Eng Chiet Shoong and others v Cheong Soh Chin and others and another appeal

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 13 July 2016
• Neutral Citation: [2016] SGCA 45
• Plaintiff Counsel: Alvin Yeo SC, Koh Swee Yen, Jared Chen, Ho Wei Jie and Jill Ann Koh (WongPartnership LLP)
• Docket Number: Civil Appeals Nos 97 and 99 of 2014
• Date: 13 July 2016
• Hearing Date: 03 February 2016
• Subject Matter: Unjust enrichment,Contract,Implied contracts,Quantum meruit,Restitution
• Year: 2016
• Citation: [2016] SGCA 45
• Defendant Counsel: Philip Jeyaratnam SC, Foo Maw Shen, Daryl Ong, Chu Hua Yi, Charmaine Kong and Ooi Huey Hien (Rodyk & Davidson LLP)
• Court: Court of Appeal (Singapore)
• Published date: 19 July 2016

Andrew Phang Boon Leong JA (delivering the judgment of the court): Introduction

Under what circumstances will the law award compensation for work done by a particular party where there is no express contract? It is clear that, if an award is to be made, it must be premised on legal principle as opposed to some vague and general notion that it is simply just and fair to award such compensation. This ostensibly simple issue belies a number of difficult legal questions and even more difficult issues of application. As we shall see, the former is (fortunately) not the focus of the present appeal although the latter is. Indeed, the present appeal illustrates once again the crucial importance of a granular analysis of the relevant facts in order to arrive at a just and fair result that is simultaneously grounded in sound legal principle.

We pause to observe (parenthetically) that there has in fact been much academic writing on the legal principles relevant to this appeal. This stems – in large part – from an “industry growth” in the law of unjust enrichment. As this court observed in Wee Chiaw Sek Anna v Ng Li-Ann Genevieve (sole executrix of the estate of Ng Hock Seng, deceased) and another [2013] 3 SLR 801 (at [99]), “[t]he law of unjust enrichment is still developing and there remain … many unresolved issues (and even controversies)” (see also generally, from the Singapore perspective, Rachel Leow and Timothy Liau, “Unjust Enrichment and Restitution in Singapore: Where Now and Where Next?” [2013] Sing JLS 331 (“Leow & Liau”)). Whilst this is inevitable in a relatively fledgling area of the law, the court – in dealing with real facts and real parties – must nevertheless have a stable base of legal principles from which to apply the relevant law to the relevant facts of the case before it.

On occasion, though, where the law is unclear and must be resolved in order to resolve (in turn) the case at hand, the court will have to lay down a clear set of legal principles (which will guide the courts in future cases as well). It is on occasions such as these that relevant academic literature can – and often is – of considerable assistance to the courts.

As alluded to above, the present appeal – fortunately – does not require a resolution of thorny legal issues. However, as some of them were canvassed in the course of the parties’ written and oral submissions, we will touch briefly on them although we will not endeavour to resolve them until they are next raised directly before the court for decision.

The basic facts of the present case are relatively straightforward. Indeed, the case may not inaccurately be described as a sad tale of “fall outs”. There was, first, the financial fall out that resulted from the global financial crisis of 2008, which was a major factor in leading to the fall out between the parties who had hitherto been family friends. Put simply, the Engs and the Wees decided to combine their resources and expertise in order to bring to fruition a funds business concept, which was termed “the WWW concept” and was first mooted in early 2004. It was an ambitious project, which, if successful, would have yielded enormous financial profits. The Wees, who are high net worth individuals, were to provide the financial resources which the Engs would manage. The Engs comprised a husband and his wife. The husband, Eng Chiet Shoong (“ECS”) had considerable experience in fund management. The WWW concept sought to leverage his expertise and the Wees’ capital to the financial benefit of all concerned. To this end, ECS introduced in late 2004 or early 2005 five private equity (“PE”) funds to the Wees (“the initial PE funds”), who committed up to US$30m to these funds (the Engs point out that the actual commitment amount for the initial PE funds was over US$14m). During the subsequent months, the Wees committed another US$100m to ten PE funds (“the additional PE funds”). The Wees also took stakes in five direct investments, which included a hotel project (“Project Plaza”). Management fees calculated at 1.5% per annum on a US$30m commitment were set in respect of the initial PE funds (this yielded fees of US$450,000 per annum). There were no agreements with respect to management fees in relation to the additional PE funds as well as Project Plaza. The WWW concept ultimately failed to materialise, owing in part to the 2008 global financial crisis. Relationships between the parties frayed and deteriorated. By December 2011, the Wees were demanding the transfer of the investments to them. By February 2012, they pressed the Engs for proper accounting. The Wees filed a claim against the Engs, seeking a return of their investments with the latter. The Engs, on the other hand, filed a counterclaim against the Wees for management fees and expenses. The High Court judge (“the Judge”) held in favour of the Wees with respect to the main claim and dismissed the Engs’ counterclaim (see Cheong Soh Chin and others v Eng Chiet Shoong and others [2015] SGHC 173 (“the GD”)). The Engs filed the appeal in Civil Appeal No 97 of 2014 (“CA 97”), whilst the Wees filed the appeal in Civil Appeal No 99 of 2014 (“CA 99”) with regard to the timeframe during which they had to pay management fees in respect of the initial PE funds. So much by way of a brief snapshot of the proceedings. Before we turn to a more detailed rendition of the facts, it might be apposite to note that the issue which raises the most difficulties (and which was alluded to at the outset of this judgment) relates to CA 97 – in particular, what was the legal basis (if any) upon which a claim for management fees could be successfully claimed by the Engs (and this, in turn, raised the related (as well as important) issue as to the capacity in which the Engs had done the work and incurred the expenses which are the subject matter of their counterclaim against the Wees)?

