TAN HONG JOO & 2 Ors v FULL HOUSE BUILDING CONSTRUCTION PTE. LTD. & Anor

Facts

Tan Hong Joo (THJ), his wife Goh Siew Ling and Ooi Chooi Teik appealed to the Appellate Division of the High Court in Civil Appeal No 56 of 2023, arising from Suit No 74 of 2020. The respondents were Full House Building Construction Pte Ltd (FH) and Tan Hong Chian (THC).

THJ and THC began as equal shareholders and directors of FH. After the relationship soured, THC brought proceedings including an oppression suit, and was removed as director in March 2017. A settlement agreement dated 20 April 2018 provided that THC would buy the shares of THJ and Goh for $3.6m and that the appellants would step down. Clause 1 was a full and final settlement, clause 10 barred objections to FH's management before signing, clause 18 warranted that trade receivables were not less than $3.3m as of 28 February 2018, and clause 24 said each party would bear its own costs of the suit.

After completion, the respondents sued. They said the appellants had used a directors' resolution under Art 114 of FH's articles to have FH reimburse $251,163.78 of their own legal fees, and that debts from two customers counted as receivables were not recoverable. The trial judge allowed both claims, ordering $251,163.78 paid to FH and $465,207.57 to THC, each with interest of 5.33% per annum.

Issues

1. Whether the settlement agreement barred FH's claim to recover the legal fees reimbursed to the appellants.
2. Whether clause 10 prevented the respondents from suing on the receivables warranty in clause 18.
3. Whether pre-judgment interest was correctly awarded and from what date.

Holding

The Appellate Division dismissed the appeal in its entirety, but varied two orders: the $465,207.57 under the warranty claim was to be paid by the appellants to FH rather than to THC, which the respondents accepted, and interest on that sum was to run from 20 October 2018 instead of the date of the agreement. Interest on the reimbursement claim from 24 April 2018 was left undisturbed. The appellants were ordered to pay the respondents costs of $40,000 inclusive of disbursements.

Reasoning

On the reimbursement claim, the court agreed that Art 114 only allows a director to be indemnified for costs of proceedings ended by a court decision, so it did not cover a suit resolved by settlement. Unlike the judge, it read clauses 1 and 10 widely enough to cover even ultra vires acts before signing. But clause 24 was a specific provision that prevailed over those general clauses. Having FH, itself a party, pay the appellants' costs ran against the substance of clause 24, under which each party carried its own costs. The court let the respondents run this argument although it was not in their Case, as no new evidence was needed and the appellants were not prejudiced. It found no contemporaneous evidence for the appellants' professed understanding of clause 24, and Ooi's account of a remark by THC had not been put to THC.

On the warranty claim, the question was not how the appellants managed FH but whether the debts were in substance receivables as warranted. Clause 10 could not override the express warranty, or it would mean nothing. The appellants no longer disputed that the debts were not receivables, so the warranty was breached. Expectation loss was the shortfall the judge had found, but making good the warranty meant the money should go to FH.

On interest, FH had been out of pocket for the whole reimbursed sum from 24 April 2018, following Grains and Industrial Products Trading Pte Ltd v Bank of India and another [2016] 3 SLR 1308. For the warranty, the judge had overlooked that receivables would not have been collected the moment the agreement was signed, so the start date was moved six months on.

From the judgment