Power Solar System Co Ltd (in liquidation) v Suntech Power Investment Pte Ltd

• Jurisdiction: Singapore
• Judge: Mavis Chionh Sze Chyi JC
• Judgment Date: 25 October 2018
• Neutral Citation: [2018] SGHC 233
• Court: High Court (Singapore)
• Hearing Date: 14 May 2018,17 May 2018,05 July 2018
• Docket Number: Suit No 59 of 2014
• Plaintiff Counsel: Ashok Kumar, Gregory Leong and Cephas Yee (BlackOak LLC)
• Defendant Counsel: Danny Ong, Yam Wern-Jhien, Vince Gui and Danitza Hon (Rajah & Tann Singapore LLP)
• Subject Matter: Credit and security,Money and moneylenders,Loans of money,Evidence,Presumptions,Presumption of fact in loans of money,Contract,Contractual terms,Interpretation
• Published date: 02 October 2019

Mavis Chionh Sze Chyi JC: Introduction

This was an action brought by the Liquidators of the Plaintiff (Power Solar System Co Ltd) against a company which was previously the Plaintiff’s wholly-owned subsidiary (the Defendant, Suntech Power Investment Pte Ltd). The Plaintiff claimed from the Defendant a total sum of US$197,501,785. According to the Plaintiff’s case, of the total sum claimed, a sum of US$55,560,000 was due and owing by the Defendant as the consideration for the transfer of all of the Plaintiff’s shares in another company known as Suntech Power Co Ltd (“Shanghai Suntech”), while the claim for the balance amount arose from loans extended by the Plaintiff to the Defendant. The Defendant denied any liability to repay these amounts.

At the conclusion of the trial, I gave judgment for the Plaintiff in the sum of US$197,501,785 (with interest). As the Defendant has filed an appeal, I set out below the grounds for my decision.

The parties

The Plaintiff is a company incorporated in the British Virgin Islands (“BVI”) and wholly owned by Suntech Power Holdings Co Ltd (“SPH”), a company incorporated in the Cayman Islands. The Plaintiff operated as an investment holding company, whereas SPH was a solar panel producer previously listed on the New York Stock Exchange. SPH was the ultimate holding company for multiple subsidiaries and affiliate companies. I will refer to this group of companies collectively as “the Suntech Power group”. The Defendant, a company incorporated in Singapore, was previously also part of the Suntech Power group. The Defendant operates as an investment holding company engaged in equity investments. Between 8 October 2007 (the date of the Defendant’s incorporation) and 15 May 2013, it was a wholly-owned subsidiary of the Plaintiff. A chart setting out the structure of this group of companies – as at April 2013 –– is exhibited¹ in the affidavit of evidence-in-chief (“AEIC”) of Yat Kit Jong (“Jong”), one of the Plaintiff’s joint and several liquidators. Jong is from PricewaterhouseCoopers Consultants (Shenzhen) Ltd; the other liquidator is John Ayres from PricewaterhouseCoopers (British Virgin Islands) Ltd. Jong was the Plaintiff’s main witness in the trial.

SPH was placed into provisional liquidation on 7 November 2013. It was subsequently placed in official liquidation on 27 January 2015. The Plaintiff was placed into liquidation on 14 November 2013 via a sole shareholder’s resolution passed by SPH’s joint provisional liquidators.

Undisputed background facts

As can be seen from the corporate structure chart at exhibit YKJ-3 (in Jong’s AEIC), one of the Plaintiff’s other wholly-owned subsidiaries was a company in the People’s Republic of China (“PRC”) known as Wuxi Suntech Power Co Ltd (“Wuxi Suntech”) which was engaged in the manufacture of photovoltaic (“PV”) cells and modules. Wuxi Suntech was SPH’s principal operating subsidiary in the PRC. In March 2013, following a petition filed in the Wuxi Intermediate People’s Court (“WIPC”), Wuxi Suntech was placed in bankruptcy reorganisation under PRC law.² A group of ten individuals was appointed as Wuxi Suntech’s bankruptcy administrator (“the Wuxi Administrator”).

On or around 15 May 2013, the Plaintiff’s shares in the Defendant and in another wholly-owned subsidiary – Suntech Power Japan Corporation (“Suntech Japan”) – were transferred to Wuxi Suntech, purportedly as part of a debt restructuring exercise within the Suntech Power group.³ The details of this purported debt restructuring exercise are found in [19] of Jong’s AEIC. The upshot of this exercise, insofar as the Plaintiff and the Defendant were concerned, was that the Defendant became a wholly-owned subsidiary of Wuxi Suntech from 15 May 2013.

The above arrangement did not last long. On 12 February 2014, Wuxi Suntech entered into an agreement with a company known as Fast Fame Global Limited (“Fast Fame”) for the transfer to the latter of the entire equity interest in the Defendant.⁴ The consideration for this transfer was US$1. Fast Fame was incorporated in the BVI on 3 January 2014 – the month prior to the transfer agreement,⁵ and less than a fortnight before the commencement by the Plaintiff’s Liquidators of the present suit. The writ of summons in the present suit was filed on 14 January 2014.

