E C Investment Holding Pte Ltd v Ridout Residence Pte Ltd and another (Orion Oil Limited and another, Interveners)

Quentin Loh J: Background

39A Ridout Road, Singapore, (the “Property”), is a rectangular plot of land comprising some 40,600 square feet, or 3779 square metres, in a good class bungalow area. A two-storey house together with a swimming pool and tennis court sits on this elevated plot with good frontage of about 170 feet, (52 metres), along Ridout Road and a generous depth of 240 feet, (73 metres).

The 1st Defendant, a company incorporated in Singapore, is the registered proprietor of the Property. Mr Agus Anwar, (“AA”), is its only director and shareholder. The 2nd Defendant, Hong Leong Finance Ltd, (“HLF”), is a mortgagee having provided credit facilities of $30 million to AA to finance the purchase of the Property and for AA’s share trades. HLF registered its mortgage over the Property on 18 September 2006. Mr Phua Siow Choon, for HLF, informed me that as of 16 July 2010, the sum outstanding to the 2nd Defendant was $20,346,252.42 and interest was accumulating at about $5,408 a day.

Two parties are claiming specific performance of the sale of the Property to them: the Plaintiff, EC Investment Holding Pte Ltd, claims specific performance of the sale of the Property to it under an Option dated 5 June 2009, (the “1st Option”), for a purchase price of $20 million; and the 2nd Intervener, Mr Thomas Chan Ho Lam, (“TC”), also asks for specific performance of the sale of the Property to him under an Option dated 7 October 2009, (the “2nd Option”), but at a purchase price of $37 million.

The 1st Intervener, Orion Oil Ltd, a BVI company, (“Orion”), claims an interest in the proceedings by virtue of its charge registered against the 1st Defendant pursuant to a Deed of Charge dated 24 September 2008 over the proceeds of sale of the Property. Orion says it made a loan of $10 million to AA pursuant to a loan agreement dated 22 September 2008 and it is secured by the Deed of Charge given by the 1st Defendant.

Mr Agus Anwar’s Financial Woes

From his affidavit dated 23 December 2009, (set out in 2.AB pp 400-461), in separate proceedings, (OSB No 58/2009/V), AA appears to have been a man of some means. He was originally an Indonesian citizen and businessman, holding a Masters in Mechanical Engineering from Fachhochschule Dusseldorf, Germany. At one time he was a significant shareholder in two Indonesian banks, PT Bank Kredit Asia and PT Bank Pelita, but in the 1997 financial meltdown, there was a run on “his” banks and they were taken over by an Indonesian Government agency known as IBRA in 1998. AA came to Singapore in 2000 to start on a clean slate. In 2004 he became a Singapore citizen. Having worked in the financial sector for most of his working life, AA became an investor in several companies. This included acquiring a 28% stake in the Singapore Petroleum Company in 2003 through his own company, Kapital Asia Co. Ltd, (“Kapital Asia”), and a substantial stake in Keppel Telecommunications and Transportation Ltd as well as coal mines in Indonesia.

AA purchased the Property in September 2006 for $28 million. He put up $11 million and the stamp duty of over $744,000 from his own funds and took the balance $17 million from a facility of $30 million extended to him by HLF earlier in June 2006. As noted above, HLF registered its mortgage over the Property in September 2006.

On 16 May 2008, HLF recalled the loan and terminated their facility. Payment was not forthcoming and HLF eventually commenced OS No. 1458 of 2008/A, obtaining an Order of Court on 2 February 2009 for the 1st Defendant to deliver vacant possession of the Property and for AA to pay the $20,742,627.50 that was due as of 12 November 2008 under the mortgage. AA was coming under increasing financial pressure. His investments were then badly hit by the global financial crisis sparked off by the collapse of Lehman Brothers in September 2008. AA made partial payment of $505,847 in March 2009 and $1.35 million over April and May 2009. In May 2009, HLF was pressing AA to reduce his outstanding loan of $19.638 million to $18 million.

It was within this context that AA came to give the 1st Option to the Plaintiff. This will be dealt with in greater detail below.

HLF filed a Writ of Possession on 22 September 2009 and vacant possession of the Property was delivered to HLF on 22 October 2009. There were a number of abortive attempts to auction off the Property but I was told by counsel during the interlocutory stages that the auction, after the grant of the 1st Option, was put off because there were certain assurances from the Plaintiff to HLF that the Plaintiff will make good any shortfall from the 1st Defendant for the outstanding loan. I was told by counsel during the hearing that this assurance is no longer there, presumably because this matter went into full blown litigation with rival claims being made. In any case, HLF have their security and no purchaser can get unencumbered title unless HLF’s mortgage is discharged.

