Forest Fibers Inc and another v K K Asia Environmental Pte Ltd and others

• Jurisdiction: Singapore
• Judge: Lai Siu Chiu SJ
• Judgment Date: 27 December 2016
• Neutral Citation: [2016] SGHC 282
• Plaintiff Counsel: K Muralitherapany and Ng Lip Kai (Joseph Tan Jude Benny LLP)
• Docket Number: Suit No 226 of 2016 (Summons No 2494 of 2016)
• Date: 27 December 2016
• Hearing Date: 03 June 2016
• Subject Matter: Civil procedure,Injunctions
• Year: 2016
• Defendant Counsel: the second and third defendants in person.
• Court: High Court (Singapore)
• Citation: [2016] SGHC 282
• Published date: 27 October 2017

Lai Siu Chiu SJ: Introduction

Forest Fibers Inc (“the first plaintiff”) is a Canadian company while RGA Holdings International Inc (“the second plaintiff”) is a Panamanian company. Both companies are in the business of buying, selling and/or recycling waste material and/or selling recycled products. The common director and shareholder of both plaintiffs is a Canadian national, Colubriale Domenico (“Domenico”), who is also the president of the second plaintiff.

KK Asia Environmental Pte Ltd (“the Company”) is a Singaporean company which like the plaintiffs is in the business of buying and selling waste material and/or processing waste material into recycled products and/or selling recycled products. Loh Choon Phing Robin (“the second defendant”) and Loh Yin Kuan (“the third defendant”) are shareholders and directors of the Company. The second and third defendants will be referred to collectively henceforth as “the defendants”. The third defendant is the father of the second defendant. The Company owns a factory in Malaysia while the second and third defendants own the Company’s sister company in Malaysia called KK Asia Malaysia situated at Ampang, Selangor. The second defendant together with his wife jointly own the property known as No 248 Carpmael Road, Singapore 429961 (“No 248”) while the third defendant owned No 246 Carpmael Road, Singapore 429960 (“No 246”) until it was sold on or about 1 April 2016. Henceforth, Nos 246 and 248 will be referred to collectively as “the Properties”.

The second plaintiff applied in Summons No 2494 of 2016 (“the application”) for an injunction against the defendants to restrain them from parting with, selling, charging or otherwise disposing of the Properties. In the alternative (under prayer 2), the second plaintiff applied for any sale proceeds of the Properties (net of sale expenses) to be held by their solicitors as stakeholders pending further orders. The second plaintiff sought a further order that the defendants provide the details of the buyers of No 246, namely, Tan Wee Kiat and Say Li Shan (“the purchasers”), and/or their solicitors.

I heard and dismissed the application. As the second plaintiff (with leave granted by the Court of Appeal on 15 September 2016) has appealed against my decision (in Civil Appeal No 140 of 2016), I now set out the reasons.

The facts

The genesis of Suit No 226 of 2016 (“the Suit”) was a Purchasing Finance Agreement dated 22 April 2015 made between the first plaintiff and KK Asia Malaysia. There was a further Purchasing Finance Agreement dated 8 May 2015 (“the PFA”) made between the Company and the first plaintiff for the “[p]urchase part” and between KK Asia Malaysia and the first plaintiff’s associate company, Forest Fibers Hong Kong Ltd (“FFHK”), for the “[s]elling part”. Domenico deposed that under the PFA, the first plaintiff agreed to provide the Company with raw waste materials for the latter’s processing. The Company would then account to the first plaintiff and/or FFHK for the finished product and/or the Company would deliver the finished product for sale to third party end-buyers on the instructions of the first plaintiff and/or FFHK. Subsequent to the signing of the PFA, the defendants informed Domenico that they were facing cash-flow problems. They requested Domenico to invest in the Company; Domenico agreed.

Using the second plaintiff as the investment vehicle, a share sale agreement dated 9 July 2015 (“the Share Sale Agreement”) was executed with the defendants as the vendors. The second plaintiff agreed to purchase 50% of the shares in the Company from the defendants for US$200,000. Currently, the second plaintiff is a 50% shareholder in the Company while the defendants each hold 25% shares.

