High Court · Decided 18 May 2011

The Stansfield Group Pte Ltd (trading as Stansfield College and another v Consumers’ Association of Singapore and another

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[2011] SGHC 122Case no. Suit No 743 of 2007

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Marine Insurance Act 1906

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Judith Prakash J:
Introduction
[1] The first plaintiff is The Stansfield Group Pte Ltd. Until 3 January 2007, the first plaintiff was the owner of two private educational organisations (“PEOs”), viz Stansfield College (“Stansfield”) and Singapore Institute of Commerce (“SIC”), which offered tertiary education to local and foreign students. On 3 January 2007, the first plaintiff transferred SIC to the second plaintiff, SIC College of Business and Technology Pte Ltd. On 5 April 2008, the first plaintiff transferred Stansfield to one of its subsidiary companies, Stansfield College Group Pte Ltd. I will hereafter sometimes refer to Stansfield and SIC collectively as “the schools”.
[2] The first defendant, Consumers’ Association of Singapore (“CASE”), is a society registered with the Registry of Societies. Its principal aim is the protection of the interests of consumers.
[3] The second defendant is NTUC Income Insurance Co-operative Limited (“Income”). It is a co-operative society registered with the Registry of Co-operative Societies and is in the insurance business.
[4] The plaintiffs have made claims against both defendants in tort and contract. As against CASE, their claim is for the following:
(a) a declaration that the Notices of Suspension of Case Trust Membership dated 20 November 2006 issued by CASE to the schools were unlawful and void;
(b) the sum of $107,523.84 as special damages; and
(c) damages to be assessed.
As against Income, their claim is for the same amount of $107,523.84 as special damages and also for damages to be assessed.
The facts
General background
[5] One of CASE’s functions is to administer various accreditation schemes with the objective of encouraging businesses in the service and retail industries in Singapore to be more consumer-friendly and to adopt fair business practices. One such accreditation scheme is directed at the private education business and is known as CaseTrust for Education.
[6] CaseTrust for Education was developed as part of the “Education Excellence Framework” launched by the Economic Development Board in September 2004 which was aimed at developing Singapore as a world class education hub. One important purpose of the Education Excellence Framework was to ensure that the welfare of foreign students in Singapore was protected so as to attract them to Singapore. From 1 September 2005, all PEOs in Singapore that wished to enrol foreign students had to possess a valid CaseTrust for Education membership. To ensure that this requirement was met, from that date, the Immigration and Checkpoints Authority (“ICA”) did not issue student passes to foreign students who enrolled in PEOs that were not members of CaseTrust for Education.
[7] One of the key requirements for a PEO that wishes to acquire membership in CaseTrust for Education is that it has in place arrangements that satisfy the Student Protection Scheme (the “Scheme”). The Scheme was devised to protect foreign students against losing their tuition fees paid to a PEO by reason of the insolvency or premature closure of such PEO. There are two methods of protecting student fees under the Scheme. PEOs participating in the Scheme must either:
(a) deposit no less than 70% of each foreign student’s tuition fees in an escrow arrangement with a participating bank (“the escrow option”); or
(b) take out an insurance policy from a participating insurer to provide each foreign student with insurance coverage for no less than 70% of the tuition fees paid by the student (“the insurance option”).
[8] At all material times, Income participated in the Scheme by providing insurance cover under the insurance option. It was the only insurer in Singapore to do so.
[9] The first plaintiff decided to choose for the insurance option. It applied to Income for cover in late 2004. At the time of application, the first plaintiff provided Income with its audited financial statements and other information. Income then commissioned Dun & Bradstreet (Singapore) Pte Ltd (“Dun & Bradstreet”) to perform financial due diligence on the first plaintiff to determine its financial stability and assess the commercial risks of insuring Stansfield’s and SIC’s students. In late November 2004, the first plaintiff’s financial condition was found to be fair. On 1 December 2004, Income issued two separate master insurance policies, one for each of Stansfield and SIC, viz policies number 1000000021 and 1000000022 (each an “SPS policy”). The aggregate maximum insurable limit under these policies was initially $5m. It was later increased to $8m based partly on the security of two banker’s guarantees which the first plaintiff provided to Income.
[10] Sometime in 2005, the schools applied for membership in CaseTrust for Education and were assessed by CASE’s independent assessors to determine their eligibility. During the assessment, both schools were required to furnish evidence of their participation in the Scheme. They did so by providing CASE with copies of the SPS policies. On 25 August 2005, Stansfield became an accredited member of CaseTrust for Education and SIC acquired the same status the next day.
Documentation relating to CaseTrust for Education
[11] Various agreements and documents were presented to me as governing the relationship between CASE (as the administrator of CaseTrust for Education) and the schools (as member PEOs of CaseTrust for Education).
[12] First, there is The Code of Practice for CaseTrust Members (“the Code of Practice”). This is a generic code that sets out the good business practices expected of members of CaseTrust. It applies generally to CaseTrust members across all industries and is not specifically designed for members of CaseTrust for Education. It does not contain any specific reference to CaseTrust for Education or the Scheme. Clause 10 of the Code of Practice sets out the sanctions that may be imposed by CASE in the event that a PEO breaches the Code or other terms and conditions of membership:
[13] Second, a CaseTrust Information and Application Kit (“the Info-Kit”) was sent to the schools in 2005 when they were applying for membership in CaseTrust. The Info-Kit was also available on CASE’s website. It provides general information, forms and checklists on CaseTrust for Education and sets out the terms and conditions governing membership. It also sets out the criteria that any PEO has to meet if it wishes to become an accredited member of CaseTrust for Education.
[14] The Info-Kit explains the importance of the Scheme to CaseTrust for Education. It states (at para 9 of Chapter 2) that a PEO that achieves CaseTrust for Education will have in place the Scheme to protect the student’s tuition fees in the event that the PEO is unable to continue operations due to adverse situations such as insolvency. The two methods of protection prescribed by the Scheme are set out in para 12 of Chapter 3 and the insurance option is explained at para 16 as follows:
[15] The Info-Kit states that a PEO must enter into an escrow arrangement or an insurance agreement under the Scheme in order to qualify for membership of CaseTrust for Education. Under “C. Practices and Systems” criterion C15 of the Info-Kit states:
Criterion C15 appears as part of a checklist intended to facilitate assessment of PEOs who are applying for accreditation. The applicant PEO has to indicate in a box next to criterion C15 whether or not it has a Student Tuition Fee Account (Escrow) endorsed by CASE or whether it has a Student Tuition Fee Insurance endorsed by CASE.
[16] The Info-Kit explains to PEOs the consequences of a breach of the terms and conditions of membership. Chapter 7 of the Info-Kit states, inter alia:
[17] Third, on 10 January 2005, CASE entered into an agreement (“the CASE-PEO agreement”) with each of the schools. The preamble of each CASE-PEO agreement provided as follows:
[18] Clauses 2.1(a) and (f) of the CASE-PEO agreement dealt with the Scheme in the following terms:
[19] The “Student Contract” referred to in the CASE-PEO agreement is defined in cl 1.1 thereof as being a “standard student contract duly approved by CASE made or to be made between a Student and the PEO relating to his/her course of studies with the PEO”. In cll 3.1 and 3.2 of each standard student contract, the PEO undertakes to the student that it has in place a scheme (ie either the escrow option or the insurance option) for the student’s protection and that it will procure insurance coverage for the student in accordance with the framework of the Scheme.
