant denied liability and refused to offer any sums in compensation.

37. The alleged representations

38. [27]

    [27] On 31 May 2012, the plaintiffs commenced the present suit, bringing alternative claims for breach of contract and for fraudulent misrepresentation. However, as the breach of contract claim has been abandoned, it only remains for me to consider the claim in fraudulent misrepresentation (see [4] above).

39. [28]

    [28] The plaintiffs identify the following three oral representations, allegedly made by Mr Choo on behalf of the defendant (collectively, “the alleged representations”), as forming the basis of their cause of action in fraudulent misrepresentation:

40. (a) “[T]hat Halcyon had secured big marine projects in the year 2008 and that there would be a lot of work for its Resident Contractors and the Plaintiffs would have priority in the projects assigned by Halcyon” (“the first representation”). The first representation was allegedly made to the first plaintiff sometime in February/March 2008 and to the second plaintiff in May 2008 (before the second plaintiff was incorporated).

41. (b) “[T]hat on payment of the service fee of $3,500 per foreign worker, the said worker would be given work on projects assigned by Halcyon to the Plaintiffs” (“the second representation”). The second representation was allegedly made to the first plaintiff in February 2008 and to the second plaintiff in “early July 2008”.

42. (c) “[T]hat the Plaintiffs from March to December 2008 should continue to bring their foreign workers into Singapore so that the said foreign workers could start work immediately in Halcyon’s shipyards when projects became available” (“the third representation”). This representation had purportedly been repeated to the plaintiffs on various occasions from March 2008 through to October 2008.

43. [29]

    [29] I pause to note that, in their statement of claim (“SOC”), the plaintiffs pleaded that four representations had been made; however, they only listed three in their closing submissions. The missing representation, which is found at para 31(c) of the SOC but is omitted from their closing submissions, reads, “that in assisting Halcyon in the manner described in paragraph 26 [the issuance of the GOFF Invoices], Halcyon would assign projects to the Plaintiffs so that all the Plaintiffs’ foreign workers. [sic] would be employed”. When questioned on this, Mr Sim, counsel for the plaintiffs, clarified that the plaintiffs would not be relying on this representation as an independent cause of action in misrepresentation. However, Mr Sim clarified that he would be relying on the fact of the issuance of the GOFF invoices as evidence that the alleged representations had been made.

44. [30]

    [30] Given the plaintiffs’ position on this issue, I will examine the claim on the basis of the three alleged representations identified at [28] above.

45. Two threshold questions

46. [31]

    [31] Before I proceed to the substantive issues, two threshold legal questions first arise for determination. The first relates to standing. According to the plaintiffs, the first representation was made before the incorporation of the second plaintiff. This raises the question of whether the second plaintiff can bring a claim in misrepresentation on the basis of an alleged representation made to its promoter (Mr Lee) before it was incorporated (“the incorporation issue”). The second relates to agency. According to the plaintiffs’ case, all the alleged representations were made by Mr Choo. This raises the question of whether Mr Choo was acting within his authority as the defendant’s agent when he made the alleged representations (“the agency issue”).

47. The incorporation issue

48. [32]

    [32] I will begin with the incorporation issue. To the best of my knowledge, this point has not been explicitly considered in Singapore. However, it appears to have been well travelled in several common law jurisdictions and I have had the benefit of their well-reasoned decisions in arriving at a landing on this issue.

49. The principle in Leslie Leithead

50. [33]

    [33] I begin first with the seminal decision of the New South Wales Court of Appeal in Leslie Leithead Pty Co Ltd v Barber (1965) 65 SR (NSW) 172 (“Leslie Leithead”), which appears to have been the first case to consider this issue. In Leslie Leithead, the defendant was the owner of a business dealing mostly in imported oils, the supplier of which was the Shell Oil Company (“Shell”). Hart was a representative of Shell. In 1959, the defendant approached Hart and attempted to negotiate a sale of his business to Shell. Shell was not interested but Hart expressed a personal interest in purchasing the business. During the course of negotiations, the defendant suggested that Hart form a company (in which Hart would hold 75% of the shares and the defendant 25%) to complete the purchase. The defendant later falsified some accounts to give the appearance that his business was turning a profit when it had actually been incurring a loss and presented these accounts to Hart. Relying on the falsified accounts, Hart entered into a sale agreement, in which the sale was purported to be made to “a company to be formed”. Hart proceeded to incorporate the plaintiff which then purchased the shares in the business.

51. [34]

    [34] When the fraud was discovered, the plaintiff brought an action against the defendant in fraudulent misrepresentation. The defendant attempted to argue that the representation was not actionable because it had not been made to the plaintiff, but to Hart, its promoter. This argument was summarily rejected. Brereton J, who delivered the judgment of the court, wrote (at 177):

52. [35]

    [35] Brereton J made two crucial findings: first, he found that the representation was intended to be of continuing character (“the inducement offered to Hart was intended to be communicated to… and acted upon the company when formed”); second, he found that the representation was, in essence, a representation to an agent which was intended to be acted on by the (albeit still unincorporated) principal (“it was at all times contemplated that the purchase was to be effected by a company to be formed and controlled by Hart”).

53. [36]

    [36] Leslie Leithead has since been applied by other Australian courts (see, eg, Djaw Pty Ltd v Schmitz and Ors [2002] QDC 168), in Hong Kong (see, eg, Peconic Industrial Development Ltd and Another v Chio Ho Cheong and Others [2006] HKCFI 524), and also in England and Wales (see, eg, Richard Butler-Creagh v Aida Hersham [2011] EWHC 2525 (QB)). Ken Handley, the author of Spencer Bower and Handley, Actionable Misrepresentation (LexisNexis, 5th Ed, 2014) (“Spencer Bower and Handley”) wrote, at para 9.03 (citing Leslie Leithead), that “[a] continuing representation to a promoter, intended to be acted upon by the company when formed, becomes a representation to the company”.

