Sitt Tatt Bhd v Goh Tai Hock

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 26 November 2008
• Neutral Citation: [2008] SGHC 220
• Docket Number: Suit No 560 of 2006
• Date: 26 November 2008
• Published date: 03 December 2008
• Year: 2008
• Plaintiff Counsel: Harpreet Singh Nehal SC and Lim Shack Keong (Drew & Napier LLC)
• Citation: [2008] SGHC 220
• Defendant Counsel: N Sreenivasan and Ramesh Bharani Nagaratnam (Straits Law Practice LLC)
• Court: High Court (Singapore)
• Subject Matter: Company entering into contracts,Incorporation of companies,Whether direct contract with sole shareholder and director should be implied,Constructive trusts,Agent paying money out for other purposes,Whether court should pierce the corporate veil,Contract,Companies,Whether payment out in breach of trust,Trusts,Collateral contracts,Whether company fulfilled obligations depending entirely on sole shareholder and director,Whether personal covenant should be implied into existing contracts,Whether money subject to trust,Agent knowing purpose of money,Sole shareholder and director of company receiving money as agent,Whether sole shareholder and director liable for breach of trust as alter ego of company,Quistclose trusts,Section 94 Evidence Act (Cap 97, 1997 Rev Ed),Company acting solely through sole shareholder and director,Lifting corporate veil,Parol evidence rule

26 November 2008 Judgment reserved

Judith Prakash J:

1 By this action, the plaintiff seeks the return of a sum of US$1 million which it remitted to the defendant’s personal bank account on 3 August 2005. The plaintiff has put forward two causes of action, one for breach of trust and the other for breach of contract. The defendant’s position is that he received the money on behalf of his company, Prime International Consultants Pty Ltd (“Prime”), which was entitled to it as a commitment fee and that he did not hold the same on trust for the plaintiff. He further denies that there was ever any contract between him and the plaintiff. The relevant contractual relations were between the plaintiff and Prime.

Background

2 The plaintiff is a company incorporated in Malaysia and listed on the Kuala Lumpur Stock Exchange. The key decision maker in the plaintiff at the material time was its Executive Deputy Chairman, Tan Sri Datuk Dr Mohan M K Swami (“Tan Sri Mohan”). In relation to the matters giving rise to this action, he was assisted chiefly by the plaintiff’s Director of Corporate Affairs, Ravi Navaratnam (“Mr Navaratnam”).

3 The defendant is a chartered engineer by profession. He emigrated to Australia from Singapore in 1987 and thereafter acquired a wealth of work experience in relation to oil and gas in the engineering, trading, marketing and consultancy sectors. In 1991, he procured the incorporation in Australia of Prime. Prime is wholly owned by the defendant. He is its sole shareholder and director. In relation to the matters giving rise to this action, Prime was assisted by its business consultant Kevin Humphrys (“Mr Humphrys”).

4 The next important player in this story is an Indonesian company, PT Kutai Timur Resources (“KTR”). In about April 2005, KTR received letters of recommendation from various local authorities in Indonesia allowing it to survey, study, mine, manage, revive, develop, explore, exploit and produce oil and gas from wells located in the region of Kutai Timur, East Kalimantan, Indonesia (the “Project”).

5 On 16 July 2005, Prime signed a memorandum of understanding (“MOU”) with KTR. The purpose of the MOU was to record the parties’ intentions to negotiate with each other to secure the Project and to define their respective responsibilities and interests in connection with the Project. Prior to the signing of the MOU, the defendant had met Tan Sri Mohan and had learnt that the plaintiff was interested in going into the oil and gas industry. The defendant had approached the plaintiff in connection with the Project because Prime and KTR required funding for the operation of the Project.

6 On 22 July 2005, the defendant and Mr Humphrys met Tan Sri Mohan in Prime’s office in Perth. They discussed the possibility of Prime and the plaintiff participating in a joint venture with KTR in relation to the Project. They then signed a document entitled “Heads of Agreement” which was expressed to be made between the plaintiff represented by Tan Sri Mohan and Prime represented by the defendant. This was a short document. It contained four terms. The relevant portion read as follows:

OBLIGATIONS

PI [Prime] to facilitate the successful signing of the Project Agreement in partnership with PT Kutai Timur Resources and other multinational oil and gas companies.

STB [the plaintiff] to compensate PI on the successful signing of the agreement by the following:

1. Within thirty days of the signing of the Project Agreement, make available the sum of US5,000,000 per oil field block (payable to PI or other parties nominated by PI).

7 Thereafter, Tan Sri Mohan went to Jakarta with the defendant to meet KTR. On 26 July 2005, Tan Sri Mohan met with Pak Sulaiman, the president of KTR, his colleague Abdullah Syafei (known to all as “Pak Sany”), and two officials from Pertamina (Indonesia’s state oil company). Pak Sulaiman told Tan Sri Mohan that KTR was considering inviting the plaintiff to participate as a partner in the joint venture for the Project. He also told Tan Sri Mohan that KTR would obtain the requisite approval for the Project from Pertamina in about two months. Tan Sri Mohan confirmed that the plaintiff was interested in participating, subject to the results of due diligence being satisfactory.