Documentation and procedure relating to the insurance scheme
[20] On 9 September 2004, Income entered into a Master Insurance Agreement with CASE under which it agreed to provide insurance facilities in respect of the Scheme to qualified PEOs who had applied for such insurance. Clause 2.6 of this agreement gave Income absolute discretion to, at any time, decline insurance cover to any PEO and/or any student as well as to impose loading or other conditions in respect of any insurance policy granted to PEOs under the insurance scheme.
[21] As stated above, Income issued two SPS policies to the first plaintiff in December 2004. Under SPS policy number 1000000021, which was in respect of the first plaintiff trading as Stansfield, the maximum insurable limit was $2m in the aggregate, and under SPS policy number 1000000022, which was in respect of the first plaintiff trading as SIC, the maximum insurable limit was $1.5m in the aggregate. Apart from the difference in insurable limits, the terms of both SPS policies were identical. Each policy stated that in consideration of the payment of the premium prescribed by Income for each insured student, it would provide the benefits stated in the policy for the insured students subject to the maximum limits of liability prescribed in the individual Certificate of Student Insurance issued to each insured student covered by the policy.
[22] Under the Terms and Conditions of each SPS policy, the term “Maximum Insurable Limit” was defined as meaning the sum (as revised by Income from time to time) stated in the Schedule to the SPS policy to be the maximum insurable limit for that policy in respect of all insured students covered or to be covered under the policy from time to time. Conditions 6 and 7 of the SPS policies are important. They provide:
[23] The SPS policies stated that the administration agency for the insurance services provided by Income would be a company called Aegis Insurance Service Pte Ltd (“Aegis”). Aegis was given the job of handling all administration matters arising in the operation and management of student protection policies.
[24] The schools were required by Income to submit an individual insurance application for each student they wished to protect under the SPS policies. Each insurance application had to contain the relevant particulars of the individual student applicant including his passport details, course of study and tuition fees. Insurance applications were done online via Income’s online insurance application system using login IDs and passwords issued to the schools. The online insurance application system was the only way that Stansfield and SIC could apply for insurance cover for their students. At the time an application was keyed-in, the system would generate details of the premium payable in respect of such application.
[25] So long as the Maximum Insurable Limit for a school had not been reached, when that school made an insurance application via the online application system, the application would be transmitted to Aegis. Aegis would then proceed to generate the necessary documents. No further instructions would be received from Income as to whether the application had been accepted or not. The documents that would be generated were:
(a) a letter of insurance confirmation for ICA;
(b) an individual Certificate of Student Insurance for the student applicant; and
(c) a debit note in respect of the application for insurance.
These documents would be released to the plaintiffs by Aegis upon collection of the premium payable. A staff member from the schools would, ordinarily, attend at the offices of Aegis to make payment by way of cheque and collect the relevant documents. It bears repeating that once an online application had been properly keyed into the system and the application was within the Maximum Insurable Limit, it was automatically accepted.
The parties and their representatives
[26] At all material times, one Mr Kannappan s/o Karuppan Chettiar (“Mr Chettiar”) was a director and the chairman of both the plaintiffs. His wife, Ms Cenobia Majella, was a co-director of the plaintiffs. In November 2005, as the first plaintiff was expanding its business, Mr Chettiar recruited Mr Ken Yeo Poh Siah (“Mr Yeo”) and Dr Joseph Pious (“Dr Pious”) to join the key management team. Between November 2005 and December 2006, Mr Yeo was the Group Registrar responsible for the administration of student matters, records and operations. Dr Pious was employed as the Chief Executive Officer of the first plaintiff.
[27] In January 2006, Mr Yeo established a new department in the first plaintiff called the “Student Pass Office”. This office was responsible for handling and administering the student pass applications of students from both schools. The office had two dedicated employees: one each in Stansfield (Clari in January 2000) and SIC (Julie, in January 2006). Clari and Julie were replaced by Vernice and Nura sometime in April or May 2006 and these employees were in turn replaced by Farida and Noraini sometime in August 2006.
[28] The department in CASE responsible for the administration of the CaseTrust scheme is the CaseTrust Secretariat. Within that department, the head of CaseTrust for Education was a Ms Shennon Khong. At the material time, Shennon Khong was assisted by Ms Angela Lee (“Ms Lee”), an executive who reported to her on all matters relating to CaseTrust for Education. Ms Lee’s duties included processing applications and renewals of CaseTrust membership, conducting due diligence checks on CaseTrust applicants and members and dealing with queries relating to CaseTrust. One of her responsibilities was to periodically check with the banks and Income on the number of students protected by an escrow or insurance arrangement, and also to check with the ICA on the number of student passes issued to determine whether there were any discrepancies in the figures.
[29] At the material time, Mr Seah Seng Choon (“Mr Seah”) was the executive director of CASE. He, however, was out of the office travelling during much of the period in 2006 when the events that this case is concerned with occurred. At that time, Shennon Khong was away on maternity leave. Therefore, Ms Lee, who covered most of Ms Khong’s day-to-day duties, handled the interactions with the plaintiffs and Income on behalf of CASE. She sought advice and guidance from Thevanathan Pillay (“Mr Pillay”) who held the post of Assistant Director (Legal). Mr Pillay was the legal adviser to the CaseTrust Secretarial and advised it on all legal matters relating to CaseTrust. In Mr Seah’s absence, he was also responsible for disciplinary matters.
[30] The person in Income who was involved in the events leading to this action was Mr Teo Chin Poh Terence (“Mr Teo”). At the material time, he was the Head of the Property and Casualty Department of Income. He was in charge of the management of the two SPS policies entered into between the plaintiffs and Income. In this connection, he was in close and regular contact with Mr Tay Kong Suan Richard, a director of Aegis.
Events leading to the suspension of the schools’ CaseTrust membership
[31] Around the end of September 2006 while reviewing all student records, the plaintiffs identified 23 international students, all of whom seemed to have been issued with valid student passes without any corresponding application or payment for insurance having been made to Income. On or about 6 October 2006, Mr Yeo, having received confirmation that those students did not have insurance cover, instructed his staff to make the necessary applications for such insurance cover. On 14 October 2006, the first plaintiff sent Income 23 insurance applications accompanied by two cheques in payment of the premiums for the same. On 10 November 2006, however, Aegis wrote to the first plaintiff stating that there were no records of outstanding bills relating to those cheques. It returned the cheques under cover of the said letter and reminded the first plaintiff that correspondence and documents in respect applications under the SPS policies had to be sent via Aegis and not directly to Income.
[32] This episode was peculiar because neither school had reached its Maximum Insurable Limit and therefore if the applications had been made properly, they should have been accepted and the premiums would have been due to Income. At the time the plaintiffs attempted to make the applications, the online application system had not been altered in any way and was available to the plaintiffs. It would therefore appear (and the evidence seems to support) that the reason for this rejection was that the plaintiffs’ staff had not keyed in the applications correctly when using the online application system so that the applications had not been received by Income or Aegis and Aegis had not generated the usual documents in respect thereof. That was why there was no record of any amount being due from the plaintiffs. Further, the plaintiffs had not followed the usual procedure in that they had not attended at Aegis’ office with their cheques to hand over the same in exchange for the confirmation letters for ICA and the Certificates of Insurance for the students. Instead, they had sent the cheques directly to Income accompanied by print-outs of the applications that they had tried to make for their various students.
