Drydocks World LLC (formerly known as Dubai Drydocks World LLC) v Tan Boy Tee

• Jurisdiction: Singapore
• Judge: Lai Siu Chiu J
• Judgment Date: 25 August 2010
• Neutral Citation: [2010] SGHC 248
• Court: High Court (Singapore)
• Hearing Date: 25 May 2010
• Docket Number: Originating Summons No 387 of 2010
• Plaintiff Counsel: Ang Cheng Hock SC, Ramesh Selvaraj and Jacqueline Lee (Allen & Gledhill LLP)
• Defendant Counsel: Davinder Singh SC, Jaikanth Shankar, Alecia Quah and Alexander Lee (Drew & Napier LLC)
• Subject Matter: Civil Procedure,Contract
• Published date: 30 August 2010

Lai Siu Chiu J : The background

In this Originating Summons (“OS”), Drydocks World LLC (“the plaintiff”) sued Tan Boy Tee (“the defendant”) for allegedly breaching the terms in particular cl 2.2.1(i)), of a Deed of Undertaking dated 29 October 2007, relating to the defendant’s sale to the plaintiff of his majority shareholdings in a listed company (since delisted) known as Labroy Marine Limited (“LML”).

The plaintiff had also applied by way of Summons No 2207 of 2010 (“the Application”) to convert the OS to a writ of summons and for the court to order timelines for the filing of pleadings.

Both the OS and the Application came up for hearing before this Court. After hearing the parties’ lengthy arguments and submissions, I dismissed with costs the Application as well as the OS. My dismissal of the OS was however without prejudice to the plaintiff’s right to commence a writ action against the defendant based on cl 2.2.1(i) of the Deed and without prejudice to the defendant’s right to raise objections to the new cause of action.

Both parties were dissatisfied with and have appealed against my orders. The plaintiff filed its notice of appeal in Civil Appeal No 103 of 2010 while the defendant’s appeal was filed in Civil Appeal No 107 of 2010.

The facts The parties and background

The plaintiff is a company incorporated in Dubai, United Arab Emirates on 23 May 2007. It is in the shipbuilding, rig building, ship repair and FPSO (Floating Production, Storage, Offtake) conversion business. It is the holding company of two entities, Drydocks World – Dubai LLC and Drydocks World – Southeast Asia Pte Limited. Before 17 December 2007, the plaintiff was known as Dubai Drydocks World LLC.

The defendant was the founder and Executive Chairman of LML. He was also the director of LML from around 14 April 1980 to around 28 December 2007, and directly and indirectly held 58.6% of its shares.

LML was a public limited liability company, which was incorporated in Singapore in 14 April 1980 and whose shares were publicly traded on the main board of the Singapore Exchange Securities Trading Limited (“SGX”). Its principal activities were the owning and chartering of tankers, tug boats and barges. The principal activities of the subsidiaries of LML included (i) the owning, chartering and operating of tugboats, barges, cargo vessels, tankers, bulk carriers etc, (ii) building, conversion, fabrication of rigs, FPSO, offshore structures and ocean-going vessels and (iii) the repair of ships, tankers and other ocean-going vessels etc.

The Deed of Undertaking

On or about 4 January 2008, the plaintiff acquired the defendant’s 58.60% shareholding in LML pursuant to a voluntary conditional cash offer it had made earlier (the “VCC offer”).

In consideration of the VCC offer, the defendant had, on 29 October 2007, issued a Deed of Undertaking (the “Deed”) to the plaintiff in which he gave various warranties. The plaintiff sued the defendant in a separate suit (Suit No 1083 of 2009) inter alia for breaches of clauses 2.2.1(iii) and 2.1.3 of the Deed, The OS was only concerned with the alleged breach of cl 2.2.1(i) of the Deed. For ease of reference, I set out cl 2.2.1 in its entirety: 2.2.1: I hereby undertake that I will not for a period of three years from the date the Offer becomes or is declared unconditional in all respects: (i) engage, be employed or be interested directly or indirectly in any business within the Restricted Territories which is similar to or competing with the business of any Group Company. (ii) carry on for my own account either alone or in partnership or be concerned as a director in any company engaged or about to be engaged in any business within the Restricted Territories which is similar to or competing with the business of any Group Company; (iii) assist with technical advice any person, firm or company engaged or about to be engaged in any business within the Restricted Territories which is similar to or competing with the business of any Group Company; or (iv) solicit in the Restricted Territories in competition with the business of the Company the custom of any person, firm or company, who, at any time during the period I held any shares in the Company, was a customer of any Group Company.

[emphasis added]

The “Restricted Territories” was defined in cl 2.2.2 of the Deed to include Singapore. “Group Company” was defined in cl 1.3.2(i) to refer to LML and/or any of its subsidiaries or associated companies.

