Sakae Holdings Ltd v Gryphon Real Estate Investment Corp Pte Ltd and others (Foo Peow Yong Douglas, third party) and another suit

• Court: High Court (Singapore)
• Judge: Judith Prakash JA
• Judgment Date: 07 April 2017
• Neutral Citation: [2017] SGHC 73
• Citation: [2017] SGHC 73
• Hearing Date: 10 February 2016,27 January 2016,28 January 2016,23 February 2016,26 February 2016,15 January 2016,16 February 2016,18 February 2016,25 February 2016,20 January 2016,24 February 2016,21 January 2016,17 February 2016,26 January 2016,19 February 2016,22 January 2016,19 January 2016,24 June 2016
• Docket Number: Suits Nos 1098 and 122 of 2013
• Published date: 07 July 2018
• Plaintiff Counsel: Davinder Singh SC, Jaikanth Shankar, Zhuo Jiaxiang, Navin Shanmugaraj, Samantha Tan, V Kumar Sharma and Aloysius Tan (Drew & Napier LLC)
• Defendant Counsel: R Chandra Mohan, Vikram Nair, Jonathan Yuen, Tan Ruo Yu, Doreen Chia and Khelvin Xu (Rajah & Tann Singapore LLP),Samuel Chacko, Lim Shack Keong, Charmaine Chan-Richard and Cara Soo Min (Legis Point LLC),Siraj Omar and Alexander Lee (Premier Law LLC)
• Subject Matter: Companies,Directors,Shadow directors,Oppression,Minority shareholders

Judith Prakash JA: Introduction

Douglas Foo Peow Yong (“Douglas Foo” or “Mr Foo”) and Ong Siew Kwee (“Andy Ong” or “Mr Ong”) met as fresh-faced young lads when they enrolled in National Service. They became fast friends and this friendship lasted beyond their National Service days and grew to encompass their families as well. By 2010, both were successful businessmen in different spheres. Andy Ong then invited Douglas Foo to invest in a property development with him. Douglas Foo accepted with alacrity and that seemingly innocuous decision spelt the beginning of the end of their friendship. Two years later, their relationship was in tatters and legal actions were started by Douglas Foo’s company against Andy Ong and his companies. The allegations are serious, involving oppression, breach of fiduciary duty and exploitation, and the amounts involved are substantial.

Background Parties and law suits

There are two consolidated actions. The plaintiff in each action is Sakae Holdings Ltd (“Sakae”), a listed company of which Douglas Foo is a director and chairman of the board. The first action is Suit 122 of 2013 (“Suit 122”) in which the defendant is Andy Ong alone. The second action is Suit 1098 of 2013 (“Suit 1098”) in which there is a whole slew of defendants. The sixth defendant is Griffin Real Estate Investment Holdings Pte Ltd) (“the Company”), a company in which Sakae is a minority shareholder and in which the oppressive actions are alleged to have occurred. The other defendants are: (i) individuals including Andy Ong who were directors or alleged de facto directors of the Company; and (ii) various other companies which are controlled by Andy Ong and against which Sakae seeks relief.

On 3 September 2010, Sakae entered into a joint venture agreement (“the JVA”) with the first defendant in Suit 1098, Gryphon Real Estate Investment Corporation Pte Ltd (“GREIC”). Under the JVA, Sakae was to hold 24.69% of the issued share capital of the Company with GREIC holding the remaining 75.31%. The purpose of the joint venture was to enable the Company to invest in about 90% of the units in the building in Victoria Street known as “Bugis Cube” with a view to selling the investment for a profit. At the time of the trial, the directors of the Company were Douglas Foo and Ho Yew Kong (“Mr Ho”), the fourth defendant in Suit 1098.

In Suit 1098, Sakae claims against the defendants for relief under s 216 of the Companies Act (Cap 50, 2006 Rev Ed) (“Companies Act”) for conduct which was oppressive to Sakae as a minority shareholder in the Company. In line with the usual practice in minority oppression claims, the Company is a party to the suit solely as a nominal defendant. Sakae makes numerous allegations against the third, fourth and fifth defendants, who are Andy Ong, Mr Ho and one Ong Han Boon, who were allegedly directors of the Company at all material times, for wrongfully diverting moneys from the Company over the course of seven transactions. Sakae further claims against the remaining five defendants, which make up a group of companies allegedly owned and controlled by Andy Ong (“the ERC Group”), for the repayment of moneys that were diverted from the Company and for declarations that constructive trusts be imposed on assets which the ERC Group companies have purchased using moneys from the Company. There was also a claim against a tenth defendant but this was discontinued during the proceedings. In addition, Douglas Foo, who is also a director of the Company, has been joined as a third party. The claim made by Andy Ong, GREIC and six of the other defendants against Douglas Foo is that his breach of directors’ duties owed to the Company contributed to the seven wrongful transactions and that he is liable to indemnify these defendants against any liability they may be found to have to Sakae.

In Suit 122, Sakae claims against Andy Ong for breach of fiduciary duty owed to Sakae (as one of Sakae’s directors) and for the tort of inducing a breach of contract in relation to one of the seven transactions, specifically the conclusion of a share option agreement between the Company and ERC Holdings Pte Ltd in respect of shares in the Company.