[33] On 16 October 2006, Ms Lee received a telephone call from an officer of the Singapore Tourism Board (“STB”) who informed her that there was some market talk regarding Stansfield’s and SIC’s financial status. At Ms Lee’s request, this call was followed the same day by an e-mail from the STB which was copied to various other agencies as well and stated, inter alia:
Shortly thereafter, Ms Lee received another e-mail from the STB which asked:
[34] Ms Lee was concerned about potential problems relating to the plaintiffs’ CaseTrust membership and decided to commence an investigation into the plaintiffs’ compliance with the Scheme. This investigation involved checking with both Income and ICA on the number of insurance policies purchased by the plaintiffs and the number of student passes that had been issued. On 19 October 2006, Ms Lee sent an e-mail to Mr Teo informing Income that CASE was investigating SIC and Stansfield and wanted certain information from Income including the number of insurance policies applied for by both schools over the preceding eight months, whether the premiums of all students had been fully paid and how the students would be protected in the event that the schools were to close down.
[35] On 20 October 2006, Mr Teo responded by, inter alia, asking Ms Lee about the nature of CASE’s investigation. Ms Lee’s e-mail in reply sent out the same morning stated:
[36] Mr Teo then checked and discovered that Stansfield had not made any online insurance applications for eight months (from March 2006 to October 2006) whilst SIC had not done so for the six months between May 2006 and October 2006. This was unusual in view of the size and scale of the plaintiffs’ organisation. Further, the total value of the policies issued to the schools’ students was below the Maximum Insurable Limits. At that time, the Maximum Insurable Limits of the SPS policies totalled $6m and the value of the actual policies issued totalled $711,660. This left a further sum of $5,288,340 available for utilisation by the schools.
[37] Mr Teo explained to the court that upon ascertaining the above information, he had the following concerns:
(a) that there was a genuine possibility that the plaintiffs might be in financial distress which could expose Income to considerable financial risk;
(b) Income did not have sufficient information at that stage to manage its risk exposure with respect to the SPS policies; and
(c) CASE was investigating the plaintiffs and he believed that Income should not take any action which might alert plaintiffs to those investigations and potentially compromise the same.
Mr Teo then decided that the best way forward would be to freeze all new insurance applications from the plaintiffs pending CASE’s investigation.
[38] At about 10pm on 20 October 2006, Mr Teo sent an e-mail to CASE stating that Income had not received any new applications from Stansfield or SIC for more than six months. The e-mail went on to state:
A copy of the e-mail was sent to Aegis.
[39] According to Mr Teo, the suspension referred to in his e-mail was the freezing of all new applications for insurance cover under the Scheme by the plaintiffs. This was effected by resetting the plaintiffs’ login password to Income’s online insurance application system. This resetting was effected on 23 October 2006. Income did not inform the plaintiffs of what it had done. It should also be noted here that Ms Lee’s position was that when she read Mr Teo’s e-mail informing her about the suspension of the “bond facility” she did not understand that he meant that Income was suspending its insurance facilities to the plaintiffs.
[40] In the meantime, on 19 October 2006, Ms Lee had also asked the ICA to inform her of the number of student passes issued to students of Stansfield and SIC over the previous six months. On 26 October 2006, she was given the “stock figures” for the schools and on 3 November 2006, the ICA provided the “flow figures” (ie the number of new student passes issued during the period). Having received this information from ICA, she proceeded to compare it with the information given to her by Income. Ms Lee then discovered that there were substantial discrepancies between the number of insurance policies applied for by the schools and the number of student passes issued by the ICA. During the period between April 2006 and September 2006, the ICA had issued 229 student passes to students in Stansfield and 297 passes to students in SIC. During the same period, the plaintiffs had not applied for any policies for Stansfield students and had only applied for 47 policies for SIC students. This meant that 229 Stansfield students and 250 SIC students were, apparently, not covered by any insurance policy under the Scheme during the period.
[41] On or about 9 November 2006, the plaintiffs made several attempts to access Income’s online insurance application system. The plaintiffs attempted to follow up with Income and, according to Mr Yeo, were informed that the telephone operator was not aware of the Scheme.
[42] On 14 November 2006, CASE wrote to Stansfield and SIC informing them of the discrepancies it had found and asking for an explanation to be given on or before 23 November 2006. It should be noted that these letters (“14 November letters”) were sent by post. The letter to Stansfield was put to the attention of Mr Chettiar. It informed Stansfield that between April and September 2006, 229 student passes had been issued and no insurance applications had been submitted and therefore there was a total shortfall of 229. It further stated:
The letter to SIC was put to the attention of Mr Yeo and, apart from the difference in figures (the total shortfall being 250), the wording was identical.
[43] On 17 November 2006, CASE sent Income copies of the 14 November letters. Mr Teo, having read these letters, found that it was clear to him that the plaintiffs had failed to insure all of their international students. He said that this was a great concern to him. It was one thing not to purchase any insurance over a period of time, it was another thing to enrol students but omit to purchase insurance policies to cover them. This would nullify the protection intended to be provided by the Scheme. Mr Teo found the information particularly worrying because it gave credit to the tip-off that the plaintiffs might be in financial distress. In his view, there were important questions on the plaintiffs’ financial condition which needed to be answered so that Income could assess its options. The possible options were:
(a) to choose to reduce the Maximum Insurable Limits of the SPS policies;
(b) to require them to provide more security to maintain the current Maximum Insurable Limits of the SPS policies; or
(c) to terminate the SPS policies altogether.
[44] Mr Teo informed the court that he did not wish to take any of the above steps without investigation and he therefore decided to continue the freezing of the insurance facilities in respect of new applications until the conclusion of CASE’s investigation or until Income’s questions on the state of the plaintiffs’ finances could be fully answered. He considered that since CASE had now asked the plaintiffs for an explanation for the discrepancies, Income could proceed to give the plaintiffs notice of this freezing action as such notice would no longer threaten or compromise CASE’s investigation. Consequently, on 17 November 2006, Mr Teo sent an e-mail to Aegis instructing them to proceed to notify the plaintiffs of the freezing of the insurance facilities. He sent a copy of this e-mail to CASE to inform it of Income’s decision.
[45] CASE received Mr Teo’s e-mail at 6.16pm on 17 November 2006. That was a Friday. Ms Lee immediately informed Mr Pillay about the suspension of the insurance facilities. They agreed with each other that this was a serious matter as the suspension of the plaintiffs’ insurance facilities meant that newly enrolled students and current students without insurance coverage could not be protected under the Scheme. However, they decided to postpone making any decision as to what should be done until after the weekend.
