EC Investment Holding Pte Ltd v Ridout Residence Pte Ltd

• Jurisdiction: Singapore
• Court: Court of Appeal (Singapore)
• Judgment Date: 28 September 2011
• Docket Number: Civil Appeals Nos 177 and 184 of 2010
• Date: 28 September 2011

[2011] SGCA 50

Court of Appeal

Chao Hick Tin JA

,

Andrew Phang Boon Leong JA

and

VKRajah JA

Civil Appeals Nos 177 and 184 of 2010

ECInvestment Holding Pte Ltd

Plaintiff

and

Ridout Residence Pte Ltd and others and another appeal

Defendant

Lee Eng Beng SC, Disa Sim and Jonathan Lee (Rajah & Tann LLP) for the appellant in Civil Appeal No 177 of 2010 and the first respondent in Civil Appeal No 184 of 2010

Tan Cheng Han SC, PBalachandran and Kenneth See (Robert Wang & Woo LLC) for the first respondent in Civil Appeal No 177 of 2010 and the appellant in Civil Appeal No 184 of 2010

Phua Siow Choon (Michael BBOng & Co) for the second respondent in Civil Appeals Nos 177 and 184 of 2010

Kelvin Tan Teck San and Denise Ng (Drew & Napier LLC) for the third respondent in Civil Appeals Nos 177 and 184 of 2010

Alvin Yeo SC, Melvin Lum, Daniel Tan and Chan Xiao Wei (Wong Partnership LLP) for the fourth respondent in Civil Appeals Nos 177 and 184 of 2010.

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Domowicz et al v Orsa Investments Ltd (1993) 15 OR (3d) 661 (refd)

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Federal Computer Services Sdn Bhd v Ang Jee Hai Eric [1991] 2 SLR (R) 427; [1991] SLR 259 (folld)

George Inglefield, Ltd, Re [1933] Ch 1 (refd)

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Wroth v Tyler [1974] Ch 30 (refd)

Bankruptcy Act (Cap 20, 2009 Rev Ed) s 45

Moneylenders Act 2008 (Act 31 of 2008)

Rules of Court (Cap 322,R5, 2006 Rev Ed) O 57 r 3 (2) , O 57 r 15 (1) (a)

Supreme Court of Judicature Act (Cap 322, 2007 Rev Ed) s 41

Credit and Security—Money and moneylenders

Equity—Remedies—Specific performance—Damages in lieu of specific performance

Land—Sale of land—Contract

In 2006, 39 A Ridout Road, Singapore 248438 (‘the Property’) was purchased by Ridout Residence Pte Ltd (‘Ridout’), the first respondent in Civil Appeal No 177 of 2010 and the appellant in Civil Appeal No 184 of 2010 (‘the two appeals’), for $28 m. The Property was held on trust by Ridout for it sole shareholder and director, one Mr Agus Anwar (‘Anwar’). To effect the purchase, Anwar used $17 m out of a total loan of $30 m obtained from Hong Leong Finance Limited (‘HLF’), the second respondent in the two appeals, which was secured by way of a mortgage over the Property. In 2008, Anwar obtained a further loan of $10 m from Orion Oil Limited (‘Orion’), the third respondent in the two appeals, which was secured by a charge registered against Ridout in respect of the balance of the proceeds of sale of the Property.

The main issues raised in CA177/2010 were (a)whether the judge (‘the Judge’) below was right in regarding the transaction between ECI and Ridout as purely a loan coupled with security; and (b)if the transaction between ECI and Ridout was a sale of the Property, whether ECI should be denied specific performance and only be awarded damages. CA184/2010 was an appeal by Ridout against, essentially, the Judge's refusal to award damages for consequential losses suffered by Ridout following his dismissal of ECI's claim.

