Tinyow v Lee

In *Tinyow v Lee*, the appellant, a shareholder, brought proceedings against the respondents, also shareholders, for breach of an oral agreement. The agreement arose in the context of rescuing a company facing severe financial difficulties. The appellant alleged that the respondents had promised to pay him $70,000 each. In return, the appellant was to acquire the respondents' shares without payment, accept their resignations as directors, and provide them with releases. The appellant had indeed accepted the resignations.

The central legal issues before the Court of Appeal were whether the oral promises constituted a binding agreement to pay the appellant personally, or whether the payments were intended for the company, thereby meaning no damage had been established by the appellant. Further, the court had to determine whether the appellant had provided sufficient consideration for the respondents' promises, particularly in light of the appellant discharging the company's debts, which provided a substantial equivalent to a release from guarantees to the bank, even though only the bank could grant an actual release. The court considered the distinction between consideration that is bargained for and consideration that arises from a practical benefit or the acceptance of a detriment.

The Court of Appeal found that the oral agreement was for the respondents to pay the appellant personally, not the company. The court held that the appellant had provided sufficient consideration by accepting the respondents' resignations as directors and by discharging the company's debts, which conferred a practical benefit on the respondents by relieving them of their guarantees. The court concluded that the appellant had suffered damage as a result of the respondents' breach.

Consequently, the appeal was allowed, and the orders of the trial judge were set aside. A verdict was entered for the appellant, with judgment in the sum of $55,000 against the first respondent and $65,000 against the second respondent, together with interest. The respondents were ordered to pay the appellant's costs of the appeal and the District Court proceedings, and each respondent was granted a certificate under the Suitors’ Fund Act 1951.