Cheong Soh Chin and others v Eng Chiet Shoong and others

• Jurisdiction: Singapore
• Judge: Vinodh Coomaraswamy J
• Judgment Date: 28 September 2018
• Neutral Citation: [2018] SGHC 130
• Court: High Court (Singapore)
• Docket Number: Suit No 322 of 2012 (Summons No 2927 of 2017)
• Published date: 09 April 2019
• Year: 2018
• Hearing Date: 28 June 2017,27 June 2017
• Plaintiff Counsel: Philip Jeyaretnam SC, Foo Maw Shen, Chu Hua Yi, Ooi Huey Hien and Jasmine Yong (Dentons Rodyk & Davidson LLP)
• Defendant Counsel: Koh Swee Yen, Jared Chen, Ho Wei Jie, Jill Ann Koh Ying and Lim Yangyu (WongPartnership LLP)
• Subject Matter: Res Judicata,Issue estoppel,Cause of action estoppel
• Citation: [2018] SGHC 130

Vinodh Coomaraswamy J: Introduction

In the liability phase of this action, I decided substantially in favour of the plaintiffs. I ordered, amongst other things, that the defendants account to the plaintiffs on the wilful default basis. I also dismissed the defendants’ counterclaim for management fees and related expenses of about US$17m. On appeal, my decision was left largely undisturbed, although the Court of Appeal did allow the defendants’ appeal in relation to one head of their counterclaim.

At the commencement of the accounting phase of this action, the parties raise a preliminary issue for my determination: whether the defendants are now entitled to argue that the parties entered into an overarching agreement under which the plaintiffs were to pay the third defendant’s expenses.¹ The plaintiffs argue that the defendants are barred by the doctrine of res judicata from raising this issue again because it was decided against them at the liability phase of this action, both by me and by the Court of Appeal.² The defendants contest this, submitting that issue of whether there is an overarching agreement in relation to “expenses” has not yet been raised or disposed of by any court.³

After hearing the parties, I agree with the plaintiffs that the issue of whether there is such an overarching agreement is res judicata. Specifically, I have held that both cause of action estoppel and issue estoppel operate to prevent the defendants from raising the issue again. I have also held that the defendants are precluded from raising any arguments on the basis of contract or quantum meruit to resist any of the plaintiff’s claims to falsify the account.

The defendants have appealed against my decision.⁴ I now set out my detailed grounds.

Background facts

The facts of the parties’ dispute are set out in detail in my judgment on liability in Cheong Soh Chin and others v Eng Chiet Shoong and others [2015] SGHC 173 (“Cheong Soh Chin (HC)”). They are also canvassed in the Court of Appeal’s decision on liability in Eng Chiet Shoong and others v Cheong Soh Chin and others and another appeal [2016] 4 SLR 728 (“Eng Chiet Shoong (CA)”). It therefore suffices for me to set out the background to this dispute briefly.

The plaintiffs are the Wees, a family of high net worth individuals. The first plaintiff, Cheong Soh Chin, is the mother of the second and third plaintiffs, Wee Boo Kuan and Wee Boo Tee. The first and second defendants, Eng Chiet Shoong and Sylvia Lee, are husband and wife. They are experienced asset managers. The third defendant, C S Partners Pte Ltd (“CSP”), is a company incorporated by Ms Lee to provide “integrated services to families on wealth protection and wealth creation”. I shall refer to all three defendants collectively as “the Engs”.

In early 2004, the parties agreed to combine their capital and financial expertise in a project they called the “WWW Concept”. The WWW Concept was intended to be a long-term and profitable collaboration for the Wees and the Engs. Under this concept, it was envisaged that the parties would find fledgling private equity (“PE”) fund managers and provide them with seed capital to start new PE funds in which the parties would also invest. They would then participate in the fund managers’ profits and also in the funds’ profits.

The first step in the WWW Concept was for the parties to build a track record for themselves, in order to attract fledgling hedge fund managers. To do this, the Wees and the Engs decided to set up their own PE fund. This PE fund was to be a fund of funds, ie a fund which would invest its capital in other funds. The plan was that the Wees would provide the necessary capital for the initial PE fund and the Engs would provide the financial expertise. Once the PE fund had a good track record, it would become the first fund under the WWW Concept.

Subsequently, in 2004 and 2005, the Wees invested US$30m in five PE funds (“Initial PE Funds”) and another US$100m in ten additional funds (“Additional PE Funds”). The Wees agreed to pay the Engs a management fee of 1.5% in respect of the Initial PE Funds. There was no similar agreement with respect to the Additional PE Funds.

In addition to investing their capital in these PE funds, the Wees also invested capital in five ventures which the Engs introduced to them. The ventures are known as Project Plaza, Project Sailfish, Project Red Spot, the Bahamas Fund, and the Kendall Court Fund.

