Asia Hotel Investments Ltd v Starwood Asia Pacific Management Pte Ltd and Another

JudgeLai Siu Chiu J
Judgment Date10 April 2007
Neutral Citation[2007] SGHC 50
Citation[2007] SGHC 50
CourtHigh Court (Singapore)
Plaintiff CounselAlvin Yeo SC, Tay Peng Cheng, Linda Wee and Linda Low (Wong Partnership)
Defendant CounselTan Kok Quan SC, Kannan Ramesh, Marina Chin, Eddee Ng and See Chern Yang (Tan Kok Quan Partnership)
Published date14 October 2008

[LawNet Admin Note: Click on the link to the PDF above to see the Annexes]

10 April 2007

Judgement reserved.

Lai Siu Chiu J:


1 This is the third but by no means the final chapter in the litigation between the parties herein. In this chapter, the court’s task was to assess the plaintiff’s chances of acquiring a hotel in Bangkok, which opportunity it lost due to the defendants’ breach of an agreement signed between the parties.

2 The plaintiff, Asia Hotel Investments Ltd, was incorporated in the Channel Islands in 1998 for the purpose of investing in luxury hotels and golf courses in South East Asia. What the plaintiff did was to secure a hotel and put together a programme whereby the hotel would be renovated and/or refurbished, rebranded and repositioned under the brand of an international chain of hotels. The plaintiff’s president and its alter ego is one Gary Murray (“Murray”) who is a Canadian national but who has resided for many years now in Bangkok, Thailand and is married to a Thai citizen. (References to the plaintiff in this judgment in effect are a reference to Murray.) Prior to coming to Asia in 1998, Murray worked for Larco Enterprises Ltd (“Larco”), one of Canada’s largest privately-owned hotel investment and property development firms. During his ten-year tenure with Larco, Murray developed, or helped to develop, the Holiday Inn at Whistler, British Columbia, and the Marriott Hotel at Vancouver Airport.

3 The first defendant, Starwood Asia Pacific Management Pte Ltd, is in the business of providing hotel management and consultancy services whilst the second defendant, Starwood Hotels & Resorts Worldwide Inc, is the parent company of the first defendant. Amongst the hotel brands owned by the second defendant are, inter alia, Westin, St Regis, Sheraton, W Hotels and Four Points.

The background

4 The plaintiff wanted to invest in a four-star hotel known as Grand Pacific Hotel (“GPH”) situated along the prestigious Sukhumvit Road in the central business district of Bangkok. At the material time GPH was owned by PS Development Co Ltd (“PSD”). PSD was in turn owned by a Hong Kong company, Lai Sun Development Co Ltd, and two of its associates, Studyhome Holdings Limited and Upton Company (collectively referred to as “Lai Sun” henceforth), together with a Thai gentleman, Pongphan Samawakoop (“Pongphan”), in the ratio of 54.25% and 45.75% shares respectively. (Henceforth, the 54.25% interest of Lai Sun in GPH will be referred to as “the Lai Sun stake” where appropriate.) Pongphan was also the chairman of PSD.

5 In the last quarter of 2001, Lai Sun wanted to sell its stake in GPH. Under a shareholders’ agreement, Pongphan had the right of first refusal to the Lai Sun stake but he did not wish to buy the same as PSD was heavily indebted to its creditors (and Pongphan had guaranteed PSD’s loans from its bankers). The plaintiff, however, was very interested to buy over the Lai Sun stake, convert GPH into a five-star hotel and also restructure PSD’s debts. In 2001, the plaintiff had purchased the four-star Melia hotel situated at Hua Hin in the Gulf of Thailand and after renovations, had turned it into the five-star Hilton Hua Hin Resort & Spa (“HHH”), a top resort in the Hilton chain. As Murray so proudly put it, HHH was the “jewel” in the plaintiff’s crown. In seeking to buy over the Lai Sun stake and rebrand GPH, the plaintiff intended to repeat its success with HHH. According to Murray, the plaintiff had bought and sold the Merlin Hotel (in Pattaya) as well as another hotel prior to the HHH deal.

6 With Pongphan’s approval, the plaintiff (through its nominee, Siam Hotel Properties Co Ltd (“SHP”)) entered into a memorandum of understanding dated 7 November 2001 (“the first MOU”) with Lai Sun to buy over the Lai Sun stake for US$7.5m (“the purchase price”). Under the first MOU, the plaintiff had until 14 December 2001 to enter into a contract to buy over the Lai Sun stake and pay a deposit of US$500,000. Lai Sun on its part undertook not to sell the Lai Sun stake to any third party during that period.

7 The plaintiff then looked for an international hotel operator to manage GPH. It also tried to secure loans from financial institutions to fund the purchase price, to pay for the upgrading of GPH and to restructure the debts of PSD. After approaching and holding discussions with various hotel operators including the first defendant, Hyatt International, Marriott International Inc, Six Continents Hotels (who owns the Crowne Plaza brand), the plaintiff decided to focus its attention on the defendants; Murray sensed that the defendants were keen to have a Westin Hotel in Bangkok, having recently lost the management of the Bangkok Banyan Tree Hotel/Resort under the Westin brand.

