The former Bolton manager agreed to take up a coaching position at Brighton on 27 June, but changed his mind just two days later after an offer from newly-appointed Saints manager Ronald Koeman.
Hyypia said: "Everything was sorted, everything was agreed.
"The way it all happened, I was very disappointed," Hyypia told Sky Sports News.
Hyypia was reluctant to go into details but confirmed Lee informed him of his decision over the phone.
"When the club announced he was coming here, that evening he called me and said he was going to Southampton," he added.
"I couldn't understand it and I couldn't believe it.
"I wish him all the best."