Chua Kim Leng (Cai Jinling) v Phillip Securities Pte Ltd

• Jurisdiction: Singapore
• Judge: Andrew Ang J
• Judgment Date: 28 November 2006
• Neutral Citation: [2006] SGHC 221
• Court: High Court (Singapore)
• Year: 2006
• Published date: 30 November 2006
• Plaintiff Counsel: Cheah Kok Lim (Ang & Partners)
• Defendant Counsel: Benjamin Sim and Tan Beng Swee (Shenton LLC)
• Subject Matter: Contract,Contractual terms,Whether contract vague and ambiguous,Whether contract void for uncertainty,Intention to create legal relations,Whether email exchange between the parties reflected an intention to enter into legal relationship
• Citation: [2006] SGHC 221

28 November 2006

Andrew Ang J:

1 The plaintiff was employed as a dealing director with the defendant, a securities company which is a member of the Singapore Exchange Securities Trading Ltd (“SGX”).

2 The plaintiff’s claim against the defendant was for commission due to her, that being an agreed share of the fees earned by the defendant in respect of a share offer by Tiong Woon Corporation Holding Ltd (“TWC”) underwritten by the defendant. Details of the arrangement between the parties are set out later herein.

3 Prior to her employment with the defendant, the plaintiff was a vice-president with OCBC Securities Pte Ltd (“OCBC Securities”), another securities company. The plaintiff was asked to join the defendant by a former colleague, one Lim Han Boon, who had himself moved from OCBC Securities and joined the defendant as a dealer in April 2004.

4 The plaintiff averred that it was an express term of her employment that the defendant would extend to her a loan of $160,000 (“the loan”) to pay moneys owing from her to OCBC Securities. As evidenced by a promissory note dated 12 August 2004, the plaintiff obtained the said loan of $160,000 from the defendant’s associate company, Phillip Credit Pte Ltd (“Phillip Credit”), presumably through arrangements made by the defendant as the plaintiff did not apply to Phillip Credit for such a loan.

5 According to the defendant, the plaintiff needed the loan as two of her customers at OCBC Securities had incurred contra or trading losses for which she had to indemnify OCBC Securities. The plaintiff claimed that the loan was to be set off from commission or moneys earned by her whilst working for the defendant. However, the defendant denied that there was any agreement for the loan to be paid from such commission or moneys earned by the plaintiff. Instead, the defendant alleged that the plaintiff promised and undertook to pay $5,000 per month as her two customers at OCBC Securities would pay her a combined sum of $5,000 per month.

6 That aside, as noted above (at [2]), the plaintiff claimed that she had entered into an agreement with the defendant to share the commission to be earned by the defendant in respect of a share offer by TWC which offer was underwritten by the defendant. The plaintiff’s case was that the terms of the agreement were evidenced by an e-mail and the attachment thereto sent by the defendant’s senior manager, one Melvin Yong Heng Yew (“Yong”), to the plaintiff on 4 January 2005 (“4 January e-mail”) and another e-mail Yong sent her on 5 January 2005 (“5 January e-mail”). According to the plaintiff, those e-mails were the culmination of a series of e-mail exchanges between her and Yong as to the TWC deal since December 2004.

7 The plaintiff claimed that the defendant agreed, as evidenced by the terms of agreement set out in the 4 January e-mail attachment prepared by Yong, that:

(a) The plaintiff would be paid a commission for the introduction of the client, TWC, and for securing the offer of the shares.

(b) There would be offered, by way of a preferential pro rata placement, approximately 80 million shares in TWC valued at approximately $23.446m at 30 cents per share.

(c) One of the controlling shareholders of TWC, Ang Choo Kim and Sons, would take up $10m worth of shares amounting to 42.65% of the shares that were to be offered.

(d) The rest of the $13.446m worth of shares would be offered to existing shareholders and underwritten by the defendant.

(e) In the event the defendant was obliged to take up the unsubscribed portion, the plaintiff would place them out to third parties. If the plaintiff was unable to fully place out the unsubscribed portion, the plaintiff would indemnify the defendant for any losses suffered by the defendant in having to close out the open position.

(f) The fee that the defendant would earn from the preferential offer exercise would be 2.9% of the $23.446m (dollar value), amounting to $680,000.

(g) Of the fee referred to in (f), the plaintiff would be entitled to 63%, ie, $430,000 whilst the defendant would receive $250,000.

