Raffles Town Club Pte Ltd v Lim Eng Hock Peter and others (Tung Yu-Lien Margaret and others, third parties)

Chan Seng Onn J:

[4] RTC alleged that the Defendants (viz, Peter Lim, Lawrence Ang, William Tan and Dennis Foo) had breached duties owed to the plaintiff company as its directors at the material time by conspiring on a scheme which enabled them to siphon substantial sums of money from RTC for their personal benefit through the following means:

(a) Accepting 18,992 members into the Club even though they knew or ought to have known that the maximum number of initial members for an exclusive, premier club on the site was around 7,000;

(b) Causing RTC to enter into a sham Management Agreement with EH, under which $78m was paid out by RTC as management fees;

(c) Paying themselves some $13m by way of disguised dividends, directors’ remuneration and reimbursement of private expenses; and

(d) Earning interest from the loan of $33m that they had procured RTC to make to RTCI.

[5] These claims were defended vigorously by the Defendants on several fronts, including on the ground that the various impugned transactions had been authorised by the shareholders acting collectively. In particular, Peter Lim sought to distance himself from any alleged impropriety on the part of the directors by denying that he was either a director or a shareholder of RTC at all material times. His denial faced considerable opposition from RTC. Even his alleged co-conspirators, Lawrence Ang and William Tan, brought a counterclaim against Peter Lim and Dennis Foo for an indemnity or contribution on the basis that Peter Lim was a director and shareholder of RTC. On this issue, Lawrence Ang and William Tan aligned themselves with the position taken by RTC in the Main Action.

[6] I agreed with the Defendants in the main and dismissed RTC’s claims against them. However, despite Peter Lim’s strenuous disavowal of his role as a director and shareholder, I had no doubt after having considered the extensive evidence led on this issue at the trial, that he had been a de facto director and beneficial shareholder of RTC (see [64] – [68] of the RTC Judgment).

[9] Third party claims were brought against Margaret Tung and Lin Jian Wei, the current directors and shareholders of RTC, as well as against Lawrence Ang and William Tan. The latter pair also instituted a counterclaim against Peter Lim and Dennis Foo.

[10] In their third party claim against Margaret Tung and Lin Jian Wei, Lawrence Ang and William Tan alleged that:

(a) Margaret Tung and Lin Jian Wei had breached cl 7 of the RTC S&PA dated 6 June 2001, and Recital (F) and cl 4.3 of the Deed dated 18 February 2002;

(b) Margaret Tung and Lin Jian Wei had acted in bad faith, unconscionably and conspired with RTC in commencing the Main Action; and

(c) In so doing, they were using RTC to unjustly enrich themselves.

[11] With regard to this third party claim, I held that:

[13] Peter Lim shared Lawrence Ang and William Tan’s misgivings of conspiracy amongst Margaret Tung, Lin Jian Wei and RTC with the predominant intention of causing personal damage and injury to him. I found (at [227]) that whatever intention they had to injure him was incidental to the Main Action and dismissed this claim against them.

[15] Peter Lim and Dennis Foo claimed that the commencement of the Main Action by RTC constituted breaches on Lawrence Ang and William Tan’s part of cll 2.4(c) and 5.3 of the Deed of Settlement entered into by the four of them. I decided in favour of Lawrence Ang and William Tan because (a) cl 2.4(c) did not cover the loans impugned in the Main Action; and (b) cl 5.3 did not apply when allegations of fraud and dishonesty have been made against Peter Lim and Dennis Foo (see [231] – [232]).

[17] In their counterclaim, Lawrence Ang and William Tan claimed contribution or indemnity from Peter Lim and Dennis Foo in respect of all aspects of the Main Action on the grounds that: (a) Peter Lim was the controlling mind and driving force behind the business of EH, a beneficial shareholder of both EH and RTC and had received large sums of money from EH and RTC through Lawrence Ang; and (b) Dennis Foo was beholden to Peter Lim and was the latter’s agent. I held (at [236]) that owing to the failure of RTC’s claims against the Defendants the issues of indemnity and contribution, which were contingent on RTC’s success in the Main Action, did not arise.

(a) In respect of the Main Action:

(i) whether Margaret Tung and Lin Jian Wei should be personally liable for Peter Lim’s costs recoverable from RTC on an indemnity basis;

(ii) whether Peter Lim is entitled to his costs occasioned in defending the Main Action on the ground that he was not a director or shareholder of RTC at the material time;

(iii) whether the costs in relation to the expert witnesses on valuation should be awarded against RTC; and

(iv) whether a certificate for costs for more than two solicitors should be granted in favour of the Defendants in the Main Action.