At the close of the plaintiff’s case, Andy Ong, Ong Han Boon, GREIC and the five companies in the ERC Group made a submission of no case to answer and elected not to call any evidence. In this judgment, I will sometimes refer to these defendants collectively as the “AO Defendants”. Mr Ho is the only defendant who did not make such a submission or election. Sakae’s claims against the AO Defendants and those against Mr Ho will therefore have to be assessed somewhat differently.

History of the parties

Douglas Foo and Andy Ong have known each other for more than 20 years. In July 2003, on Douglas Foo’s recommendation, Andy Ong was appointed an independent director of Sakae, a position that he held until 18 March 2013.

The fourth and fifth defendants in Suit 1098, Mr Ho and Ong Han Boon, are Andy Ong’s associates. These two defendants have held and continue to hold various positions in various companies in the “ERC Group”, which is allegedly owned or controlled by Andy Ong. It is Sakae’s case that Mr Ho and Ong Han Boon have, under the instructions of Andy Ong, wrongfully diverted funds from the Company for Andy Ong’s personal benefit.

The remaining defendants are companies in the ERC Group and Sakae claims that they are the recipients of funds which have been wrongfully diverted from the Company. The relevance of each company to the dispute will be explained in more detail below but, for ease of reference, they are the following: GREIC, the first defendant; ERC Holdings Pte Ltd (“ERC Holdings”), the second defendant; Gryphon Capital Management Pte Ltd (“GCM”), the seventh defendant; ERC Unicampus Pte Ltd (“ERC Unicampus”), the eighth defendant; ERC Institute Pte Ltd (“ERC Institute”), the ninth defendant; and ERC Consulting Pte Ltd (“ERC Consulting”), the eleventh defendant.

GREIC is the company with which Sakae concluded the JVA for the purpose of investing in the Bugis Cube units. The Company was incorporated to carry out the joint venture and originally, as was intended, GREIC was the majority shareholder holding 75.31% of the issued capital with Sakae holding the remaining 24.69%. By the time of the trial GREIC held 45.35% of the issued capital with ERC Holdings having a 29.96% interest in the Company. Due to a further subscription for shares, Sakae maintained its shareholding percentage at the same level. At the time of trial, Mr Ho was the sole director of GREIC. Mr Ong, Ong Han Boon and Mr Ho are all shareholders of GREIC.

The second defendant, ERC Holdings, is a company founded by Andy Ong, who is its chief executive officer and owns 86.85% of its shares. ERC Holdings is allegedly the ultimate holding company of the ERC Group, which includes, among other entities, the following defendant companies: GCM, a company established for the purpose of managing the Company’s real estate investment. The directors of GCM are Andy Ong and Ong Han Boon. ERC Unicampus, an investment holding company. Mr Ho was the sole director of ERC Unicampus until 12 July 2013. He was replaced by Ong Han Boon who remained the sole director of ERC Unicampus at the time of trial. ERC Institute, a professional training and consultancy company. It is wholly owned by Entrepreneur’s Resource Centre Pte Ltd, which is in turn wholly owned by ERC Holdings. The directors of ERC Institute are Andy Ong and Ong Han Boon. ERC Consulting, a company providing business consulting and education services. It is wholly owned by ERC Holdings. Andy Ong is one of the two directors of ERC Consulting.

Facts leading up to the dispute

Sometime in late 2009, Andy Ong floated the idea of acquiring over 90% of the units in Bugis Cube to Douglas Foo. The plan was to develop Bugis Cube and eventually sell the investment off at a profit. Douglas Foo expressed interest in the investment opportunity and suggested that the funding be provided by Sakae. The proposal culminated in the JVA under which GREIC and Sakae were to undertake the business of real estate investment and other property-related transactions through the Company, with Sakae being the minority shareholder.

The JVA also provides that: The board of the Company shall consist of four directors, with GREIC and Sakae entitled to each appoint two directors regardless of their relative shareholding positions in the Company; With respect to certain defined matters (referred to as “Shareholder Reserved Matters”), the Company can only act if it obtains the prior unanimous approval of all shareholders in a general meeting, and these shareholders are required to act reasonably and in the best interests of the Company and the shareholders when exercising their voting rights; With respect to other defined matters (“Board Reserved Matters”), the Company can only act if it obtains the prior majority approval of all its directors, who are required to act reasonably and in the best interests of the Company and the shareholders when exercising their voting rights; and Any director or shareholder who has a direct or indirect interest in any matter that would require shareholder or board approval is obliged to declare that interest and is not entitled to vote on that matter.

At the same time as the JVA was entered into, Sakae also acquired 20% of the shares in GCM. Since Andy Ong had established GCM to provide management services to the Company, Sakae took the view that its acquisition of GCM shares would be synergistic with its investment in the Company.

It is Sakae’s case that it and Douglas Foo subsequently left the management of the Company in the hands of Andy Ong and GCM. In the years that followed, Andy Ong, Ong Han Boon and Mr Ho allegedly diverted the assets of the Company to the ERC Group over the course...