Cleantech Partners Hangzhou Pte Ltd and another v Han Cheng Fong and others

• Jurisdiction: Singapore
• Judge: Tan Lee Meng J
• Judgment Date: 27 February 2013
• Neutral Citation: [2013] SGHC 52
• Court: High Court (Singapore)
• Docket Number: Suit No 266 of 2011
• Published date: 05 March 2013
• Year: 2013
• Hearing Date: 17 August 2012,27 September 2012,31 July 2012,30 November 2012,17 October 2012
• Plaintiff Counsel: Chan Kia Pheng, Harpal Singh, Tan Wei Ming and Favian Kang (KhattarWong LLP)
• Defendant Counsel: Anthony Lee Hwee Khiam and Pua Lee Siang (Bih Li & Lee)
• Subject Matter: Companies,Directors,Duties,Tort,Conspiracy
• Citation: [2013] SGHC 52

Tan Lee Meng J:

The first plaintiff, Cleantech Partners Hangzhou Pte Ltd (“CTPHZ”), is a wholly-owned subsidiary of the second plaintiff, Cleantech Partners Pte Ltd (“CTP”). The first defendant, Dr Han Cheng Fong (“Han”), is a former chairman and former director of CTPHZ. The second defendant, Mr Low Soo Chee (“Robin”), and the third defendant, Ms Liew Sok Kuan (“Christine”), are former directors of CTPHZ and CTP. Han, Robin and Christine, who will collectively be referred to as “the defendants” for convenience, are presently the directors of the fourth defendant, International Eco-City Pte Ltd (“IEC”).

This case concerns CTPHZ’s participation a low-carbon eco-park project in Hangzhou, China, known as the “Hangzhou Singapore Eco-Park development project” (“the Hangzhou project”). The plaintiffs asserted that the defendants breached their statutory and fiduciary duties as their directors and that the defendants conspired to use unlawful means to divert the Hangzhou project from them to IEC. The defendants denied these charges.

Background

The founder directors of CTP, a Singapore company, are Mr Teo Chong Nghee Patrick (“Patrick”), Mr Lim Shih Hsi (“Richard”), Mr Michael Heng Swee Hai (“Michael”) and Robin.

In late 2009, CTP collaborated with a Chinese company, Hangzhou Vanwarm Holdings Group Ltd (“Vanwarm”), to develop the Hangzhou project. This project, which is managed by the Hangzhou Qianjiang Economic Development Area Management Committee (“HQEDA”), is intended to showcase clean and environmentally friendly technological innovations.

CTP’s founder directors invited Han to participate in the Hangzhou project because of his expertise in the property market in Singapore and China. Han was a former Chief Executive Officer of Fraser & Neave Ltd and a former Deputy Chairman of DBS Land. Han arranged for Christine, a former real estate sales executive from Frasers Centrepoint Limited, to be involved with the Hangzhou project.

The 1 March 2010 Meeting

Han wanted to have the terms of his participation in the Hangzhou project recorded in a shareholders’ agreement. In early March 2010, CTP’s founder directors, Han, Christine and Cleantech Ventures Asia Pte Ltd (“CTVA”), a company controlled by Patrick and Richard, signed a document (“the 1 March document”). Han asserted that the 1 March document was a shareholders’ agreement but Patrick, Richard and Michael insisted that it was not.

Apart from giving shares and offering directorships in CTP to Han and Christine, the 1 March document provided, inter alia, that Han would become the chairman and a director of a new subsidiary of CTP, subsequently named CTPHZ, which was to be set up to roll out the Hangzhou project. The 1 March document also stipulated that profits from the Hangzhou project would be shared between CTP and CTPHZ in the proportion of 33% and 67% respectively. Of the 67% intended for CTPHZ, 33% would be shared by its directors while the remaining 67% would be distributed to CTPHZ’s management, headed by Han, at his sole discretion. The 1 March document further provided that any “change to the above Resolutions shall require unanimous decision of the board of directors of CTP”.

Tripartite agreement between HQEDA, CTP and Vanwarm

On 23 March 2010, CTP entered into a tripartite agreement with HQEDA and Vanwarm (“the Tripartite Agreement”) to collaborate on the preparation of a master plan for and the development and promotion of the Hangzhou project.

Han declines to take part in fund-raising for CTP

Shortly after agreeing to helm CTPHZ, Han disagreed with Patrick, Richard and Michael over CTP’s fund raising efforts for its business. On 24 March 2010, the Business Times reported that CTP was “dipping its toes into potential deals, including a coal gasification project in Indonesia, a wind farm project in Vietnam and a solar panel installation business in China” (“the BT Report”). Han thought that the BT Report, which was published after Patrick, Richard and Michael had been interviewed, portrayed CTP as a substantial company when it merely had one project, namely the Hangzhou project. Concerned that such misstatements in the course of CTP’s fund raising efforts for its business might tarnish his reputation, Han informed CTP’s directors on 7 April 2010 that he would focus his attention on CTPHZ and not sit on CTP’s board “so as not to stand in the way of [CTP’s] fund raising efforts”. The directors of CTP accepted his stand.

