Lim Sze Eng v Lin Choo Mee

• Jurisdiction: Singapore
• Judge: Andrew Phang Boon Leong JA
• Judgment Date: 30 November 2018
• Neutral Citation: [2018] SGCA 84
• Plaintiff Counsel: Hui Choon Wai and Ho Si Hui (Wee Swee Teow LLP)
• Docket Number: Civil Appeal No 204 of 2017
• Date: 30 November 2018
• Hearing Date: 15 October 2018
• Subject Matter: Interpretation of contracts,Contract,Contractual terms
• Year: 2018
• Defendant Counsel: Narayanan Sreenivasan SC and Tan Kai Ning Claire (Straits Law Practice LLC)
• Court: Court of Appeal (Singapore)
• Citation: [2018] SGCA 84
• Published date: 04 December 2018

Andrew Phang Boon Leong JA (delivering the judgment of the court): Introduction

In the present proceedings, Mr Lim Sze Eng (“LSE”) appeals against the decision of the High Court judge (“the Judge”) to allow in part a claim brought by Mr Lin Choo Mee (“LCM”) in Suit No 1099 of 2016 (“the Suit”) seeking, inter alia, damages for LSE’s alleged breaches of various terms under a settlement agreement: see Lin Choo Mee v Lim Sze Eng [2018] SGHC 7 (“the GD”).

LSE and LCM are two brothers who had entered into a settlement agreement dated 28 December 2015 (“the Settlement Agreement”) which provides for the disposal of LCM’s shares in three family-run companies, namely, Tat Leong Investment Pte Ltd (“TL Investment”), Tat Leong Development (Pte) Ltd (“TL Development”), and Tat Leong Petroleum Co (Pte) Ltd (“TL Petroleum”) (collectively, “the TL Companies”), either by LSE purchasing LCM’s shareholding in those companies or by capital reduction of those companies. The parties had entered into the Settlement Agreement in resolution of their differences arising out of Civil Appeals Nos 101, 102 and 103 of 2015 (“the Winding Up Appeals”), which were appeals brought by LSE against the decision of the High Court to: (a) grant LCM’s applications in Companies Winding Up Nos 226, 227 and 228 of 2014 (“the Winding Up Applications”) for the TL Companies to be wound up under s 254(1)(i) of the Companies Act (Cap 50, 2006 Rev Ed); and (b) order LSE to pay LCM costs fixed at S$40,000 excluding disbursements, with such costs and disbursements to be reflected solely against the value of LSE’s shares in the TL Companies (“the Costs Order”): see Lin Choo Mee v Tat Leong Development (Pte) Ltd and others and other matters [2015] SGHC 99 (“the Winding Up Judgment”).

Pursuant to the Settlement Agreement, LCM was entitled to receive a sum of money in lieu of his shares in the TL Companies (“the Consideration”), and this sum could only be determined once the sale price of a shop unit at 14 Scotts Road #03-11, Far East Plaza (“the FEP Unit”) had been determined. LCM also alleged that LSE was obliged under the same agreement to satisfy the Costs Order. To date, the FEP Unit remains unsold, the Consideration remains unpaid, and the Costs Order remains unsatisfied. LCM thus commenced the Suit, alleging, among other things, that LSE had breached various terms under the Settlement Agreement by failing to both sell the FEP Unit and pay LCM the Consideration within the stipulated timeframes, and failing to satisfy the Costs Order. The Judge found in favour of LCM on these issues. LSE now brings the present appeal.

We reserved judgment following the hearing, and now furnish our decision and the accompanying reasons.

Background

LSE and LCM are respectively the eldest and second eldest sons of Mr Lin Whan Chiu (“the Father”), who, with his wife, Mdm Tan Ah Kar (“the Mother”), had a total of five sons and three daughters (collectively, “the Lin Family”). The Lin Family operated a business that was primarily focused on the petroleum industry, and which gradually diversified into properties. LSE was the driving force behind the Lin Family business.

The TL Companies

In June 1977, LSE and his wife, Mdm Tan Lay Hoon (“TLH”), incorporated TL Petroleum. LCM was appointed a director of TL Petroleum shortly thereafter. In January 1979, LSE and LCM incorporated TL Development, and were its founding directors and shareholders. In May 1983, LSE and LCM incorporated TL Investment, and were also its founding directors and shareholders. TL Investment is an investment holding company with the chief purpose of holding shares in TL Development – indeed, presently, the only assets that TL Investment holds are shares in TL Development. Leadership of the TL Companies was vested in the Father and three of his eldest sons, while ownership of the TL Companies resided primarily in the Father and all five of his sons. LSE was, at all times, either the joint or outright majority shareholder in TL Development and TL Investment. Following the transfer of the Father’s shares in TL Development and TL Petroleum to LSE in 1991 (after the Father was diagnosed with cancer), LSE became the clear majority shareholder in the TL Companies, while LCM was a minority shareholder.

