Borneo Ventures Pte Ltd v Ong Han Nam

• Jurisdiction: Singapore
• Judge: Lai Siu Chiu SJ
• Judgment Date: 05 May 2020
• Neutral Citation: [2020] SGHC 91
• Court: High Court (Singapore)
• Hearing Date: 30 July 2019,22 July 2019,24 July 2019,16 October 2019,18 September 2019,25 July 2019,23 July 2019,26 July 2019,29 July 2019,31 July 2019
• Docket Number: Suit No 1268 of 2016
• Plaintiff Counsel: Teh Guek Ngor Engelin SC, Yeo Yian Hui Mark, Lim Xiao Wei Charmaine and Bryan Hew Jianrong (Engelin Teh Practice LLC)
• Defendant Counsel: Lem Jit Min Andy, Selvaratnam Sharmini Sharon, Poon Pui Yee and Zhuang Changzhong (Eversheds Harry Elias LLP)
• Subject Matter: Contract,Breach,Contractual terms,Warranties
• Published date: 13 May 2020

Lai Siu Chiu SJ: Introduction

The claim in Suit No 1268 of 2016 (“this Suit”) is by Borneo Ventures Pte Ltd (“the Plaintiff”) against Ong Han Nam also known as Edward Ong (“the Defendant”) for breach of contract.

The Plaintiff is a company incorporated in Singapore and is a wholly owned subsidiary of GSH Corporation Limited (“GSH”), a public listed company. The executive chairman of GSH is Goi Seng Hui who is also known as Sam Goi (“Goi”).

The Defendant is a Malaysian and is the sole owner of a British Virgin Islands (“BVI”) incorporated company called Eagle Origin Limited (“Eagle”), which in turn owns 22.5% of the shares in a company called The Sutera Harbour Group Sdn Bhd (“SH Group”). Besides Eagle and the SH Group, the Defendant also owns other companies and shares in other companies such as Sutera Harbour Holdings Sdn Bhd (“SH Holdings”).

The facts

The Defendant, through Eagle, had been the sole owner of SH Group (previously known as JV Amazing Sdn Bhd) prior to the acquisition. Pursuant to a Subscription Agreement dated 30 December 2013 (“the SA”), the Plaintiff acquired 77.5% of the share capital in SH Group and thereby became its majority shareholder for a consideration of about RM700m. This acquisition under the SA was completed on 26 March 2014. The SA was preceded by a term sheet dated 18 October 2013 (“the Term Sheet”).

SH Group is the holding company of a fully integrated resort called Sutera Harbour Resort Sdn Bhd (“SH Resort”), covering approximately 384 acres located at Kota Kinabalu, Sabah. The SH Resort consists, inter alia, of two five-star hotels with extensive convention and banquet facilities, which the Defendant developed from the 1990s until July 2000 when SH Resort was completed and officially opened by the then Malaysian Prime Minister.

The SH Resort is in turn the parent company of five companies, namely, (i) Advanced Prestige Sdn Bhd (“Advanced Prestige”); (ii) Eastworth Source Sdn Bhd (“Eastworth Source”); (iii) The Little Shop Sdn Bhd; (iv) Sutera Harbour Travel Sdn Bhd; and (v) Sutera Harbour Golf & Country Club Bhd (“SHGCC”). The Defendant has been a director of SHGCC since 19 December 1991. For ease of reference, the court will refer to all five companies collectively as “the Sutera Target Group”.

The corporate structure of the various companies mentioned above, after the completion of the SA, is best depicted in the chart below:

Besides all the above companies, the Defendant also owns a construction company called Pembinaan OCK (Malaysia) Sdn Bhd (“Pembinaan OCK”) as well as a Singapore company called OCK Investment Pte Ltd (“OCK Investment”). As will become apparent, the Defendant also owned or controlled a number of other companies relevant to the present dispute. These will be discussed where relevant below.

SHGCC owns and has title to a 99-year leasehold estate in state land located at Sembulan District, Kota Kinabalu, Sabah, with an area approximating 95.58 hectares or 238.63 acres (“the Sembulan Land”). In the SA, the Defendant had warranted to the Plaintiff, inter alia, that SHGCC owned the Sembulan Land without encumbrances.

The Plaintiff alleged that by a sale and purchase agreement signed on 21 March 2014 (“the S&P”) but which was apparently back-dated to 1 March 2014, SHGCC agreed to sell to the Defendant’s company, Omega Brilliance Sdn Bhd (“OBSB”), a portion of the Sembulan Land measuring 1.459 acres (“the Subject Land”) for RM1,000 as consideration (“the Transaction”).¹ The S&P was signed by the Defendant on behalf of OBSB which company had been incorporated on 7 February 2013. The Defendant had become its director on 22 March 2013. OBSB is wholly owned by a BVI company called MDS International Limited² (“MDS”) which sole shareholder is the Defendant.

A power plant known as the co-generation facility (“the Co-Gen Facility”) is situated on the Subject Land. The Co-Gen Facility was developed by a company called Profound Heritage Sdn Bhd (“PHSB”) between 1997 and 1999, at a cost of RM155m with financing from Malayan Banking Bhd (“Maybank”) and Bank Islam (L) Ltd (“Bank Islam”) (however, see [149] below discussing the actual use of the loan from Bank Islam). The loan from Maybank was for RM118,250,000 (“the RM118.25m loan”) while the loan from Bank Islam was for US$24m (“the US$24m loan”). PHSB was owned and controlled by the Defendant until it was wound up by an order of court in Malaysia on 11 January 2012 for failing to pay its debts. The court-appointed liquidators were Mr Ooi Woon Chee (“Ooi”) and Mr Ong Hock An (“Ong”) (jointly “the Liquidators”) who were from KPMG Corporate Services Sdn Bhd (“KPMG”). PHSB came out of liquidation on 19 June 2015.³ The Co-Gen Facility was operated by PHSB and supplied electricity to the SH Resort.

