RGA Holdings International Inc v Loh Choon Phing Robin and another

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 25 September 2017
• Neutral Citation: [2017] SGCA 55
• Citation: [2017] SGCA 55
• Defendant Counsel: The Respondents in person.
• Published date: 30 September 2017
• Hearing Date: 05 July 2017
• Plaintiff Counsel: K Muralitherapany and Ng Lip Kai (Joseph Tan Jude Benny LLP)
• Docket Number: Civil Appeal No 140 of 2016
• Court: Court of Appeal (Singapore)
• Date: 25 September 2017
• Subject Matter: Injunctions,Civil Procedure

Chao Hick Tin JA (delivering the grounds of decision of the court): Introduction

In the High Court, the appellant, RGA Holdings International Inc (“RGA”), applied for: (a) an interim prohibitory injunction to restrain Mr Loh Choon Phing Robin (“Robin Loh”) and Mr Loh Yin Kuan (“Peter Loh”) (collectively “the respondents”) from parting with, selling, charging or otherwise disposing of two properties, until the disposal of High Court Suit No 226 of 2016 (“Suit 226”) or further order, and (b) in the alternative, an interim mandatory injunction that the sale proceeds of the properties be held by its solicitors as stakeholders pending further order.¹ The two properties in question are situated at Carpmael Road, Singapore. One of these properties (“248 Carpmael”) is owned by the first respondent, Robin Loh, and his wife. The other (“246 Carpmael”) was owned by the second respondent, Peter Loh, until he sold it in April 2016.

The basis for the injunction application was a term of a Share Sale Agreement between RGA and the respondents, by which the respondents undertook not to sell the two properties in return for RGA extending loans to KK Asia Environmental Pte Ltd (“KK Asia”), a company in which they are shareholders.

The High Court judge (“the Judge”) dismissed the application: see Forest Fibers Inc and another v K K Asia Environmental Pte Ltd and others [2017] 3 SLR 823 (“GD”). This was primarily for the reason that the undertaking in the Share Sale Agreement did not create a caveatable interest in the properties. In the Judge’s view, all RGA had under the Share Sale Agreement was only a personal claim against the respondents for breach of their undertaking not to sell the properties.

After hearing from counsel for RGA and also from the respondents, who appeared in person, we allowed the appeal but only to the extent that we granted an interim prohibitory injunction to restrain the respondents from selling 248 Carpmael until the determination of Suit 226 or further order. In our view, and with respect, the Judge erred in finding that an interim prohibitory injunction could only be granted if RGA had an interest in land – in this case, a proprietary interest in the properties. An interim prohibitory injunction will normally be granted to restrain the breach of a negative covenant in a contract unless it would cause undue hardship to a defendant. In such cases, the court is not normally concerned with the balance of convenience or whether damages would be an adequate remedy, because it is simply holding the party in breach to the terms of the contract until the determination of the trial. The undertaking in the Share Sale Agreement not to sell the two properties was a negative covenant. The respondents had already breached that undertaking because of Peter Loh’s sale of 246 Carpmael. It was therefore necessary, in our judgment, to restrain them from selling 248 Carpmael and thereby from continuing to breach their contractual undertaking.

We did not grant the mandatory injunction to compel the respondents to pay over the sale proceeds of 246 Carpmael to its solicitors to be held as stakeholders pending further order. Since RGA only sought an interim mandatory injunction as an alternative to the interim prohibitory injunction, there was strictly speaking no need for us to consider this request in light of our decision to grant the interim prohibitory injunction. In any event, a high threshold had to be met for the grant of an interim mandatory injunction and we did not think that threshold was met here.

We now give our reasons for granting an interim prohibitory injunction to restrain the respondents from selling 248 Carpmael until the determination of Suit 226 or further order. We will begin by setting out some background to the case.

Facts The parties

RGA is a Panamanian company. It is the second plaintiff in Suit 226. The first plaintiff is a Canadian company named Forest Fibers Inc (“Forest Fibers”). Both companies are in the business of buying, selling and/or recycling waste material and/or selling recycled products.² RGA and Forest Fibers share a common director and sole shareholder, a Canadian national by the name of Mr Colubriale Domenico (“Mr Domenico”).³

Peter Loh and Robin Loh are each directors and 25% shareholders of KK Asia,⁴ a Singaporean company in the same business as RGA.⁵ KK Asia, Robin Loh and Peter Loh are the first, second and third defendants in Suit 226. Robin Loh is Peter Loh’s son.

