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Singapore – Company Law: Sembcorp Marine Ltd v PPL Holdings Pte Ltd And Another And Another Appeal [2013] 4 SLR 193.

13 March, 2014

 

Legal News & Analysis – Asia Pacific – Singapore – Dispute Resolution

 

In what will likely form a locus classicus of Singapore contract law, the Court of Appeal sets out the applicable principles for interpretation of contracts and implication of terms – emphasizing that all evidence, extrinsic or otherwise, is relevant to determining parties’ intentions.

 
This case involved a joint venture, PPL Shipyard, between two parties, Sembcorp and PPL Holdings. While they were initially equal partners, PPL Holdings first sold part of its stake to Sembcorp before selling its remaining stake to a third party. PPL Shipyard’s Sembcorp-nominated directors then took steps to reduce PPL Holdings’ board influence and executive control in PPL Shipyard.

 
The dispute centered around provisions in the joint venture agreement and the articles of association which stated that Sembcorp and PPL Holdings were entitled to appoint three directors each as long as each held 50% of the shares in PPL Shipyard. On this basis, PPL Holdings challenged the validity of the Sembcorp-nominated directors’ actions. However,before the Court of Appeal, Sembcorp successfully submitted that there was an implied term which had the effect of disapplying the clauses relating to board representation and control once the 50-50 joint venture proportion changed.

 
In this judgment, the Court took the opportunity to set out the applicable principles for the construction of contracts and the implication of terms. In terms of evidence, the Court would consider all evidence, extrinsic or otherwise, which was relevant to the ascertainment of the parties’ intentions. Then, the Court would use the business efficacy and officious bystander tests in conjunction and complementarily to ascertain the implication of terms.

 
PPL Holdings also sought to bring a minority action against Sembcorp on the basis of oppression or injustice. However, the Court declined to grant PPL Holdings’ request to invalidate the Sembcorp-nominated directors’ resolutions as the invalidation of the resolutions would not go far in addressing PPL Holdings’ complaint of minority oppression.

 

Rajah & Tann

 

For further information, please contact:

 

Francis Xavier SC, Partner, Rajah & Tann
francis.xavier@rajahtann.com

 
Lai Yew Fei, Partner, Rajah & Tann
yew.fei.lai@rajahtann.com

 

Rajah & Tann Dispute Resolution Practice Profile in Singapore

 

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