54. Cramaso LLP

55. [37]

    [37] The recent decision of the Supreme Court of the United Kingdom (“UKSC”) in Cramaso LLP v Ogilvie-Grant and others [2014] AC 1093 (“Cramaso”) is instructive. In Cramaso, the respondents were the owners of a grouse moor in Scotland on which commercial shooting took place. The respondents wished to let the moor out and (represented by one Mr Kennedy) entered into negotiations with a Mr Erskine. In the course of negotiations, Mr Kennedy forwarded Mr Erskine an email (originally sent to him by the respondent’s chief executive) containing an inaccurate estimate of the grouse population in the moor. Relying on this representation, Mr Erskine formed Cramaso LLP (the appellant) with his wife and used it as a vehicle to take up the lease for the moor. At the material time, Mr Kennedy was aware of Mr Erskine’s intention for the lease to be taken up by a limited liability partnership. Cramaso LLP took up the lease but later found out that the estimates were incorrect. It then brought suit against the respondents for negligent misrepresentation.

56. [38]

    [38] At first instance, the claim was dismissed on the basis that the appellant could not recover damages because it had not been in existence at the time the representation was made. On appeal, the Inner House of the Court of Session held (a point also conceded by the respondent) that the lower court erred in holding that a duty of care could never be owed to a non-entity but it nonetheless found that a duty of care did not arise on the facts. The Supreme Court of the United Kingdom (“UKSC”) unanimously reversed the decision of the Inner House and held that a duty of care did arise on the facts. Lord Reed, who delivered the leading judgment in the UKSC, held that the respondent had a continuing duty of care to ensure the accuracy of the representation as to the grouse population in the moor. This duty arose when the representation was first made and continued even after the Cramaso LLP had been formed. After Cramaso LLP was formed, the only thing that changed was the role of Mr Erskine, who now acted as the agent of Cramaso LLP (see Cramaso at [56] per Lord Toulson). Thus, the continuing representation (which was first made by the respondent to Mr Erskine) became a direct misrepresentation made by the respondents to Cramaso LLP (through Mr Erskine).

57. [39]

    [39] In arriving at this conclusion, the UKSC relied on the decision of the House of Lords in Briess v Woolley [1954] AC 333 (“Briess”). In Briess, the plaintiffs entered into a contract for the purchase of shares in X (a company) on the basis of a fraudulent misrepresentation made by R, its managing director. At the time the misrepresentation was first made, R had no authority to negotiate a sale. However, R was subsequently authorised by X’s shareholders to do so. The House of Lords held that it did not matter that R had no authority when the fraudulent misrepresentation was first made because the fraudulent misrepresentation was of a continuing character. After R was authorised by X to negotiate a sale, the fraudulent misrepresentation continued to be made by X (through R) to the plaintiffs such that a cause of action arose when the plaintiffs acted on the fraudulent misrepresentation to their detriment. By analogy, the UKSC in Cramaso reasoned that it did not matter that Mr Erskine was not Cramaso LLP’s agent at the time the misrepresentation was first made (because Cramaso LLP had yet to be formed) because the misrepresentation continued to be asserted to Mr Erskine until and after he became Cramaso LLP’s agent (after Cramaso LLP was formed).

58. [40]

    [40] Mr Chan, counsel for the defendant, submits that Cramaso misapplied Briess. He argues that “in Briess, there was already a company in existence… the principle in Briess cannot simply be applied to the situation where a company has yet to be incorporated, as this is not a question of agency, but a more fundamental question of whether there exists a legal entity by which (or to which) representations can be made.” With respect, this argument is flawed.

59. [41]

    [41] Mr Chan focuses his analysis on the legal position at the time of the representation and argues that, in the present case, because the second plaintiff did not exist at the time, it could not have been the recipient of the first representation and therefore cannot now bring suit in fraudulent misrepresentation. This analysis is incorrect. The pivotal question is not what the legal position is at the time the representations were made but what the legal position is at the time the misrepresentations were acted on, because that is when the tort of fraudulent misrepresentation is complete (see Briess at 353 per Lord Tucker). This was also the basis upon which Cramaso was decided, as is clear from the following extract from Lord Reed’s speech (at [30] of Cramaso):

60. [42]

    [42] When seen in this light, the difficulty presented by the incorporation issue fades away. It does not matter that the entity bringing suit did not exist at the time the representation was first made so long as the representation was intended to be communicated to the representee and, having been so communicated, was an operative factor in its mind at the time it was relied on (see Cramaso at [63] and [64], per Lord Toulson).

61. The ratio of the cases

62. [43]

    [43] In summary, the ratio of the cases is that if a representation is made to A in the contemplation that the representation will continue in force and be acted on by a third party (“B”) then that representation will be of continuing effect and will, when made known to B through A, become a direct representation to B. If B subsequently relies on the representation which proves to be false and suffers a loss, he has a cause of action against the representor. It does not matter that B (a company) had yet to be incorporated at the time the representation was first made.

