Allplus Holdings v Phoon Wui Nyen: Enforceability of Settlement Agreement Clause as Penalty

In Allplus Holdings Pte Ltd and others v Phoon Wui Nyen (Pan Weiyuan), the High Court of Singapore addressed the enforceability of a clause in a settlement agreement. The plaintiffs, Allplus Holdings Pte Ltd, Hanabi Holdings Inc, Leng Huat Private Limited, and Teoh Teck Shin Anson, sued the defendant, Phoon Wui Nyen, for breach of a settlement agreement. The court, presided over by Foo Tuat Yien JC, held that the disputed clause was an unenforceable penalty clause and dismissed the plaintiffs' claim. The plaintiffs' appeal was allowed.

1. Case Overview

1.1 Court

High Court of the Republic of Singapore

1.2 Outcome

Appeal Allowed, Plaintiffs' claim dismissed.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore court case regarding whether a clause in a settlement agreement was an unenforceable penalty clause, resulting in the dismissal of the plaintiff's claim.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Allplus Holdings Pte LtdPlaintiff, RespondentCorporationAppeal DismissedLost
Hanabi Holdings IncPlaintiff, RespondentCorporationAppeal DismissedLost
Leng Huat Private LimitedPlaintiff, RespondentCorporationAppeal DismissedLost
Teoh Teck Shin AnsonPlaintiff, RespondentIndividualAppeal DismissedLost
Phoon Wui Nyen (Pan Weiyuan)Defendant, AppellantIndividualAppeal AllowedWon

3. Judges

Judge NameTitleDelivered Judgment
Foo Tuat YienJudicial CommissionerYes

4. Counsels

Counsel NameOrganization
Chacko SamuelLegis Point LLC
Yeo Teng Yung ChristopherLegis Point LLC
See Chern YangPremier Law LLC
Joanna ChewPremier Law LLC

4. Facts

  1. Plaintiffs entered into a loan agreement with Zenna for $2.5m.
  2. Phoon was the sole shareholder and director of Zenna.
  3. The reverse takeover did not materialise.
  4. Plaintiffs filed Suit No 868 of 2011 against Zenna and Phoon.
  5. The parties entered into a settlement agreement.
  6. Phoon issued two post-dated cheques.
  7. The second cheque was dishonoured.

5. Formal Citations

  1. Allplus Holdings Pte Ltd and others v Phoon Wui Nyen (Pan Weiyuan), Suit No 638 of 2015 (Registrar’s Appeal Nos 276 and 277 of 2015), [2016] SGHC 144

6. Timeline

DateEvent
Plaintiffs entered into a loan agreement with Zenna.
Loan agreement dated.
Disbursement of monies under the Loan Agreement.
Repayment date set on loan agreement.
Plaintiffs filed Suit No 868 of 2011 against Zenna and Phoon.
Plaintiffs entered judgment in default of defence against Zenna.
Phoon’s Defence (Amendment No 1) filed.
Parties attended mediation and entered into a Settlement Agreement.
Phoon issued two post-dated cheques.
First cheque for $500,000 cleared for payment.
Second cheque presented for payment was dishonoured.
Phoon’s solicitors requested the second cheque be presented for payment on or after 30 June 2015.
Plaintiffs’ solicitors demanded payment of $3,633,074.33 based on cl 4 of the Settlement Agreement.
Plaintiffs commenced Suit 638 against Phoon.
Phoon’s solicitors denied liability for the larger sum.
Fresh cheque dated 30 June 2015 for $500,000 was delivered to the Plaintiffs’ solicitors.
Fresh cheque dated 30 June 2015 for $500,000 was delivered to the Plaintiffs’ solicitors.
Plaintiffs returned the cheque to Phoon’s solicitors.
Phoon’s solicitors informed the Plaintiffs that he was “ready, willing and able” to pay the $500,000.
Plaintiffs’ solicitors replied that they were prepared to accept that cheque in payment of the undisputed portion of Phoon’s liability.
Phoon filed an application under O 14 r 12 of the Rules of Court.
Plaintiffs filed an application under O 14 r 1 of the Rules of Court for summary judgment.
Assistant registrar dismissed Phoon’s application and granted summary judgment to the Plaintiffs.
Hearing date.
Oral judgment delivered, dismissing the Plaintiffs' claim.
iTronic Holdings was decided.
Judgment date.

7. Legal Issues

  1. Enforceability of Penalty Clause
    • Outcome: The court held that Clause 4 was a penalty clause and thus unenforceable.
    • Category: Substantive
    • Related Cases:
      • [2015] UKSC 67
      • [1915] AC 79

