NutryFarm: Ex-CEO’s alleged durian deals may spur a legal stink

Durians at a fruit stand in Singapore’s Geylang neighbourhood; taken September 2021Durians at a fruit stand in Singapore’s Geylang neighbourhood; taken September 2021

— NutryFarm is weighing legal action against its ex-CEO over settlement agreements in its Thai durian business. 

— The company said it wasn’t informed or consulted on the terms of the agreements, and only received the purchase agreements with compensation clauses on 23 May.

–The compensation to customers for durian shipment shortfalls could run as high as S$6.8 million.

NutryFarm International is contemplating legal action against its former CEO Cheng Meng after receiving two settlement agreements from subsidiary Global Agricapital Thailand (GAT) alleging the company owes compensation of as much as CNY33.4 million, or S$6.8 million, for shortfalls in durian shipments, the durian supplier said in filings to SGX on Friday and Sunday.

Cheng Meng, who was removed as CEO in February, remained the executive director of GAT, with his authority “ringfenced” to only the Thailand durian business, the filings said. The settlement agreements were executed for GAT by Cheng Meng, the filings said.

Shenton Wire was unable to locate contact information for Cheng Meng to seek comment for this article.

NutryFarm said it received the settlement agreements — which were dated in January — on 23 May, and that prior to receipt, it was never informed nor consulted about the agreements or their terms.

The company clarified Sunday that in the purchase agreements known to the company prior to 23 May, there were no commitments on minimum quantities and deliveries by GAT and no compensation clauses.

“The board holds Cheng Meng personally responsible for the settlement agreements, including the compensation and penalty amounts therein, all economic and financial losses suffered and that will be suffered by the company and the group, and any fiduciary and regulatory breaches as a result of his own actions,” NutryFarm said, adding it was considering various options, including legal action.

Deals with Moonda and China Railway

The first settlement agreement, with customer Moonda, indicated GAT was to provide compensation of CNY15.6 million for only delivering 44 containers of fresh durians from Thailand out of 200 which had been agreed, the filing said.

The second settlement agreement with customer China Railway, indicated GAT was to pay compensation of CNY17.8 million, offset by around CNY17.43 million China Railway owed to GAT, due to only 222 containers of fresh durians being delivered out of the 400 which had been agreed, the filing said.

For both agreements, “the shortfall was due to GAT reducing delivery quantities as it was unable to ensure the quality of the Thailand fresh durians during shipment because of the shipping delays and/or restrictions imposed by the Chinese Customs to control Covid-19,” NutryFarm said.

The company said it is investigating whether there are any other purchase agreements it isn’t aware of, as well as the authenticity of the settlement agreements, and whether Cheng “willfully withheld” information about the agreements from the board and executed the agreements without board approval.

NutryFarm said Sunday its results for the fiscal year ended 30 September 2021 have been restated to exclude all of the Thai durian business operated by Cheng Meng which can’t be verified or substantiated, and it plans to continue doing so, meaning GAT won’t impact its financial results.