Liberty Sky Investments Ltd v Goh Seng Heng and another

JurisdictionSingapore
JudgeAudrey Lim JC
Judgment Date20 February 2019
Neutral Citation[2019] SGHC 39
Plaintiff CounselHarpreet Singh Nehal S.C., Keith Han and Tan Tian Yi (Cavenagh Law LLP)
Docket NumberSuit No 1311 of 2015
Date20 February 2019
Hearing Date05 October 2018,01 October 2018,03 October 2018,12 October 2018,02 October 2018,08 October 2018,04 October 2018,11 October 2018,03 December 2018,09 October 2018,10 October 2018
Subject MatterEquity,Bar to rescission,Contract,Misrepresentation,Misrepresentation Act, section 2(1),Fraudulent,Remedies,Rescission,Innocent misrepresentation
Year2019
Defendant CounselLok Vi Ming S.C., Joseph Lee, Evans Ng and Kelly Tseng (LVM Law Chambers LLC)
CourtHigh Court (Singapore)
Citation[2019] SGHC 39
Published date12 February 2020
Audrey Lim JC: Introduction

The plaintiff Liberty Sky Investments Limited (“LSI”) commenced this suit against the first defendant (“Goh”) and the second defendant (“Michelle”), Goh’s daughter, essentially for misrepresentations made to LSI’s representatives Florence Gong (“Florence”) and her husband Andy Lin (“Andy”). LSI alleged that the representations induced it to enter into a Sale and Purchase Agreement (“SPA”) to buy 32,049 shares in Aesthetic Medical Partners Pte Ltd (“AMP”) from Goh for $14,422,050. On 24 November 2015, LSI proceeded to rescind the SPA. LSI now seeks a declaration that the SPA had been validly avoided and rescinded and for the return of its money and other reliefs. The defendants deny that they made the representations as claimed by LSI, and claimed that LSI has wrongfully rescinded the SPA and sought damages for wrongful rescission. At the end of the trial, LSI’s counsel, Mr Singh SC, stated that LSI would not be proceeding in its claim against Michelle.1

Background

LSI is incorporated in the Seychelles with Florence as its sole director and shareholder. Goh, a medical doctor, founded AMP in 2008 to operate his medical practice at Paragon Shopping Centre. He then incorporated Aesthetic Medical Holdings Pte Ltd (“AMH”) which operated a chain of clinics (“PPP Clinics”) to provide laser facial treatments. Around 2012, AMH became a wholly-owned subsidiary of AMP. Goh was the Group Executive Chairman of AMP from 6 January 2012 to 30 June 2014 and a director from 1 September 2008 to 2 February 2016. Michelle was the Chief Executive Officer and director of AMP, and a director of AMH, at the material time. Goh and Michelle have throughout remained shareholders of AMP.

Plaintiff’s case Florence and Andy’s testimonies

In November 2013, Florence and Andy were introduced to Goh and Michelle in Shanghai by Nelson and Terence Loh (“Nelson” and “Terence”), who owned a minority shareholding in AMP through RSP Investments (“RSP”) and who were running a franchise of the PPP Clinic in China. Florence and Andy subsequently acquired the franchise rights to operate a PPP Clinic in Suzhou, China (“PPP Suzhou”). In September 2014, Florence met Goh and Michelle for the second time when she attended a training workshop organised by AMP. In early October 2014, Florence arranged to attend training sessions in Singapore conducted by AMP. PPP Suzhou was not doing very well and Florence was looking for a mentor to teach her business management and marketing skills. She thus began to correspond regularly with Goh whom she found to be an “excellent mentor” and whom she placed a “great amount of trust and confidence in”.2

On 23 October 2014, after the training sessions in Singapore, Goh invited Florence to dinner (“the 23 October 2014 dinner”) and said the following to persuade her to purchase his shares in AMP (“the SPA deal”):3 There would be a trade sale of all AMP shares to an important person in Singapore, which was imminent and would likely take place within one month; If the trade sale did not materialise, Goh intended to list AMP through an initial public offering (“IPO”) on the Singapore Exchange (“SGX”), and the IPO was targeted for completion around March to June 2015 and in any event no later than 24 months after any acquisition of AMP shares by LSI; and Goh required LSI’s financial support to buy out certain minority investors in AMP with voting rights who could stifle the trade sale or IPO (“Minority Shareholders”). At that time, he unable to do so as his money was “stuck” elsewhere (“the Minority Shareholders Representation”). The proposed trade sale and/or IPO will be called a “liquidity event” where convenient. Additionally, Goh also informed Florence that he would protect LSI’s investment by guaranteeing its capital.4 Florence sent a WeChat message to Andy that night to discuss the matter.5

On 24 October 2014, Florence met Goh and Lee Kin Yun (the Chief Operating Officer of AMH) (“Lee”) (“24 October 2014 meeting”) where Goh repeated the representations (at [4] above). He also stated that the SPA deal was an excellent investment opportunity as the trade sale would be to one Peter Lim, a Singapore billionaire investor, there was a “99% certainty” of a trade sale and that it would take place “very soon”. Goh told Florence that the negotiations on the trade sale were at an “advanced stage”, and if the trade sale did not occur, there would be an IPO of AMP on the SGX scheduled for March to June 2015. Goh also stated that he needed her money to buy out the Minority Shareholders as soon as possible, so that the liquidity event would not be jeopardised.6

