E C Investment Holding Pte Ltd v Ridout Residence Pte Ltd and others and another appeal

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 28 September 2011
• Neutral Citation: [2011] SGCA 50
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeals Nos 177 and 184 of 2010
• Year: 2011
• Published date: 06 October 2011
• Hearing Date: 15 March 2011
• Plaintiff Counsel: Lee Eng Beng SC, Disa Sim and Jonathan Lee (Rajah & Tann LLP)
• Defendant Counsel: Tan Cheng Han SC, P Balachandran and Kenneth See (Robert Wang & Woo LLC),Phua Siow Choon (Michael BB Ong & Co),Kelvin Tan Teck San and Denise Ng (Drew & Napier LLC),Alvin Yeo SC, Melvin Lum, Daniel Tan and Chan Xiao Wei (WongPartnership LLP)
• Subject Matter: Credit and Security,Money and moneylenders,Equity,Remedies,Specific performance,Damages in lieu of specific performance,Land,Sale of land,Contract
• Citation: [2011] SGCA 50

Chao Hick Tin JA (delivering the judgment of the court): Introduction

Before us are two appeals, Civil Appeal No 177 of 2010 (“CA 177”) and Civil Appeal No 184 of 2010 (“CA 184”) (collectively, “the present appeals”). CA 177 is an appeal by E C Investment Holding Pte Ltd (“ECI”) against the decision of the High Court judge (“the Judge”) in E C Investment Holding Pte Ltd v Ridout Residence Pte Ltd and another (Orion Oil Ltd and another, interveners) [2011] 2 SLR 232 (“the Judgment”), where the Judge dismissed ECI’s application in Originating Summons No 1357 of 2009 (“OS 1357”) for, in the main, specific performance of an agreement for the sale of 39A Ridout Road, Singapore 248438 (“the Property”) to it at the price of $20m. CA 184 is an appeal by Ridout Residence Pte Ltd (“Ridout”) against, essentially, the Judge’s refusal, following his dismissal of ECI’s claim, to award damages for consequential losses suffered by Ridout. ECI (the appellant in CA 177) is the first respondent in CA 184, while Ridout (the appellant in CA 184) is the first respondent in CA 177.

The other parties to the present appeals are: the second respondent in both appeals, Hong Leong Finance Limited (“HLF”), which is the registered mortgagee of the Property; the third respondent in both appeals, Orion Oil Limited (“Orion”), which had granted a $10m loan to Anwar secured by a charge registered against Ridout in respect of the remainder of the proceeds of sale of the Property after satisfaction of HLF’s prior interest; and the fourth respondent in both appeals, Mr Thomas Chan Ho Lam (“Thomas Chan”), who was granted an option by Ridout to purchase the Property at the price of $37m after ECI had exercised its earlier option to purchase the Property at the price of $20m.

The material facts The circumstances in which ECI came to be interested in the Property

In 2006, the Property, which has a land area of about 40,600 sq ft, was purchased by Ridout for $28m. Ridout held the Property on trust for its sole shareholder and director, one Mr Angus Anwar (“Anwar”). To effect the purchase, Anwar used $17m out of a total loan of $30m from HLF secured by a mortgage over the Property. In 2008, Anwar obtained a further loan of $10m from Orion secured by a charge registered against Ridout in respect of the balance of the proceeds of sale of the Property, ie, subject to the prior claim of HLF.

Between March and May 2009, HLF pressed Anwar for repayment to reduce the loan. In an attempt to stave off a mortgagee’s sale of the Property, Anwar made partial repayment of around $2m to HLF. In May 2009, HLF sought further repayment from Anwar so as to reduce the then outstanding loan of approximately $19.6m to $18m. Anwar then tried to obtain loans from friends and personal contacts. At the time, Anwar obtained a valuation of the Property from Colliers International Consultancy & Valuation (Singapore) Pte Ltd dated 15 April 2009 (“the Colliers Report”), which gave the Property an open market value of $29m and a forced sale value of $23.2m.

Among the people whom Anwar contacted was one Mr Ivan Lim, who was given a copy of the Colliers Report. Ivan Lim in turn approached, inter alia, one Mr Lim Swee Hoe (“SH Lim”), who was a director of SHL Realty Pte Ltd and who was shown the Colliers Report. We should at this juncture note that of the people whom Ivan Lim approached, none was interested in giving a loan to Anwar, although some were open to the idea of buying over the Property. SH Lim then approached one Mr Tan Koo Chuan (“KC Tan”) and one Mr Melvin Poh (“Poh”), who were the shareholders and directors of ECI. SH Lim showed KC Tan and Poh the Colliers Report. As ECI is a property developer, KC Tan and Poh were not interested in granting a loan. However, SH Lim also told KC Tan and Poh that Anwar (acting through Ridout) was prepared to sell the Property, but that the buyer must be willing to pay $2m upfront. To that, KC Tan and Poh indicated their interest.

