Tan Cheng Soon Don v Teo Aik Hua

• Jurisdiction: Singapore
• Judge: Vince Gui
• Judgment Date: 06 February 2024
• Neutral Citation: [2024] SGDC 20
• Court: District Court (Singapore)
• Docket Number: District Court Originating Claim No. 350 of 2022
• Hearing Date: 21 November 2023,23 November 2023,24 November 2023,21 August 2023,10 January 2024,24 January 2024
• Citation: [2024] SGDC 20
• Year: 2024
• Plaintiff Counsel: Adrienne Grace Milton and Yeo Cai Yun Kimberly (Tito Isaac & Co LLP)
• Defendant Counsel: Say Chin Phang, Sean and Leow Wei Jie, Andy (Keystone Law Corporation)
• Subject Matter: Contract,Formation,Oral Contract,Loan Agreement,Subsequent conduct,Admissions
• Published date: 14 February 2024

District Judge Vince Gui: Introduction

The Defendant works as a hawker selling prawn noodles at Zion Riverside Hawker Centre. His prawn noodles earned him various accolades over the years. His business achieved a breakthrough when he received the prestigious Michelin Bib Gourmand accolade in 2018. The accolade opened the door to a multitude of business opportunities. After turning down various investors seeking to either buy his recipe or start a venture, he eventually decided to partner the Claimant, a childhood friend. They opened a restaurant specialising in prawn noodles.

The restaurant failed to turn a profit, despite being featured favourably on food blogs and news outlets. It struggled to stay afloat amidst recurring surges of the Covid-19 pandemic in 2021 which brought about several rounds of dining restrictions. The Claimant repeatedly injected fresh funds to no avail. With no end to the pandemic in sight, he eventually threw in the towel in September 2021. By then, he had sunk $350,000 into the business.

The relationship between parties soured as the venture came to an end. The Claimant demanded the Defendant to repay a portion of the monies that he contributed to the venture. The Defendant refused, reminding the Claimant that the agreement was for the Claimant to fund the venture. The Claimant brought this action to recover what he deemed were personal loans extended to the Defendant. Parties came before me to adjudicate their dispute. Having heard parties, I dismissed the claim with brief oral grounds. These are my written grounds of decision.

Background facts

I begin with the background facts.

The Claimant and the Defendant were childhood friends for over 30 years. Their friendship dated back to their “kampong” days in Bukit Timah. Though they grew up together, their careers took on different trajectories.¹

The Claimant climbed the ladder in the corporate world. He became the Chief Executive Officer (“CEO”) and director of a company listed on the Singapore Exchange Mainboard called Sin Heng Heavy Machinery Limited.² He was conversant in English and Hokkien.

The Defendant was conversant in Hokkien but not English. He ceased formal education at Primary 3. He started becoming a hawker at 16 years old. Since then, he has dabbled in various dishes such as chicken rice and duck rice. In or around 2003, he developed a prawn noodle recipe that became his signature dish ever since. From then on, he sold that dish to make a living. At the time of the action, the Defendant sold the dish at a hawker stall located at Zion Riverside Food Centre called “Zion Road Big Prawn Noodles” (also known as “Fresh Taste Big Prawn Noodle”).³

His signature prawn noodles earned him various accolades over the years. In 2018, he was awarded the much-coveted Michelin Bib Gourmand accolade. He went on to secure that accolade in the subsequent years save for 2020 when no selection took place because of the Covid-19 pandemic. According to the Michelin Guide, his prawn noodles came with a soup that has a “rich prawn flavour” with “fresh prawns, chilli and pork rinds”. It was called a “great bowl of noodles”.⁴

Securing the accolade was a monumental milestone in his culinary career. It opened doors to all sorts of business opportunities. For instance, a Chinese investor reportedly approached him in 2019 offering $500,000 for his prawn noodle recipe. Separately, the Select Group offered him the opportunity to run a stall at “Hawker’s Street”, hawker centre themed eatery located at the basement of ION Orchard shopping mall, including the right to choose a prime spot at the eatery. But these opportunities did not interest the Defendant. Part of it was due to his reluctance to work with strangers. With little formal education, he was wary that he might be taken advantage of.⁵

A different opportunity presented itself when the Claimant offered to partner the Defendant. The Claimant regularly patronised the Defendant’s stall. During his visits, he sometimes assisted the Defendant with collecting payment while he prepared orders. While chatting, they discussed the idea of opening a restaurant to sell his prawn noodles. The Claimant advised that doing so would increase the value of his branding and recipe. According to the Defendant, the Claimant told him that he wanted to venture out of the construction and machinery industry. The Defendant said he did not take up the offer immediately.⁶

