Re Yan; Hughes v Wong (No 2)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

TRUSTS, EQUITY & PROBATE LIST

S CI 2014 05950

DAVID JAMES HUGHES (in his capacity as administrator ad colligendum bona of the estate of LAI LIN YAN, deceased)	Plaintiff
v
WONG KAI WAH (aka THOMAS WONG) & Ors (according to the attached schedule)	Defendants

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JUDGE:	McMillan J
WHERE HELD:	Melbourne
DATE OF HEARING:	16 November 2015
DATE OF JUDGMENT:	25 August 2016 (Redacted judgment published 10 October 2016)
CASE MAY BE CITED AS:	Re Yan; Hughes v Wong (No 2)
MEDIUM NEUTRAL CITATION:	[2016] VSC 504 (First Revision 10 October 2016)

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CONTRACT — Construction of settlement agreement — No point of principle — Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 — Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37 — Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J S Graham	Lawson Hughes Peter Walsh
For the First Defendant	Mr J O’Bryan	Russell Kennedy Pty Ltd
For the Second Defendant	Mr J C Paterson	Mason Black Lawyers
Third defendant	In person
Fourth defendant	No appearance
Fifth Defendant	No appearance
Sixth Defendant	No appearance

SCHEDULE OF PARTIES

BETWEEN:

DAVID JAMES HUGHES (in his capacity as administrator ad colligendum bona of the estate of LAI LIN YAN)	Plaintiff
- and -
WONG KAI WAH (aka THOMAS WONG)	First Defendant
- and -
WONG KAI YUAN (aka PHIL WONG)	Second Defendant
- and -
WONG KHAI SOON (aka LAWRENCE WONG)	Third Defendant
- and -
SENSYN AUSTRALIA PTY LTD (ACN 004 940 336) (as trustee for the Sportscraft Unit Trust)	Fourth Defendant
- and -
ADENAL INVESTMENTS PTY LTD (ACN 004 261 209)	Fifth Defendant
- and -
DAVINSKI NOMINEES PTY LTD (ACN 005 202 184) (as trustee for the Sportsgirl Centre Unit Trust)	Sixth Defendant

HER HONOUR:

Introduction

Questions have arisen in relation to the meaning and implementation of a Settlement Agreement dated 2 June 2009 (‘the SA’) in which various disputes between members of the family of Lai Lin Yan (‘Madam Yan’) were resolved.

By amended originating motion dated 17 April 2015, the plaintiff seeks various orders in relation to the appointment of a valuer for the purposes of making determinations pursuant to certain clauses in the SA, various declarations as to the proper construction of the SA and orders for the payment of certain sums the subject of the declarations.

The parties participating in the proceeding are the plaintiff, who is the administrator ad colligendum bona of the estate of Madam Yan,[1] and two of Madam Yan’s sons, who are the first and second defendants respectively.
[1] Where there is a reference to the plaintiff, it is a reference to the plaintiff acting in his capacity as administrator ad colligendum bona of the estate of Madam Yan.

The third defendant is also a son of Madam Yan. He attended the trial but did not participate in any of the substantive issues for determination. He informed the Court that he was without legal representation due to his lack of means. The third defendant’s interest in the SA is for the payment of certain amounts due to him by the first and second defendants. He is concerned about the long delay in the implementation of the SA and considers that the Court should intervene to prevent any further delay to him as a beneficiary who has no ‘influence on the performance of transactions but suffer[s] the consequences of delay’.

The fourth, fifth and sixth defendants are Australian companies that are part of the family’s extensive holdings and affected by the relief sought in the proceeding. The fourth, fifth and sixth defendants did not appear at the trial. The solicitor who has acted for them over an extended period has accepted service of process and has been provided with copies of significant correspondence and been given access to other documents in the proceeding.

Madam Yan also had five daughters. They have no personal interest in the matters that are the subject of the SA as it does not create any rights or obligations for them. Nevertheless, the plaintiff has endeavoured to contact them and kept them informed of the developments in the proceeding.

The family’s corporate holdings include companies in Australia, Hong Kong and the British Virgin Islands. The Australian companies are Davinski Nominees Pty Ltd (‘Davinski’), Sensyn Australia Pty Ltd (‘Sensyn’) and Adenal Investments Pty Ltd (‘Adenal’). The Hong Kong companies are Teamhing (HK) Ltd (‘Teamhing’) and Winsberg Development Ltd (‘Winsberg’). The British Virgin Islands company is Melia Financial Services Ltd (‘Melia’). Teamhing, Winsberg and Melia are not parties to the SA but are defined in the SA, as are other relevant persons being Tracy Arnott, Tan Kim Thong and Teo Chee Seng,[2] with the latter three having acceded to the SA. The corporate holdings also include companies in Singapore and Malaysia. The control of these companies is also dealt with under the SA.
[2]SA: clause 27.

Background

Madam Yan and her husband, Wong Kuan Meng (‘Mr Wong’), married in 1947. Their eight children were born in Singapore between 1949 and 1966. Madam Yan and her husband developed a successful hardware business in Singapore and Malaysia, operating through various companies, including companies incorporated in other jurisdictions for various purposes.

Mr Wong died on 8 August 1999. On his death, his estate included assets and companies in Malaysia, Singapore, Hong Kong, Australia and the British Virgin Islands.

Mr Wong appointed Madam Yan as the executrix of his will and estate. He left all his cash and money in the bank to Madam Yan and the residue of his estate to Madam Yan, to be held on trust for her and her three sons in the proportions of: 57.5 per cent for Madam Yan, 2.5 per cent for the third defendant, 20 per cent for the first defendant and 20 per cent for the second defendant.

Before he died, Mr Wong had transferred many of his shareholdings in the companies to Madam Yan. She was the holder of the bulk of the shares in Winsberg and Teamhing and had control of those companies, giving her ultimate control of Davinski, Adenal and Sensyn and the Australian properties. Madam Yan also owned the only share in Melia. The first and second defendants had substantial, but not controlling holdings, in Winsberg and Teamhing.

As a result, the bequests of 20 per cent of the residue of Mr Wong’s estate to each of the first and second defendants did not operate to transfer 40 per cent of the family holdings to them equally. There was a dispute as to whether Madam Yan’s shareholdings were in part held on trust as to 20 per cent for each of the first and second defendant.

After Mr Wong’s death, control of the family businesses was divided between the first and second defendants. The first defendant became the managing director of the Singapore and Malaysian companies, responsible for the management of their operations. The second defendant became the managing director of the Hong Kong and Australian companies, responsible for the management of their operations, with the husband of one of Madam Yan’s daughters, assisting him in the management of the Hong Kong and Australian companies. In 2003 and 2004, Madam Yan bought the shares of the third defendant and the five daughters in the companies.

The 2006 transactions

This structure continued until late 2006 at which time certain transactions took place that involved Madam Yan executing documents that transferred the ownership and control of Melia, the Australian companies and trusts and the Hong Kong companies and trusts from her to the first defendant. Transfers of money totalling A$12.7 million also took place, with withdrawals of A$10.1 million from the Davinski bank account and A$2.6 million from the Sensyn bank account. These amounts appear to have been received as repayment of loans owed by Davinski and Sensyn to Melia and have then been paid to the first defendant by Melia as director’s fees of A$2.7 million and a special dividend of A$10 million.

The Victorian proceeding

In 2007 Madam Yan, by her litigation guardian, issued a proceeding in this Court (‘the Victorian proceeding’), whereby Madam Yan and the second defendant sought to set aside the 2006 transactions. The first defendant denied the claims made against him in the Victorian proceeding. He issued a counterclaim alleging that the second defendant caused or procured the withdrawal of substantial funds from Davinski’s bank account between March 2003 and October 2004. The second defendant admitted the payments were made, alleging they were justified on various grounds, including that they were repayments of loans made by him.

After enquiry as to the whereabouts of the $A12.7 million, the Court was informed that $A7.5 million to $A8 million had been donated by the first defendant to various charities. The first defendant was ordered to pay the balance of the A$12.7 million into court. On 29 March 2007, the amount of $A4.7 million was paid into Court. The first defendant then located a further $A2.13 million of the $A12.7 million which on 17 April 2007 was ordered to be paid into Court.

The Singaporean proceeding

In her later years, Madam Yan suffered from moderate to severe dementia. In 2007, five of Madam Yan’s daughters issued a proceeding in the High Court of Singapore, where it was found that she was of unsound mind and incapable of managing her own affairs (‘the Singaporean proceeding’). Orders were made that four of Madam Yan’s daughters and the third defendant be appointed as members of a Committee of Persons for Madam Yan.[3] The Singaporean proceeding concerned various allegations made against the first and second defendants that moneys had been removed from certain companies. During the course of the Singaporean proceeding, differences arose between members of the initial committee that touched upon issues in the Victorian proceeding.
[3]The composition of the Committee subsequently altered and comprised two of Madam Yan’s daughters and the second and third defendants.

Mediation of the Singaporean proceeding and the Victorian proceeding

On 9 May 2009, the Singapore High Court requested the family to mediate the issues relating to Madam Yan’s various wills, the Victorian proceeding and the issues that had arisen between the committee members.

The mediation was conducted on 22 May 2009 and 2 June 2009. On the second day of the mediation, the SA was signed by all individuals concerned in both proceedings, by Madam Yan’s litigation guardian and all members of the Committee of Persons for Madam Yan at that time. Both the first and second defendants attended the mediation and were represented by lawyers.

Court approvals of the SA

On 13 July 2009, the SA was approved by the Singapore High Court in the Singaporean proceeding.

On 2 April 2012, the SA was approved by this Court in the Victorian proceeding.

Limited grant of representation for Madam Yan’s estate

On 9 April 2012, Madam Yan died

On 25 August 2012, the limited grant of representation was made appointing the plaintiff as administrator of Madam Yan’s estate for the purpose of administering her rights in the Victorian proceeding and under the SA. The plaintiff was given the power to do all things necessary and proper to implement and carry into effect the SA, including the power to give a good receipt for any monies received under the SA. The grant was limited in duration until a grant of probate or a general grant of letters of administration is made in respect of the estate of Madam Yan or until further order.

Summary of the SA

The SA provides for the first defendant to restore the shareholdings and office bearers in the Hong Kong companies, the Australian companies and Melia to their positions that prevailed before the 2006 transactions took place and for various dispositions of shares or share valuations and payments to be made. The ultimate effect of these transactions is that the first defendant will become the sole owner of the Singapore and Malaysian companies and the businesses they operate by buying out the other shareholders in those businesses. The major shareholder is the estate of Madam Yan. At the same time, the first defendant will cease to have any interest in the Hong Kong companies, the Australian companies and Melia, with the estate of Madam Yan buying out his interest, resulting in the estate of Madam Yan and the second defendant owning and being in control of them.

