Ong & Co Pte Ltd v Ong Choon Huat Watson

• Jurisdiction: Singapore
• Judge: Lai Siu Chiu JC
• Judgment Date: 17 November 1993
• Neutral Citation: [1993] SGHC 272
• Docket Number: Originating Summons No 667 of 1993
• Date: 17 November 1993
• Year: 1993
• Published date: 19 September 2003
• Plaintiff Counsel: Woo Bih Li (Bih Li & Lee)
• Citation: [1993] SGHC 272
• Defendant Counsel: Tay Siok Leng (Loh Lin Kok)
• Court: High Court (Singapore)
• Subject Matter: Setting aside,Agreement reached under a mutual mistake of fact,Contract,Compromise of action,Mistake,Mistake of fact,When court can look behind a settlement reached bona fide between the parties

The background

Cur Adv Vult

On 28 July 1989, the plaintiffs obtained judgment from the Supreme Court of British Columbia, Canada against one Christopher Chua Kung Siew (`Chua`) in the sum of C$2,184,144.10 (`the judgment sum`) together with interest and costs. Chua failed to pay any part of the judgment sum and on 20 July 1990, Chua was adjudged a bankrupt on a petition presented by the plaintiffs to the same court on 2 February 1990. Pursuant to the receiving order made against him, Coopers & Lybrand (`the trustees`) were appointed the trustees of Chua`s estate.

Under s 71(2) of the Canadian Bankruptcy and Insolvency Act (`the Act`), Chua ceased to have any capacity to dispose or otherwise deal with his property upon the receiving order being made against him. Under s 71(1) of the Act, Chua`s bankruptcy related back to the date that the petition was filed against him.

Chua held a membership (`the membership`) at the Singapore Island Country Club (`SICC`) and, on or about 22 May 1992, he gave a power of attorney to his sister-in-law, Madam Heah Siew Im (`Heah`), who purported to transfer the membership to the defendant who is her godson. SICC was not informed of Chua`s bankruptcy prior to the transfer.

On 30 April 1993, the plaintiffs obtained an order under s 38 of the Act authorizing the plaintiffs to commence action in Singapore or elsewhere for, inter alia, a declaration:

(a) that the transfer by Chua to Heah and or the defendant (of the membership) was void as against the trustees;

(b) that Heah and or the defendant held the membership in trust for Chua and that they be directed to transfer the membership to the plaintiffs.

On 6 May 1993 the trustees assigned and transferred all their rights title and interest in the membership to the plaintiffs.

On 2 June 1993, the plaintiffs commenced proceedings in Singapore in Suit No 1189 of 1993 (`the suit`) against the defendant for, inter alia, a declaration:

(a) that the transfer of the membership to the defendant is void;

(b) in the alternative, that the defendant holds the membership in trust for the plaintiffs.

After service of the writ of summons in the suit, the defendant and the plaintiffs, through their respective solicitors, negotiated a settlement which terms, as set out in the facsimile transmission from the defendant`s solicitors to the plaintiffs` solicitors on 2 July 1993 (see exh P3 of Woon Kok Yan`s affidavit), are as follows:

(a) the defendant would pay the plaintiffs $130,000 in exchange for the plaintiffs` agreement to relinquish their claim on the membership;

(b) the defendant would pay the plaintiffs` costs agreed at $10,000;

(c) the defendant would pay the total sum of $140,000 by 9 July 1993;

(d) upon payment, the suit would be discontinued with the defendant`s consent.

On 9 July 1993, after the plaintiffs` solicitors had forwarded the notice of discontinuance (for the suit) to the defendant`s solicitors for endorsement of their consent, the latter wrote to say that as the membership had ceased due to Chua`s bankruptcy pursuant to r 43(a)(ii) of SICC`s rules (`the rule`), the defendant would not pay the agreed sum unless the plaintiffs gave him an indemnity.

