Tam Tak Chuen v Khairul bin Abdul Rahman

• Jurisdiction: Singapore
• Judgment Date: 30 December 2008
• Date: 30 December 2008
• Docket Number: Suit No 706 of 2007
• Court: High Court (Singapore)

Tam Tak Chuen

Plaintiff

and

Khairul bin Abdul Rahman and others

Defendant

[2008] SGHC 242

Judith Prakash J

Suit No 706 of 2007

High Court

Contract–Duress–Illegitimate pressure–Role of manifest disadvantage in determining illegitimacy of pressure–Other factors relevant in assessing whether pressure exerted illegitimate–Factors relevant in assessing vitiation of victim's consent–Judicial discretion to award damages in lieu of rescission

The plaintiff and the first defendant began practising medicine in partnership at a clinic in 1998. Subsequently, they decided to corporatise their practice, and by 2007 three medical companies had been incorporated to that end. The plaintiff and the first defendant held an equal number of shares in the capital of all three companies (“the J Companies”) and were the directors of the same. A fourth company, the sixth defendant, was also set up, with the plaintiff and the first and second defendants as directors and equal shareholders.

In December 2006, the first defendant obtained video footage from a closed circuit camera of the plaintiff having sexual relations with a clinic employee in the clinic's consultation room. At a meeting on 4 March 2007, the plaintiff was confronted with the video footage. The first defendant presented the plaintiff with three options: one, the first defendant would offer to buy out the plaintiff's half share in the J Companies for $50,000 and ask the plaintiff to resign from all his directorships; two, the plaintiff would buy out the first defendant's half share instead and the first defendant would resign; or three, the first defendant would apply to court for the J Companies to be wound up and the incriminating video footage would be tendered to court as evidence.

At the end of the meeting, the plaintiff agreed to sell his shares in the J Companies to the first defendant for $50,000. The plaintiff further agreed to transfer his one-third interest in the sixth defendant to the first defendant, and to take over a third of the sixth defendant's hire purchase liabilities.

Subsequently, the plaintiff brought this suit seeking a declaration that his agreement to sell his shares in the four companies to the first defendant and resign as a director of the companies, and the documents that he executed pursuant there ought to be set aside as having been procured under duress. In the alternative, the plaintiff sought damages against the first defendant.

Held, granting judgment for the plaintiff:

(1) There were two elements in the wrong of duress: pressure amounting to compulsion of the will of the victim, and the illegitimacy of the pressure exerted.Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 endorsed: at [22].

(2) A threat was illegitimate where the terms secured as a result of the threat of lawful action were so “manifestly disadvantageous” to the complainant as to make it unconscionable for the defendant to retain the benefit of them: at [22].

(3) On the evidence, it was clear that the pressure applied by the first defendant to apply to wind up the companies and tender the video footage as evidence in support of such application was illegitimate because, while not unlawful, it was an abuse of legal process, made in support of an unreasonable and wrongful demand, amounting to unconscionable conduct: at [51] to [59].

(4) Once the plaintiff proved the first element of duress, it was up to the defendant to disprove the second element: that the pressure had contributed nothing to the plaintiff's decision to execute the decision, and his consent had not been vitiated. Alexander Baron v Alexander Ewan Armstrong [1976] AC 104 endorsed: at [62].

(5) The factors that have to be considered to disprove the second element include whether the person alleged to have been coerced protested; whether this person had alternative courses open to him; whether he was independently advised; and whether after entering into the contract he took steps to avoid it. It appeared here that the second element was established. Significantly, the alternatives proffered by the first defendant had not been genuine, as he had only prepared documents for the transfer of shares to him and not vice versa. Pau On v Lau Yiu Long [1980] AC 614 endorsed: at [62] to [76].

(6) The plaintiff's main claim was for the documents he signed to be set aside, with an alternative claim for damages to be assessed. In the absence of compelling reasons provided by the defendants as to why the plaintiff should be awarded damages instead of the primary relief, the primary relief sought should be awarded: at [79].

Alexander Barton v Alexander Ewan Armstrong [1976] AC 104 (folld)

Grainger v Hill (1838) 4 Bing (NC) 212; 132 ER 769 (folld)

Pau On v Lau Yiu Long [1980] AC 614 (folld)

Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 (folld)

Ang Cheng Hock and Tham Wei Chern (Allen & Gledhill LLP) for the plaintiff

Harish Kumar and Goh Seow Hui (Rajah & Tann LLP) for the defendants.

