Feen, Bjornar and others v Viking Engineering Pte Ltd and another appeal and another matter

• Jurisdiction: Singapore
• Judge: Andrew Phang Boon Leong JA
• Judgment Date: 17 November 2020
• Neutral Citation: [2020] SGCA 112
• Plaintiff Counsel: Ramesh Bharani s/o K Nagaratnam and Ong Ying Ting Eunice (RBN Chambers LLC)
• Docket Number: Civil Appeals Nos 45 and 46 of 2020 and Summons No 81 of 2020
• Date: 17 November 2020
• Hearing Date: 19 October 2020
• Subject Matter: Professions,Valuer,Minority shareholders,Judicial review of valuation,Companies,Oppression
• Published date: 20 November 2020
• Defendant Counsel: Mahesh Rai s/o Vedprakash Rai and Yong Wei Jun Jonathan (Drew & Napier LLC)
• Court: Court of Appeal (Singapore)
• Citation: [2020] SGCA 112
• Year: 2020

Andrew Phang Boon Leong JA (delivering the grounds of decision of the court): Introduction

The appeals in CA/CA 45/2020 (“CA 45”) and CA/CA 46/2020 (“CA 46”) were against the decision of the High Court judge (“the Judge”) in Viking Engineering Pte Ltd v Feen, Bjornar and others and another matter [2020] SGHC 78 (“the GD”), concerning whether the Judge had erred in refusing to set aside a court-ordered valuation made by an independent valuer that was appointed by the consent of the parties.

In the proceedings below and in these appeals, the appellants contended that the valuation should be set aside because the independent valuer materially departed from his instructions and the valuation was in manifest error. Having carefully considered the evidence and the parties’ submissions, we dismissed the appeals and CA/SUM 81/2020 (“SUM 81”), the appellants’ application in CA 45 to adduce a competing valuation report. We now provide the detailed grounds for our decision.

Background facts

The first appellant in CA 45 and the appellant in CA 46 is Mr Bjornar Feen (“Mr Feen”). Mr Feen and the respondent in the appeals, Viking Engineering Pte Ltd (“Viking Engineering”), were joint venture partners in Viking Inert Gas Pte Ltd (“VIG”).

Viking Engineering commenced a claim based on minority oppression in HC/S 294/2017 (“S 294”) against Mr Feen, VIG, and three companies that Mr Feen controlled, namely, Feen Marine Pte Ltd (“Feen Marine”), Scanjet Feen IGS Pte Ltd (“Scanjet Feen”), and Feen Marine Scrubbers Pte Ltd. In S 294, Viking Engineering alleged, among other things, that Mr Feen had diverted VIG’s business opportunities to Feen Marine and Scanjet Feen. In this judgment, we refer to the defendants in S 294 collectively as “the Defendants”. In S 294, Viking Engineering sought relief under s 216 of the Companies Act (Cap 50, 2006 Rev Ed) (“the Companies Act”) in the form of a buyout order or, in the alternative, a winding-up order.

Viking Engineering subsequently applied in HC/SUM 4101/2017 (“SUM 4101”) for summary judgment, seeking an order that Mr Feen purchase its 30% shareholding in VIG (“the Shares”). The Judge found that oppression had been made out. On 9 April 2018, she ordered Mr Feen to purchase Viking Engineering’s Shares at a price to be determined by an independent valuer (“the Buyout Order”), on the following terms: An independent valuer was to be appointed by agreement within 14 days of 9 April 2018 (para 2(a)). The valuer was to ascertain the fair value of the Shares as at 9 April 2018 on a going concern basis (para 2(b)), without applying a discount to account for the fact that the Shares were a minority shareholding (para 2(c)). The valuer “shall have regard to any and all financial information and records” of VIG as the valuer “may deem necessary, relevant or desirable for the purposes [of] ascertaining the purchase price or otherwise for carrying out the … order” (para 2(d)). The valuer was to adjust the purchase price of the Shares on the assumption that VIG had undertaken all the business that was diverted away from it to any one or more of the Defendants (para 2(e)). The adjustments were to be made on the following bases (para 2(f)): the valuer was only to take into account the business of inert gas systems and exhaust gas cleaners (para 2(f)(i)); all goodwill and revenue earned by the other Defendants in respect of the aforesaid business was to be attributed to VIG, unless that goodwill or revenue arose from a contract that would have been physically impossible for VIG to have earned (para 2(f)(ii)); and the valuer was to give regard to the financial information and records of the other Defendants as the valuer “may deem necessary, relevant or desirable for the purposes of ascertaining the purchase price or otherwise for carrying out the … order” (para 2(f)(iii)). By agreement, Mr Feen would bear the costs of the valuation exercise (para 2(g)). The parties had liberty to apply (para 2(h)).

Mr Richard Hayler (“Mr Hayler”) of FTI Consulting (Singapore) Pte Ltd (“FTI”) was appointed by the parties’ agreement on 8 June 2018. He subsequently circulated a letter of engagement dated 13 June 2018 (“the LOE”) to the parties. The parties signed and returned the LOE. Mr Hayler finalised a valuation report (“the FTI Report”) around 2 November 2018, following delays by the Defendants in providing the documents that he had requested. The FTI Report was released to the parties around 29 July 2019.

