Otech Pakistan Pvt Ltd v Clough Engineering Ltd and Another

• Jurisdiction: Singapore
• Judge: Chan Sek Keong CJ
• Judgment Date: 27 December 2006
• Neutral Citation: [2006] SGCA 46
• Docket Number: Civil Appeal No 51 of 2006
• Date: 27 December 2006
• Year: 2006
• Published date: 08 January 2007
• Plaintiff Counsel: Wendy Tan and Rajmohan (Haq & Selvam)
• Citation: [2006] SGCA 46
• Defendant Counsel: Steven Chong SC, Sim Kwan Kiat and Kelvin Poon (Rajah & Tann)
• Court: Court of Appeal (Singapore)
• Subject Matter: Champerty,Contract,Whether agreement champertous and unenforceable,Whether plaintiff entitled to payment under agreement,Whether law of champerty applying to all kinds of legal disputes including those referred to arbitration,Plaintiff alleging agreement subsequently revised and plaintiff entitled to larger percentage of settlement sum -Whether concluded agreement to revise plaintiff's compensation existing,Formation,Agreement between plaintiff and defendant for plaintiff to assist defendant in securing settlement in legal proceedings between defendant and third party

27 December 2006

Judith Prakash J (delivering the judgment of the court):

Facts

1 The first respondent, Clough Engineering Ltd (“Clough”), entered into two contracts with the Oil and Gas Development Company Limited (“OGDCL”), a government-owned corporation in Pakistan, in connection with the construction of two gas-condensate processing plants. The first, entered into in 1992, was for the upgrading and extension of the Dhodak gas plant (“the Dhodak project”) and the second, concluded in 1995, was for the upgrading and extension of the Dakhni gas plant (“the Dakhni project”).

2 Neither project went well. The Dakhni project was suspended in November 1996 by OGDCL which then sought to encash a performance guarantee furnished by Clough. In respect of the Dhodak project, Clough suffered loss and damage, and commenced legal proceedings in Pakistan against OGDCL in 1997. Considering that it needed local expertise to help it resolve its difficulties with OGDCL, Clough engaged the services of the appellant, Otech Pakistan Pvt Ltd (“Otech”), to assist it in relation to OGDCL’s claims against it and in prosecuting its own claims against OGDCL.

3 On 2 April 1997, Clough entered into an agreement with Otech (“the 1997 Agreement”) under which Otech agreed to do the following:

(a) assist Clough to defend its rights against OGDCL;

(b) present and negotiate Clough’s claims against OGDCL in respect of both projects;

(c) retain, seek advice, and give information and instructions to lawyers and other professionals to protect Clough’s rights against OGDCL and to negotiate its claims against OGDCL; and

(d) assist Clough in reaching a negotiated settlement with OGDCL in respect of Clough’s pending claims in relation to the projects.

4 In return for these services, Clough agreed to pay Otech:

(a) 40% of any sum in excess of US$8m recovered from OGDCL with respect to the Dakhni project dispute; and

(b) half of any amount in excess of US$3m recovered from OGDCL with respect to the Dhodak project dispute.

5 Despite Otech’s engagement, Clough’s disputes with OGDCL remained unresolved. At the end of 1999, Clough decided that a negotiated settlement with OGDCL was preferable as its claims against OGDCL were unlikely to succeed and Clough wanted to bid for further projects in Pakistan. As Clough wanted to offer Otech an incentive to conclude a negotiated settlement with OGDCL, the parties conducted discussions on a more advantageous remuneration package. At a meeting in Singapore on 1 November 1999, a possible revision of the compensation formula for Otech’s services was discussed.

6 Subsequently, Clough became dissatisfied with Otech’s performance. Its relationship with Otech deteriorated and on 26 February 2002, Clough terminated Otech’s services. Otech accepted the termination.

7 In July 2004, Clough finally settled its disputes with OGDCL for US$7.515m. Otech then insisted that an agreement had been reached on 1 November 1999 for Otech to be paid 20% of any settlement sum paid by OGDCL to Clough. When Clough refused to pay Otech, Otech commenced an action against both Clough and one of its directors, William Harold Clough (“the second respondent”). It sued Clough for breach of the agreement allegedly concluded on 1 November 1999 and sued the second respondent for procuring the breach of that agreement. Otech’s case had to be put on this basis because it was not entitled to any remuneration under the original terms of the 1997 Agreement since the settlement amount was less than US$8m.

The decision below

8 The action was heard by Tan Lee Meng J (“the Judge”) who dismissed Otech’s claims. In his written judgment, which is reported as Otech Pakistan Pvt Ltd v Clough Engineering Ltd [2006] 3 SLR 1 (“HC”), the Judge held that:

(a) there was no evidence of an agreement between the parties on 1 November 1999 for Otech to be paid 20% of the net settlement sum received by Clough from OGDCL (HC at [26]);

(b) even if the 1997 agreement had been revised on 1 November 1999, Otech was not entitled to the amount claimed because it had played no part in the conclusion of the settlement of the disputes between Clough and OGDCL (HC at [33]);

(c) as Otech’s claim against Clough lacked substance, it was unnecessary to consider whether the alleged 1999 agreement was void on the ground of champerty (HC at [34]); and

(d) Otech’s claim against the second respondent for inducing breach of contract was without foundation (HC at [35]).

