Lee Chee Wei v Tan Hor Peow Victor and Others and Another Appeal

• Jurisdiction: Singapore
• Judge: Lee Seiu Kin J
• Judgment Date: 16 April 2007
• Neutral Citation: [2007] SGCA 22
• Court: Court of Appeal (Singapore)
• Year: 2007
• Published date: 24 April 2007
• Plaintiff Counsel: Tan Chee Meng SC, Philip Fong Yeng Fatt, Jenny Chang Man Phing and Adrian Wee Heng Yi (Harry Elias Partnership)
• Defendant Counsel: Ng Lip Chih (Ng Lip Chih & Co),The second respondent in Civil Appeal No 88 of 2006 in person,K Muralidharan Pillai, Harveen Singh and Sim Wei Na (Rajah & Tann)
• Subject Matter: Civil Procedure,Bifurcation of proceedings into liability and assessment of damage phases,Importance of applying early,Either party can apply,Pleadings,Failure to expressly plead assessment of damages,Relevance of parties' conduct of case,Whether court has discretion to order assessment of damages,Contract,Contractual terms,Rules of construction,"Entire agreement" clauses,Application and effect of such clauses,When factual matrix may be relevant,Remedies,Damages,When damages awarded in lieu of specific performance,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
• Citation: [2007] SGCA 22

16 April 2007 Judgment reserved.

V K Rajah JA (delivering the judgment of the court):

1 The present proceedings have arisen as a result of a purchaser’s refusal to complete a share purchase. It has engendered a multitude of contractual issues ranging from the construction of a contract to the fashioning of an appropriate contractual remedy. From a broader perspective, these proceedings also illustrate the jurisprudential tensions that sometimes prevail between procedural and substantive justice: if the factual matrix should entail, as it does in the present case, that the “justice of the case” is at odds with the “conduct of the case”, how should such a conflict be resolved so that a just outcome is ultimately ensured?

The facts

2 The circumstances are relatively straightforward and can be summarised within a brief compass. The plaintiff was the business development director of Distribution Management Solutions Pte Ltd (“DMS”) and held 2.5% or 8,333,340 shares (“subject shares”) in DMS. The subject shares constitute the subject matter of the present action. The first defendant was the chief executive officer (“CEO”) and managing director of Accord Customer Care Solutions Ltd (“ACCS”) and a director as well as chairman of the board of directors of DMS. The second, third and fourth defendants were the CEO, chief financial officer and general manager of DMS respectively.

3 Prior to joining DMS, the plaintiff had owned three companies holding distribution rights to the telecommunication products of various established brands, including Nokia. His trials and tribulations commenced when he sold off his group of companies to DMS and joined DMS as an employee. He was induced by the first defendant to believe that he would assume an important business development role as well as profit substantially from the proposed listing of DMS. DMS became a subsidiary of ACCS, and steps were soon taken to prepare DMS for listing.

4 Soon after his companies were absorbed by the ACCS group, the relationship between the plaintiff and the second defendant began to fray. The plaintiff became deeply aggrieved as he felt he was being deliberately marginalised. He became, as he pithily expressed, an “executive officer with no executive powers”. Matters came to a head when the plaintiff was abruptly transferred to another ACCS subsidiary, again without being accorded any meaningful substantive responsibilities. Having reached the end of his tether by this point, he resolved to leave the group and consulted the first defendant, who then agreed to find a mutually acceptable buyer for the subject shares.

5 Four further meetings followed to iron out the creases, culminating eventually in an undated share purchase agreement (“Agreement”) executed between 17 and 20 February 2005, between the plaintiff and the fourth defendant, for the purchase of the subject shares. The purchase price for the plaintiff’s shares was fixed at $4.5m. $750,000 was immediately paid to the plaintiff pursuant to the Agreement, leaving a balance of $3.75m to be settled on completion of the purchase. Although the fourth defendant was the only nominal purchaser of the shares in question, the initial payment was made to the plaintiff via a cheque from Invest Asia Holdings Ltd, an offshore company often engaged by the first defendant for his private business dealings. This cheque was handed to the plaintiff by the financial controller of ACCS, Kuan Chow King.

6 On 21 February 2005, the defendants’ business difficulties dramatically spilled over into the public domain when Nokia Pte Ltd announced the termination of its contract with ACCS. Shortly thereafter, the Commercial Affairs Department of the Singapore Police Force (“CAD”) began an investigation into the affairs of ACCS and some of its senior officers. These officers included the first, third and fourth defendants. On 1 March 2005, the plaintiff met the first defendant to enquire about the completion of the Agreement, but was abruptly informed that the latter had no money to pay for the subject shares. On 14 March 2005, the plaintiff again contacted the first and second defendants to enquire about the transaction’s progress. Again, no satisfactory response was received. The defendants appeared to have lost all resolve and incentive to complete the purchase in light of the pressing problems threatening the very survival of the ACCS group of companies.

