Cendekia Candranegara Tjiang v Yin Kum Choy and Others

JurisdictionSingapore
JudgeMPH Rubin J
Judgment Date30 June 2002
Neutral Citation[2002] SGHC 136
Docket NumberSuit No 198 of 2001
Date30 June 2002
Published date19 September 2003
Year2002
Plaintiff CounselShriniwas Rai and Arumugam Ravi ( Hin Rai & Tan )
Citation[2002] SGHC 136
Defendant CounselNazim Khan ( Chan Ng Aqbal )
CourtHigh Court (Singapore)
Subject MatterWhether plaintiff responsible for deal's collapse so as to preclude recovery of earnest money,Whether plaintiff personally liable for certain expenses relating to proposed deal,Signing of Memorandum of Understanding between parties,Whether conflict of interest,Contract,Certainty of MOUÂ’s terms and conditions,Words and Phrases,s 272(2) Companies Act (Cap 50, 1994 Ed),Role of judicial manager,"Earnest money",Whether plaintiff's counter-proposals constitute repudiation,Winding up,Nature of MOU,Clause in MOU requiring signing of further agreements between parties,Judicial manager performing other roles for other defendants,Formation,Judicial manager,Legal standing and authority of judicial manager to pursue counterclaim after revocation of appointment and appointment of liquidators,Whether MOU conclusive in scope and constituting a binding agreement,Companies

Judgment

GROUNDS OF DECISION

Introductory

1 The plaintiff, an Indonesian businessman, a prospective investor in a Singapore company known as Yuan Guang Building Materials Pte Ltd (‘the company’) which was under judicial management since 18 February 1999, brought this action against the judicial manager, the first defendant herein, seeking the refund of a sum of $462,800, paid by him as earnest money as well as deposit to the first defendant. The plaintiff’s allegation was that the Memorandum of Understanding (‘MOU’) entered into between them in relation to the purchase of the assets of the company was not binding, on account of its inherent uncertainty as well as due to problems encountered in relation to a host of new terms and conditions introduced in the eight formal agreements forwarded to the plaintiff for his signature, many months after the signing of the said MOU.

2 The defence of the first defendant was that the said MOU constituted a binding agreement; the execution of the eight formal agreements was but a mere formality and that all the essential or fundamental terms of the agreement between the parties had been incorporated in the MOU. For his part, the first defendant counterclaimed against the plaintiff for $596,817.81, as being rentals and other outgoings owing from the plaintiff arising from the operation of a new company (‘Newco’), set up to implement the terms of the agreement reached between the parties.

3 In a nutshell, the principal issue to be decided in this case was whether the MOU entered into between the parties on 10 November 1999 was a binding final agreement. At the heart of the issue was cl 2 of the MOU which stipulates that: "[T]he investor [i.e., the plaintiff] shall enter into the relevant agreements (the "contracts") with the JM [judicial manager] and with the directors of the respective company in the Group [.e., YGBM and its associated companies, named in the MOU], which terms and conditions will be agreed upon at a later date".

4 Another issue that was equally crucial concerned the status and authority of the first defendant in continuing to prosecute the set-off and counterclaim on behalf of the company even after the termination of his appointment as the judicial manager consequent upon the winding-up of the company by the court on 6 April 2001. The action herein was commenced by the plaintiff on 21 February 2001 against him as the judicial manager of the company. The first defendant filed his defence and counterclaim as the company’s judicial manager on 29 March 2001. The company was wound up on 6 April 2001 and three persons other than the first defendant were appointed by the court as the company’s liquidators. The first defendant, despite an unambiguous statement from the solicitors for the liquidators, that he had no authority to continue with the action on behalf of the company, still persisted and would not let go his hold of the proceedings. The ensuing question therefore, was whether under the law the first defendant had any legal standing to continue with any claim on behalf of the company.

5 The allegations and counter-allegations of the parties by and large swirled around the inter-actions between the plaintiff and the judicial manager as well as a reported fall-out between the plaintiff and two of the company’s directors, Kwan Yew Choong (‘KYC’) and Kwan Fatt Cheong (‘KFC’), called jointly as the Kwan brothers, the second and third defendants respectively in this action. They did not appear at the trial; nor were they called to give evidence at the hearing although the roles played by them in the transaction were no less significant to the defence. Another material feature in this case was that the first defendant, in addition to being the judicial manager of the company was at all material times, representing the interests of the second and third defendants as their nominees, as declared by him in the MOU. The court was told that the action against the second and third defendants had been discontinued following an agreement between the parties that the two of them would abide by the decision of the court in this action. Consequently, after hearing evidence and arguments on behalf of the plaintiff and the first defendant, and having regard to the locus standi of the first defendant when he ceased to be the judicial manager of the company the court handed down a decision in favour of the plaintiff and dismissed the first defendant’s counterclaim. The facts which gave rise to this action and the reasons for the court’s decision are set out below.

