OCBC Capital Investment v Wong Hua Choon: Oral Agreement & Intention to Be Bound

In OCBC Capital Investment Asia Ltd v Wong Hua Choon, the High Court of Singapore addressed whether an oral agreement was binding absent a formally executed written agreement. OCBC Capital Investment Asia Ltd ("OCIA") sued Wong Hua Choon ("Mr. Wong") for breach of contract, alleging that Mr. Wong had entered into a binding oral agreement to extend a Risk Participation Agreement. The court, presided over by Steven Chong J, held that no binding oral agreement existed, as the parties' objective intention was to be bound only upon the formal execution of a written supplemental agreement. Consequently, OCIA's claim was dismissed.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Claim Dismissed

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

OCBC Capital Investment sued Wong Hua Choon for breach of an oral agreement. The court found no binding oral contract existed, as parties intended to be bound only upon formal execution.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
OCBC Capital Investment Asia LtdPlaintiffCorporationClaim DismissedLost
Wong Hua ChoonDefendantIndividualClaim DismissedWon

3. Judges

Judge NameTitleDelivered Judgment
Steven ChongJudgeYes

4. Counsels

Counsel NameOrganization
William OngAllen & Gledhill LLP
Edwin TongAllen & Gledhill LLP
Joseph TayAllen & Gledhill LLP
Ling LiweiAllen & Gledhill LLP
Chew Kei-JinTan Rajah & Cheah
Teo Jun Wei AndreTan Rajah & Cheah
Winston YienTan Rajah & Cheah
Chen Yixin EdithTan Rajah & Cheah

4. Facts

  1. OCBC Capital Investment Asia Ltd (OCIA) invested in Frontken shares in 2007.
  2. Wong Hua Choon, Frontken's CEO, entered into a Risk Participation Agreement (RPA) to underwrite the downside risk of OCIA's shares.
  3. The global financial crisis caused Frontken's share price to fall below the floor price.
  4. OCIA decided to exit its investment in February 2009.
  5. OCIA and Mr Wong negotiated an extension of the Risk Participation Period.
  6. A Term Sheet was created outlining the terms of the agreement.
  7. The Term Sheet stated that a Supplemental Agreement was to be executed to effect necessary changes.
  8. OCIA sent the formal legal documentation to Mr Wong for execution four days before the expiry of the Risk Participation Period.
  9. Mr Wong did not sign the agreement before the expiry of the Risk Participation Period.
  10. OCIA claimed that Mr Wong was deliberately avoiding its calls to take advantage of the expiring time limit.

5. Formal Citations

  1. OCBC Capital Investment Asia Ltd v Wong Hua Choon, Suit No 63 of 2010, [2012] SGHC 25

6. Timeline

DateEvent
Mr Wong and/or Frontken approached OCIA to participate in a placement exercise.
OCIA invested RM14,999,380.00 in the placement exercise.
OCIA decided to exit from its investment in Frontken.
Mr Wong requested OCIA for time to raise sufficient funds to purchase OCIA’s Frontken shares.
Mr Wong communicated that he had difficulty raising the funds to purchase OCIA’s entire shareholding in Frontken.
Mr Goh put forward a proposal whereby Mr Wong would purchase part of OCIA’s Frontken shares and the Risk Participation Period in respect of its remaining shares would be extended.
OCIA completed its internal preparations to sell its shareholding on the open market at a moment’s notice.
Follow-up meeting between parties.
Meeting held where parties agreed to follow through with the preparation of the formal legal documentation based on the Term Sheet.
Mr Goh forwarded a list of the panel of lawyers that OCIA would be agreeable to appoint to prepare the formal documentation.
Mr Wong gave his concurrence to the appointment of Shook Lin & Bok (Malaysia) to prepare the Supplemental Agreement.
Formal legal documentation was completed and sent to Mr Wong for execution.
Mr Wong responded by email after the expiry of the Risk Participation Period.
Meeting with Mr Wong where he declined to sign the Supplemental Agreement.
OCIA initiated the present action against Mr Wong.
Decision Date

7. Legal Issues

  1. Breach of Contract
    • Outcome: The court held that no binding oral agreement existed, and therefore there was no breach of contract.
    • Category: Substantive
    • Sub-Issues:
      • Intention to create legal relations
      • Requirement of written agreement
    • Related Cases:
      • [2012] SGHC 25
      • [2011] 4 SLR 617
      • [2010] 1 WLR 753
  2. Estoppel by Convention
    • Outcome: The court held that the elements of estoppel by convention were not met.
    • Category: Substantive
    • Sub-Issues:
      • Common assumption
      • Detrimental reliance
    • Related Cases:
      • [2008] 2 SLR(R) 474
      • (1988) 164 CLR 387