The plaintiff summarised the effect of the SA and other relevant matters in an affidavit sworn 7 November 2014 as follows:[4]
[4]Affidavit of plaintiff dated 7 November 2014 [45].

Winsberg shares: the total number of shares on issue in Winsberg is 9,000. Pursuant to the SA, of the 7,794 shares in Winsberg restored to Madam Yan, she would retain 3,609 shares or 40% of the total number and transfer 2,866 (approximately 32%) to the first defendant, bringing his total shareholding (with the 603 he already owned) to 3,469 shares or approximately 38.5%. Madam Yan would also transfer 1,319 shares (approximately 15%) to the second defendant, which together with his existing 603 would bring his interest in Winsberg to approximately 21%. However, rather than actually transfer any shares to the first defendant, Madam Yan would pay him cash in lieu. Furthermore, the first defendant would transfer his existing 603 shares to Madam Yan in exchange for cash; their value is to be determined by an independent valuer if it is not agreed. The result would then be that Madam Yan would own 3,609 plus 2,866 plus 603 shares in Winsberg, being 7,078 shares or approximately 79% of the total. Therefore, Madam Yan would have to pay the first defendant for the total of 3,469 shares that he transfers to her. The first defendant would also ensure that the single share held by Mr Tan would be transferred to Madam Yan;[5]
[5] SA: clauses 6, 7, and 8.
Teamhing shares: the total number of shares on issue in Teamhing is 9,000. Of the 7,243 shares in Teamhing restored to Madam Yan, she is to retain 3,365, and transfer 2,660 to the first defendant and 1,218 shares to the second defendant. The first defendant is to accept cash from Madam Yan in lieu of those 2,660 shares, and in addition is to transfer his existing 864 shares to Madam Yan for cash. Again, the value of the shares is to be fixed independently if not agreed. The result would then be that Madam Yan would own approximately 75% of Teamhing and the second defendant would own the remainder. The first defendant would also ensure that the single shares held by each of Messrs Tan and Teo would be transferred to Madam Yan.[6]
[6]SA: clauses 9, 10, 11 and 12.
Melia shares: the total number of shares on issue in Melia is 1,000. Prior to the 2006 transactions, there was only 1 share on issue. However, in 2007, 999 further shares were issued to the first defendant, hence the total number of shares on issue increased to 1,000. Madam Yan is to receive one share (being the share the subject of the contentious 2006 transfer to the first defendant) plus the additional 999 shares issued in 2007. She is to retain 420 of those shares, and transfer 200 shares to the second defendant and 380 shares to the first defendant. The first defendant is to be paid cash by Madam Yan in lieu of the 380 shares, and the value of the shares is to be determined by independent valuer, if it is not agreed. The result would then be that Madam Yan would own 800 shares and the second defendant would own 200 shares.[7]
[7]SA: clauses 13 and 14.
Australian companies: the first defendant must restore the 1 “A” Class share in each of Davinski, Sensyn and Adenal to Madam Yan, and it is acknowledged that the aggregate beneficial interest in respect of these shares is held as to 42% by Madam Yan, as to 38% by the first defendant and as to 20% by the second defendant. However, the first defendant is to be paid cash by Madam Yan in lieu of receiving the beneficial interest in these shares.[8]
[8]SA: clauses 15 and 16.
Other matters
Stamp duty and all other costs incidental to the share transfers (save for the transfers from Mr Tan and Mr Teo, who are to transfer their single shares to the first defendant, who is then to transfer these shares to Madam Yan) are to be borne by Madam Yan as to 70% and the first defendant as to 30%.[9]
The first defendant is to buy Madam Yan’s and the second defendant’s shares in the Singapore companies and Malaysian companies and pay the stamp duty in respect of those transactions.[10] This provision will make the first defendant the sole owner of those companies. The values of the shares to be transferred are to be determined by an independent valuer, if they are not agreed.
Clause 19(c) provides for Madam Yan to buy all of the first defendant’s shares in the Australian companies in which he would otherwise be a minority shareholder. This appears to be a ‘mopping up’ provision, as the significant shareholdings are dealt with in earlier provisions of the SA. The values of all shares to be transferred are to be determined by an independent valuer, if they are not agreed.
In respect of the A$12.7 million withdrawal by the first defendant from the bank accounts of Davinski and Sensyn, the monies paid into the Supreme Court of Victoria (approximately A$6 million of the said A$12.7 million) together with any accrued interest will be released to the companies from which they came.[11]
Clause 18(d) deals with a sum of ‘approximately A$9.8 million’. Clause 18(d) of the SA provides for those moneys to be released to Madam Yan. This relates to moneys that are now held by the plaintiff’s firm, Lawson Hughes Peter Walsh, in interest-bearing, controlled monies deposit accounts with the Westpac Banking Corporation. This amount derives from part of the amounts that the first defendant alleged in his counterclaim were improperly withdrawn from Winsberg and Teamhing by the second defendant in 2003 and 2004. It has also been the subject of a number of dealings authorised by the Supreme Court of Victoria since the SA was made. In addition, the plaintiff has from time to time deducted from this money his fees, costs and expenses incurred in his role as limited administrator of Madam Yan’s estate. The current balance totals approximately A$10,217,975.17 which continues to be held by Lawson Hughes Peter Walsh in interest-bearing, controlled monies deposit accounts with the Westpac Banking Corporation, and interest is continuing to accrue on the sums so held.
The third defendant is to be paid S$2,000,000 by the first defendant and S$500,000 by the second defendant.[12]
The plaintiffs are to discontinue the Victorian proceeding, the second defendant is to discontinue the counterclaim, and there are to be no orders as to costs.[13]
The first defendant is to renounce his rights to Madam Yan’s estate in respect of all matters dealt with in the proposed compromise.[14]
Clause 18(g) provides for payment of a further cash sum to the first defendant. The SA links that payment to the A$12.7 million and the A$9.8 million referred to at clauses 18(c) and (d); a total of $A22.5 million. Clause 18(c) provides for the entire sum of A$12.7 million to be paid to Davinski and Sensyn, while clause 18(d) provides for the entire sum of A$9.8 million to be paid to Madam Yan. As noted above, the A$12.7 million sum was the amount removed from Winsberg and Teamhing after the first defendant assumed control of them: an order was made for its remaining amount to be paid into Court, and ultimately approximately A$6 million was paid in. Clause 18(g) then provides that the first defendant is to be entitled to A$8.55 million, being 38% of the total of A$22.5 million referred to in clause 18(c) and (d). Clause 18(g) actually refers to S$22.5 million, not A$22.5 million but in the context of the provision it seems clear that this is a typographical error and that it should refer to the sum of A$22.5 million. The sum of A$8.55 million is to be set off against the sum of approximately A$6 million which represents the balance of the A$12.7 million that has not been paid into Court. The final amount to be paid to the first defendant pursuant to these provisions is to be ‘finalized and agreed upon’. There has been no agreement as to the amount to be paid to the first defendant: the different positions that have been taken in that regard are referred to at [60]-[61] [of the affidavit].

[9]SA: clause 17.

[10]SA: clause 19(b) and (d).

[11]SA: clause 18(c).

[12]SA: clauses 21 and 22.

[13]SA: clause 18(a), (b) and (e).

[14]SA: clause 23.

Agreed questions for determination

The questions for determination were agreed between the plaintiff and the first and second defendants as follows:

A. Appointment of valuer and determination of value

A.1 Who should be appointed as valuer (‘the appointed valuer’) for the purposes of making the determinations pursuant to clauses 7, 11, 14, 16 and 19 of the SA?

A.2 Upon a proper construction of the SA, is the appointed valuer to be appointed by the plaintiff and the first and second defendants jointly or on some other basis and, if so, on what other basis? What access should the plaintiff and the first and second defendants have to the appointed valuer to make submissions on the determination of value?

A.3 Upon a proper construction of the SA, are the determinations of value by the appointed valuer to be made as at the date of the SA, being 2 June 2009, or some other date or dates and, if so, what date or dates?

B Payments under the SA

B.1 Upon a proper construction of the SA, are the payments under clauses 7, 11, 14, 16, 19, 21(b) and 22 to be made concurrently, after the making of the said determinations and the obtaining of any necessary finance by the plaintiff or at some other time or times and, if so, what other time or times?

B.2 Upon a proper construction of the SA, what sum is to be paid pursuant to clause 18(g), and by whom, and when?

B.3 Upon a proper construction of the SA, is the said sum under clause 18(g) to be paid to the third defendant as to S$1 million, plus any interest, pursuant to clause 21(a) and the balance to the first defendant, or is the whole of the said sum to be paid to the first defendant?

B.4 Upon a proper construction of the SA, when is payment to be made by the second defendant to the third defendant pursuant to clause 22?

B.5 Upon a proper construction of the SA, is interest payable on the payments to be made under clauses 7, 11, 14, 16, 18(g), 19, 21(a), 21(b) and 22 and, if so, in what amount or amounts?

Questions of the second defendant for determination

The second defendant raised further questions for determination. The plaintiff and the first defendant agree these questions should be determined in this proceeding. Some of the issues raised by the second defendant’s questions were addressed, in part, prior to the trial when objections were made to certain paragraphs in two affidavits filed by the second defendant.[15] After reasons were delivered in respect of the objections, the second defendant informed the parties that he intend raising the issues again at the trial. No objection to that course was raised by the plaintiff or the first defendant.
[15]Hughes v Wong [2015] VSC 510 (25 September 2015) (McMillan J).

The questions for determination by the second defendant are:

C.1 Upon a proper construction of the SA, do clauses 6, 9, 13, 15 and 18(g) recognise that prior to the 2006 transactions, as described in the affidavit of the plaintiff sworn on 7 November 2014, Madam Yan held 20 per cent of the shares in Teamhing, Winsberg, Melia, Davinski, Sensyn and Adenal on trust for each of the first and second defendants?

C.2 Upon a proper construction of the SA, pursuant to clause 18(g), is the first defendant required to repay to Madam Yan (by way of set-off) the amount of dividends he received from Teamhing and Winsberg over and above the amount to which the owner of 38 per cent of the shares in those companies was entitled, and which dividends were not received by the plaintiff and the second defendant as shareholders in those companies, such repayment to be part of the financial settlement to be achieved through the performance of the SA?

