SPacific Resources Ltd v Tomolugen Holdings Ltd

• Jurisdiction: Singapore
• Judgment Date: 10 May 2016
• Date: 10 May 2016
• Docket Number: Suit No 1076 of 2014 (Registrar’s Appeal No 150 of 2015) Chua Lee Ming JC
• Court: High Court (Singapore)

SPacific Resources Ltd

and

Tomolugen Holdings Ltd

[2016] SGHC 88

High Court — Suit No 1076 of 2014 (Registrar’s Appeal No 150 of 2015) Chua Lee Ming JC

Suit No 1076 of 2014 (Registrar’s Appeal No 150 of 2015) Chua Lee Ming JC

High Court

Contract — Consideration — Plaintiff and defendant entering into share sale and put option agreement — Plaintiff purchasing shares from defendant — Defendant granting plaintiff put option to require defendant to purchase same shares — Clause in agreement allowing any period to be extended by mutual agreement between parties — Parties entering into amendment agreement extending option period indefinitely — Whether amendment agreement supported by consideration

Contract — Contractual terms — Condition precedent in agreement requiring plaintiff to provide board resolution of plaintiff for completion of sale of shares — Whether condition precedent also applied to completion of purchase of shares by defendant if plaintiff exercised put option

Pursuant to a share sale and put option agreement (“the Agreement”), the plaintiff purchased 2.9 million shares (“the Sale Shares”) in Auzminerals Resource Group Limited from the defendant for S$12.5m. Pursuant to cl 2B of the Agreement, the defendant granted the plaintiff a put option (“the Put Option”) to require the defendant to purchase the 2.9 million shares (“the Option Shares”) from the plaintiff at S$12.5m.

The Put Option would expire if it was not exercised within the option period (“the Option Period”). As originally defined, the Option Period expired after 13 May 2013. Clause 9 of the Agreement provided that any period mentioned in the Agreement could be extended by mutual agreement between the parties. The plaintiff requested that the Option Period be extended and, pursuant to an amendment agreement dated 7 March 2013 (“the Amendment Agreement”), the Option Period was amended by removing the expiry date. On 5 August 2014, the plaintiff exercised the Put Option. The defendant failed to complete the purchase of the Option Shares.

On 17 November 2014, judgment in default of appearance was entered against the defendant. On 12 May 2015, an assistant registrar (“the AR”) set aside thejudgment on the defendant’s application. The plaintiff appealed against the AR’s decision.

On appeal, the defendant argued that the default judgment should be set aside because there were two triable issues. The first was whether the Amendment Agreement was supported by consideration; if not, it was not binding and the plaintiff’s exercise of the Put Option was invalid. The second was whether the plaintiff’s exercise of the Put Option was subject to the conditions precedent in cl 3A of the Agreement. Clause 3A(b) required the plaintiff to produce, not later

than the date for the completion of the Sale Shares, a board resolution approving the transactions contemplated in the Agreement, such resolution not having been varied or revoked on the completion of the Sale Shares or the completion of the Option Shares, as relevant. The defendant argued that cl 3A(b) required the plaintiff to produce a new board resolution for the completion of the sale of the Option Shares and that the condition precedent had not been fulfilled. The plaintiff submitted that production of the board resolution was a condition precedent to the completion of the plaintiff’s purchase of the Sale Shares and cl 3A(b) merely required that the same resolution should not have been varied orrevoked on or before the completion of the Option Shares.

Held, allowing the appeal:

(1) The Amendment Agreement was supported by consideration. At the time that the Amendment Agreement was entered into, the Option Period as originally defined had not yet expired. If the plaintiff exercised the Put Option by 13 May 2013, completion of the sale of the Option Shares would have had to take place within 30 days and the defendant would have had to pay the plaintiff $12.5m on completion. The Amendment Agreement extended the Option Period indefinitely. This benefitted the defendant as it reduced the risk that the plaintiff would exercise the Put Option by 13 May 2013, and consequently the risk that the defendant would have to pay the plaintiff $12.5m within 30 days thereafter: at [16] and [17].

(2) It did not matter that the plaintiff might still have exercised the Put Option by 13 May 2013 notwithstanding the amendment; the increased probability that it would not have done so was sufficient. It was settled law that the court did not concern itself with the adequacy of consideration: at [17].

(3) Clause 3A(b) did not require the plaintiff to produce a new board...