Loy Wei Ezekiel v Yip Holdings Pte Ltd and another matter

• Jurisdiction: Singapore
• Judge: Belinda Ang Saw Ean JCA
• Judgment Date: 06 December 2022
• Neutral Citation: [2022] SGHC(A) 43
• Citation: [2022] SGHC(A) 43
• Docket Number: Civil Appeal No 3 of 2022 and Summons No 26 of 2022
• Published date: 09 December 2022
• Year: 2022
• Plaintiff Counsel: Lim Tean (Carson Law Chambers)
• Defendant Counsel: Yeoh Oon Weng Vincent (Malkin & Maxwell LLP)
• Hearing Date: 20 July 2022,11 August 2022
• Court: High Court Appellate Division (Singapore)

Hoo Sheau Peng J (delivering the grounds of decision of the court): Introduction

AD/CA 3/2022 (“AD 3”) is an appeal brought by the appellant, Mr Loy Wei Ezekiel (“Mr Loy”), against the decision of the Judge of the General Division of the High Court (the “Judge”) in HC/RA 154/2021 (“RA 154”) upholding the decision of the assistant registrar (“AR”) not to set aside a judgment in default of appearance obtained against Mr Loy by the respondent, Yip Holdings Pte Ltd (“Yip Holdings”), in HC/S 836/2020 (“Suit 836”). For the purpose of AD 3, Mr Loy also applied for leave to adduce further evidence by way of AD/SUM 26/2022 (“SUM 26”). We heard and dismissed the application and the appeal on 11 August 2022. These are the reasons for our decision.

The facts Background

To begin with, we highlight that HC/S 703/2017 (“Suit 703”) is a related action, and it forms the backdrop to this appeal. The trial of that action was heard by Chan Seng Onn J (as he then was), with judgment delivered on 28 April 2020 in Yip Fook Chong (alias Yip Ronald) and another v Loy Wei Ezekiel and another [2020] SGHC 84 (“Yip v Loy”). For convenience, we draw on some of the undisputed facts as set out in Yip v Loy.

Yip Holdings is a company incorporated in Singapore. Its present directors and shareholders are Mr Loy and Mr Yip Fook Chong @ Yip Ronald (“Mr Yip”).¹ Mr Loy is the majority shareholder with 105,000 shares (being 52.5% of the shares), while Mr Yip holds 95,000 (being 47.5% of the shares).²

Mr Loy first met Mr Yip sometime in or around December 2015. At that time, Mr Yip was a 73-year-old retiree. He was the sole director and shareholder of Yip Holdings which was a dormant company. As for Mr Loy, he was a 22-year-old businessman.³

Mr Yip owned and lived on a property at 130 Lorong J Telok Kurau Singapore 425958 (the “Telok Kurau property”). Originally, the Telok Kurau property was mortgaged to Coutts & Co Ltd (“Coutts”).⁴ As Coutts was winding down its operations, it pressured Mr Yip to pay back the outstanding loan of $2,625,000. This led Mr Yip to look for an alternative source of funds to pay off Coutts.⁵

On or around 20 April 2016, Mr Loy was appointed a director of Yip Holdings, and 52.5% of the shares in Yip Holdings were transferred to Mr Loy between 20 to 21 June 2016. The notification of his appointment as director and the notifications in relation to the share transfers were lodged with Accounting and Corporate Regulatory Authority (“ACRA”) from 22 to 23 September 2016 (the “Notifications”).⁶ In Suit 703, Mr Yip challenged the validity of the Notifications and the underlying transactions.

Then, on 17 November 2016, Yip Holdings entered into a loan agreement with Ethoz Capital Ltd (“Ethoz”) for the sum of $4m, secured by the Telok Kurau property (the “Ethoz Loan”). Of the loan amount of $4m, a sum of $281,500 was retained by Ethoz as interest for the first year of the loan, facility fee and commitment fee, while another sum of $2,450,000 was paid to Coutts to discharge the mortgage over the Telok Kurau property. As for the remaining sum of $1,268,500 (the “Balance Sum”), it was deposited into Yip Holdings’ bank account.⁷ It was not disputed that subsequently, the interest that had to be paid to Ethoz attributable to the Balance Sum amounted to $76,110 (the “Interest”).⁸

On 18 November 2016, Mr Loy transferred the Balance Sum to the bank account of Yip & Loy Pte Ltd (“YLPL”). Mr Loy is the sole shareholder and director of YLPL which was subsequently renamed Property Street Pte Ltd (“PSPL”). Thereafter, by way of three transactions on 18 November 2016, 22 November 2016, and 30 December 2016, the Balance Sum was transferred out from YLPL’s bank account into Mr Loy’s personal bank account.⁹

The prior action – HC/S 703/2017

On 2 August 2017, Mr Yip and Yip Holdings commenced Suit 703 against Mr Loy and PSPL. Mr Yip and Yip Holdings alleged, inter alia, that:¹⁰ Mr Yip did not appoint Mr Loy as a director of Yip Holdings, and Mr Loy was not duly appointed as a director of Yip Holdings; Mr Yip did not transfer the shares to Mr Loy, and that Mr Loy was not a shareholder of Yip Holdings; Mr Loy wrongfully accessed the ACRA online filing system to lodge the Notifications; Mr Loy caused Yip Holdings to enter into the Ethoz Loan; The transfer of $1,268,500 to PSPL was wrongful; Mr Loy and/or PSPL had been unjustly enriched, and Mr Yip and/or Yip Holdings had the right to recover the sum from Mr Loy and/or PSPL in restitution. Further or alternatively, the transfer of $1,268,500 was in breach of trust and/or fiduciary duty by Mr Loy, and that the sum should be repaid to Mr Yip and/or Yip Holdings. Mr Loy and/or PSPL should pay the Interest to Mr Yip and/or Yip Holdings.