The plaintiff subsequently acquired the rest of the shares in LML and LML was delisted from SGX. LML is currently known as Labroy Marine Pte Ltd and is wholly owned by Drydocks World -Southeast Asia Pte Limited, which was incorporated in Singapore on 25 March 2008. LML remains a marine construction and engineering group with core businesses in shipbuilding, repair offshore rig-construction and shipping.

The OML shares placement exercise

The public listed Otto Marine Limited (“OML”) is an offshore marine group engaged in shipbuilding and ship chartering, as well as ship repair and conversion services for a range of vessels including offshore support vessels, ocean-going tugs, car ferries, general cargo ships and others. On 4 February 2010, OML announced that it had issued and allotted 220m placement shares at $0.432 per share (the “Placement Shares”). The defendant’s alleged participation in the placement exercise was the subject of the plaintiff’s complaint in the OS.

According to the plaintiff, its attention was drawn on or around 8 February 2010 to a media release by OML dated 4 February 2010 (the “Media Release”) published on the websites of OML and SGX. The Media Release stated that OML had successfully raised $95m upon the placement of 220m new shares in the capital of OML at $0.432 per share, and that “[p]rominent businessmen Mr Tan Boy Tee and Mr Tan Kim Seng have participated in the placement”. The Media Release also quoted Mr Lee Kok Wah (“Lee”), the Group Managing Director of OML, as follows:

We are pleased that marine and offshore veterans like Mr B.T. Tan and Mr K.S. Tan have recognised the huge growth potential of Otto Marine and have decided to take significant stakes in the placement. The bulk of the newly raised proceeds will fund the growth of our Specialised Offshore Services business, which we are confident will soon rival our shipbuilding and ship chartering businesses.

The plaintiff made arrangements with M&C Services Pte Limited (“M&C”), the share registrar of OML, to inspect OML’s share register. On 4 March 2010, Ms Nadiawati Abdul Wahab, a secretary with Drydocks World – Southeast Asia Pte Limited, inspected the share register of OML as updated at 28 February 2010. She was not able to identify the defendant’s name or his identification number in the register. Believing therefore that it was likely that the defendant had participated in the placement through nominees, the plaintiff filed an application for pre-action discovery and interrogatories against OML on 18 March 2010 (in Originating Summons No 289 of 2010) and obtained an order thereto on 26 March 2010.

On 1 April 2010, Lee filed an affidavit to furnish Answers to the Interrogatories served on OML. Lee’s statements in his Answers were the cause of the dispute between the plaintiff and defendant in the Application. The plaintiff had relied heavily on para 10 of Lee’s affidavit where he said

I recall that sometime between 26 January 2010 and 4 February 2010 [closure of placement] Tan Da Peng, the Institutional Sales Manager of Kim Eng Securities Pte Ltd told me over the phone that Tan Boy Tee is taking up 11,000,000 (eleven million) Placement Shares.”

However, Tan Da Peng (“Tan”), in his first affidavit filed on 12 May 2010 on the defendant’s behalf disputed the above paragraph in Lee’s affidavit – Tan asserted that he never suggested to Lee or to anyone else that the defendant would be taking up any of the placement shares.

Based on Lee’s Answers to the Interrogatories, the plaintiff formed the view that the defendant had acquired the shares in OML through his son Thomas Tan Soon Seng (“Thomas”) as nominee; it commenced the OS on that premise. The defendant’s case was that the premise was not correct – Thomas acquired the shares in his own name, paying for it with monies from a joint account he held with his twin brother Terry, and had disposed of the shares on or about 14 February 2010, well before the plaintiff’s first letter of demand dated 4 March 2010.

The defendant and Thomas, in their respective affidavits filed on 12 May 2010, both denied the accuracy of the Media Release insofar as it suggested the defendant’s participation in the placement exercise. The defendant gave his version of Thomas’s participation in the placement exercise as set out below.

On or about 25 January 2010, Tan who is/was the Senior Vice President of Institutional Sales of Kim Eng Securities had informed Sebastian Heng (“Heng”), the financial advisor to Thomas that OML would be entering into a placement agreement with Kim Eng Securities as placement agent, to procure subscriptions for 220m new ordinary shares in OML. Tan asked Heng if any of the latter’s clients would be interested to participate. Heng informed Thomas on the same day of Tan’s offer and Thomas indicated that he wanted to acquire 11m shares in OML. Heng then conveyed Thomas’ interest in the placement exercise to Tan. Sometime around 26 January 2010, Tan contacted Lee. I have already highlighted that the parties’ dispute revolved around what Tan said during that telephone conversation with Lee.

Tan maintained that he did not at any point speak to Thomas or the defendant directly (which both Thomas and the defendant confirmed in their respective affidavits). The plaintiff did not challenge this. Neither did it challenge the defendant’s evidence that Thomas had signed the placement application...