The rule states:

any member who has been adjudicated bankrupt as from the date of such adjudication ceases to be a member; provided that a member who has lost his membership under the provisions of r 43(a)(ii) may, on his discharge from bankruptcy, apply to the committee for reinstatement of his membership and the committee may, in its absolute discretion, approve and accept such application upon such terms as the committee may see fit to impose.

The defendant`s request was promptly rejected by the plaintiffs` solicitors who gave notice that if the required payment was not made on time, the plaintiffs would institute a fresh action based on the settlement. In response, the defendant`s solicitors reiterated the defendant`s stand and, on the same day, filed his defence to the suit.

Accordingly, on 15 July 1993, the plaintiffs commenced these proceedings and sought an order that the defendant pay to them forthwith S$140,000 together with interest at 10% from 10 July 1993. The application was supported by an affidavit of the plaintiffs` credit manager, Woon Kok Yan.

The defendant`s attempt to strike out these proceedings on the basis that it amounted to an abuse of the process of the court was unsuccessful. In his affidavit filed on 17 August 1993 to oppose the plaintiffs` application, the defendant exhibited a letter (`exh C`) he had received from the SICC dated 5 August 1993 which stated:

The club has just become aware that the transferor Chua Kung Siew had been adjudged a bankrupt in Canada on 20 July 1990. Under the then r 43 of the club`s Rules, he ceased to be a member as of that date. Accordingly, his conversion of his membership to a transferable one and subsequent transfer to you are of no effect.

The club now gives you notice that your membership will be terminated with immediate effect and your name will be deleted from the register of members.

Kindly arrange for your membership cards (4), golf tags(4) and car labels ... to be returned to the club ... for cancellation ...

The defendant contended that he could not proceed with the settlement reached with the plaintiffs as the membership was non-existent. His offer was in effect to buy over the membership from the plaintiffs at the then prevailing market price of $220,000 less transfer ($40,000) and conversion fees ($50,000) rather than his surrendering the membership to them. It would be foolish of him to part with $140,000 if the membership was non-existent, hence his request for an indemnity that the plaintiffs refund him the $140,000 in the event SICC claimed the return of the membership after he had complied with the settlement. He had entered into the settlement based on a mistake of fact - both parties believed that the assignment to the plaintiffs from the trustees was valid when it was null and void because of the rule.

The arguments

Counsel for the plaintiffs put forward the following arguments in support of his clients` claim:

(1) The plaintiffs do not accept the defendant`s interpretation of the rule. In any event, SICC`s ruling is not binding on the plaintiffs.

(2) The only issue is whether the court can look behind a settlement that has been reached bona fide between the parties. The plaintiffs say the court cannot as, if a settlement can be set aside based on subsequent developments or knowledge, there can never be a true settlement or finality (see Foskett`s The Law and Practice of Compromise ; Knowles v Roberts ; Holsworthy Urban District Council v Holsworthy Rural District Council and Callisher v Bischoffsheim ).

(3) As an unimpeached compromise represents the end of a dispute, it matters not whether, as alleged by the defendant, there was a failure of consideration or mistake or ultra vires. The defendant`s reasons for settling the suit and what he knew or did not know at the material time are not relevant as the defendant cannot be allowed to renege on a settlement.

(4) SICC`s letter to the defendant dated 5 August 1993 (supra) talked of cessation of membership with immediate, not retrospective, effect; therefore, the defendant enjoyed SICC`s facilities from the time of the transfer until that date.

(5) If the membership is void as the defendant contended, then there is no necessity for an indemnity as an indemnity can only be given for something voidable. Therefore, by seeking an indemnity, the defendant was taking an inconsistent stand. The rule only made a membership voidable (see the proviso) and does not automatically terminate a membership since it would be difficult to police an automatic termination based on bankruptcy.

(6) The defendant`s allegation was not that the plaintiffs do not have an assignment from the trustees but that the effect of the assignment was no longer valid. Therefore, the true nature of the mistake was not one of fact, as the...