Justlogin Pte Ltd and Another v Oversea-Chinese Banking Corp Ltd and Another

• Jurisdiction: Singapore
• Judge: Tay Yong Kwang J
• Judgment Date: 20 November 2006
• Neutral Citation: [2006] SGHC 209
• Date: 20 November 2006
• Subject Matter: Whether defendants' breach of obligations causing loss of chance of transaction,Power of court to fix another appropriate date if injustice caused,Ancillary obligations,Assessment,Time,Appropriate measure of value of loss of chance,Whether reasonable steps taken to mitigate damages caused,Computation,Quantum,Amount of damages suffered by first plaintiff as result of defendants' breach of obligations under deeds,Determination in light of object of transaction,Whether mitigation relevant in claim for loss in value of company,Method of valuation,Damages assessed at date of breach,Damages,Causation,Mitigation
• Docket Number: Suit No 938 of 2002 (Registrar's
• Published date: 21 November 2006
• Defendant Counsel: Vinodh Coomaraswamy SC, Marcus Yip and Georgina Lum (Shook Lin & Bok)
• Court: High Court (Singapore)
• Plaintiff Counsel: Foo Maw Shen and Daryl Ong (Yeo Wee Kiong Law Corporation)

20 November 2006 Judgment reserved

Tay Yong Kwang J:

The background

1 These cross-appeals against the assistant registrar’s assessment of damages arose out of the decision of Kan Ting Chiu J (Justlogin Pte Ltd and another v Oversea-Chinese Banking Corporation Limited and another [2004] 1 SLR 118) which was affirmed by the Court of Appeal (see Oversea-Chinese Banking Corporation Limited and another v Justlogin Pte Ltd and another [2004] 2 SLR 675) upon appeal by the defendants. The dispute centred on two deeds entered into on 20 July 2001. The first deed was between Justlogin Pte Ltd (“JLI”) (the first plaintiff) and the defendants (“the JLI deed”), while the second was between the holding company of JLI, Justlogin Holdings Pte Ltd (“JLIH”) (the second plaintiff) and the defendants (“JLIH Deed”).

2 JLI, a company incorporated in Singapore, is an applications service provider offering a range of office collaborative applications. The company was an off-shoot of Singapore Engineering Software Pte Ltd, which in turn was a company within the Singapore Technologies group of companies. JLI’s Chief Executive Officer was Kwa Kim Chiong (“Kwa”) and it was he who dealt with the officers of the defendants relating to the matter from which these proceedings arose. JLIH, an investment holding company incorporated by Kwa and others in the management team of JLI, held 58.4% of the issued share capital of JLI. The defendants are in the banking business, with the second defendant being a wholly-owned subsidiary of the first.

3 In the 1990s and early 2000s, the defendants were keen on making capital investments in start-up companies. Accordingly, the first defendant, through eVentures (the investment arm of the second defendant), invested $2m in JLI, giving the defendants some 16.6% of JLI’s shareholding. The first defendant had also obtained, again through the second defendant, some 12.79% of the share capital of iPropertyNet Pte Ltd (“iProp”), an applications service provider which developed and maintained Internet-based software applications for property-based businesses.

4 iProp had at least some $5.6m in cash but had no viable business to inject this into, due largely to the inability of its shareholders to agree on its business direction. When the defendants bought into iProp, the latter had received in-principle approval to list its shares on the Stock Exchange of Singapore. However, the defendants were not keen to do so as the market conditions were unfavourable then. When the listing was aborted, some of iProp’s shareholders wanted the company wound up in order to recover their investment. To stave off a voluntary winding-up, the defendants negotiated with some of the shareholders to buy over their shares. By August 2001, the defendants had a total of 57.23% of iProp’s shares, making them the largest single shareholder of iProp. This was achieved by the acquisition of additional shares amounting to 44.44%.

5 In relation to the proposed acquisition of the said additional shares, the two deeds in issue came into being. There was concern that the Monetary Authority of Singapore (“MAS”) might not approve the acquisition of the additional shares because of its policy that banks should not own more than a certain percentage of non-core banking businesses. To meet this concern, and also because the first defendant’s senior management was not keen to increase its investment in iProp, a back-to-back arrangement, with the object of divesting the defendants’ additional shares in iProp to a third party, was conceived. This resulted in the two deeds mentioned earlier. These two deeds were contingent upon the defendants successfully acquiring the additional shares in iProp.

6 Three officers of the first defendant handled the investments in iProp and JLI – Winston Koh (“Koh”), a senior vice-president, Simon Seow (“Seow”) and Ng Chee Yong (“Ng”), both vice-presidents. Koh and Seow were the defendants’ nominees as directors in iProp. After iProp became a subsidiary, Koh became chairman of the board of directors of iProp. At the time of commencement of the present proceedings, these three officers had left the first defendant’s employment.