Mr Anwar’s Section 45 Bankruptcy Act Individual Voluntary Arrangement

It is necessary to deal with an intervening development. At an interlocutory hearing on 18 May 2010, I was told by counsel for the 1st Defendant, Prof Tan Cheng Han SC, that a Court Order had just been made under section 45 of the Bankruptcy Act (Cap 20, 2009 Rev Ed) (the “Bankruptcy Act”), ordering all matters against AA to be stayed for 42 days. Prof. Tan SC had been shown a copy of a trust deed stating that the 1st Defendant was holding the Property on trust for AA. Mr Alvin Yeo SC, counsel for TC and who was applying for an interim injunction, took the position that the facts surrounding the trust deed should certainly be investigated and he for one wanted to inspect the same. I ordered, inter alia, that the 1st Defendant’s team secure copies of this trust deed and circulate copies to all counsel to take instructions.

AA filed OSB No. 58 of 2009/V on 23 December 2009 and obtained an order under section 45(3) of the Bankruptcy Act (the “section 45(3) IVA Order”) from Choo J on 17 May 2010. AA had to submit his proposal by the end of June 2010.

On the first day of the hearing of this OS, 5 July 2010, Mr David Chan from Messrs Shook Lin & Bok LLP appeared stating that he was acting for AA’s nominees under AA’s Individual Voluntary Arrangement, (“IVA”) and asked for the proceedings to be stayed pending the decision of the Creditors’ Meeting scheduled for 23 July 2010. Mr Chan said the IVA proposal had been submitted to the nominees on 25 June 2010. The notices had “been done”, (which I take to mean had been drafted and finalised), and they would be sent to all creditors shortly.

Mr Chan submitted that I should not be making any orders for specific performance because the Property was part of AA’s assets. The Property was listed as belonging to him personally in his affidavit setting out his assets. Any disposal of the Property by me in these proceedings was therefore caught by the section 45(3) IVA Order and would be disposing off an asset of AA’s insolvent estate. Mr Chan said the Property was worth much more than $37 million today but accepted that he had no valuation to back that statement from the bar. Mr Chan’s oral application was opposed by all counsel present on various grounds.

Mr Lee Eng Beng SC, counsel for the Plaintiff, (who had just taken over the matter from their previous lawyers), took objection not only to the lateness of the application and lack of notice but also to the legal basis of Mr Chan’s application that the Property should fall into AA’s insolvent estate. Mr Lee SC said the application must falter on the well-known principle that if a party entered into a contract to purchase property, the beneficial ownership shifts to the buyer and if there is a supervening bankruptcy, the bankruptcy takes subject to the buyer’s interest. Mr Yeo SC agreed and submitted on a more basic point, and I agreed with him – that there was no proper application supported by an affidavit before me. Mr Yeo SC reminded me that when I first learned of the section 45(3) IVA Order at the PTC on 18 May 2010, I asked Prof Tan SC and his instructing solicitor, Mr P Balachandran, to invite Messrs Shook Lin & Bok LLP to attend the next PTC and update all concerned on those proceedings. They did not. Nor did they write to any of the parties.

I therefore informed Mr Chan that we were proceeding with the taking of the evidence for the rest of that week and oral submissions were going to be made the following week on 15 and 16 July 2010. That would give him the time, if his clients wished, to intervene and take out a proper application supported by an affidavit. In the event, no such application took place. It will also be noticed that AA was giving evidence in these proceedings and had filed four affidavits, (6 January, 9 April, 25 June and 1 July 2010).

The Plaintiff’s Case

The Plaintiff contends that its case is very simple and straightforward. The terms of the deal between the Plaintiff and the 1st Defendant are very clearly and unambiguously set out in the 1st Option and the Deed of Settlement dated 8 June 2009 (the “Deed of Settlement”). In exchange for a $1.5 million option fee, the Plaintiff was granted an option by the 1st Defendant to purchase the Property for $20 million. That option could be cancelled by the 1st Defendant within 60 days of the execution of the Deed of Settlement by payment of a cancellation fee of $180,000 and refund of the option fee of $1.5 million. If the 1stOption was not cancelled, the Plaintiff would be entitled to exercise the 1st Option to purchase the Property at $20 million.

The 1st Defendant failed to cancel the 1st Option by failing to make repayment of the $1.5 million option fee and “compensation” of $180,000 within the 60 days and the Plaintiff therefore claimed specific performance.

All the technical issues raised by the 1st Defendant, the 1st and 2nd Interveners were raised to...

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