Trans-Cab v Smart Automobile: Refund of Good Faith Deposit Dispute
In Trans-Cab Services Pte Ltd v Smart Automobile Pte Ltd, the High Court of Singapore addressed a dispute over a $1 million 'good faith deposit' paid by Trans-Cab to Smart Automobile for the acquisition of a company owning CNG refueling stations. The deal fell through, and Trans-Cab sought a refund. Tay Yong Kwang J ruled in favor of Trans-Cab, ordering the refund of the deposit and dismissing Smart Automobile's counterclaim. The court found that the Memorandum of Understanding (MOU), which stipulated the deposit's refundability, remained binding despite the subsequent Share Purchase Agreement (SPA).
1. Case Overview
1.1 Court
High Court1.2 Outcome
Judgment for Plaintiff
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Dispute over a $1m good faith deposit for a failed company acquisition. The court ordered the refund of the deposit.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Trans-Cab Services Pte Ltd | Plaintiff | Corporation | Judgment for Plaintiff | Won | Leo Cheng Suan, Lim Khoon |
| Smart Automobile Pte Ltd | Defendant | Corporation | Counterclaim Dismissed | Lost | Anthony Soh |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Tay Yong Kwang | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Leo Cheng Suan | Infinitus Law Corporation |
| Lim Khoon | Lim Hua Yong LLP |
| Anthony Soh | Engelin Teh Practice LLC |
4. Facts
- Trans-Cab agreed to buy Smart Automobile's company, which owns two CNG refueling stations, for $25 million.
- Trans-Cab paid a $1 million 'good faith deposit' to Smart Automobile.
- The MOU stated the deposit would be refunded if a definitive agreement wasn't reached or if the purchaser elected not to complete the sale.
- The SPA was executed, but Trans-Cab did not complete the purchase.
- GSPL terminated the original gas retail agreement with Smart Automobile before the SPA was signed.
- Smart Automobile did not disclose the termination of the original gas retail agreement before the MOU was signed.
- Trans-Cab elected not to complete the sale due to concerns about the continuity of CNG supply from GSPL.
5. Formal Citations
- Trans-Cab Services Pte Ltd v Smart Automobile Pte Ltd and another, Suit No 755 of 2010, [2012] SGHC 110
6. Timeline
| Date | Event |
|---|---|
| GSPL sets Start Date for interim gas supply to Smart Automobile. | |
| GSPL confirms interim gas supply arrangements with Smart Automobile. | |
| MOU signed between Trans-Cab and Smart Automobile. | |
| Trans-Cab sends first draft of Share Purchase Agreement to Smart Automobile. | |
| Smart Automobile informs Trans-Cab that documents will be sent after SPA is signed. | |
| Aw sends email stating the Company would need to request GSPL officially for permission to release information on the CNG supply agreement. | |
| Smart Automobile sends Building Agreements to Trans-Cab. | |
| Smart Automobile requests permission from GSPL to release information regarding their CNG supply agreement. | |
| Share Purchase Agreement executed by the parties. | |
| Trans-Cab asks for the CNG supply agreement between GSPL and the Company. | |
| GSPL objects to disclosure of Terminated GRA to any prospective buyers. | |
| Defendants provide answers to Due Diligence Questionnaire. | |
| Smart Automobile discloses letter dated 5 April 2010 from GSPL for interim gas supply. | |
| Smart Automobile discloses letter dated 23 March 2010 from GSPL setting out the notice of termination of the GRA. | |
| Trans-Cab informs Smart Automobile that it will not complete the sale and purchase of shares. | |
| UOB debits $20,000 from the Company’s account for payment of a facility fee. | |
| Decision Date |
7. Legal Issues
- Refundability of Good Faith Deposit
- Outcome: The court held that the good faith deposit was refundable because the MOU, which stipulated its refundability, remained binding despite the subsequent SPA.
- Category: Substantive
- Breach of Contract
- Outcome: The court found that the defendants breached the SPA by failing to ensure the continuation of CNG supply, entitling the plaintiff to elect non-completion.
- Category: Substantive
- Interpretation of Contractual Clauses
- Outcome: The court interpreted the 'Entire Agreement Clause' in the SPA to include the MOU, thus giving effect to the MOU's terms regarding the refund of the deposit.
- Category: Substantive
8. Remedies Sought
- Refund of Deposit
- Interest
- Costs
9. Cause of Actions
- Breach of Contract
- Failure of Consideration
10. Practice Areas
- Commercial Litigation
11. Industries
- Transportation
- Energy
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| D’Oz International Pte Ltd v PSB Corp Pte Ltd | High Court | Yes | [2010] SGHC 88 | Singapore | Cited to support the principle that a term sheet and preliminary agreement referred to in a franchise agreement formed part of the parties' legal agreement. |
| Ng Giap Hon v Westcomb Securities Pte Ltd and other | Court of Appeal | Yes | [2009] SGCA 19 | Singapore | Cited to support the principle that an entire agreement clause does not necessarily exclude the implication of terms into a contract unless it expresses such effect in clear and unambiguous language. |
| Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd | Court of Appeal | Yes | [2008] SGCA 27 | Singapore | Cited for the permissive stance taken by the Court of Appeal towards extrinsic evidence which can explain and illuminate written words of an agreement. |
| Lee Chee Wei v Tan Hor Peow Victor and others | Court of Appeal | Yes | [2007] SGCA 22 | Singapore | Cited to support the principle that courts will strive to give effect to the parties' expressed intent and their legitimate expectations when they enter into a contract. |
| Howe v Smith | N/A | No | (1884) 27 Ch D 89 | N/A | Cited for the principle that deposits are inherently forfeitable and whether there exists a right to its return depends on the conditions of the contract. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| No applicable statutes | |
15. Key Terms and Keywords
15.1 Key Terms
- Good Faith Deposit
- Memorandum of Understanding
- Share Purchase Agreement
- CNG
- Gas Retail Agreement
- Due Diligence
- Conditions Precedent
- Entire Agreement Clause
- Continuation of Supply
15.2 Keywords
- contract
- deposit
- CNG
- share purchase
- agreement
- refund
- due diligence
16. Subjects
- Contract Law
- Mergers and Acquisitions
- Energy Law
17. Areas of Law
- Contract Law
- Sale of Shares
- Due Diligence
- Arbitration Law