Yeoh Wee Liat v Wong Lock Chee and another suit

• Jurisdiction: Singapore
• Judge: Quentin Loh J
• Judgment Date: 20 August 2013
• Neutral Citation: [2013] SGHC 153
• Court: High Court (Singapore)
• Docket Number: Suit No 724 of 2011/G and Suit No 762 of 2011/V
• Year: 2013
• Published date: 27 August 2013
• Hearing Date: 20 September 2012,04 March 2013,25 March 2013,18 September 2012,27 February 2013,26 February 2013,19 September 2012,08 April 2013,01 March 2013,28 February 2013,17 September 2012
• Plaintiff Counsel: William Ong, Tan Xeauwei, Felicia Tan and Joseph Tay (Allen & Gledhill LLP),Lim Ker Sheon and Wee Qian Liang (Characterist LLC)
• Defendant Counsel: David Chan, Koh Junxiang and Christine Ong (Shook Lin & Bok LLP)
• Subject Matter: Contract
• Citation: [2013] SGHC 153

Quentin Loh J:

Yeoh Wee Liat (“Yeoh”) and HRT Corporation Pte Ltd (“HRT”) are the plaintiffs in Suit No 724 of 2011 and Suit No 762 of 2011 respectively. Wong Lock Chee (“Wong”) is the defendant in both suits. The main question in these suits is the rightful percentage of shares held by each of the parties in a company, Next Capital Pte Ltd (“NCPL”). The answer depends on what the parties agreed and whether the plaintiffs have paid for their shares.

The background

HRT’s sole director is one Phuah Bee Lee (“Phuah”). However, at all material times it was represented in its dealings by Phuah’s husband, Richard Kuah Ah Eng (“Richard”). HRT is wholly owned by two of Richard’s sisters. Richard, Yeoh and Wong were longstanding friends and business associates who had entered into numerous investments together. NCPL is a company in the restaurant business. It wholly owns a Chinese restaurant known as Jin Shan Lou and holds an indirect interest in a Japanese restaurant known as Hide Yamamoto. Both of these restaurants are at the Marina Bay Sands (“MBS”). The genesis of NCPL and its business model must be briefly explained to provide context for the parties’ arguments.

Sometime in late 2007 or early 2008, Richard, Yeoh and Wong were in talks with two Japanese individuals, Junichiro Yamada and Yamamoto Hidemasa (“the Japanese investors”), on the possibility of setting up a Japanese restaurant at MBS. Wong had been pursuing the possibility of leasing a unit at MBS for this purpose. This bore fruit in April 2009 when MBS offered a lease to NCPL (“the first lease”) for the operation of a Japanese restaurant. NCPL was at that time a shell company with a paid-up capital of $2, and its sole shareholder was a company known as Mataban Development Pte Ltd. Mataban was wholly owned by Wong, who in turn held 45% of the shares on trust for Phuah. Because MBS required that NCPL’s share capital be increased to $500,000, Wong arranged for Mataban to inject the necessary funds into NCPL in September 2009. Thereafter, NCPL had a total of 500,000 shares with a value of $1 each.

Two subsidiary companies of NCPL were then incorporated, Next Capital Holdings Pte Ltd (“NCHL”) and Next Capital JV Pte Ltd (“NCJV”). NCPL held 50% of NCHL’s shares, with the remaining 50% held by the Japanese investors. NCHL in turn owned 10.2% of NCJV, with the remainder of the shares held by a broader set of investors. It was NCJV that actually operated Hide Yamamoto. It paid a marked-up rent to NCPL for the first lease as well as management fees to NCHL. As can be seen, the parties’ financial outlay was limited to rent and associated costs, and they were only exposed to the profits and losses of Hide Yamamoto through the small indirect stake in NCJV. They also had limited involvement in the day-to-day running of the restaurant. The parties refer to this low-risk, consistent return, business model as the earning of “dry money”.

In July 2009, MBS offered NCPL the lease of a second unit for the operation of a Chinese restaurant (“the second lease”). The original intention of the parties was also to use this lease to earn “dry money”. To this end, negotiations with various groups of potential investors, both local and foreign, were initiated. These continued up to April or May 2010 but eventually came to nought. In April 2010, Wong asked Richard and Yeoh to allow him to run the Chinese restaurant himself. They agreed, and Wong has been managing Jin Shan Lou since.

Mataban remained NCPL’s sole shareholder until 6 January 2010. On that day, share transfer forms reflecting the transfer of 122,500 shares in NCPL (24.5% of the total) from Mataban to each of the plaintiffs were executed by Wong as the director of Mataban.¹ These transfers were witnessed by Yeoh and Phuah respectively. The remaining 255,000 shares (51%) were transferred to Wong.² In May 2010, 105,000 shares (21%) were transferred from Wong to his wife, Christina Tay (“Christina”), leaving 150,000 shares in Wong’s name.

