Crest Capital Asia Pte Ltd and others v OUE Lippo Healthcare Ltd (formerly known as International Healthway Corp Ltd) and another and other appeals

• Jurisdiction: Singapore
• Judge: Judith Prakash JCA
• Judgment Date: 30 March 2021
• Neutral Citation: [2021] SGCA 25
• Year: 2021
• Docket Number: Civil Appeal Nos 113, 132 and 135 of 2020
• Published date: 06 April 2021
• Hearing Date: 29 January 2021
• Plaintiff Counsel: Lok Vi Ming SC, Lee Sien Liang Joseph, Chan Junhao, Justin and Lee Ying Hui (LVM Law Chambers LLC),Tan Chee Meng SC, Chng Zi Zhao Joel, Leo Zhen Wei Lionel, Wong Zheng Hui, Daryl and Li Yiling Eden (WongPartnership LLP),Goh Kok Leong, Daniel Tan An Ye and Dillion Chua Hong Bin (Ang & Partners)
• Defendant Counsel: Toby Landau QC (instructed), Tham Lijing and Rachel Low Tze-Lynn (Tham Lijing LLC),Lee Eng Beng SC, Cheng Wai Yuen, Mark, Chow Chao Wu Jansen, Sasha Anselm Gonsalves and Dawn Seow (Rajah & Tann Singapore LLP)
• Court: Court of Appeal (Singapore)
• Citation: [2021] SGCA 25
• Subject Matter: Accessory liability,Damages,Trusts,Principal,Conspiracy,Agency,Evidence of agency,Tort,Assessment

Steven Chong JCA (delivering the judgment of the court): Introduction

These appeals arose from a claim which was brought following this court’s decision in The Enterprise Fund III Ltd and others v OUE Lippo Healthcare Ltd (formerly known as International Healthway Corp Ltd) [2019] 2 SLR 524 (“The Enterprise Fund III”) wherein we held that a transaction, comprising a loan agreement for the setup of a credit facility (“the Standby Facility”), the open market acquisitions of the first respondent (“IHC”)’s shares, and a trust arrangement for those purchased shares, were void by virtue of s 76A(1A)(a)(i) of the Companies Act (Cap 50, 2006 Rev Ed) (“the Companies Act”). That said, we held that the open market acquisitions of the shares were saved by s 76A(1A) Companies Act as they involved dispositions of book-entry securities. The upshot of this was that the third appellant in CA 113/2020 (“EFIII”) became the legal and beneficial owner of the IHC shares it acquired through the open market acquisitions, and consequently IHC did not incur any contractual liability under the Standby Facility.

However, IHC claimed that it and its various subsidiaries and related companies suffered losses beyond the liability under the Standby Facility. An action, Suit No 441 of 2016 (‘the Suit”), was thereafter brought against various parties (including the present appellants) who were involved in the provision of the Standby Facility and related transactions. The claims pursued against them in the Suit were founded on different causes of action. Following the trial of the Suit, the various defendants including the appellants were found to be jointly and severally liable for the losses suffered by the respondents. The judge below (“the Judge”) recorded her findings in her judgment issued on 9 July 2020 (“Judgment”).

These appeals thus give rise to several interesting legal issues in the law of torts. While it is undoubtedly true that a corporate entity would deal with third parties through its representatives and/or agents, the mere fact that such representatives and agents are authorised by their principals to enter into contracts with third parties (thereby giving rise to contractual liability) does not inexorably lead to the conclusion that those principals would be similarly liable in tort for the acts or omissions of their representatives and/or agents. It remains necessary to undertake a separate factual inquiry as to whether such acts or omissions can be attributed to the principals. Equally, it is important to bear in mind that the inquiry should be separately conducted with respect to each principal as each principal’s knowledge of, and/or complicity in, the conduct of the representative and/or agent is not necessarily the same. When different principals are represented by the same set of lawyers there is a danger that the full extent of this critical distinction might not be adequately fleshed out.

Arising from the fact that different tortious claims were brought against different parties is another interesting question viz whether such different defendants could, inter alia, be jointly and severally liable and if so under what circumstances. These issues will be addressed below.

Background facts Dramatis personae

These appeals feature the same two respondents, who were the plaintiffs in the suit below. IHC is a publicly listed company on the Singapore Exchange’s Catalist board. IHC wholly owns the second respondent (“IHC Medical Re”). IHC and IHC Medical Re shall be referred to collectively as “the respondents”.

IHC Medical Re in turn owns IHC Healthcare REIT (“IHC Healthcare”), which itself owns two trusts, IHC Australia First Trust (Australia) (“IHC First Trust”) and IHC Australia Second Trust (Australia) (“IHC Second Trust”). IHC First Trust and IHC Second Trust shall be referred to collectively as the “Australian Trusts”. The Australian Trusts own three properties in Australia (“Australian Properties”): two properties in St Kilda (“St Kilda Properties”), held by IHC First Trust; and one property in Geelong (“Geelong Property”), held by IHC Second Trust.

