Jumabhoy Rafiq v Scotts Investments (Singapore) Pte Ltd

JurisdictionSingapore
JudgeChao Hick Tin JA
Judgment Date06 October 2004
Neutral Citation[2004] SGCA 48
Date06 October 2004
Subject MatterWhether trial judge correct in awarding costs of proceedings to respondent,Words and Phrases,Respondent's articles of association specifically providing for appellant's remuneration,Trial judge ordering Registrar to conduct inquiry as to expenses incurred by appellant,Remuneration,Directors,Meaning of "indemnify for ... costs and expenses",Respondent conceding liability for expenses properly incurred by appellant,Whether such agreements amounting to undertaking to remunerate appellant on time-costs basis,Civil Procedure,Costs,Whether appellant nevertheless entitled to remuneration on quantum meruit basis,Quantum meruit,Implied contracts,Appellant director of respondent company,Respondent passing resolutions and issuing indemnities purporting to indemnify appellant for costs and expenses incurred,Companies,Contract,Whether covering appellant's remuneration
Docket NumberCivil Appeal No 15 of 2004
Published date11 October 2004
Defendant CounselHarish Kumar and Linda Ong (Engelin Teh Practice LLC)
CourtCourt of Appeal (Singapore)
Plaintiff CounselTan Bar Tien and Winston Quek Seng Soon (B T Tan and Co)

6 October 2004

Chao Hick Tin JA (delivering the judgment of the court):

1 This was an appeal by a director of a company against a decision of the High Court refusing his claim for remuneration: see Scotts Investments (Singapore) Pte Ltd v Jumabhoy Ameerali [2004] SGHC 20. We heard the appeal on 25 August 2004 and dismissed it with costs. We now give our reasons.

The background

2 The respondent, Scotts Investment (Singapore) Pte Ltd (“SIS”), a company then under compulsory liquidation, instituted Suit No 736 of 2002, against, inter alia, the appellant, Rafiq Jumabhoy (“RJ”), for breaches of duty as a director of SIS. The other two defendants to the action were Ameerali R Jumabhoy, the father of RJ, and Iqbal Jumabhoy, the brother of RJ. In turn, RJ counterclaimed for remuneration amounting to some $916,275 allegedly due to him from SIS, as well as for the reimbursement of expenses totalling $164,034.68, which RJ asserted that he had incurred on account of SIS. Eventually, the claim of SIS against RJ and the other two defendants was discontinued. What remained was the counterclaim of RJ.

3 The counterclaim was in respect of work done and services rendered by RJ to SIS as well as expenses incurred by him on account of SIS pursuant to three resolutions passed by the board of SIS, ie, the resolutions of 27 July 1996, 6 August 1996 and 18 June 1997, and the written indemnities dated 30 June 1997 and 9 October 1997 given by SIS to RJ.

4 SIS was incorporated in May 1991 to hold the Jumabhoy family’s stake in Scotts Holding Ltd, a public listed company. One of SIS’s main subsidiaries was Lion City Holdings Pte Ltd (“LCH”). Besides the persons already mentioned above, the other members of the Jumabhoy family which we ought to identify for this case are Yusuf Jumabhoy (“YJ”) and Mustafa Jumabhoy (“MJ”), who are the brothers of ARJ and uncles of RJ; and Assad Jumabhoy (“AJ”), a brother of RJ.

5 By the mid-1990s, the members of the Jumabhoy family, including grandfather Rajabali Jumabhoy, were involved in protracted legal proceedings brought about by a certain financial crisis in SIS. Banks which had granted facilities to SIS became alarmed. The members of the Jumabhoy family were concerned that the banks might act against SIS.

6 It was during that period that the resolutions were passed by the board of SIS empowering YJ and RJ to carry out certain acts on behalf of the company. YJ and RJ were expected to deal with the banks, which RJ did. We would observe that in undertaking the tasks, RJ would also be protecting his own interest in SIS. As the counterclaim of RJ rested entirely on the resolutions passed and the indemnities given, it is necessary that we set out the material parts of those documents in extenso:

27 July 1996 resolution

IT WAS RESOLVED THAT without prejudice to their respective rights and the right of the other plaintiffs and/or defendants [sic] under the various suits which have been filed and further reserving the rights of some of the Company directors challenging the legality of the investment in LCH and the guarantees provided to LCH by the Company pursuant to Article 112 of the Articles of Association of the Company Mr Yusuf Jumabhoy and Mr Rafiq Jumabhoy be appointed from among the directors of the Company to review the Company’s investment in LCH to determine the steps (if any) to be taken by the Company to safeguard the Company’s investment in LCH and all amounts owing to the Company or guaranteed by Company for the debts of LCH and to exercise all the powers of the Board in connection therewith and all things incidental thereto including without limitation:

(a) deciding all questions, taking all steps required and approving all matters to give effect to such steps as they may agree to take vis-à-vis LCH pursuant to their review;

(b) obtaining such reports or other data as they may deem necessary to assist them in their review and in determining the steps to be taken vis-à-vis LCH;

(c) instructing M/s Rajah & Tann as solicitors for the Company, and any other professional advisers (including auditors) or any third party on all matters relating to LCH and to settle the terms of their appointment; and

(d) exercising all discretion and doing all acts and things necessary or expedient to give effect to all matters referred to in this resolution.

and the Company shall indemnify Mr Yusuf Jumabhoy and Mr Rafiq Jumabhoy for all costs and expenses incurred by them (or each of them) personally in respect of their appointment.

