Sun Electric v Menrva Solutions: Breach of Contract & Negligence in Electricity Futures Market
Sun Electric Pte Ltd and Sun Electric Power Pte Ltd sued Menrva Solutions Pte Ltd and Chan Lap Fung Bernard in the High Court of Singapore, alleging breach of contract and negligence related to consultancy services provided by Menrva regarding Sun Electric Power's participation in the Enhanced Forward Sales Contract Scheme. The court, presided over by Justice Vinodh Coomaraswamy, found Menrva in partial breach of contract but dismissed the negligence claim and the attempt to lift Menrva's corporate veil. The court ruled in favor of the defendants on both the claim and counterclaim, awarding nominal damages to the plaintiffs for breach of contract and ordering an assessment of damages for the fees due to the defendant.
1. Case Overview
1.1 Court
High Court of Singapore1.2 Outcome
Judgment largely in favor of the Defendants on both the claim and counterclaim. Nominal damages awarded to Plaintiff for breach of contract; counterclaim for fees due to Defendant to be assessed.
1.3 Case Type
Civil
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
Sun Electric sues Menrva Solutions for breach of contract and negligence related to loss-making hedges in the electricity futures market. The court found a partial breach but dismissed the negligence claim.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Sun Electric Pte Ltd | Plaintiff | Corporation | Nominal damages awarded | Partial | |
| Sun Electric Power Pte Ltd | Plaintiff | Corporation | Claim Dismissed | Lost | |
| Menrva Solutions Pte Ltd | Defendant | Corporation | Counterclaim Allowed | Partial | |
| Chan Lap Fung Bernard | Defendant | Individual | Claim Dismissed | Won |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Vinodh Coomaraswamy | Judge | Yes |
4. Counsels
4. Facts
- Sun Electric Power Pte Ltd (SEP) participated in the Enhanced Forward Sales Contract Scheme (Scheme) to create liquidity in the electricity futures market.
- Menrva Solutions Pte Ltd was engaged by Sun Electric Pte Ltd (SE) as a consultant to advise on SEP's obligations as a market-maker under the Scheme.
- Mr. Chan, Menrva's principal, committed SEP to a series of hedges in the form of contracts for differences (CFDs) to mitigate SEP's risk as a market-maker.
- The CFDs turned out to be loss-making, resulting in a loss of just under $1.46m for SEP.
- Sun Electric Pte Ltd terminated the Consultancy Agreement with Menrva for alleged non-performance.
- The Consultancy Agreement stipulated that Menrva was to provide the services of Mr. Chan to SE.
- The Energy Market Authority of Singapore (EMA) established the Enhanced Forward Sales Contract Scheme (Scheme) to facilitate participation in Singapore’s electricity futures market.
5. Formal Citations
- Sun Electric Pte Ltd and another v Menrva Solutions Pte Ltd and another, Suit No 200 of 2016, [2018] SGHC 264
6. Timeline
| Date | Event |
|---|---|
| Energy Market Authority of Singapore established the Enhanced Forward Sales Contract Scheme | |
| Sun Electric Power Pte Ltd accepted as a participant in the Scheme | |
| Menrva Solutions Pte Ltd incorporated | |
| Menrva and Sun Electric Pte Ltd executed the Consultancy Agreement (backdated) | |
| Sun Electric Power Pte Ltd secured Tong Teik Pte Ltd as its Market Making Partner with Menrva's assistance | |
| The Scheme was launched | |
| The Scheme was suspended by the EMA | |
| The EMA announced amendments to the Scheme | |
| Amendments to the Scheme took effect, and the Scheme was re-launched | |
| Mr. Chan sent the November Report to Dr. Peloso | |
| Dr. Peloso emailed Mr. Chan regarding the caps and risk | |
| Sun Electric Pte Ltd terminated the Consultancy Agreement | |
| Mr. Chan rejected the allegations of breach | |
| Parties met unsuccessfully to resolve their differences | |
| Plaintiffs commenced this action | |
| Certified Transcript | |
| Certified Transcript | |
| Certified Transcript | |
| Trial began | |
| Judgment reserved | |
| Judgment issued |
7. Legal Issues
- Breach of Contract
- Outcome: The court found Menrva in breach of sub-clause (a) of the Consultancy Agreement for failing to provide daily indicative valuations.
- Category: Substantive
- Sub-Issues:
- Failure to provide daily indicative valuation
- Failure to perform quarterly auditing
- Failure to produce consolidated report
- Negligence
- Outcome: The court found that Menrva and Mr. Chan did not owe a duty of care to the plaintiffs and, even if they did, they did not breach that duty.
- Category: Substantive
- Sub-Issues:
- Failure to exercise reasonable care and skill
- Failure to advise on risk management
- Failure to monitor performance of contracts for differences
- Lifting the Corporate Veil
- Outcome: The court rejected the plaintiffs' attempt to lift the corporate veil and hold Mr. Chan personally responsible for Menrva's breach of contract.
