Alwie Handoyo v Tjong Very Sumito and another and another appeal

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 06 August 2013
• Neutral Citation: [2013] SGCA 44
• Court: Court of Appeal (Singapore)
• Hearing Date: 28 November 2012
• Docket Number: Civil Appeal Nos 82 and 83 of 2012 (Suit No 89 of 2010)
• Plaintiff Counsel: Sivakumar Vivekanandan Murugaiyan (Genesis Law Corporation) and Tang Hang Wu (TSMP Law Corporation),Ang Cheng Hock SC, Tay Yong Seng and Ivan Lim (Allen & Gledhill LLP) and Nicholas Narayanan (Nicholas & Tan Partnership LLP)
• Defendant Counsel: Peter Gabriel, Kelvin David Tan Sia Khoon and Ong Pang Yew Shannon (Gabriel Law Corporation)
• Subject Matter: Agency,Evidence of agency,Bailment,Civil procedure,Pleadings,Companies,Incorporation of companies,lifting corporate veil,Contract,Contractual terms,Equity,Conversion,Evidence,Proof of evidence,onus of proof,standard of proof,Witnesses,Restitution,Unjust enrichment,Tort,Misrepresentation,fraud and deceit
• Published date: 10 November 2014

V K Rajah JA (delivering the judgment of the court): Introduction

Civil Appeal Nos 82 and 83 of 2012 (“CA 82” and “CA 83” respectively) are appeals against the decision of the High Court in Suit No 89 of 2010 (“Suit 89”). CA 82 is the appeal by the fifth defendant, Alwie Handoyo (“Alwie”). CA 83 is the appeal by the first defendant, Chan Sing En (“Chan”). The first plaintiff, Tjong Very Sumito (“Tjong”), and the second plaintiff, Iman Haryanto (“Iman”), are the respondents (collectively “the Respondents”) in CA 82 and CA83. There was originally a third plaintiff in Suit 89, Herman Tintowo (“Herman”), but he discontinued his action on 13 January 2012 and is not a party to the appeals.

The dispute between the parties is over the payment of the purchase price of US$18m under a sale and purchase agreement (“the first SPA”) for the purchase of shares in an Indonesian company. Tjong, Chan and Alwie were involved in a transaction with several parties, including Magnus Energy Group Ltd (“MEGL”) which is a Singapore public-listed company and its wholly-owned subsidiary Antig Investments Pte Ltd (“Antig”), as well as two offshore shell entities, Aventi Holdings Limited (“Aventi”) and Overseas Alliance Financial Limited (“OAFL”). The first SPA was entered into between the Respondents and Herman (collectively “the Plaintiffs”) as the seller of the shares, and Antig as the purchaser.

The circumstances surrounding the transaction are murky, to say the least. In a nutshell, this was a convoluted transaction the true nature of which appears to have been intentionally masked through the interposition of layers of apparently legitimate transactions. As is often the case with such questionable transactions, when business partners’ relationships sour and disputes arise, the unravelling of the transaction presents considerable legal difficulties. The present case is no different, as the lengthiness of the decision of the High Court judge (“the Judge”) in Tjong Very Sumito and others v Chan Sing En and others [2012] 3 SLR 953 (“the Judgment”) bears testament.

Facts The protagonists

Tjong is the main protagonist in the dispute. He set up PT Deefu Chemical Indonesia (“PT Deefu”) on 5 December 2000 with Iman. Tjong and Iman are brothers while Herman is their friend. Although the relevant agreements were entered into between Antig and the Plaintiffs, Tjong conducted the negotiations with Chan. Tjong was introduced to Alwie by a mutual acquaintance, and Alwie in turn introduced Tjong to Chan. Tjong claimed that he is not well versed in English. He knows words and phrases but is unable to carry on a full conversation in English. Nevertheless, he has not disclaimed any of the relevant agreements.

Chan played a pivotal role throughout the negotiations and execution of the relevant agreements. He was the managing director of MEGL up till 1 June 2008. He was also a director of Antig up till 15 May 2008 when he resigned. He was the point man for MEGL and Antig in the negotiations and execution of the first SPA. Chan has known Alwie and Johanes Widjaja (“Johanes”), the third defendant in Suit 89, since 1999–2000 and has business dealings with both of them.

Alwie is a businessman based in Jakarta, Indonesia. He holds various directorships and owns shares in a number of Indonesian companies. He was introduced to Tjong sometime in the late 1990s by a mutual acquaintance, one Mr Rahardjo. Alwie has known Johanes since 2000 or 2001 and had business dealings with him prior to this dispute. Alwie and Johanes are key participants in this dispute as they are the directing mind and will of OAFL and Aventi, the two entities which were paid a sizeable portion of the US$18m purchase price.

