Lai Meng v Harjantho Johnny

• Jurisdiction: Singapore
• Judge: Goh Joon Seng J
• Judgment Date: 30 June 1999
• Neutral Citation: [1999] SGCA 45
• Docket Number: Civil Appeal No 307 of 1998
• Date: 30 June 1999
• Published date: 19 September 2003
• Year: 1999
• Plaintiff Counsel: Appellant in person
• Citation: [1999] SGCA 45
• Defendant Counsel: Aqbal Singh (Chan Ng & Aqbal)
• Court: Court of Appeal (Singapore)
• Subject Matter: Whether shares accepted in exchange for profit sharing arrangement with company,Formation,Offer and acceptance of shares,Contract

Judgment:

TAN LEE MENG J

(delivering the grounds of judgment of the court): In this case, the respondent, who alleged that he loaned the appellant the sum of $40,000, sued the appellant to recover the said sum. The district judge dismissed the respondent`s claim but his decision was reversed by the learned High Court judge, who heard the respondent`s appeal against the decision of the district judge. We allowed the appellant`s appeal against the decision of the learned High Court judge and now give our reasons for doing so.

2.In October 1991, the respondent and his wife incorporated an exempt private limited company, Smart Car Rental Ltd (hereinafter referred to as `the company`). The respondent and his wife were the first directors and shareholders of the company. In 1992, the company employed the appellant as its general manager. The appellant was paid a monthly salary of $1,000 and a monthly transport allowance of between $800 and $1,200. In addition, he was entitled to a share of the company`s profits.

3.In early 1993, two of the respondent`s friends, Koh Soon Huat and Neo Keng Tiong, expressed an interest in investing in the company. For this purpose, the authorised share capital of the company was increased and 200,000 additional shares were issued at the price of $1 per share. Koh and Neo were allotted 100,000 and 40,000 of the newly issued shares respectively. The respondent`s wife was allotted 20,000 of the newly issued shares while the remaining 40,000 shares were allotted to the appellant.

4.All the 200,000 shares issued in 1993 were paid for. Koh paid for his own shares as well as those in the name of Neo. The district judge accepted that the appellant`s 40,000 shares had been paid for with money from the respondent`s wife`s account and that the money in question belonged to the respondent and his wife. The respondent contended that it was evident from the circumstances that he had loaned the appellant the sum of $40,000 to pay for the shares allotted to the appellant and that he was entitled to recover the said sum from the appellant, who resigned from the company in 1996.

5.The appellant denied that he had asked for or had received any loan from the respondent to finance the acquisition of his 40,000 shares. He claimed that he gave up his right to a share of the profits of the company in exchange for the 40,000 shares and that Koh and the respondent were to pay for the said 40,000 shares. He alleged that notwithstanding this arrangement, his 40,000 shares were in fact paid for by Koh alone. For good measure, he added that there was no requirement that he repay the sum of $40,000 or any part thereof to either the respondent or Koh.

6.The appellant conceded that he had no personal knowledge as to whether the 40,000 shares allotted to him had in fact been paid for by Koh. He had merely relied on what he had been told by Koh, namely, that Koh had paid for the 40,000 shares in question. The trial judge accepted that Koh did not pay for the appellant`s shares.

7.The appellant`s other line of defence rested on much firmer ground. It was not disputed that the appellant was offered the 40,000 shares on the basis that if he chose to become a shareholder, he would have to give up the profit sharing scheme, to which he was entitled as general manager of the company. The appellant claimed that it was understood that he would be given shares without having to pay for them in return for giving up his right to a share of the company`s profits. He said that he would not have accepted the respondent`s offer of shares in the company if he had to purchase the shares himself and give up his right to a share of the company`s profits.

8.The district judge accepted that it may have been beneficial for the appellant to acquire shares in the company. All the...