Ding Pei Zhen v Yap Son On

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 23 September 2015
• Neutral Citation: [2015] SGHC 246
• Plaintiff Counsel: Hee Theng Fong, Ong Po Qin and Lin Chunlong (Harry Elias Partnership LLP)
• Docket Number: Suit No 558 of 2013
• Date: 23 September 2015
• Hearing Date: 14 April 2015,22 April 2015,16 April 2015,15 April 2015,23 April 2015,17 April 2015,24 April 2015,21 April 2015,08 June 2015
• Subject Matter: admissibility of evidence,rules of construction,Contract,assignment,remedies,contractual terms,Equity,damages,Choses in Action,estoppel
• Year: 2015
• Citation: [2015] SGHC 246
• Defendant Counsel: Devinder Kumar Rai (Acies Law Corporation)
• Court: High Court (Singapore)
• Published date: 31 December 2016

Judith Prakash J: Introduction

In June 2012, the plaintiff and the defendant made an agreement on how certain shareholdings in a listed company should be divided between them. The agreement, which was handwritten in Chinese on a page from the prospectus prepared for the listing of the company, is now the centre of the parties’ dispute. The plaintiff says that under the agreement she is entitled to more shares than she has so far received. The defendant denies this and says he has fully discharged his obligations. The main issue therefore is what the parties actually agreed on.

The plaintiff is Ding Pei Zhen, a Chinese businesswoman residing in Jinjiang in the Fujian Province of the People’s Republic of China. Although she has only a basic education, the plaintiff is an enterprising woman who has been successful in business: she owns and runs a shoe factory. She is also referred to as “Hei Mei” in the correspondence between her and the defendant.

Xie Yinlai (“Mr Xie”) is a business associate of the plaintiff who also resides in Jinjiang. While he is not a party to the agreement that is central to the dispute, he played an integral role in the whole transaction and is also key to the defendant’s counterclaim. He is also referred to by the plaintiff as “Chief Xie”.

The defendant is Yap Son On, a Malaysian businessman currently residing in Singapore. The defendant has experience in preparing companies for public listing and has parlayed this experience into a successful business. He acts as a listing consultant to China-based companies having the potential and desire to be listed on stock exchanges outside China. He also invests in such companies. Generally, the defendant acts through his company, One Capital Group Investment Limited (“One Capital”), of which he is the sole director and shareholder. He is also referred to by the plaintiff as “Chief Ye”.

Background facts The listing of Goldrooster AG

The defendant first became acquainted with the plaintiff and Mr Xie sometime in 2009. The trio subsequently agreed to work together in procuring the listing of Chinese companies on foreign bourses. The plaintiff’s role was to introduce likely companies to the defendant who would then offer his services as their listing consultant. The plaintiff and the defendant also agreed that they would invest in such companies and share the expenses of the listing in return for share capital in the listed company.

Sometime in early 2010, the plaintiff referred one Li Wenwen (“Mr Li”), who was then the owner of Jinjiang Goldrooster Sports Goods Co Ltd (“Goldrooster Jinjiang”), to the defendant. Goldrooster Jinjiang was in the business of designing, manufacturing and distributing sports fashion apparel, footwear and accessories in the People’s Republic of China. In July 2010, Mr Li engaged the defendant, through One Capital, to act as a consultant in the foreign listing of Goldrooster Jinjiang. The two men executed an agreement dated 29 July 2010 (“Listing Agreement”) which provides that for its services One Capital would be paid 5% of invested funds as commission and 12% of “[Goldrooster Jinjiang’s] shares of the after-listing total capital” as remuneration (“the Listing Fee”). It was also agreed between the defendant and Mr Li that the defendant would be responsible for all expenses incurred in the listing exercise (“the Listing Expenses”).

Goldrooster Jinjiang was re-structured for the purpose of the listing. A Hong Kong company (“Goldrooster HK”) was incorporated as the tax vehicle and it became the 100% shareholder of Goldrooster Jinjiang. The shares of Goldrooster HK itself were held by four companies which had been incorporated in the British Virgin Islands. These were: Zhuo Wei Investments Limited (“Zhuo Wei”); Season Market Limited (“Season”); Xanti Investments Limited (“Xanti”); and Fortune United Investment Limited (“Fortune”). Mr Li was the ultimate owner of Zhuo Wei whilst the defendant was the ultimate owner of the other three companies (collectively “the Yap Companies”) although two of them were held on his behalf by nominees. According to the plaintiff, originally it had been agreed that the shares in the listed company that were to be allotted to her would be put into a BVI company owned by her. Subsequently, she was advised by the defendant that if she, as a Chinese citizen, appeared to be the beneficial owner of these shares there would be problems in the listing. The defendant and his nominees did not face such problems and the plaintiff therefore agreed that all shares intended for her should be placed in the Yap Companies together with those intended for the defendant.