[46] On the morning of Monday, 20 November 2006, Ms Lee and Mr Pillay resumed their discussion on the plaintiffs. According to Ms Lee’s testimony, they agreed that this was an urgent situation which necessitated CASE responding promptly with appropriate measures. They also decided that in order to safeguard the interests of the students, unless the plaintiffs’ insurance facilities were restored by Income by the end of that day, the schools’ membership in CaseTrust for Education would be suspended as an interim measure pending resolution of the matter. They agreed that CASE could no longer afford to give the schools until 23 November 2006 to explain the discrepancies as a change in circumstances had taken place on 17 November 2006, ie, the schools no longer had any valid insurance facilities under the Scheme.
[47] That same morning, Mr Tay of Aegis sent an e-mail addressed to Mr Chettiar and Ms Majella at their respective e-mail addresses and copied to Mr Teo and two other employees of Aegis. The e-mail was sent out at 9.38am and the subject heading was “SIC – Notification of Suspension of SPS Facility”. The e-mail read:
At that time, Mr Chettiar and Ms Majella were in India. Mr Chettiar testified that he did not see the e-mail until about 12.30pm Indian time or about 3pm Singapore time. He then instructed Ms Majella to forward the e-mail to Mr Yeo, Dr Pious and another senior employee of the plaintiffs, Mr Ramel Ang (“Mr Ang”), and she did so at 3.11pm Singapore time.
[48] I must now relate what happened as between the plaintiffs and CASE on 20 November 2006. The parties have rather different accounts of what occurred and I will deal with this separately.
The plaintiffs’ version
[49] The plaintiffs’ position is that although the 14 November letters were received in their offices on 18 November 2006 (Saturday), Mr Yeo did not see the letter addressed to SIC until the morning of 20 November 2006. It is not clear when Dr Pious read the letter addressed to Stansfield as he did not testify. In any event, Mr Yeo’s evidence was that the first he knew of the discrepancies was when he read the 14 November letter to SIC on that Monday morning.
[50] Mr Yeo said that when he came across the letter, he was a bit taken aback by it. Until then, he had been under the impression that there were only 23 students who had been issued student visas without the required insurance policies. He was perturbed to find out that in fact 250 students were not covered and he immediately telephoned Ms Lee to seek further clarification on the 14 November letter. This was at about 10am.
[51] During the telephone conversation, Ms Lee informed Mr Yeo that CASE had sent Stansfield a similar letter seeking an explanation of the discrepancy between the number of student passes issued and the number of students protected by insurance policies. Mr Yeo then informed Ms Lee of SIC’s unsuccessful attempts to access Income’s online insurance application system and that Income had recently returned two cheque payments for two batches of insurance applications. Upon concluding the conversation, Mr Yeo had the impression that CASE was only seeking clarification of the discrepancies that it had found. As the 14 November letter had only requested “clarification” and the plaintiffs had been given till 23 November 2006 to respond, Mr Yeo says he thought that the matter was “merely one of routine clarification”.
[52] At about 3pm on 20 November 2006, Mr Yeo received a telephone call from Ms Majella who told him about Aegis’ e-mail of the same day. Shortly thereafter, Mr Chettiar himself called. Mr Yeo confirmed that he had not received the Aegis e-mail himself and informed Mr Chettiar of the 14 November letter to SIC and of the problems the plaintiffs’ staff had encountered with logging on to the online insurance application system.
[53] Later, Mr Yeo met with Mr Ang and Dr Pious to discuss the developments and decide on what steps to take. He then confirmed that Stansfield had also received the 14 November letter. At about 3.45pm that afternoon, the three employees spoke to Mr Chettiar and told him about the 14 November letters. Mr Chettiar instructed them to prepare and provide a written response to CASE by the end of the same day, notwithstanding that the letters had fixed 23 November 2006 as the deadline. Mr Chettiar gave them various instructions as to what the response should contain.
[54] At about 4pm, Mr Yeo telephoned Ms Lee again. He informed her of the e-mail from Aegis telling the plaintiffs of the suspension by Income. Mr Yeo had called Ms Lee to seek CASE’s assistance in getting Income to lift its suspension and he therefore requested such assistance from her and explained that the plaintiffs would rectify the discrepancies between the number of issued student passes and the number of student insurance policies immediately after the suspension by Income had been lifted. He emphasised that without the lifting of such suspension, the plaintiffs would not be able to make good the discrepancies. Ms Lee responded that CASE’s query and Income’s suspension were two separate matters and that the plaintiffs had to deal directly with Income. Mr Yeo informed Ms Lee that he would deliver the plaintiffs’ response to CASE by 6pm. During this conversation, Ms Lee did not at any time mention the possibility of CASE suspending the schools’ membership of CaseTrust.
[55] Later that evening, Mr Yeo made a third telephone call to Ms Lee. His purpose was to ask for directions to CASE’s office as well as to inform her that he would be a little late. By the time he arrived at CASE’s office, the offices were locked and all lights were turned off. There were no staff members around. He then telephoned Ms Lee to let her know that he was outside the office and she met him at the entrance. Mr Yeo handed the plaintiffs’ written response to her. This was at about 6.15pm. Without opening the envelop or reading the response, Ms Lee immediately handed two letters to Mr Yeo and requested him to acknowledge receipt of the same. The letters were addressed to the schools and when Mr Yeo opened them he discovered that they were Notices of Suspension of CaseTrust membership. Mr Yeo left CASE’s office within five minutes of arriving there.
[56] The letter that Mr Yeo handed to Ms Lee was on the letterhead of the first plaintiff and was signed by Dr Pious. It read as follows:
It would be noted that nowhere in this letter did the first plaintiff contest CASE’s findings or its figures. There was no challenge to the assertions that Stansfield had not insured 229 students and SIC had not insured 250 students.
CASE’s version
[57] Ms Lee confirmed that at about 10am on 20 November 2006, Mr Yeo telephoned her regarding the 14 November letters. She said that during the conversation, she informed Mr Yeo that CASE had only just found out that Income had suspended the plaintiffs’ facilities under the Scheme on 17 November 2006, and accordingly, the plaintiffs failed to satisfy a fundamental and key criterion of CaseTrust for Education. Mr Yeo confirmed to her that the plaintiffs’ insurance facilities had indeed been suspended by Income. Ms Lee then informed Mr Yeo that unless Income restored its facilities immediately, CASE would suspend the schools’ membership in CaseTrust by that same day. She then gave Mr Yeo an opportunity to explain the plaintiffs’ position.
[58] Mr Yeo told Ms Lee that the reason for the discrepancy was that a number of the schools’ foreign students were not protected by any insurance coverage. He explained that this was due to an administrative oversight on the part of the plaintiffs, which was caused by the plaintiffs’ staff turnover and internal restructuring. He also kept apologising for the oversight. Mr Yeo also informed her that the schools had attempted to submit a few applications for insurance coverage to Income on 10 November 2006, but these had been rejected. Ms Lee said that Income had not made an issue of the rejection of applications and, in any event, this did not change the fact that Income had decided to suspend the plaintiffs’ insurance facilities.
[59] Ms Lee informed Mr Yeo that his explanation was not satisfactory to CASE as more than 400 of the schools’ students had not been covered by insurance for a period of six months and Income had now suspended the plaintiffs’ insurance facilities. She also explained that any suspension of the schools’ CaseTrust membership in the present situation was not a sanction but only an interim measure to protect the students’ interests and to enable the plaintiffs to remedy the deficiency and restore their insurance facilities. She then told Mr Yeo that if the plaintiffs wished to submit written submissions, they had to do so by 4pm that day. Before ending the conversation, Ms Lee reminded Mr Yeo that unless Income restored the plaintiffs’ student protection facilities, CASE would suspend the schools’ memberships in CaseTrust by the end of that day.