63. [44]

    [44] To my mind, this is not entirely a novel point of law, even if it involves the application of two established principles to an unusual fact pattern (see Cramaso at [46] per Lord Toulson). These two principles are: first, the doctrine of continuing representation – that a pre-contractual representation is of continuing effect until it is corrected (see Yokogawa Engineering Asia Pte Ltd v Transtel Engineering Pte Ltd [2009] 2 SLR(R) 532 at [12]; Smith v Kay (1859) 7 HLC 750; With v O’Flanagan [1936] 1 Ch 575; Cramaso at [22]) and, second, the principle that a representation made to a third party for intended transmission to the plaintiff can be actionable (see Thode Gerd Walter v Mintwell Industry Pte Ltd [2009] SGHC 44 at [32]; Pilmore v Hood (1838) 5 Bing (NC) 98; Clef Aquitaine SARL and another v Laporte Materials (Barrow) Ltd and another [2001] 1 QB 488).

64. [45]

    [45] The proposition articulated in Spencer Bower and Handley, while correct, need not be narrowly restricted only to representations made to promoters of companies. It suffices that the representation was made to a person who stands in such relation with the nascent company that he will – after the date of the company’s incorporation – be the company’s agent.

65. [46]

    [46] This outcome is also consonant with legal policy. If a company could never sue on a misrepresentation made to its promoter before its incorporation then there would be a lacuna in the law: the one who has suffered loss (the company) has no standing; while the one who has standing (the promoter) has suffered no loss. This is analogous to the situation which faced the House of Lords in White v Jones [1995] 2 AC 207. In that case, the House of Lords was concerned with a situation in which, due to the negligence of a solicitor, a beneficiary was left out of the inheritance. The House of Lords (per Lord Goff of Chieveley at 259H to 260A) observed that if no duty were recognised, the wrong would not be compensable because the only entity with standing (the estate) has suffered no loss while the person who has suffered loss (the disappointed beneficiary) has no standing.

66. [47]

    [47] In summary, the fact that the second plaintiff had not been incorporated at the time the first alleged representation was made is not, by itself, an insuperable obstacle to the second plaintiff’s claim, provided the alleged representations were intended to be of continuing character and intended to be relied on by the second plaintiff after its incorporation. On the assumption that the alleged representations were in fact made – the determination of which will be dealt with below – it is clear that they were (a) intended to be of a continuing character; and (b) intended to be relied on by the second plaintiff. This is because, taking the plaintiffs’ case at its highest, it was Mr Choo who specifically encouraged the second plaintiff to be incorporated in order that the second plaintiff would bring in additional workers to work on the defendant’s projects.

67. The agency issue

68. [48]

    [48] Even assuming that all the alleged representations were made, the plaintiffs must still prove that Mr Choo was, at the material time, an agent of the defendant and that he was acting within the scope of his authority when he made the alleged representations. As a starting point, I accept the defendant’s evidence that Mr Choo was only formally employed by the defendant in October 2008, when he was given the position of “Human Resource Co-Ordinator (Labour Affairs)”. This is abundantly clear from Mr Choo’s Central Provident Fund (“CPF”) statements, which show that he only began receiving CPF contributions from the defendant in October 2008. While the plaintiffs had initially pleaded that Mr Choo was the defendant’s employee at all material times, under cross-examination Mr Lee admitted that he did not know when Mr Choo was formally employed by the defendant.

69. The parties’ arguments

70. [49]

    [49] Mr Sim submits that, even before 1 October 2008, Mr Choo played a critical role in the defendant’s operations so the alleged representations, if made, would have been within the scope of his apparent, if not actual, authority. He makes this argument in two parts.

71. (a) First, he submits that Mr Choo was acting within his actual authority in making the alleged representations. He points out that it is undisputed that the defendant had engaged Mr Choo as a “labour consultant” in December 2007 and that, in this capacity, Mr Choo (i) sourced for resident contractors for the defendant; (ii) allocated foreign work permit quotas to each of the resident contractors; and (iii) was effectively in charge of the application of the foreign work permits.

72. (b) Second, and in the alternative, Mr Sim submits that Mr Choo was acting within his apparent authority in making the alleged representations for three reasons. First, he notes that it is undisputed that Mr Choo was given an office in the defendant’s premises (in which the various agreements were signed). Second, he points out that the Goldrich and Gates Labour Supply Agreements were always executed by Mr Ong without variation. Third, he points out that Mr Ong himself had admitted that, whenever one of the defendant’s subsidiaries required workers, it would be Mr Choo who would decide which resident contractor to activate.

73. [50]

    [50] Mr Chan, counsel for the defendant, submits that the plaintiffs cannot make good their case on actual authority because they have not adduced any specific evidence to prove that the defendant had expressly authorised Mr Choo to make the alleged representations. Equally, Mr Chan submits that the plaintiffs cannot rely on the doctrine of apparent authority in this case because there is no evidence that the defendant (rather than Mr Choo) had represented to the plaintiffs that Mr Choo had the authority to make the alleged representations. In that connection, Mr Chan points out that Mr Lee did not meet Mr Ong until December 2008 and argues that Mr Lee could not have received any direct representations from the defendant regarding Mr Choo’s authority before that.

74. Did Mr Choo have the authority to make representations regarding the defendant’s allocation of work?

75. [51]

    [51] In my view, it is clear that the plaintiffs’ arguments in relation to actual authority cannot succeed. The plaintiffs have not led evidence on the precise scope of the terms of Mr Choo’s engagement as a “labour consultant”, having not furnished any documents on the scope of his employment or any oral communications as to the ambit of his actual authority. Furthermore, insofar as the plaintiffs seek to rely on the usual authority of “labour consultants”, this must fail because they have not led evidence on the scope of a “labour consultant’s” authority in the defendant’s corporate structure (see Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd and another and another suit [2009] 4 SLR(R) 788 at [120]).

