Foo Peow Yong Douglas v ERC Prime II Pte Ltd and another appeal and other matters

• Judge: Sundaresh Menon CJ
• Judgment Date: 22 October 2018
• Neutral Citation: [2018] SGCA 67
• Citation: [2018] SGCA 67
• Defendant Counsel: and S Suressh, Farrah Joelle Isaac and Zhuang Changzhong (Eversheds Harry Elias LLP),Vikram Nair and Foo Xian Fong (Rajah & Tann Singapore LLP)
• Published date: 15 November 2018
• Hearing Date: 03 September 2018
• Plaintiff Counsel: Chua Sui Tong and Wong Wan Chee (Rev Law LLC),Koh Swee Yen, Ong Pei Chin, Huang Meizhen Margaret, and Liu Sheng Nicholas (WongPartnership LLP)
• Docket Number: Civil Appeals Nos 196 of 2017 and 55 of 2018 and Summonses No 39, 83, 86 and 91 of 2018
• Court: Court of Appeal (Singapore)
• Date: 22 October 2018
• Subject Matter: Loss of confidence,Just and equitable,Loss of substratum,Companies,Directorial misfeasance,Winding up

Sundaresh Menon CJ (delivering the judgment of the court): Introduction

There are two appeals before us. The first is Civil Appeal No 196 of 2017 (“CA 196”), brought by Douglas Foo Peow Yong (“Foo”) against the decision of a Judge of the High Court (“the Judge”) in Companies Winding Up No 143 of 2017 (“CWU 143”) to refuse an application to wind up ERC Prime II Pte Ltd (“ERCP II”). Tan Tek Seng Kelvin (“Tan”) and Ainon Binte Ismail (“Ainon”) are non-parties in CA 196 who appeared below and before us to oppose the application to wind up ERCP II. The second appeal is Civil Appeal No 55 of 2018 (“CA 55”), which is brought by Yap Chew Loong (“Yap”) against the decision of a Judicial Commissioner of the High Court (“the JC”) to refuse an application in Companies Winding Up No 146 of 2017 (“CWU 146”) to wind up Gryphon Real Estate Investment Corporation Pte Ltd (“GREIC”). Tan and Koh Poh Leng (“Koh”) are the second and third respondents respectively in CA 55.

These appeals raise a number of factual questions regarding the state of the companies concerned and the conduct of their management to date. Given the potential urgency of the matter, having regard to some concerns (including as to time bars) that we will touch on below, we have prepared our judgment on an expedited basis and have only dealt with the points necessary to dispose of the appeals.

Background

ERCP II and GREIC, the two companies that are the subject of these appeals, are investment holding companies set up by Ong Siew Kwee (“Andy Ong”) and his associates pursuant to two joint ventures that he entered into with Foo sometime in 2009 or 2010. The first venture was the acquisition and development of what was known as the Big Hotel located at 200 Middle Road, Singapore; and the second was the acquisition and development of units in a mall known as Bugis Cube located at 470 North Bridge Road, Singapore. We will refer to these ventures as “the Big Hotel project” and “the Bugis Cube project” respectively.

ERCP II and the Big Hotel project

ERC Unicampus Pte Ltd (“ERCU”) is a corporate vehicle that was incorporated for the purposes of acquiring and holding the Big Hotel project. Its shareholders include ERCP II, through which Foo made his investment in the project, and other special purpose vehicles (“SPVs”) set up by Andy Ong and his associates. ERCP II is the subject of CA 196, an appeal arising out of CWU 143.

ERCP II is an investment holding company incorporated in November 2010. Clause 3.2 of its shareholders’ agreement dated 21 February 2011 states that its “principal business” is to invest in the project of acquiring, converting and managing the Big Hotel through ERCU. At the time of the application below, it held 32.24% of the shares in ERCU. Aside from these shares, ERCP II has no business of its own and no other valuable asset. The Big Hotel property has been sold and most of the investment returns distributed. ERCP II therefore only has the following assets at present: a claim to a share of a security deposit of $3.75m that was returned by the purchaser of the Big Hotel property to ERCU and is presently held by ERCU (“the Security Deposit”), and a potential claim to a share of $33.45m held in escrow by Rajah & Tann Singapore LLP (“R&T”) (“the Escrow Sum”) as solicitors for ERCP II, pending the determination of Originating Summons No 1004 of 2017 (“OS 1004”) brought against ERCU by Griffin Real Estate Investment Holdings Pte Ltd (“GREIH”) for the Escrow Sum to be paid to it. The Escrow Sum is currently held by R&T pursuant to a settlement agreement dated 3 December 2016 between the parties in Originating Summons No 924 of 2015 (“OS 924”), which included ERCP II and ERCU. We will elaborate on GREIH and these related actions later (see [16] and [26]–[27]).

According to Foo, ERCP II also has some interest in a $5m retention sum held by Dentons Rodyk & Davidson LLP, the law firm that acted as the solicitors for the purchasers of the Big Hotel property from ERCU (“the Retention Sum”). The context of this sum is not entirely clear but, in any case, this is not a material point for the purposes of this appeal.

