Ng Koon Yee Mickey v Mah Sau Cheong

• Jurisdiction: Singapore
• Judge: Quentin Loh JAD
• Judgment Date: 30 September 2022
• Neutral Citation: [2022] SGHC(A) 33
• Citation: [2022] SGHC(A) 33
• Docket Number: Civil Appeal No 57 of 2021
• Published date: 04 October 2022
• Year: 2022
• Plaintiff Counsel: Tham Lijing (Tham Lijing LLC) and Goh Peizhi Adeline (Withers KhattarWong LLP) (instructed),Tan Li-Chern Terence (Robertson Chambers LLC)
• Defendant Counsel: Isaac Tito Shane, Kawal Pal Singh s/o Amarjit Singh, Jaspreet Kaur Purba, and Sindhu Nair d/o Muralidharan Nair (Tito Isaac & Co LLP)
• Subject Matter: Debt and Recovery,Right of set-off,Contract,Breach,Contractual terms,Implied terms,Duty to cooperate,Prevention principle,Termination
• Hearing Date: 02 November 2021
• Court: High Court Appellate Division (Singapore)

See Kee Oon J (delivering the judgment of the court): Introduction

This appeal centres on whether a share purchase agreement (“SPA”), signed between the appellant, Ng Koon Yee Mickey (“Ng”), and the respondent, Mah Sau Cheong (“Mah”), on 13 November 2013, had been validly terminated by Mah. The appellant appeals the decision of the Judge of the General Division of the High Court (the “Judge”) handed down orally in Mah Sau Cheong v Ng Koon Yee Mickey HC/S 506/2018 (28 April 2021) (the “Judgment”). The Judge found that Mah had validly terminated the SPA and was thereby entitled to two tranches of payments that he had made to Ng pursuant to the SPA. For the reasons set out below, we allow the appeal.

Facts

HC/S 506/2018 (“Suit 506”) was first commenced by Mah, who brought claims against Ng for sums he had disbursed to Ng under three agreements dated 29 May 2013 (the “Agreements”): (a) S$241,800; (b) RMB 1m (approximately S$209,734); and (c) RMB 2m (approximately S$419,468) (collectively, the “Disbursed Sums”). As the proceedings progressed, Ng eventually conceded that he was liable for the Disbursed Sums, but claimed that his liability should be set off against a sum that Mah owed to him under the SPA (the Judgment at [2]–[3]).

Under the SPA, Ng agreed to sell his then-5% shareholding in Enersave International (HK) Ltd (“Enersave International”) to Mah. Enersave International was the parent company of Xianda Holdings (HK) Ltd, which in turn owned Xianda (Tianjin Seawater Resources Development Co Ltd) (the “Xianda SPV”). These related companies were corporate vehicles used to carry out the Nangang Project, which concerned the production of desalinated seawater and other types of water products in Nangang (the “Nangang Project”) (the Judgment at [5]). The Nangang Project was initially founded by Ng and two other colleagues (the “Founding Members”).¹ Sometime in 2011, Mah was approached to invest in the Nangang Project and Mah’s initial involvement was therefore to provide funding to it.² At the time of the execution of the SPA, Mah held 80% of the shares in Enersave International, whilst Ng held 5% and the remaining 15% was held by the other two founders.³ Mah’s shareholding later increased to more than 90% (the Judgment at [5]).⁴ Mah later removed the Founding Members, including Ng, as directors of Enersave International by July to August 2016, and appointed persons related to himself to the board (the Judgment at [27]).

As part of the Nangang Project, an operational agreement was required to be executed (the “Operational Agreement”). The contracting parties to the agreement were the Xianda SPV and the Committee of TEDA-Tianjin Economic-Technological Development Area (Nangang Industrial Zone) (“TEDA”).⁵ Mah acknowledged that he was one of the directors of the Xianda SPV but claimed that he was not involved in the day-to-day affairs and/or operational matters relating to the Nangang Project, or the negotiations, finalising and signing of the Operational Agreement.⁶ Unsurprisingly, Ng disputed this and argued that Mah played a key role in the negotiations, finalising and signing of the agreement.⁷

Under the SPA, Mah agreed to purchase Ng’s then-5% shareholding in Enersave International for RMB 13m, to be paid in three tranches of an initial deposit of RMB 2m (the “Tranche 1 Payment”); a cash payment of RMB 3m (the “Tranche 2 Payment”) and a final cash payment of RMB 8m (the “Tranche 3 Payment) (the Judgment at [6]). The conditions of payment are set out at Article 1.2.1 of the SPA:⁸ 1.2.1 Terms and Conditions of Payment

The above-mentioned purchase price is payable as follows: a) Initial Deposit The Purchaser has already remitted to the Vendor/ in the amount of Chinese Yuan Two Million (RMB2.0 million) as initial deposit, the Vendor hereby acknowledges receipt of this amount as exhibited in Appendix 1; b) Cash Payment Chinese Yuan Three Million (RMB 3.0 million) shall be payable by 18th November 2013 or within one month from the date of signing of the Investment Collaboration Agreement, whichever date is later pertaining to the Nangang Project between XIANDA and the Tianjin Economic-Technological Development Area (hereinafter referred to as “TEDA”); c) Final Cash Payment Chinese Yuan Eight Million (RMB8.0 million) shall be payable within two month from the Closing Date subject to the execution of the relevant transfer documents by the Parties for the transfer and registration of the Purchase Shares with the relevant authorities in Hong Kong.

