OUE Lippo Healthcare Ltd (formerly known as International Healthway Corp Ltd) and another v Crest Capital Asia Pte Ltd and others

• Jurisdiction: Singapore
• Judge: Hoo Sheau Peng J
• Judgment Date: 09 July 2020
• Neutral Citation: [2020] SGHC 142
• Court: High Court (Singapore)
• Docket Number: Suit No 441 of 2016
• Year: 2020
• Published date: 16 July 2020
• Hearing Date: 25 July 2019,26 July 2019,04 July 2019,22 June 2020,10 July 2019,20 August 2019,24 July 2019,29 November 2019,09 July 2019,13 August 2019,23 August 2019,03 July 2019,12 July 2019,16 August 2019,14 August 2019,23 July 2019,11 July 2019,15 August 2019,05 July 2019,22 August 2019,21 August 2019
• Plaintiff Counsel: Lee Eng Beng SC, Cheng Wai Yuen Mark, Chow Chao Wu Jansen, Danitza Hon Cai Xia and Sasha Gonsalves (Rajah & Tann Singapore LLP)
• Defendant Counsel: Manoj Pillay Sandrasegara, Chng Zi Zhao Joel, Tan Kai Yun and Wong Zheng Hui Daryl (WongPartnership LLP),The sixth defendant unrepresented,Goh Kok Leong, Ng Weiting and Daniel Tan An Ye (Ang & Partners)
• Subject Matter: Companies,Directors,Shadow directors,Capital,Share capital,Tort,Conspiracy,Agency,Evidence of agency,Principal,Trusts,Accessory liability,Equity,Fiduciary relationships,When arising,Duties,Remedies,Equitable compensation,Rectification,Contract,Illegality and public policy,Statutory illegality,Contractual terms,Implied terms,Restitution,Unjust enrichment,Damages,Assessment,Civil procedure,Costs,Principles
• Citation: [2020] SGHC 142

Hoo Sheau Peng J: Introduction

In this suit, the plaintiffs claim against the defendants for their roles in causing the first plaintiff, OUE Lippo Healthcare Ltd (formerly known as International Healthway Corp Ltd) (“IHC”), to enter into a credit facility (to be referred to as the “Standby Facility”), and to use the funds to indirectly acquire its own shares.

The plaintiffs rely on three causes of action. First, the plaintiffs claim that as officers of IHC, the sixth defendant, Mr Fan Kow Hin (“Mr Fan”) and the eighth defendant, Ms Lim Beng Choo (“Ms Lim”), acted in breach of their duties to IHC. Second, the plaintiffs claim that the first to fifth defendants (the funding entities which are collectively referred to as the “Crest entities”), the seventh defendant, Mr Andrew Ah Kong Aathar (a substantial shareholder of IHC whom I shall refer to as “Mr Aathar”) and Ms Lim provided dishonest assistance to Mr Fan. Third, the plaintiffs claim that all the defendants engaged in a conspiracy by unlawful means to injure IHC. As a result of the defendants’ conduct, the plaintiffs suffered losses in connection with the Standby Facility, as well as another credit facility known as the “Geelong Facility”.

The Crest entities and Mr Lim defend the claims on various grounds. They also brought counterclaims against the plaintiffs. Although Mr Fan is a bankrupt, the plaintiffs obtained leave to continue with the action against him. Mr Fan, however, did not file a defence. He is not represented in the proceedings. Mr Aathar filed a bare defence. However, by the time of the trial, there was a stay of the proceedings against him. This was pursuant to a voluntary arrangement approved by Mr Aathar’s creditors under the Bankruptcy Act (Cap 20, 2009 Rev Ed). Nonetheless, Mr Aathar, as well as Mr Fan, gave evidence before me.

The trial concerns both liability and quantum, save that there is bifurcation in relation to the quantification of one category of loss, ie, loss arising from the termination and sale of the plaintiffs’ Australian business.

I pause to highlight that after the trial, but before the parties filed their closing and reply submissions, the Court of Appeal released The Enterprise Fund III Ltd and others v OUE Lippo Healthcare Ltd (formerly known as International Healthway Corp Ltd) [2019] 2 SLR 524 (“The Enterprise Fund III”), and determined that the Standby Facility which funded the indirect acquisition by IHC of its own shares is void under by s 76A(1)(a) of the Companies Act (Cap 50, 2006 Rev Ed) (“Companies Act”) for contravention of s 76(1A)(a)(i) of the same. This determination, as well as some of the observations within the Court of Appeal’s judgment, are pertinent to this case.

Having heard the evidence, and considered the closing and reply submissions of the parties, this is my judgment.

Background The parties

IHC is a Singapore-incorporated company listed on the Catalist board of the Singapore Exchange (“SGX”).¹ The second plaintiff, IHC Medical Re Pte Ltd (“IHC Medical Re”), is a wholly-owned subsidiary of IHC. IHC Medical Re is the ultimate holding company for IHC’s Australian business through IHC Healthcare REIT (Singapore Trust).² The Australian business consisted primarily of three properties in Australia (the “Australian properties”) as follows:³ two properties at 541 and 553 St Kilda Road, Melbourne, Victoria, Australia (the “St Kilda properties”); and a property at 73 – 79 Little Ryrie Street, Geelong, Victoria, Australia (the “Geelong property”).

