Simgood Pte Ltd v MLC Barging Pte Ltd and others

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 26 July 2016
• Neutral Citation: [2016] SGCA 46
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 165 of 2015
• Published date: 29 July 2016
• Year: 2016
• Hearing Date: 07 July 2016
• Plaintiff Counsel: Avinash Vinayak Pradhan, Kwek Choon Lin Winston and Lim Zhi Ming Max (Rajah & Tann Singapore LLP)
• Defendant Counsel: Troy Yeo Siew Chye (Chye Legal Practice),and The third respondent in person.
• Subject Matter: Tort,Conspiracy,Inducement of breach of contract,Companies,Incorporation of companies,Lifting corporate veil,Trusts,Constructive trusts
• Citation: [2016] SGCA 46

Chao Hick Tin JA (delivering the oral judgment of the court): Introduction

The appeal before us arises out of a complex factual matrix which pertains, in the main, to a shipbuilding contract which had been entered into between the appellant, Simgood Pte Ltd (“Simgood”) and the first defendant in the suit below, MLC Shipbuilding Sdn Bhd (“MLC Shipbuilding). Under the terms of the contract, the latter was to construct and deliver a vessel with hull number 5282 to Simgood (“Contract 5282”). MLC Shipbuilding failed to deliver this vessel.

Apart from a cause of action in contract against MLC Shipbuilding, Simgood also brought claims against eight other defendants in the suit below. Simgood alleged that these defendants had contributed, in some way, to MLC Shipbuilding’s failure to deliver the vessel. A key allegation made by Simgood was that the seventh to ninth defendants (who were either shareholders or directors of MLC Shareholding or its affiliate companies) had dishonestly swapped the hull numbers of two vessels and this had, according to Simgood, resulted in the non-delivery of the vessel under Contract 5282.

In the decision below, the Judge found that while the seventh to ninth defendants’ acts were dishonest, the reason they swapped the hull numbers was to postpone the repayment of a loan facility with DBS Bank Ltd and the swap did not have a bearing on MLC Shipbuilding’s failure to deliver the vessel to Simgood. The Judge eventually held that only MLC Shipbuilding was liable for failing to deliver the vessel to Simgood and therefore ordered specific performance of Contract 5282, failing which MLC Shipbuilding would have to pay damages to Simgood. The Judge additionally held that the fifth defendant (“Nantong MLC”), which was the Chinese company actually constructing the vessel, was liable in the tort of detinue. Nantong MLC was therefore also ordered to deliver up the vessel to Simgood, failing which it would be liable to pay damages to Simgood. It was subsequently revealed that the vessel had already been sold to an unknown third party although it is not clear who had sold the vessel.

This led Simgood to commence the present appeal as against five of the nine defendants in the suit below (“the Respondents”). The Respondents consist of the following: MLC Barging Pte Ltd (“MLC Barging”), an affiliate company of MLC Shipbuilding (the second defendant in the suit); MLC Maritime Pte Ltd (“MLC Maritme”), an affiliate company of MLC Shipbuilding (the third defendant in the suit); Tan Ho Seng (“Tan”), a shareholder and/or director of MLC Shipbuilding, MLC Barging, MLC Maritime and Nantong MLC (the seventh defendant in the suit); Eng Chor Wah (“Eng”), the wife of Tan Ho Seng, who is also a shareholder and director of MLC Maritime (the eighth defendant in the suit); and Nantong Tongbao Shipbuilding Co Ltd (“Nantong Tongbao”), a Chinese company which initially owned 56% of the shares in Nantong MLC although this may have been reduced to 40% pursuant to a shareholder’s resolution in June 2008 (the sixth defendant in the suit). Nantong Tongbao did not participate in the trial. For ease of reference, Tan and Eng will be referred to collectively as “the Tans”.

According to Simgood, the Judge should have found the Respondents liable under four heads of action: (a) the Respondents had committed the tort of conspiracy by unlawful means; (b) the Respondents had committed the tort of inducing the breach of Contract 5282; (c) the corporate veil should be pierced such that several of the Respondents should be concurrently liable for the wrongs committed by Nantong MLC; and (d) a remedial constructive trust should be imposed over the vessel.

We heard the parties on 7 July 2016, and reserved judgment to consider certain factual issues which had arisen in the course of the hearing. Having considered the matter further, we dismiss Simgood’s appeal in Civil Appeal No 165 of 2015 (“CA 165/2015”). A comprehensive exposition of the facts may be found in the Judge’s decision of Simgood Pte Ltd v MLC Shipbuilding Sdn Bhd and others [2015] SGHC 303 (“the GD”) at [1]–[49]. For present purposes, we preface the reasons for our decision with a summary of the facts which are germane to the determination of this appeal.

Summary of facts

In April 2008, Simgood and its affiliate companies entered into a series of shipbuilding contracts with MLC Shipbuilding. Apart from Contract 5282, another relevant contract in this series of contracts was that entered into between MLC Shipbuilding and PT Indoliziz (ie, an affiliate company of Simgood) for the former to construct and deliver to the latter a vessel with hull number 5284 (“Contract 5284”). Prior to these contracts being entered into, the keel for a vessel which bore hull number 5282 had already been laid. This vessel was referred to as “Vessel A” in the GD.

In July or August 2008, the Tans formulated a plan with Redzuan Goh Bin Mohammed Karian (“Redzuan”), their then son-in-law and the ninth defendant in the suit below, to change the hull number of Vessel A from 5282 to 5284. At that time, Vessel A was at an advanced stage of construction. In September 2008, the keels for a further two vessels were laid. One of these vessels was assigned hull number 5282. This vessel was referred to as “Vessel B” in the GD. With Vessel A now bearing hull number 5284 and Vessel B bearing hull number 5282, this meant that Contract 5282 was further from completion.

According to the Judge, the Tans and Redzuan switched the hull numbers between Vessel A and Vessel B in order to take further advantage of a loan facility extended by DBS Bank Ltd (“DBS”) that was attached to a vessel bearing hull number 5282. By making the switch, the loan facility would no longer be tied to Vessel A, which was closer to completion at that time (see [114] of the GD]).

As part of the plan, the Tans and Redzuan also engineered a series of contracts which, inter alia, altered the ownership of Vessel B. The purported effect of these contracts was the interposition of MLC Barging into the contractual picture such that it was to be regarded as the seller of Vessel B to MLC Shipbuilding, and MLC Shipbuilding would then on-sell the Vessel to Simgood. The Judge found that the reason for the creation of this contractual chain was so that DBS would not be aware of the change in hull numbers between Vessel A and Vessel B (see [118] of the GD). The Judge further found that these contracts were sham contracts and gave no effect to them (see [96] of the GD).

Vessel A was subsequently completed in March 2009...