DIALECTIC PR LLC v BRILLIANTE RESOURCES INTERNATIONAL PTE LIMITED & Anor

Facts

Dialectic PR LLC and Dialectic Distribution LLC, part of a US distribution group headed by Mr Zachary Zeltzer, bought KN95 face masks from Brilliante Resources International Pte Limited, a Singapore company in a group of which Mr Woon Joon Foong, Jerrel was sole shareholder and director. After three earlier mask deals, on or about 23 April 2020 the parties contracted, on a quotation from Brilliante Singapore, for KN95 masks described as CE & FDA approved at US$1,265,000.00, paid on 24 April 2020. On arrival in the US the masks were detained; testing on 21 May 2020 by a NIOSH laboratory found that every mask in the sample fell well short of 95% filter efficiency. At Mr Woon's suggestion the masks were shipped back to Hong Kong at the plaintiffs' expense in the hope of a refund, stored, and finally discarded on 22 June 2021.

In Suit 126 of 2021 the plaintiffs sued Brilliante Singapore for breach of contract and sought to make Mr Woon personally liable by lifting the corporate veil, on the grounds of alter ego or fraud, or for inducing breach of contract. The defendants argued, among other things, that Brilliante Singapore acted only as the plaintiffs' agent, and that Mr Zeltzer knew the certifications were fake and did not care, pointing to WhatsApp messages in which he said he personally believed everything was fake.

Issues

1. Whether Brilliante Singapore was acting as the plaintiffs' agent rather than as seller.
2. Whether Brilliante Singapore breached the contract, including the conditions implied by ss 13 and 14 of the Sale of Goods Act.
3. Whether the corporate veil should be lifted to make Mr Woon personally liable.
4. Whether Mr Woon was liable for inducing Brilliante Singapore's breach of contract.

Holding

The High Court allowed the claim in part: it allowed the claim against Brilliante Singapore for breach of contract and dismissed the claim against Mr Woon. Brilliante Singapore was ordered to pay US$3,254,673.28 with interest at 5.33% from 22 June 2021 until payment, comprising the purchase price, storage, freight, testing and insurance costs, and loss of profits. Costs were to be heard later.

Reasoning

The agency argument had been abandoned by Mr Woon at trial and in any event had no evidential basis; the quotation and messages showed a sale, with the plaintiffs contracting only with Brilliante Singapore.

The court read the WhatsApp messages as showing Mr Zeltzer was a pragmatist who knew the masks had to pass import checks, and found the parties agreed on some standard of quality, though no express standard was fixed. Uncontested expert evidence showed the masks were not CE or FDA approved, since the certifying bodies were not EU notified bodies and FDA registration was not approval, breaching s 13. The expert also showed the Chinese GB 2626-2006 standard was substantially the same as the NIOSH test, so even on the defendants' case the masks were not of satisfactory quality under s 14. The plaintiffs had mitigated reasonably by trying to secure a refund.

On veil lifting, people may run one-man companies and groups as they see fit; one urgent payment through another group company and Mr Woon's evasive answers about a related-party payment did not show alter ego. Mr Woon admitted not disclosing the true source of the masks, but the court found this was to protect his position as middleman, not a scheme to defraud, and gave no weight to the expert's view that the masks were not from the stated manufacturer.

Inducement failed because there was no proof Mr Woon intended a breach; direct sourcing from the manufacturer was not a pleaded or proven term, and he was keen to keep the business.

From the judgment