In the FTI Report, Mr Hayler determined that as at 9 April 2018, VIG was valued at $44m. This figure was the average of the valuations obtained using: (a) a discounted cash flow (“DCF”) analysis of VIG’s revenue; and (b) a comparative analysis taking into account the share valuations of two listed companies. The FTI Report correspondingly valued the Shares at $13.2m.

On 16 September 2019, Viking Engineering applied in HC/SUM 4610/2019 (“SUM 4610”) for an order pursuant to O 45 r 6(2) of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) (“the ROC”) that Mr Feen pay $13.2m for the Shares within 7 days of the order. On 22 October 2019, the Defendants filed HC/OS 1324/2019 (“OS 1324”) to seek a declaration that the FTI Report was not final and binding, or that it be set aside or otherwise disregarded.

The proceedings and the decision below

In the proceedings below, the parties agreed that the FTI Report was an expert determination and that, applying the principles in the Singapore High Court decision of The Oriental Insurance Co Ltd v Reliance National Asia Re Pte Ltd [2009] 2 SLR(R) 385 (“Oriental Insurance”) at [47], it could only be set aside on the following three grounds: where the expert materially departed from instructions; where there is a manifest error in the expert’s determination that justly requires judicial intervention; or there was fraud, corruption, collusion, dishonesty, bad faith, bias, or the like.

The Defendants relied on the first two grounds in OS 1324. The Judge found that Mr Hayler had acted within the scope of his instructions under the Buyout Order and the LOE, both of which afforded him a wide discretion (see the GD at [33], [39] and [48]). She also found that the Defendants’ submissions on manifest error, which relied on an expert report by KPMG Services Pte Ltd (“KPMG”), only raised differences in expert opinion. These did not constitute manifest error (see the GD at [72], [76] and [79]). The Judge accordingly dismissed OS 1324. With regard to SUM 4610, Viking Engineering did not submit on O 45 r 6(2) of the ROC in the light of the Judge’s indication that she would set the purchase price of the Shares in accordance with the valuation in the FTI Report. The Judge ordered Mr Feen to purchase the Shares at $13.2m (see the GD at [85]).

The issues to be determined

CA 45 was the Defendants’ appeal against the Judge’s dismissal of OS 1324. In CA 46, Mr Feen’s case was that the Judge should not have exercised her discretion under O 45 r 6(2) of the ROC to make the order in SUM 4610. In our view, there were three issues in the present appeals: first, whether the Defendants should be granted leave to raise a new argument in CA 45 to challenge the validity of the Buyout Order; second, if the Buyout Order was valid, the grounds on which any valuation made pursuant to it may be challenged; and third, whether the FTI Report should be set aside.

Our decision in CA 45 and CA 46 Leave to raise a new argument challenging the validity of the Buyout Order

The Defendants sought leave under O 57 rr 13(3) and 13(4) of the ROC to raise a new legal argument in CA 45 that the Buyout Order was invalid because Viking Engineering ought to have availed itself of the buyout provisions in VIG’s articles of association (“VIG’s Articles”) before commencing S 294. The Defendants submitted that as Viking Engineering did not take this course of action, its commencement of S 294 was an abuse of process.

We did not accept this submission for the following reasons. In the first place, the “extended” doctrine of res judicata barred this issue from being raised. This doctrine applies to points that were not previously decided because they were not raised in earlier proceedings, even though they could and should have been raised in those proceedings (see the decision of this court in The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT International Ltd (nTan Corporate Advisory Pte Ltd and others, other parties) and another appeal [2015] 5 SLR 1104 at [102]). The inquiry is directed to whether, having regard to the substance and reality of the earlier action, an issue reasonably ought to have been raised (see the Singapore High Court decision of Goh Nellie v Goh Lian Teck and others [2007] 1 SLR(R) 453 at [53]). In our judgment, the answer to this question was in the affirmative. Viking Engineering’s application in SUM 4101 was for the court to enter summary judgment in S 294 pursuant to O 14 r 1 of the ROC. Any submission that the commencement of S 294 was an abuse of process should have been ventilated at that stage but was not.

In any event, we were not persuaded by the merits of the Defendants’ new legal argument. The Defendants relied on this court’s statements in Ting Shwu Ping (administrator of the estate of Chng Koon Seng, deceased) v Scanone Pte Ltd and another appeal [2017] 1 SLR 95 (“Ting Shwu Ping”) that the existence of a shareholder exit mechanism in a company’s articles may affect the exercise of the court’s jurisdiction under s 216 of the Companies Act in the following ways (at [75]): (a) it can negate any unfairness arising from shareholder disputes or exclusion – unfairness has to be assessed in light of the shareholder’s ability to exit the ‘unfair situation’ under the procedure provided for in the articles; (b) it may render the application an abuse of process because the existence of a...