9 Otech appealed against the above decision. We dismissed the appeal and now give the reasons for our decision.

The issues in the appeal

10 The issues that arose in the appeal were the same issues that arose before the Judge. They were:

(a) Whether there was a concluded agreement on 1 November 1999 to revise the compensation formula under the 1997 Agreement so that Otech would be entitled to receive 20% of any recovery that Clough obtained from OGDCL.

(b) Whether Otech had performed its side of the bargain in respect of the 1997 Agreement as varied so as to be entitled to the compensation claimed.

(c) Whether the 1997 Agreement was, in any event, champertous and therefore unenforceable.

(d) On the basis that the 1997 Agreement was valid, whether the second respondent was liable to Otech for inducing Clough to breach its contract with Otech.

Did the parties agree on 1 November 1999 to revise the payment formula in the 1997 Agreement?

11 The Judge considered this issue in the light of Otech’s pleaded case that its claim was based on an oral agreement concluded on 1 November 1999. He noted that since a party is bound by its pleadings, Otech’s case had to fail if no agreement was made on that date. The Judge referred to the evidence of Mr Sohail Latif (“Mr Latif”), the president of Otech, that the conclusion of the oral agreement was confirmed by two e-mails sent to him on 8 November 1999 and 10 November 1999 respectively by Clough’s International Director, Mr Jeremy James Roberton (“Mr Roberton”). The Judge examined this correspondence and concluded that its contents made it clear that the proposed revision of the 1997 Agreement had not been finalised on 1 November 1999.

12 The Judge also considered Mr Latif’s reply e-mail of 9 November 1999 and held that this was a counter-proposal to a draft proposal made by Mr Roberton and thus that the correspondence taken together showed that there had been no agreement on 1 November 1999. Of equal significance to the Judge was Mr Latif’s concession during cross-examination that Mr Roberton’s e-mails of 8 and 10 November 1999 did not refer to any concluded agreement between the parties. In the view of the Judge, “Mr Latif’s volte face effectively scuttled Otech’s case against [Clough] altogether” (HC at [24]). He concluded that there was no evidence whatsoever of an agreement between the parties on 1 November 1999 for Otech to be paid 20% of the net settlement sum received by Clough from OGDCL and therefore Otech’s claim had to be dismissed.

13 On appeal, Ms Wendy Tan, counsel for Otech, submitted that the Judge had erred in finding that there was no evidence of an agreement in 1999 because he had not taken account of clear admissions made by Mr Roberton in correspondence after 1 November 1999. This correspondence was not that which was exchanged in November 1999 itself but correspondence that was generated much later, having been sent out between 8 November 2001 and 26 February 2002. The only contemporaneous document that she sought to rely on was an internal memorandum that Mr Roberton had sent to his colleagues on 4 November 1999. Ms Tan argued that the documents she was relying on admitted to the existence of a contract through the use of the words “agreed” and “agreement”. Although she accepted that the correspondence referred to by the Judge had used the words “draft” and “draft proposal” in relation to the remuneration terms discussed, Ms Tan argued that these e-mails merely reflected an attempt on Clough’s part to further vary an agreement which had been reached on 1 November 1999.

14 Despite the valiant arguments made by Ms Tan, she was not able to overcome the wealth of contemporaneous evidence that showed that no agreement had been reached on 1 November 1999 itself. In our judgment, the Judge’s finding on this issue could not be upset. We will discuss the evidence that supported his decision before dealing with the evidence on which Ms Tan relied.

15 The first document that was generated after the meeting of 1 November 1999 was an e-mail sent the very next day by Mr Roberton to his colleagues. The relevant portions of that read:

Subject: Meeting with Otech

Otech is willing to consider a change in arrangements – our ideas were floated but not detailed. I am to put something to him asap with a view to finalising something when I am back in Singapore next week.

That memorandum clearly indicated that the discussion with Mr Latif had been preliminary and had not resulted in a finalised contract.

16 Two days later, on 4 November 1999, Mr Roberton sent his colleagues an e-mail attaching the draft of a letter to Mr Latif that incorporated comments from his colleagues and saying that if they agreed he would send it to Mr Latif. The last sentence of the e-mail read:

I would like to send it to Sohail as that was what we agreed with him and I believe I should be seen as the one dealing with him.

In her submissions, Ms Tan emphasised this last sentence and said that it showed that there had been an agreement on 1 November 1999. Mr Roberton was, however, asked about this e-mail in cross-examination and it was suggested that his use of the word “agreed” showed that a contract had been concluded on that date. He rejected that suggestion. He explained that in using the word “agreed”, what he had been referring to was an agreement that he would be the one dealing with Mr Latif and therefore he had stated in his e-mail that he wanted to send the proposal to Mr Latif. Whilst this...