C.3 Upon a proper construction of the SA, is the plaintiff required to pay forthwith to the second defendant an amount equivalent to the dividend which the second defendant was entitled to receive as a 20 per cent shareholder of Teamhing and Winsberg?

C.4 Upon a proper construction of the SA, pursuant to clause 17:

(a) Is the plaintiff required to ensure that any stamp duty payable on the transfer of shares pursuant to the SA has been paid and that it has been apportioned: 70 per cent paid by Madam Yan; and 30 per cent paid by the first defendant?

(b) Is Madam Yan relieved from the payment of stamp duty payable as a result of the 2006 transactions?

(c) If there is any stamp duty payable as a result of the 2006 transactions, then is it to be paid by the first defendant as part of the financial settlement to be achieved through the performance of the SA?

C.5 Upon a proper construction of the SA, immediately prior to the transfer of ownership and control of Teamhing, Winsberg, Davinski, Sensyn, Adenal and Melia pursuant to the terms of the SA from those persons who have exercised ownership or control since the 2006 transactions, are the transferees permitted to complete a due diligence of each company, and is the first defendant and each of those companies required to provide such access and information to the transferees so as to enable them to complete such due diligence?

C.6 Upon a proper construction of the SA, when making the payments pursuant to the SA to reverse the effect of the 2006 transactions, is each payment to be made to the person, company or entity from whom those moneys were received as part of the 2006 transactions, and if funds flowed through more than one person, company or entity, then are the funds to be repaid back through each of them in turn by way of restitution?

Applicable principles of construction

The purpose of the SA was to regulate the rights of the parties with respect to the matters in it and resolve their disputes in relation to the matters that were the subject of disputes in both proceedings. The language of the SA, with the various dispositions of shares or share valuations and payments to be made, uses expressions such as to achieve a ‘clean cut’, ‘full and final settlement’ and ‘full and final settlement of the legal proceedings in Australia’,[16] making it clear that the parties intended to achieve a full and final settlement in respect of the matters addressed in it.
[16]See, eg, SA: clauses 1 and 24.

The SA is not well drafted and does not address all of the matters that now arise for consideration, particularly in respect of its implementation. The parties agree on the relevant principles that govern the interpretation of commercial contracts. In summary, in interpreting the SA, it is necessary to ascertain what a reasonable business person would have understood the terms of it to mean, considering the whole of the text of the document and the commercial purpose or objects to be secured by it and by construing the contract to ascertain whether it is appropriate to imply terms to fill in any gaps in the SA.

In Electricity Generation Corporation v Woodside Energy Ltd, the plurality of the High Court stated:

[T]his Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. As Arden LJ observed in Re Golden Key Ltd (in rec), unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption ‘that the parties … intended to produce a commercial result’. A commercial contract is to be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.[17]

[17](2014) 251 CLR 640, 656-657 [35] (French CJ, Hayne, Crennan and Kiefel JJ) (citations omitted).

More recently, in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd, French CJ, Nettle and Gordon JJ stated:

[46] The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
[47] In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
[48] Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
[49] However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.
[50] Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations.
[51] Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption ‘that the parties … intended to produce a commercial result’. Put another way, a commercial contract should be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.[18]

[18](2015) 256 CLR 104, references omitted. Their Honours stated at [52] that ‘[t]hese observations are not intended to state any departure from the law as set out in Codelfa Construction Pty Ltd v State Rail Authoriy of New South Wales and Electricity Generation Corporation v Woodside Energy Ltd’. See also, [108]–[109] (Kiefel and Keane JJ), [119] (Bell and Gageler JJ).

In stating these principles, there is no intention to depart from the position as stated in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (‘Codelfa’),[19] which remains binding authority.[20] In Codelfa, Mason J referred to the ‘true rule’, namely, that ‘evidence of surrounding circumstances is admissible to assist in the interpretation of [a] contract if the language is ambiguous or susceptible of more than one meaning’ and said:

[W]hen the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties’ presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract. [21]
[19](1982) 149 CLR 337.
[20]Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 89 ALJR 990 [52] (French CJ, Nettle and Gordon JJ), [108]–[109] (Kiefel and Keane JJ), [199] (Bell and Gageler JJ).
[21]Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 352. The current status of the ‘true rule’ is the subject of some ongoing conjecture, fanned by observations made in reasons for the refusal of special leave to appeal given in Western Export Services Inc v Jireh International Pty Ltd (2011) 86 ALJR 1, [2]–[3] but which did not arise for determination in the more recent decisions of the High Court now set out, and is not relevant in this proceeding.

Agreed questions for determination
A. Appointment of valuer and date of the determination of the value
A.1 Who should be appointed as the appointed valuer for the purposes of making the determinations pursuant to clauses 7, 11,14, 16 and 19 of the SA?

The SA identifies a number of valuation tasks required to be undertaken. Following the restoration of the shareholdings in Winsberg, Teamhing, Davinski, Sensyn, Adenal and Melia to the pre-2006 position, certain transfers of shares in those companies will take place,[22] and the first defendant will accept cash in lieu of the shares otherwise to be transferred to him.[23]
[22]SA: clauses 6, 9, 10, 12, 13 and 15.
[23]SA: clauses 7, 11, 14 and 16.

The mechanism for calculating the cash payable to the first defendant in respect of the shares is expressed in identical terms in the SA, as follows:

For the purposes of full and final settlement and pursuant to the ‘clean cut’ arrangement and for the purposes of expediency, [the first defendant] will accept cash in lieu equivalent to the value of [the … shares to be transferred to him] [and the … shares in his own right to be transferred by him to [Madam Yan]. Such value of the shares is to be agreed on a willing seller-willing buyer basis or as determined by a valuer to be appointed jointly by the parties whose valuation shall be final and binding.

The SA also provides that the first defendant will purchase all of the shares of Madam Yan and the second defendant in the Singaporean and Malaysian companies[24] with the mechanism for valuing the shares expressed in clause 19(e) as follows:

Such value of the shares is to be agreed on a willing seller-willing buyer basis or as determined by a valuer to be appointed jointly by the parties whose valuation shall be final and binding.

[24]SA: clause 19(b).

The valuation tasks and the SA read as a whole, make it clear that clauses 7, 11, 14, 16 and 19(e) of the SA contemplates the appointment of a valuer as a process to enable the valuations to be undertaken for the implementation of its provisions.

The plaintiff consulted with the solicitors for the first and second defendants as to the valuation tasks to be undertaken and a list of appropriate valuers. There is a degree of unanimity between the plaintiff, the first and second defendants in that they agree that a valuer should be appointed and that a single firm, rather than multiple firms, should be appointed as the valuer.

After the consultantion with the solicitors for the first and second defendants, the plaintiff undertook the task of communicating with the various valuers to ascertain whether they had the appropriate expertise, resources, experience, as well as their availability and fee estimates. Ultimately, he identified the firms of Deloitte, Pitcher Partners and Grant Thornton as appearing to have the relevant capabilities, experience and presence for the task.

The first and second defendants agree that Deloitte and Ernst & Young should be excluded from appointment as both firms had previously been retained on behalf of parties in relation to the SA or related matters. They also agree that the valuer should be one of the major accounting firms, in particular, Pricewaterhouse Coopers (‘PwC’), KPMG, Pitcher Partners or Grant Thornton. Neither the first or second defendant made any enquiries of these firms to ascertain their expertise, resources, experience, availability or fee estimates.

The plaintiff considers that either Grant Thornton or Pitcher Partners would be the most suitable firms to conduct the valuations, with Grant Thornton being his preferred choice. At trial, the first defendant supported the choice of Grant Thornton as the appointed valuer.

The second defendant did not oppose the appointment of Grant Thornton, but preferred the appointment of a larger accounting firm, such as KPMG or PwC. His reasons were not based on any investigation but were simply his view based on the significance of the valuations and their sophisticated and extremely complex nature, involving complicated calculations of large private companies in five countries. In support of the appointment of a larger accounting firm, the second defendant made a number of observations: that the valuations are particularly difficult as they must be calculated by reference to the market share of the assets and liabilities of the companies; the diverse operations of the companies mean the valuations will be complex, requiring international expertise and resources; the valuation of the companies affects many persons, including the parties to this proceeding, all of Madam Yan’s family and the unidentified beneficiaries of Madam Yan’s estate requiring all steps be taken to ensure all affected parties accepted and trusted the valuations.

Ultimately, the second defendant did not oppose the appointment of Grant Thornton and, in the circumstances, I accept the plaintiff’s recommendation that Grant Thorton is the appropriate firm to be appointed as valuer for the various valuations tasks to be undertaken under the SA.

A.2 Upon a proper construction of the SA, is the appointed valuer to be appointed by the plaintiff and the first and second defendants jointly or on some other basis and, if so, on what other basis? What access should the plaintiff and the first and second defendants have to the appointed valuer to make submissions for the determination of value?

Clauses 7, 11, 14, 16 and 19 of the SA have the same formulation in relation to the determination of the value of the shares in relation to the company to which each clause refers:

Such value of the shares is to be agreed on a willing seller-willing buyer basis or as determined by a valuer to be appointed jointly by the parties whose valuation shall be final and binding.

Submissions of the plaintiff

The appointment of the appointed valuer is expressed as a joint appointment by ‘the parties’. The term ‘the parties’ is not defined in the SA and is not used consistently throughout the SA, for example, ‘parties hereto’, ‘parties … to the Australian suit’and ‘all parties’, ‘in full and final settlement of [the Victorian proceeding], the parties agree as follows’.[25] While the construction of the phrase ‘parties’ varies throughout the SA, and although not stated anywhere in the SA, a natural reading of the SA would strongly suggest that the parties to the SA are Madam Yan and the first and second defendants. Clause 19(a) of the SA reinforces that they are the main persons involved in the SA where it provides :

That each party [the first and second defendants and Madam Yan] will henceforth endeavour to have a ‘clean cut’ from the other in respect of the shareholdings in the various companies in which they are shareholders.

[25]SA: clauses 18(f), 15, 19, 25, 26 and 1.

The SA also refers to ‘clean cut’ in clauses 7, 11, 14, 16 and 19 and is a clean cut as between Madam Yan and the first and second defendants. This phrase is also referred to in clauses 7, 11, 14, 16, 19(b) and (c) between Madam Yan and the first defendant on the one hand and between the first and second defendant on the other hand. There is no reference to a ‘clean cut’ between Madam Yan and the second defendant.

