Loh Chiang Tien and another v Saman Dharmatilleke

• Jurisdiction: Singapore
• Judge: Vinodh Coomaraswamy J
• Judgment Date: 28 February 2020
• Neutral Citation: [2020] SGHC 45
• Court: High Court (Singapore)
• Docket Number: Suit No 362 of 2018
• Year: 2020
• Published date: 10 March 2020
• Hearing Date: 29 October 2019,10 February 2020,30 October 2019
• Plaintiff Counsel: P Padman and Lim Yun Heng (KSCGP Juris LLP)
• Defendant Counsel: Ravana Sivanathan Wijaya (R S Wijaya & Co)
• Citation: [2020] SGHC 45

Vinodh Coomaraswamy J (delivering the judgment of the court ex tempore):

This action arises out of a series of dealings between the plaintiffs and the defendant between March 2011 and January 2012. The defendant was then a shareholder of and the sole director of Innovative Nano Systems Pte Ltd (“INS”). The plaintiffs were then interested in investing in INS.

The plaintiffs’ claims in this action can be broadly categorised as falling under three separate heads: $375,000 (“Share Agreement Claim”)¹; $14,000 (“Repayment Claim”)²; $33,458 (“Exhibition Claim”)³.

Having considered the parties’ submissions, including the written submissions filed by both parties after the oral submissions on 10 February 2020, and for the reasons which follow, I dismiss the Share Agreement Claim and the Exhibition Claim but allow the Repayment Claim.

The Share Agreement Claim

The Share Agreement Claim arises from an agreement dated 25 March 2011 between the second plaintiff and the defendant (“the Agreement”). The Agreement was drafted by Mr Tan Wee Tin (“Mr Tan”).⁴ Under the Agreement, the second plaintiff agreed to lend $375,000 to the defendant in exchange for the defendant agreeing to subscribe for and then transfer to the second plaintiff shares worth $375,000 in INS on or before 24 April 2011. The principal terms of the Agreement are as follows:⁵

This simple agreement is made between [the defendant] of INS and [the second plaintiff] on the 25th March 2011, whereas both parties mutually agreed to the following: (a) [The defendant] wishes to borrow and [the second plaintiff] agrees to make an interest-free friendly loan of S$375,000 (dollars three hundred and seventy five thousand) to enable [the defendant] to inject new capital in INS. … (c) Within a period of 30 days (thirty days) from the date of this agreement, [the defendant] agrees to sell and [the second defendant] and/or his nominee agrees to purchase shares in INS from him equivalent to 10% (ten percent) of INS’s existing share capital for S$375,000 thereby [the defendant] discharges the above borrowing. (d) [The defendant] will agree to pass the relevant director’s resolution to put into effect the transfer of shares in (c).

The second plaintiff duly lent the $375,000 to the defendant by a cheque dated 11 April 2011⁶. However, the defendant failed to transfer 10% of the shares in INS to the second plaintiff or his nominee before the expiry of the 30-day period in clause (c) of the Agreement, ie by 24 April 2011.⁷

The defendant convened an emergency general meeting of INS in January 2011 to pass the necessary resolutions approving a rights issue which had the effect of increasing INS’s shares capital and increasing the shares of INS held by the defendant. It was out of these shares that the defendant was to transfer 10% of INS to the second plaintiff under the Agreement

In May 2011, two shareholders of INS commenced Originating Summons 404 of 2011 (“OS 404”). The relief which they sought in OS 404 was to cancel the rights issue and any sale of the rights shares by the defendant. In August 2011, the court hearing OS 404 ordered that the rights issue be cancelled and that the sale of the rights shares be cancelled (“Order of Court”).⁸

The defendant failed to transfer 10% of INS to the second plaintiff as he was obliged to do under the Agreement. The defendant therefore breached the Agreement.

Counsel for the plaintiffs, Mr P Padman (“Mr Padman”) argues that the second plaintiff is entitled to recover from the defendant the $375,000 paid under the Agreement on four grounds:⁹ as damages for breach of the Agreement; as a debt; as a sum payable by the defendant under s 2(2) of the Frustrated Contracts Act (Cap 115, 2014 Rev Ed) (“FCA”) on the basis that the Order of Court in OS 404 frustrated the Agreement; on a restitutionary claim as a sum recoverable upon a total failure of consideration.

At the outset, I deal with a point raised by counsel for the defendant, Mr RS Wijaya (“Mr Wijaya”). He argues that Share Agreement Claim must fail because the second plaintiff implicitly waived his right to recover the $375,000 from the defendant when both plaintiffs elected to make further advances to the defendant in anticipation of a future joint venture.

