Lee Pei-Ru Alice and another v Airtrust (Singapore) Pte Ltd

JurisdictionSingapore
JudgeTay Yong Kwang J
Judgment Date25 November 2013
Neutral Citation[2013] SGHC 259
CourtHigh Court (Singapore)
Docket NumberSuit No 523 of 2011
Published date23 January 2014
Year2013
Hearing Date02 October 2013,26 September 2013,04 October 2013,25 September 2013,24 September 2013
Plaintiff CounselAaron Lee, Clement Julien Tan, Ms Koh En Ying and Ms Seow Wan Jun (Allen & Gledhill LLP)
Defendant CounselMs Rajan Menon Smitha, Mohamed Nawaz Kamil and Ms Michelle Neo (WongPartnership LLP)
Subject MatterContract
Citation[2013] SGHC 259
Tay Yong Kwang J: Introduction

This suit concerned alleged oral assurances allegedly made by the late Peter Fong (“Peter”) that certain investments made by the first plaintiff, Alice Lee Pei-Ru (“Alice”) and the second plaintiff, Fong Wei Heng (“Wei Heng”) would be repaid by the defendant, Airtrust (Singapore) Pte Ltd (“Airtrust”). I allowed the claim and ordered the investment sums to be repaid. The defendant has appealed against my decision.

Background

Alice is Peter’s widow. Wei Heng is the only son of Peter and Alice. When the purported oral assurances were made, Linda Kao (“Linda”) was (and continues to be) the managing director of Airtrust while Evelyn Ho (“Evelyn”) was Peter’s personal assistant. Peter also had daughters from an earlier marriage.

Peter was a successful businessman. He had an impeccable reputation of always keeping his word. In 1972, he founded Airtrust, a company with dealings in the power, oil and gas industries. He remained the chairman and a director of Airtrust until he passed away on 25 April 2008. He held a majority of the issued and paid up share capital of Airtrust. On 3 January 2006, Peter transferred 51% of the issued share capital in Airtrust to Fong Foundation Limited (“Fong Foundation”), a public company limited by guarantee to promote charitable, educational and cultural causes, with the intention of having the Fong Foundation run Airtrust after his demise. At the material time from September to December 2006, all the directors and registered shareholders of Airtrust, with the exception of Linda and Evelyn, were members of Peter’s family. Peter was practically the alter ego of Airtrust.

Since 2003, Airtrust was a 40% shareholder in a Belize company named Southern Cross Ltd (“Southern Cross”). Kenneth Cooper (“Cooper”) held 40% of the shares in Southern Cross, while Anton Soleiman and Hsien Yoong How (“Hsien”) held 17% and 3% respectively.

Sometime in 2006, Southern Cross planned a project to purchase and convert a vessel, the MV Cobalt Transport (“the MV Cobalt”) into a barge and accommodation vessel for deployment in charter contracts supporting oil rig operations in remote areas. The total cost for the purchase and conversion of the MV Cobalt was initially projected at about USD 8m. However, due to a budget overrun, the total cost escalated to about USD 11m. Southern Cross could not afford this overrun. As the MV Cobalt was to be used in a valuable charter project with a Japanese Company, Impex Masela Limited (“the Impex contract”), it was crucial that the conversion be completed before December 2006.

Cooper, on behalf of Southern Cross, approached Peter for assistance in procuring an additional USD 2.2m. Airtrust was, however, facing cash-flow problems at that time. Peter agreed to look for additional external investors who, collectively, would be entitled to the following rights: 20% of the net profit of the Impex contract, together with a return of the USD 2.2m; or Conversion of the USD 2.2m into 20% equity ownership of the MV Cobalt after one year of the sum of USD 2.2m being advanced or completion of the Impex Contract, whichever was earlier.

Peter approached the following people to invest: Dr Goh Hak Su (“Dr Goh”), Professor Yeoh Kian Hian (“Professor Yeoh”), Henry Lim (“Henry”), Linda and Alice (for herself and Wei Heng, then a minor). Peter also procured the Fong Foundation to invest. All the people approached, save for Linda who declined, initially invested the following amounts in September 2006:

Person(s) Amount invested in Singapore Dollars
Alice and Wei Heng 863,500
Dr Goh 863,500
Professor Yeoh 431,750
Henry 431,750
Fong Foundation 851,500

The money for Alice and Wei Heng’s investment was paid by Coronation Housing Pte Ltd (“Coronation Housing”), a company jointly owned by Peter and Alice. Sometime in November 2006, Coronation Housing was repaid S$863,500, with interest, in the following manner: S$431,750, with interest, was paid by Alice after she received funds from the proceeds of the sale of a property owned by a New Zealand company, Henley Downs Holding Limited. Fong owned 80% of the aforementioned company. S$431,750, with interest, was paid by the Fong Foundation.