The wider group referred to as ‘all the parties’ who are the signatories to the SA have no interest in the transfers of the various shareholdings referred to in the SA, although the third defendant has an interest in receiving payment of moneys as a result of the transfers occurring under the SA. The use of the phrase ‘all the parties’ in the SA, therefore, has a different meaning to the phrase ‘the parties’.

The plaintiff submits that, on its proper construction, the SA contemplates a joint appointment of the valuer by the parties, that is, the estate of Madam Yan, the first and second defendants, in respect of all determinations of value to be undertaken. This accords with the text of the SA and its evident purpose, and it presents as a more workable and commercially sensible mechanism than separate appointments by different groupings of parties.

In response to the first defendant’s position that there should be a division of the valuation tasks, such as the Australian and Hong Kong valuations on the one hand, and the Singaporean and Malaysian valuations on the other, with different parties involved in each exercise, the plaintiff submits the language of the SA does not permit such a division and it would be unworkable in that it would likely produce conflict, disagreement and suspicion between the parties.

Submissions of the first defendant

The first defendant submits that as the purpose of the valuations in clauses 7, 11, 14, 16 and 19 of the SA is to facilitate a ‘clean cut’, the appointment of the valuer should be a joint appointment by the parties involved in the ‘clean cut’ in the companies in which they are buying or selling shares. This would ensure the valuation of the shares remained a matter between the interested parties and no one else.

He submits that for the valuation of shares in Winsberg, Teamhing, Melia and the Australian companies, the appointment of the valuer should be jointly by the estate of Madam Yan and him and any submissions be limited to those two parties. For the valuation of shares in the Singaporean and Malaysian companies, he says that the estate of Madam Yan, the first and second defendants should jointly appoint the valuer and all of them make submissions if they so choose.

Specifically, in respect of the valuation of shares in Winsberg, the first defendant is to accept cash in lieu equivalent to the value of the 2,866 shares to be transferred to him and the 603 shares in his own right to be transferred by him to the estate of Madam Yan. As the administrator of the estate of Madam Yan and the first defendant are the two parties involved in the purchase and transfer of the shares in Winsberg, they should be the only persons jointly appointing the valuer to value those shares and make submissions to the appointed valuer.

In respect of the valuation of the shares in Teamhing, Melia, Davinski, Sensyn and Adenal, the transactions for the transfer and purchase of shares is between the estate of Madam Yan and the second defendant and no other person.

In respect of the purchase and transfer of the shares in the Singaporean and Malaysian companies, those transactions involve the purchase by the first defendant of shares belonging to the estate of Madam Yan and also shares belonging to the second defendant. Accordingly, the estate of Madam Yan and the first and second defendants should jointly appoint the valuer for the purpose of the valuation of these shares and all three should be able to make submissions to the valuer.

Submissions of the second defendant

The second defendant supports the plaintiff’s submissions and submits that ‘it is appropriate that those parties be permitted to have input into the contents of the instructions and brief to [be] provided to the valuer and, if necessary, to make appropriate submissions to the valuer’.

He submits that he has an interest in the valuation of the Australian companies as he is a shareholder in Teamhing and Winsberg and both these companies have an interest in the Australian companies. As a result, he should play a role in briefing the valuer in relation to these companies in the context of an agreement that was to be clean cut, full and final.

Conclusions

I accept the plaintiff’s position that where the phrase ‘the parties’ is used in the SA, it means Madam Yan and the first and second defendants and where the phrase ‘all the parties’ is used, it means the signatories to the SA.

The agreement as to value contemplated by clauses 7, 11, 14, 16 and 19(e) of the SA, that is, ‘value of the shares is to be agreed on a willing seller-willing buyer basis’, is in each instance an agreement reached between Madam Yan and the first and second defendants and not some different combination of persons. The language of the SA does not contemplate a division of the valuation tasks, as submitted by the first defendant. I accept the plaintiff’s submissions that the division of the tasks would be unworkable for the reasons given by him. There is no contrary intention indicated in the SA. A joint appointment of the appointed valuer by the plaintiff, first defendant and second defendant for each determination to be made under clauses 7, 11, 14, 16 and 19(e) of the SA is consistent with the language used in the SA, such as a ‘clean cut’ and ‘full and final settlement’ between them. Such an interpretation is also consistent with the intention of the parties in the SA to produce a commercial result in the context of resolving all disputes between the parties.

There must be a formal appointment and engagement of the appointed valuer, with a letter of instruction setting out the tasks required to be undertaken. The plaintiff has offered to do this at the first instance on behalf of the parties, with the costs of the appointed valuer being borne equally by the three parties. The plaintiff will pay those costs at the first instance, with the first and second defendant then reimbursing him forthwith for their one third share of those costs. This arrangement was not objected to by the first or second defendants.

The appointed valuer is to identify the information and documents needed to undertake the valuations. The parties to the SA, in particular, the first and second defendants as co-directors of the various companies, must provide the relevant information and documents to the appointed valuer consistently with their obligations to assist in giving effect to the valuation mechanism and provide the information that is reasonably required by the appointed valuer. If required by the appointed valuer, the first and second defendants must provide any other relevant information to the appointed valuer, with copies being provided to each other and the plaintiff.

With the appointment of the appointed valuer being ‘jointly by the parties’, each should have the opportunity to make submissions to the appointed valuer in respect of the determinations to be made under clauses 7, 11, 14, 16 and 19(e) of the SA, with the mechanics of the submission process being determined by the appointed valuer.

A.3 Upon a proper construction of the SA, are the determinations of value by the appointed valuer to be made as at the date of the SA, being 2 June 2009, or some other date or dates and, if so, what date or dates?

Clauses 7, 11, 14, 16 and 19(e) or elsewhere in the SA are silent about the date or dates to be used for the purposes of the valuations. Each party has a different view on this issue. The plaintiff submits that the date for the valuations is finely balanced. The first defendant submits that the relevant date is the date that the valuation is actually conducted. The second defendant submits that the relevant date is 2 June 2009, being the date of the SA.

Submissions of the plaintiff

The plaintiff submits that it is commercially sensible and consistent with the language of the SA that the same date be adopted for each of the determinations, rather than different dates for different determinations.

As identified by the first and second defendants, the date of valuation at present or the date of the SA being 2 June 2009 present as the two most likely possibilities but there is no clear indication in the SA and no compelling reason based on its commercial purpose for preferring one date over the other.

The plaintiff submits that the parties would have expected the share valuations to take place within a reasonable period after the execution of the SA, suggesting that a date no later than 31 December 2009 might be chosen for the valuation. When the SA was signed, the parties could have only intended a short period of delay and a date no later than 31 December 2009 would allow for the mechanics of the valuation to be undertaken and achieved. In further support for a date no later than 31 December 2009, the plaintiff notes two matters: the first being the obligation of the parties under clause 26 of the SA to use their best efforts to obtain the court approvals ‘as soon as possible’; the second being that the SA makes no provision for the payment of interest, as would be expected for the payment of fixed sums, such as the payments to the third defendant.

The plaintiff considers that, as a result, it is unlikely that the parties would have intended that the sums to be paid under the SA would be affected by market fluctuations and they would have wanted them to be paid at the earliest possible time by reference to a common date. This is also supported by the circumstance that the SA involved serious and drawn out litigation between the parties for some time, that the SA concluded their longstanding disputes on the basis of a ‘clean cut’. This makes it unlikely that the parties intended the valuation date to operate without qualification or end date and likely that it be within a reasonably expedient time frame, such as no later than 31 December 2009.

Submissions of the first defendant

In the absence of a date in the SA at which time the shares are to be given their value, the two obvious choices are the date of the signing of the SA and the date that the valuations take place, with these two choices defining the limits of the range of times that are reasonably possible given the terms of the SA.

The first defendant submits that, on a proper construction of the SA, the shares should be given the value as at the date the valuations take place, not the date of the SA. This is because there are significant indications in the SA that the shares are not to be given the value as they existed at the time of the signing of the SA.

The first indication is that the SA does not say the shares are to be purchased at their present value at the date of the signing of the SA. This is to be contrasted with clauses 18(g) referring to ‘this figure is to be finalized and agreed upon’ and clauses 21 and 22 which refers to the specific amounts to be paid to the third defendant.

The second indication is that it is apparent from the SA that it would not be implemented immediately. The various terms of the SA suggest that the valuations would await at least the approvals from the Victorian Supreme Court and the High Court of Singapore and they were always to be an indeterminate date. Clause 26 of the SA states explicitly that if the court approvals were not obtained, ‘the parties agree to renegotiate in good faith so as to obtain the said approval[s] and achieve a global settlement’.

The final indications are that it is not reasonable to assume that the parties intended that the price of the shares would be fixed at the value as at the date of the SA when the time for payment is not clear, there is no provision for interest to be paid in respect of the payments for the value of the shares to be transferred and there is no provision for what is to occur in the event that any company pays a dividend after the date of valuation, with a consequent effect on the valuation of the shares to be transferred.

Submissions of the second defendant

The second defendant submits that as no date for valuations is given in the SA, it ought be inferred that the date be the date of the SA so as to give the SA the requisite certainty. An indeterminate date provides for speculation as to when the shares should be given their value, and it is unlikely that this is what the parties had in mind. At the time the SA was signed, the parties did not contemplate that the share valuation process would take such a long time to complete and they did not expect a delay. Accordingly, the delay that has occurred should not be built into the valuation of the shares.

Alternatively, the second defendant submits that the shares should be valued a reasonable period after the date of the SA. It was never contemplated that the date of the valuation would be the date of court approvals being given and, if the parties intended this, they would have explicitly said so in the SA.

Conclusions

The parties identify three dates for the valuation date: the date of the SA being 2 June 2009; a reasonable period after the date of the SA being no later than 31 December 2009 or the date of valuation at present. The SA does not provide for the valuations to be done on different dates for different determinations and the parties agree that the same date should be adopted for all the valuations.

The purpose and intention of the SA was to finalise the valuation of the shares in order to effect a ‘clean cut, a ‘global settlement’ and ‘full and final settlement’ to achieve finalisation of serious and long drawn out litigation between the parties. The emphasis throughout the SA is on finalising the disputes between the parties. When negotiating the settlement of disputes, the parties would have understood that the valuations would need to be on a particular date and that it takes time for the valuations to be undertaken. Reasonable business people would not contemplate the valuation date to be open ended where the common purpose is for the finalisation of all the disputes. The language used in the SA and the intention of the SA to settle long standing disputes does not contemplate an open ended date for the valuations. The SA contemplates certain mechanisms for the purpose of the settlement, such as the approvals of the Court to the settlement. The parties did not intend that there would be substantial delay before the approvals were obtained, the main provisions of the SA became operative and the necessary share dealings and payments were performed by the various individuals or companies. The obligation to obtain court approvals does not mandate a date for the valuations. This is reinforced by the provision that if the approvals were not obtained, the parties were to ‘renegotiate in good faith so as to obtain the said approval and achieve a global settlement’.