The Wees’ investments in the PE Funds and in these five ventures were held through a network of 24 special purpose vehicles (“SPVs”). Although these vehicles were established and maintained with the Wees’ funds, all of the vehicles were set up and controlled by the Engs.

The relationship between the parties deteriorated and eventually broke down. In April 2012, the Wees brought this action against the Engs. The Wees sought, among other things, orders requiring the Engs to render an account and to return the assets which the Wees had entrusted to them. The Engs brought a counterclaim against the Wees for fees and expenses incurred in managing and administering the Wees’ investments.

My decision in the liability phase – Cheong Soh Chin (HC)

In Cheong Soh Chin (HC), I allowed the Wees’ claim, holding that the Engs were indeed liable to account to the Wees and to pay to the Wees the sums which the account showed were due. I dismissed the bulk of the Engs’ counterclaim, holding that the parties were not in the relationship of a service provider and client but were instead joint risk runners working together towards the WWW Concept (at [69]). I did, however, hold that the Engs were entitled to management fees of US$450,000 per annum for the Initial PE Funds. Accordingly, I ordered the Wees to pay these management fees up to the date that the Engs transferred the structures holding these funds to the Wees (at [77]–[78]).

As for the Additional PE Funds, I held that the Engs were not entitled to any management fees at all (at [81]). I held that there was no express or implied agreement that the Engs would be paid fees for the Additional PE Funds (at [83]). Additionally, I held that the Additional PE Funds were part of the WWW Concept and that the Engs had rendered their services in the expectation that they would be compensated for those services out of the eventual profits of the WWW Concept, if it succeeded. I therefore rejected the Engs’ claim that they were entitled to an award of fees on a quantum meruit (at [86]–[87]).

I also rejected the Engs’ claim for management fees and expenses for Project Plaza, both in contract and on a quantum meruit (at [96]–[106]). I held that the Engs were risk runners with respect to Project Plaza also, and that they expected to be compensated for their services and expenses but never took steps to negotiate and agree that compensation with the Wees. I held further that the parties had no overarching agreement under which the Wees were to meet all of the expenses incurred by the Engs in connection with Project Plaza (at [98]–[99]).

Lastly, I rejected the Engs’ claim for breakup and facilitation fees. I found that the Wees never agreed to pay any such fees to the Engs (at [93]–[94]). I also rejected the Engs’ claim for approximately US$320,000 for work done administering the Wees’ other investments partly on the basis there was no evidence to suggest that any such work was actually done (at [107]).

Court of Appeal’s decision on appeal – Eng Chiet Shoong (CA)

There was no appeal against my decision on the Wees’ claim. But both parties appealed my decision on the Engs’ counterclaim. The Engs appealed my dismissal of their counterclaim. The Wees appealed my order that they pay management to the Engs fees for the Initial PE Funds beyond the date on which they demanded the transfer of the PE Funds.

The Court of Appeal allowed the Wees’ appeal on the counterclaim. It held that the Wees had to pay management fees only up to the date on which the Wees demanded the transfer, plus a period of reasonable notice. The court took into account the payments that the Wees had already made to the Engs between 2005 and 2009 and ordered the Wees to pay management fees for three further annual periods of 2009-2010, 2010-2011 and 2011-2012 (at [103]–[105]).

The Court of Appeal dismissed the Engs’ appeal on the counterclaim in all respects save in relation to Project Plaza. The Court of Appeal reversed my finding that Project Plaza fell within the WWW Concept (at [62]) and held instead that the Engs were entitled to be paid A$2m for work done on Project Plaza on a quantum meruit (at [86] and [92]).

In all other respects, the Engs’ appeal failed and the Court of Appeal left my findings in Cheong Soh Chin (HC) undisturbed (at [93]):

For the reasons set out above, we allow [the Engs’ appeal] in part inasmuch as the Engs are entitled to be compensated for work done with regard to Project Plaza (albeit not with regard to the [Additional PE Funds]). We decline to interfere with the Judge’s findings on the other aspects of the Engs’ counterclaim. [emphasis added]

Issue to be determined

The parties now come before me in the accounting phase of this action. At a pre-trial conference, the parties drew my attention to the preliminary issue set out at [2] above. I directed that that issue be heard before I heard evidence in the accounting phase.⁵

Each party couches the preliminary issue slightly differently.⁶ Counsel for the Wees couches it as follows:⁷

In view of the HC Judgment and the CA Decision stating that there was no overarching agreement for the [Wees] to pay all of CSP’s Project Costs and CSP’s Internal Costs (the “Findings”), are the [Engs] precluded from asserting to the contrary (or otherwise estopped from asserting that there was an overarching agreement for the [Wees] to pay the same)?

On the other hand, counsel for the Engs couches it as...