Publicis Group SA v Chong Hon Kuan Ivan

• Jurisdiction: Singapore
• Judge: Tan Lee Meng J
• Judgment Date: 28 February 2003
• Neutral Citation: [2003] SGHC 41
• Court: High Court (Singapore)
• Year: 2003
• Published date: 07 October 2003
• Plaintiff Counsel: Prakash Mulani and Parhana Moreta (J Koh & Co)
• Defendant Counsel: Chong Boon Leong, Ajinderpal Singh, and Louis Chan (Rajah & Tann)
• Subject Matter: Civil Procedure,Whether proceedings begun by originating summons should continue as if they had been begun by writ,Rules of Court Order 28 rule 8(1).
• Citation: [2003] SGHC 41

1 In OS No 948 of 2002, the plaintiffs, Publicis Groupe SA ("Publicis"), a French public-listed advertising company, which entered into a Call and Put Option Agreement with the defendant, Mr Ivan Chong Hon Kuan ("Ivan"), the former managing director and chief executive of Publicis Eureka Pte Ltd with respect to the latter’s shares in that company, sought to enforce the terms of the said contract. After hearing the arguments of counsel for both parties, I ordered that the proceedings continue as if the cause or matter had been begun by writ for reasons which are set out below.

Background

2 Ivan is the founding member of Eureka Advertising Pte Ltd ("Eureka"), a local advertising agency. Under his management, Eureka made profits between 1980 and 1996. Having established the company in the local market, Ivan sought to raise Eureka’s profile in 1996 by entering into a joint venture with Publicis, a French company with an interest in the Asia-Pacific region. In December 1996, Publicis acquired 60% of the shares in Eureka, which was renamed Publicis Eureka Pte Ltd ("PEP"). The acquisition was on the assumption that Publicis and Ivan would work together to build PEP’s business. As such, Ivan was appointed PEP’s managing director and chief executive officer.

3 Publicis and Ivan also entered into a Call and Put Option Agreement, under which the former were granted an option to purchase the latter’s 76,800 shares in PEP "at any time within sixty (60) Business Days after the termination of [his] employment with the Company by notice in writing to [him] for all the option shares". The price for the shares was to be fixed with reference to an agreed formula and it was to be calculated and certified by PEP’s auditors.

4 Things did not turn out as expected. The working relationship between Publicis and Ivan deteriorated after the former incorporated a wholly owned subsidiary, FCA Communications, in Singapore and it worsened after Publicis acquired the interests of Saatchi & Saatchi, an international advertising agency, in September 2000. Ivan complained vociferously that Publicis diverted lucrative business from PEP to their other companies. On the other hand, Publicis, which denied diverting profits from PEP to FCA, contended that FCA sheltered PEP from operating losses.

5 On 6 November 2000, Ivan’s solicitors, Rajah & Tann, asserted in a letter to Publicis’ solicitors, J Koh & Co, that Publicis had acted in a manner prejudicial to Ivan’s interest and added that he and two other original shareholders were prepared to sell their shares (the "original shareholders’ shares") in PEP to Publicis for not less than $6.4m.

6 Negotiations for the sale and purchase of the original shareholders’ shares continued without a breakthrough for a while. To break the impasse, Publicis’ chairman and chief executive officer, Mr Maurice Levy, informed Ivan on 15 May 2001 that his company was prepared to purchase the original shareholders’ shares for $4.4m and pay for them on the basis of a time-table proposed by Ivan. On 21 May 2001, Ivan, who claimed to have accepted Maurice’s offer, replied that he was glad that the parties had "finally come to an agreement".

7 The parties were supposed to sign legal documents with respect to the sale and purchase of the said shares. Unfortunately, these documents were not signed because of some disagreement between the parties. On 2 October 2001, Ivan informed Publicis that as the latter had reneged on the agreement to purchase his shares, he would commence legal proceedings. On 9 February 2002, Ivan’s employment with PEP was terminated. On 11 June 2002, Publicis sought to exercise their right under the Call and Put Option Agreement to purchase Ivan’s shares in PEP for only $2,267,904, the price calculated and certified by PEP’s auditors, Ernst & Young. Ivan refused to transfer the shares in question to Publicis.

8 A number of suits were filed by Ivan as a result of the dispute between the parties. These include actions in relation to his claim for damages for wrongful termination of his contract of employment, his application for leave under section 216A of the Companies Act to commence an action on behalf of PEP against Publicis, and his allegation of oppression against minority shareholders. Ivan could not serve the requisite documents in his numerous suits on Publicis in Singapore as the latter refused to appoint local solicitors to accept service of the said documents. Having made it difficult for Ivan to serve the said documents in Singapore, Publicis then instructed J Koh & Co to file OS No 948 of 2002 on 9 July 2002 to enforce the terms of the Call and Put Option Agreement.

9 Frustrated at not being able to serve on Publicis in Singapore the requisite documents in connection with his suits, Ivan sought leave for substituted service of the said documents on J Koh & Co. He also attempted to have his suits consolidated with OS No 948 of 2002. Publicis opposed Ivan’s applications, claiming that they had no intention to evade service and that service of the requisite documents in France was neither impossible nor impracticable. The Deputy Registrar, who heard Ivan’s application on 22 August 2002, thought that the application for substituted service was premature. As such, the question of consolidation of the numerous actions in question did not arise.

Whether the dispute can be resolved on the basis of affidavit evidence

10 An originating summons may be a relatively simple and swift way of determining the rights and liabilities of the parties concerned. However, it is not an appropriate process where there is a dispute regarding essential facts which cannot be resolved on the basis of affidavits. Hence, Order 28 Rule 8(1) of the Rules of Court provides as follows:

Where, in the case of a cause or matter begun by originating summons, it appears to the Court at any stage of the proceedings that the proceedings should for any reason be continued as if the cause or matter had been begun by writ, it may order the proceedings to continue as if the cause or matter had been so begun and may, in particular, order that pleadings shall be delivered or that any affidavits shall stand as pleadings, with or without liberty to any of the parties to add thereto or to apply for particulars thereof.

11 Ivan’s counsel contended that whether or not Publicis may rely on the Call and Put Option Agreement cannot be determined on the basis of affidavit evidence. He made the following points:

(i) The Call and Put Option Agreement is no longer relevant as the shares in question had already been sold for a higher price in May 2001 when Ivan accepted Publicis’ offer of 15 May 2001.

(ii) It was not the intention of the parties that Publicis would have the right to purchase Ivan’s shares under the terms of the Call and Put Option Agreement if his employment was, as he asserted, wrongfully terminated.

(iii) Publicis should not be allowed to take advantage of the courts to enforce their claim in OS No 948 of 2002 when they have made things difficult for Ivan by refusing to appoint local solicitors to accept service of the requisite documents in his suits against them.

(iv) The provisions in the audited accounts for the financial year 2001 are being disputed by Ivan and as the appointment of Ernst & Young as the company’s auditor is an issue pending adjudication in OS No 347 of 2002, Publicis cannot rely on the calculations made by this firm of auditors for the purposes of the Call and Put Option Agreement,

Only the first three assertions will be considered in this judgment as they are sufficient to establish that the originating summons in question ought to be converted to a writ.

Whether there was a binding agreement in May 2001

12 If, as Ivan alleged, there was a binding agreement for the sale and purchase of Ivan’s shares in May 2001, Publicis cannot rely on the terms of the Call and Put Option Agreement to purchase his shares. Publicis contended that whatever may have transpired between the parties in May 2001, there was no contract because the parties did not sign the requisite legal documents pertaining to, inter...