Lim Koon Park v Yap Jin Meng Bryan and others

• Jurisdiction: Singapore
• Judge: Lai Siu Chiu J
• Judgment Date: 07 August 2012
• Neutral Citation: [2012] SGHC 159
• Court: High Court (Singapore)
• Hearing Date: 19 March 2012,13 March 2012,02 March 2012,14 March 2012,20 March 2012,05 March 2012,06 March 2012,12 March 2012,07 March 2012,02 May 2012,01 March 2012,15 March 2012,09 March 2012,16 March 2012,08 March 2012
• Docket Number: Suit 184 of 2010/Z
• Plaintiff Counsel: Josephine Choo and Emily Su (WongPartnership LLP)
• Defendant Counsel: Vinodh Coomaraswamy SC, Georgina Lum and Victoria Ho (Shook Lin & Bok LLP)
• Subject Matter: Contract,Oral Agreement,Misrepresentation,Companies,Minority Oppression,Breach of Director's Duties
• Published date: 15 April 2014

Lai Siu Chiu J: Introduction

This suit centres around two properties, situated at Nos. 428 and 434 River Valley Road, Singapore (“the properties”), during the heady days of property investment before the 2008 global financial crisis. The main actors sought to leverage on their collective expertise to embark on a joint venture to acquire, possibly develop, and eventually sell the properties for a profit. Lim Koon Park (“the plaintiff”) was the architect, Yap Jin Meng Bryan (“the first defendant”) was the financier, Lim Geok Lin Andy (“Andy”) was the seasoned property developer while Tan Swee Hu Clarence (“Clarence”) was the administrator. Wee Pek Joon (“the third defendant”), the wife of the plaintiff, was joined as an unwilling co-defendant to this action. Riverwealth Pte Ltd (“the second defendant”) was the company incorporated to acquire and hold the properties until they could be sold.

The facts The background

In 2006, the first defendant was a high-flying banker in the Asset Management Division of Deutsche Bank Group (“the Bank”). In the course of sourcing out potential real estate projects for the Bank, the first defendant consulted and had regular discussions with Andy, an old friend, whose family business dealt in building materials and real estate development. Andy eventually introduced the first defendant to the plaintiff, who joined the regular discussions, and the three became fast friends. The first defendant and the plaintiff saw their relationship as being mutually beneficial – the first defendant sought to tap the industry knowledge of the plaintiff (as he is an architect) while the plaintiff had hopes of being appointed by the Bank as a project manager on one of the potential real estate projects.

While nothing did materialise as far as the Bank was concerned, the seeds of future cooperation between the parties were sown as the first defendant entertained thoughts of investing personally in smaller scale projects, and was keen to leverage on the expertise and industry knowledge of both Andy and the plaintiff. This led to the incorporation of Land Acquisition Advisory N Development Pte Ltd (“LAAnD”) on 10 May 2007, with Clarence (a trusted friend of the first defendant) holding 50% of the shares, the plaintiff 25% of the shares, and Andy the remaining 25%. The first defendant did not take up any shareholding as he was still with the Bank.

Surfacing of the properties and incorporation of the second defendant

In early July 2007, the plaintiff informed the first defendant, Andy and Clarence that No 434 River Valley Road (“No 434”) was up for sale. The erstwhile owner of No 434 was ExxonMobil Asia Pacific Pte Ltd (“Exxon”). The plaintiff learnt about the sale as he was engaged by CB Richard Ellis (“CBRE”), who represented Exxon, to assist them in submitting an Outline Application to the Urban Redevelopment Authority (“URA”) for the development of No 434 into residential flats with attic and swimming pool. In that Outline Application submitted to the URA, the gross plot ratio of No 434 was stated to be 1.4.

The plaintiff, however, believed that it was possible to secure approval from the URA for a higher plot ratio of 2.8 for No 434 and duly communicated this to the first defendant, Andy and Clarence. This understandably sparked great enthusiasm among the foursome as a higher plot ratio meant that the property could be developed at a greater intensity, meaning there was significant commercial gain to be had by purchasing No 434 (which plot ratio was perceived by the market to be 1.4), applying for the plot ratio to be increased to 2.8 and then selling or developing the property. Eager to take advantage of what appeared to be an attractive commercial opportunity, the parties arranged a consultation in September 2007 with one Timothy Lee (“Lee”), a senior planner at the URA. At that meeting, the plaintiff, being an architect and the only one with the industry knowledge, led the discussions. Following the meeting, the parties decided to proceed with their plan as there was money to be made.

