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

• Jurisdiction: Singapore
• Judge: Chua Lee Ming J
• Judgment Date: 18 December 2018
• Neutral Citation: [2018] SGHC 273
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 1004 of 2017 and Summons No 5460 of 2017 (Registrar’s Appeal No 377 of 2017)
• Year: 2018
• Published date: 05 November 2019
• Hearing Date: 09 April 2018,22 January 2018
• Plaintiff Counsel: Abraham S Vergis, Nawaz Kamil, and Kenny Lau (Providence Law Asia LLC)
• Defendant Counsel: Vikram Nair, Gan Eng Tong, and Foo Xian Fong (Rajah & Tann Singapore LLP)
• Subject Matter: Res Judicata,Issue estoppel,Doctrine of abuse of court,Equity,Remedies,Account,Third party liability,Expenses
• Citation: [2018] SGHC 273

Chua Lee Ming J: Introduction

In this Originating Summons, the plaintiff, Griffin Real Estate Investment Holdings Pte Ltd (in liquidation) (“GREIH”), seeks to recover a share of the proceeds of the sale of a property at 200 Middle Road #01-00, Singapore 188980 known as the Big Hotel. GREIH claims that in 2011, certain directors of GREIH had wrongfully caused it to extend an unauthorised loan of $10 million (”the $10m Loan”) to the defendant, ERC Unicampus Pte Ltd (“ERCU”); and ERCU knowingly received the $10m Loan and used the monies to help it complete its purchase of the Big Hotel (then known as the Prime Centre).

Registrar’s Appeal No 377 of 2017 (“RA 377”) is GREIH’s appeal against the decision of the Assistant Registrar dismissing its application in Summons No 5460 of 2017 (“SUM 5460”) for specific discovery of documents relating to the costs, expenses, and other liabilities allegedly incurred by ERCU in respect of the investment in the Big Hotel.

Facts

The detailed background leading to the present dispute can be found in the High Court’s judgment 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 Holdings (HC)”) and the Court of Appeal’s judgment in Ho Yew Kong v Sakae Holdings Ltd and other appeals [2018] 2 SLR 333 (“Sakae Holdings (CA)”). For present purposes, the salient facts are set out below.

In 2009/2010, Mr Ong Siew Kwee (“Andy Ong”) led other investors in investing in two properties which came to be known as the Bugis Cube and the Big Hotel. The Bugis Cube investment involved acquiring an old commercial complex at 470 North Bridge Road, Singapore 188735 (then known as the North Bridge Commercial Complex), redeveloping it into a new shopping mall and selling it. The Big Hotel investment involved acquiring an old commercial building at 200 Middle Road, Singapore 188980 (then known as the Prime Centre), redeveloping it into a mid-range hotel and selling it. In this judgment, I will use the terms “the Bugis Cube” and “the Big Hotel” to refer to the respective properties both before and after the redevelopment of each property.

Andy Ong set up a complex structure using special purpose vehicles (“SPVs”) to hold (directly or indirectly) the investment in each property. GREIH and ERCU were two of these SPVs. Another company, ERC Holdings Pte Ltd (“ERC Holdings”) was set up as the ultimate holding company of the SPVs.

GREIH was the SPV that was used to acquire the Bugis Cube. Sakae Holdings Ltd (“Sakae”) was one of the shareholders of GREIH. Subsequently, in November 2010, ERCU acquired the Big Hotel at a purchase price of $103m.⁰ On 17 January 2011, ERCU obtained a loan from the United Overseas Bank Limited (“UOB”) for $77.25m to fund part of the purchase price for the Big Hotel (“the UOB-ERCU Loan”).¹ The UOB-ERCU Loan was secured by a mortgage over the Big Hotel and by guarantees given by Andy Ong and ERC Holdings. One of the conditions precedent in the UOB-ERCU Loan was that ERCU had to pay the balance of the purchase price before it could draw down on the loan.

On 21 January 2011, UOB granted GREIH a six-month short term loan of $10m for the express purpose of financing its working capital requirements (“the UOB-GREIH Loan”). The loan was secured among other things, by a mortgage over the Bugis Cube property and a guarantee from Andy Ong.

The completion date for the sale and purchase of the Big Hotel was 14 March 2011. As ERCU had not received payment in full from the investors in the Big Hotel project, Andy Ong and Mr Ong Han Boon (“Han Boon”) arranged for the $10m Loan from GREIH to ERCU to enable the latter to complete its purchase of the Big Hotel from the sellers, Garden Estates (Pte) Ltd (“Garden Estates”).

Andy Ong and Han Boon issued a letter to UOB dated 3 March 2011 to draw down the UOB-GREIH Loan and to disburse the $10m to Garden Estates.

On 14 March 2011, GREIH drew down on the UOB-GREIH Loan. On GREIH’s instructions, UOB paid the $10m to Garden Estates. The balance of the purchase price for the Big Hotel was paid by ERCU using the UOB-ERCU Loan and $15.48m in cash contributions (part of which had been paid earlier upon the signing and exercise of the option to purchase).

