Ebony Ritz Sdn Bhd v Sumatec Resources Bhd
Jurisdiction | Singapore |
Judge | George Wei J |
Judgment Date | 09 November 2017 |
Neutral Citation | [2017] SGHC 282 |
Court | High Court (Singapore) |
Hearing Date | 20 April 2017 |
Docket Number | Suit No 534 of 2016 (Registrar’s Appeals Nos 48—52 and 85 of 2017) |
Plaintiff Counsel | Wendy Lin Weiqi and Goh Wei Wei (WongPartnership LLP) |
Defendant Counsel | Thenuga d/o Vijakumar (Morgan Lewis Stamford LLC) |
Subject Matter | Civil Procedure,Summary judgment,Pleadings,Amendment,Striking Out |
Published date | 21 March 2019 |
The plaintiff commenced the suit underlying these appeals, Suit No 534 of 2016, for sums due and owing under two separate contracts (the Option and Financial Representation Agreement (“OFRA”) and the “Guarantee”). The defendant’s defence is essentially that the plaintiff has compromised its claims and/or that it is estopped from bringing these claims because of its own conduct and the conduct of one of its shareholder companies.
Following an application by the plaintiff for summary judgment and to strike out the defence, the defendant sought to introduce substantial amendments to its defence. The learned AR Teo Guan Kee (“the AR”) allowed most of these amendments. He then granted the defendant conditional leave to defend the claim under the OFRA, and unconditional leave to defend the claim under the Guarantee.
The parties brought the present set of appeals and cross-appeals against the AR’s decision. In total, there are six Registrar’s Appeals before me. The appeals involve several agreements and a complicated web of closely related issues concerning summary judgment, striking out of the defence, amendments, failure to provide security required in respect of conditional leave to defend, extraction of judgment and stay of execution. It will thus be helpful to set out the background in some detail.
Facts Dramatis personaeThe defendant is Sumatec Resources Berhad (“Sumatec”), a Malaysia-incorporated company engaged in the business of upstream oil operations. The defendant is listed on the main board of the Malaysian Exchange.
The plaintiff is Ebony Ritz Sdn Bhd (“Ebony Ritz”), a Malaysia-incorporated company set up as a joint venture vehicle between Hoe Leong Corporation Ltd (“Hoe Leong”) as 80% shareholder and Auspicious Journey Sdn Bhd (“Auspicious Journey”) as 20% shareholder.1 Hoe Leong is listed on the main board of the Singapore Exchange. Auspicious Journey is a subsidiary of another Malaysian company, Grand Columbia Holdings Sdn Bhd. Auspicious Journey is neither a subsidiary nor an affiliate of Hoe Leong.2
Ebony Ritz was established to acquire a 49% interest in a tanker chartering business which was owned by Sumatec. The tanker chartering business was held through its wholly-owned subsidiary, Semua International Sdn Bhd (“SISB”) and four other subsidiaries which owned and managed Sumatec’s fleet of oil and chemical tankers. SISB and the four subsidiaries will hereinafter be referred to collectively as “the Semua Group”.3
Mr Kuah Geok Lin (“James Kuah”) and his brother, Mr Kuah Geok Khim (“Paul Kuah”), are both directors of both Hoe Leong and Ebony Ritz. James Kuah is also the chief executive officer (“CEO”) of Hoe Leong and the Managing Director of Ebony Ritz.