The Share Sale Agreement

The Share Sale Agreement was entered into on 9 July 2015 between RGA and the respondents.⁶ It came about because the respondents had invited Mr Domenico or one of the companies he was associated with to invest and be an equal business partner in KK Asia. As a result, RGA agreed to invest in KK Asia.⁷

Pursuant to cl 2.1 read with cl 1.1 of the Share Sale Agreement, RGA was to purchase 50% of the shares in KK Asia from the respondents for US$200,000 (Robin Loh and Peter Loh each held 33% of the shares in KK Asia prior to the execution of the Sale Share Agreement).⁸ Having paid the purchase price, RGA presently holds 50% of the shares in KK Asia.⁹ Clauses 3.1–3.3 of the Share Sale Agreement deal with the process for completing the sale of the shares and grant RGA an option to sell back the shares to the respondents. For the purposes of the appeal, there was no need for us to concern ourselves with the clauses dealing with the sale of the shares by the respondents to RGA.

Clauses 3.4–3.7 of the Share Sale Agreement were germane to this appeal as they formed the basis for some of the claims by RGA against the respondents in Suit 226; cl 3.7 was also the basis for RGA’s application for an injunction. We reproduce them here:

3. Completion and Undertakings

…

3.4 [RGA] undertakes to extend a loan of up to US$30,000.00 to [KK Asia] to finance its operations upon the request of the [respondents] to be made on or before 1 October 2015. 3.5 The [respondents] acknowledge that [KK Asia] is indebted to [RGA] for the sum of US$120,000.00 being a previous loan extended by [RGA] to [KK Asia]. The [respondents], jointly and severally, undertake that in the event that [KK Asia] fails to fully repay the said sum of US$120,000.00 plus simple interest at 5% per annum to [RGA] by 30 December 2016, they will pay 50% of the outstanding balance to [RGA] by 31 December 2016 and the balance 50% of the outstanding balance shall be absorbed and/or waived by [RGA]. 3.6 The Parties acknowledge that there is a rolling account of accounts payable by [KK Asia] to [Forest Fibers]. In the event that [KK Asia] is unable to pay such outstandings which are overdue, the [respondents] undertake to pay 50% of the said overdue outstandings and [RGA] undertakes to pay the balance of 50% of the said overdue outstandings to [Forest Fibers]. 3.7 In light of the aforesaid undertakings, the [respondents] further undertake not to sell their respective properties at [248 Carpmael] and [246 Carpmael]. Procedural History RGA lodges caveats over the properties

According to an affidavit filed by Mr Domenico in Suit 226, it became clear to him, a few months after the Share Sale Agreement had been signed, that the respondents were “abandoning” KK Asia.¹⁰ Anticipating that RGA might file a claim against KK Asia or the respondents, Mr Domenico instructed his solicitors to lodge a caveat against each of the properties.¹¹ The solicitors did so on 21 September 2015 in RGA’s name.

Forest Fibers and RGA commence Suit 226

On 9 March 2016, Forest Fibers and RGA commenced Suit 226 against KK Asia and the respondents. There were three groups of overlapping claims. First, Forest Fibers claimed, against KK Asia, the repayment of loans it had extended to KK Asia, allegedly via an oral agreement.¹² The loans amounted to US$59,488.38.

Second, RGA claimed, against KK Asia, the repayment of four loans it had extended to the latter between May and July 2015, amounting to US$149,578.05.¹³

Third, as against the respondents, RGA had three claims. The first claim was for a sum of US$29,744.19.¹⁴ RGA asserted that the respondents were liable for this amount because: KK Asia failed to repay loans totalling $59,488.38 to Forest Fibers pursuant to an oral agreement (see [13]); and Pursuant to cl 3.6 of the Share Sale Agreement, RGA was entitled to demand 50% of that sum from the respondents, which was US$29,744.19. The respondents did not respond to this demand; hence this claim against them was made.

The second claim was for a sum of US$74,789.02.¹⁵ RGA asserted that the respondents were liable for this amount for the following reasons: Clause 3.5 obliged the respondents to repay 50% of the US$120,000 loan in the event that KK Asia failed to do repay the full loan; The respondents’ undertaking in cl 3.5, RGA argued, also extended to the US$30,000 mentioned in cl 3.4. This was not reflected in cl 3.5 and, accordingly, RGA sought rectification of cl 3.5. Therefore, pursuant to the Share Sale Agreement, as rectified, the respondents guaranteed the repayment of 50% of US$150,000. The actual loans disbursed by RGA to KK Asia amounted to US$149,578.05. KK Asia had failed to repay the outstanding amount of US$149,578.05, as mentioned at [14]. RGA therefore demanded that the respondents repay 50% of the outstanding amount, ie, US$74,789.02, but they did not; hence RGA made this claim for that amount against the respondents.

Third, RGA asked for a declaration that it is the equitable chargee of the properties under the Share Sale Agreement. It pleaded that, by way of cl 3.7, the respondents created a fixed charge over the properties in favour of Forest Fibers and RGA as security for the various personal undertakings given by them in cll 3.5 and 3.6 of the Share Sale Agreement.¹⁶

KK Asia and the respondents denied that they were liable to repay any of those...