Chng

- vs -

Sime Darby Holdings Ltd

Judgment

DC D’Cotta J

1. This matter comes before the court in two aspects, first as an award in the form of a special Case Stated by the arbitrator, Mr. Robert MacCrindle, QC and secondly by way of motion to remit the award to the arbitrator.

   The question for my decision in the Case Stated is:

   Whether on the facts found and the true construction of the contractual bargain between the parties the claimants are entitled to the relief claimed by them or to any of it.

2. Subject to the decision of this court, the learned arbitrator has awarded and adjudged that the claimants’ claims failed and stood dismissed. If this court should answer the question in the affirmative, the learned arbitrator has made the alternative award in favour of the claimants and has also granted to the claimants such further or other relief as to this court may seem proper.

3. The claims of the claimants are as follows:

   1. A declaration that the first and second claimants are entitled to the return and re-transfer of the Golden Bay shares by the respondents;

   2. A declaration that the beneficial ownership in the Golden Bay shares has passed to the first and second claimants and that the respondents and/or their nominees are holding the said shares to or for the use of the first and second claimants;

   3. An order that the respondents do all such acts and execute all such documents as may be necessary to re-transfer the said shares to the first and second claimants on refund by them to the respondents of all the sums of money referred to in paras 3 and 4 of Annexure Document A (pp 3-4) or, alternatively, on refund by the first and second claimants of all such sums of money as may be ascertained upon the taking of proper accounts to have been paid by the respondents to or for the accounts of the claimants under the said agreement; and

   4. Costs.

4. The claimants, Chng Heng Tiu and Chng Heng Khong, are the shareholders and owners of Golden Bay Pte Ltd (hereinafter called Golden Bay) a private company incorporated in Singapore. Mr. Chng Heng Tiu was the major shareholder of Golden Bay. Golden Bay had a contract with Lian Hup Construction Co Pte Ltd another company substantially controlled by the claimants who were the contractors to build a complex on land in Orchard Road owned by Golden Bay comprising office/bank/shopping centre/flat/theatre.

5. The respondents (hereinafter referred to as Sime Darby) are and were at all material times a public company incorporated in the United Kingdom having substantial business interests in Malaysia and Singapore.

6. In early 1973 the claimants were interested in selling and Sime Darby were interested in buying the whole complex. Sime Darby were to acquire the freehold of the land immediately and were to take over the benefit of the contract with Lian Hup but the claimants were to pay for the completion of the complex.

7. In pursuance of this contract of sale and purchase, the parties entered into a comprehensive bargain which comprised the following:

   1. A Share Sale Agreement whereby the claimants agreed to sell all their said shares in Golden Bay to Sime Darby. The sale was on the basis that the claimants would be responsible to complete the building of the complex in accordance with the approved building plans. The consideration was $50m. It was to be paid partly in cash and partly by four million fully paid Sime Darby shares. The payment of the cash portion and the issue of the four million Sime Darby shares were to be by instalments as set out in cl 2(i) of the Share Sale Agreement.

   2. A Placement Agreement whereby Sime Darby undertook to arrange at the request of the claimant a placement of $8 per share of the four million Sime Darby shares should the market price thereof fall below $8 per share in July, August and September 1975.

   3. Sime Darby undertook to arrange a loan of up to $32m to the claimants by a consortium of banks. Sime Darby agreed to give a guarantee to the lenders in consideration for which the claimants agreed to mortgage the four million Sime Darby shares to Sime Darby.

8. Owing to the need to issue the four million Sime Darby shares in one lot so that the mortgage back to the respondents could take place, the four million shares were not issued by instalments as provided in the Share Sale Agreement. The schedule in the Table of Payments was also not followed in relation to Sime Darby’s payment of the cash portion by instalments. In lieu of the progress payments, the claimants were allowed by Sime Darby to, and they did, maintain a debit account with Golden Bay. The claimants could request Golden Bay to pay the expenditure under the building contract. Sime Darby guaranteed that indebtedness to Golden Bay.

9. At the date of the Share Sale Agreement, the Stock Exchanges which listed the existing shares of Sime Darby were the Stock Exchange in London, Stock Exchange in Hong Kong, the Stock Exchange of Malaysia and Singapore. The Stock Exchange of Malaysia and Singapore was a joint Stock Exchange having a trading floor in Kuala Lumpur and Singapore.

