Ong Han Nam v Borneo Ventures Pte Ltd

• Jurisdiction: Singapore
• Judge: Judith Prakash JCA,Chao Hick Tin SJ,Belinda Ang Saw Ean JAD
• Judgment Date: 08 March 2021
• Neutral Citation: [2021] SGCA 21
• Published date: 11 March 2021
• Year: 2021
• Hearing Date: 24 November 2020
• Plaintiff Counsel: Lem Jit Min Andy, Selvaratnam Sharmini Sharon, Poon Pui Yee and Zhuang Changzhong (Harry Elias Partnership LLP)
• Court: Court of Appeal (Singapore)
• Citation: [2021] SGCA 21
• Docket Number: Civil Appeal No 78 of 2020

Chao Hick Tin SJ (delivering the judgment of the court): Introduction

The core of this dispute centres on a plot of land of approximately 1.459 acres (“the Subject Land”).¹ It is part of a larger piece of land situated in the Sembulan District, Kota Kinabalu, Sabah, spanning an area of about 95.58 hectares (238.63 acres) with title number 017544875 (“the Sembulan Land”). The leasehold interest in the Sembulan Land is vested in Sutera Harbour Golf and Country Club (“SHGCC”). In March 2014, the ownership of the ultimate parent company of SHGCC, Sutera Harbour Group Sdn Bhd (“SH Group”),² changed hands with 77.5% of the shareholding in SH Group being acquired by the plaintiff-respondent (“Borneo Ventures”), from the defendant-appellant, Mr Ong Han Nam (“Ong”), pursuant to a Subscription Agreement dated 30 December 2013 (“the SA”).³ Ong gave certain warranties to Borneo Ventures in the SA. Borneo Ventures claims that there have been breaches of some of these warranties and thus seeks an indemnity from Ong for these breaches (see [8] below).

The present proceedings also come on the heels of a recently concluded Malaysian suit (“the Malaysian Suit”) where SHGCC commenced proceedings in the Malaysian High Court in Kota Kinabalu against Ong and Omega Brilliance Sdn Bhd (“OBSB”), another company owned by Ong. SHGCC claimed that Ong, as SHGCC’s director, had caused SHGCC to sell the Subject Land to OBSB allegedly at a gross undervalue of RM 1,000. As such, Ong had allegedly breached his fiduciary duties to SHGCC. Written grounds in that suit, dismissing SHGCC’s claims, were released on 7 May 2018 (“the Malaysian Judgment”).⁴ SHGCC’s appeal against that decision was also dismissed by the Court of Appeal of Malaysia.⁵ SHGCC was not granted leave to appeal further to the Federal Court of Malaysia.⁶

The cumulative effect of the Malaysian Judgment and the dismissal of SHGCC’s appeal by the Malaysian Court of Appeal, is that OBSB is legally the owner of the Subject Land. SHGCC is therefore estopped from denying OBSB’s proprietary interest in the same. SHGCC was also directed by the Malaysian High Court to transfer the whole of its interest in the Subject Land to OBSB.⁷ For the purposes of the present action in Singapore and this appeal, two substantive issues arise from the Malaysian Judgment. First, whether Borneo Ventures had indeed breached the warranties given in the SA. Second, whether the Malaysian Judgment binds Borneo Ventures either under the doctrine of res judicata, the principles of issue estoppel or abuse of process. Just to complete the picture, we should add that the Judge held that the Malaysian Judgment does not bind Borneo Ventures and that Ong had breached the warranties he gave in the SA. The present appeal is Ong’s appeal against the decision of the Judge.

Facts The parties

At all material times, Ong owned shares in many companies. He still does. One such company is SH Group, which is the holding company of Sutera Harbour Resort Sdn Bhd (“SH Resort”). SH Resort is, in turn, the parent company of five companies, one of which is SHGCC. Ong, through a British Virgin Islands incorporated company, was originally the sole owner of the SH Group, before Borneo Ventures’ acquisition of 77.5% of the shares in SH Group.⁸

Borneo Ventures is a wholly owned subsidiary of GSH Corporation Limited (“GSH”), a publicly listed company in Singapore, helmed by one Mr Goi Seng Hui (“Goi”).⁹ Borneo Ventures acquired 77.5% of the shares in the SH Group for a consideration of about RM700m, pursuant to the SA.¹⁰ This acquisition under the SA was preceded by a Term Sheet dated 18 October 2013¹¹ (“the Term Sheet”, as modified by addenda dated 21 October 2013¹², 28 October 2013¹³, 14 November 2013¹⁴) and a Disclosure Letter dated 18 March 2014 (“the Disclosure Letter”).¹⁵ The SA was eventually completed on 26 March 2014.¹⁶

Background to the dispute

We do not propose to recount all the facts as they have already been comprehensively set out in paragraphs [4] – [36] of the decision of the Judge. For present purposes, we need only set out the facts pertaining to (a) the Subject Land, (b) the purchase of the Subject Land by OBSB and (c) the SA under which Borneo Ventures acquired 77.5% of the shareholding of the SH Group. This account will sufficiently highlight the material facts giving rise to the dispute, and show why the Subject Land was left out of the asset pool that Borneo Ventures acquired through the SA.