IHC is also the holding company of two other subsidiaries, namely IHC Management Pte Ltd (“IHCM”) and IHC Management (Australian) Pty Ltd (“IHCM(A)”).⁴

Mr Fan and Mr Aathar were founders of IHC. Both held large shareholdings in IHC, reported as 23.67% and 8.73% respectively in the Annual Report of 2015.⁵ On 17 May 2015, by way of a service agreement,⁶ IHC appointed Mr Fan as its Group Chief Executive Officer (“Group CEO”). On 30 June 2015, upon the departure of the previous CEO, Mr Chia Kwok Ping (“Mr Chia”), Mr Fan was re-designated as Chief Executive Officer (“CEO”).⁷ He remained in this position until 31 January 2016.⁸ Mr Aathar did not hold any formal position in IHC.⁹

From 30 October 2013 to January 2015, Ms Lim was the Financial Controller (Corporate Finance and Real Estate Investment Trusts) of OUELH Medical Assets Pte Ltd (formerly known as IHC Medical Assets Pte Ltd).¹⁰ From January 2015, she was appointed IHC’s Vice-President (Investments), and maintained that position until 6 January 2016.¹¹ On 7 January 2016, Ms Lim was appointed IHC’s CEO and Executive Director. She held those positions until 23 January 2017.¹²

Turning to the Crest entities, the first defendant, Crest Capital Asia Pte Ltd (“Crest Capital”), is a fund administration company.¹³ It is the holding company of the second defendant, Crest Catalyst Equity Pte Ltd (“Crest Catalyst”), which is a fund management company that manages affiliated private equity funds. The third to fifth defendants, The Enterprise Fund III Ltd (“EFIII”), VMF3 Ltd (“VMF3”) and Value Monetisation III Ltd (“VMIII”), are three such funds administered and managed by Crest Capital and Crest Catalyst.¹⁴

Mr Tan Yang Hwee, also known as Glendon Tan (“Mr Tan”), is the Investment Director of Crest Capital.¹⁵ Mr Tan was the main representative handling Crest Capital’s business deals with IHC since its incorporation in 2013, including the deals that resulted in the Standby Facility and the Geelong Facility. Prior to that, Crest Capital had business dealings with a group of companies, which included Healthway Medical Development Pte Ltd, founded by, amongst others, Mr Fan and Mr Aathar.¹⁶ IHC was incorporated to expand the healthcare services offered by the group internationally.¹⁷

The Standby Facility and the Geelong Facility

The Standby Facility was a short-term credit facility of up to S$20m granted to IHC by EFIII, VMF3 and VMIII. The Standby Facility agreement was executed on 30 July 2015,¹⁸ and the facility was to be used as “general working capital”.¹⁹ It provided for fixed interest (termed “standby fees”) on the full sum of S$20m at 3.5% per month for a minimum of five months²⁰ with default interest being levied on any sums due and unpaid at an additional rate of 2% per month.²¹

I should add that an initial facility agreement was fully executed on or around 21 July 2015,²² and backdated to 16 April 2015 (with the maturity date falling two months from the date of disbursement of 16 April 2015, ie, 15 June 2015)²³. At that time, the three funds involved were EFIII, VMIII and The Enterprise Fund II Ltd (“EFII”). Essentially, the Standby Facility agreement was executed to supersede the initial facility agreement, and to extend the tenure of the facility to five months from 30 July 2015.²⁴ Additionally, VMF3 replaced EFII as an investing party.²⁵

The Geelong Facility was a mezzanine loan of S$11.5 million granted to IHC Medical Re by EFIII and VMIII, with the agreement dated 17 June 2015.²⁶ The purpose was to partially finance the acquisition of the Australian properties.²⁷ It provided for interest at the rate of 3.35% per month on the outstanding principal,²⁸ with default interest on any sums due and unpaid at an additional rate of 3% per annum.²⁹

The payments of sums due under both facilities were secured by personal guarantees from Mr Fan and Mr Aathar, as well as charges granted by IHC over all the shares of IHC Medical Re, IHCM and IHCM(A) (the “Charged Shares”).³⁰ This was done by two Deeds of Share Charges dated 17 June 2015³¹ and 30 July 2015,³² which secured payment of sums due under the Geelong Facility and the Standby Facility respectively. For convenience, I shall refer to these Deeds of Share Charges as the “17 June Deed of Charge” and the “30 July Deed of Charge”.

Subsequently, there was a dispute over the Standby Facility.³³ According to IHC, this triggered its default on the Geelong Facility,³⁴ which in turn led to IHC incurring further consequential losses. As mentioned at [1] above, IHC took issue with the defendants’ respective roles in causing IHC to enter into the Standby Facility in the first place.

The genesis of the Standby Facility

In this connection, the relevant events began on 3 April 2015 when Mr Tan, Mr Fan and Mr Aathar met at Serangoon Gardens, pursuant to arrangements made by Mr Aathar.³⁵

On 4 April 2015, at 9.06am, Mr Aathar sent Mr Tan an email, copied to Mr Fan, with the subject stated as “Standby Facility” (the “first 4 April 2015 email”). The email provided a “recap” of the group’s discussion at the meeting and contained a formal request for “a standby line” of S$20m from the Crest entities to combat an imminent short seller’s attack on IHC’s shares. The material portions of the email are reproduced as follows:³⁶

Dear Glendon,

We spoke yesterday and recap the following:

a. We noticed an unusual sale pattern on Thursday 2/4/15, particularly from one single account.

We then analysed the transactions with industry specialist… The pattern is that of a shortist and they now have between 71-75m shares.

There is a high probability that this stealth plot would lead to an imminent shorting of IHC shares this coming Monday given that they commenced activity last week. The shortist have about 75m shares ($21.3m). This is probably being carried out by a small fund given the amount they held.

b. We look to Crest to provide a standby line of $20m for use against this activity.

The terms could be the following: 1. Short term of 1-2months. 2. Interest of 3.5% per month. 3. Shares can be bought and held by Crest directly.

c. As time is of essence, we look to putting facility into place as soon as possible with a very small amount available ($3-$5m) on Monday morning 9am for standby.

We are most grateful for your support.

[emphasis added]

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