76. [52]

    [52] However, those shortcomings do not preclude a finding of apparent authority. Based on the undisputed facts, I find that the defendant had, in the course of its dealings with the plaintiffs in relation to the labour supply agreements as well as through its engagement of Mr Choo as a “labour consultant”, held him out as having the apparent authority to make representations as to the defendant’s allocation of work.

77. [53]

    [53] In Tribune Investment Trust Inc v Soosan Trading Co Ltd [2002] 2 SLR(R) 407 at [48], the Court of Appeal cited, with approval, the following passage from the speech of Lord Keith of Kinkel in Armagas Ltd v Mundogas SA [1986] 2 Lloyd’s Rep 109 (“Armagas”) at 112:

78. [54]

    [54] As pointed out by Mr Chan, in order for ostensible authority to arise, there must be a representation by the principal (ie, the defendant), and not the agent (ie, Mr Choo), to the third party (ie, the plaintiffs) as to Mr Choo’s authority (see Sigma Cable Co (Pte) Ltd v NEI Parsons Ltd [1992] 2 SLR(R) 403 at [30]).

79. [55]

    [55] However, I disagree with Mr Chan that there is no evidence that such a representation had been made. Following Armagas at 112, the representation in question can arise by conduct: eg, through the placement of the agent in a position which the outside world generally regards as carrying authority of the type alleged, or through a course of dealing. In my judgment, the defendant had represented ­– through its conduct – that Mr Choo had the authority to make representations on the allocation of work to the resident contractors. First, I considered the evidence surrounding Mr Choo’s role as a “liaison” to the resident contractors. By the defendant’s own admission, it “left most of its human resource issues to be handled by [Mr] Choo”. During cross-examination, Mr Ong testified that Mr Choo would make the recommendations on the quotas to be allocated to each resident contractor and that, to the best of his knowledge, the defendant had never disagreed with Mr Choo’s recommendation. In essence, Mr Choo had complete control over the allocation of work permit quotas, including the quotas which were eventually allocated to the plaintiffs. Crucially, it was Mr Choo who decided which of the resident contractors to deploy whenever work had to be carried out for the subsidiaries.

80. [56]

    [56] Second, it is notable that Mr Choo had, since December 2007, been engaged by the defendant as a “consultant for labour matters”. In his position as a “labour consultant”, Mr Choo occupied an office within the defendant’s premises and was assisted by two staff members who, though not employees of the defendant, were nevertheless stationed at the defendant’s office on a full-time basis. It was within these premises that Mr Choo held meetings with Mr Lee. These are representations by conduct that Mr Choo was an agent of the company with authority to deal with labour matters.

81. [57]

    [57] Third, I considered the circumstances surrounding the conclusion of the labour supply agreements. It is undisputed that Mr Choo was the only individual who dealt with Mr Lee in relation to the labour supply agreements. Mr Lee’s evidence – which was unchallenged in this respect – was that Mr Lee would first sign the agreements in Mr Choo’s presence at the defendant’s office before the signed copy of the labour agreement was taken away and returned, duly signed by Mr Ong, without any amendments. Mr Ong’s act in signing the labour supply agreements as prepared by Mr Choo must be taken to be a representation to the plaintiffs that Mr Choo had the authority to negotiate the conclusion of labour contracts with resident contractors.

82. [58]

    [58] In my judgment, the defendant must be taken to have represented to the plaintiffs that he was their agent vested with the authority to deal with issues concerning the recruitment and deployment of foreign workers. It is irrelevant to point out, as Mr Chan does, that Mr Choo’s authority was limited in ways unknown to third parties. For example, Mr Chan points out, in relation to the work permit online system, Mr Choo only had access to “key in data” and did not have the password to access the WPOL system. However, this is not relevant in an inquiry into Mr Choo’s apparent, and not actual, authority. The point is that each time Mr Choo sought to deal with the defendant’s labour issues (be it the allocation of quotas or the application of work permits), he was able to do so and that was how it appeared to the plaintiffs. In summary, I find that the alleged representations, if made, would have been made under the cloak of apparent authority.

83. Were the alleged representations made?

84. [59]

    [59] The parties’ positions are diametrically opposed. The plaintiffs paint a story of lies and broken promises. The plaintiffs assert that the alleged representations were made by Mr Choo to Mr Lee at various times between February 2008 and October 2008. The plaintiffs state that, as the resident contractors of the defendant, the provision of labour to the defendants was their raison d’être. The plaintiffs argue that, without these representations having been made, they would not have performed the financially ruinous decisions of bringing in the foreign workers (despite them not having received work for months on end), paid a substantial sum in service fees, or paid for the continuing upkeep of the workers until January 2009, when the entire affair unravelled.

85. [60]

    [60] The defendant, on the other hand, paints a story of a business venture gone sour. Its position is that the pleaded representations were never made. It disclaims any responsibility for the plaintiffs’ financial woes, denies that any representations had been made, and avers that the plaintiffs’ predicament is a combination of their poor business decisions and the parlous economic climate that followed the global financial crisis. From the defendant’s perspective, Mr Lee’s animus ought to be directed against Mr Choo, who had some role in the business venture, and that the defendant had only been dragged into the picture because it has deeper pockets.

86. [61]

    [61] I will first summarise each party’s factual narrative and identify the difficulties in their respective case theories before arriving at my findings.

87. The parties’ narratives of events

88. The plaintiffs’ narrative

89. [62]

    [62] According to the plaintiffs, Mr Choo approached Mr Lee in February 2008 and, after identifying himself as being in charge of the defendant’s labour affairs, invited Mr Lee to have his company registered as one of the defendant’s resident contractors. At this meeting, Mr Choo told Mr Lee that “Halcyon had many projects in its order books so there was no need for the resident contractor to be worried about any lack of work”. However, Mr Choo stressed that the defendant “required a service fee of S$3,500 to be paid to Halcyon… [and] in return, Halcyon would give work for 2 years”.

