KLW Holdings Ltd v Straitsworld Advisory Ltd and another

• Jurisdiction: Singapore
• Judge: Hoo Sheau Peng JC
• Judgment Date: 24 February 2017
• Neutral Citation: [2017] SGHC 35
• Plaintiff Counsel: Hing Shan Shan Blossom, Tan Yi Yin Amy and Chong Yi-Hao Clayton (Drew & Napier LLC)
• Date: 24 February 2017
• Docket Number: Suit No 1199 of 2015 (Registrar’s Appeal No 381 of 2016)
• Hearing Date: 10 November 2016,17 November 2016
• Subject Matter: Summary judgment,Civil Procedure
• Year: 2017
• Defendant Counsel: Ling Daw Hoang Philip, Yap Jie Han and Ho Wei Li (Wong Tan & Molly Lim LLC)
• Court: High Court (Singapore)
• Citation: [2017] SGHC 35
• Published date: 18 October 2017

Hoo Sheau Peng JC:

This was an appeal by the defendants, Straitsworld Advisory Ltd (“Straitsworld”) and Michael ET Chan (“Mr Chan”), against the decision of the learned Assistant Registrar Paul Tan Wei Chean (“the AR”) granting summary judgment in favour of the plaintiff, KLW Holdings Ltd (“KLW”), pursuant to an application under Order 14 Rule 1 of the Rules of Court (Cap 322, R5, 2014 Rev Ed) (“ROC”) (“the summary judgment application”). After hearing the parties, I dismissed the appeal. The defendants have appealed against my decision. I now set out my reasons.

Background facts The parties

KLW is a company incorporated in Singapore and listed on the Singapore Exchange (“SGX”), with businesses in property development and property investment.

Straitsworld is a company incorporated in the British Virgin Islands. Mr Chan is, and was at all material times, the sole shareholder and director of Straitsworld. Prior to 2005, Mr Chan was an investment banker. Since then, he has been a businessman.

Dealings between the parties

From sometime in 2010, KLW and Mr Chan have been involved in business dealings. Negotiations took place mainly between Mr Chan and KLW’s former chief executive officer (“CEO”) and managing director, Lee Boon Teck (“Mr Lee”). In particular, Mr Chan recommended to KLW some potential investments in property development projects. These transactions were documented by way of term sheets. Each term sheet would briefly set out the potential investment, and provide for the payment of a commitment fee by the potential investor. Should a definitive agreement be signed by the parties within a specified period in relation to the investment, the commitment fee would form part of the investment. Otherwise, the commitment fee would be refunded.

Project Happy

Essentially, KLW’s claim was for the return of such a refundable commitment fee in the sum of S$7m (“the Commitment Fee”) paid under a term sheet signed by the parties on or around 25 May 2015 (“the Project Happy Term Sheet”). Under the Project Happy Term Sheet, the defendants proposed to introduce to KLW a potential transaction to acquire and develop a property in Vietnam (“Project Happy”).

The Project Happy Term Sheet comprised a preamble and two parts, namely Part A and Part B. The preamble set out, inter alia, that the Project Happy Term Sheet would contain “certain key indicative terms of [the] potential transaction”. The preamble also provided that:

This Term Sheet does not constitute a binding agreement between the parties relating to [Project Happy], save and except that Part B of this Term Sheet shall constitute legally binding obligations as between the parties. This Term Sheet is not intended to be, and is not, an exhaustive description of the agreement, arrangement or understanding between the Parties relating to [Project Happy].

Under Part A, it was stated that KLW’s investment in Project Happy would be subject to five “conditions precedent”, including due diligence by KLW, the approval of KLW shareholders if required, and most importantly, the “execution of a definitive agreement on [Project Happy]”.

Then, Part B, which contained the legally binding provisions, provided as follows under a section entitled “Refundable Deposit”: The parties acknowledged that on 21 June 2014, Straitsworld and KLW’s wholly-owned subsidiary Ambertree Pte Ltd (“Ambertree”) had entered into an agreement (“the Zhangye Development Term Sheet”), in relation to a property development project in Zhangye, China. Pursuant to the Zhangye Development Term Sheet, KLW had paid Straitsworld a commitment fee of S$7m. The Zhangye Development Term Sheet stipulated that the commitment fee would be refunded to Ambertree if a definitive agreement was not signed by 15 July 2014. No such definitive agreement was executed. The parties agreed that within 90 days of the Project Happy Term Sheet, the commitment fee would be paid into an escrow account held on trust for KLW. The amount would be utilised as part of the funding required under any definitive agreement between the parties for Project Happy or for any other transaction acceptable to KLW. If no such definitive agreement was entered into within 180 days of the date of the Project Happy Term Sheet, the amount was to be refunded to KLW forthwith. Mr Chan undertook to fulfil the payment obligations of Straitsworld under the Zhangye Development Term Sheet and the Project Happy Term Sheet.

