Justlogin Pte Ltd and Another v Oversea-Chinese Banking Corp Ltd and Another

• Jurisdiction: Singapore
• Judge: Kan Ting Chiu J
• Judgment Date: 29 October 2003
• Neutral Citation: [2003] SGHC 262
• Docket Number: Suit No 938 of 2002
• Date: 29 October 2003
• Year: 2003
• Published date: 07 November 2003
• Plaintiff Counsel: Bernard Doray and Benjamin Goh (Arthur Loke Bernard Rada and Lee)
• Citation: [2003] SGHC 262
• Defendant Counsel: V Coomaraswamy and Chua Sui Tong (Shook Lin and Bok)
• Court: High Court (Singapore)
• Subject Matter: "Best endeavours",Contractual terms,Whether obliged to take reasonable steps or to use "best endeavours" to ensure performance,Contract,Whether actions taken satisfy test of reasonable steps or "best endeavours",Obligations of parties under contract,Words and Phrases,Test to be satisfied

1. The parties in this case sought to carry out a series of corporate operations involving themselves and their associate companies. There were two underlying motivations, one to acquire the cash assets of a company, and the other, to dispose of an investment without showing a loss. The exercise ended without reaching the first stage.

2. The first plaintiff Justlogin Pte Ltd (“JLI”) is an applications service provider offering office collaborative applications. Singapore Engineering Software Pte Ltd holds approximately 22.9% of its shares and the first defendant Oversea-Chinese Banking Corporation Ltd (“OCBC”) holds 16.6% of it. The second plaintiff Justlogin Holding Pte Ltd (“JLI-H”) holds a majority 58.4% of the shares.

3. OCBC is, as its name declares, a bank, and the second defendant Bank of Singapore Ltd (“BOS”) is its wholly-owned subsidiary.

4. OCBC made some investments in the computer industry. Besides the shares in JLI it held through BOS 12.79% of an e-commerce enabler known as iPropertyNet Pte Ltd (“iProp”). The investment was not a success. There was dissent amongst the shareholders of iProp. The shareholders intended to make an initial public offering and float the company, but that was not carried through because of unfavourable stock market conditions. Some shareholders wanted to wind up the company and recoup their investments as the company had about $5.6m in cash, but OCBC were not in favour of that.

5. JLI was a company on the move. It needed funds for its project, and was attracted by iProp’s $5.6m cash holdings.

6. The plaintiffs alleged that in order to thwart the move OCBC wanted to acquire a further 44.44% of the shares of iProp in August 2001 so that its shareholding would go up to 57.23%, and iProp would become a subsidiary of OCBC. Before OCBC can acquire those shares it needed to obtain the approval of the Monetary Authority of Singapore (“MAS”).

7. The defendants did not intend to keep their interest in iProp in the long term. Even before the completion of the purchase of the additional iProp shares they entered into two deeds with the plaintiffs on 20 July 2001 which main intention and effect were that

(i) JLI was to acquire from iProp its business and assets, and

(ii) JLI and JLI-H were to acquire from OCBC its iProp shares.

8. For the purpose of this judgment, only the first deed needs to be referred to. Clause 1 of the deed provides that

The parties hereby agree and undertake that conditional upon the completion of the Event [OCBC’s acquisition of the additional 44.44% of iProp shares]:-

(a) JLI shall enter into a formal sale and purchase of business and assets agreement (including all other relevant ancillary documents thereunder) with iProp in accordance with the terms and conditions set out in the Schedule hereof (the “iProp Assets Sale Agreement”) within 30 days from the completion of the Event; and

(b) JLI, BOS and OCBC shall enter into a formal sale and purchase agreement (including all other relevant ancillary documents thereunder) for the iProp Sale Shares in accordance with the terms and conditions set out in the Schedule hereof (the “iProp (JLI) S&P Agreement”) within 30 days from the completion of the Event.

(Emphasis added)

9. Clause 2 made clear that

This Deed sets out the understanding and intention of the respective parties hereto with respect to the transactions and matters referred to herein. Subject to the completion of the Event, the parties shall cause (and where applicable, procure other relevant parties named herein), in due course and within the time frames specified herein, to inter alia enter into the Agreements which will provide in detail the respective matters set out in this Deed. (Emphasis added)

Pending the execution of the Agreements:-

(a) the respective terms and conditions set out in this Deed shall be binding on each of the respective parties hereto with respect to the transactions set out herein; and

(b) no modifications to the nature of any of the transactions contained herein and/or to the terms and conditions in relation to such transactions shall be made without the written agreement of all parties named herein.

The parties acknowledge that they intend this Deed to be binding and legally enforceable notwithstanding that there are certain matters in the Agreements yet to be agreed.

