Case Study – A Brief Overview Of Star Asia Group Singapore Holding Pte Ltd v Fung Keong Rubber Manufactory (Malaysia) Sdn Bhd
Star Asia Group entered into a SPA with Fung Keong Rubber whereby Fung Keong Rubber is to sell their plants and machinery to the Star Asia Group for a total sum of RM5,500,000.00. Before the SPA can be completed (and as per the terms of the SPA) Star Asia Group was given 14 days (upon Fung Keong Rubber confirmation) to inspect the plants and machinery.
However, this was not done within the time limit and when Star Asia Group finally inspects the plants and machinery, they insisted on testing the plants and machinery with raw materials.
Fung Keong Rubber did not allow them to do so, contending that the plants and machinery were at all times operational. They took it as a sign that Star Asia Group had no intention to complete the agreement, thereby terminating the agreement and forfeiting the deposit that was paid by Star Asia Group.
Subsequently, Star Asia Group sued Fung Keong Rubber, demanding that Fung Keong Rubber either complete the SPA or return the deposit. Fung Keong Rubber counterclaimed and stated that they do not need to complete the SPA and demanded damages arising from the non-performance of the SPA.
Central to the arguments by both parties was whether the term ‘operational’ in the SPA entitles the Star Asia Group to test the machines by using raw materials when it is explicitly stated in the terms of the SPA that the machines are purchased on an ‘as is where is basis and whether the subsequent negotiations can be considered a supplementary agreement to the original SPA.
The court rejected both party’s claim. For rejecting Star Asia Group’s claim, the court states that since the sale is based on an ‘as is where is’ basis and if it has other meaning it must be clearly stated in the SPA. As Star Asia Group did not comply with the terms of the SPA, Fung Keong Rubber has every right to terminate the SPA. In this regard, the court has this to say:
“…the term ‘as is where is’ appearing in a sale transaction is defined in the Encyclopedia of Practical Usages of Terminology for Business Agreements, at page 40, as being a sale of goods ‘without warranty or guarantee as to quality, character, condition, size, weight or kind’. In other words, to quote PW1, ‘I take them as I see them’”.
The Court also held that the subsequent negotiations do not consider a supplementary agreement but are a fresh offer. By making a fresh offer, the Star Asia Group has accepted the terms of the SPA and had willingly entered into a fresh negotiation for a fresh SPA.
As for Fung Keong Rubber’s claim, the court held that there is no merit to the counterclaim because (as stated in the SPA) in the event that Star Asia Group reaches the SPA, Fung Keong Rubber is only entitled to terminate the SPA and forfeit the deposit and once the termination and forfeiture clause is activated, neither party shall have any other claim against the other party.