Lee Chee Wei v Tan Hor Peow Victor

• Jurisdiction: Singapore
• Judgment Date: 16 April 2007
• Date: 16 April 2007
• Docket Number: Civil Appeals Nos 88 and 91 of 2006
• Court: Court of Appeal (Singapore)

Lee Chee Wei

Plaintiff

and

Tan Hor Peow Victor and others and another appeal

Defendant

[2007] SGCA 22

Andrew Phang Boon Leong JA

,

V K Rajah JA

and

Lee Seiu Kin J

Civil Appeals Nos 88 and 91 of 2006

Court of Appeal

Civil Procedure–Bifurcation of proceedings into liability and assessment of damage phases–Importance of applying early–Either party can apply–Civil Procedure–Pleadings–Failure to expressly plead assessment of damages–Relevance of parties' conduct of case–Whether court having discretion to order assessment of damages–Contract–Contractual terms–Rules of construction–“Entire agreement” clauses–Application and effect of such clauses–Contract–Contractual terms–Rules of construction–When factual matrix may be relevant–Contract–Remedies–Damages–When damages awarded in lieu of specific performance–Contract–Remedies–Specific performance–Contract for sale of shares in company pursuing public listing–Whether specific performance appropriate remedy–Circumstances in which specific performance will be granted

In February 2005, the plaintiff entered into an agreement to sell his shares in Distribution Management Solutions Pte Ltd (“DMS”) (the “Agreement”), a subsidiary of Accord Customer Care Solutions Ltd (“ACCS”), to the fourth defendant for $4.5m. The Agreement expressly provided for the parties' position if listing did not take place and further contained an “entire agreement” clause.

Shortly thereafter, the Commercial Affairs Department began an investigation into the affairs of ACCS and some of its senior officers, which included the first, third and fourth defendants. As a result, the prospective listing plans of DMS were abandoned, and the fourth defendant refused to complete the agreement. The first, third and fourth defendants were subsequently convicted and sentenced to imprisonment for engaging in a conspiracy to cheat and the falsification of documents. The plaintiff commenced proceedings against all four defendants for breach of the Agreement, alleging that the fourth defendant entered into the Agreement on behalf of all the defendants.

The defendants argued that the plaintiff was not entitled to enforce the Agreement on the grounds that: (a) the failure to list DMS on the Main Board of the Singapore Exchange, a contingent condition of the Agreement; (b) the failure to provide a resolution of the board of directors of DMS approving the registration of the transfer of the shares as required by the Agreement; and (c) that the failure to list DMS frustrated the purpose of the Agreement.

The trial judge rejected the defendants' arguments and found that the first and third defendants were the principal parties interested in the purchase of the plaintiff's shares and accordingly held the first, third and fourth defendants liable for breach of the Agreement. Nonetheless, the trial judge ordered nominal damages of $300 and disallowed the plaintiff's claims for specific performance or damages in lieu of specific performance due to the failure by the plaintiff to plead for damages “to be assessed”. A counterclaim by the fourth defendant for repayment of the sum of $750,000 paid as an initial deposit under the agreement was also allowed on the basis that the plaintiff was not entitled to retain the money paid unless the Agreement specifically provided that it was paid as a non-refundable deposit or if the plaintiff actually performed his part of the bargain. The plaintiff was dissatisfied and appealed on the grounds: (a) that specific performance of the sale and purchase agreement for shares in a public company should have been ordered; (b) if not, damages in lieu of specific performance and the assessment should have been granted; and (c) that the counterclaim for payment of the sum of $750,000 should have been allowed. The fourth defendant cross-appealed in relation to the finding of liability.

Held, allowing the plaintiff's appeal in part and dismissing the fourth defendant's cross-appeal with costs:

(1) Whether listing was or was not a contingent condition of the Agreement should primarily be determined by reference to the plain terms of the Agreement. The fact that the prospect of non-listing was more than a conceivable possibility and yet was not expressly excluded by the Agreement was most pertinent. It was one thing to suggest that the court should contemplate the “factual matrix” in order to assist in the interpretation of a document, but entirely another to refer to extrinsic evidence in a contrived and misguided attempt to persuade the court to “infer” a contingent condition that was clearly inconsistent with the express terms of the contract: at [17], [20] and [21].

