nTan Corporate Advisory Pte Ltd v TT International Ltd

• Jurisdiction: Singapore
• Judge: Aedit Abdullah JC
• Judgment Date: 22 August 2017
• Neutral Citation: [2017] SGHC 207
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 824 of 2016
• Published date: 15 November 2018
• Year: 2017
• Hearing Date: 20 March 2017,21 February 2017,22 February 2017
• Plaintiff Counsel: Edwin Tong SC, Kenneth Lim Tao Chung (Kenneth Lin Daocong), Peh Aik Hin, Tham Chuen Min, Jasmine (Tan Jianmin) and Chua Xinying (Allen & Gledhill LLP)
• Defendant Counsel: Chan Hock Keng, Ong Pei Chin, Lawrence Foo and Chong Wan Yee Monica (Zhang Wanyu) (WongPartnership LLP)
• Subject Matter: Companies,Schemes of arrangement,Receiver and manager,Remuneration of
• Citation: [2017] SGHC 207

Aedit Abdullah JC: Introduction

In this case, the plaintiff, a corporate advisory firm, seeks assessment of its professional fees in respect of work done for the defendant company. This assessment is sought pursuant to the orders made by the Court of Appeal in The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT International Ltd and another appeal [2012] 4 SLR 1182 (“TTI 2012”).

Background

The plaintiff, nTan Corporate Advisory Pte Ltd (“the Plaintiff”), is a boutique corporate advisory firm. The Chief Executive Officer of the Plaintiff is Mr Nicky Tan Ng Kuang (“Mr Nicky”).¹

The defendant company, TT International Limited (“the Defendant”), was locally incorporated in 1984 as a private limited company and was subsequently listed on the Main Board of the Singapore Exchange Securities Trading Limited (“the SGX Main Board”) in 2000. At the material time, the Defendant was primarily involved in the business of consumer electronics, being the main distributor and licensee of the AKIRA brand of electronic products worldwide. It was founded by a couple, Mr Sng Sze Hiang and Ms Tong Jia Pi Julia (collectively, “the Sngs”). While its business appeared to do well, it incurred losses from foreign exchange derivatives, and had large loans, entailing personal guarantees from the majority shareholders of the company, the Sngs. Following the global financial crisis in 2008, the company’s position worsened, as credit dried up while it had outstanding claims from creditors amounting to some $607.03m.²

In the midst of this, the Defendant had embarked on the construction of the Big Box, a development of a retail complex in Jurong East (“the Big Box Project”). Unsurprisingly, the Defendant ran into difficulties financing the project; an adjudication award was even made against it. In this connection, personal guarantees and loans had to be provided by its founders and majority shareholders, ie, the Sngs.³

It was against this backdrop that the Plaintiff was appointed by the Defendant as its independent financial advisor⁴ by an appointment letter dated 28 October 2008. That letter, read together with another letter dated 15 May 2009, constituted the terms of the engagement for the Plaintiff’s work as the Defendant’s independent financial advisor (“the Contract”).⁵

Under the terms of the Contract, the Plaintiff was to be paid time costs based on hourly rates set out in the letters of engagement, disbursements, and a “Value-Added Fee” (“the VAF”). The parties had keenly negotiated the Contract, with particular focus on the VAF component.⁶ The VAF was to be paid on the occurrence of various events, including the obtaining of new funds or the approval of a scheme of arrangement. The VAF comprised of “7.5% of the Net Value of Debt Resolved” and “5.0% of Total Gross Transaction Value” (“the VAF Formula”).⁷ In simple terms, the VAF was a percentage of the amount of debt owed by the Defendant to its creditors which was “waived, written off, extinguished, forgiven or avoided” or converted into equity in the Defendant pursuant to the anticipated scheme of arrangement. Separately, it also included a percentage of an increase in value of the Defendant through the raising of new funds, loans or assets arising from the Plaintiff’s efforts.⁸ Hence, the greater the value of the debt rendered not payable as well as the higher the increase in the Defendant’s value, the greater the amount of the VAF the Plaintiff stood to receive. For this reason, the VAF is also described as “a success fee”.

Following its appointment, the Plaintiff embarked on work,⁹ the value and effect of which is disputed between the parties. As it was, a scheme of arrangement was approved by the High Court in March 2010. However, a revote was subsequently ordered by the Court of Appeal in August 2010. At the revote, the scheme was approved again. This scheme was approved by the Court of Appeal on 13 October 2010 (“the Scheme”),¹⁰ resulting in three personnel from the Plaintiff being named as the scheme managers¹¹ (“the SM”) and the Plaintiff becoming entitled to the VAF under the Contract.

