City Harvest Church v AMAC Capital Partners and another

• Jurisdiction: Singapore
• Judge: Chua Lee Ming JC
• Judgment Date: 17 November 2015
• Neutral Citation: [2015] SGHC 299
• Court: High Court (Singapore)
• Docket Number: Suit No 1077 of 2014 (Registrar’s Appeal Nos 181 and 182 of 2015)
• Year: 2015
• Published date: 21 November 2015
• Hearing Date: 17 September 2015,15 September 2015
• Plaintiff Counsel: Ong Su Aun Jeffrey and Yeo Lai Hock, Nichol (JLC Advisors LLP)
• Defendant Counsel: A Rajandran (A. Rajandran)
• Subject Matter: Civil Procedure,Judgments and orders,Setting aside judgment in default of appearance,Summary judgment,Conditional leave to defend
• Citation: [2015] SGHC 299

Chua Lee Ming JC: Introduction

The plaintiff, City Harvest Church, sued the defendants for $16,339,333 and accrued interest of $4,645,904, in connection with certain investments made by the plaintiff. The first defendant, AMAC Capital Partners (“AMAC”), was the plaintiff’s investment manager. The second defendant, Chew Eng Han (“Chew”), was the sole director and majority shareholder of AMAC. Chew was sued as a guarantor for the payment of the sums due from AMAC to the plaintiff.

The plaintiff’s claim for $16,339,333 and accrued interest of $4,645,904 comprised the following:

Tranche	Principal Owed	Interest Owed	Total
First Outstanding Tranche	$1,324,333	$612,514	$1,936,847
Second Outstanding Tranche	$3,000,000	$765,370	$3,765,370
Third Outstanding Tranche	$3,015,000	$820,020	$3,835,020
Fourth Outstanding Tranche	$9,000,000	$2,448,000	$11,448,000
Total	$16,339,333	$4,645,904	$20,985,237

On 22 October 2014, the plaintiff entered judgment in default of appearance against AMAC. AMAC applied to set aside the judgment. Separately, the plaintiff applied to enter summary judgment against Chew. On 8 June 2015, the learned Senior Assistant Registrar (“SAR”) set aside the judgment against AMAC and gave Chew leave to defend, in respect of all four Outstanding Tranches, on condition that the full amount claimed was paid to the plaintiff. AMAC and Chew appealed against the SAR’s decisions.

I heard both the Registrar’s Appeals and allowed the appeals in part: I allowed the appeals with respect to the First to Third Outstanding Tranches (total amount $9,537,237) and made the order setting aside the judgment against AMAC, and the order giving Chew leave to defend, unconditional. As for the Fourth Outstanding Tranche (total amount $11,448,000), I agreed with the SAR that the order setting aside the judgment against AMAC and the order giving Chew leave to defend, should be conditional. I imposed the condition that AMAC and/or Chew furnish security in the sum of $1.5m within six weeks of my decision.

AMAC and Chew have appealed against my decisions in respect of the Fourth Outstanding Tranche.

The facts

The plaintiff appointed AMAC as its investment manager in 2007. Sometime in March 2009, one Oh Chee Eng (“Chee Eng”) approached Chew and asked if AMAC could arrange a three-month bridging loan of $5m for a corporate exercise by his company, Transcu Group Limited (“Transcu”). Chee Eng offered a “fee” of 5% for the three-month loan. The “fee” was equivalent to an interest rate of 20% per annum (“pa”).

Chew was then a member of the Management Board (“the Board”) of the plaintiff. He brought this opportunity to Tan Ye Peng (“Ye Peng”) who was the Vice-Chairman of the Board. In his Blackberry message to Ye Peng on 8 March 2009 (“the BB message”), Chew informed Ye Peng about Chee Eng’s proposal and suggested a profit sharing arrangement under which AMAC and the plaintiff would split the “fee” in the ratio 40:60. Chew said AMAC could specifically set up a fund “for deals like this”. The fund would be called the Special Opportunity Fund (“SOF”). AMAC would issue a contract to the plaintiff stating that “whatever [the plaintiff] puts in is guaranteed with a 3 [percent] return after 3 months”. AMAC would collect the fee of 5% from Transcu and pay the plaintiff 3%. Chew considered the deal to be “very safe” as it would be secured by more than 100m Transcu shares, which were then worth about $21m.

On 9 March 2009, the plaintiff’s then Finance Manager, Ms Sharon Tan (“Sharon”), sent emails to the plaintiff’s investment committee and Board seeking approval to make the investment based on Chew’s proposal. The emails stated that the SOF would be offering a bridging loan to Transcu and that it would guarantee a return of 3% in three months. It would appear that the plaintiff’s Board gave its approval as the plaintiff subsequently signed an agreement dated 17 March 2009 (“the SOF Agreement”) to invest in the SOF.

Under the SOF Agreement, the SOF would operate in the following manner: AMAC would issue invitations to the plaintiff to subscribe to a tranche of the SOF “as and when opportunities arise”. Each SOF tranche would be for a specific amount and a specific fixed period. The return for each tranche would be fixed but the rate would depend on the nature of the opportunities that arise. The plaintiff had a right to participate in tranches of $1m or more. Payment of the principal sum and the fixed return to the plaintiff was guaranteed.