The Subject Land houses a power plant (“the Co-Gen Facility”) which was originally developed and owned by another one of Ong’s companies (“PHSB”). The Co-Gen Facility supplied electricity to the SH Resort and some parts of Kota Kinabalu vide a license granted by the Energy Commission.¹⁷ From about 1998, PHSB paid rent to SHGCC for the use of the Subject Land.¹⁸ The last tenancy agreement signed between them was on 1 December 2012¹⁹ and that tenancy expired on 30 November 2013. During the term of this tenancy, on 12 July 2013, and pursuant to an asset sale agreement (“the ASA”), PHSB transferred ownership of the plant and machinery to OBSB in exchange for OBSB paying off PHSB’s total debts to Bank Islam.²⁰ The Subject Land was expressly excluded from the ASA²¹ and it remained a part of the Sembulan Land (and therefore SHGCC’s property) until it was carved out in 2014.²² Under a sale and purchase agreement dated 21 March 2014 (“the S&P”), SHGCC sold the Subject Land to OBSB for a nominal sum of RM1,000.²³ As a result of the S&P and the ASA, both the Subject Land and the assets of the Co-Gen Facility were consolidated under the ownership of OBSB.

While giving evidence at the trial below, Ong conceded that the existence of the S&P was never disclosed to Borneo Ventures prior to the completion of the transaction under the SA.²⁴ Such non-disclosure, according to Borneo Ventures, amounted to a breach of the warranties given by Ong in the SA. The relevant clauses of the SA are as follows:

Clause 6.1 of the SA reads:

[SH Group], [SH Holdings], [SH Resort] and [Ong] hereby jointly and severally represent and warrant with [Borneo Ventures] in terms of the representations and warranties more particularly set out in Clauses 6.4 and in Schedule 2 hereto (such representations and warranties collectively referred to as ‘Warranties’), which representations and warranties shall form part of this Agreement and [SH Group], [SH Holdings], [SH Resort] and [Ong] each further represents and warrants that the Warranties shall be fulfilled, true and accurate at the date of this Agreement, and shall continue to be fulfilled, true and accurate at each of the Completion of the [SH Resort] Acquisition, Proposed Capitalisations and Proposed JVA Loan (as the case may be) in all respects as if they had been given afresh on such date.

Paragraph 18.2 of Schedule 2 states:

The relevant companies within the Sutera Target Group (as identified in Schedule 4) (the ‘Relevant Land Owners’) has good marketable title to the Land and is the beneficial and legal owner in sole possession of the Land from all encumbrances.

Schedule 4 states:

… [SHGCC] is the sole legal and beneficial owner of the parcel of Land under 99 years lease of state land situated at Sembulan, District of Kota Kinabalu, Sabah held under Title No. 017544875 (expiring on 31 December 2091) with a total area measuring approximately 95.58 hectares (238.63 acres).

Paragraphs 4.1(c) and 4.1(g) of Schedule 2 state:

Subject to any provisions to the contrary, whether express or implied, contained in this Agreement, between the date of this Agreement and Completion, the Sutera Target Group or [SH Group]: … (c) have not disposed of, and will not dispose of, any of its assets other than assets disposed of in the Ordinary Course of Business; … (g) have not except for inventory or equipment in the Ordinary Course of Business, sold, abandoned or made any other disposition of any of its properties or made any acquisition of all or any part of the properties, share capital or business of any other person; …

Paragraph 6.6(b) of Schedule 2 states:

Arm’s Length Dealings

Each of the companies in the [SH Group] have not disposed, or agreed to dispose, of any assets, and has not provided or agreed to provide any services or facilities (including without limitation, the benefit of any licenses) which was or will be less than its market value, or otherwise than on an arm’s length basis

Paragraph 11.1 and 11.2(a) of Schedule 2 respectively state:

Contracts between the Companies and Vendors

Save as disclosed in the Disclosure Letter, there are no existing contracts, arrangements, understandings or engagements to which any of the companies in the Sutera Target Group or [SH Group] are a party and in which [SH Holdings], [SH Group] or [Ong] and/or any director, officer, employee or shareholder of any of the companies in the Sutera Target Group of [SH Group] and/or any person connected to any of them is directly or indirectly interested.

Contracts at Arm’s length

(a) There is no contract, arrangement or understanding to which any company in the [SH Group] are parties or by which they are bound which is not on entirely arm’s length terms.

Further, under cl 8.1 of the SA, Ong was liable to indemnify Borneo Ventures for any losses suffered as a result of Ong’s breaches of the warranties in the SA. The relevant portions of cl 8.1 state:

[SH Group], [SH Holdings], [SH Resort] and [Ong] hereby jointly and severally and irrevocably covenant to keep the Investors fully and effectively indemnified against all actions, claims, costs, damages, deficiencies, demands, expenses, liabilities and losses (including all legal costs incurred on a full indemnity basis) that may be suffered incurred or sustained by the Investors in consequence of or in connection with: (a) any breach or inaccuracies of any of the Warranties; … (c...