The fact that clause 18(g) refers to a figure that is ‘to be finalised and agreed upon’ does not support a determination for a later date for the valuations as the clause relates to a specific calculation regarding the funds in Court, as well as providing a date for payment, consequent upon the release of the money from Court. Likewise, clauses 21 and 22 of the SA are the only provisions that provide for payments of fixed sums to the third defendant consequent on the valuations having been undertaken.

The SA does not make provision for the payment of interest or for what would occur if there were a substantial delay in implementing the SA, such as the payment of dividends since the date of the SA. These factors taken together with the fact that the SA does not contemplate an open ended valuation date and that the SA’s overall purpose is to settle the longstanding disputes between the parties means that the likely date for the valuations is the date of the SA, being 2 June 2009.

B. Payments under the SA
B.1 Upon a proper construction of the SA, are the payments under clauses 7, 11, 14, 16, 19, 21(b) and 22 to be made concurrently, after the making of the determinations and the obtaining of any necessary finance by the plaintiff or at some other time or times and, if so, what other time or times?

The SA does not say in terms when all the payments referred to in clauses 7, 11, 14, 16, 19, 21(b) and 22 are to be made or whether they are to be made concurrently.

Submissions of the plaintiff

The plaintiff submits that on a proper construction of the SA, the payments under clauses 7, 11, 14, 16 and 19 are to be made concurrently at a reasonable time after the determinations of value made by the appointed valuer under those clauses. This construction does not offend the language of the SA and presents as a workable and commercially sensible approach to the making of the payments, including any ‘netting off’.

Based on that construction, the question will arise as to what is a reasonable time for the concurrent payment. The plaintiff submits this will depend upon the circumstances that arise upon the making of the determinations, such as whether finance needs to be arranged to fund Madam Yan’s payment obligations, the need to address liabilities affecting Madam Yan’s estate and whether advice is needed to be taken by the plaintiff as the administrator of her estate, such as advice on taxation and stamp duty. The first and second defendants may also have their own considerations to address.

The plaintiff submits that the payments to be made to the third defendant by the first defendant under clause 21 of the SA and by the second defendant under clause 22 are in a different category and are not payments to be made concurrently with the payments under clauses 7, 11, 14, 16 and 19 of the SA. Clauses 21 and 22 of the SA specify the times for payment to the third defendant, with no express reference to the payments under clauses 7, 11, 14, 16 and 19 of the SA.

Submissions of the first defendant

The first defendant submits that the question arises as to whether it is appropriate for a term to be implied in the SA that the payments under clauses 7, 11, 14, 16, 19, 21(b) and 22 are to be made concurrently.

Save for the payments to the third defendant under clauses 21(b) and 22 of the SA, the first defendant submits that the criteria for the implication of a term in BP Refinery v Hastings are satisfied such that a term should be implied in the SA that the payments under clauses 7, 11, 14, 16 and 19 are to be made concurrently.[26] There is nothing in the SA that gives any indication as to whether the payments under clauses 7, 11, 14, 16 and 19 should be made concurrently after the valuations and obtaining the necessary finance or at some other time. Clearly the shares that are included in clauses 7, 11, 14, 16, and 19 cannot be purchased until their value has been determined. As all of the shares to be purchased need to be valued and funds will need to be available to finance those purchases, it is sensible that the payments in relation to all purchases take place at the same time, particularly given that the estate of Madam Yan and the first defendant are each buying and selling to each other so there can be offsets.
[26]BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283.

The first defendant also notes that clause 24 provides that ‘the above shall constitute a global and full and final settlement of the aforesaid matters…’ which suggests that the various provisions of the SA are inter-related and that the payments should be made concurrently.

In respect of the payments to the third defendant, both clause 21(b) and clause 22 of the SA specify the time or times at which payment is to be made to the third defendant. No term can be implied that the payments under clause 21(b) and 22 are to be made concurrently with the payments under clauses 7, 11, 14, 16 and 19 because the term to be implied must not contradict any express term of the contract.

Submissions of the second defendant

The second defendant submits that the payments under clauses 7, 11, 14, 16, 19, 21(b) and 22 are to be made concurrently, at the earliest possible date following confirmation by the parties that all necessary steps have been completed.

The second defendant also submits that the dates for the payments by the second defendant to the third defendant are unclear and there should be an implied term that the second defendant be paid a dividend on the basis that this is implied in the SA, such dividend to be paid at the same time as the other payments under the SA. This would allow for certainty to be placed on clause 22 and mean that the payments could also be made concurrently. The second defendant also refers to clause 24 of the SA and submits this means that all the payments should be made concurrently because of a ‘global and full and final settlement’ of all the disputes.

Conclusions

The plaintiff, the first defendant and the second defendant agree that the payments under clauses 7, 11, 14, 16 and 19 of the SA are to be made concurrently, with the plaintiff and the first defendant agreeing that the concurrent payments should be made a reasonable time after the determinations of value have been made under those clauses. This will allow for the arranging of any finance, taking advice, and for the calculation of any offsets between the parties. Clause 3 of the SA contemplates a reasonable time as it provides that the parties shall agree on the timing in order for the parties to secure the necessary finances pursuant to the SA. The second defendant did not disagree with the payments being made concurrently in respect of these clauses.

In respect of the payments to be made to the third defendant under clauses 21 and 22 of the SA, there is no basis to conclude that these payments should be made concurrently with the payments under clauses 7, 11, 14, 16 and 19 of the SA. This is because the times for the payments to him are specified under clauses 21 and 22. They are, therefore, in a different category to the payments under clauses under 7, 11, 14, 16 and 19 of the SA in which no time for payment is specified. Accordingly, no term to the effect submitted by the second defendant should be implied into the SA. Such a term does not satisfy the criteria for implication of a term in the SA: it is not reasonable and equitable, it is not necessary to give business efficacy to the contract, it is not so obvious that it ‘goes without saying’, it is not capable of clear expression and it contradicts the express terms in the SA.

B.2 Upon a proper construction of the SA, what sum is to be paid pursuant to clause 18(g), and by whom, and when?

Clause 18(g) of the SA deals with the moneys that were the subject of the Victorian proceeding as follows:

G. The sum of approximately A$8.55 million (being 38 per cent of the total sum of S$22.5 million mentioned in 18(c) and (d) above) will be set off against the sum of approximately A$6 million which was utilised by [the first defendant] and [the first defendant] will be paid the difference within 7 days of release of the monies from the Court or such other time as the parties agree. This figure is to be finalized and agreed upon.

Clauses 18(c) and 18(d) of the SA provide as follows:

C. In respect of the monies of approximately $A12.7 million of which a sum of approximately A$6 million remains frozen and/or held in Court pursuant to the Plaintiffs’ Mareva injunction, the Plaintiffs will discharge the injunction and consent to the said monies with interest accrued thereon being released to the company(ies) from which the monies were withdrawn;
D. In respect of the monies of approximately A$9.8 million held in a trust account(s) by [Madam Yan’s] solicitors, Baker & McKenzie, the said monies with interest accrued thereon shall be released to [Madam Yan] and the Defendants [in the Victorian proceeding] so consent to the said release…

Submissions of the plaintiff

The plaintiff submits that different interpretations of clause 18(g) are possible as it is not particularly prescriptive or clear as to the amount to be paid, the identity of the payer(s) or the time for payment.

In respect of the amount to be paid, the plaintiff submits that the clause tends to support a construction that the interest accruing on the moneys paid into Court should not be included in the base amounts of the moneys held on trust. This is because, for example, the use of the word ‘approximately’ in clause 18(g) and the need for the figure to be ‘finalized and agreed upon’ rather than specified amounts. On that basis, the plaintiff submits that the payment under 18(g) is to be calculated as follows:

Sum representing first defendant’s 38%
share of approx. $22.5M ($22,496,397):[27]  $8,548,630.80
[27]The $22.5 million is the total of $12.7 million referred to in clause 18C and $9.8 million referred to in clause 18D. The $9.8 million should be $9,796,397 making a total of $22,496,397. Thus, 38% of the total is $8,548,630.80 absent any amount for accrued interest.
Less sum utilised by the first defendant
from the $12.7 withdrawn from Davinski
and Sensyn (being $6.83M as paid into court
plus $280,010.76):     $5,589,989.24
Total sum to be paid to the first defendant:   $2,958,641.62

The plaintiff submits that although the identity of the payers of the amount to be paid to the first defendant is not specified in clause 18(g), in the circumstances it seems likely that Davinski and Sensyn are to make the payment to the first defendant under clause 18(g). This is because the amount to be paid is calculated by reference, inter alia, to sums withdrawn from Davinski and Sensyn and the first defendant’s interest in them. The plaintiff submits that it makes sense that these companies make the payment to the first defendant in the same proportions as when the moneys were paid into Court, that is, Davinski as to 79.5% and Sensyn as to 20.5%.

The timing of the payment in clause 18(g) is ‘within 7 days of release of the monies from the Court’ or such other time as the parties agree. This is tied to the release of monies to Davinski and Sensyn under clause 18(c) of the SA. The moneys were released from the Court on 22 November 2012. Although it is also stated that ‘[t]his figure is to be finalized and agreed upon’, the plaintiff considers this to be part of the machinery for the parties or the Court to arrive at the final figure to be paid, rather than something intended to affect or displace the specified time for payment.

Submissions of the first defendant

The first defendant submits that the amount to be paid to him pursuant to clause 18(g) is $3,397,872.12 as calculated in a letter from his then solicitors, Aitken Partners, dated 4 December 2012 as follows:

Sum representing 38 per cent interest
of first defendant in pooled funds:   $8,656,874.73
Less net amount used by first defendant
(including credit of $7,160,986.63 paid from
Court and $280,010.76 from Aitken Partners):                 $5,259,002.61
Net amount due to first defendant:  $3,397,872.12

He submits that this amount should be paid to him by the estate of Madam Yan, Davinski and Sensyn ‘being the recipients of the monies paid into Court‘ in the Victorian proceeding and that the payment was due on 29 November 2012, being 7 days after the release of the last of the moneys from Court.

