Perennial (Capitol) Pte Ltd and another v Capitol Investment Holdings Pte Ltd and other appeals

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 26 February 2018
• Neutral Citation: [2018] SGCA 11
• Docket Number: Civil Appeals Nos 51—53 of 2017
• Date: 26 February 2018
• Published date: 01 March 2018
• Plaintiff Counsel: Thio Shen Yi SC, Ngo Shuxiang Nicholas and Reshma Nair (TSMP Law Corporation)
• Defendant Counsel: the respondent unrepresented and absent,Davinder Singh SC, Pardeep Singh Khosa and Chen Chi (Drew & Napier LLC)
• Court: Court of Appeal (Singapore)
• Hearing Date: 13 November 2017
• Subject Matter: Companies,Insolvency law,Winding up,Grounds for petition

Judith Prakash JA (delivering the grounds of decision of the court): Introduction

These appeals concerned winding-up applications commenced against three separate companies by two disaffected and related shareholders on the “just and equitable ground” which is a well utilised ground for attempting to liquidate a company where the shareholders of the company concerned stand in a quasi-partnership relationship to each other. In the alternative, the shareholders sought an order that they be bought out by the opposing shareholder in each of the companies. The applications were dismissed at first instance after a full hearing. The disaffected shareholders appealed, seeking to persuade us to take a different view from the judge. On the facts and the law we were not able to do so and, accordingly, dismissed the appeals at the end of the hearing.

The appeals raised issues which were closely related to those which this court recently considered in Ting Shwu Ping (administrator of the estate of Chng Koon Seng, deceased) v Scanone Pte Ltd and another appeal [2017] 1 SLR 95 (“Ting Shwu Ping”). The novel question that arose in this case was whether the principles established in Ting Shwu Ping are applicable in the context of a deadlock between equal shareholders of a company sought to be wound up, particularly where neither party desires to sell its shares to the other. Driving the dispute, however, was a tussle over the control of the parcel of land at the corner of North Bridge Road and Stamford Road on which for decades the iconic Capitol Theatre stood.

We now give our full grounds for dismissing the appeals.

The background

The appellants before us, and the applicants below, were Perennial (Capitol) Pte Ltd (“Perennial”) and New Capitol Pte Ltd (“New Capitol”). The appellants sought to wind up three companies, Capitol Investment Holdings Pte Ltd (“CIH”), Capitol Hotel Management Pte Ltd (“CHM”) and Capitol Retail Management Pte Ltd (“CRM”) (collectively, “the respondent companies”) on the “just and equitable ground” under s 254(1)(i) of the Companies Act (Cap 50, 2006 Rev Ed). The appellants were two of the three shareholders in each of the respondent companies, the third being Chesham Properties Pte Ltd (“Chesham”).

The facts underlying this dispute were covered in detail by the High Court Judge (“the Judge”) who heard the applications in his grounds of decision: see Perennial (Capitol) Pte Ltd and another v Capitol Investment Holdings Pte Ltd and other matters [2017] SGHC 84 (at [3]–[18] (“the GD”). What follows is an account of the key facts.

The incorporation of the respondent companies

In April 2010, the Urban Redevelopment Authority (“URA”) launched a tender for a lease of a parcel of land located at the junction of North Bridge Road and Stamford Road. This parcel included the land on which the Capitol Theatre stood. While it was run-down and neglected, some of its former glory and fame still clung to the building, and the tender gave developers in Singapore an opportunity to acquire and capitalise on a landmark site.

One such developer was Mr Kwee Liong Seen (“Mr Kwee”). He invited Mr Pua Seck Guan (“Mr Pua”) and Mdm Sukmawati Widjaja (“Mdm Widjaja”) to join him in collectively bidding for the lease. It was envisioned that the land would be developed into an integrated development project comprising a theatre, a hotel and a retail mall (“the Capitol Project”) which would include the restoration and refurbishment of the Capitol Theatre and the other conserved buildings adjacent to it. Mr Pua and Mdm Widjaja responded with enthusiasm and the parties decided to incorporate special purpose vehicles to hold their respective interests in the joint venture. To that end, Mr Kwee incorporated Chesham on 14 May 2010, Mdm Widjaja incorporated Top Property Investment Pte Ltd (“Top Property”) on 8 June 2010, and Mr Pua incorporated the first appellant, Perennial, on 16 August 2010, as a wholly owned subsidiary of Perennial Singapore Investment Holdings Ltd, which is in turn a wholly owned subsidiary of Perennial Real Estate Holdings Ltd (“PRE Holdings”). Mr Pua is the Chief Executive Officer and one of the directors of PRE Holdings. Chesham, Top Property and Perennial are, hereafter, collectively referred to as “the Original Shareholders”.

