Columbia Asia Healthcare Sdn Bhd and another v Hong Hin Kit Edward and another and other suits

• Jurisdiction: Singapore
• Judge: Woo Bih Li J
• Judgment Date: 10 April 2014
• Neutral Citation: [2014] SGHC 65
• Court: High Court (Singapore)
• Docket Number: Suits No 861 and 862 of 2008 and 964 of 2009
• Year: 2014
• Published date: 16 October 2015
• Hearing Date: 15 August 2012,04 March 2013,15 February 2013,24 August 2012,30 August 2012,05 February 2013,20 February 2013,28 August 2012,18 February 2013,19 February 2013,06 February 2013,21 February 2013,13 February 2013,14 February 2013,22 February 2013,31 August 2012,21 August 2012,22 April 2013,08 February 2013,17 August 2012,23 August 2012,16 August 2012,25 February 2013,27 February 2013,05 March 2013,27 August 2012
• Plaintiff Counsel: Harish Kumar and Jonathan Toh (Rajah & Tann LLP) and Troy Yeo (Troy Yeo & Co),Michael Khoo SC and Ong Lee Woei (Michael Khoo & Partners)
• Defendant Counsel: Niru Pillai and Liew Teck Huat (Global Law Alliance LLC)
• Citation: [2014] SGHC 65

Woo Bih Li J:

There are three sets of proceedings stemming from the purchase of Gleni International Hospital (“the Hospital”) erected on No 2A Jalan Listik, Medan, Sumatera Utera, Indonesia (“the Land”). The purchaser was Columbia Asia Healthcare Sdn Bhd (“Columbia”). The vendors (“the Vendors”) were Mr Edward Hong Hin Kit (“Edward Hong”), Mr Albert Hong Hin Kay (“Albert Hong”) (collectively, “the Hongs”) and Mr Boelio Muliadi (“Boelio Muliadi”).

The purchase of the Hospital and the Land was structured in the form of a share purchase. The Hospital and the Land were owned by PT Nusautama Medicalindo (“PTNM”). PTNM was in turn wholly-owned by Universal Medicare Pte Ltd (“UMPL”). The Vendors held all the shares in UMPL. Columbia agreed to purchase 99% of the shares in UMPL (“the Sale Shares”) from the Vendors pursuant to a share sale agreement (“the SSA”) dated 24 December 2007. Columbia subsequently acquired the remaining 1% of UMPL’s shares pursuant to an option also dated 24 December 2007 (“the Call Option Agreement”).

At the time of completion of the SSA, a Singapore company, Medical Equipment Credit Pte Ltd (“MEC”), was registered as the chargee of a charge on the title certificate to the Land (“the MEC Charge”). MEC was owned by DVI Inc (“DVI”), an American corporation.

The proceedings

The three sets of proceedings are Suits No 861 and 862 of 2008 (“Suit 861” and “Suit 862” respectively) and Suit No 964 of 2009 (“Suit 964”). They were consolidated and heard together.

Suits 861 and 862

Suits 861 and 862 were brought by Thermal Industries & Supplies (Pte) Ltd (“Thermal Industries”) and Thermal International (S) Pte Ltd (“Thermal International”) (collectively, “the Thermal Companies”) respectively against PTNM on 19 November 2008. The Thermal Companies are Singapore companies involved in the provision of medical supplies and equipment to hospitals and medical facilities. The Thermal Companies are controlled by Edward Hong, who is a director and substantial shareholder in both companies. These are a breakdown of the claims made by the Thermal Companies in Suits 861 and 862:In Suit 861, Thermal Industries claimed from PTNM the sums of S$262,934.48 and S$10,000. The former was the balance of monies advanced by Thermal Industries as a loan to PTNM;¹ and the latter was for four second-hand servers sold by Thermal Industries to PTNM.²In Suit 862, Thermal International claimed from PTNM the sums of S$393,399.70, S$3,320 and US$9,763.00. The first was the balance for a Magnetic Resonance Imaging (“MRI”) machine sold by Thermal International to PTNM. The latter two were for various supplies provided by Thermal International to PTNM.

PTNM disputed these claims. Columbia applied successfully to be joined as a defendant in Suits 861 and 862. Should PTNM be found liable in Suits 861 and 862, PTNM and Columbia brought third-party proceedings against the Hongs for indemnities provided by them as vendors under the SSA.

In Suit 861, PTNM also counterclaimed against Thermal Industries for damages to be assessed for the supply of allegedly defective second-hand servers.

In Suit 862, both PTNM and Columbia counterclaimed against Thermal International the sum of S$144,046.03 as payment mistakenly made by PTNM to Thermal International for a Philips angiography machine.

Suit 964

Suit 964 was filed on 11 November 2009, more than a year after Suits 861 and 862 were commenced. The plaintiffs, Columbia and PTNM, claimed against the Hongs for alleged breaches of the SSA. The claims in Suit 964 sought, amongst others:An order for damages to be assessed for receiving an encumbered title to the Land because of the existence of the MEC Charge and/or costs, including legal costs, of taking the necessary measures to remove the MEC Charge on the Land so as to obtain a good and marketable title to the Land.A declaration that the Hongs are liable to indemnify Columbia/PTNM for any claim by DVI in relation to the transfer of shares held by DVI in PTNM (“the DVI Shares”) to Albert Hong, including all costs of defending any such claim.A declaration that the Hongs are liable to indemnify Columbia and/or PTNM in relation to actual and potential liabilities as a result of the Vendors’ breaches of various warranties given in the SSA (principally relating to the under-declaration and under-payment of tax).An order for damages to be assessed for over-payment for the Sale Shares and/or the diminution in value of PTNM and/or the Sale Shares as a result of the inflation of PTNM’s 2007 revenue figures.