A spate of withdrawals then occurred. The exact circumstances surrounding the withdrawals were contentious and shall be examined further below.

Sometime in November 2006, Alice approached Peter to halve her and Wei Heng’s investment in the MV Cobalt. Peter procured the Fong Foundation to take over the half share by paying S$431,750 to Alice. Dr Goh approached Peter in December 2006 to withdraw his investment and Peter got Alice to take over the entirety of Dr Goh’s investment. The $863,000 that was used to repay Dr Goh ultimately came from a trust account meant for Wei Heng. Henry approached Peter in October 2007 to withdraw his investment. Peter arranged for Airtrust to repay Henry in full. After Peter passed away, Professor Yeoh approached Linda sometime in October 2008 to withdraw his investment. Similarly, Airtrust repaid Professor Yeoh in full.

Thus, after October 2008, Alice and Wei Heng together with the Fong Foundation were the only investors remaining. They had by then invested a total of S$1,295,250 and S$1,283,250 respectively. Unfortunately, the MV Cobalt project became, and is still currently, engaged in contentious litigation in Indonesia.

On 28 July 2011, the plaintiffs filed this suit, seeking repayment of the sum of S$1,295,250 from Airtrust. This suit is one of the many legal battles that currently plague the late Peter’s family and businesses. Due to the legal strife, receivers and managers were appointed by consent on 17 January 2012 to manage Airtrust.

The respective cases

The plaintiffs asserted that Peter was confident about the MV Cobalt and represented to investors that their investments in the MV Cobalt were without risk. Peter was the controlling mind and will of Airtrust. Peter, for and on behalf of Airtrust, had covenanted with the investors that they could terminate and exit their investments at any time by looking to Airtrust to repay their advances. Further and/or in the alternative, Peter (for and on behalf of Airtrust) had assured the Plaintiffs and Henry that their investments were without risk and agreed to indemnify them and keep them indemnified for any loss or damage to their investments.

The defendant asserted that Peter did not represent to Alice that the plaintiffs’ investment could be terminated at any time and that the sums advanced would be repaid by Airtrust. Peter also did not commit to Airtrust indemnifying the plaintiffs’ investment. If there was any assurance given by Peter to Alice, it was, at most, a personal assurance that the investment was safe and that he would support it. There was no intention to create legal relations. Even if Peter had undertaken a legally binding obligation to repay the investment sum upon request, this was done in his personal capacity and not on behalf of Airtrust. There was thus no obligation on the part of Airtrust tore pay the plaintiffs the sums claimed.

The issues raised

Accordingly, the issues raised were as follows: Did Peter make representations to Alice to the effect that the plaintiffs would be able to exit their investments at any time and would be repaid and/or be indemnified by Airtrust for any loss or damage to their investments? If such representations were made, were they of any legal effect? If they were of legal effect, were they made by Peter in his personal capacity or on behalf of Airtrust?

The plaintiffs’ evidence

With respect to the plaintiffs’ initial investment, Alice averred in her affidavit of evidence-in-chief (“AEIC”) that:

Peter Fong told us that if we advanced money to Airtrust, it would be without risk as Airtrust would underwrite it. Wei Heng and I could terminate our investment arrangement at any time by asking Airtrust to repay the principal sum advanced by us, in full and final settlement against both Airtrust and Southern Cross.

Similarly, with regard to the plaintiffs’ second investment, where Alice took over Dr Goh’s investment, she averred in her AEIC that:

Peter said that I would have the same investment terms as Dr Goh.

Under cross-examination, Alice said that:

I have the same terms as myself, the first investment, and that is I have the right that this investment is without risk, I have the right to exits [sic], and Airtrust will pay me back.

Documentary evidence

A key document corroborating the plaintiffs’ version of events was an email from Linda to Alice sent on 31 March 2009 (“the 31 March email”). Due to the importance of this email, I shall set it out in full below (Wei Heng is referred to as Wei Wei in the email):

Hi Alice,

I would like to recap what we discussed on Sunday and give you my views.

Investment in MV “Cobalt” in Southern Cross is still recorded in the books of Southern Cross and protected by the asset (MV “Cobalt”). Lawyers are still fighting the cases with Indonesian creditors. If amicable solution can be found, we will still pursue to complete the vessel for sale/charter. There is no definite time line for settlement but it is not a hopeless case. I can understand the need of Wei Wei’s maintenance cost and I share with you that renting out the Peak may be a reasonable course of action. I can also agreed that Mr. Fong had assured all of us that the investment was without risk and would be supported by Airtrust as a last resort. However, to involve Airtrust in “re-financing” Wei Wei’s investment, I see only 2 alternatives: Airtrust to take over the investment (in which case, I am not in a good position to decide for Airtrust, in the capacity of managing director) Airtrust to extend a personal loan to Wei Wei as a shareholder (with...

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