Straits Advisors Pte Ltd v Behringer Holdings (Pte) Ltd and Another

• Jurisdiction: Singapore
• Judge: Lee Seiu Kin J
• Judgment Date: 08 April 2009
• Neutral Citation: [2009] SGHC 86
• Court: High Court (Singapore)
• Published date: 16 April 2009
• Citation: [2009] SGHC 86
• Plaintiff Counsel: Surenthiraraj s/o Saunthararajah and Sharmini Selvaratnam (Harry Elias Partnership)
• Defendant Counsel: Gregory Vijayendran and Sung Jing Yin (Rajah & Tann LLP)
• Subject Matter: Contract
• Year: 2009

8 April 2009 Judgment reserved.

Lee Seiu Kin J:

1 This is an appeal from the decision of Assistant Registrar Then Ling (“the AR”) in Summons No 4224 of 2008 (“Sum 4224/08”). The defendants had taken out Sum 4224/08 to determine the following question:

Whether on a true construction of the Consultancy Agreement dated 10 November 2006 between the Defendants and the Plaintiff (“the Consultancy Agreement”) pleaded by the Plaintiff at paragraph 7 of the Statement of Claim filed herein on 4 August 2008 (in particular Clauses 3 and 4 of the same), Clause 4 is operative only one month after the Plaintiff receives written notification from the Defendants of:-

a) the 2^nd Defendant’s decision to proceed with a plan to list on a recognised stock exchange; or

b) there is an anticipated takeover action of the Defendants.

[emphasis in original]

Background to the Action

2 The plaintiff is a corporate finance advisory firm. The first defendant is a limited private company incorporated in Singapore and is in the business of general wholesale trading. The second defendant, an unregistered foreign company, is the sole shareholder of the first defendant. On 11 January 2006, the defendants engaged the plaintiff to provide services related to an intended initial public offering (“IPO”) of the shares of the second defendant.

3 The plaintiff and the defendants entered into four separate agreements on 11 January 2006. First, there was a letter (the “Release Letter”) under which the plaintiff released Dominic Andrla (“DA”) so that he could be appointed as the defendants’ Group Chief Financial Officer (“CFO”). Second, there was a letter which clarified the terms of the Release Letter (the “Side Letter”) with respect to the plaintiff’s remuneration. Third, there was an employment agreement entered into between DA and the defendants under which DA was appointed as Group CFO of the defendants (the “CFO Agreement”). I will refer to these three agreements (the Release Letter, the Side Letter and the CFO Agreement) collectively as the Previous Agreements. The fourth was a secondment agreement, under which Mr Ricardo Villanueva was to be seconded to the defendants as head of corporate finance.

4 On 16 October 2006, the defendants appointed a new CFO, Roch Low, and DA’s responsibilities as CFO were transferred to Roch Low. As a result, the plaintiff and the defendants entered into a consultancy agreement dated 10 November 2006 (the “Consultancy Agreement”) which was to supersede the Previous Agreements.

5 There arose a dispute as to whether the plaintiff’s or DA’s appointment had been terminated by the defendants. There was an exchange of email between Roch Low and DA with respect to the necessity of the plaintiff’s services but it is not necessary for me to make any finding as to whether the plaintiff’s services were terminated by the defendants. Thereafter, the plaintiff commenced Originating Summons No 417 of 2008 (“OS 417/08”) against the defendants, claiming to be entitled to 5,668,852 shares of the second defendant (the “Shares”) under the Consultancy Agreement. OS 417/08 was heard by Belinda Ang J, who ordered it to be converted into a writ. After this was done, the defendants applied under O 14 r 12 of the Rules of Court (Cap 322, r 5, 2006 Rev Ed) for the determination of the above question (at [1]).

6 I set out the salient terms of the Consultancy Agreement:

2 Terms and compensation for Mr Andrla’s services after Transfer Date

The terms for the provision of Mr Andrla’s services after the Transfer Date (the ‘Pre-Listing Terms’) are as follows:

Job Title:	Senior Consultant
Description:	To maintain a high level overview of issues relating to the Finance and Corporate Finance departments … so as to be ready to assist Behringer with its IPO …
Time contribution:	With effect from the Consultancy Date, Mr Andrla’s time devoted to Behringer will be determined solely by Mr Andrla. However, in any event, it will not exceed the equivalent of (2) working days a month. This time may or may not be spent at Behringer’s premises, at Mr Andrla’s discretion. Behringer is aware that Mr Andrla will spend part of his time attending to other business matters not relating to Behringer and is agreeable to the same.

