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

• Jurisdiction: Singapore
• Judge: Kannan Ramesh J
• Judgment Date: 18 April 2017
• Neutral Citation: [2017] SGHC 84
• Court: High Court (Singapore)
• Docket Number: Companies Winding Up Originating Summonses Nos 72 to 74 of 2016
• Published date: 03 March 2018
• Year: 2017
• Hearing Date: 20 January 2017,03 January 2017,03 March 2017
• Plaintiff Counsel: Thio Shen Yi SC, Colin Liew, Reshma Nair and Nicholas Ngo (TSMP Law Corporation)
• Defendant Counsel: Defendants, unrepresented, absent,Davinder Singh SC, Pardeep Singh Khosa and Chen Chi (Drew & Napier LLC)
• Subject Matter: Companies,Winding up,By-laws,Insolvency law,Grounds for petition
• Citation: [2017] SGHC 84

Kannan Ramesh J: Introduction

In Winding-Up Applications 72 to 74 of 2016 (collectively, “the Applications”), Perennial (Capitol) Pte Ltd and New Capitol Pte Ltd (“the plaintiffs”) applied for the court to wind up three companies, Capitol Investment Holdings Pte Ltd (“CIH”), Capitol Hotel Management Pte Ltd (“CHM”) and Capitol Retail Management Pte Ltd (“CRM”) respectively (collectively, “the defendants”) on the “just and equitable” ground in section 254(1)(i) of the Companies Act (Cap 50, 2006 Rev Ed) (“the Act”). In the alternative, the plaintiffs sought to obtain a buy-out order under s 254(2A) of the Act against Chesham Properties Pte Ltd (“Chesham”). Chesham resisted the Applications.

I dismissed the Applications with detailed oral grounds on 3 March 2017 and the plaintiffs have appealed. These are the full grounds of my decision.

Facts The parties

The plaintiffs are wholly owned subsidiaries of Perennial Singapore Investment Holdings Pte Ltd, which is in turn a wholly owned subsidiary of Perennial Real Estate Holdings Ltd (“PREH”), an integrated real estate owner, developer and manager. Mr Pua Seck Guan (“Mr Pua”) is the Chief Executive Officer of PREH and one of its directors.

The plaintiffs collectively hold 50% of the shares in each of the defendants. The other 50% is held by Chesham. Chesham was incorporated by Mr Kwee Liong Seen (“Mr Kwee”) in May 2010 and is now owned in equal shares by Colonnade Properties Pte Ltd, which is indirectly owned by Pontiac Land Pte Ltd (“Pontiac Land”), and Philean Capital Ltd. Mr Kwee is a director of both Pontiac Land and Chesham. Mr Pua and Mr Kwee are both also directors of each of the defendants.

The defendants were incorporated in August 2010 to hold the assets of a development project (“the Capitol Project”) which was originally jointly undertaken by Mr Pua, Mr Kwee and Mdm Sukmawati Widjaja (“Mdm Widjaja”), the Executive Chairman of Top Global Limited. The Capitol Project was intended to be a joint venture of special purpose vehicles represented by these three persons.

Background to the dispute

On 21 April 2010, the Urban Redevelopment Authority (“the URA”) launched a tender for a 99-year lease of a parcel of land situated at Lot 364M TS 10 and a stratum of subterraneous space at Lot 80001L, on which the Capitol Project was sited. The land was situated at the junction of Stamford Road and North Bridge Road and comprised the historic Capitol Theatre, Capitol Building and Stamford House, all of which have been designated by the URA as conservation buildings. These three buildings were to be refurbished to form part of a larger integrated mixed-use development comprising a theatre, a hotel and a retail mall.

Mr Kwee, who had experience in developing and managing luxury hotels and commercial buildings, took a keen interest in the tender and invited Mr Pua and subsequently Mdm Widjaja to join him in jointly bidding for the lease. Mr Pua and Mdm Widjaja agreed, and it was decided that the three of them would incorporate companies as 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 Perennial (Capitol) Pte Ltd (“the first plaintiff”) on 16 August 2010 (collectively, “the Original Shareholders”).

On 16 August 2010, the Original Shareholders further incorporated nine companies, including the three defendants, for the purpose of holding various components and assets of the joint venture. CIH was incorporated to hold the assets of the joint venture, employ a management team to oversee all the components of the Capitol Singapore and manage the finances of the joint venture. CRM and CHM were incorporated to manage the retail and hotel/theatre components of the Capitol Project respectively, and were also appointed the respective managers of two trusts, the Capitol Retail Trust and Capitol Hotel Trust, constituted on 17 August 2010. The residential component of the Capitol Project was to be managed by another of the nine incorporated companies, Capitol Residential Development Pte Ltd (“CRD”). The Original Shareholders each appointed one director to the boards of directors of each of the nine companies. The first plaintiff appointed Mr Pua and Chesham appointed Mr Kwee. It is noteworthy that the Original Shareholders did not deem it necessary to document their relationship at the outset in a joint venture agreement (“JVA”). That underscored the trust and relationship that Mr Pua, Mr Kwee and the Mdm Widjaja reposed in each other.