In their defence, Mr Loy and PSPL claimed that between April to September 2016, an alleged oral agreement was entered into between Mr Loy and Mr Yip. The alleged oral agreement comprised the following parts:¹¹ Mr Yip agreed to appoint Mr Loy as a director of Yip Holdings, to transfer 52.5% of the shares in Yip Holdings to Mr Loy, and for Mr Loy to run the operations and finances of Yip Holdings; Mr Yip agreed to enter into the Ethoz Loan; Mr Yip agreed to give a sum of $175,000 to Mr Loy for reducing the amount payable to Coutts from $2,625,000 to $2,450,000 (the “haircut sum”); Out of the loan sum of $4m, Mr Yip agreed for $281,500 to be retained by Ethoz, and for $2.45m to be used to discharge the mortgage in favour of Coutts. Further, Mr Yip agreed to the use of the Balance Sum for investments to grow the capital of Yip Holdings. We shall refer to this as the “Investment Agreement”. Once the capital had been grown sufficiently, Loy would transfer the funds back to Yip Holdings’ account and the profits would then be used to provide funds for a redevelopment project along Rangoon Road (the “redevelopment project”). Concurrently, Mr Yip would also sell the Telok Kurau property, to provide more funds for the redevelopment project.

In response, Mr Yip and Yip Holdings denied the existence of any oral agreement. In the alternative, should the court find that Mr Yip agreed to any aspect of the oral agreement, they pleaded that any such aspect would not be valid or enforceable, and that they should not be bound, inter alia, on the ground of unconscionability or because Mr Yip had special disabilities, as a result of “necrotizing fasciitis, and was hospitalised from 14 July to 4 August 2016 undergoing 3 surgeries and a period of prolonged ICU stay”, that Mr Loy took advantage of.¹²

In Yip v Loy, Chan J made the following findings: Mr Yip agreed to appoint Mr Loy as a director, to transfer the shares, and allow Mr Loy to run the operations and finances of Yip Holdings (at [147]–[164]). Mr Yip agreed to the Ethoz Loan. In fact, it was not disputed by Mr Yip that he signed the loan documents knowingly, and that he agreed to the Ethoz Loan (at [165]). Mr Yip did not agree to give Mr Loy the haircut sum (at [166]–[171]). Mr Yip did not agree to the Investment Agreement. He also did not agree to sell the Telok Kurau property to fund the redevelopment project (at [172]–[188]). While there was evidence from Dr Mervyn Koh (“Dr Koh”) from Tan Tock Seng Hospital that Mr Yip was suffering from some mental impairment before and after his hospitalisation, as well as post-ICU delirium on 14 September 2016, Mr Yip signed the relevant resolutions in relation to the appointment of Mr Loy as director and the share transfers “with full knowledge of the nature of those documents”. In fact, these documents were signed around the same time as the documents for the Ethoz Loan (which Mr Loy did not challenge). Further, Mr Yip did not specifically plead non est factum to contend that he did not know and understand what he was signing at the relevant time (at [144]–[146]). Given the view taken of the medical evidence, there was insufficient basis to find that Mr Yip had been exploited by Mr Loy (at [190]–[196]). The transfer of the Balance Sum out of Yip Holdings’ account was unauthorised and was for Mr Loy’s personal use and benefit (at [198]). Given the finding that share transfers were valid, Mr Loy is a majority shareholder of Yip Holdings. As the minority shareholder of Yip Holdings, Mr Yip did not have locus standi to commence the action without the consent of Mr Loy. Mr Yip also failed to obtain leave to pursue a derivative action. Accordingly, the claim against Mr Loy for breach of fiduciary duty was dismissed (at [199]–[205]). The loss of the Balance Sum was suffered by Yip Holdings and not by Mr Yip as he had no proprietary rights to it. The failure of Mr Yip to pursue derivative action to sue as a minority shareholder of Yip Holdings meant that Yip Holdings was no longer a party to Suit 703 and the claim in unjust enrichment was dismissed (at [218]–[220]).

Accordingly, Chan J dismissed the claims in Suit 703.

Application for leave to commence a derivative action – HC/OS 526/2020

Following the outcome in Yip v Loy, on 5 June 2020, Mr Yip filed HC/OS 526/2020 (“OS 526”) for leave to commence an action against Mr Loy in the name and on behalf of Yip Holdings pursuant to s 216A of the Companies Act 1967 (2020 Rev Ed) (“Companies Act”). Mr Loy attended two pre-trial conferences on 25 June 2020 and 16 July 2020, but he was absent for the final pre-trial conference on 6 August 2020. When Pang Khang Chau J granted the application at the hearing on 28 August 2020, he was also absent.

The present action – HC/S 836/2020

On 3 September 2020, Yip Holdings commenced Suit 836, claiming, inter alia, breach by Mr Loy of his duty of care and/or his statutory duty and/or fiduciary duties owed to Yip Holdings as director in misappropriating the Balance Sum, and for recovery of the Balance Sum and the Interest being a total amount of $1,344,610.¹³

On 13 September 2020, Yip Holdings obtained leave for...