Facts

The relevant facts have been helpfully set out in some detail by the Judge in the GD and we have therefore, inter alia, drawn from there for the purposes of the present judgment.

The Wees are members of a prominent banking family in Singapore. Cheong Soh Chin (“CSC”) is the mother of Wee Boo Kuan (“BKW”) and Wee Boo Tee (“BTW”). The Wees inherited considerable wealth from CSC’s husband, who passed away in 1992.

ECS’s wife, Sylvia Lee Siew Yuen (“Sylvia”), was the trusted private banker to CSC’s husband for many years. Over time, the Wees came to regard Sylvia as a trusted family friend. Even after CSC’s husband died in 1992, Sylvia remained in touch with the Wees. ECS came into the picture in 2003, when Sylvia introduced him to the Wees. At that time, ECS worked for the Government of Singapore Investment Corporation (“GIC”) as a senior vice-president of GIC Special Investments Pte Ltd, which is the arm of GIC that specialises in PE investments.

The Wee brothers, while already sophisticated investors, were nevertheless relative strangers to PE funds. ECS told them about the “obscene” profits that could be reaped from this asset class and obliged them when they wanted to learn more. In 2003 and 2004, ECS schooled the Wee brothers on PE funds, including how they were structured and how fund managers and investors made profits. He shared his expertise in investing in PE funds and told them of the close personal relationships he enjoyed with the world’s leading PE fund managers. He offered to introduce them to these managers so that they could invest directly in PE funds rather than through intermediaries, which would entail another layer of fees. Impressed by ECS’s knowledge and fascinated by the prospect of investing in PE funds, the Wee brothers came to see ECS as their trusted mentor in this field.

By early 2004, ECS hit upon the WWW concept. Under this funds business concept, ECS, BKW and BTW would set up their own investment fund, seeded with the Wees’ capital, find other investors for the fund, and collect management fees from running the investment fund. The WWW concept was essentially a way for the Wee brothers and ECS to combine the latter’s industry knowledge and personal relationships with the former’s considerable capital and appetite for risk to enable all parties involved to profit from PE investments both as a fund manager and as an investor. As the WWW concept was a long-term vision and due to their close personal relationship, the parties did not enter into any contractual arrangements governing their rights and obligations in connection with the steps they would take towards fulfilling the WWW concept and what would happen if it failed.

The first step was to build a name and track record for themselves in PE investments. To this end, the Wee brothers and ECS started to work towards setting up their own PE fund. The Wees were to supply all the necessary capital for the fund, while ECS would provide the industry expertise and relationships, and oversee as well as manage the fund’s investments. This initial fund was to be a fund of funds, ie, a fund that invested in other PE funds. Once the fund had a history of good performance, it would become the first fund under the WWW concept and the Wees would sell down part of their investment to external investors.

In late 2004 or 2005, ECS introduced BKW and BTW to investment opportunities in PE funds which were managed by some of the world’s leading fund managers. The Judge found that the Wees made an initial investment of US$30m in the initial PE funds and that over the subsequent months, the Wees committed another US$100m to the additional PE funds. After ECS left his former employer in August 2005, C S Partners Pte Ltd (“CSP”) was set up the following month by Sylvia to provide “integrated services to families on wealth protection and wealth creation”.

The Wees agreed to pay ECS an annual management fee that was calculated at 1.5% of an initial commitment amount of US$30m, or US$450,000, for...