[60] As Income had not restored the plaintiffs’ insurance facilities at about 3pm on 20 November 2006, the Notices of Suspension were prepared. The Notices of Suspension were signed by Mr Pillay and he asked Ms Lee to hand them to Mr Yeo later that day if by that time the plaintiffs’ insurance facilities still had not been restored by Income.
[61] At about 4pm, Mr Yeo called Ms Lee again. During their brief conversation, Mr Yeo said he would be late in providing her with the plaintiffs’ written explanation. Ms Lee informed him that the plaintiffs had until 6pm to provide the explanation as CASE’s office would close at that time.
[62] At about 6pm Mr Yeo arrived at CASE’s office. He handed Ms Lee a copy of the plaintiffs’ letter of explanation. She asked him whether the contents of the letter were the same as his explanation to her during the morning telephone conversation. He confirmed that was so. Ms Lee informed Mr Yeo that since the plaintiffs’ insurance facilities had not been restored by Income, CASE would be suspending the plaintiffs’ membership. Mr Yeo said that he understood and added that the plaintiffs would revert to CASE soon on how they would remedy the situation. Ms Lee then handed Mr Yeo the Notices of Suspension. She proceeded to read the plaintiffs’ letter in front of Mr Yeo and found that the contents of the letter reflected the oral explanation given to her earlier. As Mr Yeo had nothing further to add, he left CASE’s office at about 6.15pm.
[63] The Notices of Suspension were in identical terms. They read as follows:
Events after 20 November 2006
[64] On 23 November 2006, the suspension of the schools from CaseTrust for Education was published on CASE’s website. In the meantime, the plaintiffs had been gathering detailed information on the discrepancies and investigating what had caused the administrative lapse. By 24 November 2006, the plaintiffs had managed to identify the students who had valid student passes but lacked the necessary insurance coverage. On 1 December 2006, the plaintiffs submitted a list of these students to Ms Lee.
[65] By way of two identical letters dated 28 November 2006, Stansfield and SIC formally responded to CASE’s Notices of Suspension. These letters stated that CASE had not informed the PEOs what “good business practice” they had breached and stated that if the breach referred to the discrepancies found between the number of issued student passes and the number of students protected by insurance from April to November 2006, the schools had clarified and given an explanation on this in their letters of 28 November 2006. The letters went on to state:
[66] On receipt of these letters, Ms Lee contacted Mr Teo to find out whether Income had restored the plaintiffs’ insurance facilities. She was told that it had not. CASE then sent a letter to each of Stansfield and SIC which stated that there had been no rectification and specified 4 December 2006 as the deadline for them to make good their default. This letter also said that the schools’ CaseTrust status had been suspended because there had been a breach of criterion C15 which stated that the Scheme had to be in place for a PEO who recruited foreign students. Further, the shortfall was a deemed breach of the standard student contract.
[67] Income, in the meantime, was in the process of evaluating whether to continue underwriting Stansfield and SIC under the Scheme. On 5 December 2006, the plaintiffs’ audited accounts were submitted to Income. The next day, Mr Teo informed Mr Chettiar that Income had to be satisfied that the schools continued “to satisfy [its] underwriting criteria upon which this facility was first made available” and that Income would review its position and revert to Stansfield and SIC in due course.
[68] On 7 December 2006, the news of the suspensions was reported on the front page of The Straits Times. Mr Chettiar held an urgent meeting with his key management personnel and subsequently drafted a letter entitled “Clarification” which was to be distributed to all staff, students and other stakeholders. In this letter, Mr Chettiar attempted to dispel any rumours regarding the plaintiffs’ solvency and emphasised that the plaintiffs were in a solid financial position. Mr Chettiar sent an e-mail to the Ministry of Education and other government authorities enclosing this letter because he wanted to quash any rumours regarding the solvency of the plaintiffs.
[69] On 10 December 2006, Mr Seah of CASE telephoned Dr Pious and Mr Teo and proposed a meeting at CASE’s office to resolve the outstanding issues between the parties so that Income would restore the schools’ insurance facilities and cover the 479 students who were uninsured. This meeting was held on 12 December 2006 and was attended by representatives from CASE (Mr Seah, Ms Lee and one Mr Loi), Income (Mr Teo), Aegis (Mr Tay) and the plaintiffs (Dr Pious, Mr Yeo, Mr Ang and one Andrew Koo). At the meeting, the plaintiffs agreed to make immediate payment of premiums to Income, and in return, Income agreed to restore the plaintiffs’ insurance facilities under the Scheme, insure the plaintiffs’ students who were not protected by insurance and train the plaintiffs’ staff on the online application procedures. Income had by this time received a report from Dunn & Bradstreet which stated that it found the plaintiffs’ financial condition as shown in the accounts to be “fair” and their credit risk to be “average”.
[70] Income lifted the suspension of the Scheme insurance facilities granted to the plaintiffs shortly after the meeting. The plaintiffs’ Maximum Insurable Limits were, however, reduced from $6m to an aggregate of $4m. Insurance cover for the uninsured students was issued with retrospective effect on 13 December 2006. On the same day, CASE lifted its suspension of the schools’ membership in CaseTrust for Education. CASE notified the plaintiffs of this action by fax and by post and also removed the names of both Stansfield and SIC from the list of suspended schools on CASE’s website.
Adverse consequences of the suspension
[71] The plaintiffs allege that they suffered adverse consequences by reason of the suspension of their membership in CaseTrust and the unavailability of the insurance facilities. They particularised these adverse consequences in their statement of claim. At this stage, it is only necessary for me to give a summary of the allegations. These are that:
(a) between in or about November 2006 and February 2007, several students who had enrolled in courses with the schools had applied to withdraw from their respective courses and had requested that the tuition fees that they had paid to the plaintiffs be refunded; and
(b) the plaintiffs suffered a loss of commercial reputation and goodwill in Singapore and internationally due to the adverse publicity in relation to CASE’s suspension of the plaintiffs from their CaseTrust membership.
In respect of sub-para (a) above, the plaintiffs seek to recover the refunded tuition fees and in respect of sub-para (b) above, the plaintiffs ask for damages to be assessed in respect of the loss of commercial reputation and goodwill.
The plaintiffs’ claim against CASE
[72] The plaintiffs set up their claim against CASE in two ways. The first way relates to the breach of contractual duties that CASE allegedly owed the plaintiffs directly. In relation to this cause of action, in the statement of claim the plaintiffs aver that:
(a) It is a necessary implied term of the CASE-PEO agreement and the Code of Practice that CASE would, inter alia, comply strictly with the terms of the CASE-PEO agreement and the Code of Practice when exercising its jurisdiction and powers to make decisions affecting the rights and interests of PEOs and would not exercise any powers over the plaintiffs which were in excess of CASE’s powers and jurisdiction (para 10.1). The suspension of the CaseTrust membership breached the implied term pleaded at para 10.1 in that it was ultra vires CASE’s rights and powers under the CASE-PEO agreement and the Code of Practice. These documents do not provide CASE with the power to suspend the plaintiffs’ CaseTrust membership making the suspension unlawful and void.
(b) Further or alternatively (para 13), the suspension was in breach of cl 10.1 and/or cl 10.2 of the Code of Practice because:
(i) CASE failed to give either of the schools an opportunity to answer the allegation; and
(ii) CASE failed to carry out any independent investigation into the schools alleged breaches of the Code.
(c) It is an implied term of the CASE-PEO agreement and the Code of Practice that (para 10.2) CASE would exercise its powers pursuant to the CASE-PEO agreement and/or the Code of Practice in a reasonable manner, and (para 10.3) CASE would not act in an arbitrary or capricious manner in its dealing with its members including the plaintiffs. CASE breached the foregoing implied terms because the suspension was unreasonable in the circumstances of the case or was arbitrary or was capricious (para 14).