Submissions of the second defendant

The second defendant submits that pursuant to clause 18(g), the Hong Kong companies are to pay to the first defendant A$2.68 million (being A$8.55 million less A$5.87 million). He makes no submissions as to when the payment under clause 18(g) is, or was, due to be made to the first defendant.

The second defendant submits that the A$280,010.76 from Aitken Partners should not be included as a credit in the calculation as there is no evidence that this amount was derived from the moneys withdrawn by the first defendant in any way, only that the amount was paid to Aitken Partners. The second defendant calculates the total amount to be paid to the first defendant as follows:

Sum to be paid to first defendant:   $8,550,000.00
Sum that first defendant is required
to repay by way of a set off:   $5,870,000.00
Balance to be paid to first defendant:   $2,680,000.00

Plaintiff’s submissions in reply to second defendant

The plaintiff rejected the second defendant’s submission as to there being no evidence that the $280,010.76 was derived from the moneys withdrawn by the first defendant. The plaintiff has included the amount in his calculation by reason of paragraph 11 of the affidavit of the first defendant sworn 29 May 2015 and the exhibits there referred to satisfy himself that the payment of the sum was money derived from the same source.

Conclusions

I accept the plaintiff’s submissions that the construction of clause 18(g) does not support the inclusion of interest accruing on the money paid into Court should be included in the base amounts of the moneys held on trust. I also accept the plaintiff’s calculation as to the amount representing the first defendant’s 38 per cent share of $22,496,397 and his submission that Davinski and Sensyn make the payments in the proportions as when the moneys were paid into court, that is, Davinski as to 79.5% and Sensyn as to 20.5%.

The submission by the second defendant that the sum of $280,010.76 should not be included in the calculation is rejected as the evidence establishes that the payment of that amount was derived from the moneys withdrawn by the first defendant. Accordingly, there is no basis to exclude the amount of $280,010.76 from the calculation.

As to the timing of the payment, the SA provides for it to be made within 7 days of the release of moneys from the Court, being 29 November 2012, or such other time as the parties agree. I accept the plaintiff’s submission that this means that the parties or the Court should work out the final figure to be paid and does not displace the specified time of payment.

B.3 Upon a proper construction of the SA, is the sum under clause 18(g) to be paid to the third defendant as to S$1 million, plus any interest, pursuant to clause 21(a) and the balance to the first defendant, or is the whole of the sum to be paid to the first defendant?

Clause 21 of the SA provides:

Having regard to the love and affection between [the first defendant] and [the third defendant], and in consideration of [the third defendant] not objecting to the terms of this settlement agreement, [the first defendant] will pay [the third defendant] the sum of Singapore Dollars Two Million (S$2,000,000.00) in the following manner:
aThe sum of Singapore Dollars One Million (S$1,000,000.00) upon receipt by [the first defendant] of his share mentioned in clause 18(g) above; and
bThe balance of Singapore Dollars One Million (S$1,000,000.00) will be paid by [the first defendant] upon full and final settlement of this agreement.

The third defendant has written to the plaintiff stating that he is in favour of the payment under clause 18(g) of the SA being paid to him as to S$1 million, plus any interest first before the balance is paid to the first defendant.

The first defendant submits that the payment due under clause 18(g) should be paid to him without reduction and there is nothing in clause 21 of the SA that reduces the amount due to the first defendant under clause 18(g) of the SA. Clause 21 of the SA is clear in that it provides the first defendant will pay the third defendant the sum of S$1 million upon receipt by the first defendant of his share mentioned in clause 18(g) of the SA and the balance of S$1 million upon ‘full and final settlement of this agreement’.

The second defendant submits no sum is to be paid to the third defendant pursuant to clause 18(g) of the SA and that clause 21 requires a payment to be paid by the first defendant to the third defendant.

The plaintiff accepts that the construction for which the first and second defendants contend is correct.

Conclusion

In respect of the payments to be made by the first defendant to the third defendant, clause 21 of the SA specifies that this should occur in two instalments of S$1 million each, the first one pursuant to clause 21(a) of the SA being ‘upon receipt by [the first defendant] of his share mentioned in clause 18(g)’ and the second one pursuant to clause 21(b) of the SA being ‘upon full and final settlement of this agreement’.

In respect of the first instalment pursuant to clause 21(a), the time for payment is tied to the first defendant’s receipt of payment under clause 18(g) of the SA.

In respect of the second instalment pursuant to clause 21(b), the specified time for payment is ‘upon full and final settlement of this agreement’.

Accordingly, the whole of the sum under clause 18(g) is to be paid to the first defendant without reduction.

B.4 Upon a proper construction of the SA, when is payment to be made by the second defendant to the third defendant pursuant to clause 22?

Clause 22 of the SA provides:

Having regard to the love and affection between [the second defendant] and [the third defendant], and in consideration of [the third defendant] not objecting to the terms of this settlement agreement, [the second defendant] will pay [the third defendant] the sum of Singapore Dollars Five Hundred Thousand (S$500,000.00) upon [the second defendant] receiving revenue or dividends to be paid out from the monies received by the various companies in respect of [the third defendant’s] shareholding.

The plaintiff has received a letter from the third defendant requesting the plaintiff to:

… seek Court Declaration on Clause 22 of the [SA] for payment of S$500,000 to [the third defendant] before any monies due from the Australian companies to [the second defendant] is to be paid to [the second defendant]…

Submissions

The plaintiff submits that whilst clause 22 is difficult to interpret and reconcile with other matters in the SA, an available interpretation is that the second defendant will make the payment to the third defendant as and when he receives revenue or dividends in respect of his shareholdings in the various companies, as a first charge and this includes payment of any dividends to the second defendant by those companies and payment from the first defendant in respect of the second defendant’s shares under clause 19(b) and (e) of the SA.

The second defendant submits that the payment he is to make to the third defendant under clause 22 is to be made concurrently with the payments under clauses 7, 11, 14, 16, 19 and 21(b) of the SA.

The first defendant submits that it is not possible to imply a term that the payments under clauses 21(b) and 22 are to be made concurrently with the payments under clauses 7, 11, 14, 16 and 19 and does not specify when the clause 22 payment is to be made. Otherwise, the first defendant does not wish to get involved in making submissions on the point as it does not involve him.

Conclusions

The language used in clause 22 does not provide for the payment to the third defendant to be made concurrently with the payments under clauses 7, 11, 14, 16, 19 and 21(b) of the SA. The provision for payment to the third defendant under clause 22 means that when the second defendant receives revenue or dividends in respect of his shareholdings in the various companies, as a first charge and that this includes payment of any dividends to the second defendant by those companies and payment from the first defendant in respect of the second defendant’s shares under clause 19(b) and (e) of the SA, the third defendant must receive a payment of S$500,000 from the second defendant.

B.5 Upon a proper construction of the SA, is interest payable on the payments to be made under clauses 7, 11, 14, 16, 18(g), 19, 21(a), 21(b) and 22 and, if so, in what amounts?
Submissions of the plaintiff

The plaintiff submits there is no contractual entitlement to interest under the SA. The SA makes no express provision for payment of interest on any sum or at any particular rate, it is not permissible to imply a term to that effect nor is it a matter of construction.

The position in relation to interest for the various sums referred to in the SA is therefore governed by general law, including, in particular, ss 58 and 60 of the Supreme Court Act 1986. The application of the statutory provisions of ss 58 or 60 would need to be a matter of application of those provisions by the parties seeking payment of interest, working through the different considerations such that the Court could arrive at a determination of what, if any, interest is payable. The plaintiff considers that the parties are not at that juncture and that it would be sufficient for present purposes to note that there is no contractual entitlement. Upon the orders for payment of the different sums being made, the question of what interest is to be paid should be determined by the Court if it cannot be agreed upon by the parties in the meantime.

Submissions of the first defendant

The first defendant submits that, pursuant to s 58 of the Supreme Court Act 1986, interest is payable on the amount to be paid to him under clause 18(g) from 29 November 2012 and on the amounts to be paid to the third defendant under clauses 21 and 22, but as those amounts are not yet due to the third defendant, no interest is presently accruing in his favour.

The SA makes no provision for interest in relation to the payments to be made under clauses 7, 11, 14, 16, and 19 of the SA. If the proper interpretation of the SA is that the shares are to be assessed at their value as it exists at the time of the valuation then it is reasonable to assume that the parties intended that no interest was to be paid on the value of the shares between the date of valuation and the payment for the shares and the transfer of the shares.

Alternatively, if in respect of the payments to be made under clauses 7, 11, 14, 16 and 19, the SA is construed such that the shares are to be assessed as at the date of the SA or some other time that is not the present time, then the question arises as to whether a term should be implied that interest be paid on the value of the shares from the time that the value is struck to the time of payment for the shares. The implication of a term that interest be paid might also arise in case of any significant delay between valuation at present price and settlement.

In those circumstances even though it could not be said that without the implied term the contract would be ineffective, a term will be implied where the consequences without the implied term would contradict what a reasonable person would understand the contract to mean.[28]
[28]Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10 [21]–[23] (Lord Hoffman).

If the value of the shares were to be assessed at the value as in 2009 and the payment for the shares was made in 2016, a reasonable person would understand the SA to mean that the person transferring the shares would be entitled to interest on the money from 2009. Similarly, if there is a significant delay between valuation at present price and settlement, a reasonable person would understand the SA to mean that the person transferring the shares would be entitled to interest on the money from the time of valuation to the time of settlement and if there was any delay in the payment of the shares, accrued interest would be included with those payments. As a result, it is proper to imply a term in the SA that interest be paid. Such an implied term meets the requirements articulated in BP Refinery v Hastings as the term is reasonable and equitable, gives business efficacy to the contract, is so obvious it goes without saying, is capable of clear expression, and does not contradict any express term of the contract.

The first defendant rejected the argument that interest cannot be implied as a term as the SA is a ‘full and final settlement’ as outlined in clause 24. The first defendant submits than an implied term regarding accrued interest is not dividing the assets further between the parties because it deals with moneys not explicitly acknowledged in the SA.

Submissions of the second defendant

The second defendant submits that no interest is payable on any of the payments to be made under the SA in respect of the relevant clauses. There is no reference to interest being payable under the SA and no reference as to what amount would be payable or the basis for its calculation. From this, it should be inferred that there was no intention by the parties to the SA that interest should be paid.

