Ang Eng Thong v Lee Kiam Hong

• Judge: Lai Siu Chiu J
• Judgment Date: 02 March 1998
• Neutral Citation: [1998] SGHC 64
• Citation: [1998] SGHC 64
• Court: High Court (Singapore)
• Plaintiff Counsel: Michael Palmer (Harry Elias & Partners)
• Defendant Counsel: Lim Sin (Teo Choo Hong & Co)
• Published date: 21 February 2013

Judgment:

GROUNDS OF DECISION

1 This is an appeal to a judge-in-chambers from the decision of the learned Senior Assistant Registrar who granted summary judgment to the plaintiff under O 14 r 3 of the Rules of the Supreme Court (RSC) for monies owed under a deed of agreement ("the deed") entered into between the defendant and plaintiff.

2 The appeal came up for hearing before me on 4 November 1997 whereupon I dismissed the appeal. The defendant, being dissatisfied with the outcome, has filed a notice of appeal (Civil Appeal No 236 of 1997).

The facts

3 There was much dispute between the parties as to the sequence of events in this case. As such, the facts will be set out in some detail with the relevant inconsistencies and discrepancies highlighted.

4 The plaintiff is a businessman and is the sole proprietor of Hiap Seng Leong Timber Merchants, which deals in timber and building materials. The defendant is the managing director of Bian Huat Hardware Private Limited ("Bian Huat"), who are general importers and exporters as well as commission agents. Its registered office is at 60 Defu Lane 1 ("the Defu Lane premises"). Bian Huat has a paid-up capital of $1.4m made up of 14,000 ordinary shares of $100 per share. The registered shareholders, the number of shares each of them held and their relationship with the defendant at the commencement of the action, are as follows:

Lee Kiam Hong (the defendant) - 6,889 shares

Lee Keng Cheng (father) - 1,644 shares

Chng Suan Choo (grandmother) - 2,029 shares

Lee Beng Hui (uncle) - 1,404 shares

Lee Meng Kui (uncle) - 478 shares

Lee Meng Lai (uncle) - 778 shares

Lee Beng Tee (uncle) - 778 shares

Besides the Defu Lane premises, the company's assets consisted of two office units at The Plaza and stock-in-trade. Incidentally, both parties had offices in the Defu Lane area.

5 In early 1992, the plaintiff began searching for bigger premises to cater to his expanding business. He was introduced to the defendant by a mutual friend, who informed him that the defendant was interested in selling the Defu Lane premises, which were on a long-term lease to Bian Huat by the Housing and Development Board ("HDB"). It was upon this introduction that the plaintiff realised that he was acquainted with the defendant's father, Lee Keng Cheng. He thus treated the defendant as a family friend. The defendant on the other hand, maintained that his relationship with the plaintiff was purely business and they were not family friends.

6 There were numerous discussions between the parties regarding the possible sale of the Defu Lane premises; the asking price was $1.6m but the plaintiff was only willing to offer $1.5m. According to the plaintiff, the defendant told him that he wanted to sell the premises on behalf of Bian Huat so that the defendant could use the sale proceeds to purchase his relatives' shares in the company and take over the company. The purpose for his so doing was so that he could sell off Bian Huat's assets and make a profit. The defendant stated that he never had any intention to purchase all the shares in Bian Huat but only those of his grand-aunt, uncles and cousin, not his father's and grandmother's. He claimed that his father and grandmother, as the remaining shareholders, supported his plan and permitted him to borrow the proceeds of sale to buy the shares of the other shareholders. The grandmother felt that the defendant was the right person to take over the flourishing business. The defendant blamed the plaintiff for pulling out of the sale of the Defu Lane premises after being assured earlier that he was set on buying the property for $1.5m. The plaintiff told him that he could not commit himself as he would have to pay a high increase in the ground rent imposed by HDB. The defendant was shocked and upset as he had already signed agreements to buy the shares of four uncles which purchase hinged on the sale for the requisite financing. The plaintiff denied ever coming to an agreement on the purchase price or misleading the defendant into believing that he was definitely buying the premises. He had second thoughts after learning from the defendant's solicitors, Messrs C H Lim & Co ("C H Lim"), about the increase in ground rent and the plaintiff had no knowledge of the defendant's agreements with his uncles.

