Morgan Bernard Jean Terigi and others v Laurence Hook

Incomlend Pte Ltd runs an online platform for buying and selling discounted invoices. It was started by Mr Morgan Terigi and Mr Dmitri Kouchnirenko, who brought in Mr Laurence Hook, then working in IT at HSBC in Hong Kong. The three called themselves the Founders. The 1st Shareholders' Deed, signed on 29 August 2016 with 14 original investors, required each Founder to sign an employment agreement with Incomlend by a set date (1 August 2016 for Mr Hook). Under Clause 4.4, a Founder who failed to do so had to transfer all his shares at no cost to the other shareholders pro rata, a scheme the court called the Giveaway Mechanism.

Mr Terigi and Mr Kouchnirenko signed their employment agreements; Mr Hook never did and stayed with HSBC, telling the others he would leave later. A Founders' Agreement of 21 April 2017 offered him more shares if he went full-time and moved to Singapore; he did not, but was given extra shares anyway, ending with 32,578 shares. A 2nd Shareholders' Deed was signed on 30 June 2017 with 27 new investors; it did not repeat Clause 4.4. Relations broke down. In early 2018 Mr Terigi and Mr Kouchnirenko invoked the default and pre-emption provisions of the 2nd Shareholders' Deed, treated Mr Hook as having offered his shares to them, and took the shares for US$29,000.

The appellants sued in HC/S 1259/2019 for declarations that Mr Hook was in breach and that the transfer was justified. The trial judge refused the declarations, holding that the 2nd Shareholders' Deed superseded the first and that Mr Hook's CV disclosed his HSBC role, and allowed his counterclaim for the loss of his shares. The appellants appealed in Civil Appeal No 24 of 2022.

1. Whether Mr Hook was estopped from being held to Clauses 4.4 and 4.5 of the 1st Shareholders' Deed.
2. Whether rights that accrued under the 1st Shareholders' Deed survived its replacement by the 2nd Shareholders' Deed, including its entire agreement clause.
3. Whether those accrued rights had been waived by election.
4. Whether Mr Hook breached the non-compete clause in Clause 16.1 of the 2nd Shareholders' Deed, and what declarations should be granted.

The court found that the real dispute was Mr Hook's failure to become a full-time employee. He breached Clauses 4.4 and 4.5 when the 1st deed was executed, so rights to his shares accrued to the other Founders and the original investors on 29 August 2016. His estoppel plea failed: the sabbatical, his father's directorship and the salary paid to his wife came long after the breach and, read against his own promises to leave HSBC, were no clear and unequivocal promise not to enforce the deed.

The court agreed the 1st deed was discharged when the 2nd deed replaced it, but held that termination does not affect rights already accrued. Clause 27.3 of the 1st deed said so expressly, and Clause 19 preserved rights not promptly exercised.

Waiver by election was not pleaded, which was fatal. In any case the accrued rights also belonged to the original investors, who appeared unaware of them, and Mr Terigi and Mr Kouchnirenko never clearly abandoned them. The entire agreement clause looked forward and did not say it extinguished accrued rights.

On Clause 16.1, the court held the CV was not disclosure but found it unnecessary to decide breach: Clause 4.4 governed divestment, and its free transfer to all other shareholders could not coexist with the sale scheme under the 2nd deed. Because the shares should have gone to the original investors as well, the transfer declaration could not be granted.

The Appellate Division allowed the appeal in part. It granted a declaration that Mr Hook breached Clauses 4.4 and 4.5 of the 1st Shareholders' Deed by not entering an employment agreement with Incomlend, so he was not entitled to keep his shares and his counterclaim failed. It refused the declaration that Mr Terigi and Mr Kouchnirenko were entitled to transfer the shares to themselves, because the transfer should have gone through the Giveaway Mechanism. It left open the US$29,000 payment and the fate of the shares already transferred. The appellants received S$30,000 in costs, reduced from the agreed S$50,000 to reflect partial success.