10. On 24 May 1973 the Stock Exchange of Malaysia and Singapore was deleted from the Register of Societies in Singapore, and Singapore and Malaysia each had a separate Stock Exchange, namely the Stock Exchange of Singapore Ltd incorporated on 24 May 1973 and the Kuala Lumpur Stock Exchange Bhd, incorporated on 2 July 1973. All shares previously issued by Sime Darby, other than the four million Sime Darby shares issued to the claimants which were formerly listed on the Stock Exchange of Malaysia and Singapore, were automatically listed on both the Stock Exchange of Singapore Ltd and the Kuala Lumpur Stock Exchange Bhd.

11. Sime Darby applied for and obtained listing of the four million Sime Darby shares on the Stock Exchange of Hong Kong on 16 May 1973 on the Stock Exchange of London on 9 December 1973 and on the Stock Exchange of Singapore Ltd on 14 June 1974.

12. On 7 November 1973 Sime Darby applied to the Kuala Lumpur Stock Exchange Bhd and to the Stock Exchange of Singapore Ltd for the listing of its unlisted shares. The Kuala Lumpur Stock Exchange Bhd by letter of 20 November 1973 demanded as a pre-requisite to the listing by it of approximately 11 million of such shares (including the said four million shares) that Sime Darby should supply a copy of a letter of approval by the Capital Issues Committee of Kuala Lumpur to the issue of such shares, or at least to the listing thereof. As found by the learned arbitrator, Sime Darby could have applied for and obtained their approval. But at all material times prior to the commencement of these proceedings they chose not to do so. On 22 March 1975 Sime Darby formally withdrew their application to the Kuala Lumpur Stock Exchange Bhd in respect of the listing of the four million Sime Darby shares.

13. In December 1973 the four million Sime Darby shares were allotted to Chng Heng Tiu one of the two claimants. These shares were registered in the name of Sime Darby’s nominees. Chng Heng Tiu received dividends as and when they were declared on the shares and on occasion he had exercised the right to vote.

14. I shall now refer to events which happened in connection with the Placement Agreement. The price of each Sime Darby share fell below $8 in July, August and September 1975. On or about 21 August 1975 the claimants informed Sime Darby that they wished to be paid in cash totalling $32m in lieu of the four million Sime Darby shares in question upon the completion of the Share Sale Agreement. Sime Darby failed to place any of the four million shares as they had undertaken. Instead on or about 10 November 1975 Sime Darby by their solicitors’ letter (Document 330 in Bundle C) indicated that they did not admit any entitlement on the claimants’ part to call for the payment in cash of $32m in lieu of the four million Sime Darby shares. Even as late as 28 January 1976 (Document 352 in Bundle C) Sime Darby kept open the issue as to whether they were under any obligation to place the shares at $8 each or to make up to the claimants the difference between the price at which the shares were to be disposed of and the sum of $8 per shares.

15. As regards the agreement under which Sime Darby agreed to procure a loan of $32m to the claimants this was carried into effect in July 1973. As agreed the claimants mortgaged the four million shares to Sime Darby as the security to support the claimants indemnity to Sime Darby. This, of course, was merely by way of mortgage and did not deprive the claimants of their right to redeem the shares the moment they had paid off the lenders.

16. In cl 15 of the award, the learned arbitrator referred to the fact that Sime Darby had repaid to the consortium of banks substantial sums in respect of the advances. As these repayments were made by Sime Darby to the banks after the commencement of the arbitration between the parties which led to the case stated, they would appear to be irrelevant to the issues before the learned arbitrator.

17. In October 1975 the parties to these proceedings agreed that 15 October 1975 shall be taken as the date for the purposes of the building contract.

18. Clauses 23 and 24 of the award read as follows:

    [23]

    At no time before 3 April 1976 — (a) did the claimants have reason to know or suspect that (as was the fact) approval for listing of the said four million shares had not been obtained from the Kuala Lumpur Stock Exchange Bhd and that the shares could not, unlike the great majority of the other shares in Sime Darby, be traded on the trading floor at Kuala Lumpur; (b) did the claimants enquire or ascertain (as it would have been possible for them without difficulty to do) whether such approval been obtained; (c) did the claimants have any desire to trade the said shares on that floor or elsewhere.