90. [63]

    [63] Subsequently, in or around May 2008, Mr Choo invited Mr Lee to his office at the defendant’s shipyard and encouraged him to incorporate the second plaintiff. At this meeting, Mr Choo told Mr Lee that he had been instructed by Mr Ong to inform him that the defendant had “huge ship-repair projects” which would commence soon for which many workers would be needed. He assured Mr Lee that the workers recruited under the new company would be “fully deployed to work in Halcyon’s projects”. Acting on the strength of these representations, the second plaintiff was incorporated and it thereafter brought in additional foreign workers and paid the service fees.

91. [64]

    [64] In the ensuing months, the plaintiffs state that no work was assigned to the workers and they were left idle. Mr Lee then approached Mr Choo on many occasions, requesting that work be assigned to the plaintiffs’ workers. However, Mr Choo informed Mr Lee that the plaintiffs ought to continue retaining the workers in Singapore so they could be deployed expeditiously once the defendant issued the requisite purchase orders. Mr Lee, believing that Mr Choo’s instructions “made sense”, retained the workers.

92. [65]

    [65] In October 2008, Mr Choo asked to meet Mr Lee to relay a request from Mr Ong. During this meeting, Mr Choo informed Mr Lee that the deployment of the plaintiffs’ workers would be expedited if the second plaintiff issued invoices for work which the plaintiffs would in fact not perform. These were the GOFF Invoices. According to this arrangement, the second plaintiff would be given a cheque for the invoiced amount but was expected to return this same sum of money by way of cash or through the issuance of a separate cheque. The plaintiffs termed this process “reversing out” – in essence, it was meant to create the fiction of work. According to the plaintiffs, the GOFF Invoices were shams since none of the works invoiced were ever carried out by the plaintiffs. Mr Lee added that his role in the issuance of the GOFF Invoices was a further reason why he was reassured that his workers would be deployed and he therefore continued to recruit more workers, notwithstanding the fact that none of them had been deployed to date.

93. [66]

    [66] Following the call with Ms Chai from the MOM (see [22] above), Mr Choo approached Mr Lee to ask that he sign the Gates Fabrication Agreement and also reassured Mr Lee that his workers would soon be deployed. Following this, Mr Lee was also instructed to despatch 25 workers to the defendant’s shipyards in order that photos – purportedly showing the workers gainfully employed – could be taken. According to the plaintiffs, the taking of these photos was an elaborate charade that the defendant had, unbeknownst to the plaintiffs, engineered in order to fabricate evidence to support its appeal to the MOM regarding the loss of its sponsoring shipyard status (see [19] above).

94. [67]

    [67] Mr Lee deposed that a total of $2,163,000 (representing a sum of $3,500 for each worker) was paid by the plaintiffs to the defendant. He claimed that two cash cheques exhibited (both of which were issued by Mr Lee and encashed by Mr Ong) for a total sum of $78,000 was evidence of the payment of the service fees.

95. The defendant’s narrative

96. [68]

    [68] The defendant begins by clarifying that Mr Choo had only been formally retained as its employee in October 2008, when the defendant required Mr Choo’s assistance in dealing with the fallout that was caused by the MOM’s investigations into the plaintiffs’ affairs. Before that, the defendant submits that Mr Choo was not its agent and was merely a consultant for the defendant’s labour requirements.

97. [69]

    [69] The defendant explains that the years preceding October 2008 (before the Lehman crisis) were halcyon days for the marine industry as there was a great demand for such workers, particularly from large shipyards like the defendant’s. Further, Mr Ong deposed that it was common practice – though it might have been in violation of the terms of the Marine Industry Sponsorship Scheme – for workers brought in by resident contractors to find gainful employment in other shipyards and that many contractors (including the plaintiffs) conducted business on that premise. The defendant suggests that Mr Lee’s “business model” was to bring in the foreign workers, each of whom would pay about $5,800 in service fees, of which between $2,000 and $4,300 would be paid to Mr Lee and the foreign agent while a sum of $1,500 would be given to Mr Choo. Mr Choo avers that it was Mr Lee who first approached him to indicate his interest in having the first plaintiff registered as one of the defendant’s resident contractors.

98. [70]

    [70] The defendant states that it always dealt with all its resident contractors, including the plaintiffs, at arm’s length and neither encouraged any contractor to apply to become its resident contractor nor encouraged the incorporation of the second plaintiff. The defendant would inform its resident contractors of the quota of foreign workers available for their use but the resident contractors would be responsible for deciding if workers ought to be brought in and, if so, the types of workers that would be recruited. The defendant states that the plaintiffs’ workers were not deployed because they – being unskilled – were unsuitable, and asserts that the plaintiffs had never approached the defendant to inform them that their workers were ready for deployment. The defendant claims that it was always ready to deploy the plaintiffs’ workers (should they be suitable) but it never received word from Mr Lee that the workers were ready for deployment.

99. [72]

    [72] Mr Ong explains that, as far as the defendant was concerned, it did not care which company the workers came from because “[a]s long as the work was done, the [d]efendant and its [s]ubsidiaries were happy to pay for the work”. In any case, the defendant submits that any impropriety that might have been involved in the issuance of the GOFF Invoices is a matter between Mr Choo (who admitted to having instructed Mr Lee to issue the GOFF Invoices) and the plaintiffs alone.