(d) It is implied term of the CASE-PEO agreement and the Code of Practice that (para 10.4) CASE would give the plaintiffs notice of any charge preferred against them before calling upon them to answer the same and (para 10.5) CASE would comply with accepted principles of natural justice and would afford to the plaintiffs the right of a reasonable opportunity to be heard in connection with any independent investigation to be conducted by CASE before imposing any sanction for alleged breaches of the Code of Practice or the CASE-PEO agreement. CASE breached these terms by failing to give the plaintiffs notice of any charge preferred or to be preferred against them before calling upon them to answer the same in connection with its investigation. Further, CASE failed to accord to the plaintiffs a reasonable opportunity to be heard in connection with its investigation before imposing sanctions on the plaintiffs for alleged breaches of the CASE-PEO agreement and/or the Code of Practice.
[73] The second basis of claim against CASE is in tort. The plaintiffs have the following causes of action:
(a) They plead that the conduct of CASE in sending the e-mail dated 20 October 2006 to Income which stated that the plaintiffs “may be closing down soon” wrongfully and recklessly induced and procured the breach by Income of its obligations to the plaintiffs (paras 16 to 18).
(b) They plead that the 20 October 2006 e-mail unlawfully interfered with the contractual relationship between the plaintiffs and Income and/or hindered the performance by Income of its obligations to the plaintiffs.
(c) Further, they plead that CASE owed them a duty to not act in any manner that would adversely affect the contractual relationship between them and Income and further, to administer the CaseTrust membership scheme in such a manner so as not to cause loss or damage to the plaintiffs (para 20). CASE negligently or in breach of these duties communicated the e-mail of 20 October 2006 to Income without any reasonable basis, failed to sufficiently investigate the matters set out in that e-mail and failed to afford the plaintiffs a reasonable opportunity to deal with its concerns with respect to the plaintiffs’ CaseTrust membership. In this regard, CASE acted arbitrary or capriciously in issuing the Notices of Suspension on 20 November 2006 and CASE acted in an unreasonable manner in all the circumstances of the case.
[74] In their closing submissions, the plaintiffs highlighted six main issues relating to their claim against CASE. They formulated these issues as follows:
(a) Whether CASE breached cl 10.1 of the Code of Practice in failing to afford the plaintiffs an opportunity to be heard prior to suspending the plaintiffs’ CaseTrust for Education membership;
(b) Whether CASE breached cl 10.2 of the Code of Practice in failing to carry out an independent investigation into the plaintiffs’ alleged breaches of the Code of Practice;
(c) Whether CASE breached the pleaded implied terms of the CASE-PEO agreements and the Code of Practice;
(d) Whether CASE wrongfully and recklessly induced and procured the breach by Income of its obligations to the plaintiffs;
(e) Whether CASE unlawfully interfered with the contractual relationship between the plaintiffs and Income and/or hindered the performance by Income of its obligations to the plaintiffs; and
(f) Whether CASE breached its duty of care to the plaintiffs not to act in any manner that would adversely affect the contractual relationship between the plaintiffs and Income and to administer the CaseTrust membership scheme in such a manner so as not to cause loss or damage to the plaintiffs.
[75] I should note at this stage that at all material times, CASE’s contractual relationship was with the first plaintiff since the second plaintiff did not acquire its interest in SIC until January 2007. Since the plaintiffs themselves did not draw this distinction in their submissions, I will refer to the plaintiffs collectively in relation to liability. If liability is established, however, it must be remembered that such liability would be prima facie to the first plaintiff only and I would then have to consider whether the second plaintiff is in a position to recover damages because of its subsequent takeover of SIC. Also, strictly speaking, it was the schools as distinct businesses of the first plaintiff that were members of CaseTrust for Education.
[76] As CASE pointed out in its own closing submissions, it is apparent from the way in which the plaintiffs’ list of issues has been formulated that they have abandoned the pleaded contention that the suspension of the schools was ultra vires.
First category of issues: was CASE in breach of the Code of Practice or the CASE-PEO agreements?
[77] The issues set out in [74(a) to (c)] above can be considered together because they deal with the legal implications of the Code of Practice and the CASE-PEO agreement.
[78] The provisions of cl 10.1 and 10.2 of the Code of Practice are set out in [12] above. The heading above both provisions is “Sanctions for breach of this Code”. To paraphrase the provisions, cl 10.1 provides that when CaseTrust becomes aware that a breach of the Code or of the terms and conditions of membership has taken place, it will provide an opportunity for the member to answer the allegations. Under cl 10.2, if CaseTrust concludes after an independent investigation that a breach of the Code has occurred, it may impose appropriate penalties including warnings, fines and expulsion or a combination of the same.
[79] CASE has denied that it was in breach of cl 10 or the CASE-PEO agreement. It says the following:
(a) cl 10 is not applicable because the suspensions were not a sanction or a penalty;
(b) cl 10 is not applicable as Stansfield and SIC were in breach of the CASE-PEO agreement and not the Code of Practice;
(c) the CASE-PEO agreement is qualified by an implied term that CASE may suspend members without an opportunity to be heard as an interim measure or due to extenuating circumstances; and
(d) in any event, CASE did not breach cl 10 as it gave Stansfield and SIC an opportunity to be heard and carried out an independent investigation.
[80] Before I go on to discuss the issues in more detail, I deal with a brief submission made by CASE that the Code of Practice is not even applicable in the present case. The only basis that CASE gave for that submission was it thought that if the Code of Practice is considered in the context of the overall CaseTrust framework and if one takes into account the other contractual documents governing the contractual relationship between CASE, the plaintiffs and their students, as well as the unique characteristics of CaseTrust for Education and the Scheme, it would become apparent that the Code of Practice did not apply to the present situation.
[81] It appears that this argument is based on the fact that the Code of Practice is a generic code which applies generally to CASE members across all industries and that the practices governed by the Code include practices in relation to advertising and promotion, customer service, electronic commerce, privacy and marketing by telephone and through other media. The Code was drafted before the CaseTrust for Education scheme was developed and, according to cl 1.1, it sets out good business practices to be used by members and provides a framework for resolving disputes between the member and a consumer or between members inter se. The spirit of the Code is also to ensure that all transactions arising out of a member’s business will be conducted with honesty, integrity and transparency. CASE seems to be implying in this submission that the Code is aimed more at businesses which involve commercial transactions than at the more specialised private education sector which requires a different regulatory framework.
[82] I cannot accept this argument. It is correct that major portions of the Code of Practice are aimed at commerce in its more common form and that some of its clauses are not a good fit for entities providing private education. This is why when the CaseTrust for Education scheme was initiated it had to be supplemented by CASE-PEO agreements, the Info-Kit and the prescribed form of contract with the student. That conclusion does not, however, mean that all portions of the Code cannot be applied to PEOs. Whether a particular clause of the Code applies to a PEO would depend on what that clause prescribes and what the business of the PEO is. It is relevant that para 47 of the Info-Kit which appears as part of the section 7.4 which has the general heading “CaseTrust Accreditation Scheme” reads:
Thus, aspiring applicants to membership of CaseTrust were informed from the outset that if membership was granted, they would be expected to adhere to the Code.
[83] Further, as the plaintiffs point out, para 1.3 of section 1 of the Code of Practice is very clear. It states:
It was envisaged therefore that membership would be regulated not only by the Code but by other terms and conditions tailor-made for the particular industry involved. In this case, those terms and conditions are found in the Info-Kit and the CASE-PEO agreement. It is plain to me that the Code of Practice was intended to apply to all members of CaseTrust and that, in the absence of specific provision to that effect, PEOs who are members of CaseTrust for Education are not exempted from the provisions of the Code insofar as the same are pertinent to the business of private education and the status of being a CaseTrust member. It is also relevant in this connection that cl 10.1 is invoked not only when there is a breach of the Code but also when there is a breach of any other term or condition of membership. Prima facie therefore, the applicability of the Code as a relevant document cannot be gainsaid. Whether any particular clause of it applies in any particular situation is, however, a different question.
Were the suspensions a sanction or penalty?
[84] The plaintiffs rely on cll 10.1 and 10.2 of the Code of Practice to support their position that Stansfield and SIC could not be suspended because there was no independent investigation and they were not given a chance to answer the allegations. The position taken by CASE is that cl 10 only applies when a sanction is contemplated or invoked and did not apply in this instance because the suspension of Stansfield’s and SIC’s membership in CaseTrust for Education in November/December 2006 was not a sanction or a penalty within the meaning of the clause.
[85] CASE argues that cl 10 expressly states that members will be given an opportunity to answer the allegations prior to the imposition of certain “sanctions” and “penalties” by CASE. The clause is entitled “SANCTIONS FOR BREACH OF THIS CODE” and cl 10.2 refers to the types of “penalties” that may be imposed by CASE. Therefore, it only applies when penalties are imposed. The natural and ordinary meaning of the words “penalty” and “sanction” is that of a punishment imposed for a violation of certain rules and obligations. Those words do not apply in a case like this where the suspensions were not penalties intended to punish the schools but instead were imposed as an interim and precautionary measure intended to safeguard the reinstatement of Stansfield’s and SIC’s facilities under the Scheme.
[86] The plaintiffs disagree. They submit that the suspension of the schools’ membership of CaseTrust for Education was clearly a sanction or penalty. The terms “sanction” and “penalty” are not defined in the Code of Practice but should be understood in their “plain, ordinary and popular sense” (see Chitty on Contracts, Sweet and Maxwell, 30 Ed, 2008 para 12-051) because that is the starting point in construing a contract, as Chitty on Contracts states in the cited paragraph. They say that a suspension of membership would generally be understood as a sanction or penalty. Moreover, under cl 10.1 CaseTrust may impose “such penalties as may be specified or as may be appropriate in the circumstances, including but not limited to warnings, fines and/or expulsion”. Thus, the penalties that are named in the clause are illustrative and not exhaustive. The penalties mentioned range from a low degree of severity to a high one and, on that scale, a suspension would fall in between a fine and an expulsion.
[87] The plaintiffs also say that CASE’s subjective intentions in issuing the Notices of Suspension are irrelevant in construing the terms “sanction” and “penalty”. In any event, the suspensions operated as such because they withdrew all the rights and privileges that the schools had as CaseTrust members. The Notices told the schools to stop using the CaseTrust logo and to remove the CaseTrust decal from their premises. The Notices also left the status of the memberships in limbo because they stated that “[t]he CaseTrust Secretariat shall review and keep you updated on the status of your membership within fourteen (14) days of this letter”. The suspensions were published on CaseTrust’s website and a result, ICA rejected applications made for student visas for the schools’ students. The effect of the suspensions was punitive.
[88] The parties cited two cases which dealt with the nature of a suspension. In one case, the one relied on by the plaintiffs, a suspension was held to be equivalent to an expulsion, whilst in the other, a suspension was not considered to be punitive. The first case, John v Rees [1970] 1 Ch 345 (“Rees”), was a decision of Megarry J in the High Court of England. The case involved the authority of the National Executive Committee of the Labour Party to pass a resolution to suspend the activities of the Pembrokeshire Divisional Labour Party. In holding that such a resolution was a nullity, Megarry J quoted the case of Burn v National Amalgamated Labourers’ Union [1920] 2 Ch 364 (“Burn”) where P O Lawrence J in construing a trade union rule which authorised the union to “suspend, expel and prosecute” members held that the language of the rule did not authorise a resolution removing the plaintiff from any office held by him and preventing him from holding any delegation on behalf of the union for five years. Megarry J commented (at 397):
It can be seen from the foregoing that Megarry J considered suspension to be as penal as expulsion and to deprive the person suspended from membership of the enjoyment of his rights of membership.
[89] A different approach was taken by the majority in the Privy Council decision of Paul Wallis Furnell v Whangarei High Schools Board [1973] 1 AC 660 (“Furnell”), an appeal from New Zealand which was decided some three years after Rees. In that case, a teacher was suspended by the school board from duty as he was charged with certain disciplinary offences. The teacher then instituted legal proceedings against the school board on the ground that there had been a denial of natural justice and that he had not been told that his conduct was being investigated and had not been given an opportunity to be heard. A suspension was not included as one of the penalties prescribed under the relevant regulations. The Privy Council upheld the New Zealand Court of Appeal’s decision that the school board did not violate any rules of natural justice and that it was not unfair to suspend the teacher without giving him a right to be heard. The following passage from the judgment of Lord Morris who delivered the majority decision is pertinent (at 682F to 683B):
[90] There is therefore case authority to support the proposition that whether the act of suspending a person from a position or a membership is penal or not depends on the circumstances of the case. Among these circumstances is whether the regulations involved expressly classify suspension as a penalty or not and what the purpose of the suspension is. It may also be a matter of significance as to whether the suspending authority is charged with protecting the interests of third parties. This seems to be a significant difference between the cases of Burn and Rees on the one hand and Furnell on the other. In the first two cases, the union was considering its own interests and the conduct of the member concerned when it decided to suspend him from membership. In Furnell, the school board was investigating a complaint and thus considering the conduct of Mr Furnell but it also had to consider the interests of pupils and their parents and of the public and how these should be protected whilst the investigations were taking their course. The existence of such third party interests was a vital factor in persuading the Privy Council that suspension was invoked as a protective measure rather than a penal one. As important would be the purpose of the suspension ie whether it is considered an end in itself or is intended to provide a period in which something else can be accomplished, in the Furnell case that something else being the full investigation into the charges which could have resulted either in the complete exoneration and reinstatement of Mr Furnell or in his being subjected to a punishment. There is no indication from either Burn or Rees that in those cases it was intended that certain action be taken during the period of suspension which might result in either the lifting of the suspension or in the application of another sanction. In fact in Rees itself, the court emphasised that the practical result of the suspension there was indistinguishable from expulsion.
