Dynasty Line Limited (in liquidation) v Sukamto Sia and another and another appeal
Jurisdiction | Singapore |
Court | Court of Appeal (Singapore) |
Judge | Sundaresh Menon CJ |
Judgment Date | 29 April 2014 |
Neutral Citation | [2014] SGCA 21 |
Citation | [2014] SGCA 21 |
Defendant Counsel | Chan Leng Sun SC, Ang Hsueh Ling Celeste, Jennifer Fong Lee Cheng and Michelle Virgiany (Wong & Leow LLC),Alvin Yeo SC, Tan Whei Mien Joy, Ong Xi-Lin Adeline and Yin Juon Qiang (WongPartnership LLP),Siraj Omar and Lee Wei Alexander (Premier Law LLC) |
Published date | 02 May 2014 |
Plaintiff Counsel | Philip Jeyaretnam SC, Koh Kia Jeng, Patrick Wong and Crystal Goh (Rodyk & Davidson LLP, instructed), Siraj Omar and Lee Wei Alexander (Premier Law LLC),Samuel Chacko, Soh Ean Leng Angeline and Yeo Teng Yung Christopher (Legis Point LLC) |
Hearing Date | 14 January 2014 |
Docket Number | Civil Appeal No 103 of 2013 and Civil Appeal No 105 of 2013 |
Date | 29 April 2014 |
Subject Matter | Tort,Duties,Companies,Equity and limitation of actions,Directors,Laches,Conspiracy,Defences,Equity,Limitation of Actions,Acquiescence |
Dynasty Line Limited (“Dynasty”) was the personal investment vehicle of Sukamto Sia (“Sia”). It purchased a significant quantity of shares in a Hong Kong-listed company from several vendors, including Low Tuck Kwong (“Low”). The shares, which were Dynasty’s only asset, were transferred to Dynasty in full even though there was a substantial sum yet to be paid by Dynasty for the shares. Dynasty then pledged all the shares to various banks as security for loans to Sia and his associates, who subsequently defaulted on the loans. As a result, the shares were sold by the banks to satisfy the debts owed to them.
Some years later, Low successfully applied for Dynasty to be wound up in the British Virgin Islands (“BVI”). The liquidators of Dynasty then commenced proceedings against Sia and his co-director, Lee Howe Yong (“Lee”), for breaches of fiduciary duties under BVI law as directors of Dynasty in Suit No 256 of 2010. This claim was dismissed by the High Court judge (“the Judge”) who heard this matter and that is the subject matter of these appeals.
The main issue presented in these appeals is whether Sia and Lee had breached their fiduciary duties in causing Dynasty to pledge the shares and had thereby failed to act in the best interests of Dynasty’s creditors at a time when Dynasty’s solvency was or appeared to be in doubt.
Facts Background to the disputeDynasty was a company incorporated under the laws of the British Virgin Islands (“BVI”). Sia was its sole shareholder. Although Lee did not hold any shares in Dynasty, Sia had promised him 20% of the profits of Dynasty.
Under seven separate sale and purchase agreements dated 5 February 1996, Dynasty acquired 29,537,367 shares (“the Shares”) in China Development Corporation Limited (“CDC”) from Low and the following vendors:
The Vendors transferred their Shares to Dynasty before the intended completion date on 2 May 1996. However, only HK$64,459,317.16 or approximately 28% of the Purchase Price was ultimately paid.
The subsequent pledgesBetween April 1996 and November 1997, Dynasty pledged the Shares to various financial institutions as security for loan facilities (“the Security Transactions”) granted to Sia, Sia’s business associate Franklin Syah, and a company owned by Sia and Lee known as Beswil Investment Pte Ltd (“Beswil” and collectively, “the Borrowers”). Details of the Security Transactions are provided in the table below:
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The Borrowers defaulted on the loans. The financial institutions listed in the table above then sold the Shares and applied the proceeds to satisfy the debts they were owed.
The winding up of Dynasty and other proceedingsOn 10 June 1999, the Vendors commenced proceedings in Hong Kong against Dynasty in HCA 9505 of 1999 (“HCA 9505”) for the unpaid balance of the Purchase Price. On 6 April 2001, the Vendors obtained judgment in the sum of HK$166,042,936.79.
More than six years passed before Lau Wu Kwai King Lauren (“Lauren”) and Kennic Lai Hang Hui were appointed as joint provisional liquidators of Dynasty (“the Provisional Liquidators”) on 23 August 2007. Soon after, on 27 September 2007, the Provisional Liquidators commenced proceedings in Hong Kong on behalf of Dynasty against Sia and Lee in HCA 2057 of 2007 (“HCA 2057”) for, among other things, breaches of fiduciary duties in relation to their dealing with the Shares. The Hong Kong Court of Appeal allowed Sia’s application to stay Dynasty’s action on the ground that Hong Kong was not the appropriate forum.
Low then commenced liquidation proceedings against Dynasty in the BVI and on 22 December 2009, Dynasty was wound up by the BVI High Court. On the same day, William Tacon (“Tacon”) and Lauren were appointed as joint liquidators of Dynasty (“the Liquidators”). The Liquidators then brought the present suit in Suit No 256 of 2010 against Sia and Lee for breaches of fiduciary duties under BVI law as directors of Dynasty (“the Original Claim”) while Sia responded by filing a counterclaim against Low for a breach of a settlement agreement and against Dynasty, Low, Tacon and Lauren for conspiracy to injure him (“the Counterclaim”), also under BVI law.
The decision below The Judge dismissed the Original Claim and the Counterclaim. She held that:
Dissatisfied, Sia filed Civil Appeal No 103 of 2013 against the Judge’s dismissal of the Counterclaim while Dynasty brought a cross appeal, namely Civil Appeal No 105 of 2013, against the Judge’s dismissal of the Original Claim.
Issues From both appeals, three issues arise for our decision:
We have noted that the Judge below found that Low and Sia had entered into a collateral agreement for flexibility in the payment of the Purchase Price. Before we analyse the alleged collateral agreement, we observe that much the same allegation had in fact been raised previously in Hong Kong as a defence in HCA 9505. In those proceedings, it had been alleged that there was an oral agreement between Low and Sia that the balance of the purchase price would be paid to Low (instead of the other vendors) and that payment could be made by either Dynasty or Sia.9 However, this defence was abandoned after Low had given his evidence on the stand10 and the paragraphs referring to the collateral agreement in the amended defence were then deleted in the re-amended defence.11 Having abandoned the argument that there had been a collateral agreement in earlier proceedings, we think that Sia’s attempt to re-litigate it in the present proceedings stood to be regarded as an abuse of process. However, this argument was not fully pressed by the respondents and so not fully canvassed in the present appeal. We therefore say no more about it.
In the present proceedings, Sia’s pleaded collateral agreement was materially similar to that pleaded in HCA 9505 although it contained an additional term, namely, that part of the purchase price to be received by Low would be applied towards setting off outstanding amounts that Low owed Sia at the time. It was also pleaded in Sia’s defence that “the intention of the collateral contract was to allow some flexibility in the repayment terms”. We note here that the terms of the pleaded collateral agreement were set out in the pleadings and they made no reference to the timing of the payments.
Notwithstanding the lack of any reference in the terms of the alleged collateral agreement to the timing of the payments that fell due under the sale and purchase agreements, the Judge found that there was a collateral agreement which “provided for flexibility in the payment of the Purchase Price”12. According to the Judge, this allowed Sia to pay Low for the Shares on an
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