The Singapore High Court recently allowed claims brought by Forest Fibers Inc (“FFI”) and RGA Holdings International Inc. (“RGA”), Canadian suppliers of recycled material, against KK Asia Environmental Pte Ltd (“KK Asia”), their local joint venture partner, and its two local directors.
The case was complicated because it involved an unclear contract, multiple parties, several jurisdictions (Singapore, Canada, Malaysia) and third parties as the raw waste material shipped by FFI to KK Asia in Malaysia, as well as KK Asia’s equipment, had been seized by KK Asia’s processing agent there when KK Asia failed to pay the agent various workmanship fees and rental.
FFI had entered into a purchase finance agreement with KK Asia whereby FFI would supply raw waste material (such as banana film) to KK Asia to be processed into finished product (plastic pellets). As KK Asia soon ran into cash flow problems, FFI and RGA made various advances and loans to KK Asia to cover import and customs duties and even alleviate some of KK Asia’s operating costs.
Despite the various advances and loans, KK Asia failed to deliver the finished product to FFI. As a result, FFI and RGA commenced two Singapore High Court actions for claims in excess of US$1million comprising the value of the raw waste material supplied to KK Asia, advances and loans. Claims were also brought against the two local directors of KK Asia based on personal guarantees they had given to FFI and RGA.
The Singapore High Court allowed virtually all of FFI and RGA’s claims against KK Asia. The Court also declared that a personal guarantee in the purchase finance agreement, given by one of KK Asia’s directors to be valid and enforceable. KK Asia’s two directors were also held personally liable for some of the sums advanced by FFI and the various loans pursuant to a second personal guarantee. In addition, the Court allowed an injunction to remain against one of the directors, prohibiting him from selling his property, pursuant to an undertaking not to sell given to RGA.
The case highlights the importance of having proper a contract and operational structure, as well as carrying out through credit checks on business partners when conducting cross-border transactions and undertakings.
The successful claimant was represented by K Murali Pany and Ng Lip Kai of Joseph Tan Jude Benny LLP. The decision is reported in Forest Fibers Inc v KK Asia Environmental Pte Ltd  SGHC 195.