Cherie Hearts Group International Pte Ltd and others v G8 Education Ltd

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 28 May 2013
• Neutral Citation: [2013] SGHC 116
• Court: High Court (Singapore)
• Hearing Date: 31 January 2013,28 January 2013,29 January 2013
• Docket Number: Suit No 211 of 2011
• Plaintiff Counsel: Vincent Leow and Michelle Yap (Allen & Gledhill LLP)
• Defendant Counsel: Vikneswari d/o Muthiah and Mr Lionel Chan (Harry Elias Partnership LLP)
• Subject Matter: Contract,Specific Performance
• Published date: 06 June 2013

Judith Prakash J: Introduction

The trial of this action took place in 2011 and in April 2012, I delivered a judgment ([2012] SGHC 70) in which I granted the defendant, G8 Education Ltd (“G8”), specific performance of a contract dated 28 October 2010 between G8, the first plaintiff, Cherie Hearts Group International Pte Ltd (“CHG”), 19 other entities (who together with CHG were defined as “Sellers”) and the second and third plaintiffs as covenantors. The contract was subsequently amended twice. The parties termed this contract the “Business Acquisition Contract” and I shall refer to it, as it was subsequently amended, as the “BAC”.

Subsequent to my judgment, the parties attended before me on several occasions to work out the terms on which specific performance of the BAC should take place. I made various orders in this regard. G8 is not satisfied with some of those orders and has appealed. The orders that I made related to the amounts that G8 would be entitled to deduct from the purchase price at the time of completion of the BAC. It is relevant that, in a previous hearing, an order had been made for an assessment hearing to be conducted by the Registrar to determine certain amounts payable by CHG to G8. It was further ordered that pending such determination, these amounts were to be deducted from the purchase price and placed in escrow.

I had several hearings to try and fix a date for completion or “Financial Close” as the parties referred to it and in the course of these hearings, several orders had to be made to establish what was required from each side on completion. The aim of these hearings was to facilitate completion. During these hearings, G8 was represented by Harry Elias Partnership LLP (“HEP”) and CHG by Allen & Gledhill LLP (“A&G”). Since then, Messrs Nalpon & Co have taken over conduct of the matter for CHG from A&G.

Orders made and relevant clauses

The appeal by G8 is against the following orders which I made on 31 January 2013: That no account shall be taken of the issue of the parents’ deposit monies for the purposes of Financial Close; That no account shall be taken of the issue of the rectification costs for the purposes of Financial Close; That no account shall be taken of the issue of the compensation for the missing motor vehicles for the purposes of Financial Close; That the order that interest under the Loan Agreement is to stop accruing on 12 November 2012 cannot be varied; and That clause 8 of the [BAC] (as varied) does not cover the expenses incurred by [G8] on behalf of [CHG] from 1 March 2011.

I set out below some relevant clauses of the BAC: 1.1 Defined terms

Businesses means all of the businesses of the Cherie Hearts Group ...

Financial Close means the earliest date where all the AO Centres and Other Centres have been given OBLS approval for the transfer to [G8’s] nominated entity, or such other date as agreed by the parties. Loan Agreement means the loan agreement between [CHG] as borrower and [G8] as lender dated 17 September 2010 as subsequently varied in writing by the parties. 2.2 Purchase Price

The Purchase Price is S$24,610,027, to be satisfied in the following manner: (a) firstly, by way of payment of S$1.5 million to [CHG] upon execution of the Deed of Assignment of Franchise Agreements ... . (b) secondly, by way of set off of the Total Indebtedness under the Loan Agreement in partial satisfaction of the Purchase Price; (c) thirdly, by payment to Tembusu Growth Fund Limited of ... (d) fourthly, by assumption of current financed liabilities of [CHG] to a maximum of $3,560,000 ... (e) lastly, the balance Purchase Price is payable in Immediately Available Funds.

