Lim Koon Park and another v Yap Jin Meng Bryan and another

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 22 July 2013
• Neutral Citation: [2013] SGCA 41
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 107 of 2012 (Suit No 184 of 2010)
• Published date: 29 July 2013
• Year: 2013
• Hearing Date: 05 February 2013
• Plaintiff Counsel: Chelva Ratnam Rajah SC (instructed) (Tan Rajah & Cheah) and Srinivasan V N /Rahayu Mahzam (Heng, Leong & Srinivasan)
• Defendant Counsel: Sarjit Singh Gill SC/Lum Baoling Georgina/Ho Ching Ying Victoria Anne (Shook Lin & Bok LLP)
• Citation: [2013] SGCA 41

V K Rajah JA (delivering the judgment of the court): Introduction

This is an appeal against the decision of a High Court Judge (“the Judge”), and concerns the purchase of two properties situated at 428 and 434 River Valley Road (“the Properties”) (see Lim Koon Park v Yap Jin Meng Bryan and others [2012] SGHC 159, (“the Judgment”)). The parties had sought to leverage on their collective expertise to acquire, redevelop, and eventually resell the Properties for a profit. The dispute centres on an alleged oral profit-sharing agreement, and an alleged misrepresentation made prior to the acquisition of the Properties.

Undisputed facts Parties

The first appellant, Lim Koon Park (“Park”), was a professional architect and provided architectural expertise to the venture. The first respondent, Yap Jin Meng Bryan (“Bryan”), was a senior banker with the Asset Management Division of Deutsche Bank Group and agreed to secure financing for the venture. The second respondent, Riverwealth Pte Ltd (“Riverwealth”), was incorporated as a joint venture vehicle for the acquisition of the Properties. The second appellant, Wee Pek Joon (“Madam Wee”), is Park’s wife and held shares in Riverwealth at Park’s behest. Tan Swee Hu Clarence (“Clarence”) is a close friend of Bryan; Clarence held shares in Riverwealth as a proxy for Bryan and also provided management services to Riverwealth. Daun Consulting Singapore Pte Ltd (“Daun Consulting”) was the corporate vehicle through which Bryan and Clarence provided management services to Riverwealth. Lim Geok Lin Andy (“Andy”) provided the real estate and building materials expertise.

Background to the dispute

In 2006, Andy introduced Park to Bryan. Bryan subsequently entrusted Park with identifying potential en-bloc real estate opportunities for a real estate investment fund associated with Deutsche Bank Group. Park agreed to do so, hoping that this arrangement would pave the way for his appointment as a project manager for the en-bloc opportunities.

None of the potential projects recommended to Deutsche Bank Group came to fruition. Andy, Bryan and Park then decided to leverage on their collective expertise to buy, potentially redevelop, and resell smaller-scale projects. Andy and Park were to identify suitable properties, while Bryan was to utilise his connections in the finance industry to obtain the requisite financing.

To that end, Land Acquisition Advisory N Development Pte Ltd (“LAAnD”) was incorporated on 10 May 2007. Clarence held 50% of the shares on behalf of Bryan, while Andy and Park held 25% each. Bryan did not hold any shares as he was then still with Deutsche Bank Group.

In early 2007, Park informed Andy, Bryan and Clarence that 434 River Valley Road (“434 RVR”) was up for sale. Park knew about the sale because he was engaged by CB Richard Ellis, which was in turn acting for the sellers, ExxonMobil Asia Pacific Pte Ltd (“ExxonMobil”). Park assisted in the submission of an Outline Application to the Urban Redevelopment Authority (“URA”) for the redevelopment of 434 RVR into a residential development; in the Outline Application, the plot ratio of 434 RVR was stated as 1.4.

Park believed that it was possible to apply to the URA for an increase in the plot ratio of 434 RVR to 2.8. Park thus arranged for a meeting with Lee Yen Pin Timothy (“Timothy”), who was a senior planner at the URA. Andy, Bryan and Clarence were also in attendance. At the meeting, Timothy confirmed that a plot ratio of 2.8 would be approved.

On 28 September 2007, Riverwealth was incorporated as a vehicle for the purchase of the Properties. At the point of incorporation, Andy, Clarence and Madam Wee were the directors of Riverwealth. The shares were held in the following proportions:

Andy	50%
Clarence	25%
Madam Wee	25%

Clarence held his entire 25% share on behalf of Bryan; Andy held half of his shares (ie, 25% of the total number of shares) on behalf of Bryan. The beneficial ownership was thus:

Bryan	50%
Andy	25%
Madam Wee (alleged)	25%

Bryan was not the legal owner of any shares as he did not want to disclose his interest in Riverwealth to Deutsche Bank Group. Despite this, the entire $10,000 initial paid-up capital of Riverwealth was provided by Bryan. Park was not the legal owner of any shares as he was not a Singapore citizen and s 3 (read with s 2) of the Residential Property Act (Cap 274, 2009 Rev Ed) (“Residential Property Act”) prohibits the sale of land to companies with non-citizen directors and members. It was initially alleged by Bryan and Riverwealth that Madam Wee was in actuality holding her shares in Riverwealth on trust for Park, hence violating s 3 (read of with s 2) of the Residential Property Act. However, Bryan and Riverwealth ultimately did not pursue this point in proceedings below.

