D & C Property Pte Ltd and Another v Four Seas Construction Co Pte Ltd and Others

• Jurisdiction: Singapore
• Judge: Tan Lee Meng J
• Judgment Date: 20 August 1997
• Neutral Citation: [1997] SGHC 216
• Court: High Court (Singapore)
• Year: 1997
• Published date: 27 March 2013
• Plaintiff Counsel: Jimmy Yim and Richard Choong (Drew & Napier)
• Defendant Counsel: Chee Wai Pong and Ng Keng Chye (Ng, Ong and Chee)
• Citation: [1997] SGHC 216

JUDGMENT:

Cur Adv Vult

GROUNDS OF JUDGMENT

1. For the purpose of this trial, three suits were consolidated. Suit No. 146 of 1995, the main action, was consolidated with Suit No. 1564 of 1995, which was instituted by the first defendants in the main action against the first plaintiffs in the main action, and with Suit No. 1565 of 1995, which was instituted by the first defendants in the main action against the second plaintiffs in the main action.

2. The first plaintiffs in the main action were the developers of a building project in Swiss Club Road. Their related company, the second plaintiffs, were the developers of a building project in Cornwall Gardens. The first defendants in this action, Four Seas Construction Co. Pte. Ltd., were the main contractors for the first and second plaintiffs' building projects and the second defendant, Steven Tan, is the first and fourth defendants' director. The third defendant, Derek Lew, was the managing director of the first and second plaintiffs until he resigned on 21 July 1994. He also held 20% of the shares in these two companies. The fourth defendants, Four Seas Realty Holdings, are a related company of the first defendants. Finally, the fifth defendant, Madam So Sioe Kim, who is the second defendant's mother, is a director of the first and fourth defendant companies. During the trial, the plaintiffs withdrew their claims against Madam So Sioe Kim. As for Derek Lew, the third defendant, his whereabouts are unknown and the plaintiffs obtained judgment in default of appearance against him.

3. The first and second plaintiffs are suing the first defendants, the main contractor for their two building projects, in contract for failing to complete the projects. They also alleged that while investigating the activities of their former managing director, Derek Lew, they unearthed sufficient evidence to justify a finding by the court that he conspired with the first, second and fourth defendants to siphon money from them. The first defendants, who contended that they were entitled to withdraw from the two building projects on the ground of the first and second plaintiffs' breach of contract, filed two actions against them. The first, Suit No. 1564 of 1995, is with respect to the alleged breach by the first plaintiffs of the construction contract for the Swiss Club project and a contract to build and connect the said project's minor sewer line. The second, Suit No. 1565 of 1995, is with respect to the alleged breach by the second plaintiffs of the construction contract for the Cornwall Gardens project. As the first defendants' actions concerned the same subject matter as the main action, all three suits were consolidated.

A. THE ALLEGATION OF CONSPIRACY

4. The first and second plaintiffs' case is that they were badly served by their former managing director, Derek Lew, who conspired with the first and fourth defendant companies and their director, the second defendant, Steven Tan, against their interests. They accepted that they did not have direct evidence of the alleged conspiracy. However, they submitted that the circumstantial evidence surrounding this case is so voluminous and unusual that a reasonable man would conclude that there was a conspiracy against their interests. Various instances of alleged impropriety by Derek Lew were recounted. They included the following:

(a) opting to run the minor sewer line for the Swiss Club project through an inappropriate site and on conditions which were disadvantageous to the first plaintiffs in that they were required to appoint the first defendants as the main contractor for this project as well as the second plaintiffs' building project in Cornwall Gardens without the benefit of a competitive tender exercise.

(b) allowing the first defendants to inflate the contract price of the Swiss Club project to around $6.48 million to the detriment of the first plaintiffs.

(c) providing large advance payments to the first defendants without consulting the architect.

(d) giving a bribe of $100,000 to the second defendant after misrepresenting the purpose of the payment to the first plaintiffs.

(e) diverting to the second and fourth defendants a valuable corporate opportunity open to the second plaintiffs to acquire five properties at Tessensohn Road, after having protracted negotiations with the owner of the properties.

(f) receiving secret commissions and illegal compensation by way of purported commissions and consultancy fees from the second and fourth defendants.

