Lim Siau Hing @ Lim Kim Hoe and another v Compass Consulting Pte Ltd and another appeal

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 24 November 2023
• Neutral Citation: [2023] SGCA 39
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal Nos 23 of 2023 and 24 of 2023
• Hearing Date: 12 October 2023
• Citation: [2023] SGCA 39
• Year: 2023
• Plaintiff Counsel: Kelvin Poon Kin Mun SC, Cheng Wai Yuen Mark and Tan Tian Hui (Rajah & Tann Singapore LLP)
• Defendant Counsel: Ong Min-Tse Paul (Paul Ong Chambers LLC)
• Subject Matter: Contract,Contractual terms,Rules of construction
• Published date: 30 November 2023

Steven Chong JCA (delivering the judgment of the court): Introduction

Disputes over the existence of a contract, its terms, as well as the proper interpretation and effect of those terms regularly come before the courts for adjudication. The court’s task in this respect is rendered more challenging when the contract is contained in and/or evidenced by various documents which, on their face, do not appear to bear an obvious nexus with each other. This difficulty is further compounded when the documents are not drafted on advice from lawyers.

We are presented with such a challenge in these two related appeals which arose in connection with the reverse takeover of a company (the “RTO”). Mr Lim Siau Hing @ Lim Kim Hoe (“Mr Lim”) and Mr Lim Vhe Kai (“Damien”) (collectively, “the Lims”) had appointed Compass Consulting Pte Ltd (“Compass”) to structure the RTO. At a meeting on 17 July 2017, the parties agreed that upon successful completion of the RTO, Compass would be paid incentives in the form of bonus shares (the “Bonus Shares”) and a cash fee (the “Cash Fee”) for its services in respect of the RTO (the “Agreement”).

Typically, the documentation for such a transaction would be drafted by lawyers. However, on this occasion, the three material documents (the “17 July Documents”), which the parties claimed either contained or evidenced the Agreement, were drafted by Compass’s representative without any legal input whatsoever. The 17 July Documents were all signed by the Lims during the meeting that same day.

Following the completion of the RTO, Compass commenced proceedings for the Bonus Shares and the Cash Fee. The Lims denied that Compass was entitled to the Bonus Shares and the Cash Fee, as certain conditions had allegedly not been fulfilled. The principal issue before the High Court judge below (“the Judge”) was therefore to examine how the 17 July Documents should be construed for the purposes of determining the terms of the Agreement, and whether some or all of the 17 July Documents formed part of or evidenced the Agreement.

Although it appears to have been common ground between the parties that the Agreement was partly written and partly oral, the Judge found that the Agreement was contained wholly in writing, namely in two of the 17 July Documents (“Document 1” and “Document 2”). The consequence of that finding was that one of the 17 July Documents (“Document 3”), as well as the oral testimony in relation to the genesis and purpose of Document 3, was excluded from the Judge’s analysis altogether. On that basis, the Judge allowed Compass’s claim for the Bonus Shares but dismissed Compass’s claim for the Cash Fee.

When the 17 July Documents are properly examined, however, it becomes clear that those documents are not as self-explanatory as the Judge regarded them to be. Consistent with the parties’ positions that the Agreement was partly written and partly oral, it is instead necessary to have regard to the oral evidence to make sense of the 17 July Documents, including Documents 1 and 2.

In dealing with these appeals, we therefore consider it imperative to consider the totality of the evidence surrounding the signing and preparation of the 17 July Documents. In our judgment, once this is done, it is clear that the 17 July Documents were meant to collectively evidence an oral agreement that was reached between the parties, and that the Lims are therefore correct to say that the Bonus Shares and the Cash Fee are not due to Compass as certain conditions relating to the RTO had not been fulfilled.

For completeness, we add that these appeals were originally fixed before the Appellate Division of the High Court, but were subsequently transferred to this court because the parties relied on evidence of subsequent conduct as an aid to contractual interpretation, the admissibility of which has hitherto not been authoritatively decided by us. As we will explain below, however, this issue does not strictly arise for our consideration in these appeals.

Facts The parties

Compass is a private company limited by shares and was incorporated in Singapore in 2004. Its directors are Mr Kelvin Chin Wui Leong (“Kelvin”) and his wife, Ms Chong Lee Ching (“Ms Chong”). According to Compass, its principal business is in the provision of business advisory services.

Mr Lim and Damien are father and son respectively. They are executive directors of KTMG Ltd (“KTMG”), a public company listed on the Catalist board of the Singapore Exchange Securities Trading Ltd (“SGX”). The Lims are also the controlling shareholders of KTMG, through their collective direct and deemed shareholding interests. Mr Lim is the Executive Chairman while Damien is the Chief Executive Officer (“CEO”) of KTMG. Prior to this, the Lims were executive directors and controlling shareholders of Knit Textiles Mfg Sdn Bhd (“KTM”). In February 2019, the Lims successfully listed KTM and its related companies (the “KTM Group”) on the Catalist board of the SGX through an RTO of Lereno Bio-Chem Ltd (“Lereno”), which led to Lereno being renamed as KTMG. The RTO of Lereno, and Compass’s role in that transaction, form the background to the present dispute.