8 The first defendant offered the plaintiff its Westin brand. On 4 December 2001, the plaintiff and the first defendant signed a confidentiality cum non-circumvention agreement (“the NCA”) under which each party undertook not to solicit any source introduced by the other party or enter into any agreement with such a source for a period of 12 months. The NCA was backdated to 9 November 2001. The NCA was subject to the defendants resolving with Kirin Narula (“Kirin”) and his family (“the Narulas”), who owned the Sheraton Grande Sukhumvit (a five-star hotel situated across the road from the GPH and managed by the first defendant), the issue of a restrictive covenant which prohibited the management by the first defendant of another hotel within a one-kilometre radius of the Sheraton Grande Sukhumvit.

9 In regard to financing, the plaintiff approached Lehman Brothers and Ekachart Finance but concluded no agreement with either institution. Upon expiry of the first MOU on 14 December 2001, the plaintiff did not have any financial arrangements in place. Neither did it pay the US$500,000 deposit required by Lai Sun. The plaintiff sought an extension of 45 days of the deadline to pay this deposit. Lai Sun rejected the request, as Lai Sun did not wish to be tied down to one potential buyer with no guarantee that the plaintiff would be able to conclude the deal.

10 Shortly thereafter, Kirin (who was acquainted with Pongphan) indicated to Pongphan that the Narulas were interested in buying the Lai Sun stake. After discussions with Lai Sun on 28 January 2002, a memorandum of understanding was concluded on 5 February 2002 (“the second MOU”) between Lai Sun and the Narulas whereby the latter would be given, until 28 February 2002, the exclusive right to negotiate and purchase the Lai Sun stake. On 19 February 2002, Lai Sun extended the second MOU indefinitely.

11 On 22 March 2002, the Narulas entered into an agreement with Lai Sun to purchase the Lai Sun stake. The transaction was completed on 22 May 2002 with a loan from DBS Thai Danu Bank.

12 Although the plaintiff was aware that the Narulas were negotiating to buy the Lai Sun stake, Murray nevertheless continued to negotiate with the first defendant regarding a renovation loan of US$5m for GPH. He further sought to obtain an ex-gratia payment of US$2m termed “key money” from the defendants.

13 On 18 January 2002, the defendants forwarded their first draft letter of intent (“LOI”) to the plaintiff. This was followed by a second LOI on 22 January 2002 and a term sheet. Although the defendants were not prepared to pay Murray the “key money”, they increased the amount of the renovation loan requested by the plaintiff from US$5m to US$6m. The negotiations between the plaintiff and the defendants were inconclusive.

14 On and after 15 February 2002, the defendants showed their interest in assisting the Narulas to acquire the Lai Sun stake and in turn GPH. The Narulas’ representative contacted the first defendant to explore the possibility of entering into an arrangement under which the first defendant would manage GPH on the Narulas’ behalf. The first defendant reverted to the Narulas on 28 February 2002 on the basic terms of a management contract and offered the latter a US$5m renovation loan to upgrade GPH to a five-star hotel of Westin standard.

15 Despite the plaintiff’s reminder to the first defendant of its obligations under the NCA, the first defendant continued its contacts and negotiations with the Narulas until 18 March 2002. On 16 March 2002, the plaintiff was informed by Lai Sun that the Narulas had not yet secured the deal.

16 Three days after the Narulas had signed the sale and purchase agreement to buy the Lai Sun stake, on 25 March 2002, the defendants signed (through their nominee, Westin Asia Management Company) with the Narulas and Pongphan, an LOI to manage GPH. This was followed by the execution of a management contract between Westin Asia Management Company and the shareholders of PSD on 15 May 2002. The defendants agreed to grant a US$5m loan to the shareholders for the upgrading of GPH. The Narulas paid US$7.7m for the Lai Sun stake.

The previous litigation

17 The plaintiff commenced this suit in 2002 seeking damages from the defendants for breach of the NCA. The plaintiff’s original claim included the tort of conspiracy and unlawful interference with its economic interests. During the trial before Tan Lee Meng J, the plaintiff agreed to withdraw all its claims against the defendants save for damages for breach of contract, in return for the second defendant’s undertaking that whatever damages or costs ordered in favour of the plaintiff would be paid by the second defendant. The plaintiff claimed the sum of US$54,913,011.00 by way of damages.

18 The plaintiff’s claim was dismissed by Tan J (at [2003] SGHC 289). Although he found that the first defendant had breached the NCA as early as 15 February 2002, he held that the plaintiff’s alleged loss of a chance to acquire the Lai Sun stake was too remote and was not caused by the first defendant’s breach of the NCA. It was the judge’s view (at [43] of his judgment) that the plaintiff was in no...

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