Tong Guan Food Products Pte Ltd v Ong Leong Chuan (Ong Heng Chuan and another, interveners, Third Party)

Choo Han Teck J:

[2] The background facts are straightforward, but it will be helpful to trace the events to the origin of this action. This action, Suit No 1633 of 1999, was commenced by the plaintiff company, then represented by Drew & Napier, against the defendant, then represented by Hee Theng Fong & Co. The defendant was a director of the plaintiff and was sued in respect of alleged breaches of duties as director. One of the reliefs sought by the plaintiff was for an order for an accounting of assets purchased through company funds. There was also an allegation of misappropriation of $200,000 belonging to the company. The first and second interveners are the defendant’s brothers and they were also directors of the plaintiff company at the material time. The trial of this action commenced on 18 August 2000, and was adjourned part heard on 22 August 2000. It was scheduled to resume for hearing from 5 to 8 September 2000. On 7 September 2000, the plaintiff and the defendant entered a consent judgment. The judgment was in the following terms:

The schedule to the order of court provided that the plaintiff and the defendant would appoint a special accountant to determine whether the defendant as well as the first and second interveners had “respectively used monies or assets belonging to the plaintiff or its subsidiaries to purchase shares in the plaintiff company that belonged to Ong Siew Kuan and Ong Siew Chin” (Ong Siew Kuan and Ong Siew Chin are sisters of the defendant and interveners). The schedule also provided that the purchase of any such shares “using the monies or assets of [the plaintiff or its subsidiaries] shall be void”.

[3] Ernst & Young were appointed as the special accountant and they rendered a report in July 2002. The report indicated that the two interveners were to be liable in respect of irregularities stated in the said schedule. Consequently, the plaintiff applied by way of a summons in chambers on 18 July 2002 to “implement the terms of the settlement” of 7 September 2000 against all three brothers. The summons was served on the defendant as well as his two brothers, claiming relief not only against the defendant but also against his two brothers.

[4] The defendant, now represented by Allen & Gledhill, indicated no desire to challenge the special accountant’s report. However, on 19 July 2002 the two interveners applied by a summons in chambers for leave to intervene and challenge the plaintiff’s application to enforce the consent judgment of 7 September 2000. The second intervener also applied to cross-examine the special accountant.

[5] The second intervener’s application was fixed for hearing before another court (not the original trial judge). At the hearing, it became apparent that the primary issue was whether the interveners were bound by the consent judgment of 7 September 2000. The parties then agreed to have that issue determined as a preliminary issue. As a result, that issue was fixed for hearing before this court on 30 October 2003.

[6] The critical and foremost question at the hearing was whether persons who were not parties to the action could be bound by a consent judgment obtained between the plaintiff and the defendant there. Secondly, whether the unusual procedure adopted by the interveners in response to the plaintiff’s summons (to enforce the consent judgment) was correct and appropriate.