Conclusions

The parties agree that the SA makes no express provision for the payment of interest on any sum or at any particular rate and it is not a matter of construction. There is, therefore, no contractual entitlement for the payment of interest and the issues in relation to interest are governed by the general law. The parties do not agree as to whether a term in relation to interest should be implied, with first defendant contending it is proper to imply a term that interest be paid in certain circumstances.

The different views expressed by the parties depend on a number of different scenarios that ultimately depend on the date of assessment of the valuation process under the SA.

When the SA was entered into, it could not have been predicted that there would be such a lengthy delay in its implementation. This delay will affect the respective parties in different ways. For these reasons, the determination of what interest, if any, should be deferred until orders are made for payment of the different sums under the SA. The parties may be able to reach agreement on the issue of interest and, if not, the issue can be determined by the Court at a later stage.

C. Questions for determination raised by the second defendant

C.1 Upon a proper construction of the SA, do clauses 6, 9, 13, 15 and 18(g) recognise that prior to the 2006 transactions, Madam Yan held 20 per cent of the shares in Teamhing, Winsberg, Melia, Davinski and Adenal on trust for each of the first and second defendants?

The second defendant made no submissions concerning this question.

The plaintiff suggested the second defendant might be seeking a declaration to the effect alleged in the question as a ‘stepping stone’ to his contentions in relation to repayments by the first defendant and payment of dividends to the second defendant. Otherwise both the plaintiff and the first defendant submit there is nothing in the SA to the effect alleged in the question.

Conclusion

The second defendant does not seek a declaration to the effect alleged in the question. Neither the plaintiff nor the first defendant should be required to guess what the second defendant was hoping to achieve by raising this question for determination.

The SA does not recognise that prior to the 2006 transactions, Madam Yan held 20 per cent of the shares in the named companies on trust for each of the first and second defendant.

C.2 Upon a proper construction of the SA, pursuant to clause 18(g), is the first defendant required to repay to Madam Yan (by way of a set-off) the amount of dividends he received from Teamhing and Winsberg over and above the amount to which the owner of 38per cent of the shares in those companies was entitled, and which dividends were not received by the plaintiff (in his capacity as administrator of the estate of Madam Yan) and the second defendant as shareholders in those companies, such repayment to be part of the financial settlement to be achieved through the performance of the SA?

The second defendant made no submissions concerning this question.

Conclusion

The SA does not contain any provision to the effect alleged by the question. All payments that are required under the terms of the SA are specified in the SA. There are no terms in the SA that deal with or provide for any requirement for the first defendant to repay to Madam Yan the amount of any dividends as suggested by this question.

C.3 Upon a proper construction of the SA, is the plaintiff (in his capacity as administrator ad colligendum bona of the estate of Madam Yan) required to pay forthwith to the second defendant an amount equivalent to the dividend which he was entitled to receive as a 20 per cent shareholder of Teamhing and Winsberg?
Submissions of the second defendant

The second defendant submits that, upon a proper construction of the SA, there are two reasons that he is entitled to be paid a dividend payment equivalent to what the second defendant would have received as a 20 per cent shareholder of the Hong Kong companies. The first reason is that the first defendant has received a dividend payment from the Hong Kong companies as clause 18(g) of the SA refers to the first defendant’s 38 per cent shareholding in the Hong Kong companies. The second reason is that Madam Yan has also received a dividend payment as set out in clause 18(d) of the SA where she has received $9.8 million that was ultimately from the Australian companies, which are owned by the Hong Kong companies.

The second defendant submits that because of the dividend payments to the first defendant and to Madam Yan, it is an implied term of the SA that the second defendant was intended to be paid a dividend by the Hong Kong companies as a 20 per cent shareholder as part of the concurrent payments and receipts to be made in performing the SA.

The second defendant also submits that there is a clear reference to the receipt of such a dividend payment by reason of the statement in clause 22 of the SA that the second defendant was to receive ‘revenue or dividends to be paid out from the monies received by the various companies in respect of [the second defendant’s] shareholding’. Because no dividend payment is mentioned anywhere else in the SA, he is entitled to a payment in line with the payments to Madam Yan and the first defendant under clause 18 of the SA.

The second defendant submits that the implied term would fill the gaps in the SA as to the standards and performance that were omitted, it would be consistent with promoting the fair and reasonable contractual performance of the SA, is necessary to give business efficacy to the SA, is clear in its expression, does not contradict any express term of the SA and is ‘workable in a business sense’, relying on the principles set out in BP Refinery v Hastings.[29]
[29](1977) 180 CLR 266, 283.

The second defendant accepts that the SA does not expressly refer to him receiving a dividend payment under the SA, but if a dividend payment to him is not implied, the SA will not fulfil its stated objective of ‘finality’, including a resolution of matters ‘in a full and final settlement of the [Victorian proceeding]’. He also submits that the SA was intended to be the final resolution of all matters between the parties, including in respect of the Hong Kong companies.

He also submits that such an implied term is required by the duty of co-operation and good faith and it is clearly fair to imply such a term given that the second defendant is the only shareholder not to receive a dividend.

The second defendant relies on the fact that that there is currently A$6.83 million, plus interest, held in Court. Under clause 18(g) of the SA, the second defendant submits that A$2.68 million of this is to be paid to the first defendant, leaving A$4.5 million in Court which is an equivalent amount to the dividend payable to the second defendant, as it is 20 per cent of the A$22.5 million referred to in clauses 18(c) and (d) of the SA. If such a term is not implied in the SA, there is no guarantee that the second defendant will ever be paid a dividend as payment will be dependent on who controls the Australian companies.

Submissions of the plaintiff

The plaintiff submits that, effectively, the second defendant contends for an implied term in the SA whereby the second defendant was to be paid a dividend by the Hong Kong companies as a 20 per cent shareholder, which amounts to approximately $4.5 million. Such a term was intended by the parties to be included in the SA to provide that the second defendant receive the specified amount from the Hong Kong companies as part of the concurrent payments and receipts to be made in performing the SA.

The plaintiff submits that such an implied term fails to satisfy the conditions for the implication of a term outlined in BP Refinery v Hastings. An implied term is not necessary to achieve business finality or business efficacy to the SA. The operation of the SA provides a final outcome to all matters addressed within it whether or not the second defendant receives a ‘dividend’ payment.

The plaintiff submits that such an implied term is not required by the duty of co-operation and good faith because the parties expressed their agreement in writing where they have clearly made provision for some payments to be made, and not others. Further, the parties have been clear in articulating the payments and transfers of shares necessary to give effect to the SA and these are expressly set out in clauses 7, 11, 14, 16, 18(g), 19, 21(a), 21(b) and 22 of the SA. A payment of A$4.5 million is a significant amount and, if it were required to be paid, this would have been expressly articulated by the parties. In the circumstances, no such term requiring a ‘dividend’ payment to be made to the second defendant as alleged can be implied by the SA.

Submissions of the first defendant

The payment of a dividend to the second defendant is not addressed in the SA and there is no obligation arising pursuant to the SA for Madam Yan to pay the second defendant an amount equivalent to the dividend that the first defendant was entitled to receive as a 20 per cent shareholder of Teamhing and Winsberg. The second defendant also fails to identify what the presumed intention of the parties was in respect of the funds, an important aspect to establish for the term to be implied in the SA.

Further, the first defendant points out that the second defendant does not contend there was an actual agreement to the effect alleged by him and does not seek rectification of the SA. Otherwise, the first defendant adopts the plaintiff’s submissions concerning the implication of the term in relation to a dividend.

Conclusions

It is clear that the SA does not provide for Madam Yan to pay the second defendant an amount equal to the dividend that the second defendant was entitled to receive as a 20 per cent shareholder of Teamhing and Winsberg. The parties to the SA have expressly outlined their intentions in the SA and a ‘full and final settlement’ of the issues in the SA can be concluded without a payment to the second defendant of a dividend as alleged by him. An implied term is not required for the proper operation of the SA, or for the business efficacy of the SA or by the duty of co-operation and good faith. In any event, there is no general obligation of good faith in the context of negotiations unless the parties specifically agree to such a term. There are also limitations to what the Court will uphold in any case due to uncertainty as to the content of the obligation.[30]

C.4 Upon a proper construction of the SA, pursuant to clause 17:
(a) is the plaintiff required to ensure that any stamp duty payable on the transfer of shares pursuant to the SA has been paid and that it has been apportioned 70 per cent by Madam Yan and 30 per cent by the first defendant?
(b) is Madam Yan relieved from the payment of stamp duty payable as a result of the 2006 transactions?
(c) if there is there any stamp duty payable as a result of the 2006 transactions, then is it to be paid by the first defendant as part of the financial settlement to be achieved through the performance of the SA?

[30]See, eg, Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1; Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [2010] WASCA 222 (22 November 2010), 335, 338 (Murphy JA); Aiton Australia Pty Ltd v Transfield Pty Ltd [1999] NSWSC 996; 153 FLR 236 [156], [159] (Einstein J); Walford v Myles [1992] 2 AC 128, 136 (Lord Ackner with whom Lord Goff, Lord Jauncey and Lord Browne-Wilkinson agreed).

Clause 17 of the SA provides:

Stamp duty and all costs incidental to the aforementioned share transfers will be apportioned between parties on a 30%/70% basis with [the first defendant] bearing 30% of the said costs and [Madam Yan] bearing 70% of the said costs. For the avoidance of doubt, any stamp duty or other costs incidental to the transfers of shares to Tan and Teo[31] will not be borne by [Madam Yan] in any part.

Submissions of the second defendant

[31]SA: clause 27.

The second defendant submits that clause 17 of the SA is clear as to the liability for the payment of stamp duty for the transfer of shares pursuant to the SA and that payment of the stamp duty should be made at the same time as the concurrent payments and receipts under the SA.

In respect of the 2006 transactions, the second defendant submits that amount should be borne by the first defendant and paid as part of the concurrent payments and receipts to be made under the SA on the basis that the SA is a full, final and ‘clean cut’ agreement and that Madam Yan should not be liable to pay any other stamp duty payable in relation to or in connection with the transfer and ownership of other assets pursuant to the SA.

Submissions of the plaintiff

The plaintiff submits that pursuant to clause 17 of the SA, all stamp duty and costs incidental to the share transfers referred to in clauses 2, 6, 8, 9, 10, 12, 13 and 15 of the SA are to be borne by the first defendant as to 30 per cent and Madam Yan as to 70 per cent, and any stamp duty and costs incidental to the share transfers to Mr Tan and Mr Teo are to be borne by the first defendant.[32] Pursuant to clause 19(d), all stamp duty payable in respect of the share transfers referred to in clause 19(b) are to be borne by the first defendant as to 100 per cent. The SA does not otherwise address or affect the liability of the parties to pay stamp duty, whatever that liability may be, in accordance with the relevant legislation in Victoria or elsewhere, including in respect of the 2006 transactions.