As it transpired, the parties did not enter into any definitive agreement within 180 days from the date of the Project Happy Term Sheet, nor at any time thereafter.

The previous action

On 7 September 2015, KLW commenced Suit No 918 of 2015 (“the previous action”) against Mr Chan for a repayment of the Commitment Fee. On 30 September 2015, Mr Chan filed a Defence and Counterclaim (“the Defence in the previous action”). On 4 December 2015, KLW withdrew the previous action, acknowledging that it had been commenced before the date KLW was entitled to the refund of the Commitment Fee, ie, 21 November 2015.

The present action

On 25 November 2015, KLW brought the present action on essentially the same grounds, ie, for the repayment of the Commitment Fee, against both Straitsworld and Mr Chan.

On 18 December 2015, the defendants filed a Defence and Counterclaim (“the Defence”). On 3 May 2016, KLW filed the summary judgment application. After the due date to show cause, the defendants applied for leave to amend the Defence (“the amendment application”). The AR disallowed the defendants leave to make substantive amendments, and the defendants appealed. On 10 August 2016, I substantially dismissed the appeal, but allowed the defendants leave to introduce a new defence that the defendants had already repaid S$2m out of the Commitment Fee to KLW (“the S$2m repayment defence”).

Accordingly, on 24 August 2016, the defendants filed the Defence and Counterclaim (Amendment No 1) (“the amended Defence”). Three substantive defences were pleaded: The misrepresentation defence. At para 9, the defendants alleged that in May 2015, Mr Lee made false oral representations to the effect that: KLW had agreed to invest in Project Happy by authorising the application of the commitment fee from the Zhangye Development Term Sheet towards Project Happy; Notwithstanding the contents, the Project Happy Term Sheet was a mere formality that had to be executed before KLW could enter into a definitive agreement with Straitsworld to invest in Project Happy; and KLW would execute the definitive agreement on Project Happy once it was prepared by its lawyers. Relying on the misrepresentations, Mr Chan was induced to execute the Project Happy Term Sheet. However, Mr Chan discovered that the representations were not true because KLW did not prepare a definitive agreement, nor did it intend to enter into such a definitive agreement. Further, Mr Lee stopped all communications with Mr Chan after the Project Happy Term Sheet had been executed. KLW’s sole purpose was to induce Mr Chan to become personally liable for Straitsworld’s repayment of the Commitment Fee. The S$2m repayment defence. At paras 10 and 11, it was alleged that Mr Lee informed Mr Chan that KLW’s board of directors had requested for the Commitment Fee to be reduced to S$5m (being 10% of the value of Project Happy which was said to be S$50m). KLW’s board of directors would approve proceeding with Project Happy on that basis. Mr Chan agreed, and this accounted for the return of S$2m to KLW in two tranches of S$1.8m and S$200,000. The no consideration defence. At para 13, it was claimed that that no consideration was given for the defendants to enter into the Project Happy Term Sheet, in particular for Mr Chan to undertake to personally fulfil Straitsworld’s payment obligation to refund the Commitment Fee.

Thus, Straitsworld counterclaimed against KLW for the repayment of S$2m, or the right to set off S$2m from any sum that Straitsworld might be found liable to pay to KLW. Mr Chan counterclaimed against KLW for a declaration that the Project Happy Term Sheet be rescinded against him, and for damages, interest and costs.

In the Reply and Defence to Counterclaim (Amendment No 1) filed on 7 September 2016, KLW denied that the alleged representations were made to Mr Chan, and that he had relied on them and was thus induced to enter into the Project Happy Term Sheet. In relation to the S$2m repayment defence, KLW stated that the amount had nothing to do with Project Happy. On 3 April 2014, KLW and an Indonesian company PT Atlas Sutera Jaya (“PT Atlas”) entered into an agreement (“the Project Bali Term Sheet”) relating to a property development project in Indonesia known as “Project Bali”. A sum of S$2.2m was paid as the refundable commitment fee. As no definitive agreement materialised, the sum of S$2.2m was due to be refunded to KLW, and the S$2m was a partial refund of the amount. Lastly, KLW denied that no consideration was provided for the Project Happy Term Sheet.

The decision below

Before the AR, the defendants resisted the summary judgment application by arguing that the three aforementioned defences raised triable issues. Also, the defendants submitted that the lack of sufficient evidence and candour on KLW’s part constituted “some other reason” why there ought to be a trial on this matter. KLW countered that the three defences were not bona fide, and that there was no other reason for the matter to go to trial. As the parties’ submissions before the AR were substantially the same as those raised before me, I shall deal with them in my analysis below. For now, it suffices for me to say that the AR agreed with KLW, and granted summary judgment for KLW against the defendants in the sum of S$7m, with interest and costs.

My decision

The principles relating to summary judgment are well-settled. In order to obtain judgment, a...