Lim Kok Koon v Tan Cheng Yew and Another

• Jurisdiction: Singapore
• Judge: Lai Siu Chiu J
• Judgment Date: 17 May 2004
• Neutral Citation: [2004] SGHC 101
• Citation: [2004] SGHC 101
• Year: 2004
• Published date: 19 May 2004
• Docket Number: Suit No 522 of 2003 (Registrar's
• Date: 17 May 2004
• Plaintiff Counsel: Allan Tan (Sim Mong Teck and Partners)
• Defendant Counsel: Vinodh Coomaraswamy and David Chan (Shook Lin and Bok)
• Court: High Court (Singapore)

17 May 2004

Lai Siu Chiu J

The facts

1 Tan Cheng Yew (“the first defendant”) was at the material time, an advocate and solicitor who had been called to the Singapore Bar on 8 December 1981. He was a litigation partner of Tan JinHwee Eunice & Lim ChooEng (“the second defendant”) which law firm he joined on 15 August 2001, together with two partners from his former practice, Tan Cheng Yew & Partners.

2 In late November 2002, Lim Kok Koon (“the plaintiff”) consulted the first defendant on an intended reverse takeover (“RTO”) by Cybermast Ltd (“the Company”) of which he was and still is, a director, President and Chief Executive Officer (“CEO”). Ted Lai is another director of the Company and is its deputy CEO and Chief Operating Officer (“COO”). The Company is listed on the Stock Exchange of Singapore (“SGX”). The plaintiff is also a shareholder and director of two private companies, M & V Holdings (S) Pte Ltd (“M & V”) and Greatronic Marketing (S) Pte Ltd (“Greatronic”), subjects of the RTO.

3 At the time, another law firm acted for the Company whilst a third law firm acted for M & V and Greatronic. Despite representations made by these two law firms to the SGX over a period of several months, the SGX did not approve the RTO. The plaintiff felt increasingly exasperated and decided to seek a second opinion on the RTO. It was in that connection that the plaintiff came to consult the first defendant.

4 After the plaintiff’s initial consultation with the first defendant, the latter wrote to the plaintiff and Ted Lai on 21 December 2002, using the second defendant’s letterhead, to confirm the plaintiff’s instructions. Several meetings between the plaintiff and the first defendant followed thereafter, at the office of the second defendant.

5 According to the plaintiff, in one of those meetings, the first defendant advised him that a possible reason for the withholding of approval by the SGX was because they did not know the background of the persons involved in the RTO. To assure the SGX that the transactions involving the Company and the other two companies were above board, the first defendant suggested that the plaintiff furnish an undertaking (through the second defendant) to the SGX in the sum of $2m. The plaintiff told the first defendant that he did not have enough funds to furnish an undertaking for $2m. The first defendant eventually agreed to an undertaking of $1m.

6 Acting on the first defendant’s advice, the plaintiff handed over to the first defendant, on 11 December 2002, two cheques: one cheque drawn on United Overseas Bank Limited dated 10 December 2002 in the amount of US$200,000 (“the UOB cheque”) and the other, drawn on the Development Bank of Singapore Ltd dated 12 December 2002 in the amount of $150,000 (“the DBS cheque”). Both cheques were issued in favour of the first, not the second, defendant.

7 On 14 January 2003 the plaintiff handed the first defendant another cheque for US$290,000 (“the third cheque”), again drawn on DBS and issued in the first defendant’s favour.

8 When the plaintiff requested for receipts for the UOB and DBS cheques, the first defendant gave an excuse that as it was after office hours, the person charged with issuing receipts had left. However he assured the plaintiff that there was nothing to worry about. On subsequent occasions, when the plaintiff asked him for the receipts, the first defendant gave various excuses. In his affidavit filed on 18 July 2003, the plaintiff deposed that all three cheques were issued in favour of the first defendant at the latter’s request. Pending the issuance by the first defendant of receipts for the three cheques, the first defendant executed two Deeds of Trust (“the Trust Deeds”) in favour of the plaintiff, dated 11 December 2002 and 24 January 2003 respectively, witnessed by a solicitor employed by the second defendant.

9 The plaintiff’s last contact with the first defendant was on or about 15 February 2003. According to an affidavit filed on 19 June 2003 by the managing partner of the second defendant, Tan Jin Hwee (“Tan”), the first defendant did not report for work on 10 February 2003 although he had not applied for leave. Indeed, the first defendant has not turned up at the office of the second defendant since that date. The second defendant terminated the first defendant’s partnership with the law firm on 19 February 2003. Both the plaintiff and the second defendant are unaware of the first defendant’s present whereabouts. According to the plaintiff, there were press reports on 25 and 26 February 2003 that the first defendant had gone missing.

