Third World Development and Another v Atang Latief and Another

• Jurisdiction: Singapore
• Judge: Lai Kew Chai J
• Judgment Date: 19 February 1990
• Neutral Citation: [1990] SGCA 2
• Docket Number: Civil Appeal No 24 of 1985
• Date: 19 February 1990
• Published date: 19 September 2003
• Year: 1990
• Plaintiff Counsel: Steven Chong Horng Siong (Drew & Napier)
• Citation: [1990] SGCA 2
• Defendant Counsel: Cheong Yuen Hee and Susan Jacob (YH Cheong)
• Court: Court of Appeal (Singapore)
• Subject Matter: Effect of undertaking,Contract,Duress,Whether valid defence to breach of undertaking,Undertaking purportedly given under economic duress,Economic,Undertaking subject to foreign law

This was an appeal against the decision of FA Chua J in which he dismissed an appeal from the decision of the senior assistant registrar giving judgment to the plaintiffs, the respondents in this appeal (the respondents), in the sum of $1,226,880 (being the equivalent of US$576,000 at the exchange rate of $2.13) with interest and costs against Gwei Way Kiat, the appellant in this appeal (the appellant).

The facts, in so far as relevant, giving rise to the appeal are briefly these. The appellant at all material times was the chairman and managing director of Third World Development Ltd, a company incorporated in Sri Lanka (the company), and also held about 99% of the issued shares of the company. In 1983, the company was engaged in the construction of a building, called the Tallest Building (the building), at Station Road, Bambalapitiya, Colombo, Sri Lanka, and was also the owner of the building. On 2 December 1983, the respondents entered into a written agreement with the company (the main agreement) whereby, amongst other things, the company appointed the respondents the sole and exclusive operators to operate or conduct a public casino or public gambling on two floors of the building for a period of ten years, and the respondents agreed (by cl 4. 1) to pay to the company rent at a certain fixed rate for the two floors and also to pay to the company a percentage of the net profit. In respect of the rent, the respondents further agreed (also by cl 4.1) to pay to the company, on the signing of the main agreement, `an amount equivalent to 12 months in advance based on an area of 40,000 sq ft`, which amounted to US$576,000. The main agreement also provided that the company should deliver possession of the two floors to the respondents not later than six months from the date thereof, ie on or before 1 June 1984. On the execution of the agreement or thereabout, the respondents paid to the company a sum of US$288,000 being one half of the advance rent for the two floors payable by the respondents under cl 4.1 of the main agreement. Subsequently, on 20 January 1984, a supplemental agreement (supplemental agreement) was made between the company and the respondents varying certain provisions of the main agreement. We shall refer to both these agreements as `the agreements`.

Soon after the execution of the supplemental agreement, the appellant on 16 February 1984 executed a letter of undertaking which was addressed to both the respondents (the undertaking). The text of the undertaking is as follows:

In consideration of you agreeing, at my request, to defer your decision to request Third World Development Ltd to refund to you the advance rental of US$288,000 and to pay to Third World Development Ltd the further sum of US$288,000 being the remaining advance rental for that portion of the Tallest Building at Station Road, Bambalapitiya, Colombo 4, to be rented to you to enable you to operate or conduct a public club or public gambling under the agreement and the supplemental agreement dated 2 December 1983 and 20 January 1984 respectively, I hereby undertake and guarantee with you as follows:

(1) undertake and guarantee that you are permitted to operate or conduct a public club or public gambling at the said building;

(2) undertake and guarantee that the following work and all other external work and services to that portion of the said building to be rented to you would be installed or completed on or before 30 June 1984 or one week before the said building is officially opened by the head of the government of Sri Lanka or MALAYSIA whichever date is the earlier:

(a) permanent sufficient power supply with switch room and generator room;

(b) permanent water supply connections;

(c) permanent telephone lines (eight direct lines and two IDD lines) and one telex line;

(d) permanent sewer connections;

(e) site work including roading, separate entrance for the club, external lightings, rain water drainage, fencing, car parking and clear separation of club and construction areas;

(e) external finishes and waterproofing to the existing podium block.

If for any reason, you are not permitted to operate or conduct that public club or public gambling at the said building or if any of the work enumerated above is not installed or completed by the date indicated above, I undertake and guarantee to, on demand, refund or pay to you, without interest, the rental of US$288,000 which you have previously paid and which you will be paying to Third World Development Ltd.

I further agree that you may enforce this undertaking and guarantee on me in Singapore, Malaysia or any other country of your choice and I hereby agree to submit to the jurisdiction of the courts of the country so elected by you.

Please note that this undertaking and guarantee will be null and void and cease to have any effect as soon as you commence to operate or conduct the public club or public gambling at the said building.

After the execution of this undertaking, the respondents paid to the company a further sum of US$288,000 being the remaining half of the advance rent for 12 months stipulated in cl 4.1 of the main agreement.

Thereafter the following occurred. The company failed to deliver possession of the two floors of the building to the respondents on or before 1 June 1984; the various items of work expressed in the undertaking were not installed or completed by 30 June 1984. What is even more crucial is that the company was never issued with a licence to operate a public casino in the building. In fact, in a letter dated 23 February 1984 to the appellant, the secretary to the Ministry of Local Government, Housing and Construction of Sri Lanka informed the appellant that it would not be possible `to permit casino cum club` in the building.

On 3 July 1984, the respondents, through their solicitors, demanded from the appellant payment of the sum of US$576,000, and upon default by the appellant, the respondents took out a writ against him joining the company as the first defendant. Judgment was entered against the appellant in default of appearance; but he applied to set aside the default judgment, and it was set aside on payment of costs. As for the company, it had never been served, and the respondents subsequently amended the statement of claim and at the same time discontinued the action against the company. The company therefore is not a party to this appeal, though it is described in the heading as the first appellant.

The respondents` claim is a very simple one and is based wholly on the undertaking and the breaches of the undertaking on the part of the appellant. It is common ground that the undertaking was executed by the appellant, and that he has not honoured or performed the terms thereof. In particular, it is not disputed that the respondents were not permitted to operate or conduct `a public club or public gambling` at the building; nor is it disputed that the works enumerated in the said undertaking had not been installed or completed by the date indicated in the undertaking. Accordingly, it follows that in accordance with the terms of the undertaking, the appellant became liable to pay to the respondents on demand the total sum of US$576,000. The appellant,...