The Hongs disputed the claims in Suit 964. They also counterclaimed against both Columbia and PTNM damages for abuse of process and conspiracy with the predominant purpose of injuring the Hongs, by seeking to extort a favourable outcome in Suit 964 and Suits 861 and 862. The damage allegedly suffered by the Hongs’ includes loss of business and personal reputation.

At the outset, I should say that the statement of claim in Suit 964 did not state why PTNM is a co-plaintiff with Columbia. PTNM was not a party to the SSA. The warranties given by the Vendors under the SSA were given to Columbia. Neither did the statement of claim assert any right of PTNM to rely on the Contracts (Rights of Third Parties) Act (Cap 53B, 2002 Rev Ed) (“the CRTPA”) to enforce the terms of the SSA, unlike the third-party claims made by PTNM (and Columbia) against the Hongs in Suits 861 and 862. In those two suits, PTNM claimed that various warranties given by the Vendors in the SSA purported to confer a benefit on it (PTNM), and that it was entitled to enforce those warranties against the Hongs by virtue of s 2 of the CRTPA. Coming back to Suit 964, PTNM’s only reliance on the CRTPA was in para 22(b) of its defence to counterclaim. I do not think such a plea is appropriate. It should be in the statement of claim. In any event, I am not persuaded on the merits that PTNM is entitled to rely on the CRTPA to enforce the warranties in the SSA. I will say more about this later.

Accordingly, I am of the view that PTNM has not been correctly included as a co-plaintiff in Suit 964. Neither is it entitled to rely on the CRTPA to make a claim against the Hongs in Suits 861 and 862 for breaches of warranties. Henceforth, I shall refer only to Columbia as the plaintiff in Suit 964 and Columbia as the defendant making a claim against the Hongs in Suits 861 and 862.

The Hongs argued that Columbia’s claims were not made in good faith. They relied on the fact that Columbia’s claim in Suit 964 was against only the Hongs, even though Boelio Muliadi was also a named vendor in the SSA, and had also given the same warranties as the Hongs. This argument is untenable. It is up to Columbia to decide who it wishes to sue. The fact that it decided not to sue Boelio Muliadi was neutral. Indeed, one might argue that it made sense not to sue Boelio Muliadi, as there is no evidence as to whether he is likely to have assets in Singapore, as opposed to the Hongs, who assert that they are “prominent Singaporeans with substantial reputations in Singapore and internationally”.³

This brings me to the next point, which can be dealt with quickly. I refer to the Hongs’ counterclaim in Suit 964 for damages for abuse of process and conspiracy. I agree with Columbia that this counterclaim is without legal basis. If Columbia’s claims in Suit 964 are invalid, they will be dismissed. The claims cannot, in and of themselves, give rise to the counterclaim brought by the Hongs. Otherwise, every claim will be met by such a counterclaim. The absence of evidence and closing submissions from the Hongs to support their counterclaim reinforces the point that the Hongs were never serious about their counterclaim. It should never have been made.

Issues before this court

The main disputes between the parties lay in the claims made in Suit 964. I will thus address the issues raised in that suit first.

There are four main issues in Suit 964:The first main issue is whether the Hongs were in breach of the terms of the SSA that the Land would be free from encumbrances (on the date of completion of the SSA), and that Columbia would have good and marketable title to the Land, because the MEC Charge constituted an encumbrance on the Land (“the Encumbrance Issue”). If so, the sub-issue is whether Columbia is estopped or otherwise precluded from alleging this breach. If not, the consequential issue is the relief which Columbia is entitled to.The second main issue is whether the Hongs are liable under the SSA to indemnify Columbia against claims made by DVI, in relation to the transfer of the DVI Shares to Albert Hong, including costs of defending any such claim (“the DVI Issue”). If so, the consequential issue is whether the court should grant a declaration to that effect.The third main issue is whether the Hongs have breached the SSA due to PTNM’s alleged improper book-keeping, and under-declaration and under-payment of tax (“the Tax Exposure Issue”). The sub-issue is whether a provision of the SSA should be expunged or rectified. If not, and if the Hongs are in breach of the SSA on the third main issue, the consequential issue is the relief which Columbia is entitled to.The fourth main issue is whether the Hongs have breached the SSA by inflating revenue figures because of under-declaration and under-payment of tax (“the Inflated Revenue Issue”). If so, the consequential issue is the relief which Columbia is entitled to. Columbia alleged that it had determined the actual purchase price for the Sale Shares by applying Earnings before Interest, Taxes, Depreciation and Amortisation (“EBITDA”) with an appropriate multiplier. Hence Columbia claimed a diminution of the actual purchase price based on a similar formula.

The following issues arise for determination in Suit 861 as between Thermal Industries and PTNM:Whether Thermal Industries is entitled to...