[91] Coming to the present case, I must therefore examine the circumstances more closely in order to determine whether or not the suspension was a penalty and therefore could not be imposed under cl 10 unless the schools had been given the opportunity to be heard.
[92] The first point here relates to the purpose of the suspension. Was it intended to punish the schools because they had not provided insurance cover the foreign students? In considering the intention, I think it is irrelevant that the schools may have experienced hardship after the suspensions in that their applications for student visas were not accepted by ICA or that some students may have withdrawn. Those are painful consequences but, as Furnell recognised, hardship arising from a suspension does not turn that action into a punishment. It is also relevant that CASE gave evidence that it suspended the schools’ membership in CaseTrust and published the suspensions on its website precisely so that the ICA would not approve student visa applications or issue student passes because these new students would not be able to get protection under the Scheme since Income had suspended the insurance facilities.
[93] CASE’s position is that the suspension was an interim measure implemented on an urgent basis to address a specific problem in relation to the Scheme. Mr Pillay and Ms Lee testified that CASE only decided to suspend Stansfield and SIC after learning on 17 November 2006 that Income had suspended the insurance facilities. It says that the fact that the suspensions were implemented shortly after CASE discovered that the insurance facilities had been suspended shows that CASE was simply responding to the situation. It used the suspensions as a mechanism to immediately prevent more students from being issued passes without any valid insurance coverage and to provide a space within which the plaintiffs could sort out the matter of compliance with the Scheme.
[94] The plaintiffs make the point that CASE did not act on an urgent basis because it knew from 20 October 2006 that the insurance facilities had been suspended. On that day, Mr Teo had informed Ms Lee that Income was suspending with immediate effect its “bond facility to SIC and its affiliated schools till further notice from you”. The plaintiffs say that Ms Lee must have known that the phrase “bond facility” referred to the insurance facilities extended by Income. They think that Ms Lee’s evidence that she did not understand this phrase and that it “sounded more like maybe a personal loan between the school and the insurer” is suspect and very likely, an afterthought. The plaintiffs emphasise that Mr Teo had informed CASE that the suspension was until further notice from CASE. Logically, there would be no need for Income to wait for further notice from CASE to reinstate their personal loans to the plaintiffs unless the facilities affected CASE’s relationship with the plaintiffs in some way which was the case in relation to the insurance facilities. Further, in the course of the evidence, Mr Teo and other witnesses for Income had confirmed that it was plain that by using the term “bond facility”, Income was referring to insurance policies.
[95] Having considered the evidence, I think it is probable that Ms Lee truly did not understand that the phrase “bond facility” referred to the insurance facilities. Unlike the persons who gave evidence for Income, she is not in the insurance business and would not be familiar with the way that phrase is used in the insurance industry. She herself said that the phrase was “truly alien” to her. Lay people generally connect bonds with loans rather than with insurance or performance guarantees. The phrase “bond facility” is not a common one and it appears only once in the correspondence produced in the course of these events. Mr Teo agreed that the more precise phrase for the insurance facilities extended to the schools would be “SPS facility”. In fact, that latter phrase was the one that Mr Teo used on 17 November 2006 when he instructed Mr Tay to inform the plaintiffs of the suspension of the insurance facilities. Further, even Mr Pillay who is legally trained, did not think that the bond facility meant a personal loan between Income and the schools. When he was asked about it in court, he said that he understood it to mean a bond or charge granted to NTUC Income over certain of the schools’ assets. Mr Pillay was not shown the email of 20 October 2006 at that time and therefore did not see how the phrase was used in the email. He had nothing to do with the way that Ms Lee interpreted the phrase and thus, even if he should have understood it to refer to the insurance facilities, that understanding would not have altered the course of events.
[96] In any event, I accept CASE’s submission that Ms Lee would not have interpreted “bond facility” as being the insurance facilities because it was inconceivable to her that Income would suspend these facilities due to her e-mail of 20 October 2006. In that email, she had told Income about the rumours about the schools but had stressed that CASE needed more “concrete evidence” to substantiate the truth of the same. Whilst telling him that CASE and other governing agencies were highly concerned and that they needed to be prepared for the worst, she also said that she looked forward to receiving information and comments from Income. Thus, this was a letter informing a fellow stakeholder in the Scheme of a potentially difficult situation and asking for further information. There was nothing in that email to indicate any action being taken by CASE at that stage. As the consumer watchdog interested in the welfare of the students, CASE wanted more information but did not want to act precipitately without concrete evidence and would not have wanted Income to suspend the insurance facilities of a CaseTrust member as it would adversely affect new students who enrolled in such member school as well as prevent existing students without any insurance coverage from applying for such coverage under the Scheme. Ms Lee did not ask Income to take any action; what CASE wanted from Income was information to assist in its investigation.
[97] Thus, I accept that Ms Lee was not expecting anything to be done by Income in relation to the insurance facilities and therefore Mr Teo’s reference in his email to the suspension of the “bond facility” would not have made a strong impression on her when she read it. In hindsight, one could say that she should have wondered why he was telling her about this action and should have found out more about it but since this phrase was not in common use in connection with the Scheme and her attention was focused on other matters relating to the investigation, it is not really surprising that she did not react in any way to it. In fact, her failure to inform Mr Pillay or anyone else about this information from Income is another indication that she did not appreciate its significance. When she was told late on the evening of 17 November 2006 that Income was going to suspend its “SPS facility” to the schools with immediate effect, she went straight to Mr Pillay with the news not withstanding that the office was closing for the weekend.
[98] Going back to the purpose of the suspensions, the evidence of Mr Pillay was that the suspensions were not a sanction but were taken as a temporary action so that the plaintiffs would be able to rectify the situation. He explained that a suspension could be withdrawn at any time, even the day after it was made. On the other hand, if the membership had been revoked it could not have been restored without a fresh application for membership which would have taken about three months to process. Ms Lee had the same view and explained the suspensions were intended to “contain the situation”. On the other hand, Mr Seah testified during cross examination the suspensions were a sanction although not a penalty. In re-examination, however, he corrected himself and explained that the suspensions were to contain a situation that had occurred and were not meant to be a sanction or punishment.

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The Stansfield Group Pte Ltd (trading as Stansfield College and another v Consumers’ Association of Singapore and another

Laws this judgment relies on

Grounds of decision

Introduction

The facts

General background

Documentation relating to CaseTrust for Education

Documentation and procedure relating to the insurance scheme

The parties and their representatives

Events leading to the suspension of the schools’ CaseTrust membership

The plaintiffs’ version

CASE’s version

Events after 20 November 2006

Adverse consequences of the suspension

The plaintiffs’ claim against CASE

First category of issues: was CASE in breach of the Code of Practice or the CASE-PEO agreements?

Were the suspensions a sanction or penalty?