Lin Choo Mee v Lim Sze Eng

• Jurisdiction: Singapore
• Judge: Kannan Ramesh J
• Judgment Date: 08 January 2018
• Neutral Citation: [2018] SGHC 7
• Court: High Court (Singapore)
• Docket Number: Suit No 1099 of 2016
• Published date: 11 December 2018
• Year: 2018
• Hearing Date: 22 August 2017,18 August 2017,29 September 2017,17 August 2017
• Plaintiff Counsel: Narayanan Sreenivasan SC and Tan Kai Ning Claire (Straits Law Practice LLC)
• Defendant Counsel: Hui Choon Wai and Ho Si Hui (Wee Swee Teow LLP)
• Subject Matter: Contract,Contractual terms
• Citation: [2018] SGHC 7

Kannan Ramesh J:

This dispute concerned the interpretation of a settlement agreement dated 28 December 2015 (“the Settlement Agreement”). On 29 September 2017, I allowed the plaintiff’s claim and delivered detailed oral grounds. The defendant has now appealed. These are the full grounds of my decision.

Facts The parties

The plaintiff and the defendant are brothers. The latter is the majority shareholder of Tat Leong Investment Pte Ltd (“TLI”), which owns 50.35% of Tat Leong Development (Pte) Ltd (“TLD”), and Tat Leong Petroleum Co (Pte) Ltd (“TLP”). The plaintiff is a minority shareholder in TLI, TLD and TLP (“the Tat Leong Companies”).

Background to the dispute Events leading up to the Settlement Agreement

On 13 November 2014, the plaintiff applied to the court by way of Companies Winding Up Nos 226, 227 and 228 of 2014 for an order that the Tat Leong Companies be wound up under s 254(1)(i) of the Companies Act (Cap 50, 2006 Rev Ed) (“the Companies Act”), ie, on the basis that it was just and equitable to do so: see Lin Choo Mee v Tat Leong Development (Pte) Ltd and Others and Other Matters [2015] SGHC 99 (“the Judgment”) at [26]. The plaintiff argued inter alia that the relationship of mutual trust and confidence between himself and the defendant had broken down; and that he had been wrongfully excluded from participating in the management of the Tat Leong Companies: see the Judgment at [26(a)]–[26(b)] and [72].

On 13 April 2015, Steven Chong J (as he then was) (“Chong J”) found that a relationship of mutual trust and confidence was central to the existence of the Tat Leong Companies, ie, they were quasi-partnerships; and the relationship of trust and confidence as between the parties had disintegrated (the Judgment at [75] and [77]). Chong J also found that the plaintiff had been deliberately excluded from the management of TLD and TLI, in breach of an understanding that he was to have a management role in both companies (the Judgment at [81]). At the time of the Judgment, a court did not have the power to order a buy-out of shares, in lieu of winding up the company, on an application under s 254(1)(i) of the Companies Act. Chong J accordingly ordered that the Tat Leong Companies be wound up, although he deferred the winding-up orders for 30 days to allow the parties to reach an amicable settlement in line with the approach taken by the Court of Appeal in Sim Yong Kim v Evenstar Investments Pte Ltd [2006] 3 SLR(R) 827. Chong J also ordered the defendant to pay costs fixed at $40,000 excluding disbursements to the plaintiff, with such costs and disbursements to be reflected solely against the value of the defendant’s shares in the Tat Leong Companies (“the Costs Order”).

The parties were unable to settle the dispute within 30 days. The defendant appealed against Chong J’s decision in Civil Appeals Nos 101, 102 and 103 of 2015 (“the Appeals”). Pending the Appeals, the defendant applied for a stay of Chong J’s orders. On 23 June 2015, Hoo Sheau Peng JC (as she then was) (“Hoo JC”) granted a stay of Chong J’s orders.

On 23 November 2015, at the hearing of the Appeals, the Court of Appeal suggested that the parties attend mediation to resolve their differences.

On 28 December 2015, the parties attended mediation and entered into the Settlement Agreement at the conclusion of the mediation.

The Settlement Agreement

The Settlement Agreement provided for the defendant to purchase the plaintiff’s shares in the Tat Leong Companies for a sum of money to be determined under the terms of the Settlement Agreement (“the Consideration”). The following terms of the Settlement Agreement were material in this case.

Clause 3 of the Settlement Agreement provided as follows: 3. The consideration for [the plaintiff’s] shareholding in the three companies shall be the aggregate of the following: (a) in relation to the shareholding in [TLD] and [TLI] the consideration shall be 23.44% of the net tangible asset value of [TLD]; and (b) in relation to the shareholding in [TLP], 14.81% of the net tangible asset value of [TLP].

[emphasis added]

Clauses 4 to 8 provided for the calculation of the net tangible asset value (“NTAV”) of TLD and TLP. Notably, cl 5 provided as follows:

The [NTAV] of [TLP] shall be [$279,990 - $511,320 + the Sale Price of #03-11, Far East Plaza, 14 Scotts Road].