7 There were conflicting accounts as to how the parties entered into a loan agreement for $1.5m. According to the plaintiff, shortly after the abortive sale, the defendant said that he had a way by which the plaintiff could obtain the lease for the Defu Lane premises and he could achieve his aim of purchasing the Bian Huat shares. It was proposed that the plaintiff lend the defendant $1.5m to buy up all the shares of the company from the rest of the shareholders. In return, the defendant would grant the plaintiff an option to purchase all the shares from him for $1.5m, but only after the defendant had sold off all of Bian Huat's other assets, namely the two properties at The Plaza and stock-in-trade. The loan monies of $1.5m would be consideration for the shares. In that way, the plaintiff could take control of Bian Huat. This effectively meant that he would have control of the Defu Lane premises without having to incur any increase in ground rent. In addition, the defendant undertook not to sell the lease of the Defu Lane premises after acquiring full control of the company.

8 The defendant denied coming up with such a plan; he gave a different story. He stated that the plaintiff said that he (the plaintiff) would be willing to lend $1.5m on condition that the monies by repaid within six months and the loan be secured by the Bian Huat shares which the defendant was to acquire. In this way, the defendant would have some time to look for a buyer for the Defu Lane premises and repay the plaintiff with the proceeds of sale. The full sum would be deposited with C H Lim. It was agreed that $150,000 was to be released to the defendant first to facilitate his purchase of a new warehouse. The remaining $1.35m was to be released to C H Lim towards the purchase of Bian Huat shares only. All the shares purchased would be held by C H Lim as security. The defendant claimed that the plaintiff demanded an additional $1m for his help, to be payable in ten yearly instalments of $100,000. The plaintiff also wanted a gentlemen's agreement that, if at any time before the defendant could find a buyer for the Defu Lane premises, the plaintiff decided to buy it, the defendant would sell it to him for $1.5m. The defendant maintained throughout that the plaintiff was aware that he was acquiring the shares of his uncles, grand-aunt and cousin but not those of his father and grandmother. The plaintiff vehemently denied this.

9 On 16 March 1992, the oral agreement between the parties was effected in writing ("the first agreement"). The solicitors for both parties was C H Lim. The pertinent parts of the agreement are as follows:

3. The sum of Dollars One Million Five Hundred Thousand ($1,500,000.00) as mentioned above shall only be used solely for the purpose of purchasing the shares in the said Company except 10% of which amounting to S$150,000.00 to be released to the Borrower to purchase another factory warehouse.

4. The Lender shall have a right if he so wishes to purchase all the shares (meaning 100%) of the said Company from the Borrower as and when the Borrower has successfully completed his purchase of all the shares in the said company for a sum of Singapore Dollars One Million Five Hundred Thousand (S$1.5m) in which the Borrower shall be entitled to dispose all the stock-in-trade as well as the two (2) properties at The Plaza prior to the Lender exercising his Option to purchase the Borrower's shares.

5. At any one time after the date of purchase of the Borrower's shares by the Lender, the Borrower or any person acting on his behalf shall not dispose of the asset of the Company namely, the property known as 60 Defu Lane 1, Singapore. It is clear, intended and agreed upon between the Lender and Borrower that the Dollars One Million Five Hundred Thousand (S$1,500,000.00) loan shall be used to purchase all the shares of the said Company whose valuation of assets, etc., shall only be the value of the asset of the property known as 60 Defu Lane 1, Singapore, and all other assets, stock-in-trade, cash, etc., or otherwise shall be disposed of and these monies shall be declared by way of dividends or capital reduction for which the Lender is not entitled to.

...

11. The Lender shall allow the Borrower a space to be indicated on the plan of 60 Defu Lane 1, Singapore, for storage of the Borrower's goods, rent free up to a period of two (2) years pending the Lender taking possession of the premises.

10 There were conflicting accounts on the circumstances leading to the second agreement on 6 July 1992. According to the plaintiff, in mid-1992, the defendant told him that he had completed the acquisition of all the Bian Huat shares and wanted to develop Bian Huat's business. As such, he wanted to repay the loan of $1.5m instead of granting an option to the plaintiff of Bian Huat shares. As he had no aspirations of taking over Bian Huat's business, the plaintiff agreed with the variation on condition that the defendant repay the loan by October 1992 and that the defendant agree to procure for the plaintiff a lease of vacant land and office space at the Defu Lane premises; the defendant agreed.

11 The defendant gave a different version of the events in mid-1992. He said he had difficulty finding a buyer for the Defu Lane premises and the plaintiff offered to help him obtain a loan from Tat Lee Bank to repay the $1.5m on condition that, Bian Huat rented to the plaintiff half of the vacant land at the Defu Lane premises at cost and, the office space on the ground floor at $1,000 per month until the HDB lease expired. The defendant relented although this rendered it almost...