Hon Chin Kong v Yip Fook Mun and another

• Jurisdiction: Singapore
• Judge: Kannan Ramesh J
• Judgment Date: 09 November 2017
• Neutral Citation: [2017] SGHC 286
• Plaintiff Counsel: Lee Chiat Jin Jeffrey and Yap Ee Lin Felicia (Lee Chai & Boon LLP)
• Date: 09 November 2017
• Docket Number: Suit No 576 of 2015
• Hearing Date: 30 March 2017,09 May 2017,23 May 2017,29 March 2017,06 September 2017,27 June 2017,28 March 2017,31 March 2017
• Subject Matter: Remedies,Acceptance,Formation,Penalties,Part payments,Variation,Deposits,Contract
• Published date: 16 November 2017
• Defendant Counsel: Tan Teng Muan and Loh Li Qin (Mallal & Namazie)
• Court: High Court (Singapore)
• Citation: [2017] SGHC 286
• Year: 2017

Kannan Ramesh J: Introduction

In Suit No 576 of 2015, the plaintiff sought return of $300,000 that he had paid to the defendants in September 2013. The facts of the case were for the most part undisputed. The outcome turned on whether the parties’ negotiations amounted in law to a binding contract, the terms of that contract, and the interesting legal question of whether a contractual deposit is subject to the rule against penalties (“the penalty rule”). This is a question of law that has thus far not been fully explored in Singapore.

I issued brief oral grounds for my decision to dismiss the suit on 6 September 2017. I had indicated then that I would issue full grounds of decision. These are my full grounds.

Facts

The plaintiff is a Singapore citizen residing in Brunei. The first defendant, a Singapore citizen, is married to the second defendant, a Singapore Permanent Resident. The defendants reside in Thailand.

At the material time, the first defendant worked for Gallagher Security Management System (“Gallagher”). The defendants were the sole directors and shareholders of a company, CDX Singapore Pte Ltd (“CDX”), incorporated by the first defendant in Singapore on 3 July 2002 to supply and maintain Gallagher security products. The plaintiff operated two Brunei companies, one of which was an appointed Gallagher Access Control Sales, Installation & Service Partner in Brunei. The first defendant got to know the plaintiff in 2003 through his role as Gallagher’s representative.

In 2008 or 2009, the plaintiff made overtures about acquiring the defendants’ shareholding in CDX. He sent representatives to inspect CDX’s books and records, but ultimately chose not to proceed with the transaction. On 7 May 2013, the plaintiff e-mailed the first defendant saying that he was considering buying CDX again because his children were moving back to Singapore for National Service in September. He also confirmed that he intended to acquire the mortgage-free property owned by CDX and used as its office, 7030 Ang Mo Kio Avenue 5, #02-41 Northstar, Singapore 569880 (“the office property”). The plaintiff suggested that they “round up the deal by this month” (ie, May), which suggested an urgency on his part to complete the transaction.

On 10 May 2013, the first defendant sent the plaintiff an e-mail with the subject “Your offers”. He stated:

Hi Lawrence,

Let’s not waste time. [T]otal package sales including office will be S$850k nett.

…

I will let it to you and if you are keen at the figures I proposed, please let me know as this figures have a validated dates cause the property market is going up like crazy……

The plaintiff replied the next day. He amended the e-mail subject to “RE: Your offers (ACCEPTED)” and wrote:

Kelvin,

I am glad with your reply. Let’s round up the figure at S$800k (Singapore Dollars : Eight Hundred Thousand only) and deemed this as done deal. Let’s open a champagne to celebrate this occasion in Singapore…when is the best time to do the paperwork ?

[emphasis in original]

The first defendant replied on 20 May 2013:

Hi Lawrence,

The price your offer is too far below my expectations …

Let’s not waste time, one final price, $828k. This is the very best that I can offer …

CDX FY end on end June and me and my wife will be in Singapore during last week of June to settle the account, if you are interested, we can meet over in Singapore to clear at the transactions and please prepare cash or bank cheque or bank draft … and we can go to the secretary office and bank to do the transaction. Kindly note that we will only be Singapore for 4 working days and need to settle very things [sic] for the whole FY account. ... Let me know what’s your thinking.

Best Regards …

On 24 May 2013, the plaintiff sent the first defendant two text messages in succession stating:

Ok. Confirned [sic] la. $828k. Please email me the audited acct for June 2012 last year and the old property purchase agreement for my perusal.

I need to prepare alot of things for this payment. Thanks bro… at least we sealed this deal. Ended all happy. I m [sic] very glad.

The first defendant e-mailed the plaintiff on 25 May 2013, stating:

Hi Lawrence.

Happy with your acceptance to purchase at S$828K for the total office and company.