Submissions of the first defendant

[32]As stated at paragraph [7] above, both Mr Tan and Mr Teo have acceded to the SA.

The first defendant submits that clause 17 of the SA deals with stamp duty as regards the transfers between Madam Yan and the first defendant. Clause 19 deals with the stamp duty in relation to the Singaporean and the Malaysian companies and the SA does not deal with the 2006 transactions.

In respect of the stamp duty on share transfers in clause 17 of the SA, Madam Yan is to pay 70 per cent and the first defendant is to pay 30 per cent. The exception is that Madam Yan is not to pay the stamp duty on the transfers of shares to ‘Tan and Teo’. Clause 17 operates as an indemnity to the person or entity that is responsible to pay stamp duty in accordance with the relevant legislation and the SA cannot alter any statutory obligation to pay stamp duty.

In respect of the 2006 transactions, the SA does not address the issue of who is to pay any stamp duty payable as a result of these transactions. As such, any stamp duty payable as a result of the 2006 transactions is and remains the responsibility of the persons or entity assessed as liable in accordance with the statutory regime. Further, there is nothing in the SA that requires the first defendant to indemnify any person in respect of liability to pay stamp duty as a result of the 2006 transactions as part of the settlement to be achieved through the performance of the SA.

Conclusions

In respect of question (a), the parties are in agreement as to the liability of the payment of the stamp duty pursuant to clause 17 of the SA. Any stamp duty payable is to be paid in accordance with clause 17 of the SA. The SA does not specify an obligation on the plaintiff to ensure the payment of stamp duty payable on the transfer of shares pursuant to the SA.

In respect of questions (b) and (c), the SA does not address or affect the liability of the parties to pay stamp duty and any stamp duty payable as a result of the 2006 transactions would be the responsibility of the persons or entity assessed as liable in accordance with the relevant legislation.

C.5 Upon a proper construction of the SA, immediately prior to the transfer of ownership and control of Teamhing, Winsberg, Davinski, Sensyn, Adenal and Melia pursuant to the terms of the SA from those persons who have exercised ownership or control since the 2006 transactions, are the transferees permitted to complete a due diligence of each company, and is the first defendant and each of those companies required to provide such access and information to the transferees so as to enable them to complete such due diligence?
Submissions of the second defendant

The second defendant submits that the parties should be provided with all the instructions and information that will be provided to the appointed valuer, as well as any additional information subsequently provided to it. This information should include all information as to the conditions of the companies, their financial position and their financial books and records. This would enhance transparency and allow the second defendant to be satisfied as to the financial transactions and conditions of those entities in which he has not been involved since 2006.

He submits that the provision of such information is necessary because the second defendant is charged with the governance of the Australian entities once the share transfers have occurred and he does not have knowledge of any transactions in these companies after 2006 and he requires this information if he is to effectively manage these entities.

Conclusion

The SA does not contain any provision to the effect alleged by the second defendant. The nature of the SA does not suggest that due diligence is required as it is an agreement for a transfer of shares, and not for the effective governance of the companies. The transfers would occur even if due diligence has been completed and any problems identified.

C.6 Upon a proper construction of the SA, when making the payments pursuant to the SA to reverse the effect of the 2006 transactions, is each payment to be made to the person, company or entity from whom those moneys were received as part of the 2006 transactions, and if the funds flowed through more than one person, company or entity, then are the funds to be repaid back through each of them in turn by way of restitution?
Submissions of the second defendant

The second defendant submits that all payments to be made pursuant to the SA to reverse the 2006 transactions should be made by returning the funds to and through each of the entities through which the funds originally passed as part of the 2006 transactions. Such a process would minimise the tax liabilities and implications for the Hong Kong companies, the Australian companies and Melia. He also submits that the parties are otherwise obliged to complete the transactions so as to perform the SA in a manner that would minimise the amount of tax payable by the Australian companies, the Hong Kong companies and Melia.

Conclusion

The SA does not contain any provision to the effect alleged by the second defendant.

Conclusions on the agreed questions for determination

For convenience, the questions are repeated and the answers are now set out below.

Appointment of valuer and determination of value

Question A.1:
Who should be appointed as valuer (‘the appointed valuer’) for the purposes of making the determinations pursuant to clauses 7, 11, 14, 16 and 19 of the SA?

Answer: Grant Thornton.
Question A.2:
Upon a proper construction of the SA, is the appointed valuer to be appointed by the plaintiff and the first and second defendants jointly or on some other basis and, if so, on what other basis? What access should the plaintiff and the first and second defendants have to the appointed valuer to make submissions on the determination of value?
Answer: Jointly by the plaintiff and the first and second defendants, with all having the opportunity to make submissions to the appointed valuer. The appointed valuer is to determine that process.
Question A.3:
Upon a proper construction of the SA, are the determinations of value by the appointed valuer to be made as at the date of the SA, being 2 June 2009, or some other date or dates and, if so, what date or dates?
Answer: The determinations of value by the appointed valuer are to be made as at the date of the SA, being 2 June 2009.

Payments under the SA

Question B.1:
Upon a proper construction of the SA, are the payments under clauses 7, 11, 14, 16, 19, 21(b) and 22 to be made concurrently, after the making of the said determinations and the obtaining of any necessary finance by the plaintiff or at some other time or times and, if so, what other time or times?
Answer:
The payments under clauses 7, 11, 14, 16, and 19 of the SA are to be made concurrently, after the making of the determinations and the obtaining of any necessary finance by the plaintiff.
The payments to the third defendant under clauses 21(b) and 22 of the SA are to be made at the times specified in those clauses and not concurrently with the other payments under clauses 7, 11, 14, 16, and 19 of the SA.
Question B.2:
Upon a proper construction of the SA, what sum is to be paid pursuant to clause 18(g), and by whom, and when?
Answer:
The amount to be paid pursuant to clause 18(g) of the SA is $2,958.641.62 as calculated by the plaintiff. The amount is to be paid by Davinski and Sensyn in the proportions as when the moneys were paid into Court, that is, Davinski as to 79.5% and Sensyn as to 20.5% . The specified time for payment is within 7 days of the money being released from Court, being 29 November 2012, with the parties to agree on the final figure to be paid.
Question B.3:
Upon a proper construction of the SA, is the said sum under clause 18(g) to be paid to the third defendant as to S$1 million, plus any interest, pursuant to clause 21(a) and the balance to the first defendant, or is the whole of the said sum to be paid to the first defendant?
Answer:
The whole sum under clause 18(g) of the SA is to be paid to the first defendant without reduction.
Question B.4:
Upon a proper construction of the SA, when is payment to be made by the second defendant to the third defendant pursuant to clause 22?
Answer:
Payment of S$500,000 is to be made by the second defendant to the third defendant pursuant to clause 22 when the second defendant receives revenue or dividends in respect of his shareholdings in the various companies, as a first charge and that this includes payment of any dividends to the second defendant by those companies and payment from the first defendant in respect of the second defendant’s shares under clause 19(b) and (e) of the SA.
Question B.5:
Upon a proper construction of the SA, is interest payable on the payments to be made under clauses 7, 11, 14, 16, 18(g), 19, 21(a), 21(b) and 22 and, if so, in what amount or amounts?
Answer:
The determination of all issues about interest payable, if any, on the payments to be made under clauses 7, 11, 14, 16, 18(g), 19, 21(a), 21(b) and 22, including the question of the implication of a term in relation to interest, should be deferred until orders are made for payment of the different sums under the SA.
Question C.1:
Upon a proper construction of the SA, do clauses 6, 9, 13, 15 and 18(g) recognise that prior to the 2006 transactions, Madam Yan held 20 per cent of the shares in Teamhing, Winsberg, Melia, Davinski and Adenal on trust for each of the first and second defendants?
Answer: No.
Question C.2:
Upon a proper construction of the SA, pursuant to clause 18(g), is the first defendant required to repay to Madam Yan (by way of a set-off) the amount of dividends he received from Teamhing and Winsberg over and above the amount to which the owner of 38 per cent of the shares in those companies was entitled, and which dividends were not received by the plaintiff and the second defendant as shareholders in those companies, such repayment to be part of the financial settlement to be achieved through the performance of the SA?
Answer: No.
Question C.3:
Upon a proper construction of the SA, is the plaintiff required to pay forthwith to the second defendant an amount equivalent to the dividend which he was entitled to receive as a 20 per cent shareholder of Teamhing and Winsberg?
Answer: No.
Question C.4:
Upon a proper construction of the SA, pursuant to clause 17:
(a)is the plaintiff required to ensure that any stamp duty payable on the transfer of shares pursuant to the SA has been paid and that it has been apportioned 70 per cent by Madam Yan and 30 per cent by the first defendant?
(b)is Madam Yan relieved from the payment of stamp duty payable as a result of the 2006 transactions?
(c)if there is there any stamp duty payable as a result of the 2006 transactions, then is it to be paid by the first defendant as part of the financial settlement to be achieved through the performance of the SA?

Answers:
(a)No.
(b)The SA does not address or affect the liability of the parties to pay stamp duty as a result of the 2006 transactions.
(c)The SA does not address or affect the liability of the parties to pay stamp duty, as a result of the 2006 transactions.

Question C.5:
Upon a proper construction of the SA, immediately prior to the transfer of ownership and control of Teamhing, Winsberg, Davinski, Sensyn, Adenal and Melia pursuant to the terms of the SA from those persons who have exercised ownership or control since the 2006 transactions, are the transferees permitted to complete a due diligence of each company, and is the first defendant and each of those companies required to provide such access and information to the transferees so as to enable them to complete such due diligence?
Answer: No.
Question C.6:
Upon a proper construction of the SA, when making the payments pursuant to the SA to reverse the effect of the 2006 transactions, is each payment to be made to the person, company or entity from whom those moneys were received as part of the 2006 transactions, and if the funds flowed through more than one person, company or entity, then are the funds to be repaid back through each of them in turn by way of restitution?
Answer: No.

Further directions

The parties are to prepare an agreed minute of orders reflecting the answers to the questions and for any further directions to be made in the proceeding. I will hear the parties as to the costs of the proceeding.

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[2016] VSC 504

25 August 2016 (Redacted judgment published 10 October 2016)