Subsequent to the transfer to Wuxi Suntech of its shares in the Defendant and Suntech Japan, the Plaintiff’s shares in Wuxi Suntech itself were also transferred away from it to an entity named Jiangsu Shunfeng Photovoltaic Technology Co Ltd (“Jiangsu Shunfeng”). Jiangsu Shunfeng is a wholly-owned subsidiary of a company known as Shunfeng Photovoltaic International Limited (“Shunfeng”). It appears from disclosures made by Shunfeng to the Hong Kong Exchanges and Clearing Limited that Jiangsu Shunfeng, Wuxi Suntech and the Wuxi Administrator had entered into an agreement on 24 October 2013, whereby Jiangsu Shunfeng had agreed to purchase the entire equity interest in Wuxi Suntech for RMB3,000,000,000 on condition that the plan for the reorganisation of Wuxi Suntech received approval from the WIPC and from its shareholders.⁶ The requisite approval was obtained from the WIPC on 15 November 2013⁷ and from shareholders on 7 April 2014.⁸

Following the transfer of the Defendant to Fast Fame at the price of US$1, new directors were appointed to the Defendant’s board. One of them is Bai Yun, who has affirmed most of the affidavits filed by the Defendant in the proceedings leading up to this trial. The Defendant has not disputed the Plaintiff’s assertion that in addition to being a director of the Defendant, Bai Yun is also an officer of another PRC company known as Asia Pacific (China) Investment Management Co Ltd. Nor has the Defendant denied that Asia Pacific (China) Investment Management Co Ltd is itself a subsidiary of a company known as Asia Pacific Resources Development Investment Ltd; and that Asia Pacific Resources Development Investment Ltd is controlled by one Zheng Jianming, who is also the controlling shareholder of Shunfeng and Wuxi Suntech.⁹

The Defendant has also not denied that following its transfer to Fast Fame in February 2014, it proceeded in March 2014 to divest itself of a number of wholly-owned subsidiaries.¹⁰

On 4 September 2014, the Plaintiff applied successfully for a worldwide Mareva injunction against the Defendant.¹¹ This Mareva injunction still stands.

The trial of this matter was originally scheduled to commence on 22 May 2017 but this earlier set of trial dates was vacated after the Defendant filed its second application to strike out the Plaintiff’s claim on 4 May 2017, its first application having been made without success in January 2015. The second striking-out application was also dismissed and the Defendant later withdrew its appeal against that dismissal.

Summary of the parties’ cases

The total sum of US$197,501,785 claimed by the Plaintiff in this suit comprises the following items: A loan of US$1,513,000 made by the Plaintiff to the Defendant on 24 September 2008. The money was used by the Defendant for payments to third parties in relation to an investment in an Australian mining project;¹² A loan of US$27,000,015 made by the Plaintiff to the Defendant on 10 November 2010. This sum was used by the Defendant for a shareholder loan to Rietech Investments Ltd (Hong Kong) (“Rietech”), which in turn used the money to make a capital injection into Zhengjiang Ren De New Energy Science & Technology Co Ltd (“Zhengjiang Ren De”); A loan totalling US$123,428,770 made by the Plaintiff to the Defendant in two parts: the first being the sum of US$103,428,770 lent on 17 December 2010, and the second being the sum of US$20m lent on 24 December 2010. The monies were used by the Defendant to purchase shares in two companies – Best Treasures Consultants Ltd (“Best Treasures”) and Invest Wise Enterprises Ltd (“Invest Wise”);¹³ A sum of US$55,560,000 being the consideration due from the Defendant for the Plaintiff’s shares in Shanghai Suntech. The Plaintiff transferred its 100% shareholding in Shanghai Suntech to the Defendant pursuant to an equity transfer agreement dated 8 August 2008 (“the Equity Transfer Agreement”).¹⁴ This Equity Transfer Agreement was governed by PRC law.

The Plaintiff’s case was that the loans in question were unsecured, interest-free and repayable on demand; and that the unpaid share consideration was also repayable on demand pursuant to Art 3.2 of the Equity Transfer Agreement.

In respect of the loans, the Defendant stated in its amended Defence that it put the Plaintiff to strict proof of the relevant transfers of monies, and also denied in any event that these were loans or that it bore any liability to repay the monies.¹⁵ The Defendant also asserted in its amended Defence that these transactions “were not duly authorised by the Defendant and/or undertaken in the best interests of the Defendant”; and that “in any event, the Plaintiff ceased to have any relevant right of action against the Defendant in respect of all or part of such alleged liability, following upon the acquisition by Wuxi Suntech of the Plaintiff’s interests in the Defendant”.¹⁶

In respect of the unpaid share consideration, the Defendant stated in its amended Defence that it put the Plaintiff to strict proof that “its alleged right to payment of the alleged consideration … had accrued, which is not admitted”. The Defendant also asserted, in the alternative, that “the Plaintiff ceased to have any relevant right of action against the Defendant in respect of all or part of such alleged liability, following upon the acquisition by Wuxi Suntech of the Plaintiff’s interests in the Defendant”; further, or alternatively, that any right which the Plaintiff might have to payment of the share consideration was time-barred under PRC law.

By way of background: the above-mentioned three loans were not the only loan...