8. Remedies Sought

  1. Monetary Damages
  2. Specific Performance

9. Cause of Actions

  • Breach of Contract

10. Practice Areas

  • Commercial Litigation

11. Industries

  • Finance
  • Investment

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
United Artists Singapore Theatres Pte Ltd and another v Parkway Properties Pte Ltd and anotherHigh CourtYes[2003] 1 SLR(R) 791SingaporeCited regarding the previous view that the phrase “subject to contract” is conclusive of the parties’ intention not to be bound until a contract is signed.
Norwest Holdings Pte Ltd (in liquidation) v Newport Mining Ltd and another appealCourt of AppealYes[2011] 4 SLR 617SingaporeCited for the principle that the question of whether there is a binding contract should be determined by considering all the circumstances, not just the inclusion of the stock phrase ‘subject to contract’.
RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH & Co KG (UK Production)UK Supreme CourtYes[2010] 1 WLR 753United KingdomCited for the principle that whether parties agreed to enter into a binding contract, waiving reliance on the ‘subject to [written] contract’ term or understanding will depend upon all the circumstances of the case.
Thomson Plaza (Pte) Ltd v Liquidators of Yaohan Department Store Singapore Pte Ltd (in liquidation)High CourtYes[2001] 2 SLR(R) 483SingaporeCited for the principle that if it appears that the parties do not intend to bind themselves contractually by the agreement but only by the subsequent contract if and when they should enter into it, there will be no contract.
Low Kar Yit v Mohamed IsaHigh CourtYes[1963] MLJ 165MalaysiaCited for the principle that if it appears that the parties do not intend to bind themselves contractually by the agreement but only by the subsequent contract if and when they should enter into it, there will be no contract.
Concorde Enterprises v Anthony Motors (Hutt) LtdCourt of AppealYes[1981] 2 NZLR 385New ZealandCited for the principle that the normal inference is that the parties do not intend to be bound until the written agreement is executed.
Cheverny Consulting Ltd v Whitehead Mann LtdEnglish Court of AppealYes[2007] 1 All ER (Comm) 124EnglandCited for the principle that where solicitors are involved on both sides, formal written agreements are to be produced and arrangements made for their execution the normal inference will be that the parties are not bound unless and until both of them sign the agreement.
Von Hatzfeldt-Wildenburg v AlexanderCourt of AppealYes[1912] 1 Ch 284EnglandCited for the principle that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through.
Masters v CameronHigh Court of AustraliaYes91 CLR 353AustraliaCited for the principle that where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three cases.
Ciavarella v PolimeniSupreme Court of New South WalesYes2008 NSWSC 234AustraliaCited for the principle where the parties were content to be bound immediately and exclusively on the terms which they had agreed upon whilst expecting to make a new contract in substitution for their first contract, containing, by consent, additional terms.
Rossiter v MillerHouse of LordsYes(1877–78) LR 3 App Cas 1124United KingdomCited for the principle that the mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, embodying the terms, which shall be signed by the parties does not, by itself, shew that they continue merely in negotiation.
Elias v George Sahely & Co (Barbados)Privy CouncilYes[1983] 1 AC 646BarbadosCited in support of the proposition that unless parties are found to have clearly agreed that no legal relations are to be had without a further step, the Courts can find that the parties are immediately bound even if they do contemplate a formal agreement in writing.
PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd and AnorCourt of Appeal of the Supreme Court of VictoriaYes[2007] VSCA 310AustraliaCited for the principle that parties can by their conduct waive reliance on the “subject to contract” term.
Ground & Sharp Precision Engineering Pte Ltd v Midview Realty Pte LtdHigh CourtYes[2008] SGHC 160SingaporeCited for the principle that if the oral contract was “subject to contract”, the burden is indeed on OCIA to demonstrate that the parties intended for legal relations to be immediately binding following the 23 June 2009 meeting.
Kvaerner Construction Ltd v Eggar (Barony) LtdHigh CourtYes[2000] All ER (D) 1157EnglandCited for the principle that the absence of belief, of itself, is not strictly decisive.
Travista Development Pte Ltd v Tan Kim Swee Augustine and othersHigh CourtYes[2008] 2 SLR(R) 474SingaporeCited for the elements of estoppel by convention.
Tee Soon Kay v Attorney-GeneralHigh CourtYes[2007] 3 SLR(R) 133SingaporeCited for the principle that there has been gradual recognition of the use of estoppel as a “sword”.
Waltons Stores (Interstate) Limited v MaherHigh Court of AustraliaYes(1988) 164 CLR 387AustraliaCited for the principle that one can be estopped from denying the existence of a contract which effectively renders estoppel as an alternative “sword” in the event that an action for breach of contract fails.
Mitsui Babcock Energy Limited v John Brown EngineeringCourt of SessionYes(1997) 51 Con LR 129ScotlandCited for the principle that one can be estopped from denying the existence of a contract which effectively renders estoppel as an alternative “sword” in the event that an action for breach of contract fails.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
No applicable statutes

15. Key Terms and Keywords

15.1 Key Terms

  • Risk Participation Agreement
  • Risk Participation Period
  • Floor Price
  • Supplemental Agreement
  • Term Sheet
  • Moratorium Period
  • In-principle agreement
  • OIC Approval

15.2 Keywords

  • oral agreement
  • intention to be bound
  • subject to contract
  • risk participation agreement
  • estoppel
  • commercial litigation

17. Areas of Law

Area NameRelevance Score
Contract Law75
Breach of Contract60
Oral Agreement40
Estoppel30
Banking and Finance25

16. Subjects

  • Contract Law
  • Commercial Law
  • Financial Investments