Yeo Boong Hua and Another v Turf City Pte Ltd and Others

• Jurisdiction: Singapore
• Judge: Vincent Leow AR
• Judgment Date: 24 February 2004
• Neutral Citation: [2004] SGHC 38
• Court: High Court (Singapore)
• Year: 2004
• Published date: 29 April 2008
• Plaintiff Counsel: Oommen Mathew (Haq and Selvam) and Alice Yeo (Alice Yeo and Company)
• Defendant Counsel: Patrick Ang and Mark Cheng (Rajah and Tann)
• Citation: [2004] SGHC 38

24 February 2004

Assistant Registrar Vincent Leow:

1. This was an application by the plaintiff to amend their Originating Summons No. 1634 of 2002 (“OS”) via Summons-in-Chambers No. 5348 of 2003. Concurrently, the first to fifth defendants applied via Summons-in-Chambers No. 5864 of 2003 to expunge references to certain ‘without-prejudice’ correspondence and documents contained in the first plaintiff’s affidavit filed in support of their amendment application.

The facts

2. By way of background, this action arose out of a shareholder’s dispute. The first defendant is a company (“the Company”). Both plaintiffs along with the second to sixth defendants are shareholders of the Company. They each had about 12.5% shareholding in the Company with the exception of the second defendant who had 27.5% of the shareholding and the third and fourth defendant who had 11.25% each. Both plaintiffs alleged that they have been unfairly treated and oppressed by the majority shareholders, the details of which are mostly irrelevant to this application.

3 What is relevant is that the defendants had sought to call an extraordinary general meeting (“EOGM”) of the Company pursuant to a notice of meeting issued on 18 October 2002 in which they had intended to alter the Memorandum and Articles of Association of the Company. This led to the OS in question being filed by the plaintiffs to injunct the defendants from calling the said EOGM and from passing any resolution to alter or ratify any alteration of the Articles of Association.

4 The matter came before Belinda Ang JC (as she then was) on 16 November 2002 and she granted an interim injunction restraining the EOGM from being held. Subsequently, the first to fifth defendants applied to discharge the injunction. The discharge application was fixed for hearing in January 2003 before Tay Yong Kwang J. At that hearing, the plaintiffs informed Tay J of their intention to amend the OS to include further reliefs. Tay J then adjourned the hearing to a date after the plaintiffs’ application to amend the OS was heard.

5 However matters did not proceed. Instead the first to fifth defendants commenced negotiations with the plaintiffs with a view to an amicable settlement of the entire matter. As such, the parties mutually agreed to refrain from taking further steps in the court action. Subsequently, a number of faxes and letters were exchanged between the parties over the course of the next few months. These letters constitute the nub of the dispute here and I will examine them in detail.

6 The first letter of importance is that of the plaintiffs’ solicitors’ dated 28 February 2003 to the defendants’ solicitors in which they rejected the defendants’ offer and counter proposed the following terms:

1. Defendants are to pay the sum of S$2 million to both plaintiffs, such payment to be made forthwith;

2. Defendants are to fully discharge plaintiffs of all their liability to the first defendant and Turf Club Emporium Pte Ltd (“TCAE”, this was a company incorporated to handle the business and operations of a complex known as ‘Turf Club Auto Emporium’ which was involved in the business of selling new and used cars) for loans given to them as directors. Defendants are also to fully indemnify the plaintiffs for any tax liability that may arise in relation to those director’s loans;

3. Defendants are to procure a full discharge of all the plaintiffs’ obligations as guarantors in respect of the term loans and overdraft facilities granted by DBS bank to the first defendant. In the event that DBS Bank fails to discharge the plaintiffs from the obligations under the guarantee, defendants are to indemnify the plaintiffs for whatever costs and legal expenses that may be incurred by the plaintiffs in procuring the discharge;

4. Defendants are to procure TCAE to grant Motor Way Credit Pte Ltd (“MWC”) and Tai Huat Motor Trading Enterprise (“THMTE”) (these were companies owed by the plaintiffs) rent free usage of the premises which are presently being occupied by MWC and THMTE from the date of this agreement to the expiry of the remainder licence period;

5. Defendants are to pay the plaintiffs’ legal costs in relation to these proceedings and this settlement herein; and

6. Upon the defendants fulfilling the above, the plaintiffs are to transfer their shares in the first defendant and TCAE to the defendants or their nominees. All cost incidental and related to the transfer of the shares shall be borne by the defendants.