On 16 August 2010, the Original Shareholders incorporated nine companies (“the Nine Companies”), which included the three respondent companies, to hold various components and assets of the Capitol Project. The Original Shareholders each appointed one director to the board of directors of each of the Nine Companies. Perennial appointed Mr Pua while Chesham appointed Mr Kwee.

The articles of association of each of the respondent companies contains the following clause (“Art 22”): 22.(A) Every Member who desires to transfer any share or shares (hereinafter called “the vendor”) shall give to the Company notice in writing of such desire (hereinafter called “the transfer notice”). Subject as hereinafter mentioned, a transfer notice shall constitute the Company the vendor’s agent for the sale of the share or shares specified therein (hereinafter called “the said shares”) in one or more lots at the discretion of the Directors to the Members other than the vendor at a price to be agreed upon by the vendor and the Directors or, in case of difference, at the price, which the Auditor of the Company for the time being shall, by writing under his hand, certify to be in his opinion the fair value thereof as between a willing seller and a willing buyer, and such sum shall be deemed to be the fair value, and in so certifying the Auditor shall be considered to be acting as an expert and not as an arbitrator and accordingly the Arbitration Act, Cap. 10 shall not apply. A transfer notice shall not be revocable except with the sanction of the Directors.

On 18 August 2010, two bids were submitted through the Nine Companies to the URA. On 27 October 2010, one of these proposals won the tender. The shares in the respondent companies were subsequently distributed between Perennial, Chesham and Top Property in the respective proportions of 40%, 30% and 30%.

It should be noted that under Conditions 52 and 57.1 of the URA Conditions of Tender, the URA had the right to re-enter and resume possession of the site and dispose of it as though the tender had never been submitted, without compensation to the lessee, if the lessee were to be placed in liquidation before the issuance of the certificate of statutory completion for the Capitol Project. As of the date of the filing of the applications, no certificate of statutory completion had been issued.

In March 2012, Top Property decided to leave the Capitol Project. Following a series of negotiations, Chesham purchased two-thirds of Top Property’s shares. The remaining shares were purchased by New Capitol, another wholly owned subsidiary of Perennial Singapore Investment Holdings Pte Ltd. Thus, after Top Property’s departure from the Capitol Project, the appellants collectively held 50% of the shares in each of the respondent companies, while Chesham held the other 50%.

Mounting disagreements amongst the shareholders

Shortly after winning the tender, the Original Shareholders met to discuss how they would take the Capitol Project forward. They agreed, inter alia, to execute a joint venture (“JV”) agreement to order their relationships, interests and rights. Numerous drafts of a proposed JV agreement were circulated amongst the Original Shareholders between November 2010 and March 2011, but in the event no agreement was ever signed.

In the meantime, in December 2010, the Original Shareholders had agreed on the following allocation of responsibilities in relation to the Capitol Project: Perennial would be in charge of developing the retail component, Chesham would be responsible for developing the hotel and theatre components, while Top Property would be responsible for developing the residential component. This allocation of responsibilities reflected the respective expertise of Mr Pua, Mr Kwee and Mdm Widjaja: Mr Pua had experience in retail management. Mr Kwee had experience in developing luxury hotels and Mdm Widjaja had experience in developing and marketing luxury residential projects. The Original Shareholders also agreed on the following: Perennial (Singapore) Retail Management Pte Ltd (“PSRM”) would be engaged to develop and operate the retail components of the Capitol Project. This engagement was to be effected through management agreements called the Retail Property Management Agreements (“RPM Agreements”). PSRM was to execute RPM Agreements with CRM and CHM. The RPM Agreement between PSRM and CRM would cover the retail units to be located in a building to be newly constructed while the RPM Agreement between PSRM and CHM would cover the retail units to be located within the conservation buildings of the Capitol Project. Patina Hotels & Resorts Pte Ltd (“Patina”) would be engaged to develop and operate the retail and hotel components of the Capitol Project. This engagement was to be effected through a management agreement called the Hotel Management Agreement (“HM Agreement”). Patina was to execute the HM Agreement and a licence agreement with CHM for the purpose of managing and operating the hotel.

According to the appellants, there was an understanding that the RPM Agreements would be executed at around the same time as the HM Agreement. Chesham, however, denied that there was any such understanding.

The HM Agreement had to be signed with some urgency because it was thought desirable to market the residential units as having access to the concierge services and amenities of the hotel. The HM Agreement was executed on 29 April 2013. Subsequently, in September 2013, the appellants provided Chesham with several drafts of the two RPM Agreements. However, despite many discussions, the...