Background to the dispute

In July 2016, Damien was introduced to Kelvin by a friend, after he mentioned that he and his father were considering listing the KTM Group. From July to September 2016, Kelvin and Damien explored the possibility of listing the KTM Group in Hong Kong, but the Lims eventually decided against this.

In April 2017, Kelvin approached Damien with the possibility of listing the KTM Group on the Catalist board of the SGX, through an RTO of Lereno. KTM eventually agreed to retain Kelvin’s advisory services for the purpose of the RTO. Consequently, Compass entered into a corporate advisory agreement dated 3 May 2017 (the “1st LOE”), which was signed by Kelvin and Damien. Under the 1st LOE, Compass was appointed as “project manager” for the RTO and was to be paid a monthly retainer of $10,000 plus out-of-pocket expenses relating to its engagement.

On or around 11 May 2017, the Lims attended a “kick-off meeting” with Kelvin and Ms Chong at KTM’s office in Malaysia. Shortly after, on 15 May 2017, Compass entered into an addendum to the 1st LOE (the “2nd LOE”), which was signed by Kelvin and Mr Lim. Significantly, the 2nd LOE expressly provided that Compass’s fees for its services were estimated to be $1.1m which could be “adjusted subject to mutual agreement should there be a change in the scope or finalised transaction structure”. More will be said about the agreed fee structure below.

From May to July 2017, Kelvin and Ms Chong facilitated separate discussions with the Lims and the then-Managing Director and CEO of Lereno, Mr Ong Puay Koon (“Mr Ong”), on how the RTO would be structured. According to the Lims, sometime prior to 17 July 2017, Kelvin visited them at their office in Batu Pahat, Malaysia, to propose that he be paid additional incentives in the form of the Bonus Shares and the Cash Fee, if various conditions were met upon completion of the RTO (the “Batu Pahat Meeting”). On a separate occasion, Kelvin also allegedly met with Mr Ong at his office in Science Park (the “Science Park Meeting”) to discuss these additional incentives. We say more about these meetings at [62] and [64] below.

Subsequently, on 17 July 2017, the Lims, Kelvin, Ms Chong, and Mr Ong attended a meeting at Lereno’s office where the structure of the RTO was finalised (the “17 July 2017 Meeting”). It is not in dispute that an agreement on the Bonus Shares and the Cash Fee was reached at this meeting (ie, the Agreement). The following three documents were signed by the Lims at the same meeting (ie, the 17 July Documents): A document titled “Project Libra: Sale of Knit Textile Manufacturing Sdn Bhd and its related companies (KTM) to Lereno Bio-Chem Ltd (Transaction)” addressed to Mr Ong and Kelvin (ie, Document 1). Document 1 stated that the Lims, “being the directors and shareholders of KTM, hereby agree to the sale of KTM to [Lereno] provided [that their] net share of equity in the listed issuer … is no less than 65% at completion of the Transaction”. The structure of the RTO was recorded in a scheme spreadsheet annexed to Document 1 (the “Scheme Spreadsheet”). A document titled “Project Libra – Corporate Service Agreements” addressed to Mr Ong and Kelvin (ie, Document 2). Document 2 stated that the Lims, “being the directors and shareholders of KTM, hereby agree to provide both [Mr Ong] and [Kelvin] and/or their nominated representatives a corporate advisory service agreement (Agreements) for a period of 2 to 3 years from completion of Transaction (the Period). The total fees for the Agreements for both [Mr Ong] and [Kelvin] is no less than S$480,000 per person for the Period”. A document titled “Project Libra: Sale of Knit Textile Manufacturing Sdn Bhd and its related companies (KTM) to Lereno Bio-Chem Ltd (Transaction)” addressed to Lereno’s board of directors (ie, Document 3). Document 3 stated that the Lims, “being the directors and shareholders of KTM, hereby agree to the sale of entire equity in KTM to [Lereno] for a consideration of S$30 Million”.

According to Kelvin, the finalised structure of the RTO was as follows. The KTM Group would be restructured such that the issued share capital of all the companies in the KTM Group would be held by a single holding entity, Knit Textile and Apparel Pte Ltd (“KTA”). The share capital of KTA would in turn be 100% held by Mr Lim. Lereno would then acquire all of Mr Lim’s shares in KTA for a consideration of $26.4m, and this consideration would be satisfied by Lereno issuing: (a) $25.3m worth of shares in Lereno to Mr Lim; and (b) $1.1m worth of shares in Lereno to Compass, since the Lims were supposed to pay Compass $1.1m in fees under the 2nd LOE. Lereno had been struggling financially at that time and was keen...