The listing of Goldrooster Jinjiang was intended to be effected on the Frankfurt Stock Exchange through a listing vehicle incorporated in Germany (“Goldrooster AG”). For this purpose, the shares held by the four companies in Goldrooster HK were transferred to Goldrooster AG. In exchange, these companies were issued shares in Goldrooster AG. Meanwhile, the plaintiff and the defendant separately agreed that the Listing Expenses would be shared between them on a 60-40 basis; in return, the plaintiff would be entitled to 60% of the shares acquired by the defendant in Goldrooster AG under the Listing Agreement (“the 60-40 Split”). They also agreed to invest jointly, on a 50-50 basis, in Goldrooster AG.

On completion of all preparatory work for the listing, Goldrooster AG had an issued share capital of €20m divided into 20 million par value ordinary bearer shares. The shares were divided between the four shareholders as follows:

(a)	Zhuo Wei:	14.5 million shares (72.5%);
(b)	Season:	3,005,000 shares (15.025%);
(c)	Xanti:	1,247,500 shares (6.2375%); and
(d)	Fortune:	1,247,500 shares (6.2375%).

Together, the Yap Companies held 5.5 million shares or 27.5% of the issued capital of Goldrooster AG at that stage.

Goldrooster AG was successfully listed on the Frankfurt Stock Exchange on 18 May 2012. Post-listing, the company’s total share capital increased to 20,720,206 shares due to the 720,206 shares that were purchased by investors pursuant to the initial public offering. An initial public offering of 5 million shares had been made and, if it had been fully subscribed, Goldrooster AG would have had an issued share capital of 25 million shares. This would have resulted in the Yap Companies owning 22% of the Goldrooster AG shares. I draw attention to this here because this figure of 22% plays an important part in the dispute between the parties. The other figure to remember is “19%” because what it stands for is another area of dispute.

The Allotment Agreement

On 15 June 2012, the plaintiff, Mr Xie and the defendant held a meeting in Jinjiang (“the June Meeting”) to determine how many Goldrooster AG shares each of the plaintiff and the defendant were entitled to, post-listing. It is a matter of contention as to what was discussed and agreed at the June Meeting. Nevertheless, the parties do not dispute that they arrived at an arrangement that was put into writing on page 157 of the listing prospectus of Goldrooster AG (“the Prospectus”). The printed content of this page is itself of great significance. The page reads:

SHAREHOLDER STRUCTURE

The following table provides an overview of the shareholding structure and the participation of the shareholders in the share capital of [Goldrooster AG] prior to the Offering and upon completion of the Offering assuming the placement of all of the Offer Shares.

Name	Shareholdings before the Offering (percentage and number of shares)	Shareholdings following completion of Offering (without exercise of Greenshoe Option)	Following completion of Offering (with full exercise of Greenshoe Option)
Zhuo Wei Investments Limited (Note)	72.50% 14,500,000	58.00% 14,500,000	58.00% 14,500,000
Season Market Limited	15.025% 3,005,000	12.02% 3,005,000	10.37% 2,592,500
Xanti Investments Limited	6.2375% 1,247,500	4.99% 1,247,500	4.315% 1,078,750
Fortune United Investment Limited	6.2375% 1,247,500	4.99% 1,247,500	4.315% 1,078,750
Free Float	0% 0	20.00% 5,000,000	23.00% 5,750,000
Total	100.00% 20,000,000	100.00% 25,000,000	100.00% 25,000,000

Note: Zhuo Wei Investments Limited is a company incorporated under the laws of the British Virgin Islands, with the sole shareholder being Ms Shu Hsia Li.

The Company is not aware of any member of the Company’s management board and supervisory board who, directly or indirectly, has an interest in the Company’s capital or voting rights which is notifiable under German law.

[italics in original]

It would be noted that the table set out three shareholding situations: the first was the distribution of shares pre-listing when the issued capital was €20m comprising 20 million shares; the second was the distribution of shares post-listing on the assumption that all the offer shares would be taken up and the share capital would be increased to 25 million; and the third was the distribution of shares post-listing on the basis that all the offer shares would be taken up and the Yap Companies would each have to give up 3% of their respective shareholdings (totalling 750,000 shares) to the public pursuant to the Greenshoe Option which would come into play if the offering had been oversubscribed. In this case, the issued share capital would still be at 25 million shares but the number of shares held by the Yap Companies would be reduced in total to 4,750,000 shares representing 19% of the capital.

The Greenshoe Option referred to in the above table was not exercised due to the lack of demand for the...