The TL Companies made several significant property investments over the years. In 1986, the Father and the Mother sold a portion of a piece of property that they owned at 5 Teo Kim Eng Road to TL Development, and TL Development proceeded to redevelop the property into two semi-detached houses (ie, 25 and 27 Jalan Rimau). Whereas the Father’s third son had occupied 25 Jalan Rimau from 1990 to 2000 and the youngest son has been residing there since 2000, LCM and his family moved into 27 Jalan Rimau in 1991 and resided there until 30 March 2016, when they moved out as required under cl 11 of the Settlement Agreement (see [20] and [27] below).

In 1990, TL Development purchased four shophouses. TL Development sold the first in 1994 and the remaining shophouses in 2000, and part of the sales proceeds was invested in two Chinese companies: Fujian Putian Minxin Building Coating Materials Co Ltd and Fujian Putian Yongda Construction Materials Co Ltd (also referred to by the parties as Yongda Building Material Co Ltd (“Yongda”)) (collectively, “the Chinese Subsidiaries”). TL Development is the sole shareholder in both of the Chinese Subsidiaries.

Sometime after 1991, TL Petroleum purchased the FEP Unit, which initially functioned as the headquarters of the TL Companies, but has been rented out since 2007.

In 2000, the Father’s third eldest son resigned as a director of TL Development and sold his shares in the TL Companies to LSE. In 2002, the Father’s fourth eldest son sold his shares in TL Development and TL Investment to both LCM and the Father’s youngest son, and sold his shares in TL Petroleum to LSE. On 7 March 2013, at the annual general meetings of both TL Development and TL Investment, LCM’s term as director in both companies was not renewed, and LSE’s wife (ie, TLH) was appointed as director in LCM’s place in both companies.

The Winding Up Applications

On 13 November 2014, LCM commenced the Winding Up Applications, seeking to wind up the TL Companies under s 254(1)(i) of the Companies Act on the basis that it was just and equitable to do so. LCM submitted that: (a) whereas there had been a mutual understanding that all the sons in the Lin Family would participate in the running of the TL Companies, LCM had been deliberately excluded from the management of the TL Companies; (b) the relationship of mutual trust and confidence between LCM and LSE had broken down, such that they were no longer able to work in concert in the management and conduct of the business of the TL Companies; and (c) the substrata of the TL Companies had ceased to exist, and were operating at a loss despite their significant assets.

On 13 April 2015, Steven Chong J (as he then was) issued the Winding Up Judgment, in which he found that: (a) the TL Companies were “family companies”, in the sense that a relationship of mutual trust and confidence was central to the existence of those companies such that they were quasi-partnerships, and it was clear that this relationship of mutual trust and confidence between LSE and LCM had disintegrated (see the Winding Up Judgment at [74]–[79]); and (b) LCM had been deliberately excluded from the management of TL Development and TL Investment, in breach of an understanding that LCM was to have a management role in the TL Companies (at [80]–[81]). Accordingly, Chong J found that there was unfairness that warranted a court-ordered winding up of the TL Companies under s 254(1)(i) of the Companies Act, and granted the Winding Up Applications (at [82]–[89]). However, Chong J ordered, pursuant to s 257(1) of the Companies Act, the winding up order to be stayed for 30 days to allow the parties to reach an amicable settlement (at [98]). Finally, Chong J ordered LSE to pay LCM costs fixed at S$40,000 excluding disbursements, with such costs and disbursements to be reflected solely against the value of LSE’s shares in the TL Companies (ie, the Costs Order) (at [99]).

The parties failed to resolve their differences within 30 days. LSE thus filed the Winding Up Appeals on 23 May 2015. On 5 June 2015, LSE applied for a stay of the orders made in the Winding Up Applications. On 23 June 2015, a stay of Chong J’s orders was granted.

On 23 November 2015, at the hearing of the Winding Up Appeals, the Court of Appeal suggested that parties attend mediation to resolve their differences. On 28 December 2015, the parties attended mediation and, at the conclusion of the session, entered into the Settlement Agreement.

The Settlement Agreement

The arrangement that the parties consented to under the Settlement Agreement was for: (a) LCM’s shareholding in the TL Companies to be disposed of either by LSE purchasing LCM’s shareholding in those companies or by capital reduction of those companies, with the net effect being that LCM would receive the Consideration in lieu of his shares in the TL Companies; and (b) each party to bear his own costs of the Winding Up Appeals (see cll 1 and 2 of the Settlement Agreement).

The Consideration was to be computed in accordance with cll 3 to 8 of the Settlement Agreement, which provide as follows: 3. The consideration for [LCM’s] shareholding in the [TL Companies, ie, the Consideration] shall be the aggregate of the following: (a) in relation to the shareholding in [TL Development] and [TL Investment] the consideration shall be 23.44% of the net tangible asset value of [TL Development]; and (b) in relation to the shareholding in [TL Petroleum], 14.81% of the net tangible asset value of [TL Petroleum]. 4. The net tangible asset value of [TL Development] shall be [-$200,431 - $1,088,537 + the Value of 25 and 27 Jalan Rimau -...