100. [73]

     [73] In relation to the cash cheques encashed by Mr Ong, Mr Choo explained that he had received these cheques from Mr Lee (they were a portion of his “cut” of the service fees) and had handed them over to Mr Ong in discharge of several personal loans which he owed the latter. Mr Ong stated that he regularly lent the defendant’s contractors (Mr Choo was the proprietor of M Power Engineering and Zippon Marine & Engineering – both of which were resident contractors of the defendant) sums of money to tide them over when they experienced problems with their cash-flow. Mr Ong stated that he lent Mr Choo a total of $185,000 within a few months of making his acquaintance. The defendant’s case is that neither it nor Mr Ong ever received any sums of money in connection with the service fees. Instead, service fees of $1,500 (not $3,500) were paid to Mr Choo personally.

101. Service fees

102. [74]

     [74] It is apparent that the dispute over the service fees features prominently in this case – whether it was paid, for what amount and to whom. It also serves as the underlying factual premise for the plaintiffs’ claims, particularly in respect of the second representation. Based on the evidence before me, my findings on the service fees are set out below:

103. (a) First, I find that Mr Choo received $1,500 in service fees for his personal benefit as there is no evidence that any portion of the service fees found its way to the defendant. It is common ground that Mr Choo did receive a portion of the service fees. The dispute lies with the quantum and the capacity in which Mr Choo received the payments. Mr Choo had deposed that he received $1,500 in service fees from Mr Lee while the plaintiffs aver that the full sum of $3,500 was paid to the defendant via Mr Choo. On this point, I prefer the evidence of Mr Choo because, having already admitted to receiving the service fees, there is no reason for him to be untruthful about the quantum. Besides, Mr Lee was not able to adduce any documentary evidence to prove that he had paid the entire service fees received from the foreign workers (amounting at least to $3,500) to Mr Choo.

104. (b) Second, I find that Mr Lee must have received a portion of the service fees for himself. It is undisputed that Mr Lee received at least $3,500 from the foreign workers (the defendant did not challenge the fact that Mr Lee had received service fees but only disputed its quantum – Mr Choo deposed that $5,800 is the usual amount). I have also already found that Mr Choo received only $1,500. Thus, it must necessarily follow (as there is no evidence to prove the contrary) that the balance remained with Mr Lee. I also note that this finding is consistent with Mr Lee’s evidence that the market practice was that the director of the resident contractor would also receive a cut of the service fees.

105. (c) Third, I find that Mr Ong received the sum of $78,000 paid through the cash cheques for his personal benefit and that this represented at least a portion of his share of the service fees. It is undisputed that the two cash cheques were issued by Mr Lee and cashed in by Mr Ong. It is also undisputed that the sum of $78,000 had come from service fees paid by the foreign workers. I reject the explanation that these cheques had been given to Mr Ong by Mr Choo as repayment of personal loans. Not only is that explanation completely unsupported by any evidence, it is simply incredible that Mr Ong would extend loans amounting to a staggering $185,000 to a mere “[business] associate” he had met just months before without requiring any commitment to repayment or any documents evidencing the alleged loans. In my view, this is just a convenient explanation for an inconvenient fact which simply cannot be accounted for. As a result of the foregoing, the only reasonable explanation is that the sum of $78,000 went to Mr Ong personally and that it represented his share of the service fees.

106. General comments

107. [75]

     [75] I now turn to the representations in general. I observe that both parties’ narratives are riddled with difficulties. On the one hand, I struggle to understand how the plaintiffs could have endured the staggering losses of which they now complain – several million dollars in service fees and expenses over the course of a year – merely on the strength of Mr Choo’s oral representations when the reality is that none of the workers were ever deployed. It is inexplicable that, despite the length of time which has elapsed, there is not a single document (save for two cash cheques) evidencing the payment of any of the service fees to the defendant nor is there written correspondence recording Mr Lee’s unhappiness with the defendant over the fact that the foreign workers were not deployed at all.

108. [76]

     [76] On the other hand, I find it astonishing that the defendant would permit the plaintiffs to take up nearly 30% of its allotment of foreign work permits (of a total of 2000) to bring in unskilled and unsuitable foreign workers, particularly since Mr Ong had deposed that it had applied for classification as a “sponsoring shipyard” in order to alleviate its manpower problems (see [13] above). I also find the explanation for the issuance of the GOFF Invoices (that it was simply an administrative convenience) too convenient by half. If the plaintiffs actually supplied workers in respect of the GOFF Invoices then it would not make sense for the plaintiffs to refund the full amount to the defendant without first taking a cut to represent the sums it was owed for the workers it supplied (I note that no evidence was led by the defendant as to what portion was for work done by the plaintiffs or that in respect of such portion, it was in fact paid). Furthermore, it would not make business sense for the plaintiffs to issue invoices (in respect of which it would be liable to pay taxes on the full sum invoiced) if only a portion of the payment was due to them.

109. [77]

     [77] Mr Sim urged me to accept the plaintiffs’ narrative of events because there was no plausible reason why Mr Lee would have acted the way he did – bringing himself to the brink of financial ruin – without an assurance of work. He submitted that there was no reason for the defendant to allow the plaintiffs to take up nearly 30% of its allotment of 2000 foreign work permits if it were not benefitting from the receipt of service fees. Mr Sim also urged me to reject the defendant’s explanation that the plaintiffs’ workers were unskilled, arguing that it was both inconsistent with the documentary evidence (given that many of the IPA certificates exhibited seem to suggest that at least some of the workers were skilled) but also with the testimony of Mr Choo and Mr Ong that the plaintiffs had supplied workers in relation to the GOFF Invoices, which required the deployment of semi-skilled labour.

