M+W Singapore Pte Ltd v Leow Tet Sin and another

JurisdictionSingapore
JudgeJudith Prakash J
Judgment Date16 January 2015
Neutral Citation[2015] SGHC 10
Date16 January 2015
Docket NumberSuit No 731 of 2011
Published date20 January 2015
Plaintiff CounselChua Sui Tong, Lim Wei Lee, Daniel Tan, Huang Haogen (WongPartnership LLP)
Hearing Date20 March 2014,12 March 2014,13 March 2014,14 March 2014,11 March 2014,25 March 2014,30 May 2014,21 March 2014,19 March 2014,18 March 2014
Defendant CounselNarayanan Vijay Kumar and Niroze Idroos (Vijay & Co)
CourtHigh Court (Singapore)
Subject Matteraccessory liability,Res judicata,issue estoppel,inducement of breach of contract,Trusts,acts amounting to assistance,Companies,Tort,winding up
Judith Prakash J: Introduction

The plaintiff, M+W Singapore Pte Ltd, is a construction company. In February 2009, it was appointed by Jurong Data Centre Development Pte Ltd (“JDD”) to design and build a high-tech data centre (“the Data Centre”). The first defendant, Leow Tet Sin, and the second defendant, Yukiyasu Nakagawa, were at all material times the only directors of JDD and the joint signatories of its bank accounts.

In October 2009, JDD, having failed to make certain payments due to the plaintiff under the construction agreement signed between them on 19 February 2009 (“the Construction Contract”), executed a debenture in favour of the plaintiff. The security was given in order to induce the plaintiff to continue work on the Data Centre. By the terms of the debenture, JDD agreed that all “Monetary Claims” would be charged to the plaintiff by way of a first fixed charge.

In January 2010, the Inland Revenue Authority of Singapore (“IRAS”) refunded a sum of $6,456,230.09 (“the GST Refund”) to JDD. Subsequently, JDD spent amounts totalling $5,348,413.51 out of the GST Refund. The plaintiff’s position is that the GST Refund was a Monetary Claim and therefore subject to the charge in its favour. Accordingly, JDD should not have spent any part of the same. In this action, the plaintiff seeks to recover the said sum of $5,348,413.51 from the defendants, jointly and severally, on the basis that: they dishonestly assisted in a breach of trust; or they induced a breach of contract; or they were engaged in fraudulent trading in respect of JDD within the terms of s 340 of the Companies Act (Cap 50, 2006 Rev Ed) (“the Act”).

Background

At the material time, the JL Group of companies comprised Japan Land Ltd (“Japan Land”), a listed company incorporated in Singapore, Japan Asia Land Ltd (“Japan Asia”), a company incorporated in Japan and JDD. Japan Asia is a subsidiary of Japan Land but operates as the headquarters of the JL Group. In 2008, JDD was incorporated in Singapore as a special purpose vehicle to develop the Data Centre. JDD was wholly reliant on Japan Land and Japan Asia for funding as it had no other business apart from the development (and subsequent operation) of the Data Centre. During most of the material period, the president of Japan Land, and head of the JL Group, was one Mitsutoshi Ono (“Mr Ono”).

The first defendant is a certified public accountant who obtained his accountancy degree in 1970. In 2005, he was employed as the deputy managing director of Japan Land. He was promoted to the post of executive director in 2007 and when JDD was incorporated, the first defendant was made one of its directors. He continued to be the executive director of Japan Land and did not receive any extra remuneration for his position in JDD.

The second defendant is a construction engineer by training and experience. In 2007, after working in construction engineering companies for about 40 years, he joined Japan Land as a director. The second defendant was appointed a director of JDD because of his construction engineering experience and he held this appointment in JDD concurrently with his position as director of Japan Land. Like the first defendant, he did not receive extra remuneration for the new post.

The Construction Contract and the search for investors

In April 2008, JDD invited tenderers to quote for the construction of the Data Centre. The plaintiff was the successful tenderer. Under the Construction Contract, JDD agreed to pay the plaintiff $213,458,436.03 to design and complete the Data Centre on a turnkey basis. The Construction Contract provided for the plaintiff to be paid by way of progress payments. In mid-August 2009, JDD began to default on prompt payment of the progress payments and by October 2009, it owed the plaintiff about $60m.

Meanwhile, Japan Land had been looking for a new investor to help with the financing of the Data Centre. In June 2009, it was approached by one Ang Chee Seng (“Mr Ang”) the chief executive officer of a Singapore company, Elchemi Group Ltd (“Elchemi”), which was interested in investing in the Data Centre through its subsidiary ConnectedPlanet Holdings Ltd (“CPH”). A Memorandum of Understanding was signed between Elchemi, Japan Land and Japan Asia on 21 August 2009 and in order to facilitate the negotiations between the JL Group and Elchemi, work on the Data Centre had to continue uninterrupted. During the relevant period, the plaintiff was aware that there were negotiations taking place between JDD and Elchemi/CPH for the latter to make a substantial investment in JDD.