- Category: Substantive
- Sub-Issues:
- Alter ego doctrine
- Abuse of corporate form
8. Remedies Sought
- Monetary Damages
- Lifting the Corporate Veil
9. Cause of Actions
- Breach of Contract
- Negligence
10. Practice Areas
- Commercial Litigation
- Breach of Contract
- Negligence
- Corporate Law
11. Industries
- Energy
- Finance
- Legal
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Romar Positioning Equipment Pte Ltd v Merriwa Nominees Pty Ltd | Court of Appeal | Yes | [2004] 4 SLR(R) 574 | Singapore | Cited regarding the rules of pleading and the inadmissibility of new matters raised in the reply that should have been included in the statement of claim. |
| Nirumalan K Pillay and others v A Balakrishnan and others | N/A | Yes | [1996] 2 SLR(R) 650 | Singapore | Cited regarding the function of a reply in pleadings, which is to answer matters raised in the defence and not to supplement the statement of claim. |
| V Nithia (co-administratrix of the estate of Ponnusamy Sivapakiam, deceased) v Buthmanaban s/o Vaithilingam and another | N/A | Yes | [2015] 5 SLR 1422 | Singapore | Cited regarding the rules of pleading, specifically that the plaintiff must plead his cause of action with sufficient particulars. |
| Y.E.S. F&B Group Pte Ltd v Soup Restaurant Singapore Pte Ltd (formerly known as Soup Restaurant (Causeway Point) Pte Ltd) | N/A | Yes | [2015] 5 SLR 1187 | Singapore | Cited regarding the interpretation of contracts, emphasizing the importance of both text and context, with the text being the first point of reference. |
| Hewlett-Packard Singapore (Sales) Pte Ltd v Chin Shu Hwa Corinna | Court of Appeal | Yes | [2016] 2 SLR 1083 | Singapore | Cited regarding the objective principle of contract interpretation, focusing on the expressed intentions of the parties rather than their subjective intentions. |
| PlanAssure PAC (formerly known as Patrick Lee PAC) v Gaelic Inns Pte Ltd | N/A | Yes | [2007] 4 SLR(R) 513 | Singapore | Cited regarding the implied term that a party is to exercise reasonable care and skill in providing services under a contract, encompassing a temporal aspect. |
| RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd and another appeal | N/A | Yes | [2007] 4 SLR(R) 413 | Singapore | Cited regarding the principle that damages are awarded as of right for breaches of contract. |
| Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency | Court of Appeal | Yes | [2007] 4 SLR(R) 100 | Singapore | Cited regarding the universal test for a duty of care, involving factual foreseeability, proximity, and the absence of policy considerations against a duty of care. |
| Hotel Royal @ Queens Pte Ltd (trading as Hotel Royal @ Queens) v J M Pang & Seah (Pte) Ltd | N/A | Yes | [2014] 3 SLR 967 | Singapore | Cited regarding the establishment of proximity between parties through a contract for consultancy services, distinguished on the facts. |
| Max-Sun Trading Ltd and another v Tang Mun Kit and another (Tan Siew Moi, third party) | N/A | Yes | [2016] 5 SLR 815 | Singapore | Cited regarding the principle that a duty of care in tort should not cut across the structure of relationships created by contracts. |
| Deutsche Bank AG v Chang Tse Wen and another appeal | N/A | Yes | [2013] 4 SLR 886 | Singapore | Cited regarding the consideration of the contractual matrix when determining legal proximity between parties. |
| Hedley Byrne | N/A | Yes | [1964] AC 465 | N/A | Cited regarding the concept of voluntary assumption of responsibility, which is a contract minus only consideration. |
| Chu Said Thong and another v Vision Law LLC | N/A | Yes | [2014] 4 SLR 375 | Singapore | Cited regarding the requirements for a voluntary assumption of responsibility, which must be conscious and volitional. |
| Animal Concerns Research & Education Society v Tan Boon Kwee | N/A | Yes | [2011] 2 SLR 146 | Singapore | Cited regarding the concept of proximity requiring more than just physical closeness between the parties. |
| Alwie Handoyo v Tjong Very Sumito and another and another appeal | Court of Appeal | Yes | [2013] 4 SLR 308 | Singapore | Cited as authority for the alter ego ground being an independent ground for lifting the corporate veil. |
| Prest v Petrodel | UK Supreme Court | Yes | [2013] 2 AC 415 | United Kingdom | Cited regarding the principles for lifting the corporate veil, specifically the concealment and evasion principles. |
| Hadley v Baxendale | N/A | Yes | [1854] 9 Exch 341 | N/A | Cited regarding the rule for determining the recoverability of damages for breach of contract, specifically the distinction between losses arising naturally and incidental, consequential, or indirect losses. |
| Amalgamated Investment and Property Co Ltd (in liq) v Texas Commerce International Bank Ltd | N/A | Yes | [1982] QB 84 | N/A | Cited regarding estoppel by convention. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Unfair Contract Terms Act (Cap 396, 1994 Rev Ed) | Singapore |
| Contracts (Rights of Third Parties) Act (Cap 53B, 2002 Rev Ed) | Singapore |
| Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Enhanced Forward Sales Contract Scheme
- Market-maker
- Contracts for Differences
- Forward Sale Contracts
- Wholesale Electricity Price
- Liquefied Natural Gas Vesting Price
- Market Making Partner
- Consultancy Agreement
- Hedge Ratio
- Daily Indicative Valuation
15.2 Keywords
- breach of contract
- negligence
- electricity futures
- corporate veil
- consultancy agreement
- contracts for differences
- market maker
- Singapore
- enhanced forward sales contract scheme
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Contract Law | 75 |
| Breach of Contract | 70 |
| Duty of Care | 65 |
| Negligence | 60 |
| Lifting corporate veil | 50 |
| Corporate Law | 40 |
16. Subjects
- Contract Law
- Tort Law
- Company Law
- Financial Services
- Energy Market