…

I will be departing to Brunei on 24th June and return to Singapore on 26th June … can you join me to Singapore for settling of all the documents as I will depart Singapore on 1st July. We only have a few days to clear all important document’s first where we need to go to the secretary office for the transaction (together with your payment) and than [sic] follow by the bank to have your name & signature. Thereafter, I need to transfer all the E-filing name and passwords to you. You will need to get ready your Sinpass [sic] login name and password … CDX email account will also be transfers [sic] to you too. To straighten all things, as mentioned by you, we will be clear of all dollars and cents during end of June where any balance for the amount billed base on work completions before 1st July 2013 will belongs to me and any new invoices starting from July’13 onwards will be yours. I will pay for CDX income tax for FY ending June 2013 to you first where you will pay to the government one year later.

…

See you next month.

[emphasis added]

CDX’s unaudited accounts for financial year 2012 were attached to the e-mail. The targeted completion of the transaction was therefore end June 2013, during the defendants’ visit to Singapore.

Thereafter, the parties began making arrangements to hand over CDX. As proposed in the first defendant’s e-mail of 25 May 2013, the plaintiff met the defendants in Brunei from around 24 to 26 June 2013 and again in Singapore on or around 28 June 2013. On 27 and 28 June 2013, the first defendant told one Lorraine Lee (“Ms Lee”) from BSP Management Pte Ltd, CDX’s corporate secretarial service providers, that he and the second defendant would be resigning and transferring all the shares in CDX to the plaintiff. He asked Ms Lee to prepare the necessary documents, as well as “all FY ending documents”, for them to sign on 28 June 2013. He also instructed Ms Lee to arrange for him to “clear off” the accounts receivable and accounts payable of CDX so that the company’s financial accounts would be reset when the plaintiff took over as director. The parties signed the following documents, prepared by Ms Lee, on 28 June 2013: the plaintiff’s consent to be appointed director of CDX; two directors’ resolutions signed by the defendants, to appoint the plaintiff as sole director of CDX and authorising the transfer of their shares to the plaintiff; letters of resignation by the defendants as directors of the company; a directors’ resolution signed by the plaintiff and defendants, accepting with immediate effect the defendants’ resignation as directors; two share transfer forms, by which the defendants transferred their shares in CDX to the plaintiff; and a directors’ resolution signed by the plaintiff authorising him as the sole mandate holder for CDX’s bank account with UOB Bank. These steps were consistent with the 25 May 2013 email.

However, payment was not forthcoming. The plaintiff apparently requested an extension of time to complete the sale by 12 July 2013, a Friday. On 3 July 2013, the first defendant sent the plaintiff a WhatsApp message saying, “Have your bank settled the transfer? Don’t forget that it will takes [sic] 5 working days to clear large sum and the dead line is next Friday.” He again asked for updates “[u]rgently” on 8 July 2013. The plaintiff replied that same day in a lengthy e-mail, in which he asked the first defendant to bear with him “for a little longer [than] that 14 days window as discussed”. He assured the first defendant that he would “definitely” make the transfer “sometime these few days”. On 19 July 2013, the plaintiff sought to defer payment to 1 October as he was still “waiting for the funds”. Notably, there was no assertion by the plaintiff that he was not under a contractual obligation to make payment. The plaintiff was clearly seeking more time to pay.

On 20 July 2013, the plaintiff sent the first defendant the following WhatsApp messages:

I m proposing to effect the payment into 3 times. 1 st 300, 2nd 300 and 3rd 228. [U]pon receiving your 1st payment, I also give u a letter to allow u to grand [sic] me the transfer of the signed cdx document for the property for the purpose of maximum re financing it. … The mortgage payment upon receiving shall be for your 3rd payment. After that, u pass the signed documents to me . The 2nd payment shall be anytime in between now to sept.

The 1st and 2nd payments is the maximum I can stretch, shall be from my bank in brunei. This is my do able [sic] realistic option.

The first defendant replied some hours later, saying:

Can email us your letter to read through the contents first? My wife indicate that the the [sic] first payment can be act as an [sic] down payment deposit, 2nd payment she will transfers all her shares to your name first and final payment will be all my shares to your name. … How does this sound?

Also need a final letter to indicate the last payment schedule and time frame.

[emphasis added]

Fifteen minutes later, the plaintiff replied, “Can and accepted. The letter should be ready not later than next week” [emphasis added].

On 29 July 2013, the first defendant received an e-mail from Ms Gina Fe A Maratas (“Ms Maratas”), the plaintiff’s accountant, attaching what Ms Maratas described as a “letter for CDX purchase agreement”. I hereafter refer to this as “the Purchase Letter”. This was a two-page document, apparently drafted by the plaintiff himself, broadly setting out the process for taking over CDX. The document was divided into Part 1, Part 2 and Part 3, corresponding to the three payments to be made by the...