Evidence

6 The plaintiff’s evidence was to the following effect. He is in his forties, educated in Bahasa Indonesia, and is engaged in a business in Surabaya, Indonesia dealing with glass and furniture. He had known the Kwan brothers, directors of the company for more than 10 years. Sometime in September 1999, KFC, the third defendant approached the plaintiff and told him that his company had not been doing well and that he was looking for a buyer for the company. KFC suggested that the plaintiff speak with the company’s judicial manager to enquire if the latter was interested. As a result, the plaintiff visited Singapore in September 1999 and met with KFC and subsequently the first defendant. It might perhaps be helpful at this stage to reproduce paras 3 to 15 of the plaintiff’s affidavit of evidence-in-chief to fully appreciate the background which led to the present dispute. They are as follows:

3. I visited Singapore in September 1999 and met with the 3rd Defendant. He explained that the company was facing difficulties, and was presently under the supervision of the 1st Defendant.

4. The 3rd Defendant requested that we assist him by taking over the Company at the price of about S$4 million and a personal debt of S$600,000.00. The 3rd Defendant promised that the 1st Defendant would have to be consulted.

5. The 3rd Defendant informed me that if the deal went through the 1st Defendant would then help me find a Bank to finance the amount of S$3 million and the remainder of S$1.6 million were to be funded by me. With these funds I could assist to save him and his families and his brother and his families from bankruptcy.

6. The 3rd Defendant also told me that the sale of the company and its related companies will also include trade marks and goodwill.

7. The 3rd Defendant then arranged a meeting with the 1st Defendant. The 1st Defendant said no contract could be entered outright, he preferred the Memorandum of Understanding and later we would have several Agreements to embody the terms.

8. The 1st Defendant said I have to pay earnest money which would be 10% of the purchase price. He also told me that this money would be safe. It can earn interest on the 10%. If the parties enter into a formal contract this would become part of the purchase price. I believe what he said.

9. I did not consult any lawyers as I felt that this was a preliminary understanding and with the advice of my solicitors, the formal agreements would be properly studied concluded and executed in December 1999. The Memorandum of Understanding was signed on 10th November 1999. A photocopy of the same is annexed and marked "CCT 2".

10. The 1st Defendant told me that in order to facilitate, I would have to form a new company which will eventually take over the business of the company. As time was running short, he wanted this company to be incorporated as he expected the Agreement for the sale of the company to be reached by December 1999.

11. The 1st Defendant said that a Company need to be incorporated with a $2.00 paid up capital and later the capital would be enlarged.

12. I agreed to pay the necessary fee for the registration of the Company and the Company known as IS Glass Pte Ltd was incorporated with a paid-up capital of $2.00.

13. However, no Agreements were prepared by December 1999 and the Draft Agreements were only sent to me in April 2000. I then consulted my present solicitors, Messrs. Hin Rai & Tan. My solicitors and I had a meeting with the 1st Defendant together with the 2nd and 3rd Defendants.

14. I as the Plaintiff has to consider the following terms:-

a) The fact that the Company was under Judicial Management, the usual complexities in matters like finance, management, employees and operation problems arise. The Company has also claims by many creditors, some of them are banks with substantial loan.

b) The taking over of Company as a going concern and thus many detailed aspects of the business operation have to be looked into, such as checking and verification of stock, materials, finished products, plants, machinery, equipments, accounts, statutory documents, taxation, litigation matters, employees, sales data and forecasts, creditors and debtors lists, customers lists, etc.

c) In short, a very thorough due diligence needs to be done before a decision can be made as to whether or not the Plaintiff would like to proceed with the purchase.

