Peng Ann Realty Pte Ltd v Liu Cho Chit

JurisdictionSingapore
Judgment Date02 June 1994
Date02 June 1994
Docket NumberSuit No 1487 of 1987
CourtHigh Court (Singapore)
Peng Ann Realty Pte Ltd
Plaintiff
and
Liu Cho Chit and others
Defendant

[1994] SGHC 156

Goh Joon Seng J

Suit No 1487 of 1987

High Court

Evidence–Proof of evidence–Standard of proof–Whether inference sufficiently compelling to satisfy high standard of proof in cases where fraud alleged–Limitation of Actions–Effect of time having run–Whether claim by beneficiary against trustee for conspiracy to defraud time barred–Section 22 (1) Limitation Act (Cap 163, 1985 Rev Ed)–Tort–Conspiracy–Company alleging conspiracy to defraud due to selling of its land at inordinately low price for managing director's benefit–High standard of proof–Whether directors knew that part of land would not be acquired–Whether purchaser of land knew that part of land would not be acquired–Whether fraud could be inferred

The plaintiff company, Peng Ann Realty Pte Ltd (“PAR”), was incorporated on 14 June 1972 in order to buy a 186.7 acre piece of land (“the land”). The first defendant, Liu, and the third defendant, Yip, were directors of PAR. However, 5.8 acres of the land were compulsorily acquired and it appeared that the rest of the land would likewise be acquired. On 23 January 1973, PAR agreed to sell the land to Collin Investment Pte Ltd (“CIP”), in which the second defendant, Tan, was a shareholder, for $2.05 million. Soon after, four side agreements were concluded for CIP to sell an “approximate area of 5 acres” of the land (“the 5 acres”) to Collden Realty Pte Ltd although there was no access to the area. These agreements involved Liu's wife and Tan's daughter. Tan's daughter was not aware of these transactions and did not authorise Tan to act on her behalf. The sale was completed on 14 March 1973. On 23 July 1976, the land was compulsorily acquired save for 4.2 acres of the 5 acres dealt with in the side agreements.

On 23 June 1984, due to disputes arising from the side agreements, Liu's wife commenced action against Tan, the fourth defendant and CIP. PAR alleged that it became aware of the side agreements only at this stage and accordingly commenced the present proceedings on 25 May 1987 alleging conspiracy to defraud on the part of Liu, Tan and Yip. PAR also argued that Liu and Yip were in breach of their fiduciary duty under s 157 (1) of the Companies Act (Cap 50, 1990 Rev Ed) because they did not give PAR the benefit of their knowledge that the 5 acres would not be compulsorily acquired. However the allegations of breach of duty as directors were eventually not pursued.

The defendants denied liability on the basis that the controlling shareholder of PAR had been informed of the side agreements. They also argued that the claim was time barred.

Held, allowing the claim against all the defendants except the third defendant:

(1) In cases where fraud is alleged, the plaintiff must prove its case to a higher standard than in a non-fraud case. Circumstantial evidence may be used to infer fraud, but must be so compelling and convincing that, bearing in mind the high standard of proof, one is nevertheless satisfied that an inference of fraud is justified. On the evidence, there was no basis for inferring conspiracy to defraud or a breach of duty on the part of Yip: at [33] and [34].

(2) On the part of Liu and Tan, there was sufficient evidence to infer a conspiracy to defraud. The side agreements were not as open as contended because the names of Liu's wife and Tan's daughter were used as nominees. Tan's daughter did not even know of the side agreements. Additionally, since there was no legal access to the 5 acres, it had no prospect of being a subdivided lot and hence could not be conveyed. Yet, Liu undertook to obtain its subdivision and assured Tan that the 5 acres would not be compulsorily acquired: at [35] to [40].

(3) Liu's actions and the terms of the sub-agreements showed that Liu and Tan knew that the 5 acres would not be acquired or could be left out of the acquisition of the surrounding land. Due to this, the value of the land sold to CIP was considerably more than the purchase price of $2.05 million: at [41].

