Singapore company to pay US$238,000 to capital of Argentina for failure to deliver COVID-19 test kits

SINGAPORE: A Singapore company was ordered by the High Court to pay the government of the city of Buenos Aires close to US$238,000 (S$317,450) for failing to deliver COVID-19 test kits ordered during the height of the pandemic in 2020.

The government of Argentina's capital city had launched the lawsuit in Singapore after the company said it would not make a full refund of the US$1.77 million purchase price.

On Friday (May 12), Justice Lee Seiu Kin ordered HN Singapore and its sole director to pay US$237,619.35 in damages. This is the balance sum that the company did not pay the government.

According to a judgment released on Friday, Buenos Aires' government wanted to acquire COVID-19 test kits for its people.

In March 2020, a health emergency was declared in Argentina due to the COVID-19 pandemic, followed by a nationwide lockdown. Buenos Aires has a population of about 15 million.

Its health ministry proposed a health strategy to stop the spread of COVID-19 quickly, a key pillar of which was to acquire rapid virus detection test kits. As there was a global shortage of supplies, Buenos Aires' government publicly sourced kits by contacting manufacturers and distributors both nationally and internationally.

WHAT HAPPENED

The government got in touch with HN Singapore, whose sole director was Singaporean Nicholas Eng Teng Cheng. 

Mr Eng had incorporated the company in September 2016 as a vehicle to carry out the business of import and export of goods, and to provide consultancy services.

However, since its incorporation, HN Singapore had only imported goods and had not successfully exported goods.

An employee working for the Buenos Aires government sent a Whatsapp message to Mr Eng after being introduced, expressing his government's interest in buying 500,000 COVID-19 test kits manufactured by a Chinese company.

Mr Eng sent a letter of offer for the sale of the test kits to the government employee on Mar 27, 2020.

The government of Buenos Aires awarded HN Singapore the contract to supply COVID-19 test kits on Apr 2, 2020. 

Although the original plan was for 500,000 test kits, the Buenos Aires government mistakenly wrote in the contract that 300,000 test kits were to be bought at US$5.90 per piece, for a total price of US$1.77 million.

Despite the error, both sides agreed to go ahead. Mr Eng issued a pro forma invoice to the Buenos Aires government for 300,000 test kits for the price of US$1.77 million.

The government paid HN Singapore the price in full on Apr 6, 2020.

However, HN Singapore sent a letter of proposal three days later to request a variation of the agreement.

Under the variation, HN Singapore would only deliver 182,475 test kits instead for the same price of US$1.77 million.

The government of Buenos Aires accepted this variation via an email. According to the contract, the test kits had to be delivered by Apr 26, 2020.

KITS NOT DELIVERED

HN Singapore sought to buy the test kits from a factory in China for US$821,137.50. However, the factory purportedly could not deliver the kits due to various reasons including new restrictions in China on export requirements for medical equipment.

After the kits were not delivered by the stipulated date, the government of Buenos Aires requested a refund of the purchase price. 

HN Singapore transferred a total sum of US$1,532,380.65 to the government, over three dates in June and July 2020.

However, HN Singapore wrote a letter to the government in July 2020, saying it could not refund the balance sum of US$237,619.35 as it had been spent on "non-refundable charges, expenses and fees".

These include a payment to a Chinese middleman company for sample test kits from the factory, partial payment for the kits from the factory and payments for shipping and insurance.

The government of Buenos Aires was represented by lawyers Sean Francois La'Brooy, Luis Inaki Duhart Gonzalez and Faustina Joyce Fernando of Selvam LLC.

HN Singapore and Mr Eng were represented by lawyers Loo Choon Chiaw, Goh Shu Quan Leon, Chia Foon Yeow and Lim Jun Wei from Loo & Partners.

The defendants said that although they failed to deliver the test kits by Apr 26, 2020, the plaintiff had waived this and did not treat it as breach until a month later.

The defendants argued that the plaintiff had continued to work with them for the delivery of the test kits, with HN Singapore updating the plaintiff of the progress of the production of the test kits and fresh regulations in China.

Lawyers for the defendants also argued that the regulations in China had constituted "an event of frustration" that made the delivery "impossible to perform" without any fault on its part.

The plaintiff had also sued the defendants for misrepresentation, by portraying that they would be able to deliver the test kits when they could not.

Justice Lee found that the plaintiff succeeded in its claim for breach of contract, awarding damages of US$237,619.35 to it.

However, he dismissed its claim in misrepresentation, as well as a counterclaim by HN Singapore in unlawful termination.

Justice Lee ordered the defendants to pay interest on the sum at the rate of 5.33 per cent from the date of the writ until the date of payment. The defendants were also ordered to pay costs to the plaintiff.