(2) The effect of an entire agreement clause was essentially a matter of contractual interpretation and necessarily depended upon its precise wording and context. Generally, such clauses were conducive to certainty as they defined and confined the parties' rights and obligations within the four corners of the written document, thereby precluding any attempt to qualify or supplement the document by reference to pre-contractual representations. However, in so far as contracts were not interpreted in a vacuum, objective facts could potentially assist in the interpretation of ambiguous terms. Entire agreement clauses would usually not prevent a court from justifiably adopting a contextual approach in contract interpretation. Such clauses had little bearing on textual or interpretative controversies as to the meaning of particular words or terms in contracts: at [25] and [41].

(3) The contention by the defendants that there was a breach of a promissory condition that the plaintiff would obtain a resolution approving the transfer of the shares from DMS' board of directors was entirely without merit: at [43] to [45].

(4) The failure to list did not frustrate the Agreement. The failure to list could not in such a factual matrix exempt the defendants from their obligation to purchase the shares. To establish that a frustrating event had occurred was always an uphill task and rightly so, in order that legitimate commercial expectations might be preserved and protected. Imprudent commercial bargains could not be aborted or modified merely because of an adverse change in circumstances: at [47] and [48].

(5) The trial judge's refusal to make an order for specific performance was affirmed. While the subject matter of the contract might readily lend itself to an order of specific performance, the more pertinent issue in every case was whether specific performance constituted the just and appropriate remedy in the circumstances. Notwithstanding that the quantum of damages seldom affected the right to specific performance, based on the facts, damages were sufficient to restore the plaintiff to the position he would have enjoyed had the contract been performed: at [55] and [56].

(6) An assessment of damages in lieu of specific performances was appropriate in the circumstances. A failure by the plaintiff to plead for damages “to be assessed” did not per se impair the discretion to order an assessment of damages. The words “to be assessed” were in effect superfluous given that any claim for damages must necessarily be assessed (unless otherwise agreed) whether it involved a simple uncontroversial line item or multiple items. On the facts, such as assessment would not prejudice the defendants to an extent that could not adequately be compensated by costs: at [62] and [80].

(7) Whether the sum of $750,000 was recoverable by the party in default if the contract was discharged by reason of his breach depended upon the construction of the contract. In the absence of any specific provision, the recoverability of the $750,000 hinged on the nature of the payment as evinced by the intention of the parties expressed by the Agreement. Based on the facts, the sum of $750,000 was likely to have been an advance payment which was prima facie immediately repayable: at [85], [88] and [89].

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Cropper v Smith (1884) 26 Ch D 700 (refd)

Dies v British and International Mining and Finance Corporation Limited [1939] 1 KB 724 (refd)

Duncuft v Albrecht (1841) 12 Sim 189; 59 ER 1104 (refd)

Exklusiv Auto Services Pte Ltd v Chan Yong Chuan Eric [1995] 3 SLR (R) 728; [1996] 1 SLR 433 (distd)

Fraser & Neave Ltd v Yeo Hiap Seng Ltd [1988] 2 SLR (R) 407; [1988] SLR 96 (refd)

Ho Kian Siang v Ong Cheng Hoo [2000] 2 SLR (R) 480; [2000] 4 SLR 376 (refd)

Hong Fok Realty Pte Ltd v Bima Investment Pte Ltd [1992] 2 SLR (R) 834; [1993] 1 SLR 73 (refd)

Howe v Smith (1884) 27 Ch D 89 (refd)

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Inntrepreneur Pub Co v East Crown Ltd [2000] 2 Lloyd's Rep 611 (folld)

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Johnson v Agnew [1980] AC 367 (refd)

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Koek Tiang Kung v Antara Bumi Sdn Bhd [2005] 4 MLJ 525 (refd)

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Lim Lay Bee v Allgreen Properties Ltd [1998] 3 SLR (R) 1028; [1999] 1 SLR 471 (refd)

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McDonald's Hamburgers Limited v Burgerking (UK) Limited [1987] FSR 112 (folld)

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