8 The defendant then produced a document entitled “Tripartite Joint Venture Agreement” (“TJVA”). The plaintiff reviewed the document and, after further discussion, the parties agreed on the terms of the TJVA. It was signed on 27 July 2005 by all three parties, viz, KTR, Prime and the plaintiff. At the same time, MOU signed a power of attorney (“POA”) in favour of Prime and the plaintiff. Among the salient terms of the TJVA were the following:

(a) KTR was desirous of working together with the plaintiff and Prime on the Project (Recital 8);

(b) the parties were desirous of entering into a further joint venture agreement (the “Final JVA”) to define their complete roles and responsibilities in the Project (Recital 8);

(c) the parties were to endeavour to achieve the terms of the TJVA in a timely and efficacious manner (Clause 1(1));

(d) upon the signing of TJVA, KTR was to confirm with the relevant authorities in Indonesia, including BP MIGAS and Pertamina, that the necessary approvals and licenses would be issued to enable KTR, Prime and the plaintiff to survey, study, mine, manage, revive, develop, explore, exploit and produce oil and gas from the Project (Clause 2(1)); and

(e) the plaintiff and Prime were to at all times act consultatively and jointly with each other to assist in negotiating relevant terms with third parties such as consultants, contractors, engineers, financiers and other external experts required to further the successful implementation of the Project (Clause 2(2)).

9 The parties have different versions of the next part of the story. According to Tan Sri Mohan, before he and the defendant left Jakarta on 28 July 2005, the defendant requested that the plaintiff make an upfront payment of US$5 million. This was the first time he had raised the issue of such a payment. He told Tan Sri Mohan that the money was needed to purchase a data pack from BP Migas which contained important geological information about the area where the Project’s oil wells were situated.

10 The parties arrived in Singapore on 28 July 2005. Tan Sri Mohan was joined by Mr Navaratnam and another colleague, Dato Pang Wee Pat (“Dato Pang”). All three of them had a meeting with the defendant the same day. At that meeting, the defendant said that “the Indonesians” were in Singapore and that they had asked for an upfront payment of US$5 million. After some discussion, the defendant reduced this amount to US$1 million and Tan Sri Mohan said that if the Project was genuine there should not be a problem about an upfront payment but that he needed authority from the plaintiff’s board in order to make the same. On 2 August 2005, the plaintiff’s board met and, after discussion, gave its mandate for a payment up to US$2 million.

11 On 3 August 2005, there was a meeting in Singapore between Tan Sri Mohan, Dato Pang, Mr Navaratnam and the defendant. Tan Sri Mohan informed the defendant that the plaintiff proposed to make payment directly to KTR in two stages: the first US$500,000 would be paid upfront and the balance US$500,000 would be paid after suitable operator for the Project had been appointed. The defendant did not accept this and it was eventually agreed that the sum of US$1 million would be paid to Prime. On 3 August 2005, the plaintiff remitted this sum to the defendant’s personal bank account in Singapore. In this connection, the plaintiff wrote a letter to Prime which read as follows:

Re: Acknowledgement of receipt of US$1,000,000.00

With reference to your letter dated 29 July 2005, authorizing the payment of US$1,000,000.00 to be made to Mr. GOH TAI HOCK, kindly acknowledge receipt of the sum of US$1,000,000.00 via Telegraphic Transfer (TT) enclosed herewith being an up front payment to secure the Project as stipulated under the Tripartite Joint Venture Agreement between PT Kutai Timur Resources and Sitt Tatt Berhad and Prime International Consultants Private Limited.

The letter was signed by Dato Pang. Beneath his signature, there was an acknowledgement of receipt of the US$1 million signed by the defendant.

12 The defendant’s version of events as set out in his affidavit of evidence-in-chief was that during the meeting in Perth on 22 July 2005, Tan Sri Mohan had agreed that Prime would receive a sign-on fee if it succeeded in getting the plaintiff involved in the Project by signing agreements with KTR. This fee was discussed and agreed in an amount of up to AUD 2 million. It was understood that a portion of these monies would be paid to KTR’s representatives. Tan Sri Mohan suggested that after the plaintiff had signed agreements with KTR, he and the defendant should fly into Singapore for Prime to collect the sign-on fee.

13 During the subsequent discussions with KTR in Jakarta, KTR agreed to appoint Prime and the plaintiff as its attorneys under the POA in order to facilitate the progress of the Project. The POA was signed on 27 July 2005. Thereafter, according to the defendant, Prime and the plaintiff at a separate meeting agreed that a sign-on fee of US$1 million (equivalent to AUD 2 million) would be paid by the plaintiff to Prime for the successful signing of the POA. A portion of these monies were to be disbursed to Pak Sulaiman and Pak Sany on behalf of KTR for their involvement in the signing of the POA and other agreements with KTR. The defendant said it was only on 28 July 2005 when he met Dato Pang in Singapore that he and Tan Sri Mohan were told that the approval of the plaintiff’s board would be required for the payment of the sign-on fee. The defendant reiterated that the purpose of this payment was for Prime to assist the plaintiff to secure its involvement in the Project by signing the POA, the...