Case Summaries

Lim Sze Eng v Lin Choo Mee [2018] SGCA 84

SUPREME COURT OF SINGAPORE

30 November 2018

Case Summary

Lim Sze Eng v Lin Choo Mee [2018] SGCA 84
Civil Appeal No 204 of 2017

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Decision of the Court of Appeal (delivered by Judge of Appeal Andrew Phang Boon Leong)

Outcome: CoA dismisses appeal by the appellant against HC decision to award the respondent damages for the appellant’s breach of various terms under a settlement agreement.

 

Background

1          This was an appeal against the decision of the High Court judge (“the Judge”) to allow in part a claim brought by the respondent, Mr Lin Choo Mee (“LCM”), in a suit (“the Suit”) commenced against his elder brother, the appellant, Mr Lim Sze Eng (“LSE”), seeking, among other things, damages for the alleged breaches by LSE of various terms under a settlement agreement dated 28 December 2015 (“the Settlement Agreement”). The Settlement Agreement was entered into in resolution of their differences arising out of appeals (“the Winding Up Appeals”) brought by LSE against the decision of the High Court to grant applications (“the Winding Up Applications”) brought by LCM to wind up three family-run companies, namely, Tat Leong Investment Pte Ltd (“TL Investment”), Tat Leong Development (Pte) Ltd (“TL Development”), and Tat Leong Petroleum Co (Pte) Ltd (“TL Petroleum”) (collectively, “the TL Companies”).

The material facts

2          LSE is the founding director and majority shareholder of the TL Companies. On the other hand, LCM is a minority shareholder in the TL Companies, and used to be a director of the companies until his term as director in TL Development and TL Investment was not renewed in March 2013.

3          In November 2014, LCM commenced the Winding Up Applications, seeking to wind up the TL Companies under s 254(1)(i) of the Companies Act (Cap 50, 2006 Rev Ed). The High Court granted the applications, and ordered LSE to pay LCM costs fixed at S$40,000 excluding disbursements, with such costs and disbursements to be reflected solely against the value of LSE’s shares in the TL Companies (“the Costs Order”). LSE appealed against the decision. In November 2015, the Court of Appeal suggested that parties attend mediation to resolve their differences. On 28 December 2015, the parties attended mediation and, at the conclusion of the session, entered into the Settlement Agreement.

4          The material terms of the Settlement Agreement are as follows:

a          LCM’s shareholding in the TL Companies would be disposed of either by LSE purchasing LCM’s shareholding in those companies or by capital reduction of those companies, with the net effect being that LCM would receive a sum of money in lieu of his shares in the TL Companies (“the Consideration”), and each party shall bear their own costs of the Winding Up Appeals (cll 1 and 2).

b          The Consideration comprises: (i) 23.44% of the net tangible asset value (“NTAV”) of TL Development; and (ii) 14.81% of the NTAV of TL Petroleum (cl 3).

c          One of the components of the NTAV of TL Petroleum is the sale price of a shop unit at 14 Scotts Road #03-11, Far East Plaza (“the FEP Unit”) (cl 5).

d          The sale of the FEP Unit “is to be completed within six months” of the date of the Settlement Agreement, and the payment of the Consideration to LCM “shall be made … within 9 months hereof or within 1 month of the completion of sale of both [LCM’s place of residence] and [the FEP Unit], whichever is earlier” (cl 10).

e          Neither party shall have any claim against the other in relation to any matter arising from or connected to the subject matter of the Winding Up Appeals, save for any costs orders already made (cl 13).

5          It was also allegedly common ground, based on the parties’ pleadings in the Suit, that the Settlement Agreement contains implied terms that: (a) first, the parties “shall take reasonable endeavours and/or do all that may be necessary to give effect to the spirit and intent of the Settlement Agreement and to implement the terms of the Settlement Agreement”, and the “parties would cooperate to enable the sale of the [FEP Unit] and/or not to prevent performance of the sale of the [FEP Unit] by their acts and/or omissions” (“the Reasonable Endeavours Term”); and (b) second, “the sale price of the [FEP Unit] shall be reasonable” (“the Reasonable Price Term”).

6          Pursuant to the Settlement Agreement, the parties appointed Colliers International (Singapore) Pte Ltd (“Colliers”) as the agent for the sale of the FEP Unit. In March 2016, Colliers gave an indicative valuation of the FEP Unit of S$2.1–2.2m. In the first six months of 2016, the parties first marketed the FEP Unit for sale in the open market, and then put the FEP Unit up for auction at the reserve price of S$2.2m, but were unsuccessful. After the six-month deadline provided for under cl 10(b) for the sale of the FEP Unit elapsed on 28 June 2016, LCM proposed discharging Colliers as the agent for the sale of the FEP Unit and appointing another firm to perform an independent valuation. LSE refused, and instead proposed that the FEP Unit be auctioned at the slightly reduced reserve price of S$2.1m.

7          On 28 September 2016, the nine-month long-stop deadline provided under cl 10(c) for the payment of the Consideration to LCM elapsed. In October 2016, LCM agreed to auction the FEP Unit at the reserve price of S$2.1m until the end of 2016. But the auctions carried out in October, November and December 2016 were all unsuccessful.

8          In January 2017, LCM proposed to lower the reserve price of the FEP Unit for the auction to S$1.5m. LSE refused. At the auction held at the reserve price of S$2.1m on 19 January 2017, an offer of S$1.1m was made for the FEP Unit. But LSE did not accept the offer.