Between 17 March 2009 and mid-2010, AMAC issued invitations to subscribe to 18 tranches (described as Tranches 1 to 18) of the SOF. Tranche 1 involved a principal sum of $5m and was for a term of three months for a fixed return of 3% (ie, 12% pa). This was based on the loan that Chee Eng had requested and that led to the creation of the SOF. In short, the $5m loan requested by Chee Eng was the underlying loan for Tranche 1. Although the BB message suggested that the borrower was either Chee Eng or Transcu, Chew alleged that the loan was in fact made to Mr Akihiko Matsumura (“Akihiko”) who was a major shareholder of Transcu. At any rate, at the end of the three-month period, the underlying loan was repaid by the borrower and AMAC paid the plaintiff its principal sum of $5m plus accrued interest of $150,000.

The documentary evidence showed that the plaintiff subscribed to at least 16 of the 18 tranches.ⁱ According to the defendants, there was an underlying loan for each tranche. In other words, the monies paid by the plaintiff for each tranche were used to make the underlying loan linked to that tranche. The principal amount in each of the 16 tranchesⁱⁱ ranged from $350,000 to $9m; in the majority of cases, the amount was at least $3m. Each tranche was for a period ranging from one week to four months; most of them were for a period of at least two months. The applicable interest rates for each tranche ranged from 5% pa to 24% pa except for two tranches, ie, Tranche 6 and Tranche 9. Tranche 6 was an investment of $1.5m for a mere one week and the interest rate was 3% for the one-week term (ie, about 156% pa)!ⁱⁱⁱ Tranche 9 was an investment of $2.35m, also for one week; the interest rate was 1% for the one-week term (ie, 52% pa)!^iv

As at 30 September 2010, AMAC had paid the plaintiff the principal sums and the accrued interest for all the tranches that the plaintiff had subscribed to except Tranches 13, 14, 16, 17 and 18. On 30 October 2010, the plaintiff agreed to a 6-month extension to 28 February 2011 for AMAC to make payment of the sums due under these tranches. The conditions for the extension of time included the following:^v The coupon rates for Tranches 16, 17 and 18 will be increased by 2%. AMAC was to confirm that there was “an underlying loan of S$12,220,000 excluding accrued interest to Mr Akihiko Matsumura” for Tranches 13, 14, 16 and 17.

AMAC agreed to the conditions and the payment dates for Tranches 13, 14, 16, 17 and 18 were extended to 28 February 2011.^vi AMAC also confirmed in writing that Tranches 13, 14, 16, and 17 were supported by an underlying loan of $12.22m to Akihiko.^vii

AMAC did not manage to pay the plaintiff by 28 February 2011. On 11 May 2011, AMAC paid the plaintiff the outstanding balance for Tranche 17.^viii Subsequently, the plaintiff agreed to extend the payment dates for the remaining Tranches 13, 14, 16 and 18 to 30 June 2012. The interest rates for these four tranches were increased to 8% pa with effect from 1 August 2011, and the interest accrued was to be paid on 31 December 2011, 31 March 2012 and 30 June 2012^ix.

It appeared that AMAC was unable to pay the interest that accrued on 31 December 2011, and on 25 January 2012, AMAC requested a further extension of time^x Ye Peng sent Chew an email touching on several terms relating to a revised payment schedule. One of the conditions imposed by the plaintiff was a personal guarantee from Chew to the plaintiff for all the monies that AMAC owed the plaintiff. In his reply on 14 March 2012, Chew agreed to give the guarantee.^xi On 30 April 2012, Chew signed a guarantee in favour of the plaintiff. And so it came to pass that Chew became liable to the plaintiff as a guarantor for AMAC’s liabilities relating to the SOF.

According to the defendants, AMAC was unable to pay the plaintiff because the borrower had defaulted on the underlying loans. The defendants also had difficulty liquidating the Transcu shares (which were held as collateral for the underlying loans) within a short time frame due to market liquidity conditions. The problem became worse when trading of the Transcu shares was suspended.

The First, Second, Third and Fourth Outstanding Tranches in the plaintiff’s present claim (see [2] above) represented the balance amounts still owing to the plaintiff in respect of Tranches 13, 14, 16 and 18 respectively.

Tranche 13 involved a principal sum of $2.92m. The initial term was for three months. There were two invitations to subscribe in relation to this tranche. One described the deal as one whereby “[the plaintiff] buys 29 million shares in Transcu Group Limited”, and at the end of the three months, the plaintiff would be paid $2.9m plus 25% of the average value of the 29m Transcu shares.^xii However, a second document simply referred to the principal sum of $2.92m and stated that the “targeted return” will be 1.5% for the three-month period.^xiii Both these documents were signed by the plaintiff and AMAC. In its statement of claim, the plaintiff relied on the latter to assert its claim for payment of the monies due under Tranche 13.^xiv

Tranche 14 involved a principal sum of $3m. The initial term was for six weeks. As with Tranche 13, there were two documents relating to this tranche. One described the deal as one whereby “[the...