Judgment reserved.

Judith Prakash J

1 The chief protagonists in this multi-party action are the plaintiff, Dr Tam Tak Chuen, and the first defendant, Dr Khairul bin Abdul Rahman. The plaintiff's claim against the second and sixth defendants was settled shortly after the trial commenced and the trial therefore proceeded only against the remaining four defendants. The third, fourth and fifth defendants are corporate entities and basically were joined as nominal defendants as the reliefs that the plaintiff is seeking include prayers for declarations that would affect the shareholdings in these companies.

Background

2 The plaintiff, Dr Tam, and the first defendant, Dr Khairul, are both medical practitioners. In January 1998, they started practising in partnership under the name and style of Eden Family Clinic (the “Jurong Clinic”) from premises located in Jurong West Street 41. In 1999, the parties decided to corporatise their practice and, on 5 July 1999, the fifth defendant, Eden Healthcare Pte Ltd, was incorporated to carry on the business of the Jurong Clinic. Subsequently the two men procured the incorporation of two more companies: in the third defendant, Eden Family Clinic Pte Ltd, in September 2006. From its establishment, the fourth defendant provided aesthetic medical services at the Jurong Clinic but the third defendant was not activated. As at 3 March 2007, the day before the events that gave rise to this action took place, Dr Tam and Dr Khairul each held an equal number of ordinary shares in the capital of all three companies (collectively the “J Companies”) and were the directors of the J Companies.

3 The plaintiff, the first defendant and Dr Ashraff Shamsuddin Eilyaas, the third defendant, also practised at a clinic in Kembangan known as Eden Medical Aesthetics (“the Kembangan Clinic”). The Kembangan Clinic was operated by the sixth defendant, Eden Medical Aesthetics Pte Ltd, and the three men were the directors of and equal shareholders in the sixth defendant.

4 The hitherto friendly and trusting relationship between Dr Tam and Dr Khairul began to break down in 2004. Dr Khairul had for some time been hearing rumours that Dr Tam, who was married, was having an affair with one Ms Joanne Chew, an employee working in the Jurong Clinic. In August 2004, he asked Dr Tam about these rumours. Dr Tam emphatically denied them. Dr Khairul, who had been considering ending his partnership with Dr Tam, said he was persuaded to carry on the relationship by Dr Tam's assurances in relation to Ms Chew.

5 In October 2006, however, Dr Khairul's suspicions about Dr Tam's behaviour were aroused again. He decided to obtain evidence of the affair and installed a closed circuit camera in the consultation room and treatment room of the Jurong Clinic. Needless to say, this was done without Dr Tam's knowledge. In December 2006, Dr Khairul obtained video footage from the closed circuit camera of Dr Tam having sexual relations with Ms Chew in the clinic's consultation room. He did not, however, confront Dr Tam with that evidence at that time. His explanation was that he was not sure what he should do. He was upset at having been duped into continuing in partnership with Dr Tam in August 2004. He was deeply hurt by Dr Tam's betrayal of his trust and wanted to end the partnership but was not sure how to go about it.

6 In the end, according to Dr Khairul, he settled on the following options:

(a) he would offer to buy out Dr Tam's half share in each of the J Companies for $50,000 and ask Dr Tam to resign from all his directorships; or

(b) Dr Tam could buy out his half share in the J Companies for an agreed price and Dr Khairul would resign from all his directorships; or

(c) he would apply to court for the J Companies to be wound up on the “just and equitable ground” and, if necessary, the video recording made on 5 December 2007 would be tendered to court as evidence.

7 On 4 March 2007, Dr Khairul sent Dr Tam an SMS message telling him that there would be a meeting of the three partners (ie, including Dr Ashraff) at the Kembangan Clinic that evening at 9.00pm. The three doctors met as scheduled and the first issue they discussed was the rental for the Kembangan clinic. When that discussion was completed, Dr Khairul asked Dr Ashraff to leave the meeting room.

8 Dr Khairul then told Dr Tam that he was going to end their partnership. When pressed for a reason, Dr Khairul asked Dr Tam again whether he was having an affair with Ms Chew. Dr Tam denied it. When Dr Tam continued to deny the relationship despite various matters that Dr Khairul brought to his attention, Dr Khairul took out and showed Dr Tam several photographic stills taken from the video footage of Dr Tam having sexual relations with Ms Chew. He then indicated to Dr Tam that their partnership was at an end.

9 The parties'...