Yeo Boong Hua and others v Turf Club Auto Emporium Pte Ltd and others

Choo Han Teck J:

[1] The story in this long running dispute began in 2001. It had been the subject of several court orders, including two from the Court of Appeal. There were two parts to the plot, each separated from the other by the event known as the “Consent Order”, an order of court made by consent on 22 February 2006 in a consolidated action. Following the Consent Order, further disputes arose between the parties, culminating in Suit No 27 of 2009 (“the present suit”), which involved, in essence, an attempt to set aside the Consent Order on the grounds of mistake, breach and frustration. On 2 November 2012, I dismissed the action in the present suit for the reasons that follow.

[2] The three plaintiffs in the present suit were Yeo Boong Hua, Lim Ah Poh and Teo Tian Seng (collectively, “the plaintiffs”). They were in the business of trading in used cars and had come together to bid for the lease of premises formerly known as the Singapore Turf Club (“the Premises”) when the Singapore Land Office (“SLO”) invited tenders in early 2001. The plaintiffs thought that it would be a business opportunity to lease the Premises, and hoped to set up low-end supermarkets and childcare centres (where people could leave their children while shopping for groceries and used cars). With this in mind, they formed Bukit Timah Carmart Pte Ltd (“BTC”) to be their representative company for the tender exercise. When the tender exercise closed on 2 March 2001, SLO received only two bids, one from BTC and the other from the second defendant, Singapore Agro Agricultural Pte Ltd (“Singapore Agro”), the representative company used by the third, fifth, sixth, seventh and eighth defendants, namely Koh Khong Meng (“Koh”), Tan Huat Chye (“HC Tan”), Ng Chye Samuel (“Ng”), Tan Chee Beng (“CB Tan”), and Ong Cher Keong (“Ong”) (collectively, “the Singapore Agro representatives”).

[3] According to the plaintiffs, they commenced discussions with the Singapore Agro representatives on 2 March 2001 in relation to the forming of a joint venture company so that no matter which faction (ie, BTC or Singapore Agro) were to succeed in obtaining the lease granted by SLO (“the head lease”), it would hold such lease on trust for both factions (“disputed oral agreement”). The plaintiffs averred that there was an understanding between all parties that they would set up a joint venture company which would sublease the Premises from BTC or Singapore Agro (whichever succeeded in the tender for the head lease). Parties then executed a Memorandum of Understanding dated 8 March 2001 (“MOU”), the salient portions of which were as follows:

[4] It was the plaintiffs’ case that HC Tan was the main party of the events surrounding these arrangements, and that CB Tan (HC Tan’s son), Koh and Ong had acted under the directions of HC Tan. In characterising the case as “a tale of businessmen versus bankrupts” (HC Tan, Ng and Ong were adjudged bankrupts), the plaintiffs referred to the defendants as “the bankrupts and their cronies” with whom the plaintiffs were unhappily engaged in business dealings, and from whom the plaintiffs were seeking to disentangle themselves. The defendants however viewed the plaintiffs’ corporate manoeuvres as a witch hunt aimed at pressuring the Singapore Agro representatives to cause TCAE and TCPL to declare dividends. The defendants denied that any business relationship commenced between the two factions on 2 March 2001. They claimed that such relationship only started from the time of the MOU, which, both parties agreed, was executed before the announcement of the successful tender party. This disagreement underpinned a larger dispute between the two factions - while the plaintiffs asserted that the MOU reflected only part of an oral agreement between the parties arising from the 2 March 2001 discussions, the defendants argued that the MOU constituted the complete agreement between them. The MOU was subsequently varied orally, such that two, instead of one, joint venture companies were to be formed for the purpose of jointly exploiting the head lease. These two companies were Turf Club Auto Emporium Pte Ltd (“TCAE”) and Turf City Pte Ltd (“TCPL”), the first and fourth defendants.

[5] Singapore Agro was awarded the head lease by SLO for the Premises in April 2001. Singapore Agro signed the head lease with the SLO on 10 July 2001 (“2001 head lease”), which was for a term of three years running from 1 September 2001, and which provided that the landlord “may at his absolute discretion grant a fresh tenancy for a further term of three years subject to new terms and conditions and revision of rental upon the expiration of the [original] term”. Singapore Agro granted sub-leases to TCAE and TCPL on the same day (“2001 sub-leases”). The plaintiffs eventually held 37.5% of shares in TCAE as well as in TCPL (each plaintiff holding 12.5%). Counsel for the plaintiffs, Mr Adrian Tan, submitted that by paying $78,000 each, the plaintiffs effectively paid for the head lease. This, he suggested, lent credence to the plaintiffs’ argument that Singapore Agro was simply an agent holding the head lease for the benefit of TCAE and TCPL.

[6] It did not take long before disputes arose between the plaintiffs and the individual defendants. The plaintiffs claimed that the defendants had, acting on the behest of HC Tan, stripped the plaintiffs of their directorships in TCPL after the plaintiffs discovered and inquired about unusual movements of funds in the company. The parties tried to out-manoeuvre each other by the corporate route, with the result that a large part of 2001 and 2002 were occupied by general meetings followed by solicitors’ letters. The disputes resulted in the plaintiffs commencing Originating Summons No 1634 of 2002 (“OS 1634”) on 15 November 2002 in relation to TCPL’s affairs. They also commenced Suit 703 of 2004 (“Suit 703”) on 25 August 2004 for orders dealing with the accounts of TCAE and, alternatively, for TCAE to be wound up. In the meantime, following the expiry of the 2001 head lease and sub-leases, SLO granted Singapore Agro a fresh head lease for a period of three years on 10 September 2004 (“2004 head lease”). On the same day, Singapore Agro granted sub-leases to TCAE and TCPL (“2004 sub-leases”).