7 When iProp became a subsidiary of the defendants, there was a change in its Chief Executive Officer. The defendants appointed Riady Hardjabrata (“Riady”) in place of Alex Koo (a founder of iProp), who remained a minority shareholder.

8 Under the JLI Deed, JLI was required, within 30 days of the first defendant acquiring the additional shares and of iProp becoming the first defendant’s subsidiary, to enter into an agreement with iProp (“iProp Assets Sale Agreement”) in accordance with the terms and conditions set out in the schedule to the deed, also referred to as “the term sheet”. The object of the iProp Assets Sale Agreement was to enable JLI to acquire all of iProp’s business and assets, including its cash-in-hand. In return, JLI would issue new JLI shares to iProp such that iProp would hold just one share short of 50% of JLI’s expanded share capital. Under the JLI deed, time was of the essence. There was also a confidentiality clause which prohibited the parties to the deed from disclosing the negotiations relating to the deed, the existence of the deed and its contents without the prior written consent of the other parties.

9 Besides the iProp Assets Sale Agreement, the other consequential transactions which the parties had to enter into were:

(a) JLI and JLIH were to “buy over” the additional shares from the defendants. In relation to JLI, this would be done by JLI issuing shares equivalent to 16% of its enlarged share capital to the defendants. As for JLIH, although it was a “purchaser” of the additional shares, JLIH would not have to make immediate payment for the purchase. Instead, the defendants would be granted an option to buy back the additional shares from JLIH, which would have to pay for the shares only if and when the same were sold to third parties; and

(b) JLI and JLIH were also required by the defendants to use a part ($1.5m) of the cash that JLI would obtain from iProp to buy over from the defendants their shares in Bizibody.com and Ezybills, two other investee companies of the first defendant, so that the defendants’ accounts would show that the money that they had invested in those two investee companies were fully recovered.

It was not in dispute that these consequential transactions were contingent upon the execution of the iProp Assets Sale Agreement. Since that did not happen, the consequential transactions did not materialise.

10 On the same day that the two deeds were executed, the MAS wrote to inform the first defendant that it would be permitted to acquire the additional shares, with no conditions attached. In the light of this pleasant development, Koh told Ng that there could be better ways of utilising the spare cash of iProp, which would have gone to JLI.

11 On 29 August 2001, the first defendant completed the acquisition of the additional shares. Accordingly, JLI and iProp had to conclude the iProp Assets Sale Agreement within 30 days as spelt out in the JLI deed. However, the first defendant did not inform JLI of the event and of the need to proceed to conclude the iProp Assets Sale Agreement with due despatch. The iProp Assets Sale Agreement was not executed by the said deadline or by the extended deadline of 13 October 2001. This led to the eventual voluntary liquidation of iProp by its members on 27 March 2002 and the present action in which JLI and JLIH complained that the defendants had failed to fulfil their obligations under the JLI deed as they were required to procure the execution of the iProp Assets Sale Agreement by iProp.

Findings by the trial judge and the Court of Appeal

12 Kan J held that the defendants did not take reasonable steps or use their best endeavours to procure the execution of the iProp Assets Sale Agreement by iProp and were therefore in breach of their contractual obligations under the JLI deed. Accordingly, he ordered that interlocutory judgment be entered against the defendants with costs, with damages to be assessed by the registrar. On appeal by the defendants, the Court of Appeal held that the defendants took very perfunctory action and said that the argument that the defendants had satisfied their contractual obligation to use their best endeavours by doing nothing where iProp was concerned, plainly contradicted what they were obliged to do. It was clear, the Court of Appeal opined, that the defendants had changed their minds about the deal. In the result, the Court of Appeal endorsed the ruling of the trial judge and dismissed the appeal.

Assessment of damages by the registrar

13 The matter proceeded before an assistant registrar for assessment of damages over five days. The plaintiffs had one witness of fact (Kwa) and an expert witness (Rohan Kamis). The defendants called their own expert witness (Andrew Grimmett) and subpoenaed two witnesses of fact (Alex Koo, the former Chief Executive Officer and a minority shareholder of iProp, and David Leong, the former Chief Operating Officer and also a minority shareholder of iProp). At the conclusion of the hearing, written submissions were filed by the parties. The assessment proceeded on the basis of a loss of chance at acquiring the assets of iProp. The assistant registrar identified the following three issues for her determination:

(a) Was causation a live issue in the assessment of damages?

(b) Did the plaintiffs manage to prove causation on a balance of probabilities?

(c) If causation had been proved, what was the appropriate measure of the value of the loss of the chance?

14 On the first issue spelt out above, the plaintiffs took the position that the defendants were no longer entitled to raise the argument that the plaintiffs had failed to show causation because the trial judge and the Court of Appeal had already made positive findings on this point...