On 24 October 2009, a meeting was held in Tokyo to discuss the indebtedness owing to the plaintiff. This meeting was attended by the second defendant and Mr Ono on behalf of the JL Group. The plaintiff was represented by its chief executive officer, one Helmut Kurzboeck (“Mr Kurzboeck”). During the meeting, Mr Kurzboeck stated that work would not continue on the Data Centre unless payment or security was obtained from JDD. Since JDD could not pay, it agreed to provide a charge over its assets to the plaintiff – this was to prevent the plaintiff from proceeding with legal action against JDD under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“SOPA”) to recover the outstanding amounts.

Pierre Crisantha Dedigama (“Mr Dedigama”), the plaintiff’s then managing director, contacted the first defendant on 27 October 2009 regarding the signing of a debenture and a security undertaking document. According to the first defendant, Mr Dedigama pressed for both documents to be executed by 9am on 28 October 2009. He threatened JDD, saying that if the documents were not signed by the deadline, the plaintiff would take legal action against JDD for the sums owed to the plaintiff. At the same time, according to the first defendant, he assured JDD that the documents were just to satisfy the plaintiff’s head office in Vienna and enable the plaintiff to get continued funding to work on the Data Centre. They were not to take effect while negotiations were being carried out with Elchemi. JDD’s lawyers, Rodyk & Davidson LLP (“Rodyk”), were given just one day to review the documents.

After this assurance was allegedly given, a Japan Land board meeting was held on 28 October 2009 to approve the giving of security to the plaintiff by JDD. Mr Ang also gave his approval, via a written confirmation, that Elchemi was aware of the Debenture and Security Undertaking and that the two documents would not impede ongoing negotiations between JLL and Elchemi.

The Debenture

Pursuant to the resolutions passed on 28 October 2009, JDD executed a debenture dated 28 October 2009 (“the Debenture”) in favour of the plaintiff and an agreement entitled “Security Undertaking” also dated 28 October 2009 (“the Security Undertaking”). These documents were registered with the Accounting and Corporate Regulatory Authority (“ACRA”) on 25 November 2009.

By the Debenture, JDD acknowledged the debt owed to the plaintiff and agreed to secure the same by granting to the plaintiff, among other things, a fixed charge over all Monetary Claims. The following provisions of the Debenture are relevant (JDD being the Chargor and the plaintiff being the Chargee): Definitions

Claims Account” means an Account to be identified by the Chargee (and any renewal or re-designation of such account) maintained by the Chargor with any bank in Singapore into which, inter alia, the proceeds of the getting in or realisation of the Monetary Claims and the dividends, interest and other monies arising from the Shares are to be paid.

Monetary Claims” means any book and other debts, monetary claims, credit sales, receivables and other receivables owing to the Chargor and any proceeds thereof (including any claims or sums of money deriving from or in relation to any Intellectual Property, any Investment, the proceeds of any Insurance Policy, any court order, award or judgment, any contract or agreement to which the Chargor is a party and any other assets, property, rights or undertaking of the Chargor).

Fixed charges: The Chargor as beneficial owner hereby charges in favour of the Chargee, as security for the payment and discharge of the Secured Obligations, by way of first fixed charge (which so far as it relates to land in Singapore vested in the Chargor at the date hereof shall, if reasonably required by the Chargee, be perfected by the execution of a legal mortgage in the prescribed form) all the Chargor’s right, title and interest from time to time in and to each of the following assets:

all Monetary Claims other than any claims which are otherwise subject to a fixed charge or assignment (at law or in equity) pursuant to this Debenture and all Related Rights; …

Dealing with Monetary Claims : The Chargor shall not at any time during the subsistence of the Debenture, without the prior written consent of the Chargee: deal with the Monetary Claims except by getting in and realising them in a prudent manner (on behalf of the Chargee) and paying the proceeds of those Monetary Claims promptly into the Claims Account or as the Chargee may require (and such proceeds shall be held upon trust by the Chargor for the Chargee prior to such payment in); or factor or discount any of the Monetary Claims or enter into any agreement for such factoring or discounting or be entitled to withdraw or otherwise transfer the proceeds of the realisation of any Monetary Claims standing to the credit of any Claims Account.

[bold underline in original; emphasis added in italics and bold italics]

Under cl 10.1 of the Debenture, JDD was obliged to pay all Monetary Claims into the Claims Account and hold the proceeds on trust for the plaintiff. The Claims Account was never identified by...

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7 books & journal articles
  • Tort Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2015, December 2015
    • 1 Diciembre 2015
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    • Singapore Academy of Law Annual Review No. 2016, December 2016
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  • Insolvency Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2015, December 2015
    • 1 Diciembre 2015
    ...[5]. Fraudulent trading 17.58 The Singapore High Court considered a claim in fraudulent trading in M+W Singapore Pte Ltd v Leow Tet Sin[2015] 2 SLR 271 (‘M+W Singapore Pte Ltd’). The plaintiff was employed by Jurong Data Centre (‘JDD’) to design and build a data centre. The first and second......
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    • Singapore
    • Singapore Academy of Law Annual Review No. 2018, December 2018
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