Setting up of CTPHZ and appointment of Han as its chairman

On 1 April 2010, CTPHZ was incorporated. Han became its chairman. The other directors were Robin, Patrick, Richard and Christine. Although the 1 March document provided that Michael was to be on CTPHZ’s board, he was not appointed as a director of CTPHZ.

Collaboration agreement with Vanwarm

On 31 May 2010, Han signed a collaboration agreement with Vanwarm on CTPHZ’s behalf (“the Collaboration Agreement”). Under the Collaboration Agreement, a joint venture company named “Hangzhou Vanwarm Cleantech Co Ltd” (“HVC”) was to be set up and CTPHZ was guaranteed a profit of RMB130 million from the Hangzhou project by Vanwarm. Furthermore, Vanwarm undertook to arrange for Hong Kong Hong Jia Investments Co Ltd (“Hong Jia”) to lend CTPHZ USD6 million to pay for CTPHZ’s 40% share of HVC’s registered capital of USD15 million (“the Loan Agreement”).

To be enforceable in China, the Collaboration Agreement had to be registered with the appropriate governmental department there. However, this was not done as Vanwarm wanted the said agreement to be confidential. As such, whether CTPHZ would eventually receive the promised guaranteed profit of RMB130 million from the Hangzhou project depended entirely on Vanwarm’s generosity.

On 17 June 2010, HVC was incorporated in China. CTPHZ appointed Han and Robin to HVC’s board. HVC’s other directors were Vanwarm’s chairman, Mr Liu Hai (“Liu Hai”), Vanwarm’s general manager, Mr Chen Yang, and a Mr Zeng Jimin.

Deterioration of Han’s relationship with Patrick, Richard and Michael

In the meantime, Han’s relationship with Patrick, Richard and Michael rapidly deteriorated. While Patrick, Richard and Michael contended that Han was egotistical and overly protective of Christine, Han said that by August 2010, he had discovered that Patrick and Richard were planning to deprive him and Christine of their rights under the 1 March document and to remove him from his posts in CTPHZ. Without the knowledge of Patrick and Richard, the emails sent by them to each other and to Robin about sidelining or getting rid of Han were handed over by Robin to Han and Christine at the material time.

Han also discovered by August 2010 that Patrick and Richard were trying to sell their CTP shares to a Malaysian company, Bintan Kindenko Corporation Berhad. This was contrary to the understanding with HQEDA and Vanwarm that the Hangzhou project was to be a China-Singapore project. Between June and August 2010, emails were exchanged between Patrick, Richard and others which showed that Patrick and Richard were hoping by the sale of their CTP shares to, in their own words, “get rid of [Han] and [Christine]”. It was also made clear in the said emails that “[they were] going to be ruthless” when dealing with Han. The proposed sale of CTP’s shares did not materialise. According to Patrick, the sale did not materialise because Han and Christine were not interested in the deal and he was informed that “the regulators in the Kuala Lumpur Stock Exchange were unfriendly to Chinese projects”.

Han thought that his interests would be better protected if he was appointed to the CTP board, as had been envisaged in the 1 March document. He emailed CTP’s company secretary, Mr Ng Chee Tiong (“Ng”), to arrange for his appointment as the deputy chairman and a director of CTP but no action was taken on his request.

On 25 August 2010, Han instructed Ng to ask all CTPHZ directors to disclose their directorships. In an email dated 5 September 2010, Patrick informed the other CTPHZ directors that he would address the issues raised by Han with Ng in a “memo to CTP members” at a later date.

On 18 September 2010, Christine and Robin formed a new company, Green Solutions @ ARB Pte Ltd, which changed its name to IEC on 20 January 2011.

CTPHZ board meeting on 29 September 2010 and Patrick’s response

On 24 September 2010, Han arranged for a meeting of CTPHZ’s board to be held on 29 September 2010. After receiving the notice for the said meeting, Patrick emailed Richard and Robin on 27 September 2010 as follows:

I ask both of you for your support not to attend the meeting... if any of us do, it is the break up of CTP... pls believe me.

Every time we attend a Board meeting, we risk making a mistake and [Han] has already ... [planned] to catch us wrong footed.

Robin attended CTP’s board meeting on 29 September 2010 together with Han and Christine. At this meeting, the board replaced the company secretary, Ng, with Ms Sally Phuar (“Sally”) and changed the company’s registered address to the new company secretary’s address. The board also confirmed that CTPHZ had five directors, namely, Patrick, Richard, Han, Robin and Christine and that one seat on the board was left vacant. The plaintiffs claimed that Han tried to seize control of CTPHZ on 29 September 2010.

On 1 October 2010, Patrick instructed Ng to retain CTPHZ’s records until further notice because the majority of CTP’s board did not agree to the change of CTPHZ’s company secretary.

On 5 October 2010, Han sent an email to Patrick, part of which is read as follows:

I now regret very much being involved with the likes of you and Richard, but having committed to this project especially to our Chinese partners, I now have no choice but to see this project to the end. This is my commitment to Mr Liu Hai and Vanwarm and I will fulfil it. But I will do all I can to ensure that the two of...