Max Master Holdings Ltd and others v Taufik Surya Dharma and others and another suit

• Jurisdiction: Singapore
• Judge: Aedit Abdullah JC
• Judgment Date: 25 July 2016
• Neutral Citation: [2016] SGHC 147
• Court: High Court (Singapore)
• Docket Number: Suit Nos 13 and 101 of 2014
• Published date: 17 January 2017
• Year: 2016
• Hearing Date: 26 October 2015,22 October 2015,06 March 2015,05 March 2015,12 March 2015,14 October 2015,10 March 2015,04 March 2015,13 March 2015,18 January 2016,21 December 2015,23 October 2015,11 March 2015,09 March 2015
• Plaintiff Counsel: Yeoh Kar Hoe & Gina Ng (David Lim & Partners LLP), Daniel Koh, instructed counsel, (Eldan Law LLP)
• Defendant Counsel: Ng Lip Chih and Tan Jieying (NLC Law Asia LLC),Nicholas Jeyaraj s/o Narayanan (Nicholas & Tan Partnership LLP)
• Citation: [2016] SGHC 147

Aedit Abdullah JC: Introduction

The two suits before me involved largely the same parties. They were heard together as there was an overlap of facts and issues. What was in contention in the first suit, Suit No 13 of 2014 (“Suit 13”), was essentially the ownership of shares in a holding company. This would then determine the control of other entities, including an Indonesian company which carried out coal mining operations in Indonesia. The outcome turned on what happened in a meeting in Singapore on 1 October 2012. The Plaintiffs in Suit 13 claimed that there was an agreement to transfer their shares in the 3rd Defendant, United Coal Holdings Inc. (“UCHI”), to the 1st and 2nd Defendants to allow the latter to better arrange for the onward sale of PT UCI, by way of the disposal of holding companies, with the proceeds of sale to be distributed in a specific way. The Defendants, on the other hand, claimed that the shares were transferred outright to the 1st and 2ndDefendants with the possibility of repayment of loans owed to the shareholders of UCHI if there was any surplus generated. No minutes were taken of that meeting and no follow-up documentation was created. Thus, much time at trial was spent on the evidence in respect of emails, meetings and discussions in the months after the meeting to enable the court to come to a conclusion about what exactly transpired at the meeting itself, as well as the consequences which flowed from that meeting.

The second suit, Suit No 101 of 2014 (“Suit 101”), concerned loans made to some of the companies involved and the liability to repay. Funds were transferred to the 1st Defendant, United Coal Pte. Ltd. (“UCPL”), and the 2nd Defendant, Knightsbridge Global Pte. Ltd. (“KBG”). The Plaintiffs in Suit 101 claimed that the money came from them and was repayable to them by UCPL, KBG as well as UCHI, which received the benefit of these loans. These three companies, who were the Defendants in Suit 101, denied this. Again, the transfer of funds was not accompanied or preceded by much documentation.

With respect to Suit 13, I found that the agreement was one for transfer of shares to facilitate the sale of the companies. As regards Suit 101, on the other hand, I found that the loans were not shown to be repayable by the Defendants. The parties have appealed and cross-appealed.

Background Suit 13

The 1st Plaintiff, Max Master Holdings Limited (“Max Master”), is a British Virgin Islands (“BVI”) company whose sole director was Mr Suhadi Zaini (“Suhadi”). Max Master was a shareholder of UCHI. The 2nd Plaintiff, Mr Kow Chee Choy (“Tommy”), was a shareholder of UCHI and a director of both UCHI and UCPL. The 3rd Plaintiff was Mr Sulaiman Leban Koswara (“Sulaiman”), another shareholder of UCHI.

The 1st Defendant, Mr Taufik Surya Dharma (“Taufik”), was a shareholder of UCHI through his wife and a director of UCPL and KBG. The 2nd Defendant, Mr Herumanto Zaini (“Heru”), was a shareholder of UCHI and a director of UCPL and KBG. Another shareholder of UCHI was a company, Fahrenheit Assets Co., Inc. (“Fahrenheit”), which was solely owned by one Mr Hendrik Chandra (“Hendrik”). UCHI, in turn, wholly owned UCPL and KBG. UCPL and KBG respectively owned 99% and 1% of PT United Coal Indonesia (“PT UCI”).

A simplified diagram setting out the parties’ relationships is below:

PT UCI, an Indonesian company, was at the material time engaged in coal mining in Indonesia. Taufik and Heru were the president director and director of PT UCI respectively. Taufik was significantly involved in the day-to-day running of PT UCI. The decision was made to purchase, rather than rent, coal mining equipment. To finance this, loans were taken from a bank by the name of Bank Mandiri. Personal guarantees were asked for by the bank and these were eventually provided by Taufik and Heru in 2011. As it turned out, Taufik and Heru appeared to conclude that their position was exposed and risky. The parties differed as to what transpired at this time: Taufik and Heru contended that the giving of counter-guarantees was discussed. The Plaintiffs denied this.

