Teo Seng Kee Bob v Arianecorp Ltd

• Jurisdiction: Singapore
• Judge: Lai Siu Chiu J
• Judgment Date: 30 May 2008
• Neutral Citation: [2008] SGHC 81
• Date: 30 May 2008
• Subject Matter: Whether oral statements made during meeting amounting to offer or mere invitation to treat,Invitation to treat,Consideration,Exception to rule that performance of existing obligations did not amount to valid consideration,Offer,Contract,Part payment made to promisor used by promisor in its cash flow,Variation of contract,Formation,Whether promisor obtaining factual or practical benefit from promisee's performance of existing contractual obligations
• Docket Number: Suit No 243 of 2007
• Published date: 16 June 2008
• Defendant Counsel: Jimmy Yap Tuck Kong and Wong Shyen Sook (Colin Ng & Partners LLP)
• Court: High Court (Singapore)
• Plaintiff Counsel: Ang Cheng Hock and Jacqueline Lee Siew Hui (Allen& Gledhill LLP)

30 May 2008 Judgment reserved.

Lai Siu Chiu J:

1 This was a claim by Bob Teo Seng Kee (“the plaintiff”) against Arianecorp Limited (“the defendant”) for specific performance of an agreement made in November 2006, wherein the defendant allegedly agreed to transfer 300,000 shares in a company called abKey Pte Ltd (“the Company”) to the plaintiff for a consideration of $300,000 on certain terms.

2 The plaintiff is the managing-director as well as the major shareholder of the Company holding 1,650,000 shares. The defendant is a public company that was listed on the Stock Exchange of Singapore in September 1993 under its former name Vikay Industrial Ltd (“Vikay”). At the material time, the chief executive officer (“the CEO”) of the defendant was one Kea Kah Kim (“Kea”) while its chief operating officer was Ong Teck Guan (“OTG”).

3 The Company which business is the manufacture of computer peripheral equipment, was incorporated on 29 March 2004 with the plaintiff and one Quek Seow Chim (“Quek”) as the only directors and shareholders each holding one share of $1.00 par value. The plaintiff and Quek are related by marriage as their respective wives are sisters.

4 The plaintiff was the inventor and registered proprietor of the patents to a keyboard which he named the abKey keyboard (“the keyboard”). The keyboard was an improvement on the existing and conventional typewriter keyboard called the Qwerty keyboard (“the Qwerty”). Unlike the Qwerty, the layout of the keys of the keyboard were alphabetically arranged so that users would not have to memorise the layout of the Qwerty in order to learn to type. The keyboard enabled a user especially a novice typist, to type faster.

5 The plaintiff needed to raise capital for the Company from investors. Through an acquaintance Ron Lee Yee Mun (“Lee”), he was introduced to the defendant while on his own, the plaintiff approached an old classmate Ong Eng Kee (“Ong”). Eventually, on 21 May 2004, the plaintiff, the defendant, Quek and Ong signed a shareholders’ agreement (“the Shareholders’ Agreement”). The defendant was issued 300,000 shares of par value $1.00 (“the defendant’s shares”) for its investment of $300,000 in the Company. Ong’s investment of $150,000 (for which he was issued 150,000 shares) was held in the name of his company Ekong Investment Holdings Pte Ltd (“Ekong”). Quek’s 150,000 shares were bought from the plaintiff’s shareholding. The defendant and Ekong were entitled to have board representation for their investments. The defendant’s original nominee to the Company’s board was Then Chee Tat, its chief financial officer, whose successor OTG replaced him on the board. OTG was not/is not a director of the defendant. Ong was Ekong’s nominee on the board. Although Lee was also a signatory to the Shareholders’ Agreement, he was not issued any shares eventually as he had failed to procure The Economic Development Board to become a 20% shareholder.

6 On the same day that the Shareholders’ Agreement was signed, the plaintiff licensed his rights under the patents to the Company under a licence agreement (the Licence Agreement”) in consideration of which he was allotted 1,650,000 fully paid shares in the Company. Under the terms of the Licence Agreement, the rights to the patents reverted to the plaintiff in the event the Company was wound up.

7 Under cl 15.12.1 of the Shareholders’ Agreement, the defendant was given the first right of refusal to manufacture the keyboard, which was the only product marketed by the Company. The Company did outsource the manufacture of the keyboard to the defendant on the basis that the defendant’s prices were reasonable and competitive and it would be able to meet deadlines for quotations and deliverables.

8 The defendant and the Company signed an agreement on 1 July 2004 called a Management Service and Facilities Rental Agreement under which the defendant rented work-stations and office equipment at its premises to the Company at $1,000 per month and charged the Company a further $3,000 a month for the provision of professional (such as accounting) and administrative services.