I reject Mr Wijaya’s argument that the plaintiffs’ further advances to the defendant give rise to a waiver by election. First, the plaintiffs at no time faced a choice between two inconsistent contractual rights. Second, even if they did, the plaintiffs’ actions are insufficiently clear to evince an intention to elect between two such rights.

The Court of Appeal in Audi Construction Pte Ltd v Kian Hiap Construction Pte Ltd [2018] 1 SLR 317 made clear that a waiver by election requires a party to a contract making a clear and unequivocal choice between two inconsistent rights (at [54]):

This doctrine concerns a situation where a party has a choice between two inconsistent rights. If he elects not to exercise one of those rights, he will be held to have abandoned that right if he has communicated his election in clear and unequivocal terms to the other party. He must also be aware of the facts which have given rise to the existence of the right he is said to have elected not to exercise. Once the election is made, it is final and binding, and the party is treated as having waived that right by his election: see The Kanchenjunga at 397–398, which was approved by this court in Chai Cher Watt v SDL Technologies Pte Ltd [2012] 1 SLR 152 at [33].

[emphasis added in bold and italics]

I do not accept that the second plaintiff was ever faced with two inconsistent rights. “Right” here means a legal right, ie one carrying a correlative obligation. In the context of this case, “right” can only mean a contractual right arising from or out of the Agreement. When the defendant breached the Agreement, the second plaintiff had the right to enforce the defendant’s secondary obligations arising from his breach of contract. But the choice of advancing further sums to the defendant had nothing to do with the parties’ rights and obligations under the Agreement. The advances took place entirely outside the contractual context of the Agreement. Making those advances could in no way be the second plaintiff’s exercise of a contractual right under the Agreement. That also means that there is no inconsistency sufficient to ground a waiver by election between pursuing the defendant for his breach of the Agreement and advancing further sums to the defendant outside the context of the Agreement.

I also accept that the later correspondence between the parties with respect to the possibility of a joint venture and incorporating a new company was distinct from matters relating to INS and to the Agreement.¹⁰ Indeed, there is evidence that the second plaintiff continued to ask the defendant to return the moneys owing under the Agreement even during these unconnected dealings.¹¹

Further, on the facts before me, there is no evidence that the second plaintiff ever communicated to the defendant an election to waive his right to pursue the defendant for his breach of the Agreement. I accept the second plaintiff’s evidence that the reason for the plaintiffs’ later advances to the defendant was because they took a calculated risk that those advances would enhance their prospects of recovering the $375,000. The advances are not an indication, let alone a clear and unequivocal one, that they waived the right to recover the $375,000.

Ultimately, the defendant’s bare assertions that the plaintiffs “were not concerned with the sum of $375,000”¹² or that they were “no longer interested in the advance of $375,000.00 since there was no money left in [INS]”¹³ are insufficient to engage the doctrine of waiver by election. Indeed, as the second plaintiff and the defendant both accept that liability under the Agreement rests with the defendant personally and not with INS – who was not even a party to the Agreement – the fact that INS had no money would have been wholly irrelevant to the defendant’s obligations under the Agreement and any decision the second plaintiff might have made to pursue or to waive those obligations.

Breach of contract

The second plaintiff’s primary basis for the Share Agreement Claim is as damages for breach of contract. The defendant failed to transfer 10% of INS’s shares to the second plaintiff by 24 April 2011. The defendant was therefore in breach of clause (c) of the Agreement. The second plaintiff’s cause of action for a breach of contract accrued on 24 April 2011. The second plaintiff commenced this action on 11 April 2018, more than six years after the cause of action accrued. Mr Wijaya therefore argues that the action is prima facie time-barred under s 6(1)(a) of the Limitation Act (Cap 163, 1996 Rev Ed).

Mr Padman argues that the defendant made later payments which constitute part-payments resulting in a fresh accrual of a cause of action under s 26(2) of the Limitation Act. This argument is misconceived in so far as it relates to a claim in damages. Section 26(2) applies only to “a cause of action … to recover any debt or other liquidated pecuniary claim”. A claim in damages is not a claim to recover a debt or other liquidated pecuniary claim. Section 26(2) cannot assist the second plaintiff on his claim in damages.

The second plaintiff’s claim in damages for a breach of the Agreement is not only prima facie time barred but is in fact time-barred.

At this point, I observe that I find that the second plaintiff has suffered no recoverable loss by reason of the defendant’s breach of contract. This is not a reason for dismissing the second plaintiff’s claim. This finding – if the second plaintiff’s claim in damages were not time-barred – would entitle the second plaintiff to enter judgment against the defendant but limited to nominal damages. I make...