On 18 August 2010, two bids were submitted through the incorporated companies to the URA based on two different concept proposals, “Scheme A” and “Scheme B”, with two different bid prices. On 27 October 2010, the URA awarded the tender to the bidders of Scheme A. The shares in each of the defendant companies were accordingly held by the first plaintiff, Chesham and Top Property in the respective proportions of 40%, 30% and 30%, this being the shareholding that Mr Pua, Mr Kwee and Mdm Widjaja had agreed on in the event that Scheme A won the bid.

The Original Shareholders met on 2 November 2010 to discuss how to take the Capitol Project forward. They agreed, inter alia, to execute a JVA and a joint development deed (“JDD”) to order their relationships, interests and rights. On 12 January 2011, CRM, CHM and CRD executed the JDD. The JVA underwent three drafts (17 November 2010, 17 December 2010 and 16 March 2011) but, for reasons on which the plaintiffs and Chesham do not agree, was never signed.

Notwithstanding the absence of a JVA, in and around December 2010, the Original Shareholders agreed that the first plaintiff, Chesham and Top Property would be responsible for developing the retail, hotel/theatre and residential components of the Capitol Project respectively. This split of responsibilities reflected the respective expertise of Mr Pua, Mr Kwee and Mdm Widjaja. The idea seemed to be to leverage on Mr Pua’s experience in retail management, Mr Kwee’s experience in developing luxury hotels and Mdm Widjaja’s experience in developing and marketing luxury residential projects. To this end, the Original Shareholders agreed to engage Perennial (Singapore) Retail Management Pte Ltd (“PSRM”), of which Mr Pua was a director, and Patina Hotels & Resorts Pte Ltd (“Patina”), of which Mr Kwee was a director, to develop and operate the retail and hotel components of the Capitol Project respectively.

In March 2012, Top Property decided to leave the Capitol Project. Following negotiations, which are described in greater detail at [79] below, Chesham purchased two-thirds of Top Property’s shares and the remaining shares were purchased by the second plaintiff, which had been incorporated by the first plaintiff specifically for this purpose, by means of a sale and purchase agreement dated 7 March 2012. Thereafter, the plaintiffs and Chesham were equal shareholders in the Capitol Project, whose corporate structure is depicted at Annex 1 below. However, the relationship between them soured soon thereafter. There were too many disputes to enumerate here but the chief one centred on the timing of the execution of the JVA and Retail Property Management Agreements (“RPMAs”).

Execution of the JVA and RPMAs

Around the same time as Top Property’s exit in March 2012, PSRM and Patina began negotiating the terms of their respective management agreements. PSRM was to execute two RPMAs, one with CRM for the retail units to be located in a building to be newly constructed (“the New Build RPMA”) and one with CHM for the retail units to be located within the conservation buildings and galleria (“the Conservation RPMA”). Patina was to execute a Hotel Management Agreement (“the HMA”) and licence agreement with CHM for the purpose of managing and operating the hotel. According to the plaintiffs, there was a mutual understanding that the RPMAs would be executed at around the same time as the HMA, to ensure that the terms of the two agreements, to the extent possible, would mirror one another. Chesham, on the other hand, denied any such agreement. As it turned out, the HMA had to be signed with some urgency. This was in order to provide more lustre to the residential units by marketing them as having access to the concierge services and amenities provided by the hotel. Operationalising the hotel expeditiously became a matter of some importance. As such, the HMA and licence agreement were executed on 29 April 2013. This meant that while Patina had locked in its role as the hotel operator by the HMA, PSRM had not done so as the RPMAs remained to be negotiated and signed.

In July 2013, a working group was set up to negotiate the terms of the RPMAs. Subsequently, the plaintiffs provided Chesham with drafts of the two RPMAs on 1 September and 18 September 2013 respectively. However, despite multiple attempts to negotiate, the plaintiffs and Chesham were unable to agree on the terms of the RPMAs.

Sometime in May 2014, Mr Pua informed Mr Kwee of the plaintiffs’ intended participation in a reverse takeover, by which the plaintiffs’ shares would be transferred to PREH (then named St James Holdings Ltd). Mr Kwee was concerned that this would result in a change in the plaintiffs’ management and therefore sought to formalise the terms of the shareholders’ relationship in a JVA. Chesham sent a draft JVA to Mr Pua on 28 May 2014, and discussions about the terms of the draft JVA ensued.

On 24 July 2014, Chesham asked for the RPMAs to be executed contemporaneously with the JVA. The plaintiffs agreed to negotiate the RPMAs and JVA concurrently without the need to have them executed contemporaneously. Subsequently the plaintiffs felt the RPMAs to be more urgent and requested on 29 August 2014 that they be finalised before resuming...