OCBC Capital Investment v Wong: Contract Formation & Risk Participation Agreement

OCBC Capital Investment Asia Ltd ("OCBC") appealed against the High Court's decision dismissing its claim against Mr. Wong Hua Choon for breach of contract. OCBC alleged that a binding oral contract, based on a Term Sheet, was formed during a meeting on 23 June 2009 regarding Frontken shares and a Risk Participation Agreement, and that Mr. Wong breached this contract. The Court of Appeal allowed the appeal, finding that the objective facts demonstrated the existence of a binding oral contract, reversing the lower court's decision.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeal Allowed

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Appeal regarding contract formation. Court of Appeal held a binding oral contract existed, reversing the lower court's decision. Risk Participation Agreement.

1.7 Decision Date

27 September 2012

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
OCBC Capital Investment Asia Ltd	Appellant	Corporation	Appeal Allowed	Won	Lee Eng Beng of Rajah & Tann LLP Jonathan Lee Zhongwei of Rajah & Tann LLP
Wong Hua Choon	Respondent	Individual	Appeal Dismissed	Lost	Chew Kei-Jin of Tan Rajah & Cheah Teo Jun Wei Andre of Tan Rajah & Cheah Chen Yixin Edith of Tan Rajah & Cheah

3. Judges

Judge Name	Title	Delivered Judgment
Chan Sek Keong	Chief Justice	No
Andrew Phang Boon Leong	Justice of the Court of Appeal	Yes
V K Rajah	Justice of the Court of Appeal	No

4. Counsels

Counsel Name	Organization
Lee Eng Beng	Rajah & Tann LLP
Jonathan Lee Zhongwei	Rajah & Tann LLP
Chew Kei-Jin	Tan Rajah & Cheah
Teo Jun Wei Andre	Tan Rajah & Cheah
Chen Yixin Edith	Tan Rajah & Cheah

4. Facts

OCBC and Wong entered into a Risk Participation Agreement in 2007.
OCBC subscribed for 27,630,400 Frontken shares.
The Risk Participation Period was scheduled to expire on 10 August 2009.
The global financial crisis in late 2008 caused the market price of Frontken shares to fall.
OCBC decided to divest itself of its investment in Frontken in February 2009.
A meeting was held on 23 June 2009, where the parties settled on the terms contained in a Term Sheet.
The Term Sheet provided for the sale of 3,703,704 Frontken shares to Wong in five tranches.
The Term Sheet included a clause stating: 'A Supplemental Agreement to be executed to effect necessary changes.'

5. Formal Citations

OCBC Capital Investment Asia Ltd v Wong Hua Choon, Civil Appeal No 16 of 2012, [2012] SGCA 54

6. Timeline

Date	Event
2007-07-20	Risk Participation Agreement entered into
2008-01-01	Global financial crisis
2009-02-10	Meeting between Respondent, Mr. Goh, and Vincent regarding divestment
2009-02-26	Meeting between Respondent, Nicholas, Mr Goh, and Vincent
2009-06-16	Term Sheet drawn up
2009-06-23	Meeting where parties settled on terms in Term Sheet
2009-06-23	OCBC investment committee approved terms of Term Sheet
2009-08-06	Formal documentation sent to Respondent for execution
2009-08-10	Risk Participation Period expired
2009-08-11	Respondent requested time to consult lawyers
2009-08-12	Mr. Chua requested Respondent sign Letter of Extension
2009-08-28	Meeting between Respondent, Nicholas and Mr. Chua
2010-01-01	Suit initiated in High Court
2012-09-28	Judgment reserved
2012-09-28	Decision Date

7. Legal Issues

Contract Formation
- Outcome: The Court of Appeal held that a binding oral contract was formed at the 23 June 2009 meeting.
- Category: Substantive
- Sub-Issues:
  - Intention to create legal relations
  - Objective assessment of conduct
  - Interpretation of 'subject to contract' clauses
Breach of Contract
- Outcome: The Court of Appeal found that the Respondent breached the binding oral contract by refusing to execute the formal documentation and perform his obligations.
- Category: Substantive
- Sub-Issues:
  - Repudiatory breach
  - Failure to execute formal documentation
  - Obligations under contract

8. Remedies Sought

Monetary Damages

9. Cause of Actions

Breach of Contract

10. Practice Areas

Commercial Litigation
Appeals

11. Industries

Finance
Investment

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Norwest Holdings Pte Ltd (in liquidation) v Newport Mining Ltd and another appeal	Court of Appeal	Yes	[2011] 4 SLR 617	Singapore	Cited for the principle that very strong and exceptional context must be demonstrated to displace the inference that parties did not intend to be bound prior to the execution of a supplemental agreement.
Cheverny Consulting Ltd v Whitehead Mann Ltd	English Court of Appeal	Yes	[2007] 1 All ER (Comm) 124	England and Wales	Cited for the observation that where solicitors are involved on both sides and formal written agreements are to be produced, the normal inference is that the parties are not bound unless and until both of them sign the agreement.
Concorde Enterprises Ltd v Anthony Motors (Hutt) Ltd	New Zealand Court of Appeal	Yes	[1981] 2 NZLR 385	New Zealand	Cited as a case concerning commercial transactions of some complexity between parties who were not only dealing with each other for the first time but who were also represented by their own lawyers.
OCBC Capital Investment Asia Ltd v Wong Hua Choon	High Court	Yes	[2012] 2 SLR 311	Singapore	The decision from which this appeal arose.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
No applicable statutes

15. Key Terms and Keywords

15.1 Key Terms

Risk Participation Agreement
Frontken shares
Term Sheet
Supplemental Agreement
Risk Participation Period
Compensation Sum
Restricted Period
Sale Shares
Loan-to-Value ratio
Right of first refusal

15.2 Keywords

contract formation
risk participation agreement
frontken
supplemental agreement
breach of contract
shares
investment

17. Areas of Law

Area Name	Relevance Score
Contract Law	90
Banking and Finance	40
Corporate Law	30
Investment Holding	25

16. Subjects

Contract Law
Financial Transactions
Share Sales