5. As most of the alleged instances of impropriety concern the first plaintiffs' Swiss Club project, the background of this project should first be discussed. Sometime prior to 1992, Derek Lew persuaded the first plaintiffs' present managing director, Michael Ng, to take an interest in the purchase of a large plot of land in Swiss Club Road. Michael Ng, who was not knowledgeable about property development, agreed to a joint venture with Derek Lew for the purpose of purchasing and developing the said Swiss Club property. The vehicle for the joint venture was D & C Property Pte. Ltd., the first plaintiffs, in which Michael Ng held 80% of the shares. Derek Lew held the remaining 20% of the shares in the company. The land at Swiss Club Road was purchased by the first plaintiffs for $12,067,770 and Derek Lew was put in charge of the Swiss Club building project. In the first plaintiffs' view, he did not act in their interest from the very start.

6. The first instance of alleged impropriety in the Swiss Club Road project relates to Derek Lew's handling of its minor sewer line. The first plaintiffs' property did not have any discharge point for sewerage and drainage. As such, a minor sewer line had to be connected from the first plaintiffs' property to a suitable discharge point in a neighbouring property. Derek Lew decided to have the minor sewer line run across No. 23, Swiss Club Road, which is owned by the second defendant's mother. This might not have raised eyebrows except that the second defendant's mother drove a very hard bargain. She imposed seven conditions on the first plaintiffs before agreeing to allow the plaintiffs to run the minor sewer line through her property. One of them required the first plaintiffs to arrange for the appointment of the first defendants, Four Seas Construction, as the designated main contractor at a mutually agreed price for not only the Swiss Club project, but also for the Cornwall Gardens project, which was to be developed by the second plaintiffs. Such a condition was unusual in the context of an agreement to allow a neighbour to connect a sewer line.

7. The first plaintiffs' expert witness, Raymond Kuah, an architect, said that no reasonable architect would have advised the first plaintiffs to give up their right to call for open tenders for their building project in exchange for the right to run the minor sewer line across the second defendant's mother's property when there were other better options, which were not properly explored. For instance, the minor sewer line could have been connected to a neighbouring plot of land, owned by Park Court. The first plaintiffs' architect, Kok Siew Weng, said that this option was not pursued because the architects for Park Court, were rather difficult to deal with. He added that a large sum had to be paid as compensation for running the minor sewer line across the Park Court property. However, it appears that the architects for Park Court were rather helpful and had invited the first plaintiffs to discuss the minor sewer without making any demand for compensation. As there were other better options available, it remains a mystery why Derek Lew decided to connect the minor sewer line through the second defendant's mother's property when this resulted in the first and second plaintiffs losing their right to call for a competitive tender for their building projects in Swiss Club Road and Cornwall Gardens.

8. Another alleged wrongdoing concerning the minor sewer connection needs to be considered. According to the first plaintiffs' records, $100,000 in cash was paid by Derek Lew out of their bank account to the second defendant on 16 February 1993. It was stated in the payment voucher that this payment was for 'compensation for minor sewer works'. The first plaintiffs contended that the $100,000 was a bribe given to the second defendant to induce him to persuade his mother to allow her property to be used for the connection of the minor sewer. They pointed out that after receiving the alleged bribe, the second defendant informed his mother that it had been agreed 'in principle' that Four Seas Construction, the first defendants, would be appointed as the main contractors for the Swiss Club and Cornwall Gardens projects if she allowed the first plaintiffs to run their minor sewer line across her property. As a director of the first defendants, the second defendant's mother readily gave her consent. In the first plaintiffs' view, the second defendant's mother's letter to the first plaintiffs dated 22 February 1993, in which she insisted on seven conditions for her consent, was a cover-up for the conspiracy since it was clear that by then, she had already agreed to have the first plaintiffs' minor sewer line run across her property. After all, on 17 February 1993, the day after the $100,000 was allegedly paid to the second defendant, and four days before the second defendant's mother's letter to the first plaintiffs was written, the first plaintiffs' architect had written to the first defendants regarding the minor sewer line on the basis that the required consent had been obtained.

9. The next allegation of Derek Lew's impropriety relates to the cost of building the bungalows at Swiss Club Road. At the planning stage, the estimated cost of building each bungalow was $1 million. This was the figure submitted to the Urban Redevelopment Authority as well as to financial institutions, from whom...