    [24]

    On or about 3 April 1976 the claimants learned or obtained reasonable grounds for believing and believed that approval for listing of the said four million shares had not been obtained as aforesaid. Thereafter they made no enquiry or request of Sime Darby as to such listing. Mr. Chng thereafter continued to request Golden Bay to make certain payments for the debit of his debit account with Golden Bay and to authorise Sime Darby to recoup the amount of those payments under cl2(iv) of the Share Sale Agreement. The manuscript request by Mr. Chng at page 25 of Bundle X was intended by him to convey via its addressee (a Sime Darby employee) to Sime Darby, and was by it understood as conveying, authority from him to arrange for payment of S$20,000 to a third party and to offset that amount in the accounting between them under that clause. In consequence, Sime Darby caused or permitted Golden Bay on or about 22 April 1976 to effect payment of that S$20,000 on that basis. At all times after April 1973 up to 10 May 1976 the parties conducted themselves towards each other in a manner such as to indicate to each other that they regarded the Share Sale Agreement as a binding subsisting agreement.

19. On 10 May 1976 the claimants in a letter to Sime Darby claimed to rescind the Share Sale Agreement and they called for the re-transfer to them of the Golden Bay shares.

20. Clause 17 of the share sale agreement reads as follows:

    [17]

    This agreement is conditional upon approval being obtained for the listing of the said shares from all Stock Exchanges which list SDH shares and in the event that such approval is not obtained any monies paid thereunder by SDH shall be refunded by the Shareholders and any of the said shares in the Company transferred to SDH shall be re-transferred to the Shareholders and no party have any further claims or demands against the other.

21. It is common ground that the first mention of the words ‘the said shares’ refers to the four million Sime Darby shares. The second mention of the same words refers to the Golden Bay shares. The words ‘the Shareholders’ refer to the claimants and ‘SDH’ means the respondents (Sime Darby).

22. The first question for determination by the court is:

    Are Sime Darby obliged to obtain the approval of the Kuala Lumpur Stock Exchange Bhd for the listing of the four million Sime Darby shares?

23. Clause 17 is very clear to me. Its wording and place as the last clause in the Share Sale Agreement leaves me in no doubt whatever that it fairly and squarely imposes on Sime Darby an obligation in law to obtain listing approval. The intention of the parties was to confer on the four million Sime Darby shares all the attributes of the great majority of other shares in Sime Darby to the extent that the four million Sime Darby shares would be freely marketable on all the four trading floors in London, Hong Kong, Singapore and Kuala Lumpur. This must have been the intention as the bulk of the consideration was agreed to be in the form of the four million Sime Darby shares. Learned counsel for Sime Darby submitted that a true and proper construction of cl 17 would lead to the conclusion that Sime Darby were obliged only to obtain approval for listing in London and Hong Kong only or alternatively in London, Hong Kong and Singapore or Kuala Lumpur.

24. This submission is founded on the facts, inter alia, that at the time of the Share Sale Agreement, there were only three Stock Exchanges, that the Stock Exchange of Malaysia and Singapore had been dissolved and that at any rate, the Stock Exchange of Malaysia and Singapore was regulated from Singapore. Like the learned arbitrator I am unable to accept this submission which is one of the reasons given by the learned counsel for Sime Darby in his submission that on the proper construction of the contract, the claimants’ claim must fail.

25. The construction as canvassed by Sime Darby would be too artificial and not in line with the approach of the House of Lords in Schuler AG v Wickman Machine Tool Sales [1974] AC 235. As will appear later in this judgment, this interpretation of cl 17 will not lead to any grotesque or absurd result.

26. Like the learned arbitrator, I have also come to the conclusion that a term ought to be implied into cl 17 as to the time within which Sime Darby were obliged to obtain the approval of the Kuala Lumpur Stock Exchange Bhd for the listing of the four million Sime Darby shares. It is understood that the approval had to be obtained within a reasonable time. This must be the answer of the parties to the officious bystander. This must also have been the intention of the parties if they had averted to this question. This is a term to be implied because it is necessary to give ‘business efficacy’ to the share sale agreement — see Trollop v NW Metropolitan Hospital Board [1973] 1 WLR 601.

27. The learned arbitrator has held that the claimants were under an obligation in law to operate cl 17 within a reasonable time after the expiry of the reasonable time within which Sime Darby were obliged to obtain the approval for the listing. I do not think that such a term can be implied into cl 17 and the implication of such term would not accord with the principles enunciated in Trollope’s case. Furthermore, the learned arbitrator’s finding in cl 23(a) of the award would refute this. It is also pertinent to note that there was no obligation in law on the part of the claimants to ascertain whether or not Sime Darby had obtained listing approval for the four million Sime Darby shares on the Kuala Lumpur Stock Exchange Bhd. Once again I cannot accept the submission of learned counsel for Sime Darby when he said that the claimants should have invoked cl 17 within a reasonable time and they did not do so.