Article 4.7 gave Mah the “sole discretion” to terminate the SPA if the “Closing Date” did not materialise on or before 24 October 2014, and provided that in the event of termination, the initial deposit (ie, the Tranche 1 Payment in Article 1.2.1(a)) and cash payment (ie, the Tranche 2 Payment in Article 1.2.1(b)) would be repaid by way of a term loan: 4.7 Time shall be of the essence of this Agreement. The Purchaser shall at his sole discretion to terminate this agreement if the Closing Date shall not be materialized on or before 24th October 2014. In the event of termination by the Purchaser, the Initial Deposit and Cash Payment made to the Vendor shall be converted into a Term Loan to be repaid on or before 24th October 2016.

The “Closing Date” as stated in Article 1.2.1(c) in respect of the Tranche 3 Payment, and referred to in Article 4.7, is defined in Article 4.1 of the SPA: 4.1 The closing shall take place on the day the conditions pertaining to the Nangang Project between XIANDA and TEDA/relevant authorities as follows are obtained: - (a) the signing of the Operational Agreement; and (b) the obtaining of the Approval of the Feasibility Study Report

(hereinafter referred to as the “Closing Date”).

Mah made the Tranche 1 and 2 Payments to Ng but not the Tranche 3 Payment. Mah had also earlier extended the deadline for the Closing Date from 24 October 2014 to 24 October 2015, and thereafter to 24 October 2016 (the “Deadline”) (the Judgment at [9]).

The approval of the Feasibility Study Report, as required under Article 4.1(b), was completed in mid-2014 prior to the Deadline. The signing of the Operational Agreement (as required under Article 4.1(a)) only took place on 3 November 2016 after the Deadline (the Judgment at [16]).

On 21 October 2016, Mah sent an email to Ng attaching a letter, stating that the SPA would be terminated if the Closing Date did not materialise by the Deadline (the “21 October Letter”).⁹

Parties’ cases below

Mah submitted that he had validly terminated the SPA and sought the return of the Tranche 1 and 2 Payments. Ng responded that Mah had no right to terminate the SPA as the Closing Date had in fact materialised. Even if Mah had such a right, the right had not been properly exercised as Mah did not give him a valid notice of termination. Further and alternatively, Mah had breached his duty to cooperate and was therefore precluded from terminating the SPA. He therefore denied that he was liable to repay the Tranche 1 and 2 Payments.

Ng further submitted that Mah’s obligation to make the Tranche 3 Payment had been triggered upon the signing of the Operational Agreement, and therefore counterclaimed against Ng for the Tranche 3 Payment, less any amounts he owed to Mah under the Agreements. In respect of set-off, Ng argued that the defence of legal set-off would operate by law to extinguish Mah’s claim. Alternatively, the court’s orders for Ng to pay the Disbursed Sums and for Mah to make the Tranche 3 Payment would be set off against each other as a matter of practicality. There was therefore no need to consider whether Mah’s claim would be extinguished by equitable set-off; but Ng claimed that he would have been able to show, in any event, that there was a close connection between the Disbursed Sums and the counterclaim such that it would be manifestly unjust for the sums not to be set off against each other.

Decision below

The Judge found that Mah had validly terminated the SPA and was thereby entitled to reclaim the Tranche 1 and 2 Payments. First, since the Operational Agreement was signed only after the Deadline, the Closing Date had not materialised by 24 October 2016 and Mah had a right to terminate the SPA. The Judge rejected Ng’s contention that Article 4.7, in requiring the Closing Date to “materialise”, only meant that the signing of the Operational Agreement” had to be a “practical likelihood” by the Deadline (the Judgment at [18]–[19]).

Second, Mah had properly exercised his right to terminate the SPA. The Judge rejected Ng’s submission that Mah’s purported notice of termination by way of the 21 October Letter was ineffective because Mah’s right to terminate the SPA had not arisen at the time, and that Mah did not give notice to terminate thereafter. The Judge held that this case had not been pleaded by Ng. Assuming that Mah was required to give notice to Ng that he was terminating the SPA, the letter would be deemed to have reached Ng on 26 October 2016 pursuant to Article 4.5, which was after the Deadline (the Judgment at [22]–[23]). Article 4.5 provided that:

Any notice, direction or other instrument aforesaid, if delivered shall be deemed to have been given or made on the date on which it was delivered or [if] mailed shall be deemed to have been given or made on the third business day following the day on which it was mailed.

[emphasis added by the Judge]

Third, the Judge found that Mah did not breach his duty to take reasonable steps to procure the signing of the Operational Agreement by the Deadline. Even though Mah had fixed the signing of the agreement on a date that was after the Deadline, the objective evidence did not show that Mah could reasonably have procured the signing on an earlier date (the Judgment at [26]–[30]).

Given that Mah had validly terminated the SPA, it would follow that he was not liable for...