8. Remedies Sought

  1. Monetary Damages

9. Cause of Actions

  • Breach of Contract

10. Practice Areas

  • Commercial Litigation

11. Industries

  • No industries specified

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Real Estate Consortium Pte Ltd v East Coast Properties Pte Ltd and anotherHigh CourtYes[2011] 2 SLR 758SingaporeCited for the principle that a settlement agreement governs the parties’ legal relationship and puts an end to previously raised issues.
Ling Yew Kong v Teo Vin Li RichardCourt of AppealYes[2014] 2 SLR 123SingaporeCited for the principle that a settlement agreement governs the parties’ legal relationship and puts an end to previously raised issues.
Gay Choon Ing v Loh Sze Ti PeterCourt of AppealYes[2009] 2 SLR 332SingaporeCited for the principle that a settlement agreement governs the parties’ legal relationship and puts an end to previously raised issues.
Cavendish Square Holding BV v Talal El Makdessi and another appealUnited Kingdom Supreme CourtNo[2015] UKSC 67United KingdomCited for the distinction between primary and secondary obligations in the context of penalty clauses and the principle that the penalty rule does not apply to primary obligations.
The “Dilmun Fulmar”High CourtYes[2004] 1 SLR(R) 140SingaporeCited for the principle that a party may expressly reserve its right to revive its original claim in the event of a breach of the settlement agreement.
Woo Koon Chee v Scandinavian Boiler Service (Asia) Pte Ltd and othersHigh CourtYes[2010] 4 SLR 123SingaporeCited for the principle that a party may expressly reserve its right to revive its original claim in the event of a breach of the settlement agreement.
Thompson v HudsonHouse of LordsYes(1869) 4 HL 1United KingdomCited for the principle that a creditor may expressly reserve its right to revive a debt if the debtor fails to meet the conditions imposed by the creditor.
Novoship (UK) Limited and ors v Vladimir Mikhaylyuk and orsHigh Court of JusticeYes[2015] EWHC 992 (Comm)England and WalesCited for the principle that a creditor may expressly reserve its right to revive a debt if the debtor fails to meet the conditions imposed by the creditor.
O’Dea v Allstates Leasing System (WA) Pty LtdHigh Court of AustraliaYes[1983] HCA 3AustraliaCited for the principle that a creditor may expressly reserve its right to revive a debt if the debtor fails to meet the conditions imposed by the creditor.
Y.E.S. F&B Group Pte Ltd v Soup Restaurant Singapore Pte Ltd (formerly known as Soup Restaurant (Causeway Point) Pte Ltd)High CourtYes[2015] 5 SLR 1187SingaporeCited for the principle that whether a clause amounts to a primary or secondary obligation is to be determined by construing the agreement, taking into account both the text and the context of the agreement.
Xia Zhengyan v Geng ChangqingCourt of AppealYes[2015] 3 SLR 732SingaporeCited for the basic principles applicable to the question of whether a sum is void as being a penalty, as laid down by Lord Dunedin in Dunlop Pneumatic Tyre Company Limited v New Garage and Motor Company Limited.
Dunlop Pneumatic Tyre Company Limited v New Garage and Motor Company LimitedHouse of LordsYes[1915] AC 79United KingdomCited for the principles to determine whether a clause is a penalty clause or a liquidated damages clause.
Clydebank Engineering and Shipbuilding Co. v. Don Jose Ramos Yzquierdo y CastanedaHouse of LordsYes[[1905] AC 6]United KingdomCited for the essence of liquidated damages is a genuine covenanted pre-estimate of damage.
Public Works Commissioner v. HillsPrivy CouncilYes[[1906] AC 368]United KingdomCited for the principle that the question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach.
Webster v. BosanquetPrivy CouncilYes[[1912] AC 394]United KingdomCited for the principle that the question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach.
Kemble v. FarrenCourt of Common PleasYes(1829) 6 Bing 141United KingdomCited for the principle that it will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid.
Wallis v. SmithCourt of AppealNo(1879) 21 Ch D 243United KingdomCited in passing.
Lord Elphinstone v. Monkland Iron and Coal Co.House of LordsYes[(1886) 11 App Cas 332]United KingdomCited for the presumption that it is a penalty when ‘a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage’.
iTronic Holdings Pte Ltd v Tan Swee Leon and another suitHigh CourtNo[2016] SGHC 77SingaporeCited for considering the redefined test for penalties in Cavendish but not coming to a conclusion on whether that test applied in Singapore.
Azimuti-Benetti SpA v Darrel Marcus HealeyHigh Court of JusticeYes[2010] EWHC 2234 (Comm)England and WalesCited for the principle that great caution should be extended before striking down a clause as penal in connection with commercial contracts.
Langsat Shipping Co Ltd v Glencore Grain BVCourt of AppealYes[2009] 2 CLC 465United KingdomCited for the principle that the circumspection that the courts show before striking down a clause when the parties are of equal bargaining power does not displace the rule that the clause must be a genuine pre-estimate of damage.

13. Applicable Rules

Rule Name
O 14 r 12 of the Rules of Court
O 14 r 1 of the Rules of Court

14. Applicable Statutes

Statute NameJurisdiction
No applicable statutes

15. Key Terms and Keywords

15.1 Key Terms

  • Settlement Agreement
  • Penalty Clause
  • Primary Obligation
  • Secondary Obligation
  • Liquidated Damages
  • Reverse Takeover
  • Loan Agreement
  • Mediation
  • Settlement Sum
  • Aggregate Sum

15.2 Keywords

  • settlement agreement
  • penalty clause
  • contract law
  • singapore
  • high court

17. Areas of Law

Area NameRelevance Score
Settlement Agreement95
Penalty Doctrine85
Contract Law80
Breach of Contract75
Estoppel40
Costs25
Mistake20

16. Subjects

  • Contract Dispute
  • Settlement Agreement
  • Penalty Clause