8 In or about February 2005, SGX informed TWC’s lawyers that they should proceed with the offer of shares as a rights issue rather than as a preferential pro rata share offer. Thereafter followed various attempts by TWC to vary the structure of the offer so that it could still proceed with a placement. It is unnecessary to detail the various attempts and it suffices to say that in mid-March 2005, the SGX reiterated that the preferential offer to shareholders was essentially a rights issue and had to proceed as such. Accordingly, it was finally decided that the offer would proceed as a rights issue. The principal difference between a rights issue and the intended preferential pro rata offer to shareholders was that in a rights issue in accordance with SGX rules, shareholders could renounce their entitlement thereunder in favour of a third party.

9 On 18 April 2005, the defendant entered into an underwriting agreement with TWC in relation to the latter’s rights issue. Under that rights issue exercise, 112,525,470 shares were to be offered by TWC to its shareholders at an issue price of 21 cents for each rights share on the basis of one rights share for every two existing shares. Ang Choo Kim & Sons who had an interest in 42.7% of the issued and paid up capital of TWC gave an irrevocable undertaking to take up all their entitlement under the rights issue. The defendant agreed to underwrite the remaining rights shares.

10 Under the underwriting agreement, commission was reduced to $520,000 from the $680,000 first proposed in January 2005 partly because it was agreed between the defendant and TWC that another financial institution, Hong Leong Finance Ltd, would be appointed manager of the rights issue in place of the defendant. The rights issue exercise was completed on 5 August 2005, all rights shares having been fully subscribed.

11 While the structure of the TWC share offer was evolving, changes were also taking place in the plaintiff’s salary. Her initial salary was progressively reduced from $5,000 per month to $3,000 per month, to $1,000 per month and finally to $100 per month on 1 May 2005 which was less than two weeks after the underwriting agreement with TWC was signed on 18 April 2005. According to the defendant, this was because of the plaintiff’s poor performance. The plaintiff, however, contended that after the TWC deal had been secured, the defendant wanted to get rid of the plaintiff as they had no further use for her.

12 The plaintiff’s employment was terminated by the defendant on 27 June 2005 with immediate effect. The defendant’s entitlement to do so was a matter of contention, but that is not material to the present case. The termination was followed by another notice by the defendant ceasing their sponsorship of the plaintiff as a trading representative.

13 According to the plaintiff, TWC was scheduled to pay the defendant the commission in the sum of $520,000 on 11 August 2005. On 12 August 2005, she received a message from Yong to attend a meeting at the defendant’s premises. At the meeting on the same day, she was told she would be paid a sum of $177,847.76 and that the sum would be offset against the loan she had taken. (I should perhaps add that the actual sum offered was $10,000 more. That additional amount, as it later emerged from the evidence, represented a referral fee as to which there appeared to have been no agreement between the parties. Presumably, this was why the plaintiff left it out from her present claim.) At the meeting, Yong offered no explanation as to how the figure of $187,847.76 was arrived at. The plaintiff did not accept the figure as correct. On 15 August 2005, Yong telephoned her to say that the defendant’s managing director, one Lim Wah Tong (“Lim”), wanted her to either accept the sum of $177,847.76 or otherwise state her stand.

14 On 18 August 2005, the plaintiff wrote to the defendant, asking for the sum of $177,847.76 to be offset against the loan but also asked to be paid the difference between that and the sum of $327,600 (that being 63% of the total commission of $520,000 earned by the defendant) to which the plaintiff claimed to be entitled. In the event, the defendant failed to pay any part of the $327,600 either towards offsetting the loan or directly to the plaintiff.

15 On 2 September 2005, the solicitors for Phillip Credit sent the plaintiff a letter of demand for repayment of the loan and interest. This was followed by a statutory demand for the loan and interest under the Bankruptcy Act (Cap 20, 2000 Rev Ed).

16 The plaintiff commenced this action on 16 September 2005 and on 27 September 2005 applied to set aside the statutory demand. She succeeded in doing so and Phillip Credit’s appeal against the setting aside was dismissed by Belinda Ang J with costs.

17 The plaintiff did not deny that she was liable to repay the loan. She claimed, however, that in accordance with the agreement she had with the defendant, part of the commission she had earned from the TWC deal should be set off against the loan.

18 The plaintiff claimed that even after the moneys advanced by the defendant to her were set off, there would still be a balance of $153,160.58 (ie, $327,600 less $174,439.42, the latter sum being the loan payable with interest computed at 9% as at 11 August 2004) due to the plaintiff from the defendant. The plaintiff claimed this sum in the proceedings before me. In the alternative, in the event that I found that the plaintiff was not entitled to set off the outstanding amounts due under the loan against the moneys due to her from the defendant, she claimed the full sum of $327,600 by way of commission from the defendant for introducing TWC as a client. Alternatively, the plaintiff claimed from the defendant commission in sum of $520,000 or such sum as the court deemed just or reasonable remuneration.

Sharing of commission

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