9 The defendant in turn subcontracted the manufacture of the keyboard to a company called Racer Technology Pte Ltd (“Racer”) which produced the first shipment of 2,000 sets of the keyboard in June 2005, instead of the original deadline of mid-December 2004. Customers who had placed orders complained of the delay and worse, there were quality problems with the keyboard they received, resulting in complaints from users. The defendant eventually terminated its contract-manufacturing arrangement with the Company in September 2005.

10 In an attempt to resolve the manufacturing deadlock, the plaintiff held an informal meeting of the Company’s directors in March 2006. It was there agreed that Racer would be paid its outstanding invoices and Racer would then release the plastic moulds for the keyboard to the defendant. However, between the Company and the defendant there was another impasse. The Company could not/would not pay the defendant for the inventory (which the plaintiff claimed was overpriced and which purchase had not been approved by the Company) while the defendant would not release the inventory unless it received payment. The only way the Company could pay for the inventory was by way of letters of credit from its customers, which the defendant refused.

11 It had previously been agreed between the parties that the Company would pay the defendant 60% of tooling costs amounting to US$76,096.44 by 10 November 2004 followed by the remaining 40% amounting to US$48,315.20 within one year of 12 October 2004, by the Company purchasing 100,000 sets of the keyboard from the defendant, priced at US$0.483. If the Company was unable to purchase 100,000 sets of the keyboard within the stipulated deadline, it would have to pay the defendant in cash the balance amount owing. The Company only paid the defendant (on 28 October 2004) US$38,048.22 amounting to 30% instead of 60%, of the tooling costs.

12 In an attempt to break the impasse regarding the inventory withheld by the defendant, the plaintiff sent an email to Kea on 26 September 2006 copied to all the Company’s directors, calling for a meeting of the board of directors on 5 October 2006 to discuss the Company’s status and to resolve its problems. Kea responded stating he was not a director of the Company. (In another email sent on 27 September 2006 to OTG and Kea, the plaintiff had indicated that unless there was a change in circumstances, he would have no choice but to wind up the Company). As OTG did not turn up for the board meeting on 5 October 2006, the other directors viz the plaintiff, Ong and Quek decided to postpone the meeting for a week to 12 October 2006.

13 On 12 October 2006, the entire board met at the Pan Pacific Hotel (“the meeting”). Cindy Chang (‘Cindy”), a staff member from the Company’ auditors, was also present to record the minutes of the meeting which she did (see AB129-131). Cindy’s minutes were consistent with the defendant’s version (as given by OTG and Ong) of what transpired at the meeting, which was chaired by OTG.

14 The first part of the meeting related to OTG’s request to the plaintiff for an update on the developments on the Company particularly on the plaintiff’s efforts to raise new capital from fund managers. The discussion then turned to production problems, the quality of the keyboard and the difficulty of obtaining fresh funding if the Company did not have a product or stocks. The plaintiff handed out a list which detailed the Company’s dispute with the defendant and his proposal to resolve the problems. OTG’s reply to the list and proposal was that he could not respond as he was not wearing the defendant’s hat but rather that of the Company’s director. The directors then decided not to deliberate on the issues but to let the plaintiff raise them to the defendant directly. OTG commented that the plaintiff should negotiate with the defendant and Racer to agree on terms for the release of the inventory.

15 It was common ground that at some point of the discussion, the plaintiff offered to buy the defendant’s shares as well as Ekong’s shares. It was also not in dispute that the plaintiff produced blank offer letters (“the offer letter”) he had earlier prepared and which he handed to OTG and Ong meant for the defendant and Ekong respectively. The offer letter reads:

Agreement

I_____________(nric no. ) acting on behalf of ______________do hereby agree to sell all my/our stakeholding in abKey Pte Ltd comprising of _______shares or __% to __________________This will take effect immediately upon my receipt from _________________of a total of S$_________, being the full payment thereof. I also hereby undertake to resign from my abKey board of director’s appointment, relinquishing all the attendant benefits and privileges thereof, with immediate effect.

Signed this ____day of October 2006

Witness_____________

Witness_____________

16 The plaintiff then offered to buy the defendant’s shares for $300,000 (“the purchase price”) and similarly offered to buy Ekong’s 150,000 shares from Ong for $150,000. Although both were surprised by the plaintiff’s move, OTG and Ong indicated they would accept the plaintiff’s offers. Ong there and then signed the offer letter (“Ekong’s offer letter”) filling in the blanks by naming Ekong as the seller of 150,000 shares at the price of $150,000 and naming the plaintiff as the buyer (see AB132). Ong’s signature was witnessed by the plaintiff and Cindy.

17 The minutes recorded by Cindy contained the following last paragraph:

It was then recorded that Mr Ong Eng Kee and Ariane Corporation had agreed to sell their entire stake in the Company to Mr Bob Teo &/or his nominees at par value for the shares held by these shareholders.

On 26 October 2006, Cindy had emailed to OTG, the plaintiff, Ong and Quek the minutes and had called for comments...