Background

The dispute arises from a sale and purchase of shares in PT Deefu. In early August 2004, PT Deefu and Tjong paid US$1.2m for 100% of the share capital of PT Batubaraselaras Sapta (“PT Batubara”), the principal value of which resided in the company’s ownership of the right to mine and extract coal from the Kuaro coal formation at Kabupaten Pasir, East Kalimantan, Indonesia (“the Concession”). PT Deefu’s shares were held by Tjong, Iman, and Herman in the percentages 72.7%, 20% and 7.3% respectively. However, for all intents and purposes, the controller of the Concession was Tjong. For ease of reference, the shareholdings in PT Batubara and PT Deefu are represented by the following diagram:

Events prior to the first SPA

It appears that the Plaintiffs did not have the funds to develop and operate the Concession. Even though they had purchased the shares in PT Batubara in early August 2004, by 11 August 2004 thereabouts, they attempted to sell 67% of PT Batubara to one Mr Tjokrosaputro for US$8m. The deal with Mr Tjokrosaputro fell through. Had the deal with Mr Tjokrosaputro materialised, the Plaintiffs would have gained at least US$6.8m almost instantly from the “flipping” of their purchase of PT Batubara, despite at the same time retaining a 33% stake.

The first SPA

The Plaintiffs secured what appears on first blush to be an even “better” deal just three months later. On 23 November 2004, the Plaintiffs entered into the first SPA with Antig under which the Plaintiffs sold a total of 72% of the shareholding in PT Deefu to Antig for US$18m. 72% of PT Deefu translates to roughly 68.4% of PT Batubara, almost identical to the size of the shareholding which the Plaintiffs had tried to sell to Mr Tjokrosaputro. In other words, the Plaintiffs on paper stood to gain approximately US$10m more than what they would have obtained from the failed transaction with Mr Tjokrosaputro in just a space of three months. As we shall elaborate below (see [69]–[83], and [86]–[87]), there is more than meets the eye to this “better” deal.

The deal, which was to be completed on 13 June 2006 (“the Completion Date”), was structured in a way that left Tjong with 28% of the shareholding of PT Deefu after the sale. The purchase price of US$18m was to be paid partly in cash and partly by an allotment and issuance of shares in MEGL, the Singapore-listed parent company of Antig. Of the purchase price of US$18m, US$6m was to be paid to Tjong, US$10m in cash and shares to Aventi, and US$2m in cash and shares to OAFL.

The supplemental agreements and various letters

The Plaintiffs and Antig then entered into four supplemental agreements. The first three supplemental agreements are not particularly significant, but do help to convey a fuller picture of the entire transaction. It is the fourth supplemental agreement which is central to the dispute.

The first supplemental agreement

The terms of the first supplemental agreement dated 3 January 2005 (“the first Supplemental”) are immaterial to the present dispute. It merely provided that MEGL agreed to pay Tjong US$300,000 upon the execution of the first Supplemental and that the due diligence period was extended by a further 30 days.

The second supplemental agreement

The second supplemental agreement dated 18 February 2005 (“the second Supplemental”) was executed to clarify the extent of the Plaintiffs’ shareholding in PT Deefu. It provided that the original number of issued and fully paid-up ordinary shares in PT Deefu as reflected in the first SPA was incorrect.

The 18 February 2005 letter

Prior to the signing of the second Supplemental, there was a meeting between Tjong, Chan and Alwie at Alwie’s office. Tjong claimed that Alwie explained some of the terms of the first SPA at this meeting, including the fact that part of the purchase price would be paid to Aventi and OAFL in order to help Tjong save on tax liabilities to the Indonesian Government. This meeting and the conversation that transpired is critical, as will be evident later.

On the same day that the second Supplemental was signed, Tjong purportedly prepared a letter – with the help of a distant relative, Dr Irwan Sutisna Jahja, who is conversant with the English language, and another brother, Iman Malik, which read (when translated) (“the 18 February 2005 Letter”):¹

With this I inform you, I did not know Aventi and OAFL. Due to that I emphasize that:

1. I have never owe from Aventi and OAFL nor being indebted to them. 2. I have never given any power of attorney or whatsoever to Aventi and OAFL. 3. I have never given instruction to Antig Investment Pte. Ltd. to pay anything whatsoever to Aventi and OAFL. 4. Therefore payment for selling and buying of PT Deefu Chemical Indonesia to Antig Investments Pte. Ltd for the sum of USD 18 million must be paid directly to Tjong Very Sumito Iman Haryanto and Herman Aries Tintowo.

Tjong claimed that he gave the 18 February 2005 Letter to Chan and Alwie in Singapore and Jakarta respectively. He claimed that he personally gave the letter to Chan after the signing of the second Supplemental. Chan and Alwie, however, denied receiving the letter. The 18 February 2005 Letter was allegedly also mailed to Antig on 14 March 2005. Pertinently, both MEGL and Antig filed affidavits on 17 October 2011 stating that they have never received that document. We note that no credible evidence confirming that the 18 February 2005 Letter was received by Antig, MEGL, Chan or Alwie was adduced by Tjong.

It is worth noting that the 18 February 2005 Letter directly contradicts cl 4.02(4) of the first SPA which states:²

All payments made by the Purchaser to the persons set out in section 4.02(2) above shall be deemed as payment in full to the Vendors. [emphasis added]

The 7 March 2005 letter

On 7 March 2005, the parties signed a letter which provided that the Plaintiffs would bear the costs involved in obtaining an extension of time for the commencement date of the operation of the Concession (“the 7 March 2005 Letter”). PT Batubara had previously entered into an agreement with the Government of the Republic of Indonesia which provided that mining...