[7] OS 1634 and Suit 703 were consolidated on 28 January 2005 and the consolidated suit was settled on 22 February 2006 by the Consent Order. As the Consent Order formed the crux of the dispute, I shall set it out in full:

[8] That brings us to the events occurring after the Consent Order. Messrs KPMG was appointed on 25 April 2006 to carry out the work envisaged in the Consent Order. It rendered two valuation reports on 10 August 2007, in relation to TCAE and TCPL respectively, some 15 months after the reports were supposed to have been issued on 25 June 2006. In both reports, TCAE and TCPL were valued as at 31 May 2006. It appears that the valuation was done by KPMG on the assumption that there was no confirmation that the 2004 head lease would be extended for another three-year term. After the 2004 head lease and sub-leases expired on 30 August 2007, SLO granted Singapore Agro a further three-year lease commencing on 1 September 2007 (“2007 head lease”). Singapore Agro did not however renew or extend the 2004 sub-leases to TCAE and TCPL. The plaintiffs were aggrieved and complained that this was a breach of the Consent Order. They also demanded that KPMG carry out a revaluation of those companies. KPMG declined and reminded parties to continue with the next stage under the terms of the Consent Order and bid for the shares of TCAE and TCPL.

[9] The plaintiffs filed Summons No 4117 of 2007 (“Summons 4117”) on 13 September 2007 praying inter alia for a fresh valuation to be done. In November 2007, the matter came before Chan Seng Onn J who made no order on that application but granted the plaintiffs leave to amend the summons. The plaintiffs amended their summons on 25 January 2008, seeking an order inter alia that Singapore Agro assign the renewed head lease to TCAE and TCPL or, alternatively, to grant fresh sub-leases to them. The amended summons were dismissed on 23 June 2008 in Yeo Boong Hua and others v Turf City Pte Ltd and others and another suit [2008] SGHC 93. Instead of appealing against the order dismissing Summons 4117 or proceeding with the final obligations under the Consent Order, ie, to bid for the shares in TCAE and TCPL, the plaintiffs commenced the present suit seeking to set aside the Consent Order. They also commenced a separate action against KPMG for negligence. That action encompassed all the recriminations among the plaintiffs, the defendants and KPMG over the time taken for the report to be issued, and disputes that arose in the course of KPMG’s work. One of those disputes concerned the appointment of a Quantity Surveyor (“QS”) to assist KPMG. In essence, the plaintiffs had wanted to nominate the QS but KPMG did not agree.

[10] By the present suit, the plaintiffs sought to set aside the Consent Order. However, given the complicated and extended litigation that spanned 12 years, and having the history marked out by the Consent Order, it was necessary to understand what grounds the plaintiffs were relying on for setting it aside. It was also crucial to understand the consequences that would flow from the setting aside of the Consent Order. The gravamen of the plaintiffs’ complaint was that Singapore Agro obtained an extension of the head lease without extending the sub-leases to TCAE and TCPL. The plaintiffs alleged that by doing so, the defendants were in breach of clause 11 of the Consent Order (“Clause 11”). The question was whether the extension of the head lease had affected, varied or altered the status quo of the two companies within the meaning in Clause 11, which also applied to “assets and/or benefits which [TCAE and TCPL] presently enjoy”, and that included the doing of “anything to affect the head lease between [Singapore Agro] and the Singapore Land Office and sub-leases presently entered into between [Singapore Agro] and [TCAE and TCPL]”.

[11] It was clear from the express language of Clause 11 that the parties referred to the head lease and sub-leases as were then in force. At that time, no one envisaged that KPMG would take 15 months to complete their valuation exercise. No deadline was therefore imposed on KPMG. Consequently, it was clear that no thought was given to the situation where the head lease expired before the parties could bid for the shares in TCAE and TCPL. The parties seemed to envisage a valuation and buy-out before the expiry of the 2004 head lease and that meant that the sole owner could do whatever it wanted regarding the 2004 head lease and sub-leases. In these circumstances, I am of the view that the court would not, on its own, imply any condition into the Consent Order to cover the situation which the parties did not envisage, viz, that KPMG would take 15 months to complete its valuation exercise. Either party could have taken stronger steps to compel KPMG to expedite its work, or to apply to the court for directions, or to agree to make a “blind” bid without KPMG’s report. I was thus of the view that there was no breach of the Consent Order and no basis for it to be set aside.

[12] The question remains as to what remedies are available to the plaintiffs even if the Consent Order was not set aside. Mr Adrian Tan submitted that in the event that the Consent Order was not set aside, the plaintiffs were still entitled to damages for a breach of the Consent Order, and that the defendants would have to account to the plaintiffs in respect of the head lease. The plaintiffs’ case was founded on the basis that the disputed oral agreement between the plaintiffs and the individual defendants going back to 2001 required the defendants to hold the head lease for the benefit of both sides. I was however of the view that, having agreed to resolve their disputes by way of a single Consent Order, the parties were only entitled to remedies for breach of the Consent Order. Neither side has any claim if the Consent Order was not breached. This was also my finding in determining the issues before me in Summons 4117 against which the plaintiffs did not appeal. That is not to say that the plaintiffs have no recourse against the defendants. If the individual defendants were directors and shareholders of Singapore Agro as well as TCAE and TCPL, they might have been in breach of their duties to the latter if they had proceeded to obtain an extension of the head lease without giving the benefit to the two companies. That was not however the pleaded cause of action in the present suit. As far as the plaintiffs are concerned, the war may still go on, but this battle has been lost.