7 Following the CAD investigations, the listing plans of DMS had to be jettisoned. On 30 April 2005, the fourth defendant failed to turn up at the venue scheduled for completion. Despite two subsequent letters by the plaintiff, culminating in a letter of demand dated 12 May 2005, the fourth defendant failed to complete the transaction. The plaintiff then initiated proceedings against all four defendants for breach of the Agreement. The first, third and fourth defendants were subsequently charged with, inter alia, engaging in a conspiracy to cheat Nokia Pte Ltd by way of fictitious warranty repair claims as well as the falsification of documents generated by ACCS. All three defendants pleaded guilty and have been duly convicted and sentenced to lengthy terms of imprisonment.

The decision at first instance

8 At first instance, the plaintiff contended that the fourth defendant entered into the Agreement for and on behalf of all the defendants, whom he alleged were the actual purchasers of the shares qua principals of the fourth defendant. He asserted that the defendants were all jointly and severally liable to him. The first, second and third defendants vigorously disputed this; whilst the fourth defendant insisted that he had signed the Agreement in a personal capacity for his own account. The trial judge found that the first and third defendants were the principal parties interested in the purchase of the plaintiff’s shares and that the fourth defendant was “not the buyer he purported to be”. Such a finding is not contested in this appeal.

9 The defendants initially relied on the following three grounds to argue that the plaintiff was not entitled to enforce the Agreement against them: (a) the failure to list DMS on the Main Board of the Singapore Exchange (“SGX”), an alleged 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 subject shares as required by the Agreement; and (c) that the failure to list DMS, as described in (a), frustrated the purpose of the Agreement.

10 The trial judge rejected all three arguments and found that the first, third and fourth defendants had breached the Agreement. However, he disallowed the plaintiff’s alternative claims for specific performance or damages in lieu of specific performance, ordering instead that nominal damages of $300 be paid to the plaintiff for breach of the Agreement. A counterclaim by the fourth defendant for the 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 expressly provided that it was paid as a non-refundable deposit or if the plaintiff had actually performed his part of the bargain.

Issues raised in the appeals

11 The plaintiff appeals against this Pyrrhic victory, while the fourth defendant on the other hand, cross-appeals against the finding of breach of contract. Although the various issues relating to the appeal and cross-appeal are in fact inextricably interwoven, for ease of reference and to facilitate a better understanding, they will be examined separately.

12 The legal issues arising in the plaintiff’s appeal relate solely to the trial judge’s refusal to grant the remedies sought by the plaintiff and may be summarised as follows:

(a) Whether specific performance of the sale and purchase agreement for shares in a public company should have been ordered.

(b) If not, whether damages in lieu of specific performance and the assessment thereof should have been granted.

(c) Whether the counterclaim for payment of the sum of $750,000 should have been allowed.

13 The legal issues arising in the fourth defendant’s cross-appeal on liability relate mainly to the basis for the trial judge’s rejection of the various defences relied on by the defendants and may be summarised as follows:

(a) Whether listing was a contingent condition of the Agreement, and the effect of non-fulfilment of the same.

(b) Whether the plaintiff had breached the contractual stipulation for the DMS directors’ resolution approving the transfer of the subject shares.

(c) Whether the failure to list DMS frustrated the Agreement.

We turn first to examine the fourth defendant’s cross-appeal contesting liability before addressing the plaintiff’s appeal.

The cross-appeal on liability

Whether listing was a contingent condition of the Agreement, and the effect of non-fulfilment of the same

14 The main stumbling block challenging the fourth defendant’s first contention comes in the form of an express provision in the Agreement spelling out the parties’ positions if listing did not take place. This is prima facie completely at variance with the contention that parties intended completion to be contingent on listing.

15 Clause 4.1 of the Agreement provides:

The Completion Date for the sale and purchase of the Sale Shares shall be the earlier of (i) the listing and quotation of the Shares on the Singapore Exchange Securities Trading Pte Ltd (“SGX-ST”) or other stock exchange acceptable to [the Defendants as] the Purchaser, and (ii) 30 April 2005 if such listing and quotation of the Shares has not taken place by 30 April 2005, subject always to any moratorium (if any) that may be imposed by SGX-ST (or other relevant stock exchange), in which case the Completion Date shall be the earliest date permitted by such moratorium. [emphasis added]

16 The fourth defendant attempts to diminish, if...