28. I will now deal with cl 24 of the award. The learned arbitrator found that on or about 3 April 1976 the claimants learned or obtained reasonable grounds for believing or believed that approval for the listing of the said four million shares had not been obtained as aforesaid. Thereafter they made no inquiry or request of Sime Darby as to such listing. The learned arbitrator then proceeded as follows:

29. Mr. Chng thereafter continued to request Golden Bay to make certain payments for the debit of his debit account with Golden Bay mentioned in para 8 above, and to authorise Sime Darby to recoup the amount of those payments under cl 2(iv) of the Share Sale Agreement.

30. As will be observed, the learned arbitrator found that 3 April 1976 was the first date when the claimants came to know that Sime Darby had not applied for approval of the listing of the said shares. The claimants gave notice to Sime Darby to rescind the agreement on 10 May 1976. This period of five weeks may be referred to as the ‘critical period’. The learned arbitrator found in Annexure Document X to the award that Golden Bay during this period made four payments. A perusal of Document X will show that only the last of these payments was made on the specific instructions given by the claimants on 22 April 1976. The other three payments although made during the critical period were made in pursuance of what may be termed the continuing instructions given long before the critical period by the claimants requesting Golden Bay to make the payments for the debit of their account with Golden Bay and authorising Sime Darby to recoup the amount of those payments under cl 2(iv) of the Share Sale Agreement. Apparently the authority given by the claimants to meet these payments was not countermanded or revoked. The payments however were long over due. This is the subtle difference which the learned arbitrator failed to distinguish and which was obviously the basis of the claimants’ application for remission. It was apparently this finding which prompted the learned arbitrator to arrive at the conclusion which he did in the last sentence of cl 24 of the Award as well as his finding in cl 26(e) ‘that the claimants by their conduct as therein described prior to 10 May 1976 had chosen to affirm the Share Sale Agreement as an unconditional subsisting contract’.

31. On this question of affirmation I would like to refer to the case of McComick v National Motor & Accident Insurance Union (1934) 49 Lloyd LR 361 and to the judgment of Lord Scrutton J at p 365 in which he said:

    I think also this is clear, on a series of authorities: that whether you treat it as an election or whether you treat it as a ratification or whether you treat it as a decision simply to act on the knowledge you have acquired, the duty to take action does not arise (1) unless you know all the facts — being put on inquiry is not sufficient; you must know the facts — and (2) unless you have a reasonable time to make up your mind. You are not bound the moment the statement is made to you to make up your at once; you are entitled to a reasonable time to consider — to a reasonable time to make inquiries.

32. Lord Slesser J in the same case had this to say at page 371:

    In those circumstances, I think this case is a very long way from a waiver which can be simply based on the view that they continued to fight the case for the few hours that remained after his man had stated very ambiguously and uncertainly that he had been convicted. In my opinion, a person is entitled to a reasonable time for consideration as to whether he will take one course or another; and when he does elect, he must do it in an unequivocal way and in such a manner as to represent to other persons definitely and unequivocally that he has taken that view whereby it may act to their detriment.

33. Again in Farnworth Finance Facilities v Attryde [1970] 2 All ER 774, Lord Denning in his judgment at p 778 said:

    Affirmation is a matter of election. A man only affirms a contract when he knows of the defects and by his conduct elects to go on with the contract despite them.

34. It follows from this quite obviously that only when a party to a contract has become aware of his rights or his strict rights at law can he elect to reject or affirm. How can a party exercise this right if he is unaware of them. The claimants only became aware of their rights on 3 April 1976 after which they took steps which culminated in their terminating the contract on 10 May 1976.

35. I will now return to the four payments made by the claimants during the critical period which I have said earlier had probably prompted the learned arbitrator to arrive at the conclusion that the claimants had affirmed the contract. Let us examine the conduct of the claimants during this critical period. They learned on 3 April 1976 that Sime Darby had not obtained listing approval in Kuala Lumpur. According to the claimant (Mr. Chng) in his affidavit in support of the application by way of motion for a Case Stated he was in London consulting leading counsel from 7 April to 17 April. On his return to Singapore, he was in communication with the Stock Exchange of Kuala Lumpur from whom he learned that Sime Darby had not obtained listing approval. It is quite apparent from this that the claimants were considering what their legal position was before they made their election and finally they wrote to Sime Darby on 10 May 1976 rescinding the contract i.e. five weeks after discovery that listing approval had not been obtained. This five weeks in my opinion is a very reasonable time; the law permits them a reasonable time within which they have to elect i.e. either to affirm or reject. In my view, in the totality of the circumstances their acts in making the four payments did not constitute affirmation of the contract because their conduct during this period refutes this.