7 The defendants’ solicitors replied on 5 March 2003 to the plaintiffs’ solicitors. They stated that their clients’ understanding was that solicitors would not be involved until the agreement was firmed up. However, given that the plaintiffs’ solicitors were now involved, the defendants would be making their offer via their solicitors in writing. Their reply offer was that the defendants would in consideration for the plaintiffs transferring their 25% shareholding in both the Company and TCAE:

1. pay a sum of S$2 million;

2. obtain a full discharge of the plaintiffs from any guarantees they might have signed up for the first defendant and TCAE in relation to banking facilities;

3. to take over the plaintiffs’ liability for loans taken from the first defendant and TCAE and to ensure that the plaintiffs are discharged for such loans, if any; and

4. Each party to bear their own legal costs.

8 By this letter, the defendants had specifically rejected the second half of term (b) and the whole of term (d) in the plaintiffs’ offer dated 28 February 2003.

9 The next salvo from the plaintiffs’ solicitors was fired on 7 March 2003 where they agreed for each party to bear their own legal costs. However, they insisted upon the defendants indemnifying the plaintiffs for any tax liability in relation to the directors’ loans and included two new terms. First, the defendants were to procure the consent of TCAE for the plaintiffs’ surrender of one vacant unit in respect of the lease/licence at Turf City and the full discharge of all liability thereunder. Second, the defendants were to procure TCAE to grant MWC and THMTE a 50% reduction of rent in respect of their lease/licence of the remaining three units at Turf City from the date of the agreement to the expiry of the remainder lease/licence period.

10 The defendants’ solicitors replied on 18 March 2003 stating that they were prepared to obtain the consent from TCAE for the surrender of the lease of one unit. They were however unable to assist with the granting of rental discounts from TCAE or the indemnification of the plaintiffs against tax liability on the sales.

11 The next letter to arrive from the plaintiffs’ solicitors was dated 26 March 2003 in which the plaintiffs stated that they accept the defendants’ “offer in-principle” and that “the settlement shall be on the following terms”. They proceeded to list the terms. In addition to all the agreed terms, the plaintiffs again stated that the defendants were to fully indemnify the plaintiffs if they were liable in any way for all or any of the loans extended to them by the Company and TCAE. They further required that this be evidenced in a separate agreement. The plaintiffs also stated that the defendants in addition to the releasing of the lease for one unit were also to obtain the repayment of the security deposit of S$24,000 and the construction deposit of S$50,000 (the repayment of the construction deposit was waived subsequently by the plaintiffs by letter on the same day). The last new term was that the defendants were to make payment of S$25,000 to each of the plaintiffs being the payment of dividends to the shareholders and the re-issue of a cheque for S$10,000 which had expired.

12 The defendants’ solicitors sent a reply on 2 April 2004. This was a critical letter and much was made of this letter by both counsel. This letter was stamped ‘without prejudice & subject to contract’. Given the importance of this letter, I set it out in full below:

We refer to your two (2) letters of 26 March 2003.

We note your clients’ request for separate agreement (for an indemnity for the relevant loans). We propose that all obligations be incorporated in a single agreement. Please let us have your views on this.

Your clients were surprised to note item 4 of your first letter, in that, the said issue had never been raised in any prior discussions.

Save as stated above and that our clients are not agreeable to the repayment of the security deposit of S$24,000.00 to Motor Way Credit Pte Ltd, our clients do not object to the other terms.

13 The item 4 mentioned above referred to the repayment of the security deposit of S$24,000.00. The plaintiffs’ solicitors replied to this letter on 29 April 2003 attaching a draft Deed of Settlement for the defendants’ approval and comments, if any, by 2 May 2003 “so that matters can be finalised expediently”.

14 In reply, the defendants’ solicitors wrote back on 30 April 2003 stating that they needed to take instructions and would revert by the next week. 30 April 2003 came and went. No reply came. Instead, on 2 May 2003 the defendants notified the plaintiffs of their intention to hold another EOGM on 23 May 2003 for the purpose of considering and passing a resolution for the second defendants to buy over the shares of the existing shareholders.

15 Startled, the plaintiffs’ solicitors wrote to the defendants’ solicitors on 8 May 2003 stating that this was a breach of the interim injunction and was wholly inconsistent with the settlement reached as detailed in the Deed of Settlement. The defendants’ reply on 13 May 2003 stated that the EOGM was called “to effect the terms of the intended settlement.” Further, they stated that they had advised their clients “that the resolution should be passed if, and after a settlement is reached” and informed the plaintiffs that the EOGM would not be held.” [underlining not mine]

16 The plaintiffs’ solicitors then wrote on 14 May...