(b) In relation to the Third Party Claims:

(i) whether the costs of litigating the Third Party Claims should be recoverable from RTC; and

(ii) whether Margaret Tung and Lin Jian Wei should be awarded only one set of costs in respect of their defending the third party claims against them.

Under O 59 r 27(1), where an order is made that the costs of one party to proceedings be paid by another party to those proceedings, the amount of costs which the receiving party is entitled to recover is the amount allowed after taxation on the standard basis, unless it appears to the Court to be appropriate to order costs to be taxed on the indemnity basis.

[24] The factors enumerated in the passage from Dymocks quoted at [23] above were adopted with approval by the Court of Appeal in DB Trustees (Hong Kong) Ltd v Consult Asia Pte Ltd and another appeal [2010] SGCA 21 (“DB Trustees”) at [26]. According to the Court’s summary in DB Trustees (at [36]):

Peter Lim’s costs of defending the Main Action on the ground that he was not a de facto director and a shareholder of RTC

In summary (at [42]):

[37] In order to make out a claim of breach of directors’ duties against Peter Lim, RTC had to first establish that Peter Lim was a director at the material time. Unlike the other three Defendants, Peter Lim vigorously denied that he was a director and a shareholder of RTC, despite the clear evidence that he was a de facto director with a substantial beneficial shareholding in RTC at the material time. Even though Chan Lay Hoon, Peter Lim’s “trusted lieutenant” in RTC, gave testimony in favour of Peter Lim that he was just a consultant of RTC, her evidence actually showed clearly that he was a de facto director. According to her, Peter Lim was present at formal and informal meetings where matters in relation to RTC and EH were discussed, whatever he recommended would be implemented, and Peter Lim’s consent was required for the acceptance of 19,000 members and the payment of 15% commission to EH per membership entrance fee. Indeed, Lawrence Ang, William Tan and Dennis Foo all agreed that Peter Lim had a decisive say in the major decisions of RTC and they often deferred to his views. Owing to the weight of evidence against him, that defence was plainly unsustainable and unmeritorious.

[47] In the present case, RTC’s claims against the Defendants were not dismissed on the ground that the Defendants were the wrong persons to sue. The real question in this case was whether the Defendants had breached their duties to RTC while they were its directors. Even though it was held that the answer was “No, they had not”, it can hardly be gainsaid that the real and only fight in the Main Action was between RTC and the Defendants. RTC had not acted improperly in instituting the Main Action under such circumstances that the Third Party Claims could be said to have been “inevitable” in order to join the proper parties to the proceedings.

[51] Counsel for Lin Jian Wei submitted that it was not unreasonable for Margaret Tung and their client to engage separate sets of counsel given the magnitude of the claim and the consideration that Margaret Tung and Lin Jian Wei did not have the same involvement and knowledge with regard to the various allegations made against them by the Defendants. Moreover, counsel for Margaret Tung and Lin Jian Wei had divided areas of cross-examination between them and also covered different witnesses.

(a) As regards costs in the Main Action:

(i) RTC is to bear Peter Lim’s costs, certified for three solicitors, on the standard basis, excluding any costs incurred by him in defending the Main Action on the ground that he was not a beneficial shareholder or director of RTC;

(ii) RTC is to bear Lawrence Ang and William Tan’s costs, certified for three solicitors, on the standard basis; and

(iii) RTC is to bear Dennis Foo’s costs on the standard basis.

For the avoidance of doubt, any costs incurred by the Defendants in instituting or defending the Third Party Claims are not to be part of the costs of the Main Action. For instance, the costs incurred by Lawrence Ang and William Tan in dealing with the issue that Peter Lim was a beneficial shareholder and director of RTC will not form part of their costs in the Main Action as this issue is relevant only to the counterclaim brought by them against Peter Lim and Dennis Foo for contribution or indemnity.

(b) As regards costs in the Third Party Claims:

(i) For the issue of conspiracy, Peter Lim is to bear half, and Lawrence Ang and William Tan are to bear the other half, of Margaret Tung and Lin Jian Wei’s costs;

(ii) For the other issues in Peter Lim’s third party claim against Margaret Tung and Lin Jian Wei, Peter Lim is to bear their costs;

(iii) For the other issues in Lawrence Ang and William Tan’s third party claim against Margaret Tung and Lin Jian Wei, the former two are to bear the latter two’s costs;

(iv) Margaret Tung and Lin Jian Wei are only entitled to one set of costs, assessed on the standard basis for two solicitors;

(v) Peter Lim and Dennis Foo are to each bear half of Lawrence Ang and William Tan’s costs in the third party claim against the latter two, on the standard basis for two solicitors; and

(vi) There will be no order as to costs in respect of Lawrence Ang and William Tan’s third party counterclaim against Peter Lim and Dennis Foo.

(c) There shall be no order as to costs for this supplementary hearing on costs.