On 18 December 2007, the option to purchase 434 RVR was exercised for a sum of $36m. The parties subsequently proceeded to negotiate for the purchase of an adjoining plot — 428 River Valley Road — as they believed that they could maximise returns by developing the two plots together. On 22 February 2008, the option to purchase 428 River Valley Road was exercised for a sum of $12.5m.

The acquisition of the Properties was financed in two ways. First, a loan of $30m was extended by Hong Leong Finance to Riverwealth; this loan was jointly and severally guaranteed by Andy, Bryan and Park. Second, Bryan, in his personal capacity, extended a loan of $22,580,621.99 to Riverwealth and injected $1m of equity capital.

In March 2008, the parties discussed the issue of profit-sharing. The appellants and respondents diverge materially on this issue, which will be canvassed further below.

In April 2008, Bryan left Deutsche Bank Group, assumed legal ownership of his 50% beneficial share in Riverwealth, and became a de jure director of Riverwealth.

On 20 November 2008, Riverwealth’s equity shareholding was restructured. Riverwealth issued new shares to Bryan. Andy and Madam Wee’s respective shareholdings were diluted to 13% each, while Bryan’s share rose to 74%.

Due to the extra cash injection and increased risk exposure, Bryan wanted Andy and Madam Wee to either pay for, or transfer to him, their remaining allotments of shares in Riverwealth. Andy opted for the latter, and transferred his allotment to Bryan on 27 March 2009. Madam Wee did neither, and requested information on the financial records and account books of Riverwealth. She was then removed as a director of Riverwealth at an extraordinary general meeting (“EGM”) on 12 August 2009. The remaining directors of Riverwealth — Bryan and Clarence — passed a directors’ resolution on 4 September 2009 resolving to sell the Properties to Oxley JV Pte Ltd (“Oxley JV”). On 19 September 2009, another EGM was held where a shareholders’ resolution was passed to authorise the sale of the Properties to Oxley JV. Madam Wee, via a proxy, voted against this resolution.

Notably, Oxley JV was only incorporated on 22 September 2009. The Properties were sold to Oxley JV for a sum of $60.08m via a sale and purchase agreement signed on 8 October 2009. Oxley JV had substantially similar shareholders and directors with Oxley Wealth Pte Ltd (“Oxley Wealth”); further, Bryan was a director of Oxley Wealth from 3 September 2009 to 24 September 2009. This forms the basis for the allegation that the Properties were sold at an undervalue to a related party (see [20], [32] and [80] below).

Summary of pleadings

Park pleaded that on or about 24 September 2006, the parties had orally agreed to share the profits from any proposed joint venture in the following fixed proportion: 40% to Bryan, 30% to Park and 30% to Andy. This was subsequently varied in May 2007; the new proportions were: 50% to Bryan, 25% to Park and 25% to Andy. Park also averred that LAAnD was incorporated to reflect the varied oral agreement. The oral agreement also obliged Park to use his expertise to introduce developments with collective sale potential to financial institutions via Bryan’s contacts.

Park further pleaded that it was implied that the parties would not act in a manner contrary to the interests of Riverwealth. Park alleged that Bryan had acted in this manner by: failing to pay Park his 25% share of the profits from the sale of the Properties; selling the Properties to Oxley JV at an undervalue; diverting profits away from Riverwealth; and charging Riverwealth excessive interest for the personal loan which he extended.

Park also pleaded that Bryan, qua majority shareholder of Riverwealth, had oppressed him and Wee by unfairly excluding the both of them from management decisions regarding the sale of the Properties, unfairly removing Wee as a director of Riverwealth, diluting Wee’s shareholding and refusing to comply with requests for information and documents. Park also alleged that Bryan had breached his fiduciary duties as a director of Riverwealth by selling the Properties to Oxley JV at an undervalue in an interested-person transaction.

Contrariwise, the respondents, pleaded in their defence that no oral agreement was ever reached on 24 September 2006; there were only informal discussions on future opportunities at this point, and LAAnD was incorporated only for the purpose of evaluating property development opportunities.

The respondents, however, conceded that there was a profit-sharing agreement in place from September 2007 with regard to the Properties, whereby Bryan and Clarence were entitled to 50% of the profits, with Andy and Park entitled to 25% each. However, the agreement was merely indicative and would apply only if the following conditions were achieved: the Properties were to be resold within four months; the Properties were to be sold within the price range of $60m to $80m; and the risks and costs of holding the properties over time...