Terigi, Morgan Bernard Jean and others v Hook, Laurence

• Jurisdiction: Singapore
• Judge: Belinda Ang Saw Ean JCA
• Judgment Date: 26 January 2023
• Neutral Citation: [2023] SGHC(A) 3
• Court: High Court Appellate Division (Singapore)
• Docket Number: Civil Appeal No 24 of 2022
• Hearing Date: 18 August 2022
• Citation: [2023] SGHC(A) 3
• Year: 2023
• Plaintiff Counsel: Lee Sien Liang Joseph, Qabir Singh Sandhu, Thong Ying Xuan (LVM Law Chambers LLC)
• Defendant Counsel: Christopher Bridges and Tan Siang Teck Kenneth (Christopher Bridges Law Corporation)
• Subject Matter: Contract,Waiver,Consideration,Estoppel
• Published date: 31 January 2023

Kannan Ramesh JAD (delivering the judgment of the court): Introduction

Three men start a company, and begin to raise money from investors. They describe themselves as the “Founders”. They agree in a shareholders’ deed, to which 14 investors are also parties, to become full-time employees of the company, failing which they will transfer to the other shareholders their previously allocated shares. The relevant employment agreements were to be entered into before the date of the shareholders’ deed. One of them holds out and does not enter into an employment agreement with the company, but at the same time does not lose his shares. Instead, the three men sign another agreement which will give him more shares in the company if he dedicates himself to it full-time. They then sign yet another shareholders’ deed, this time with a further 27 new investors as well as the previous 14 investors, but this deed does not say anything about requiring the holdout to become a full-time employee of the company. The holdout never becomes a full-time employee of the company, and one day, the two other men transfer his shares to themselves citing this as the reason. Was this transfer lawful? That is the central question in this appeal.

Background The founding of Incomlend

The company is the 3rd Appellant, Incomlend Pte Ltd (“Incomlend”), a Singapore-incorporated company. Its primary business is the operation of an online platform on which users sell and buy discounted invoices – this is a trade often referred to as “factoring”.

Incomlend was first conceptualised in October 2015 by the 1st Appellant, Mr Morgan Bernard Jean Terigi (“Mr Terigi”), and the 2nd Appellant, Mr Dmitri Vladimirovitch Kouchnirenko (“Mr Kouchnirenko”). The two men agreed that Mr Terigi would take the lead on the financial and legal aspects of the business as well as the invoice-organisation, while Mr Kouchnirenko would be in charge of product development, compliance and marketing. Working together, the two men approached potential shareholders to generate investment interest.

As Incomlend was in the financial technology industry, the two men realised that they needed to bring someone who was familiar with information technology (“IT”) on board and could build Incomlend’s own in-house software. Thus, in or around the end of 2015, Mr Terigi approached the respondent, Mr Laurence Hook (“Mr Hook”), whom he met in Hong Kong, and invited him to come on board. At that time, Mr Hook was working in an IT role at the Hong Kong office of the Hongkong Shanghai Banking Corporation Ltd (“HSBC”).

It is undisputed that Mr Terigi and Mr Kouchnirenko knew at the outset that Mr Hook was working for HSBC. On 12 November 2015, Mr Terigi sent an e-mail to Mr Kouchnirenko and another person, introducing Mr Hook as “currently working for HSBC for various IT projects.” He also attached Mr Hook’s curriculum vitae (“the CV”) which stated that at that time, he had been working for HSBC’s Hong Kong office since May 2011. The CV had previously been provided to Mr Terigi by Mr Hook.

Eventually, Mr Hook agreed to come on board, and in December 2015, Mr Kouchnirenko created a chat group amongst the three men on the messaging application “WhatsApp” where they started discussing how to grow Incomlend’s business. Eventually, Incomlend was incorporated on 14 January 2016, and Mr Terigi was appointed its first director on the same day.

Mr Terigi, Mr Kouchnirenko and Mr Hook (collectively referred to as “the Founders”) got down to work to grow Incomlend. Sometime in February 2016, the Founders agreed that they would become full-time employees and shareholders of Incomlend. Subsequently in April 2016, they agreed to relocate to Singapore where Incomlend’s offices were and assume full-time employment, which meant that Mr Kouchnirenko and Mr Hook would have to give up their employment with others (see [36] below). Consequently, the Founders received ordinary shares in Incomlend, with Mr Hook receiving 20,000 shares in or around April 2016. It is important to note that Mr Hook started off with fewer shares than the other Founders: by early 2017, Mr Kouchnirenko held 39,672 shares, and Mr Terigi held 39,671 shares. However, it was agreed that, once Mr Hook left HSBC and moved to Singapore to join Incomlend as a full-time employee, they would all become equal shareholders.