[emphasis added]

Clause 5 thus set out a formula for determining the NTAV of TLP which referred to the sale price of #03-11, Far East Plaza (“the Far East Plaza Unit”). The Settlement Agreement therefore envisioned that TLP’s NTAV, and hence, in turn, the total sum of the Consideration under cl 3, would only be determined once the Far East Plaza Unit had been sold. The difficulties in the sale of this property are the principal source of this dispute.

Clause 9 provided for Colliers International Singapore (“Colliers”) to be appointed as the agent for the sale of the Far East Plaza Unit.

Clause 10 addressed the implementation of the Settlement Agreement. Clauses 10(b) and 10(c), which are of central importance in this case, stated: 10. This agreement shall be implemented as follows:

…

(b) The agent for the sale of [the Far East Plaza Unit] will be appointed within 14 days of the date hereof. … The sale of the said property is to be completed within six months hereof. (c) The payment of the consideration to [the plaintiff] shall be made, whether by way of transfer of his shareholding or by capital reduction … within 9 months hereof or within 1 month of the completion of sale of both 27 Jalan Rimau and [the Far East Plaza Unit], whichever is earlier. …

[emphasis added]

Under cl 11 of the Settlement Agreement, the plaintiff and his family were to move out of 27 Jalan Rimau, their home of 25 years, within one month after Colliers provided a valuation of 25 and 27 Jalan Rimau. 25 and 27 Jalan Rimau were family properties owned by TLD.

Clause 12 stated that “[the defendant] agrees and will procure that the [Tat Leong Companies] will not deal with their assets or take on any further liabilities save as in the ordinary course of business … [emphasis added]”. It further provided that the defendant would procure his solicitors “to hold the net sale proceeds of [the Far East Plaza Unit and 27 Jalan Rimau] as stakeholders until [the plaintiff] is paid his consideration in full…”.

Clause 13 provided that the parties would not have claims against each other “in relation to any matter arising from or connected to the subject matter of [the Appeals], save for any costs orders already made [emphasis added]”.

Clause 14 provided that the parties would refer “any dispute arising from the implementation of [the Settlement Agreement]” to the mediator who had conduct of the mediation on 28 December 2015 (“the Mediator”).

Events after the Settlement Agreement

Between January and March 2016, the Far East Plaza Unit was marketed for sale in the open market. However, no offers were made for the Far East Plaza Unit during this period.

On 30 March 2016, in accordance with cl 11 of the Settlement Agreement, the plaintiff and his family moved out of 27 Jalan Rimau.

The parties subsequently agreed to auction the Far East Plaza Unit in April and May 2016 at a reserve price of $2.2m. This reserve price was based on an indicative valuation of the Far East Plaza Unit at $2.1–$2.2m, which Colliers provided on 29 March 2016. Auctions were held on 20 April and 26 May 2016 but both were unsuccessful. No bid was made at the auctions for the Far East Plaza Unit at the opening price of $2.2m.

By a letter dated 5 July 2016, the plaintiff made several proposals to the defendant. It should be noted that by this time, the six-month period for the completion of the sale of the Far East Plaza Unit stipulated in cl 10(b) of the Settlement Agreement had expired on 28 June 2016. The plaintiff proposed that Colliers be discharged as the agent for the sale of the Far East Plaza Unit and another firm appointed to perform an independent valuation of the property; and, in the alternative, that the NTAV of TLP be assessed based on Colliers’ indicative valuation of the Far East Plaza Unit.

By a letter dated 8 July 2016, the defendant’s solicitors replied stating that the defendant did not agree to the plaintiff’s proposals in his letter of 5 July 2016. The defendant counter-proposed that the parties auction the Far East Plaza Unit in July 2016 at the slightly reduced reserve price of $2.1m.

By a letter dated 12 July 2016, the plaintiff’s solicitors wrote to the Mediator stating that a dispute between the parties had arisen from the implementation of the Settlement Agreement; and, requested that the dispute be referred to the Mediator pursuant to cl 14 of the Settlement Agreement (see [16] above). A mediation session was fixed for 9 September 2016. However, this was cancelled on 7 September 2016 because the Mediator fell ill.

By a letter dated 19 September 2016 from his solicitors, the plaintiff requested the defendant to pay him the sum of $1,104,072.05, in exchange for the plaintiff’s shares in TLI. This figure was arrived at by applying the formula for calculating the NTAV of TLD set out in cll 4, 6, 7 and 8 of the Settlement Agreement, excluding one component of the formula (the value of two Chinese subsidiaries of TLD) that was disputed at the time. Notably, the plaintiff’s request was made on the basis that the Consideration was severable into (1) the sum due under cl 3(a), for his shares in TLI and TLD and (2) the sum due under cl 3(b), for his shares in TLP (see [9] above).

By a letter from his solicitors dated 22 September 2016, the defendant replied to the plaintiff’s letter dated 19 September 2016 stating that he did not agree to the plaintiff’s proposal therein. The defendant asserted that the Settlement Agreement did not provide for part-payment of the...