110. [78]

     [78] While Mr Sim has raised some thought-provoking points, the fundamental problem with his submission is that the difficulties in the defendant’s narrative, however numerous, do not assist the plaintiffs with the proof of its affirmative case. I am not faced with a binary choice between accepting either the plaintiff’s account of events or that of the defendants. In other words, rejection of the defendant’s case theory does not invariably entail acceptance of the plaintiffs’.

111. [79]

     [79] To my mind, there is at least one other possibility which both parties understandably steered away from. In gist, this possibility is that the three men at the centre of this suit – Mr Lee, Mr Choo, and Mr Ong – had devised a plan (perhaps independently of the defendant) to earn money through the receipt of service fees. The “business plan” was for the plaintiffs to be registered as the defendant’s resident contractors and, upon being allocated a generous quota of the defendant’s foreign work permits, bring in many foreign workers. Once these workers came in, there would be an immediate financial benefit to the three of them in the form of their respective shares of the service fees (which amounted to a substantial sum in excess of $2m).

112. [80]

     [80] Under this plan, it was always contemplated that the workers would in all likelihood be deployed, because the marine industry was doing very well at that time. The three men, in coming up with this business plan, saw it as a profitable venture. When the workers arrived, they would receive an immediate cut of the service fees. When the workers were deployed, as they were optimistic they would be at that time, they would reap further benefits. However, this plan began to unravel when (a) the economy turned sour at the end of 2008; and (b) when the MOM commenced its investigations into the plaintiffs. The plaintiffs predictably avoided this explanation because it would be fatal to its case on the service fees if they acknowledged that the service fees were paid to Mr Choo and Mr Ong personally and not to the defendant. The defendant, through Mr Ong, understandably wanted to avoid this conclusion in recognition of the impropriety involved.

113. [81]

     [81] With this finding, many of the puzzling aspects of the parties’ narratives described at [75] and [76] above would be rendered explicable. That having been said, it is not necessary for me to find out exactly what happened in order to dispose of this case. At the end of the day, the plaintiffs bear the burden of proving the facts-in-issue to establish its claim in fraudulent misrepresentation, chief of which is that the alleged representations as pleaded were in fact made. On that count, I am not persuaded that the plaintiffs have succeeded.

114. The plaintiffs’ case theory in light of the conduct of Mr Lee

115. [82]

     [82] I will first make two preliminary observations. For a start, I note that the plaintiffs have accused the defendant of fraud, which is a serious allegation. In Tang Yoke Kheng (trading as Niklex Supply Co) v Lek Benedict and others [2005] 3 SLR(R) 263 at [14] (“Tang Yoke Kheng”), the Court of Appeal observed,

116. [83]

     [83] In Chua Kwee Chen and others (as Westlake Eating House) and another v Koh Choon Chin [2006] 3 SLR(R) 469 at [39], Phang JC (as he then was) clarified that the standard of proof to be applied is still the civil test of proof on a balance of probabilities. However, because of the context in question, “more evidence is required than would be the situation in an ordinary civil case”. This was applied in Wee Chiaw Sek Anna v Ng Li-Ann Genevieve (sole executrix of the estate of Ng Hock Seng, deceased) and another [2013] 3 SLR 801 (“Wee Chiaw Sek Anna”) at [30], where the Court of Appeal cited its previous decision in Tang Yoke Kheng in the context of a claim in fraudulent misrepresentation and endorsed the position that a more rigorous forensic lens should be applied to claims grounded in fraudulent misrepresentation. In the instant case, both parties do not dispute that this approach correctly reflects the law.

117. [84]

     [84] The second preliminary issue concerns my general approach towards the representations. Each of the alleged representations can form the basis of an independent cause of action in fraudulent misrepresentation (though the damages claimed in respect of each of them might differ – for example, recovery of the service fees paid is premised largely on proof of the second alleged representation, and not on the first or third). However, given that the primary evidence for each of the alleged representations is the evidence of Mr Lee, all the alleged representations will stand or fall together, based primarily on my assessment of the veracity of Mr Lee’s testimony. In assessing Mr Lee’s testimony, I am guided by the observations of the Court of Appeal in Sandz Solutions (Singapore) Pte Ltd and others v Strategic Worldwide Assets Ltd and others [2014] 3 SLR 562 at [39] and [46] in which the Court of Appeal cautioned against excessive reliance on assessments based on the demeanour of the witness and advocated a rigorous approach based primarily on a comparison between the witness’s testimony in light of the objective evidence before the court. With that in mind, I will analyse the reliability of Mr Lee’s account along two indices: (a) its internal consistency (ie, the coherence of his testimony throughout the trial); and (b) its external consistency (ie, if the evidence given at trial is consistent with the extrinsic evidence such as the behaviour of the parties and the contents of the documentary evidence on record).

118. Mr Lee’s conduct at the material time

119. [85]

     [85] First, I find it significant that none of the alleged representations, despite the obvious importance placed on them by the plaintiffs, found their way into any of the three agreements: the Goldrich Labour Supply Agreement, the Gates Labour Supply Agreement, or the Gates Fabrication Agreement. Instead, the agreements were vague and unspecific. They regulated the terms on which labour or services would be provided by the plaintiffs if the defendant so requested but did not specify that work would, in fact, be requested. This omission is particularly inexplicable in the case of the Gates Fabrication Agreement, which was signed on 1 December 2008. By this time, the plaintiffs claim that their workers had not received work for the whole year and that millions had allegedly been expended in service fees and expenses (see [64] and [68] above). In the circumstances, I find it incredible that the plaintiffs would blithely take the defendant at their word and not insist on reducing the representations into writing, given the opportunity to do so in the Gates Fabrication Agreement.