That afternoon, Goh sent Florence a WhatsApp (which she forwarded to Andy) to “please persuade Andy to take up the [33,000 AMP] shares” as “it is a good deal [and] will help [Goh and Michelle] a lot”.7 In a telephone call Goh also informed Andy that he and Florence stood to profit as a trade sale or an IPO would take place very soon. Goh told Andy that the trade sale would be “imminent” and to an entity controlled by a prominent Singapore billionaire, Peter Lim. Goh also repeated that he needed money urgently to purchase the shares from the Minority Shareholders as his own money was stuck in China.8

On 25 October 2014 during a conference call among Goh, Lee, Florence and Andy, Goh reiterated that the trade sale or IPO would take place very soon. As the SPA deal had to be completed quickly, Florence and Andy did not have time to do due diligence on AMP. In addition to the guarantee on investment capital which Goh earlier suggested, Andy asked for an “internal rate of return” (“IRR”) of 15% per annum in order to protect their investment and to incentivise Goh to negotiate a trade sale price that was higher than the 15% IRR.9 Thereafter, Lee sent a draft Term Sheet to Florence (which she forwarded to Andy), for the sale of 32,049 of Goh’s AMP shares to Florence and/or Andy.10 The draft Term Sheet provided that AMP would guarantee the buyer’s capital, and a 15% per annum IRR for 12 months. On 27 October 2014, Goh emailed Florence and Andy to state that if they were not comfortable with the SPA deal they were free to pass, and Goh would have to pass too if the decision was not quick enough as timing was of the essence.11

On 29 October 2014, after further discussions, Andy proposed some amendments to the draft Term Sheet, in particular that AMP would guarantee the buyer its capital and a minimum of 15% per annum IRR for the first 24 months and the buyer could sell the shares back to the seller at the principal and IRR specified.12 Andy explained that the guarantee of the capital plus IRR was important to ensure that if the price of any trade sale was below the price Florence/Andy paid for Goh’s shares, they would still be assured of a 15% return per annum after two years, as they wanted their capital to be protected.13 On 4 November 2014, Lee forwarded a revised Term Sheet to Andy and Florence incorporating Andy’s suggested amendments.14 The revised Term Sheet contained further amendments to provide that: (a) in the event of an IPO or trade sale within 24 months, the 15% IRR and capital guarantee would not apply; and (b) if there was no IPO or trade sale after 24 months, the buyer could sell the shares back to the seller at the principal and IRR specified.15

On 10 November 2014, Lee informed Andy that AMP was “doing a dual track IPO and/or trade sale” and that the SGX IPO timing was targeted for around June 2015 – Lee followed up with an email to Andy (copied to Florence and Goh).16 On 12 November 2014, Lee circulated a draft SPA for Andy and Florence’s review.17 Several discussions ensued and the draft SPA was revised over several email exchanges. In particular, on 22 November 2014, Andy emailed Lee and Goh to propose that the capital and IRR were to be guaranteed by Goh in addition to AMP.18

On 23 November 2014, Goh sent a WhatsApp message to Florence stating that “Andy is the first shareholder [he] guarantee[d] capital [and] IRR” and that this was because he needed a quick decision and there was “no time” for Andy to do due diligence on AMP. Goh needed Andy to simply “trust [and] invest”.19 He also told Andy and Florence that he needed their cash as soon as possible to buy back shares from most of the Minority Shareholders.20 The next day, Goh emailed Andy and Florence to state that everyone needed “to move fast” as Goh needed the money to “take out a large number of minority shareholders with voting rights very quickly”. Goh also stated that he could not provide the guarantee and that it would be provided by AMP only. Goh reiterated that AMP was providing the guarantee as they had “not give[n] you sufficient time [and] material for [d]ue [d]iligence…we needed a quick decision…”21 Goh also informed Florence that “chances are that nobody need to guarantee anything once IPO or Trade Sales take place very soon”.22

On 25 November 2014, Andy emailed Lee to verify if the guarantee given by AMP was legally viable to ensure that the investment was capital-protected.23 Lee assured him that AMP was able to provide the guarantee. The guarantee was a “backstop” position in the event that the liquidity event fell through and also to incentivise Goh and AMP’s management to achieve a better trade sale price.24 Florence stated that LSI relied on Goh’s repeated representations and assurances that either a trade sale or an IPO would take place very soon, and that he required her and Andy’s money to buy out the Minority Shareholders.

On 25 November 2014, LSI executed the SPA with Goh.25 In particular, clause 4(vii) of the SPA states as follows:26 In the event there is no IPO or trade sale at the end of the 24 months from SPA date, [LSI] can sell the above shares back to [Goh] or [AMP] …, at the principle [sic] and annualized IRR as specified above. The principle [sic] and the IRR return are guaranteed by...

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3 cases
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