The appellants in these appeals were defendants in the suit below. In CA 113/2020, the first to fifth appellants shall be referred to as “Crest Capital”, “Crest Catalyst”, “EFIII”, “VMF3” and “VMIII” respectively and collectively as the “Crest Entities”. Crest Capital is a fund administration company and the holding company of Crest Catalyst, a fund management company which manages affiliated private equity funds. EFIII, VMF3 and VMIII are three such funds administered and managed by Crest Capital and Crest Catalyst.

In CA 132/2020, the appellant (“Ms Lim”) was the Vice-President (Investment) of IHC between January 2015 and January 2016. She was IHC’s CEO and Executive Director between January 2016 and January 2017.

In CA 135/2020, the appellant (“Mr Fan”) is a co-founder of IHC and has a substantial shareholding in the same. He was the Group CEO of IHC between May 2015 and July 2015 and was re-designated as the CEO of IHC between July 2015 and January 2016.

There are two other relevant players who should be mentioned, even though they are not parties to these appeals. The first is the seventh defendant in the suit below (“Mr Aathar”), who did not file an appeal. He is the other co-founder of IHC and also a substantial shareholder of the same. However, he was never formally part of IHC’s management. The second is one Glendon Tan Yang Hwee (“Mr Tan”), who was the Investment Director of Crest Capital. Mr Tan was the main representative handling Crest Capital’s business deals with IHC from the time of the latter’s incorporation in 2013, including the deals which resulted in the facility agreements that are the subject of the dispute.

The subject matter of the dispute

These appeals centre around two credit facilities. The first is the Standby Facility, which was a short-term credit facility of up to $20m executed on 30 July 2015 for “general working capital”. The borrower under the Standby Facility was IHC. The lenders were EFIII, VMF3 and VMIII (these three entities shall be referred together as the “Standby Investors”, and for the avoidance of doubt the Standby Investors, together with Crest Capital and Crest Catalyst, make up the Crest Entities). The Standby Facility provided for fixed interest (termed “standby fees”) on the full sum of $20m at 3.5% per month for a minimum of five months (ie, $700,000 per month for five months). The Standby Facility’s maturity date was 30 December 2015.

By way of background, the Standby Facility was executed to supersede an initial facility agreement executed on 21 July 2015 but backdated to 16 April 2015 (“Original Facility”). The Original Facility’s maturity date was 15 June 2015. Under the Original Facility, the lenders were EFIII, VMIII and The Enterprise Fund II Ltd (“EFII”). Essentially, VMF3 replaced EFII as a lender under the Standby Facility. The Original Facility and Standby Facility shall be referred to collectively as the “Disputed Facilities”.

The second facility granted on 17 June 2015 (“Geelong Facility”) provided a loan of $11.5m. The borrower under the Geelong Facility was IHC Medical Re. The lenders were EFIII and VMF3.

The repayment of sums due under the Disputed Facilities and the Geelong Facility was secured by, amongst others, personal guarantees from Mr Fan and Mr Aathar, as well as charges granted by IHC over its shares in IHC Medical Re and two other subsidiaries (“Charged Shares”). The charges were granted by way of two Deeds of Share Charges dated 17 June 2015 (“June Charge Deed”) and July 2015.

The genesis of the Disputed Facilities

The discussions on the Disputed Facilities began at a meeting between Mr Fan, Mr Aathar and Mr Tan on 3 April 2015. On the morning of 4 April 2015, Mr Aathar sent Mr Tan an email, copied to Mr Fan, with the subject stated as “Standby Facility” (“Morning Email”). The Morning Email merits being set out in full:

Dear [Mr Tan],

We spoke yesterday and recap the following: a. We noticed an unusual sale pattern on Thursday 2/4/15, particularly from one single account. We then analysed the transactions with industry specialist… The pattern is that of a shortist and they now have between 71-75m shares. There is a high probability that this stealth plot would lead to an imminent shorting of IHC shares this coming Monday given that they commenced activity last week. The shortist have about 75m shares ($21.3m). This is probably being carried out by a small fund given the amount they held. b. We look to Crest to provide a standby line of $20m for use against this activity.

The terms could be the following: 1. Short term of 1-2 months. 2. Interest of 3.5% per month. 3. Shares can be bought and held by Crest directly.

c. As time is of essence, we look to putting facility into place as soon as possible with a very small amount available ($3-$5m) on Monday morning 9am for standby.

We are most grateful for your support.

[emphasis added]

On the afternoon of the same day, Mr Aathar sent another email to Mr Tan, copying Mr Fan, again with the subject stated as “Standby Facility” (“Afternoon Email”). Mr Aathar stated in the Afternoon Email that “[he could] give [Mr Tan] a firm undertaking from IHC that all security arrangements [would] be restored and reinstated by IHC … to the satisfaction of Crest”.

Mr Aathar, Mr Fan and Mr Tan had further correspondence on 9 April about the “Standby Facility”. The exchange now included three additional individuals: Ms Lim, Mr Chia Kwok Ping (“Mr Chia”), IHC’s CEO at the time, and Mr Lim Chu Pei (“Mr CP Lim”), an Investment Analyst with Crest Capital. The correspondence on 9 April included a term sheet dated 6 April 2015 (“Term Sheet”), which was circulated to all six individuals. The Term Sheet provided that the facility provided would be...