Griffin Real Estate Investment Holdings Pte Ltd (in liquidation) v ERC Unicampus Pte Ltd and another appeal

• Jurisdiction: Singapore
• Judge: Tay Yong Kwang JA
• Judgment Date: 24 October 2019
• Neutral Citation: [2019] SGCA 57
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeals Nos 7 and 8 of 2019
• Published date: 05 November 2019
• Year: 2019
• Hearing Date: 24 October 2019
• Plaintiff Counsel: Abraham Vergis, Nawaz Kamil and Kenny Lau Hui Ming (Providence Law Asia LLC)
• Defendant Counsel: Vikram Nair and Foo Xian Fong (Rajah & Tann Singapore LLP)
• Subject Matter: Equity,Remedies,Account
• Citation: [2019] SGCA 57

Tay Yong Kwang JA (delivering the judgment of the court ex tempore):

We agree with the Judge on all his findings set out in his judgment in [2018] SGHC 273, except the formula for computing the share of profit for the plaintiff (“GREIH”) in the Originating Summons, arising from the sale of Big Hotel in September 2015. The said formula is set out at [99] of the judgment and is reproduced below. In the formula, the $10m is the amount that the defendant (“ERCU”), received knowingly from GREIH and which was loaned from GREIH to ERCU in breach of fiduciary duties owed by Andy Ong and Ong Han Boon. The $103m is the purchase price for Prime Centre (before it was re-developed into Big Hotel), the UOB-ERCU Loan refers to the bank loan of $77.25m taken out by ERCU for the said purchase and the “Expenses” were sums incurred by ERCU in respect of the re-development of the property (explained further below). The $203m refers to the sale price of Big Hotel.

The formula set out by the Judge was as follows:

The Expenses incurred by ERCU (as set out at [64] of the judgment) comprised: costs incurred in re-developing Prime Centre; interest expenses incurred in 2014 and 2015 on loans obtained to finance the re-development of the said property; and management fees incurred in 2014 and 2015 for the management of Big Hotel.

GREIH’s appeal is that the Expenses should not feature in the first half of the equation and should rightly feature only in the second half of the equation in order to arrive at the net profit. We agree with GREIH that the Judge’s formula results in double-counting of the Expenses in that the Expenses were used as part of ERCU’s capital contribution to the acquisition costs for Prime Centre and then deducted from the sale price for Big Hotel to arrive at the net profit. However, we agree with the Judge that the Expenses which were incurred to earn the returns from the investment in re-developing Prime Centre into Big Hotel and eventually selling it at a profit must logically be taken into account in arriving at the net profit from the sale. If these expenses had not been incurred, there would have been no Big Hotel to sell and no case was put forward that the property would have fetched a resale price of $203m even without re-development into Big Hotel.

One of the points in ERCU’s appeal is that the UOB-ERCU Loan should not be deducted in the first half of the formula. We agree with ERCU on this issue. We do not...