10 On 17 February 2003, Tan Chau Yee (“TCY”), a litigation partner of the second defendant, informed Tan he had spoken to Ted Lai from the Company. Ted Lai told TCY that $1m had been paid personally to the first defendant and that he (Ted Lai) had attempted, unsuccessfully, to contact the first defendant for some two weeks. Ted Lai alleged the second defendant was supposed to issue a letter of undertaking, according to the representations made to him and the plaintiff by the first defendant.

11 When Tan and TCY looked into the file opened for the Company, they did not find copies of the three cheques, the letter of undertaking or the Trust Deeds. Indeed, there were no documents or letters to any third parties from the first defendant wherein he had identified himself as legal adviser in the RTO. There was nothing in the file to indicate the first and/or second defendant had taken over representation of either the Company, or of M & V and Greatronic, from their existing solicitors. However, the file contained a draft memorandum of understanding (“MOU”) apparently prepared by the first defendant, which terms stated the first defendant personally agreed to acquire from the plaintiff and the chairman (Huang Ming Lang), their shareholdings in the Company and would be allotted 20% shares in M & V. There was also correspondence in the file between the first defendant and another law firm on a possible initial public offering (“IPO”) in place of an RTO.

12 Tan deposed in his aforesaid affidavit that neither he nor any other solicitor of the second defendant was aware that the first defendant had opened a file in the Company’s name. Tan expressed surprise that the first defendant had opened a file, let alone handled the same on his own, as advising on an RTO was well outside the first defendant’s areas of practice and expertise. He deposed that a solicitor advising on an RTO must, in addition to having a good grasp of general company law, be familiar with the Singapore Code on Take-overs and Mergers and certain provisions of the Companies Act (Cap 50, 1994 Rev Ed) on the subject. Technical and complex regulatory issues have to be cleared with the SGX and also possibly with the Securities Industry Council. As it is an area of law involving a complex regulatory regime, there is a great risk for any client to be advised by a lawyer who does not practise in the field. Tan added that the second defendant has never advised on any RTO of the nature the plaintiff consulted the first defendant on, although the law firm is well able to handle IPOs. If the law firm had indeed been consulted by the plaintiff and/or the Company, the matter would have been handled by Tan himself and two other solicitors, who specialise in that area of practice.

13 On Tan’s instructions, TCY contacted and obtained from Ted Lai, copies of the UOB and DBS cheques. Copies of the third cheque and the alleged letter of undertaking were not, and were never furnished by Ted Lai or the plaintiff. On 19 February 2003, the plaintiff’s present solicitors (“the Solicitors”) wrote to the second defendant to advise that they had taken over the matter. The Solicitors forwarded copies of the Trust Deeds and requested, from the second defendant, all documents in the second defendant’s file, as well as a cheque to return the plaintiff’s payments of $150,000 and US$490,000.

14 On behalf of the second defendant, Tan replied to the Solicitors’ letter on 20 February 2003, stating that the alleged payments were not paid into the second defendant’s account and that all evidence (including the Trust Deeds) pointed to the fact that the sums of money were paid to the first defendant personally. Consequently, it was a personal matter between the plaintiff and the first defendant. Tan rejected any liability to the plaintiff on the part of the second defendant.

15 The Solicitors disagreed with the stand taken by the second defendant and on 23 May 2003, commenced these proceedings on the plaintiff’s behalf.

The pleadings

16 In the statement of claim, the plaintiff, inter alia, alleged that the first defendant rendered advice to and received the three sums of money from the plaintiff in the ordinary course of business as a partner of the second defendant. As the moneys handed over by the plaintiff had been dishonestly misappropriated by the first defendant, the second defendant was liable.

17 After entering a memorandum of appearance to the writ of summons by its solicitors, the second defendant applied on 19 June 2003, vide Summons in Chambers No 3774 of 2003 (“the Application”), to strike out the writ of summons pursuant to O 18 r 19 and O 3 r 4 of the Rules of Court (Cap 322, R 5, 1997 Rev Ed) and, under the inherent jurisdiction of the court, on the grounds that the statement of claim:

(a) disclosed no reasonable cause of action;

(b) was scandalous, frivolous and vexatious and/or;

(c) was an abuse of the process of the court.

18 The Application was heard on 30 July and 1 August 2003 and dismissed with costs by the learned Deputy Registrar. The second defendant appealed against his decision in Registrar’s Appeal No 279 of 2003 (“the Appeal”).

The Appeal

19 I heard and allowed the Appeal on 26 August 2003. On 16 September 2003, I heard further arguments at the request of counsel for the second defendant. I then varied the costs order I had...