Charles Lim Teng Siang and another v Hong Choon Hau and another

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 22 April 2021
• Neutral Citation: [2021] SGCA 43
• Published date: 27 April 2021
• Docket Number: Civil Appeal No 49 of 2020
• Year: 2021
• Hearing Date: 01 March 2021
• Plaintiff Counsel: Lok Vi Ming SC, Qabir Sandhu, Law May Ning (LVM Law Chambers LLC) (instructed), Daryl Ong Hock Chye (LawCraft LLC)
• Citation: [2021] SGCA 43
• Defendant Counsel: Christopher Woo, Joel Ng and Sujesh Anandan (Quahe Woo & Palmer LLC)
• Court: Court of Appeal (Singapore)
• Subject Matter: Rescission,Contract,Discharge,Variation,No oral modification clause

Steven Chong JCA (delivering the judgment of the court): Introduction

This appeal arose from a decision of the High Court which held that an agreement for the sale and purchase of shares in a public-listed company had been orally rescinded by mutual agreement. Both parties in the court below, in particular the appellants, who one might have expected to have raised the point, did not pay sufficient attention to a boilerplate clause in the agreement which prohibited any “variation, supplement, deletion or replacement of or from” the agreement unless made in writing and signed by or on behalf of both parties. As a result, this issue was not addressed by the Judge below. In this appeal, this clause occupies centre stage.

The introduction of this new point gives rise to two interesting issues on appeal. First, does a clause which prohibits “variation, supplement, deletion or replacement” unless made in writing and signed by or on behalf of both parties apply to rescission? Second, assuming that the oral variation of an agreement has been proved, can the other party rely on such a clause to invalidate the oral variation? This latter question is a vexed question of law which requires an examination of the principle of party autonomy in contract law, its ramifications, and its limit. The question also requires consideration of the difficulties in giving effect to an oral variation in the face of such a clause.

Material facts

The first appellant (“Mr Lim”) was a relationship manager with United Overseas Bank (“UOB”) at all material times. In 2014, he was the beneficial owner of approximately 15.49 million shares in a public-listed company known as PSL Holdings Ltd (“PSL”). Of these, 5.735 million shares were held by his wife, Yvonne Seow Ee Fun (“Ms Seow”), and another 9.755 million shares were held by his mother, the second appellant (“Mdm Tay”), on behalf of Mr Lim. In addition, Mr Lim had three banking clients who also owned PSL shares, namely, Dr Chung Sook Yin (“Dr Chung”), Tan Seung Yuen (“TSY”), and Dr Currie Chiang (“Dr Chiang”) who owned not less than 4 million shares, 15.5 million shares, and 5.5 million shares respectively.

In 2014, Mr Lim was introduced by one George Lim (“George”) to Tedy Teow (“Mr Teow”), who was a wealthy businessman. Discussions ensued and Mr Lim agreed to sell Mr Teow 35 million PSL shares for $10.5 million at 30 cents per share. Mr Teow informed Mr Lim that he would purchase the shares through his associates, the respondents, Hong Choon Hau (“Mr Hong”) and Tan Kim Hee (“Mr Tan”). Mr Lim claimed that he had persuaded Dr Chiang, Dr Chung and TSY to sell their respective shares as part of this share transaction. Thereafter, Mr Lim asked a solicitor, Low Chai Chong (“Mr Low”), from Rodyk & Davidson LLP (“Rodyk”) (as it then was), to draft the Sale and Purchase agreement (“SPA”). When the draft was done, Mr Low sent the SPA to Mr Lim and to one Bernard Lim Wey Chyuan (“Bernard”), the latter being the point of contact for Mr Teow and the respondents. Bernard then arranged for a meeting between Mr Lim and the respondents. On 17 September 2014, the following persons met at Rodyk’s office (“the Rodyk Meeting”): Mr Lim; Ms Seow; the respondents; Mr Hong’s personal assistant, Carrie Lang Cheah Yean (“Carrie”); Bernard; Mr Low; and Mr Low’s associate, Alvin Liong.

At the Rodyk Meeting, Mr Lim and the respondents signed the SPA. The material terms of the SPA were as follows: Mr Lim and Mdm Tay were to sell the respondents 35 million PSL shares, with Mr Hong and Mr Tan each purchasing 17.5 million shares (cl 2); The Completion Date would be 17 October 2014 (cl 1.1); The total consideration would be $10.5 million (cl 3.1); Time shall be of the essence as regards all the times mentioned in the SPA (cl 7.1); No variation, supplement, deletion or replacement of any term of the SPA shall be effective unless made in writing and signed by or on behalf of each party (cl 8.1); and The delay or failure to exercise any right, remedy, power or privilege under the SPA shall not constitute a waiver (cl 9.2).

After signing the SPA, Mr Lim arranged for the respondents to open private bank accounts with UOB. The intention was for the respondents to transfer monies from their Malaysian bank account to these UOB accounts to facilitate the payment under the SPA. The next day, Mdm Tay went to Mr Low’s office and signed the SPA. It is not disputed that the respondents did not, at any time, meet or speak to Mdm Tay in connection with the SPA.