In relation to clause 2.2(b) above, the parties acknowledge that: • An offset against Total Indebtedness under the Loan Agreement has occurred through the assignment of the Franchise Agreements ... . • In relation to the AO centres and Other Centres, the Buyer will receive the profits and bear the expenses of those Businesses from 1 March 2011, subject to the legal transfer of such Business to the Buyer or its nominated entity on satisfaction of all conditions precedent (including lease assignment and lodgement of the child care licences with the Department by 28 February 2011). In the meantime, monies advanced under the Loan Agreement shall incur interest as provided therein provided that on 1 March 2011 an offset against the Total Indebtedness under the Loan Agreement shall occur in partial satisfaction of the Purchase Price.

8.4 Seller’s Parent Credit Accounts/Bond Monies

At Financial Close the Sellers must pay to the Buyer an amount equal to the total of or all: (i) payments or prepayments; (ii) deposits; and (iii) credits or bond monies,

received by the Sellers from clients of the Business, for services to be provided, sold or supplied by the Business after Financial Close (Prepayments).

Reasons for my decision Parents’ deposit monies

The submission made by G8 was that pursuant to cl 8.4 of the BAC, CHG had to pay G8 on Financial Close all deposit monies in the parents’ credit accounts and/or bond monies that it had received for the ten childcare centres sold to G8. On 15 November 2012, G8 had, through HEP, informed CHG of its obligations in this regard. It had also asked for a list of the bonds supplied by the parents. However, no substantive reply was received to this request until 28 January 2013, the date of the hearing. On that date, A&G stated that CHG had only received $10,210 in respect of the centre run by Teeny-Tiny Childcare Centre & Development Pte Ltd (“Teeny Tiny Centre”) and that there were no deposit monies for the other centres. G8 did not accept this response and submitted that there must have been deposit amounts taken by the other centres as well.

The response to this from CHG was that no bond monies or deposits had been received from the parents at all. The deposits referred to in cl 8.4 were deposits that were to be made for services to be rendered after Financial Close and nine of these centres had not been operated by CHG and the other Sellers since March 2011, a period of nearly two years. The sum of $10,210 in respect of the Teeny-Tiny Centre was for the January 2013 school fees for that centre and, therefore, did not fall within cl 8.4.

The order that I made was that parties were entitled to reserve their respective positions in respect of the claim to deposits but, for the purposes of Financial Close, no account was to be taken of this item. This was because there was no proof before me of any amount received on account of deposits from the parents of children in the ten childcare centres or any evidence as to what the quantum of such deposits might be. Whilst the clause provided for deposits received to be paid over, it would only operate if indeed such deposits had been paid to the Sellers.

Motor vehicles

Under cl 5.3(x) of the BAC read with Schedule 3 entitled “Plant and Equipment”, on completion CHG was obliged to furnish G8 with all properly executed documents required to transfer to G8 any motor vehicle included as part of the Plant and Equipment under Schedule 3. It was G8’s position that there were three motor vehicles that were covered by this clause and that the same had to be delivered to it on completion and if they were not, G8 would be entitled to full compensation for their non-delivery.

CHG’s position was that it owned two motor vehicles at the date the BAC was originally entered but that these motor vehicles had thereafter been sold. It was asserted that the motor vehicles had been handed over to G8 in May 2011 after G8 had taken over some of the childcare centres but, shortly thereafter, on 25 May 2011, the vehicles had been returned to CHG by G8. The vehicles were then sold and after hire purchase commitments were met, CHG recovered $3,800 for one and $2,400 for the other.

Whilst it was apparent that at least two motor vehicles were covered by the BAC and should have been available for delivery to G8 on completion, I was not in a position to determine either the truth of CHG’s assertion that it had handed over the vehicles to G8 but that they had been rejected or to determine the value of the vehicles in the event that G8 had not rejected them. It was not even possible for me to ascertain whether there were two vehicles or three that had to be delivered. G8 wanted full compensation but the amount of this could not be determined by me because the evidence required was lacking. I needed a valuation of the vehicles plus information as to whether any amounts were owing on account of...