Sometime in June 2020, the Defendant finally decided to venture into the restaurant business. This came at a time when he received news that Zion Riverside Food Centre would undergo renovations from November 2020 to April 2021. Initially, the Defendant wanted to team up with a separate group of friends, but those discussions came to a nought when they could not agree on the business model and their respective shareholding. Still keen on opening a restaurant, the Defendant asked if the Claimant was interested to partner up. He estimated that the start-up costs would amount to around $250,000. He also suggested opening the restaurant at a shophouse located at 291 South Bridge Road Singapore 058831 which was available for rent. The Claimant affirmed his interest in the venture.⁷

The Claimant and the Defendant incorporated a company to run the restaurant. They agreed to name the restaurant “Zhi Wei Xian @ Zion Road Big Prawn Noodle”. They incorporated the company, 2 Bowls Pte Ltd (the “Company”), through a corporate secretarial firm called RMS Corporate Service Ltd (“RMS”) on 30 November 2020.⁸

It is not disputed that both parties attended RMS’ office on that day along with the Defendant’s fiancé, Lin Jia Yi (Lisa) (“Lisa”). It is also not disputed that the Claimant and the Defendant initially agreed for each of them to own an equal stake in the Company. The Defendant wanted to involve Lisa in this business and allow her to own a portion of the Defendant’s stake in the Company. Eventually, the Claimant, the Defendant and Lisa were registered as shareholders in the respective percentages: 50%, 30% and 20%. At the meeting, parties also discussed and agreed that the Claimant would provide loans to fund the venture. It is undisputed that the Claimant was supposed to recover his loan from the Company’s profits should the Company turn profitable, with any excess profits to be split in accordance with the parties’ respective shareholding.⁹

I pause to note that the issue of who received the loans would become a flashpoint of dispute later when the venture failed. Both parties advanced conflicting versions of the understanding reached on that day.¹⁰ The Claimant took the position that the loans were made to the Defendant in his personal capacity, such that the Defendant was to repay him 25% of the loan sum of $250,000, i.e., $62,500, in the event the venture fails. The Defendant and Lisa took the position that the loans were made to the Company. The understanding was for the Claimant to be responsible for financing the venture, while the Defendant was to allow the Restaurant to use his “goodwill, logo, branding, concept and recipe”. The Defendant explained that the agreement was basically for the Claimant to provide money and for them to provide effort. Lisa’s contribution was to come in the form of handling the Company’s bookkeeping and administrative work.

The Defendant designed the restaurant’s logo in or around 18 December 2020 and asked Lisa to show it to the Claimant on that day, which she did. The logo featured a blue prawn, which according to the Defendant was more expensive compared to the regular red prawns.¹¹

The restaurant opened in January 2021. The Defendant and Lisa managed the day-to-day operations. The Defendant prepared the soup and ingredients every day. The soup combined a base stock made from pork and chicken bones (simmered for six hours) with prawn broth. The Defendant oversaw the cooking with the help of kitchen staff. To elevate the Restaurant’s standing, the Defendant introduced new dishes such as a cold crab. He also offered customers the option of having Japanese-style sliced pork instead of the usual pork ribs to pair with the prawn noodles. After some experimentation, he determined that the shoulder butt of Brazilian pork was the best variety to serve. Every day after midnight, the Defendant would personally select wild-caught prawns at Jurong Fishery Port to serve at the restaurant. According to the Defendant, he only purchased wild-caught prawns instead of farmed prawns because wild prawns were tastier.¹²

First loan of $250,000

The Claimant disbursed an initial loan of $250,000 over six months in the following instalments:

Date	Amount ($)
10 December 2020	150,000
14 January 2021	30,000
18 February 2021	20,000
17 March 2021	10,000
17 March 2021	10,000
20 April 2021	20,000
19 May 2021	10,000
Total	250,000

The Defendant transferred the above monies into the Company’s bank account.

Second loan of $50,000

In 2021, Singapore experienced recurring surges of the Covid-19 pandemic, which led to the government tightening the safe management measures to curb the viral outbreak. These measures affected the restaurant’s operations. According to the Defendant: at the time the restaurant opened, Singapore was in Phase 3 of its re-opening, with dining groups up to 8 persons being permitted; the permitted dining group size was however reduced to 5 persons from 8 to 15 May 2021; from 16 May to 20 June 2021, dining-in was prohibited altogether; the Claimant and the Defendant decided to close the restaurant from 21 May to 2 June 2021 to cut costs; and it re-opened from 3 to 13 June 2021, only to close again from 15 to 20 June 2021.¹³

At around the same time, Lisa informed the Defendant that the Company’s bank account balance was running low and there were...