The Scheme included the following aspects:¹² a reverse Dutch auction to allow retirement of debts at a discount – retirement was in order of decreasing rate of discount, with payment coming out of a fund established for that purpose (“Reverse Dutch Action”); restructuring of the balance debt that was considered sustainable; other debts not falling into the earlier categories were converted into redeemable convertible bonds; a fixed and floating charge was granted by the Defendant over all the assets of the company in favour of the Scheme creditors; a moratorium applied to all the Scheme creditors preventing the commencement or continuation of any proceedings against the Defendant and/or its subsidiaries; and the Scheme would last for 11 years, assuming performance of the obligations under the Scheme.

The Plaintiff was an “excluded creditor” under the terms of the Scheme, which meant that the VAF was not subject to the Scheme. Materially, the VAF was not disclosed to the Scheme’s Management Committee of creditors (“the MC”) or the court prior to the Court of Appeal’s sanction of the Scheme. It was only almost a year after the Scheme was sanctioned that details of the VAF were disclosed to the MC. Thereafter, in 2012, the MC sought directions from the Court of Appeal on the payment of the VAF to the Plaintiff. The matter was of some controversy between the parties.¹³ Eventually, the Court of Appeal in TTI 2012 made orders with respect to the fees payable to the Plaintiff (“the VAF Orders”): 34 … [W]e direct that the relevant parties to this dispute (ie, the SM/[the Plaintiff], the [Defendant] and the MC) are to endeavour to reach an agreement as to what ought to be the proper amount of professional fees awarded for [the Plaintiff]’s efforts in reviving the [Defendant] to date. In the event the parties are unable to reach an agreement, we order that [the Plaintiff]’s global fees (before and after the SM’s appointment) will be assessed by a High Court judge. …

[emphasis added]

Since no agreement on the fees was forthcoming, it is out of the above directions that the present application by the Plaintiff arises.

It bears mention that the Plaintiff sought to set aside the decision in TTI 2012 and/or the VAF Orders. The Court of Appeal in The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT International Ltd (nTan Corporate Advisory Pte Ltd and others, other parties) and another appeal [2015] 5 SLR 1104 (“TTI 2015”) declined to do so, though it noted the possibility of setting aside the Scheme. However, both the MC and the Defendant resisted the setting aside of the Scheme.

Up till the present proceedings, in addition to an initial $500,000 non-refundable deposit (“the Deposit”), the Defendant has already paid $10,266,164 to the Plaintiff. This $10,266,164 corresponds to all of the Plaintiff’s billed time costs for the period from 28 October 2008 to 31 May 2011 (“the Billed Time Costs”), save for a sum of $401,150 for April 2009, for which the Plaintiff had initially issued a credit note (“the Credit Note”).

The MC was not part of the present proceedings. However, a number of creditors, ie, bondholders, were present at the hearing.

The Plaintiff’s Case

The Plaintiff’s claim for its global fees is set out as follows:¹⁴

	Description	Quantum of fees claimed (excluding GST)
1.	Billed Time Costs for the period of 28 October 2008 to 31 May 2011 which have already been paid by the Defendant	$10,266,16415
2.	Unpaid time costs for the month of April 2009	$401,15016
3.	Fixed monthly fee from August 2011 to July 2012	$830,00017
4.	Time costs for August 2012 to November 2012	$42,30018
5.	VAF	$27,602,925 – computed based on the formula set out at [38] below19 + 5% of the amount adjudicated in respect of certain disputed claims (“the Disputed Claims”)20
6.	Deposit	$500,000
7.	Outstanding disbursements	$3,285.40
	Total	$39,645,824.40 + 5% of the Disputed Claims

The Plaintiff argues that the agreement between the parties, ie, the Contract, should be the starting point to determine its fees. The Contract should not be ignored. Both the decisions in TTI 2012 and Re Econ Corp Ltd [2004] 2 SLR(R) 264 (“Re Econ (No 2)”) did not entail the discarding of an agreement for fees. The fact that the fee is to be assessed does not mean that the Contract should be disregarded – the Court of Appeal in TTI 2012 was careful to indicate that it was not interfering with the contractual arrangements. In any event, in TTI 2015, the Court of Appeal noted that TTI 2012 was wrong and it did not have the power to unilaterally subject the VAF to taxation or assessment. The Contract remained binding. Similarly, Re Econ (No 2) did not require that the fee arrangement be disregarded. The Defendant itself has acknowledged that the court should have reference to the Contract in terms of an “all-in” amount of $10m.²¹

The Contract was neither set aside nor challenged. This contractual arrangement arose out of extensive negotiations and indicated what was fair, reasonable and adequate remuneration, as mandated in TTI 2012. The Defendant has also not disputed these arrangements until the present proceedings. The Defendant could not now be allowed to rewrite the VAF Formula and disregard a valid contract. Sanctity of contract requires the parties to be bound: Forefront Medical Technology (Pte) Ltd v Modern-Pak Pte Ltd [2006] 1 SLR(R) 927 at [24] and MAE Engineering Ltd v Fire-Stop Marketing Services Pte Ltd [2005] 1 SLR(R) 379 at [27].²²

The VAF Formula reflects the direct and tangible benefit derived by the Defendant from the Plaintiff’s work. It provided full...