Subsequently, on 28 September 2007, the parties incorporated the second defendant. At incorporation, the directors and shareholders of the second defendant were Andy (50% shareholding), the third defendant (25% shareholding) and Clarence (25% shareholding). The first defendant injected all of the initial paid-up capital of the company ($10,000) and held 50% beneficial interest through the shareholdings of Andy and Clarence. This arrangement was adopted as the first defendant was still a director of the Bank and was sensitive about his disclosure obligations. The third defendant took up the 25% shareholding in accordance with the plaintiff’s preference and no one objected.

As stated in [1], the second defendant was incorporated as a special investment vehicle for the specific purpose of purchasing the properties. On 18 December 2007, the option to purchase No 434 was signed. The parties also began negotiations for the purchase of the adjoining plot at No. 428 River Valley Road (“No 428”) as they believed that they could maximise returns by selling, or developing, the two properties together. On 6 March 2008, the option to purchase No 428 was inked.

Financing

Financing was critical, especially since this was the parties’ maiden foray into property investment as a team. The bulk of the requisite funds came from Hong Leong Finance, which provided a $30m loan to the second defendant, equivalent to 61.8% of the purchase price of the properties (which was $48.5m). The loan was guaranteed by the first defendant, the plaintiff, and Andy, jointly and severally. In addition, the first defendant extended a personal loan of $22.58m to the second defendant, and injected all of the second defendant’s equity capital ($1m).

The first defendant leaves the Bank

Around April 2008, the first defendant left the Bank and became a director of the second defendant. He also assumed legal ownership of 50% of the shares of the second defendant, hitherto held on his behalf by Andy and Clarence, and thereby became the majority shareholder of the second defendant. Around this time, Daun Consulting Singapore Private Limited (“Daun”) was also incorporated, as a vehicle through which the first defendant and Clarence were to provide management services to the second defendant. The plaintiff was also officially appointed architect for the project through his firm, Park+Associates Pte Ltd.

Dark clouds gather

Meanwhile, a major financial storm was brewing. Jones Lang LaSalle (“JLL”) had initially valued the properties at $80m with a maximum plot ratio of 2.8. Based on this valuation, the second defendant had engaged CBRE as its marketing agent for an exclusive period of 4 months. Unfortunately, the financial tsunami hit the shores of Singapore around that time, the property market moved southward and there was no investor or buyer in sight. This put the parties in a financial bind as the lukewarm property market led to an increased holding period for the properties; that meant that the first defendant, who was the sole financier of the project, had to pump even more money into the venture to meet the additional financing costs (interest payments) that were incurred.

Relations thaw

The erstwhile marriage of convenience between the parties soon crumbled under the stress and vicissitudes of the market. Given the extra cash he had to inject and his increased risk exposure, the first defendant wanted the shares held by Andy and the third defendant to be returned to him, or for them to pay for those shares. The honeymoon, so to speak, was over. Andy decided to give up his shares and completed the transfer of all his shares to the first defendant on 27 March 2009. The third defendant returned 12% of her shareholding to the first defendant but refused to return the remainder.

Earlier, around March 2008, the parties had also started to discuss how profits, if any, were to be shared. This was the gravamen of the dispute before the court – the parties took diametrically opposed positions which will be discussed later. It suffices to say at this juncture that the dispute about profit sharing caused the breakdown in the parties’ relationship.

The infighting manifested itself in the boardroom of the second defendant. Matters escalated and the third defendant was told that she should either pay for her remaining 13% stake in the second defendant or resign as a director. The plaintiff on his part started to question Daun’s role in Riverwealth, and demanded fees for his architectural services. The third defendant, in her erstwhile capacity as a director of the second defendant, requested for financial records and account books. She was eventually removed as a director of the second defendant on 12 August 2009 at an extraordinary general meeting (“EGM”).

Meanwhile, the first defendant and Clarence started probing into how the plaintiff arrived at the view that the maximum plot ratio of the properties could be increased to 2.8. This was after they heard from different sources that the properties never had a maximum plot ratio of 1.4. Rather, they were told that at all material times, the properties already had a plot ratio of 2.8. After consulting CBRE, Lee (from URA), and Dr Goh Chong Chia (“Dr Goh”) (who was the first and second defendants’ expert), they took the view that the plaintiff had misrepresented the applicable maximum plot ratio of the properties since 2006.

Sale of the properties

On 19 September 2009, another EGM of the second defendant was held, and it was resolved that the properties would be sold “on such terms and to such parties as may be approved by the directors”. This EGM was attended by the third defendant’s proxy, Srinivasan s/o Namasivayam (“Srinivasan”), who is a lawyer. At the EGM, Srinivasan informed the first defendant and Clarence that Colliers International (“Colliers”)...