The parties agree and acknowledge that in the event of a breach or threatened breach or, an intention evinced by any party to breach, any provision of this Deed, damages will not be an adequate remedy for the non-breaching party and that the non-breaching party may seek all available remedies at law or in equity.

The parties agree and acknowledge that they have entered into this Deed for the purposes and with the intentions described in the Recitals, and accordingly, any party shall be entitled to seek injunctive relief and/or specific performance as against the other party.

10. The schedule mentioned in clause 1, which is also referred to as the term sheet by the parties sets out in some detail the terms for the sale of the assets -

1. Issue of New Shares by JLI to iPropertyNet Pte Ltd (“iProp”)

(a) JLI agree to issue 8,560,202 new preference shares (“Class A preference shares”) of par value $0.10 each, at the issue price of $1.99 per Class A preference share, in favour of iProp in consideration for the transfer of business and assets from iProp to JLI valued at no less than $17 million. As part of the iProp business and assets to be transferred, a minimum of $5.6 million will be in the form of cash held by iProp, assuming the transfer of business and assets takes place by end August 2001.

(b) The new Class A preference shares shall, upon issuance, constitute 50% less one (1) share of JLI’s enlarged issued share capital, on the fully-diluted basis and assumption that SES (an existing shareholder of JLI) has converted its entire convertible term loan of $99,246.90 into 992,469 ordinary shares of par value $0.10 each in JLI. As at the date hereof, the amount of such outstanding convertible loan is $35,000 which may be converted by SES into 350,000 ordinary shares in JLI.

(c) Such Class A preference shares will have preferential rights in distribution of assets and return of capital. In the event of liquidation of or other return of capital by JLI, the holders of Class A preference shares shall have priority in the return of capital up to the aggregate of:

(i) $4,100,000 (assuming that a cash amount of $5,600,000 will be transferred by iProp to JLI as part of its assets, and this $4,100,000 shall be adjusted accordingly depending on the actual amount of cash so transferred) less any amount previously distributed; and

(ii) any declared and unpaid dividends thereon

over holders of ordinary shares with respect to any net proceeds from liquidation of JLI after payments to all the creditors of JLI, whether secured or unsecured.

For the avoidance of doubt, the Class A preference shares shall rank pari passu with ordinary shares in respect of any dividend payable. The dividend payable in respect of Class A preference shares shall be equal to the dividend payable from time to time in respect of the ordinary shares.

(d) Voting rights: The Class A preference shares shall entitle all holders to receive notice of, and to attend at all general meetings of JLI and shall entitle the holders to vote at any matter in such general meeting.

Consent of the majority of the holders of Class A preference shares shall be required for any acts by JLI that:-

(i) alters, changes or removes the rights, preferences and privileges of the preference shares; or

(ii) creates any new shares having preference over or being on parity with the preference shares; or

(iii) increases the authorised number of the preference shares.

(e) Pre-emption and Co-sale rights: The holders of Class A preference shares shall pari passu with the ordinary shareholders be entitled to all pre-emption and co-sale rights accorded under the shareholders’ agreement dated 4 Dec 2000 (“Shareholders’ Agreement”).

(f) Conversion rights: Holders of Class A preference shares shall be entitled from time to time to convert all or any part of the preference shares into such number of ordinary shares at the conversion ratio of 1 Class A preference share for 1 ordinary share (the “Conversion Ratio”).

Holders of Class A preference shares shall give 7 days’ written notice to JLI that it elects to convert, provided that conversion shall be automatic in the event of JLI obtaining approval in principle for a public listing on a recognised stock exchange.

(g) Such share issue to be completed within 60 days from the signing of the sale and purchase agreement in respect of the business and assets of iProp.

2. Purchase of iProp shares from OCBC (and/or its related companies, including BOS) by JLI

(a) JLI agree to purchase from OCBC (and/or its related companies, including BOS) up to 2,341,063 iProp shares constituting 38% of iProp’s issued share capital. The final number of such iProp shares to be acquired by JLI shall be decided solely at the discretion of OCBC.

(b) Aggregate consideration payable by JLI for the 2,341,063 iProp shares is $6,460,000, and this shall be satisfied by JLI by issuing to OCBC 3,252,877 new preference shares (“Class B preference shares”) of par value $0.10 each at the issue price of $1.99 per Class B preference share, constituting approximately 16% of JLI’s enlarged issued share capital, in consideration for the purchase of the said iProp shares.

In the event that the final number of iProp shares to be acquired by JLI amounts to less than 2,341,063, the total aggregate price shall be adjusted proportionately.

(c) The Class B preference shares shall confer on its holders the same rights as the holders of Class A preference shares save that holders of Class B preference shares intending to transfer any of its Class B preference shares shall not be required to: (i) procure the prospective...