Thereafter, the Completion Date passed, but the share transaction was never completed. Instead, from October 2014 until August 2018, Mr Lim continued to serve as the relationship manager for Mr Hong’s and Mr Tan’s UOB accounts.

On 3 May 2018, Mr Lim instructed his solicitors to send a letter to the respondents, demanding compliance with the SPA and threatening legal action (“May 2018 Letter”). The respondents refused, whereupon the appellants filed a writ of summons on 3 September 2018.

The parties’ cases The appellants’ case

The appellants claimed damages for breach of the SPA, as the respondents had wrongfully failed to complete the sale. The respondents had provided various excuses for the non-completion, including Mr Teow’s refusal to complete. Mr Lim alleged that he had sought to communicate with Mr Teow and/or the respondents to complete the sale, but to no avail.

Mr Lim claimed that the respondents had requested multiple extensions of time, purportedly to take instructions from Mr Teow, and that they had offered to get him involved in other business deals/opportunities as compensation for the delay in the completion. Mr Lim denied that the SPA was rescinded via a telephone call with Mr Hong on 31 October 2014, and asserted that there was in fact no such telephone call.

Mdm Tay claimed that she left all matters pertaining to the transaction to Mr Lim, and that she did not know what had happened to the transaction until around 2018 when Mr Lim informed her that it did not go through.

The respondents’ case

The key to the respondents’ defence is an alleged telephone call between Mr Lim and Mr Hong on or about 31 October 2014, during which the SPA was claimed to have been rescinded by mutual agreement.

According to Mr Hong, between 28 October 2014 and 31 October 2014, he read announcements from Nordic Group Limited (“Nordic announcements”) which caused him to doubt Mr Lim’s representation that he owned the 35 million PSL shares which formed the subject matter of the SPA. The announcement also led him to realise that, contrary to Mr Lim’s representation, the 35 million PSL shares would not allow the respondents to achieve a reverse takeover of PSL. On the evening of 31 October 2014, Mr Hong called Mr Lim and told him that these announcements contradicted what Mr Lim had previously represented to him. Mr Lim then informed Mr Hong that the SPA was cancelled and would no longer be effective. During the telephone call, Mr Hong also told Mr Lim that there was still interest in investing in agarwood and other business deals that Mr Lim might have, and they both agreed that they should instead pursue other business opportunities.

Mr Tan corroborated Mr Hong’s account. Mr Tan’s evidence was that around 31 October 2014, he had indeed been informed of Mr Hong’s telephone call with Mr Lim in connection with the Nordic announcements, which led to the mutual rescission of the SPA.

The respondents pleaded in the alternative that the appellants were estopped from relying on their legal rights under the SPA.

The respondents also pleaded that: (a) they had not agreed to purchase 17.5 million PSL shares each; (b) they had never entered into any agreement with Mdm Tay, whom they had never met; (c) Mr Lim had promised to enter into an addendum agreement to give them free PSL shares but failed to do so; (d) the copy of the SPA adduced by Mr Lim was not authentic and the appellants were unable to produce the original copy; and (e) they had been induced to enter the SPA due to Mr Lim’s fraudulent misrepresentations. In particular, Mr Lim had misrepresented that: (a) he owned 35 million PSL shares; (b) this amount of shares would allow the respondents to achieve a reverse takeover of PSL; (c) the respondents would then be able to use PSL as the corporate vehicle to secure a supply of agarwood; and (d) while the listed share price of PSL was at that time only 17 cents per share, it would increase to 60 cents per share after the reverse takeover was completed.

The High Court Decision

The Judge issued her grounds of decision in Lim Teng Siang Charles and another v Hong Choon Hau and another [2020] SGHC 182 (“GD”). She found that: the SPA was authentic and was signed by the respondents (GD at [6]); the alleged misrepresentations were not made out (GD at [8] to [16]); and Mr Lim had never promised the respondents free shares or an addendum agreement (GD at [24] to [25]). These findings are not challenged by the respondents on appeal.

However, the Judge accepted the respondents’ evidence that the SPA had been rescinded by mutual agreement through a telephone call between Mr Lim and Mr Hong on 31 October 2014 (GD at [47], [68]), and that Mr Lim was authorised to act for Mdm Tay, while Mr Hong was authorised to act for Mr Tan (GD at [68]). She reasoned as follows: The appellants did not serve any notice on the respondents to complete the SPA from the Completion Date of 17 October 2014 all the way till the May 2018 Letter (see [8] above), even though the SPA provided that time was of the essence (GD at [48]). There was no documentary evidence to support Mr Lim’s alleged attempts to chase the respondents to complete the transaction. This was in spite of the fact that Mr Lim had communicated with Mr Hong via WhatsApp and email concerning other matters. Mr Lim must also have had the respondents’ contact details...