(4) PAR's claim was not statute barred because s 22 (1) of the Limitation Act (Cap 163, 1985 Rev Ed) applied. That section provided an exception for an action in respect of any fraud to which the trustee was a party or privy to. Here, PAR's claim was that of a beneficiary against Liu as trustee for conspiracy to defraud. Further, Liu had knowledge that the 5 acres would or could be left unacquried. The exception was therefore applicable: at [46].

Sumitomo Bank Ltd v Thahir Kartika Ratna [1992] 3 SLR (R) 638; [1993] 1 SLR 735 (folld)

Companies Act (Cap 50, 1990 Rev Ed) ss 157 (1), 157 (3)

Limitation Act (Cap 163, 1985 Rev Ed) s 22 (1) (consd);s 22 (2)

H E Cashin and Lalita Seenivasan (Murphy & Dunbar) for the plaintiff

Woo Tchi Chu and Pee Hwee Leng (Robert W H Wang & Woo) for the first defendant

C S Wu and Jimmy Yap (Donaldson & Burkinshaw) for the second defendant

Harpal Singh (Harpal Wong & M Seow) for the third defendant.

Judgment reserved.

Goh Joon Seng J

1 The plaintiffs are a company incorporated in Singapore on 14 June 1972. The first defendant was the managing director from the date of incorporation to 3 March 1978. The other directors at the material time were the third defendant and one Koh Chee Chong. The third defendant was the nominee of one Lok Bok Sim (“LBS”) who was at all material times in effective control of the plaintiffs.

2 The first defendant through his company, Hoe Huat Construction & Engineering (Pte) Ltd (“Hoe Huat”), was at all material times a contractor of the Housing & Development Board (“HDB”). He had known the late Mr Teh Cheang Wan since 1966 when the latter was the Chief Architect of HDB. LBS was at all material times the managing director of Singapore Finance Ltd. In or about 1970, the first defendant came to know LBS and thereafter they became business associates. Through his company, Hoe Huat, the first defendant assisted LBS in the latter's housing development at Mandalay Road from around 1971 to 1973.

3 In 1972, through Mr Koh Chee Chong, LBS came to know that the piece of land at Kampong Chai Chee with an area of 186.7 acres comprised in Lots 21-26, 4-4, 4-7, 120, 121, 122 and 123 and 221 of Mukim 28 was available for sale. Having agreed on the price at $1.09m with the owners, the estate of Tan Chwee Boon, deceased, the plaintiff company was incorporated for the purchase of the land. The contract for the purchase was entered into in or about June 1972. Completion took place on 27 October 1972. Pending completion, on 20 July 1972 two of the lots, namely, 221 and 4-4 with a total area of 5.8 acres were acquired by the Government. Some neighbouring lands were also acquired. The compensation paid was $228,000 or $0.89 per square foot.

4 On 23 January 1973, following negotiations between the first defendant on behalf of the plaintiffs and the second defendant on behalf of Collin Investment Pte Ltd (“CIP”), now known as Lee Kai Investment Pte Ltd, an agreement (“the main agreement”) was entered into by which the plaintiffs agreed to sell three of the lots (“the three lots”), namely, Lots 21-26 (156 acres, 2 roods and 20 poles), 4-7 (19 acres, 1 rood and 6 poles), 123 (2 acres, 3 roods and 11 poles) to CIP for $2.05m. This worked out at about $0.25 per square foot irrespective of the zoning. The three lots were within four zones under the master plan, that is, about 50.13% were zoned “water catchment”, 20.02% “rural”, 7.84% “permanent residential” and 22.01% “temporary residential”. The main agreement was signed by the first defendant on behalf of the plaintiffs and by the second defendant on behalf of CIP.

5 Along side the main agreement, four side agreements (“the side agreements”) were entered into on the same day or some days later but backdated to 23 January 1973. They were:

(a) An agreement (“the subsale agreement”) between CIP as vendor and Mdm SS Lim (“Lim Siam Soi”), the wife of the first defendant, and Miss Collin Tan (“Collin Tan”), daughter of the second defendant, as purchasers. The second defendant signed the subsale agreement on behalf of CIP and Collin Tan. The first defendant signed on behalf of Lim Siam Soi. By the subsale agreement, part of Lot 21-26 zoned residential described in the schedule as “approximate area of 5 acres” and stated in the annexed plan as “ 5 acres” (“the 5 acres”) was sold by CIP to Lim Siam Soi and Collin Tan at the price of $50,000 or about $0.25 per square foot.