I should add that PHSB was itself owned by Vibrant Square Sdn Bhd (“Vibrant”) who had as its shareholder another BVI company called Osterly Holdings Limited (“Osterly”), which held 30% of the shares in Vibrant, while the remaining 70% were owned by one Datuk Zarazilah (“Zarazilah”). Osterly’s shares are owned by the Defendant. Further, the evidence adduced in court from the Defendant was that Zarazilah held the 70% shares in Vibrant in trust for him. As the Defendant owned all the shares in Osterly (which held 30% of the shares in Vibrant) and Zarazilah held the remaining 70% in trust for him, that meant that the Defendant was the ultimate owner of and wholly controlled PHSB.

Since at least 2002 (see [164] below), tenancy agreements had been entered into between SHGCC and PHSB on an annual basis for the rental of the Subject Land.On 1 December 2012, the Liquidators of PHSB entered into a year’s tenancy with SHGCC to rent the Subject Land at RM5,558 per month.

After PHSB was wound up, the Defendant entered into negotiations and reached an agreement with Bank Islam to settle the outstanding debts owed by PHSB. Under the settlement terms, PHSB would make payment of RM33.6m to Bank Islam to discharge the charge which Bank Islam held over PHSB’s plant and machinery and all other securities. The settlement sum of RM33.6m, together with various fees payable under the settlement agreement for a total of RM34.438m, was paid to Bank Islam on or about 28 March 2013 by OBSB and/or the Defendant on behalf of PHSB. As noted below at [157], however, the Defendant admitted that the money came from another of his companies, Investasia Sdn Bhd (“Investasia”).

On 12 July 2013, OBSB (represented by the Defendant) and the Liquidators of PHSB executed an asset sale agreement (“the ASA”) for the sale of PHSB’s plant and machinery to OBSB in consideration for the RM33.6m paid to Bank Islam on PHSB’s behalf in March 2013, as recounted by Recital D of the ASA. Under cl 2.2.4 of the ASA, the Subject Land was expressly excluded from the sale but the Co-Gen Facility was included.

Prior to completion of the SA on 26 March 2014 (see [4] above), the Defendant had issued to the Plaintiff a disclosure letter dated 18 March 2014 (“the Disclosure Letter”) (which was wrongly dated 18 March 2013) where no mention was made of the S&P or the Transaction.⁴ The relevant paragraphs from the Disclosure Letter, addressed to both the Plaintiff and TYJ Group Pte Ltd (a company within the GSH Group), read as follows: 3 This Disclosure letter forms an integral part of the transactions effected by or under the [SA]. Each item disclosed (or deemed disclosed) in this Disclosure Letter shall be deemed to be a disclosure in respect of all warranties notwithstanding that an item disclosed may be disclosed by reference to a particular paragraph or paragraphs, or clause or clauses in the [SA].

…

6 Without limiting the generality of the disclosures referred to above, [SH Group], [SH Holdings], [SH Resort] and [the Defendant] also wish to make specific disclosures against the Warranties and these are set out in the schedule attached hereto. Each item disclosed shall, however, be deemed to be a disclosure in respect of the Warranties and shall not be limited to the paragraph or clause which is referred to in the schedule. The Plaintiff only found out about the S&P more than a year later, when a tax review was conducted on SHGCC’s accounts by its auditors.

On 29 February 2016, SHGCC commenced proceedings in the Malaysian High Court in Kota Kinabalu against (a) OBSB and (b) the Defendant in relation to the Subject Land in Suit No BKI-22NCvC-21/2-2016 (“the Malaysian Suit”). SHGCC’s claims, inter alia, were (i) for the Defendant’s breach of the fiduciary duties that he owed to SHGCC as its director; (ii) for a declaration that the S&P is null and void and has no legal effect; (iii) for an order that OBSB remove all its installations and structures on the Subject Land; (iv) for damages in the alternative, and (v) for payment of double rent from OBSB for occupation of the Subject Land.⁵

The Plaintiff commenced arbitration proceedings against the Defendant in Singapore by a notice of arbitration dated 3 October 2016,⁶ to which the Defendant filed a response on 17 October 2016.⁷ To avoid paying the high costs involved in the arbitration proceedings, the Defendant proposed to the Plaintiff that the dispute be brought to court instead. The Plaintiff agreed, and the arbitration proceedings were terminated by consent on 30 November 2016. On the same day, the Plaintiff filed this Suit.

Notwithstanding the fact that it was the Defendant who requested the Plaintiff to opt for curial instead of arbitral proceedings, the Defendant applied to court to stay this Suit on 27 December 2016 (“the Stay Application”). The Stay Application was granted by an Assistant Registrar (“the AR”) on 7 April 2017. The AR ordered a limited stay of all proceedings in this Suit against the Defendant until 31 July 2017 and awarded costs to the Defendant. The date 31 July 2017 was chosen by the AR as the trial of the Malaysian Suit...