The salient clauses of the Share Sale Agreement relevant to the application are the following: 3.3 The [second plaintiff] shall have the option to sell the Sale Shares back to the [defendants] for [US$200,000] plus simple interest at 5% per annum in the event that the Company fails to generate net profits (before tax) of US$200,000.00 within a 10 months plus period, i.e. from the date of this Agreement to 31 May 2016. In such an event, the [defendants] shall pay the [US$200,000] plus simple interest at 5% per annum to [the second plaintiff] for the Sale Shares by 31 December 2016. 3.4 The [second plaintiff] undertakes to extend a loan of up to US$30,000.00 to the Company to finance its operations upon the request of the [defendants] to be made on or before 1 October 2015. 3.5 The [defendants] acknowledge that the Company is indebted to the [second plaintiff] for the sum of US$120,000.00 being a previous loan extended by the [second plaintiff] to the Company. The [defendants], jointly and severally, undertake that in the event that the Company fails to fully repay the said sum of US$120,000.00 plus simple interest at 5% per annum to the [second plaintiff] by 30 December 2016, they will pay 50% of the outstanding balance to the [second plaintiff] by 31 December 2016 and the balance 50% of the outstanding balance shall be absorbed and/or waived by the [second plaintiff]. 3.6 The parties acknowledge that there is a rolling account of accounts payable by the Company to [the first plaintiff]. In the event that the Company is unable to pay such outstandings which are overdue, the [defendants] undertake to pay 50% of the said overdue outstandings and the [second plaintiff] undertakes to pay the balance 50% of the said overdue outstandings to [the first plaintiff]. 3.7 In light of the aforesaid undertakings, the [defendants] further undertake not to sell their respective properties at 248 Carpmael Road, Singapore 429961 and 246 Carpmael Road, Singapore 429961.

Between 5 August 2015 and 15 September 2015, the first plaintiff claimed it disbursed US$59,488.38 to the Company and/or third parties at the Company’s request as loans or advances:

Date	Amount	Receiving Party	Purpose
5 Aug 2015	US$11,461.56	The Company	Payment to subcontractor
13 Aug 2015	US$14,462.00	Genox Recycling Tech Co Ltd	Payment for equipment repair and spare parts
2 Sep 2015	US$19,913.83	Forte International (M) Sdn Bhd	Payment for the plaintiffs’ office expenses, employees’ wages, equipment and rental
8 Sep 2015	US$3,950.99	Luis Pernet Rojas	Payment for the plaintiffs’ office expenses, equipment and employees’ wages
15 Sep 2015	US$9,700.00	Teguh Jaya Polymer Sdn Bhd	Payment for handling and other charges incurred by the plaintiffs

Between 6 May 2015 and 15 July 2015, the second plaintiff claimed that at the request of the Company and/or the defendants, it disbursed US$149,578.05 to the Company as loans:

Date	Amounts
6 May 2015	US$37,487.00
7 May 2015	US$21,367.00
22 May 2015	US$60,724.05
15 July 2015	US$30,000.00

The plaintiffs alleged that it was an express or implied term of the various agreements between the parties that the various sums advanced or lent by the plaintiffs were repayable on demand. On 19 January 2016, the first plaintiff demanded repayment of US$59,488.38 from the Company by 26 January 2016. The Company failed to repay the said sum or any amount by 26 January 2016.

Further, the plaintiffs alleged that there was a breach of cl 3.5 of the Share Sale Agreement in that the Company and the defendants failed to repay the second plaintiff the advances/loans totalling US$149,578.05.

The plaintiffs then discovered that in breach of cl 3.7 of the Share Sale Agreement, the third defendant had sold No 246 to the purchasers and disposed of the sale proceeds.

Separately, the first plaintiff had sued the Company in Suit No 1159 of 2015 (“the 2015 Suit”) for its supply of waste materials totalling US$188,038.89 to the Company and for US$75,000 it had paid to the Company for waste materials which the Company failed to deliver.

On 24 December 2015, the first plaintiff obtained interlocutory judgment in default of appearance against the Company in the 2015 Suit (“the default judgment”) under O 13 r 2 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) (“the Rules of Court”). The Company applied to set aside the default judgment via Summons No 1522 of 2016. On 29 June 2016, with the consent of the first plaintiff, the default judgment was set aside and leave was granted to the Company to enter an appearance to the Writ of Summons.

Unbeknownst to the second plaintiff at the material time, the Company had on or about 26 August 2015 informed two of its Malaysian subcontractors, namely, Ever Classic Plastic Industries Sdn Bhd and Teguh Jaya Polymer Sdn Bhd, that it would be closing its factory in Malaysia temporarily due to shortage of materials. To-date the factory remains closed.

On 1 September 2015, the third defendant informed the second plaintiff by email that he would no longer be putting money into the Company and would also be closing its Singapore office. The third defendant requested the second plaintiff to pay the monthly instalments owed by the Company to Standard Chartered Bank (“SCB”) for the banking facilities provided by SCB. The sums due to SCB formed part of the Company’s monthly expenses. The second plaintiff did not accede to the third defendant’s request.

Domenico realised that the defendants were abandoning the Company due to its dire financial situation. Hence, in anticipation of the second plaintiff’s clams against the Company/the defendants and mindful that the latter had other creditors, Domenico instructed his lawyers to, and they did, lodge caveats on the Properties (“the Caveats”) on behalf of the second plaintiff.

On 24 February 2016, the Singapore Land Authority (“the SLA”) notified the second plaintiff that the registered proprietors of Nos 246 and 248 (namely, the third and second defendants...