36. I would like to refer to the third submission made by learned counsel for Sime Darby that on the proper construction of the contract, the claimants’ claim must fail and this is — ‘Because on the true construction of the contract, alternatively by reason of a term implied to avoid absurdity, the claimants right to invoke cl 17 ceased on his opting to take cash and losing all possible interest in the shares in September 1975’.

37. This does not mean that the claimants gave their shares carte blanche to Sime Darby for them to do what they liked with the shares. Document 346 in Bundle C states categorically and I quote:

    To credit the proceeds to my account with the Chartered Bank in permanent reduction of the outstanding amounts together with accrued interest advanced to me by a consortium of banks.

38. It is only for this reason that the claimants authorised Sime Darby to sell their shares because they were assured that the proceeds of sale would obtain a return of at least $32m if not more. The circumstances would have been completely different had the shares appreciated in value. As things turned out they did not. But this does not absolve Sime Darby from their obligation under the placement agreement. Once again I cannot accept the submission of learned counsel for Sime Darby.

39. In cl 26(f) of the award, the learned arbitrator came to the conclusion that the claimants were precluded by estoppel from asserting the Share Sale Agreement was not unconditional. All the acts of Sime Darby prior to 3 April 1976 was in each case done pursuant to some obligation or entitlement under the three agreements reached on 29 March 1973 between the parties. As for the claimants’ authorisation after 3 April 1976 I am not satisfied that such an act amounted to ‘a clear and unambiguous’ promise on the part of the claimants that they were not insisting on the provisions of cl 17. To quote the language of Mr. Littledale J in Re Salkeld (1840) 12 Ad & E 767 for waiver to be operative so that a party’s claim is estopped, it must be ‘unequivocal, definite, clear, cogent and complete’.

40. The nature of the conduct giving rise to estoppel was dealt with by the House of Lords in Woodhouse AC Israel Cocoa SA v Nigerian Produce Marketing Co [1972] AC 741. This case arose out of the devaluation of the sterling pound. The buyers anticipating devaluation of the sterling, requested variation of the terms concerning payment in a letter. The sellers granted a variation in different terms. It was accepted in that case that the buyers’ interpretation of the sellers’ letter was as reasonable as the different interpretation of the sellers’. Nevertheless it was held that there was not in the sellers’ letter a sufficiently unambiguous representation to found an estoppel.

41. The learned arbitrator came to the conclusion that prior to 10 May 1976 it had ceased to be possible to give restitutio in integrum to the parties of the Share Sale Agreement. Here again I am of the view that the learned arbitrator had erred in law. At common law the strict rule is that restitution must be as to the whole. However, equity allows the taking of accounts and as long as the parties could be restored to the position substantially as before, the party seeking rescission would not be denied the right — Chitty on Contract (24th Ed), paras 399–400.

42. Clause 17 itself contains the terms under which the Share Sale Agreement could be unscrambled. The procedure as set out and as agreed by the parties in that clause ought to be followed.

43. In all the circumstances I therefore answer the question before this court in the affirmative. As the learned arbitrator has made his award in respect of prayers 1 and 2 of the claimants’ amended points of claim, I now make an order in terms of prayers 3 and 4 of the claimants’ claim in the points of claim. As conditions for the rescission of the Share Sale Agreement, the claimants are to refund to Sime Darby all bona fide expenditure for the improvements of Orchard Towers and to return the four million Sime Darby shares.

Cases

Farnworth Finance Facilities v Attryde [1970] 2 All ER 774; McCormick v National Motor and Accident Insurance Union (1934) 49 Lloyd LR 361; Salkeld, Re [1840] 12 Ad & El 767; Schuler AG v Wickman Machine Tool Sales [1974] AC 235; Trollope v NW Metropolitan Hospital Board [1973] 1 WLR 601; Woodhouse AC Israel Cocoa SA v Nigerian Produce Marketing Co [1972] AC 741

Authors and other references

Chitty on Contract (24th Ed)

Representation

Lai Kew Chai Eddy and Teng Jong Pu (Lee & Lee) for the claimants.

Raymond Kidwell QC and J Grimberg (Drew & Napier) for the respondents.