…

In consideration for Straits Advisors’ services under this Agreement and, in particular, for the provision of Mr Andrla’s services to Behringer, Behringer hereby agrees to compensate Straits Advisors as follows:

Monthly payments S$8,333.33 per month …

3 Terms and compensation for Mr Andrla’s services after IPO Activation Date

The Pre-Listing Terms will be superceded by the following terms (“IPO Advisory Terms”) one month after Straits Advisors is notified in writing of the decision by BCL to proceed with a plan to list on a recognised stock exchange, or anticipated takeover action (“IPO Activation”):

Job Title:	Senior Consultant
Description:	To assist Behringer with its IPO on a recognized stock exchange …

…

In consideration for Straits Advisors’ services under this Agreement and, in particular, for the services of Mr Andrla to Behringer for the period after the IPO Activation Date, Behringer hereby agrees to compensate Straits Advisors as follows:

Monthly payments:	S$28,333 per month…
Bonus:	An annual performance bonus of S$85,000 based on reasonably agreed Key Performance Indicators (KPI)…
Success Fee:	See Section 4 below.

4 Success Fee

(1) We refer to the paragraph entitled ‘Shares’ in section 2 of the Release Letter, and 3.1 of the CFO Agreement and paragraphs 1 to 3 of the Side Letter referred to above. It is agreed, with immediate effect, as follows: -

(2) Behringer hereby agrees to issue shares in BCL to Straits Advisors or its nominee equivalent to 0.37 per cent of the post IPO (or post takeover, as applicable) share capital of BCL for a total nominal sum of US$100/- (the “Shares”). The Shares will be issued under the following circumstances:

(i) When approval has been granted by a recognised stock exchange for the listing of BCL’s shares, the Shares shall be issued upon receipt of the said approval. For the avoidance of doubt, the approval to list BCL’s shares shall be a condition precedent for the issuance of the Shares under this clause (i).

(ii) In the event of a takeover of Behringer of all or substantially all of its business, the Shares shall be issued on the offer becoming unconditional and, if applicable, the acquirer having secured more than 50 per cent of the issued share capital of BCL.

(3) In the event that Behringer terminates the appointment of Mr Andrla and/or Straits Advisors (other than for gross negligence or wilful default), prior to the conditions in (i) or (ii) above being satisfied, the Shares shall immediately be issued to Straits Advisors or its nominee for the total nominal sum of US$100/-.

…

(5) This Agreement may be terminated by Straits Advisors giving Behringer three months’ written notice or payment of the equivalent or three months’ monthly payments in lieu of notice.

(6) For the purposes of this agreement, IPO of Behringer will include the listing of any corporate vehicle as a result of any restructuring of the Behringer group resulting ultimately in the present business of BCL being listed. In the event that post IPO or post takeover share capital cannot be ascertained, the parties will agree to an equivalent number of shares in the existing share capital of BCL (or relevant corporate vehicle), provided that in any event it will not be less than 0.37 per cent of the present share capital of BCL.

[Emphasis added]

7 No IPO Activation notice was provided by the defendants. Therefore, an issue arose as to whether the plaintiff was entitled to the Shares (as provided in s 4(3) of the Consultancy Agreement) if the defendants had terminated the plaintiff’s services before giving the IPO Activation notice. The defendants estimated that the Shares in question were worth approximately US$340,131 (using the par value of each share in the second defendant to calculate the approximate value)^{[note: 1]}.

The arguments

8 The plaintiff relied on the words “with immediate effect” in s 4(1) to argue that s 4 of the Consultancy Agreement was distinct from s 3. Therefore, the plaintiff argued that there were two circumstances in which the second defendant’s shares would be allotted to the plaintiff under s 4 of the Consultancy Agreement. The first was in the event of success (where approval for listing was granted or where an unconditional offer for a takeover was made). The second was in the event of termination of the plaintiff’s services by the defendants. The plaintiff claimed that this was supported by how s 4(6) had provided for a mechanism to determine the number of shares to be issued in the event the post-IPO/takeover issued share capital of the second defendant could not be ascertained (see italicised portion above at [6]). This, according to the plaintiff, supported the interpretation that the termination fee was applicable where such termination took place before the defendants had given notice of IPO Activation.

9 Further, the plaintiff argued that the reference to Success Fee in s 3 could only be read in relation to s 4(2) and did not extend to the entire s 4. Success Fee was not a defined term. Section 3 referred to s 4 (see Success Fee under s 3) only because s 3 dealt with the possibility of reaching a success event and was therefore linked to s 4(2), which sets out the conditions for receiving the Success Fee.

10 The plaintiff also argued that the contra proferentum rule did not apply because there was no doubt or ambiguity. In the plaintiff’s view, their interpretation...