According to information provided by counsel for Foo, ERCP II’s board composition since its incorporation is as follows:

Approximate Dates	Directors of ERCP II
30 November 2010 to 14 December 2010	Andy Ong Ong HB
14 December 2010 to 15 December 2010	Andy Ong Ong HB Ho Yew Kong (“Ho”)
15 December 2010 to 12 July 2013	Ho
12 July 2013 to 24 October 2014	Ong HB
24 October 2014 to 13 April 2017	Andy Ong Ong HB
13 April 2017	Ong HB Stephen Tan Fei Wen (“Stephen Tan”)

Based on the additional evidence sought to be adduced on appeal, which we will elaborate on below, it turns out that both Andy Ong and Ong HB have been disqualified from holding any directorship since 13 March 2017. Ong HB averred that he had only found out about his disqualification on or around 1 August 2018 and had since ceased to be involved in ERCP II’s management. Thus, Stephen Tan in effect became ERCP II’s sole director from that point. On 29 August 2018, which was a few days before the hearing of this appeal, Chia Puay Khiang (“Chia”) was appointed a co-director of ERCP II by a directors’ resolution to which Stephen Tan was the sole signatory. The propriety of this appointment is disputed.

As for ERCP II’s shareholders, they comprise several individual investors, as well as Foo, Tan, Ainon and ERC Holdings Pte Ltd (“ERC Holdings”): Foo held 19.8% of the total issued and paid up shares in ERCP II as of October 2017. ERC Holdings held around 9.24% of the shares in ERCP II as of July 2017. This is the ultimate holding company of several of Andy Ong’s SPVs (collectively termed the “ERC Group”). It was incorporated on 13 May 1999 by Andy Ong, who was its majority shareholder (with a 91.85% shareholding) until 15 May 2017, which was shortly after the release of the judgment of the High Court in Suit Nos 122 and 1098 of 2013 (collectively, “the Suits”), which are suits to which he was party and which we refer to at [17] below. That judgment was adverse to Andy Ong, and after its release, he transferred all his shares in ERC Holdings to his sister, Ong Geok Yen (“Ong GY”). Andy Ong was also a director of ERC Holdings until 15 February 2016 when Ong GY took over. At the time of the hearing below, ERC Holdings’ directors were Ong GY and Ong Geok Hong Lydia, who is another of Andy Ong’s sisters. Apart from its shareholding in ERCP II, ERC Holdings also purportedly acquired shares in ERCU in October 2013 through the exercise of a share option, the legitimacy of which is presently disputed. Tan and Ainon are shareholders and collectively hold around 3.96% of ERCP II’s issued shares as at July 2017. As noted above (at [1]), they oppose the winding up of ERCP II.

There was nothing to suggest that the relevant parties’ shareholdings had materially changed by the time the appeal was heard before us.

We turn to the sequence of relevant events relating to the Big Hotel project.

On 14 October 2010, ERC Holdings obtained an option to purchase the Big Hotel property, which was exercised by ERCU on 3 November 2010. The total purchase price of the property was $103m.

By October 2013, almost three years after this, a total of five SPVs, including ERCP II, had been set up for unrelated individual investors to participate in the Big Hotel project. A shareholders’ agreement was entered into in respect of each SPV. However, Andy Ong continued to make the principal commercial and management decisions for the project and, for this purpose, he used another of his vehicles, a company known as Gryphon Estate Management Pte Ltd (“GEM”). The payment of management fees by ERCU to GEM is one of the issues in dispute.

On 17 November 2015, the Big Hotel property was sold for $203m. Prior approval for the sale was obtained from ERCU’s shareholders at an extraordinary general meeting (“EGM”) of the company that was held two months earlier on 17 September 2015.

In 2016 and early 2017, a large part of the investment returns from the Big Hotel project was distributed to the various shareholders of ERCU and, in turn, by them to their respective shareholders. At the time of the hearing below, the proceeds had been distributed to the shareholders of ERCP II, and ERCP II’s only remaining interest was its proportional share of the Security Deposit, the Escrow Sum, and possibly the Retention Sum (see [5] above).

GREIC and the Bugis Cube project

In respect of the Bugis Cube project, GREIH is the corporate vehicle through which the investment was to be made and held. For present purposes, it suffices to note that save for a period between May 2012 and April 2017, GREIH has had two shareholders: Sakae Holdings Ltd (“Sakae”), which held 24.69% of its issued share capital, and GREIC, which held the remaining 75.31%. These two shareholders represent (in a loose sense of the term) Foo’s and Andy Ong’s interests in the venture respectively.

GREIH has been the subject of extensive litigation before our courts. On 7 April 2017, the High Court issued its judgment in respect of the Suits in Sakae Holdings Ltd v Gryphon Real Estate Investment Corp Pte Ltd and others (Foo Peow Yong Douglas, third party) and another suit [2017] SGHC 73 (“Sakae (HC)”) in which it found, amongst other things, that Andy Ong and Ong HB, as directors of GREIH at the material time, had engaged in oppressive conduct towards Sakae, which was the minority shareholder in GREIH. Consequently, GREIH was ordered to be wound up (see Sakae (HC) at [293]). We upheld this aspect of the High Court’s decision on 29 June 2018: see Ho Yew Kong v Sakae Holdings Ltd and other appeals and other matters [2018] 2 SLR 333 (“Sakae (CA)”). GREIH is therefore now in the control of court-appointed liquidators. The relevance to...