The preparatory work for the transaction relating to the Property

As a result, ECI engaged Mr Lee Chow Soon (“CS Lee”) of M/s Tan Lee & Partners (“TLP”) and Ridout instructed Mr Low Yew Shen (“YS Low”) of Ng Chong & Hue LLC (“NCH”) to prepare the documentation to effect the transaction between ECI and Ridout (“the Transaction”). On 2 June 2009, YS Low sent CS Lee an e-mail headed “Sale and Purchase of Ridout Road (Subject to Contract)”¹ forwarding a statement of accounts showing the outstanding amount owed by Anwar to HLF as at 31 May 2009. On 3 June 2009, CS Lee responded enclosing a draft option to purchase (“the Draft Option”) as well as a draft deed of settlement (“the Draft Deed”) for YS Low’s comments. The Draft Option stipulated a purchase price of $20m for the Property and an option fee of $2m. As for the Draft Deed, it provided, in essence, that “within 60 days from today”,² the seller (ie, Ridout) had the right to cancel the option granted to the purchaser (ie, ECI) by refunding the option fee of $2m plus making an additional lump sum payment of $250,000 – ie, by paying a total sum of $2.25m to ECI – by way of a cashier’s order. On 4 June 2009, YS Low responded with the comment that “the drafts [were] subject to any further changes [his] clients [might] wish to make”.³

The meeting on 5 June 2009

On 5 June 2009, a meeting attended by KC Tan, Poh, Anwar, YS Low, CS Lee, one George Samuel Panthradil (“Panthradil”), the chief financial officer of another company owned by Anwar, and SH Lim was held at TLP’s office. At this meeting (“the 5 June 2009 meeting”), CS Lee produced a litigation search done on Anwar on the same day (ie, on 5 June 2009) which showed numerous actions against the latter. CS Lee, KC Tan and Poh said that in view of the litigation search, there was a significant credit risk for ECI in going ahead with the Transaction. There was then a separate breakout meeting between KC Tan, Poh and Anwar, at which KC Tan and Poh told Anwar that they were willing to pay only $1.5m as the option fee, instead of $2m as stated in the Draft Option. Faced with those circumstances, Anwar agreed to reduce the option fee to $1.5m.

The outcome of the 5 June 2009 meeting was that Ridout granted an option dated 5 June 2009 to ECI to purchase the Property at the price of $20m in consideration of an option fee of $1.5m (“the First Option”). A deed of settlement between ECI and Ridout (“the Deed of Settlement”) was also executed on 5 June 2009, but it was post-dated to 8 June 2009. Under the terms of the Deed of Settlement, Ridout had the right, “within 60 days from today”,⁴ to cancel the First Option by refunding the option fee of $1.5m and paying an additional sum of $180,000 (“the $180,000 compensation fee”) to “compensate [ECI]”⁵ – ie, by paying an aggregate amount of $1.68m (“the $1.68m”) to ECI – by way of a cashier’s order. If this right of cancellation was not exercised by Ridout within the stipulated 60-day period (“the 60-Day Period”), ECI would be entitled to exercise the First Option during the 30-day period thereafter. Following the grant of the First Option, ECI lodged a caveat against the Property on 5 June 2009. At this juncture, we would note that the sale price of $20m was $3.2m below the forced sale value placed on the Property by the Colliers Report. We should also add that although the Property was ostensibly to be sold by Ridout, which was its registered proprietor, it was effectively Anwar (Ridout’s sole shareholder and director) who was the directing mind behind the sale. We will thus, in this judgment, refer to Ridout and Anwar interchangeably as the vendor of the Property.

The parties’ solicitors, by way of a fax from NCH to TLP dated 5 August 2009, agreed that the 60-Day Period for Ridout to cancel the First Option would end on 6 August 2009 (as the Judge noted at [37] of the Judgment, this fax was most likely sent due to the ambiguity as to whether the 60-Day Period, which was expressed as “60 days from today”⁶ in cl B(a) of the Deed of Settlement, meant 60 days from 5 June 2009 (the date on which the Deed of Settlement was actually signed) or 60 days from 8 June 2009 (the date of execution stated in the Deed of Settlement)). No cancellation was effected by Ridout during the 60-Day Period. However, on 7 August 2009, NCH, on behalf of Ridout, wrote to TLP tendering a Maybank cheque (as opposed to a cashier’s order) for the $1.68m “as payment for cancellation of the [First] Option”.⁷ On 11 August 2009 (which was the next working day following the National Day weekend), TLP wrote to NCH returning the Maybank cheque and rejecting Ridout’s purported cancellation of the First Option on the grounds that (inter alia) the purported cancellation had been effected out of time. Equally pertinent to note is that Anwar admitted in evidence that the Maybank cheque would have been dishonoured had it been presented for payment as there were insufficient funds in the relevant bank account at that time to honour that cheque.

Following his failure to have the First Option cancelled, Anwar sought to persuade ECI not to exercise that option by offering to pay a higher cancellation fee. Nevertheless, on 27 August 2009, ECI exercised the First Option and lodged a second caveat against the Property stating its interest as being that of a “purchaser”.⁸ On the evening of the same day, Anwar sent SMS messages to KC Tan and Poh alleging that the Transaction was an illegal moneylending transaction and stating that he would be lodging a police report, which he duly did on 29 August 2009. Interestingly, in his police report, Anwar did not specifically complain about illegal moneylending, but only stated that ECI was “trying to make more money out of the deal”⁹ as a result of the escalation in the price of the Property.

The alleged settlement in September 2009

Further discussions between Anwar on one part and KC Tan and Poh on the other took place. Notably,...