Originating Summons No 1357 of 2010 was filed by EC Investment Holding Pte Ltd (‘ECI’), the appellant in CA177/2010 and the first respondent in CA184/2010, praying for, inter alia, specific performance of the sale and purchase agreement between Ridout and itself as evinced by an option over the Property granted by Ridout in its favour dated 5 June 2009 which was exercised by ECI on 27 August 2009 (‘the First Option’). HLF was cited as the second defendant in the action below whereas Orion and one Thomas Chan (the fourth respondent in the two appeals) intervened in the proceedings. Thomas Chan expressly asked for specific performance of an option over the Property granted by Ridout in his favour on 7 October 2009 (‘the Second Option’).

Held, dismissing the appeals:

(1) The proper approach in determining the true nature of a transaction was to look at the substance, as opposed to the form, thereof. From the facts of this case, it was clear that the First Option dated 5 June 2009 contained a ‘normal’ option in favour of ECI, albeit with some unusual features. The Deed of Settlement post-dated 8 June 2009 accorded to Ridout the right, within a 60-day period, to cancel the First Option by paying ECI $1.68 m. There could be no doubt as to what the First Option and the Deed of Settlement (collectively ‘the Two Instruments’) mean on their face: at [30], [31] and [61].

(2) There were clearly different objectives on the part of Ridout and ECI in entering into the transaction, viz, Anwar wanting to borrow money and ECI wanting to buy the Property at the best possible price. The arrangement eventually worked out by the parties' solicitors as reflected in the Two Instruments satisfied, to an extent albeit not completely, the needs of both parties. Anwar was unquestionably a seasoned businessman and entrepreneur. Similarly, KC Tan and Poh who were directors of ECI were also men of business. Neither could claim to be at a disadvantage when they entered into the transaction: at [63] and [64].

(3) In a case of this nature, as between the oral evidence of the parties and the objective contemporaneous documentary evidence, greater emphasis should be placed on the latter. At the material time, both parties were legally represented and the Two Instruments were considered and approved by the respective solicitors as representing what their clients were prepared to accept, as opposed to what they would have preferred. It would be fair to assume that the legal effect of the Two Instruments would have been explained to the parties by their respective solicitors: at [65].

(4) The arrangement set out in the Two Instruments gave Anwar some hope of keeping the Property, but it did not lie in his mouth to now claim that he did not fully appreciate the consequential effects of his failure to raise the $1.68 m which Ridout had to pay to have the First Option cancelled. As it turned out, Anwar's confidence was ill-founded. However, that was hardly a proper basis or ground to hold that the Two Instruments did not mean what they say. There was nothing in the Two Instruments which was unclear or ambiguous. While ECI did drive a hard bargain in the hope of achieving a gain regardless of whether or not Ridout cancelled the First Option, the Two Instruments were nevertheless an agreement freely entered into by Anwar on behalf of Ridout: at [65] and [71].

(5) The weight of the evidence inextricably pointed towards the finding that the true nature of the transaction between Ridout and ECI (as embodied in the Two Instruments) was that of a genuine agreement for the sale of the Property by Ridout to ECI. As Ridout did not fulfil the condition to have the First Option cancelled within the 60-day period, ECI validly exercised that option on 27 August 2009 and there came into being a valid contract under which Ridout was required to sell the Property to ECI at the price of $20 m (‘the Sale Agreement’). It was not for the court to review, ex post facto, the reasonableness of a transaction freely concluded between (what were essentially) two commercial entities. The court should not substitute its views on commercial wisdom for those of the contracting parties: at [74] and [96].

(6) The issue then turned on whether ECI should be granted specific performance of the Sale Agreement. The remedy of specific performance was founded in equity and was discretionary in nature. It was settled principle that an appellate court would only interfere with a first instance judge's exercise of discretion on limited grounds: at [75] and [76].

(7) As regards the question of whether ECI should be granted specific performance of the Sale Agreement, this court was of the view that the transaction was not ‘unclean’ just because of the extremely low purchase price of the Property. Neither had ECI suppressed material information nor approached the court with ‘unclean hands’ when it was late in making discovery. However, this court was of the view that damages would be...