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

Facts

Full House Building Construction Pte Ltd, a construction company incorporated in 1994, was founded by the brothers Tan Hong Chian (THC) and Tan Hong Joo (THJ) as equal shareholders and its only directors. In 2013 THJ's wife, Mdm Goh Siew Ling, and Mr Ooi Chooi Teik also became directors. Relations soured, leading to an oppression suit by THC and a winding up application by THJ concerning another company the brothers co-owned, Prime Maintenance Pte Ltd; THC was removed as a director of Full House by 10 March 2017. On 20 April 2018, after mediation, the parties signed a settlement agreement under which THC would buy the shares of THJ and Mdm Goh and the three directors would step down by 15 June 2018.

After the share sale was completed, Full House and THC sued the three former directors in Suit No 74 of 2020 in the General Division of the High Court. They claimed that the directors had wrongly caused Full House to pay their legal fees in the oppression suit, and that the directors' warranty that trade receivables were not less than $3,300,000.00 as of 28 February 2018 was untrue. The former directors counterclaimed: Mdm Goh and Mr Ooi for directors' fees, Mr Ooi for pay for work done after he stepped down as director, and all three for injunctions against THC over his forwarding of their solicitors' email and his dealings with Prime Maintenance's liquidators.

Issues

1. Whether the former directors were entitled to have Full House reimburse their legal costs in the oppression suit.
2. Whether the former directors breached the warranty on Full House's trade receivables.
3. Whether Mdm Goh and Mr Ooi were owed directors' fees, and whether Mr Ooi was owed pay for July 2018.
4. Whether THC's conduct over the solicitors' email and Prime Maintenance justified injunctions.

Holding

The court allowed both of the plaintiffs' claims and dismissed the directors' fees and services remuneration counterclaims, but allowed the counterclaim for injunctions, so the defendants succeeded in part. On the reimbursement claim, THJ was ordered to pay Full House $83,441.26, Mdm Goh $86,347.26 and Mr Ooi $81,375.26, with interest at 5.33% per annum from 24 April 2018. On the warranty claim, the three were ordered to pay THC $465,207.57 with interest at 5.33% per annum from 20 April 2018. THC was restrained from accessing, viewing or misappropriating private or confidential correspondence between the defendants and their solicitors, and from making allegations or requests for investigations about Prime Maintenance.

Reasoning

On reimbursement, the court read the clause that each party bear its own costs as having the effect of no order as to costs: it did not stop a party from receiving voluntary reimbursement. But Article 114 of the company's articles allowed indemnity only where judgment was given in the director's favour, the director was acquitted, or relief was granted under the Act. Settlement was not one of these, and reading the indemnity wider would go beyond its plain words. A resolution inconsistent with the constitution was not a management decision protected by the settlement's no-challenge clause, so the defendants had to return the sums.

On the warranty, the court relied on the plaintiffs' accounting expert, whose evidence was uncontradicted after the defendants' intended witness declined to appear. Once Full House agreed to accept $100,000.00 by instalments in discharge of a $614,959.15 judgment debt against BL Construction, accounting practice and the company's own policy required the forgiven $514,959.15 to be written off at once, not over three years. Recovery of that sum was unrealistic. A Buildforms debt of $31,458.00 had been treated as impaired by the defendants themselves in 2017. Without those debts receivables fell short of the warranted figure by $465,207.57, which was the measure of THC's expectation loss.

On the fees, the court accepted that "commission" in the settlement meant the directors' fees in the service agreements, pegged to net profit, and that net profit meant profit after tax. But Full House's 2018 statement showed losses before and after tax, and the defendants could not identify any error in it. Mr Ooi's July 2018 work was found to have been done while serving his two-month notice period, not under a new contract, and he agreed to forgo unpaid pay in exchange for leaving early.

On the injunctions, the email from the defendants' personal solicitors retained its confidential quality; THC accessed it knowing they would not want it disclosed and forwarded it to a cousin, so breach of confidence was made out under both LVM Law Chambers LLC v Wan Hoe Keet and another and another matter [2020] 1 SLR 1083 and I-Admin (Singapore) Pte Ltd v Hong Ying Ting and others [2020] 1 SLR 1130, with the injunction limited to solicitor-client correspondence. THC's repeated pressure on Prime Maintenance's liquidators breached the settlement's term that no investigations were required, as THC conceded at trial, and an injunction enforcing it caused him no particular hardship.

From the judgment