A meeting was eventually held on 1 October 2012. This meeting involved Taufik, Sulaiman, Hendrik, Heru, Tommy, Suhadi and one Mr Sunredi Admadjaja (“Sunredi”).

The outcome of this meeting was disputed. According to the Plaintiffs, Taufik proposed a plan to sell PT UCI and its assets. This was to be effected by UCHI selling its shares in UCPL and KBG. To facilitate the sale, the shares in UCHI would be transferred to Taufik and Heru. The Plaintiffs claimed that a time frame of several months in respect of the sale was agreed upon. The Plaintiffs further contended that the agreement also required the maintenance of the status quo of UCHI and the other companies pending the sale. The proceeds of the sale would be used to: (a) repay the loans from Bank Mandiri; (b) repay a S$1 million loan extended by Max Master to KBG to purchase two units at 237 Alexandra Road, The Alexcier (“the premises”); (c) pay a bonus to Taufik and Heru for working on the sale; and (d) repay the creditors of UCHI for loans extended to UCPL and/or on behalf of UCHI. The remaining proceeds would then be distributed to the shareholders of UCHI in proportion to their shareholding.

The Defendants, on the other hand, contended that the agreement was instead for the transfer of the other shareholders’ shares to Taufik and Heru, as they had run risks by giving personal guarantees to Bank Mandiri in respect of loans granted to PT UCI. Following such transfer, Taufik and Heru would not have any right to seek contributions for UCHI’s liabilities, while the transferring shareholders would give up their own rights save only for the repayment of any amounts that were outstanding to them by UCHI.

Suit 101

In 2008, money was received by UCPL in various tranches totalling S$2.5 million and US$2.5 million. These were recorded as owing to UCHI, but the Plaintiffs contended that these were really from Max Master, as shown by payment being made directly by Max Master and repayment being effected directly to Max Master. Suhadi also made payments to UCPL totalling about S$1.2 million, though again these were recorded as owing to UCHI. Finally, there was also a loan to KBG for a sum of S$1 million. This was recorded as owing to Colbert Marina Holdings Inc. (“Colbert”), a BVI company. The Plaintiffs claimed that UCHI, UCPL and KBG were jointly and severally liable for the monies loaned to UCPL and KBG, primarily on the basis that the companies were treated as a single economic entity. The Defendants denied any liability for repayment of the money.

The arguments The Plaintiffs’ case in Suit 13

The Plaintiffs argued that at the meeting on 1 October 2012, it was agreed that PT UCI was to be sold. Taufik and Heru were tasked to find a buyer as Taufik was already in contact with potential buyers then. If the sale materialised, the proceeds would be used to: (a) repay the loans from Bank Mandiri; (b) repay a S$1 million loan extended by Max Master to KBG to purchase the premises; (c) pay a bonus to Taufik and Heru for working on the sale; and (d) repay the creditors of UCHI for loans extended to UCPL and/or on behalf of UCHI. The remaining proceeds would then be distributed to the shareholders of UCHI in proportion to their shareholding. The transfer of shares to Taufik and Heru was solely to facilitate the sale by them, so that no further approval by the others needed to be sought. Speed was required as Taufik had told the parties that the sale had to be carried out as soon as possible.

On behalf of the Plaintiffs, it was argued that various points went against Taufik and Heru’s contentions that the shares were given to them absolutely. Taufik’s contention that he had taken on the risk of action through taking ownership of the shares ran counter to the position under Indonesian law that the shareholders of UCHI could not be liable for the indebtedness of PT UCI. No counter-guarantee or contribution was to be made to Taufik and Heru. The evidence of the other witnesses went against their contention. The email of 12 December 2011 relied on by Taufik did not support his position, which was also contradicted by other evidence.

It was said that no other reason existed for the transfer of shares. Taufik’s contention that the transfer occurred in return for the assumption of personal liability by himself and Heru for the loans from Bank Mandiri could not be sound: the loans were signed before the transfer of shares. The absolute transfer of shares in return for repayment of outstanding amounts of shareholder loans did not make sense for Tommy and Sulaiman, who did not advance any loans to UCHI.

Following the transfer of shares, it was contended that there was no change in position by either Taufik or Heru. Any effort expended by the two were part of their effort to reduce their own personal exposures or in the discharge of their duties as president director and director of PT UCI respectively.

The Plaintiffs further argued that it was expressly agreed that the sale was to be within six to nine months of the meeting. Alternatively, this was to be implied as a reasonable time, given the circumstances of the coal market, that there were interested buyers and the need to maximise the sale price. Pending such sale, the status quo in the management and property of the various companies, namely, UCPL, KBG, UCHI and PT UCI, had to be preserved, and a term should be implied to this effect. The sale of the premises was part of the sale, but it was implied that Max Master’s consent had to be obtained should the premises be sold separately.

In the circumstances, the Plaintiffs alleged that the Defendants breached what had been agreed. No sale occurred within the period and at least one sale was aborted during this time. The status quo in respect of the management and assets of...