Ebony Ritz’s acquisition of SISB under the 2010 SPAEbony Ritz’s acquisition of Sumatec’s tanker chartering business was effected through a Sale and Purchase Agreement entered into by Ebony Ritz and Sumatec on 5 May 2010 (“the 2010 SPA”). Pursuant to the 2010 SPA, Ebony Ritz purchased from Sumatec 49% of the issued and paid-up share capital of SISB (including the four subsidiaries, which would be transferred by Sumatec to SISB) for RM 44,100,000.4
By way of cl 5.1 of the 2010 SPA, Sumatec guaranteed to Ebony Ritz that the audited consolidated profit after taxation (“PAT”) of the Semua Group as stated in the consolidated audited accounts would be no less than:
This guarantee in cl 5.1 of the 2010 SPA shall be referred to as the Financial Representation. The consequences of any “shortfall” in the PAT for FY2010 and FY2011 were provided for in the other portions of cl 5. Specifically, cl 5.2 provided that if the audited consolidated PAT was less than the guaranteed amount, adjustments to reflect any shortfall “shall be made in accordance with the [OFRA]”. Clause 5.3 went on to provide that a breach or non-fulfilment of the Financial Representation would not constitute a breach of the 2010 SPA. Instead, any non-fulfilment was to be satisfied in accordance with the OFRA.
The OFRA The OFRA was a separate agreement, also dated 5 May 2010, between Ebony Ritz, Sumatec and Auspicious Journey.6 Essentially, the OFRA set out a contractual mechanism by which the shortfall in the PAT would be made good to Ebony Ritz. The material provisions of the OFRA are summarised as follows:
Clause 10 of the OFRA sets out warranties and undertakings from Sumatec in respect of the Priority Call Option Shares. These included warranties that:7
The OFRA, while clearly related to SPA 2010, is a separate agreement between Ebony Ritz, Auspicious Journey and Sumatec. As is made clear by paragraph (F) of the recitals,8 the purpose of the OFRA was to set out the terms and conditions on which adjustments would be made in the event of any non-fulfilment of the Financial Representation found within the 2010 SPA. It is not surprising that Clause 10 included the warranty that Sumatec was entitled to sell, transfer or procure the sale and transfer of the Priority Call Option shares free from all encumbrances. After all, the obligation was on Sumatec to pay or make good the shortfall under 2010 SPA.
It should also be noted that cl 19 of the OFRA provided as follows:9
19. Remedies and waivers No failure on the part of either Party to exercise, and no delay on its part in exercising, any right or remedy under this Agreement will operate as a waiver thereof,
nor will any single or partial exercise of any right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy. The rights provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.[emphasis added]
I shall return to the terms of the OFRA below. It should be noted that Hoe Leong, the majority shareholder of Ebony Ritz, is not a party to the OFRA or to the 2010 SPA.
The audited PAT of the Semua Group for FY2011 was RM 14,189,321. This fell short of the guaranteed amount of RM 31m under the Financial Representation.10 It is not in dispute that under cl 3.1 of the OFRA, Sumatec became liable to make good to Ebony Ritz a sum of RM 27,017,162.68. (“the Financial Shortfall for FY2011”).11
On or around 4 September 2012, Ebony Ritz exercised the Priority Call Option and served on Sumatec a notice to have the Financial Shortfall for FY2011 satisfied by transferring and selling to Ebony Ritz such number of shares held by Sumatec in SISB with an aggregate value equivalent to the Financial Shortfall within five business days. However, Sumatec did not transfer shares in SISB to Ebony Ritz in accordance with the Priority Call Option.12 Sumatec also did not pay or make good to Ebony Ritz the Financial Shortfall for FY2011 in any other manner. It follows that Sumatec was now in breach of its obligations under OFRA.
The 2012 SPAFollowing Sumatec’s failure to satisfy the Financial Shortfall for FY2011, Ebony Ritz, Sumatec, Hoe Leong and a Malaysia-incorporated company called Setinggi Holdings Limited (“Setinggi”) entered into another Sale and Purchase Agreement dated 21 December 2012 (“the 2012 SPA”).13 Evidently, the parties to the 2012 SPA are not the same as the parties to the 2010 SPA and the OFRA.
The recitals to the 2012 SPA provided,
Under the 2012 SPA, Ebony Ritz and Sumatec agreed that Sumatec would sell its remaining 51% interest in SISB to Hoe Leong and Setinggi (“the Sale Shares”).15 Under cl 3.1, the sale was divided into two tranches:16
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