That M/s Rajah & Tann be appointed as the Company’s solicitors to act for the Company in relation to all matters regarding LCH …

[emphasis added]

[The 6 August 1996 resolution was in all material respects similar to that dated 27 July 1996 except that this related to SIS’s investment in SHL.]

18 June 1997 resolution

IT WAS RESOLVED that in consideration for his taking action for the recovery of the assets of the company, Mr Rafiq Jumabhoy be fully indemnified for all costs and expenses incurred and against all legal liability as far as permitted by law with regards to LCH, its subsidiaries and associates and in the pursuit of any action to be taken on behalf of SIS/LCH as advised by the company’s solicitors. [emphasis added]

30 June 1997 indemnity

In consideration of your agreeing to reasonably assist (at the cost and expense of the relevant company and/or ourselves) (1) in the recovery of the assets of SIS, Lion City Holdings Pte Ltd (LCH) and/or its subsidiaries and associated companies, and including, without limitation, Scotts Weitnauer Retailing Pte Ltd, Cost Plus Pte Ltd, Connoisseurs (Private) Limited, Landberg Holdings Pte Ltd and Richberg Holdings Pte Ltd (“LCH Group”) (2) the prosecution of any claim which any company of the LCH Group may have and/or (3) any reasonable action in connection with the affairs of any company of the LCH Group as may be advised by the company’s solicitors, we agree to indemnify you and keep you indemnified at all times, to the extent permitted by law, out of our assets against all costs and expenses and liabilities incurred or suffered by you in connection with any of the foregoing, until such time as this indemnity is revoked in writing. [emphasis added]

9 October 1997 indemnity

In consideration of having agreed to our request to undertake such duties as Nominee Director of Rosebury Holdings Limited, a New Zealand incorporated Company, we … will indemnify you, and keep you indemnified against all claims, demands, and payments for which you may in the course of or arising out of such service render yourself liable and against all actions, suits, proceedings, claims, demands, costs, expenses and all other liabilities whatsoever, which may be taken or made against you in the course of arising out of such service. [emphasis added]

7 We would add that the appellant also relied on some prior correspondence with YJ to show the setting in which the resolutions were adopted. Apparently, being concerned that he would have to spend some time on the affairs of SIS, on 14 May 1996, while he was in South America, RJ wrote to YJ and raised the question of his remuneration. In this letter, RJ offered his services to SIS and asked for a fixed monthly pay of $25,000. YJ did not reply. RJ claimed that YJ agreed to the proposal contained in the letter. RJ said that YJ had assured him that YJ would procure SIS board resolutions to ensure that RJ would obtain payment for his time spent and expenses incurred. However, this was refuted by YJ who told the court that the proposal in the letter was, to quote him, “nonsense”. In this regard we should perhaps mention that a letter dated 18 May 1996 from RJ to YJ was also produced to court wherein RJ referred to a conversation he had with Mr Andrew Smith, an investment consultant of SIS, where he told Mr Smith that he (RJ) was still awaiting a reply to his letter of 14 May 1996.

The decision below

8 It would be noted that the basis of RJ’s claim was not for a fixed monthly sum, as claimed in the letter of 14 May 1996, but on a time-costs basis. While the judge was clearly aware that the dictionary meaning of “costs” could cover time costs in a “wide, literary and even economic sense”, he found that the words “costs and expenses” in the first two resolutions meant that the directors would be covered for all out-of-pocket expenses, but not a director’s remuneration which had to be specifically approved by the board. Neither was a director entitled to remuneration based on quantum meruit. In this regard, he relied on the case of In re Richmond Gate Property Co Ltd [1965] 1 WLR 335 (“Re Richmond Gate”).

9 The trial judge accepted YJ’s evidence that YJ did not agree to RJ’s proposal in the letter of 14 May 1996. Neither did the judge accept RJ’s arguments that the board had, by virtue of the resolutions, agreed to pay RJ a remuneration for his time spent in the affairs of SIS. The judge also held that as the appellant had contended that the words “costs and expenses” were intended by members of the board to cover remuneration as well, then the appellant should have adduced evidence from the directors who partook in the deliberations on the resolutions to substantiate the appellant’s claim that those words were intended to have a wider sense. No such evidence was forthcoming.

The arguments of the appellant

10 Before us the main argument advanced by RJ was the same as that canvassed in the court below, namely, that the company by its resolutions agreeing to indemnify “Mr Yusuf Jumabhoy and Mr Rafiq Jumabhoy for all costs and expenses incurred by them (or each of them) personally in respect of their appointment”, had thereby agreed to pay RJ for his time costs. The time costs were no less costs incurred by RJ and they should be reimbursed by the company.

11 RJ maintained that the resolutions be viewed against the backdrop that, on 14 May 1996, RJ had written to YJ asking for a fixed sum remuneration and there had...

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