15. In January 2000, the 3rd Defendant and I went to Europe to explore the market but before we can finish the task, the 3rd Defendant returned to Singapore. He wanted higher salary but I was not prepared. The salary of the 2nd and 3rd Defendants was fixed at S$5,00.00 per month and I was surprised that they were asking for higher salary. When I did not agree, he became very upset and in fact asked me not to proceed with the sale and he would search for a new investor. Then in April 2000, the 3rd Defendant approached me again. The 3rd Defendant informed me that he cannot get a purchaser for the Company.

7 The plaintiff commented on the various clauses in the draft agreements forwarded to him and found them to be unacceptable. According to him, some of them were not in accord with the terms found in the memorandum; some were totally new and plainly one-sided to safeguard the interests of the Kwan brothers. Having found them unacceptable, he consulted his...

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4 cases
  • Rudhra Minerals Pte Ltd v MRI Trading Pte Ltd
    • Singapore
    • High Court (Singapore)
    • 25 Septiembre 2013
    ...Pty Ltd (1986) 40 NSWLR 622 (refd) Bellamy v Debenham (1890) 45 Ch D 481 (refd) Cendekia Candranegara Tjiang v Yin Kum Choy [2002] 2 SLR (R) 283; [2002] 4 SLR 48 (refd) Climax Manufacturing Co Ltd v Colles Paragon Converters (S) Pte Ltd [1998] 3 SLR (R) 540; [2000] 1 SLR 245 (folld) Foley v......
  • Rudhra Minerals Pte Ltd v MRI Trading Pte Ltd (formerly known as CWT Integrated Services Pte Ltd)
    • Singapore
    • High Court (Singapore)
    • 25 Septiembre 2013
    ...contract was merely a formality meant to embody what was already agreed in the FCO: see Cendekia Candranegara Tjiang v Yin Kum Choy [2002] 2 SLR(R) 283 at [25], [33]). However, as I have stated above, parties may conclude a binding contract even though there are some terms yet to be agreed ......
  • Neo Corp Pte Ltd (under judicial management) v Neocorp Innovations Pte Ltd and Another Application
    • Singapore
    • High Court (Singapore)
    • 8 Septiembre 2005
    ...the company and that this was supported indirectly by the Singapore High Court decision of Cendekia Candranegara Tjiang v Yin Kum Choy [2002] 4 SLR 48 (“the Cendekia Comparative analysis of legislation in other jurisdictions 26 I turn, now, to outline counsel for the creditor’s second argum......
  • Neo Corp Pte Ltd (under judicial management) v Neocorp Innovations Pte Ltd and Another Application
    • Singapore
    • High Court (Singapore)
    • 8 Septiembre 2005
    ...the company and that this was supported indirectly by the Singapore High Court decision of Cendekia Candranegara Tjiang v Yin Kum Choy [2002] 4 SLR 48 (“the Cendekia Comparative analysis of legislation in other jurisdictions 26 I turn, now, to outline counsel for the creditor’s second argum......
5 books & journal articles
  • Contract Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2002, December 2002
    • 1 Diciembre 2002
    ...in the preceding paragraph may be contrasted with another Singapore High Court decision, Cendekia Candranegara Tjiang v Yin Kum Choy[2002] 4 SLR 48 (see also infra, para 9.90, under “Damages”), where, in fact, MPH Rubin J held that a construction of the Memorandum of Understanding (“MOU”) e......
  • Restitution
    • Singapore
    • Singapore Academy of Law Annual Review No. 2002, December 2002
    • 1 Diciembre 2002
    ...deposit 19.80 The issue of recovery of pre-contractual deposits was also raised in Cendekia Candranegara Tjiang v Yin Kum Choy[2002] 4 SLR 48. This case reinforces the point (see paras 19.71 and 19.72 above) that it can be difficult in practice to distinguish between the contractual and res......
  • Insolvency Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2005, December 2005
    • 1 Diciembre 2005
    ...company being wound up. 14.108 The liquidators sought to rely on the High Court”s decision in Cendekia Candranegara Tjiang v Yin Kum Choy[2002] 4 SLR 48 as well as an article authored by this reviewer (Lee Eng Beng, ‘The Avoidance Provisions of the Bankruptcy Act 1995 and Their Application ......
  • Insolvency Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2002, December 2002
    • 1 Diciembre 2002
    ...the documents. Powers and duties of judicial managers 14.43 The High Court”s decision in Cendekia Candranegara Tjiang v Yin Kum Choy[2002] 4 SLR 48 involved rather unusual facts. The plaintiff entered into a memorandum of understanding with a company under judicial management, its subsidiar......
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