The parties’ cases

According to the plaintiffs, the parties had initially agreed for the ownership of NCPL to be split equally between them.³ This agreement was subsequently varied: Yeoh and HRT were to hold 33% of NCPL’s shares each and the remaining 34% was to be held by Wong.⁴ Further, under the varied agreement, they were to contribute to the share capital of NCPL in proportion to their shareholdings. Therefore, Yeoh and HRT were to contribute $165,000 each, while Wong was to contribute $170,000. The plaintiffs seek to enforce this agreement.

In contrast, Wong claims that there was no binding agreement on the terms asserted by the plaintiffs. Instead, he asserts that there was initially an “understanding”, which he says was not legally binding, that the ownership and profits of NCPL were to be split equally between the parties. This was premised on NCPL executing the “dry money” business model. However, that understanding no longer had any effect when he, Wong, undertook to secure financing for the company and the plaintiffs agreed for him to run Jin Shan Lou. Wong pleads that the parties therefore agreed that he would own 51% of the shares and have majority control of NCPL, with the remaining shares split equally between the plaintiffs. Under this agreement, he was to contribute $255,000 to the share capital of NCPL and the plaintiffs $122,500 each. The share transfer forms executed on 6 January 2010 were in accordance with this agreement. Wong also pleads that Yeoh has not paid in full for his shares, while HRT has failed to pay for them at all.

The agreement Events prior to 6 January 2010

As the parties did not commit their agreement to writing, they rely on oral and circumstantial evidence to prove their respective cases. Turning first to the events prior to the transfer of shares from Mataban to the parties on 6 January 2010, I am satisfied that there is sufficient evidence that the parties had come to a contractually binding agreement sometime in September 2009 for the plaintiffs each to hold 33% of NCPL’s shares and for Wong to hold the remaining 34% (“the September agreement”).

First, there was substantial contemporaneous correspondence that had made reference to such a distribution. On 25 September 2009, Wong sent Richard an email asking him to have Yeoh pay $166,000 towards NCPL’s share capital.⁵ He repeated the request in another email to Richard the next day, although this time the amount specified was $166,666.⁶ This corresponds to one-third of NCPL’s share capital and suggests that Wong was acting on the assumption that Yeoh would be entitled to one-third of NCPL’s shares.

On 28 September 2009, Richard sent an email to NCPL’s company secretary, Strategic Alliance Corporate Services Pte Ltd (“SAC”), with instructions for Yeoh and HRT each to hold 33% of the shares and for Wong to hold the remaining 34%.⁷ Yeoh and Wong were both copied in this email and neither commented on it, indicating that Richard’s instructions were consistent with the parties’ shared expectations. Draft share transfer forms were prepared in accordance with these instructions and sent to Wong the next day, although these were eventually not executed.⁸

On 30 September 2009, Wong sent an email instructing a solicitor to draft guarantee agreements for both Richard and Yeoh.⁹ In the email, he stated that their shareholdings in NCPL would be 33% each and that HRT would own the shares on Richard’s behalf.

On 23 October 2009, Wong sent Yeoh an email, copying Richard, stating as follows: ¹⁰

[Yeoh] can you top up balance:

33% = $165,000.00 less 14,676.32 (your loan) = 150,323.68

paid 50K on 16th Oct. Balance = $100,323.68.

Can you top up another 50k by early next week?

Wong followed up with another email to Yeoh on 18 November 2009, again copying Richard, asking for the balance (which had by then been reduced to $50,323.68) to be paid:¹¹

We do not have enough funds.

[Yeoh] can you top up balance of S$50,323.68 to complete your full amount for share of capital for Sands Japanese Restaurant project.

Calculation as follows:

33% share = S$165,000.00

Less loan on 11.08.09 14,676.32

Less loan on 13.10.09 50,000.00

Less loan on 29.10.09 50,000.00

Balance to top up 50,323.68

On 18 December 2009, Richard sent another email to SAC repeating his instructions for the shares to be allocated in a ratio of 33:33:34.¹² As with Richard’s earlier email, both Yeoh and Wong were copied and neither ventured any comment. Once again, draft share transfer forms were prepared in accordance with these instructions and sent to Wong, but these were eventually also not executed.¹³

The fact that the parties were to be equal, or nearly equal, shareholders was communicated to third parties. On 16 December 2009, one of the Japanese investors, Junichiro Yamada, emailed Richard, Yeoh and Wong advising them that the auditor acting for other Japanese investors would be likely to ask who Wong was. This was because Wong seemed to be in control of both NCPL and Mataban.¹⁴ Yamada wrote that he had already explained to the auditor that he had three equal Singaporean partners, and that Wong’s companies were not selected to be their investment vehicles for any particular reason.

Separately, Yeo Siok Keak (“Yeo”), a Singaporean investor who was approached regarding the Chinese restaurant, deposed in his affidavit of evidence-in-chief that Wong had told him that he, Wong, was an equal partner with Richard and Yeoh in the MBS venture.¹⁵ Yeo testified that it was important to him that Richard, Yeoh and Wong were equal partners, since his planned investment envisaged him eventually becoming the majority shareholder in NCPL.¹⁶ Yeo therefore needed to be assured that the parties had the capacity to transfer the shares to him.

Secondly, Wong accepted in cross-examination that there was an agreement in September 2009 for the parties to have an equal stake in NCPL.¹⁷...