The Big Hotel was sold in September 2015 for $203m. The sale completed on 17 November 2015. The proceeds of sale have been returned to the investors save for a security deposit that was returned by the purchaser of the Big Hotel to ERCU; and the sum of $33.45m held in escrow (“the Escrow Sum”) by M/s Rajah & Tann Singapore LLP who are the solicitors for ERCU.

The Bugis Cube and Big Hotel investments spawned several other legal proceedings. One of these proceedings was Suit No 1098 of 2013 (“S1098”), in respect of which the judgments in Sakae Holdings (HC) and Sakae Holdings (CA) were issued. One of the orders made in S1098 was that GREIH be wound up.

Before me, it was not disputed that Andy Ong and Han Boon were directors of GREIH at the material time.

The following findings in S1098 are relevant: Andy Ong and Han Boon breached their fiduciary duties to GREIH by causing GREIH to extend the $10m Loan to ERCU: Sakae Holdings (HC) at [315] (“the Breach Finding”). $7.9m remained outstanding on the $10m Loan: Sakae Holdings (HC) at [315] (“the Repayment Finding”). Both findings will be referred to in this judgment collectively as “the S1098 Findings”.

Before the Court of Appeal, Andy Ong and Han Boon did not challenge the Breach Finding: Sakae Holdings (CA) at [131]. It appears that the Repayment Finding was also not challenged before the Court of Appeal.

GREIH’s case

GREIH submitted as follows: ERCU is estopped from challenging the S1098 Findings on the grounds of (i) issue estoppel and/or (ii) abuse of process. In any event, the evidence supports the S1098 Findings. ERCU is liable as a knowing recipient of the $10m Loan and should be construed as a constructive trustee of the balance amount outstanding. GREIH is entitled to its proportionate share of the proceeds of sale of the Big Hotel.

Whether ERCU is estopped from challenging the S1098 Findings Issue estoppel

GREIH submitted that issue estoppel applies with respect to the S1908 Findings. The requirements of issue estoppel are as follows: There must be a final and conclusive judgment on the merits of the issue which is said to be the subject of an issue estoppel. The judgment must be made by a court of competent jurisdiction. There must be identity between the parties to the two actions that are being compared. There must be an identity of subject matter in the two proceedings. See Lee Tat Development Pte Ltd v MCST Plan No 301 [2005] 3 SLR(R) 157 at [14]–[15].

It is clear that the S1098 Findings satisfy the first two requirements. The fact that ERCU made a submission of no case to answer in S1098 does not in any way alter the fact that the judgment in that case was final and conclusive on the merits.

The third requirement is that there must be identity between the parties involved in the present proceedings and in the previous litigation. GREIH and ERCU are the parties in the present proceedings. In S1098, GREIH and ERCU were co-defendants. I accept that issue estoppel may operate between defendants: Spencer Bower and Handley: Res Judicata (LexisNexis, 4th Ed, 2009) (“Res Judicata”) at para 9.08. GREIH, being the company in respect of which Sakae’s oppression action was brought, was a nominal defendant in S1098 but I agree with GREIH that that does not matter. What does matter, in my view, is that there must be identity of parties with respect to the S1098 Findings. In other words, the identity of parties must be in relation to the issues which are alleged to be the subject of issue estoppel.

S1098 was a minority oppression action by Sakae as a minority shareholder of GREIH. Sakae made numerous allegations against, among others, Andy Ong and Han Boon for wrongfully diverting moneys from GREIH. Sakae also claimed against ERCU, among others, for the repayment of moneys diverted from GREIH and for declarations that constructive trusts be imposed on assets purchased using moneys from GREIH. See Sakae Holdings (HC) at [4].

The relevant defendants to Sakae’s claim in relation to the $10m Loan were Andy Ong, Hang Boon and ERCU: Sakae Holdings (HC) at [87]. The High Court found that Andy Ong and Han Boon had breached their fiduciary duties to GREIH in relation to the $10m Loan: Sakae Holdings (HC) at [315]. As against ERCU, the High Court declined to grant a declaration that ERCU was a knowing recipient of the $10m Loan or that ERCU held a proportionate share of the proceeds of sale of the Big Hotel on trust for GREIH, on the ground that Sakae had no standing; only GREIH could bring that claim: Sakae Holdings (HC) at [317].

On the face of it, it was Sakae (not GREIH) that sought the declaration against ERCU. GREIH referred me to Goh Nellie v Goh Lian Teck and others [2007] 1 SLR(R) 453 (“Goh Nellie”) where it was pointed out (at [32]) that the courts have not taken a narrow view of what identity between the parties means and the courts have concluded that issue estoppel may arise if the “effective parties” were the same, or as between “the same parties or their privies”.

GREIH submitted that in S1098, Sakae was effectively acting for the benefit of GREIH in relation to the $10m Loan, and therefore, GREIH (not Sakae) and ERCU were the effective parties to the S1098 Findings. I agree with GREIH. I therefore find that the third requirement is satisfied.

However, GREIH faces a bigger hurdle. Only determinations which are necessary for the decision, and fundamental to it, will create an issue estoppel: Res Judicata at para 8.23. This principle is contained within the fourth requirement, ie, an identity of subject-matter: Goh Nellie at [35].

In...