Mr Hook’s refusal to become an employee

Around the same time, it became apparent to the Founders that they had enough investors from a first round of fundraising. They had 14 investors then (“the Original Investors”). Thus, they began discussing a shareholders’ deed (“the 1st Shareholders’ Deed”) for all shareholders, and a “separate agreement” that concerned only them (“the Founders’ Agreement”). The 1st Shareholders’ Deed, as the name suggests, was intended to govern the relationship between Incomlend and its first generation of shareholders, ie, the Founders and the Original Investors. On the other hand, the purpose of the Founders’ Agreement was, inter alia, to set a time limit for the Founders to equalise their shareholding, pursuant to the understanding stated above at [7].

On 31 July 2016, over a messaging platform called “Slack”, Mr Terigi sent a draft of the Founders’ Agreement, as well as a draft of the full-time employment agreement with Incomlend to the other Founders. As to this, he told the other Founders that it was “urgent” for them “to sign the employment agreements as per [the 1st Shareholders’ Deed]”. Mr Hook did not respond to this, instead raising other issues that he saw with Incomlend.

The next day, Mr Terigi again reminded the other Founders about their respective employment agreements, stating that they needed to be signed as soon as possible because the 1st Shareholders’ Deed was being finalised. Mr Hook asked about the details of the employment agreement before expressing concern over being “caught” by HSBC (as he was still employed by HSBC at that time). A day later, he explained to the other Founders that his “situation” with HSBC “was ambiguous for maybe [six months]”. Mr Hook eventually made his position clear several days later on 4 August 2016, when he explained that he would only receive his bonus from HSBC in March 2017, and that if he resigned and signed a full-time employment agreement with Incomlend, he would be walking away from three months’ worth of “free money”.

Eventually, the 1st Shareholders’ Deed was signed on 29 August 2016. This was entered into between Incomlend, the Founders, and the Original Investors. As had been discussed between the Founders, they were obliged by Clause 4.4 of the 1st Shareholders’ Deed to become full-time employees of Incomlend by entering employment agreements by dates specified in Clause 4.5. Consistent with Mr Terigi’s repeated calls for the employment agreements to be signed before the 1st Shareholders’ Deed was executed (see above at [9]–[10]), the dates specified in Clause 4.5 preceded the date of the deed – 1 August 2016 in the case of Mr Hook and Mr Kouchnirenko, and 1 July 2016 in the case of Mr Terigi. In line with the intention that the Founders commit themselves fully to Incomlend and its cause, per Clause 4.4, the employment agreement was to include, inter alia, terms concerning confidentiality, non-competition, non-solicitation and any other reasonable covenants to protect Incomlend’s interest. Importantly, it was provided in Clause 4.4 that, if anyone had not signed their respective employment agreements by the stipulated date, the shares that were previously allocated to the defaulting Founder would be transferred to the other shareholders, pro-rata to their respective shareholdings at no cost, and Incomlend would be granted a power of attorney for this purpose by the defaulting Founder which would not be revocable unless there was unanimous consent of all the parties to the 1st Shareholders’ Deed. We will refer to this as the “Giveaway Mechanism”. Additionally, once the Founders signed their respective employment agreements, they were to be appointed to and would constitute the Board of Directors of Incomlend, as per Clause 5.1.

Mr Terigi and Mr Kouchnirenko both executed their respective employment agreements with Incomlend. Mr Kouchnirenko was appointed director on 14 December 2016. But Mr Hook, who was supposed to sign his employment agreement by 1 August 2016, did not do so and remained employed with HSBC in Hong Kong; he also did not become a director of Incomlend. The reasons for this will become apparent later in this judgment (see [20]–[23] below). However, he was involved in the running of Incomlend, doing so remotely from Hong Kong. According to the Appellants, this created difficulties in their workflow and efficiency.

As is apparent from the conversations between the Founders, Mr Hook’s reluctance to fully dedicate himself to Incomlend became a source of discussion, and eventual tension. During a conversation over Slack on 20 February 2017, Mr Hook brought up the fact that his wife was pregnant and was due in the first week of September 2017. He stated that he would not be able to relocate to Singapore until the baby was a few months old. In response, Mr Terigi stated that it would be “best for [Mr Hook] to come to Singapore to be in the office every month in that case”. There was some disagreement between Mr Terigi and Mr Hook over this, with Mr Terigi accusing Mr Hook of “changing the conditions” and stating that he would not sign the Founder’s Agreement. Eventually Mr Kouchnirenko stepped in and ended the disagreement.

The Founders’ Agreement and the 2nd Shareholders’ Deed

Two months later, on 21 April 2017, the Founders’ Agreement was finalised and signed by the Founders. The Original Investors did not sign this agreement because, as is made clear from its preamble, its purpose was to “regulate the relationship between [the Founders].” Important to this appeal, the...