(b) An agreement (“the Collden agreement”) between Lim Siam Soi and Collin Tan as vendors and Collden Realty Pte Ltd (“Collden”) as purchasers, by which the 5 acres were agreed to be conveyed to Collden in consideration of which Collden would allot 22,500 shares of $1 each to Lim Siam Soi and 27,500 shares of $1 each to Collin Tan, the shares to be credited as fully paid in the books of Collden. This would give a shareholding of 45% to Lim Siam Soi and 55% to Collin Tan in Collden. The first defendant signed the Collden agreement on behalf of Lim Siam Soi. The second defendant signed on behalf of Collin Tan. No one signed on behalf of Collden presumably because it had not been incorporated at that time.

(c) An agreement (“the pre-incorporation agreement”) between Collin Tan and Lim Siam Soi, by which it was agreed that notwithstanding their respective proportion of shareholdings, that is, 55% and 45% respectively, Collin Tan would bear 80% whilst Lim Siam Soi would only bear 20% of the development costs of the 5 acres. It was also agreed that should Lim Siam Soi fail to contribute her share of 20% of the development costs Collin Tan was to advance same with interest at 10.8% pa. The first defendant again signed on behalf of Lim Siam Soi and the second defendant similarly signed on behalf of Collin Tan.

(d) An agreement (“the fall-back agreement”) between CIP of the one part and Lim Siam Soi and Collin Tan of...

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2 cases
  • Ching Mun Fong (representative of the estate of Tan Geok Tee, deceased) and Another v Peng Ann Realty Pte Ltd and another appeal
    • Singapore
    • Court of Appeal (Singapore)
    • 24 March 1995
    ... Cur Adv Vult ... The facts ... Liu Cho Chit (Liu) was at the material time one of the contractors of the Housing and Development Board (HDB). He conducted his contracting business through his company, Hoe Huat Construction & Engineering Pte Ltd (Hoe Huat). One Lok Bok Sim (Lok) was at all material times the managing director of Singapore ... ...
  • Fook Gee Finance Company Limited v Liu Cho Chit
    • Singapore
    • High Court (Singapore)
    • 30 April 1997
    ...other $25,000 on behalf of his daughter. I note that the court in Suit No 1487 of 1987 (see Peng Ann Realty Pte Ltd v Liu Cho Chit & Ors [1994] 3 SLR 576) found that Liu did not pay the $25,000 and the Court of Appeal did not disturb that finding (see Ching Mun Fong & Anor v Peng Ann Realty......
2 books & journal articles
  • APPROACHES TO THE EVIDENCE ACT: THE JUDICIAL DEVELOPMENT OF A CODE
    • Singapore
    • Singapore Academy of Law Journal No. 2002, December 2002
    • 1 December 2002
    ...Bank[1997] 1 SLR 258; Min Hong Auto Supply Pte Ltd v Loh Chun Seng & Anor[1993] 3 SLR 498; Peng Ann Realty Pte Ltd v Liu Cho Chit & Ors[1994] 3 SLR 576. 27 This was the view of the Attorney-General in “The Criminal Process — The Singapore Model” (the 10th Singapore Law Review Lecture) (1996......
  • YEO GEOK SENG V PP1 A DIRECTOR’S DUTY OF DISCLOSURE UNDER SECTION 156 COMPANIES ACT
    • Singapore
    • Singapore Academy of Law Journal No. 2000, December 2000
    • 1 December 2000
    ...plc[1992] BCLC 1084; Regal (Hastings) Ltd v Gulliver[1942] 1 All ER 378. 17 (1966) 67 SR (NSW) 279. 18 Section 157(3) Companies Act. 19 [1994] 3 SLR 576. 20 [2000] 2 SLR 501. 21 [1996] 2 SLR 109. 22 [1968] 1 QB 549, [1967] 3 All ER 98. 23 (1987) 3 BCC 520. 24 In Movitex Ltd v Bulfield[1988]......

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