9          In February 2017, Colliers provided, at LCM’s request, a fresh indicative valuation of the FEP Unit of S$2-2.2m, and also recommended a reserve price of S$1.6m. LCM then proposed to lower the reserve price to S$1.1m, but LSE refused, insisting on maintaining the reserve price of S$2.1m. Further auctions of the FEP Unit at the reserve price of S$2.1m held from February to July 2017 were also unsuccessful, with no bids received at all.

10        To date, the FEP Unit remains unsold, the Consideration remains unpaid, and the Costs Order remains unsatisfied. In the Suit, the Judge found that LSE had breached: (a) cll 10(b) and 10(c) by failing to complete the sale of the FEP Unit by 28 June 2016 and failing to pay the Consideration to LCM by 28 September 2016; and (b) cl 13 by failing to satisfy the Costs Order. LSE appealed against the Judge’s decision.

The Court’s decision

11        The Court of Appeal dismissed the appeal. First, the court disagreed with the Judge below by finding that LSE did not breach cll 10(b) and 10(c) of the Settlement Agreement by failing to sell the FEP Unit by 28 June 2016 and pay LCM the Consideration by 28 September 2016 because cll 10(b) and 10(c) did not impose an absolute obligation on him to do so. However, the court agreed with the Judge that LSE was in breach of the Reasonable Endeavours Term by refusing to lower the reserve price for the sale by auction of the FEP Unit to below S$2.1m, and that LSE was also in breach of cl 13 of the Settlement Agreement by failing to satisfy the Costs Order: at [53] and [85].

12        Clauses 10(b) and 10(c) of the Settlement Agreement do not impose absolute obligations on the parties. Although the text of the contract will undoubtedly be the first port of call for the court when interpreting a contract, the court should always proceed to examine the relevant context even if the relevant text appears, at first glance, to be plain and unambiguous. Hence, in this light, counsel’s agreements in the pleadings in relation to the Reasonable Price Term shed additional (and very important) light on the context in which the Settlement Agreement in general and cll 10(b) and 10(c) in particular were entered into, by showing that cll 10(b) and 10(c) were not intended by the parties to impose absolute obligations inasmuch as the specific timelines stipulated therein were not intended to be absolute so long as a reasonable price for the FEP Unit could not be achieved. The relevant context was one that not only embraced closure for the parties, but also ensured that their economic interests were safeguarded. Hence, there was in fact no contradiction or variation of any absolute obligation to sell the FEP Unit and pay the Consideration by the stipulated dates by the implication of the Reasonable Price Term: at [59], [62] and [63].

13        Although the parties’ pleadings that were taken into account in aiding the court in ascertaining the context in which the Settlement Agreement was entered into were drafted subsequent to the time that the particular contract was entered into, the present case can set no general precedent in so far as future cases in this regard are concerned as it involved a highly unusual fact situation. In particular, the present evidence comprised an agreed set of pleadings between parties in an adversarial position. There was also no issue relating to the objective reliability of the material that established the truth of the averments in the pleadings. Indeed, even if the stringent criteria set out by this court in both Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR(R) 1029 regarding the admissibility of extrinsic evidence for the purpose of interpretation, and Sembcorp Marine Ltd v PPL Holdings Pte Ltd [2013] 4 SLR 193 regarding the requirements of civil procedure that must be met before extrinsic evidence may be relied on for the purpose of interpretation were taken into account, the evidence substantiating the relevant pleadings would in fact pass legal muster: at [68].

14        LSE had breached the Reasonable Endeavours Term by failing to lower the reserve price for the auction of the FEP Unit from S$2.1m. There was no evidence to support LSE’s contention that even if the reserve price had been reduced from S$2.1m, there would still have been no offers made to purchase the FEP Unit. Rather, the evidence showed that LSE had failed to do everything reasonable in good faith with a view to procuring the contractually-stipulated outcome within the time allowed, given that he did not take all those reasonable steps which a prudent and determined man, acting in the interests of the obligee and anxious to procure the contractually stipulated outcome within the available time, would have taken. Also, it was incorrect for LSE to argue that the Reasonable Endeavours Term did not require him to sacrifice the commercial interests of the TL Companies. This was a case where the nature and terms of the Settlement Agreement clearly indicated that it was in the parties’ contemplation that LSE should take the initiative to lower the reserve price when it was apparent that it was necessary for him to do so in order to sell the FEP Unit: at [72], [76] to [80].

15        LSE had breached cl 13 of the Settlement Agreement by failing to satisfy the Costs Order. The text of cl 13 was plain and unambiguous in conveying the meaning that the Costs Order, which was “already made” at the time of the Settlement Agreement, ought to be encompassed within the scope of the phrase “save for any costs orders already made”. The surrounding context also supported this reading, because finding that cl 13 superseded the Costs Order would render cl 13 itself otiose and render cl 1(b), which provides that each party shall bear their own costs of the Winding Up Appeals, redundant. Finally, the evidence provided by LCM at trial also showed that at the time the Settlement Agreement was entered into, LCM knew that he was entitled to the sum of S$40,000 as costs ordered to him for being successful in the Winding Up Applications, and hence he should remain entitled to the Costs Order even after the Settlement Agreement had been entered into: at [81] to [84].

 

This summary is provided to assist in the understanding of the Court’s judgment. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s judgment.

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