120. [86]

     [86] Furthermore, I find the circumstances leading to the issuance of the Gates Fabrication Agreement to be particularly notable:

121. [87]

     [87] This exchange is just one example of how Mr Lee often gave inconsistent and contradictory testimony. Apart from that, this also reveals that even Mr Lee did not believe that the defendant had an obligation to deploy his workers. If one examines his testimony carefully, it is clear that he asked not for work per se but for a contract that would forestall the MOM’s investigations. If, as the plaintiffs now assert, the defendant had represented that they would deploy all their workers, then Mr Lee’s demands ought to have been for work – for purchase orders and the like. However, he did not do that and was instead content to receive a vague contract that did not even bind the defendant to use the plaintiffs’ workers.

122. [88]

     [88] Second, I find it significant that, under cross-examination, Mr Lee admitted that all the workers brought in by the first plaintiff and 85% of the workers brought in by the second plaintiff were unskilled. This is incongruous when we consider that the plaintiffs have pleaded that the third representation was a promise for immediate deployment (“the Plaintiffs from March to December 2008 should continue to bring their foreign workers into Singapore so that the said foreign workers could start work immediately” [emphasis added] (see [28(c)] above)). Given the terms of the third representation, one would expect Mr Lee to bring in workers who were suitable for immediate deployment. However, that was not the case. In the 15 December letter (see [23] above), Mr Lee wrote that “most of [the 400 workers brought in by the second plaintiff] are still undergoing training at our in-house training centre. We expect them to be ready for job deployment early January 2009” [emphasis added]. In other words, by Mr Lee’s own evidence, the plaintiffs’ workers were not ready for deployment because they were unskilled and not ready.

123. [89]

     [89] I find the plaintiffs’ conduct in bringing in largely unskilled workers at odds with the content of the third representation. If the third representation were made, the plaintiffs ought to have brought in workers which could immediately be set to work but this was not the case. When confronted with his 15 December letter during cross-examination, Mr Lee (perceiving how damaging it was to the plaintiffs’ case) attempted to disown his earlier response to the MOM by claiming that he had provided a “false” response to the MOM at that time and that not all of the second plaintiffs’ workers were undergoing training (and therefore unsuitable for deployment). This is yet another example of Mr Lee’s propensity to tailor his evidence whenever it suited him.

124. [90]

     [90] Third, it is critical to note that there is no documentary evidence that any correspondence had been exchanged between the plaintiffs and the defendant on anything, let alone on the substance of the alleged representations. During oral argument, Mr Sim attempted to explain this away by suggesting that the individuals in question were “people who [did not] communicate… in writing. It’s all phone calls”. I find that explanation wholly unconvincing. The subject matter is neither trivial nor casual in nature such that written communication is not usually expected. Here, we are concerned with the recruitment and employment of hundreds of foreign workers towards whom the plaintiffs owed statutory responsibilities. I find it incomprehensible that, if the defendant had in fact represented that the foreign workers would be deployed for two years at its shipyard, the plaintiffs would not have sent any written communication protesting their non-deployment at all. Furthermore, from July 2010 to May 2011, after the affair had unravelled and Mr Lee had been prosecuted, the plaintiffs sent 12 carefully written, clear, and forcefully expressed letters to the defendant seeking compensation. Mr Lee is obviously not an uneducated man. During the trial, he was able, under questioning, to discuss the niceties of insurance law with references to the territorial coverage of the insurance contracts and the doctrine of subrogation. In light of that, I am unable to accept Mr Sim’s explanation and I find the absence of documentary evidence to support the alleged representations to be a glaring omission.

125. [91]

     [91] Fourth, I note that there is no evidence that any payments of the service fees, even if made, ever went to the defendant. Instead, the only evidence before this court is that part of the service fees was paid and received by Mr Choo and Mr Ong personally (see [74(a)] and [74(c)] above). This is a glaring gap in the plaintiffs’ case because the substance of the second representation was that, upon payment of the requisite service fees to the defendant, work would be given to the plaintiffs’ workers. The absence of any evidence that the defendant received the service fees serves only to reinforce the point that the representations (or, at least, the second representation) could not have been made and that the entire affair was merely a private transaction between Mr Lee, Mr Choo, and Mr Ong.

126. [92]

     [92] Perceiving this difficulty, Mr Sim submitted that payment to an agent constitutes a discharge of the debt due to the principal. However, this submission is misconceived. There is no contractual obligation in any of the three agreements – the Goldrich Labour Supply Agreement, the Gates Labour Supply Agreement, or the Gates Fabrication Agreement – to pay any service fee to the defendant. The only reason why such a “debt” might exist is if the representations had been made – however, that is the very fact-in-issue. It is question-begging to assert that – on the assumption that the representations had been made – this would mean that there is a debt owed to the defendant which the plaintiffs had discharged by paying Mr Choo. Instead, the appropriate conclusion to draw is that the absence of any evidence that sums were paid to the defendant suggests that the representations were never made to begin with.

127. [93]

     [93] Fifth, I find it puzzling that there is no evidence that Mr Lee communicated with anyone in the defendant company other than Mr Choo. In fact, it appears that the plaintiffs first wrote to the defendant in July 2010, after Mr Lee had been prosecuted. It is also surprising that Mr Lee only sought to meet Mr Ong for the first time in December 2008, when the plaintiffs were already in dire straits (see [24] above) and not any earlier, when it was clear that Mr Choo was unable to deliver on his alleged representations. This builds on the previous point regarding the absence of evidence of payment to the defendant and gives further reason to believe that this matter is merely a private transaction between the three men.

128. Mr Lee’s conduct before the criminal proceedings

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