Straits Advisors Pte Ltd v Michael Deeb (alias Magdi Salah El-Deeb) and others

JudgeChan Seng Onn J
Judgment Date06 May 2014
Neutral Citation[2014] SGHC 94
Citation[2014] SGHC 94
CourtHigh Court (Singapore)
Published date07 May 2014
Docket NumberSuit No 349 of 2011
Plaintiff CounselChenthil Kumarasingam, Jeremy Nonis and Chiang Wan Ting (Quahe Woo & Palmer LLC)
Defendant CounselAlan Koh and Stanley Bay (Oracle Law Corporation),Andrew Yeo, Colin Chow, Margaret Ling and Joel Lim (Allen & Gledhill LLP)
Subject MatterContract,Breach,Tort,Conspiracy,Misrepresentation,Fraud and deceit,Negligence,Breach of duty
Hearing Date21 January 2013,26 April 2013,09 May 2013,02 May 2013,18 January 2013,24 January 2013,22 January 2013,14 January 2013,10 January 2013,31 October 2013,29 April 2013,03 May 2013,24 April 2013,07 January 2013,30 October 2013,08 January 2013,25 April 2013,23 January 2013,09 January 2013,30 April 2013,16 January 2013,22 April 2013,07 May 2013,23 April 2013,15 January 2013,17 January 2013,08 May 2013,30 January 2014,29 October 2013
Chan Seng Onn J : Introduction

This dispute arose from the third defendant’s failure to achieve an initial public offering (“IPO”) of its shares on a recognised stock exchange.

The plaintiff entered into a contractual engagement with the second and third defendants sometime in early 2006. The plaintiff was to provide corporate finance advisory services through two of its personnel with the aim of steering the third defendant towards an IPO. If this was successful, the plaintiff stood to be issued a portion of shares in the third defendant. Unfortunately, the planned IPO ground to a halt after an underwhelmingly short-lived pursuit which lasted not more than three months. The parties’ contractual engagement, however, did not end there. Instead, after protracted negotiations, the parties managed to enter into a new agreement in late 2006 to suit the changed circumstances. Their contractual relationship only came to an end sometime in early 2008. This was when it became clear to the third defendant that it would not be restarting an IPO in the foreseeable future. In the circumstances, the third defendant refused to issue any shares to the plaintiff. The plaintiff was aggrieved. It believed that it was entitled to the shares under the renegotiated contract so long as the parties’ engagement was terminated, regardless of whether the third defendant decided to pursue an IPO. The plaintiff thus commenced Suit No. 487 of 2008 (“Suit 487”) against the second and third defendants to claim the shares. However, its claim failed both before the High Court: see Straits Advisors Pte Ltd v Behringer Holdings (Pte) Ltd and another [2009] SGHC 86 (“Straits Advisors (HC)”) and the Court of Appeal: see Straits Advisors Pte Ltd v Behringer Holdings (Pte) Ltd and another and another application [2010] 1 SLR 760 (“Straits Advisors (CA)”).

The plaintiff brought the present action after it became privy to certain information that raised its suspicions over the propriety of the defendants’ conduct over the entire course of the engagement. In so doing, the plaintiff had considerably widened both the field of actionable claims as well as the scope of recoverable losses from its earlier action. Therefore, unlike the previous suit which turned solely upon an issue of contractual interpretation, the plaintiff’s claims in the current proceedings were more varied and less benign, involving causes of action in fraudulent misrepresentation, conspiracy, negligence, and breach of contract. The plaintiff was also not simply seeking to recover the shares in the third defendant as it did in the previous suit. Instead, included in its heads of damages here were, for instance, opportunity loss suffered in accepting the engagement, the value of the shares in the third defendant measurable at different points of the engagement, and costs incurred in the previous suit.

After careful deliberation, I find that the plaintiff has failed to establish any of the claims which it had brought. There is accordingly no need for me to consider the numerous issues which arose in relation to the quantification of damages for which expert evidence had been tendered and submissions made. I will therefore now proceed to set out the background to this dispute and the reasons for my decision to dismiss the plaintiff’s claims.

Background The parties

Straits Advisors Pte Ltd (“the plaintiff”) is a corporate finance advisory firm in Singapore. Its director, Dominic Andrla (“Dominic”), was its only factual witness and also a key character in these proceedings.

Music Group Ltd (formerly Behringer Corporation Ltd) (“the third defendant”), incorporated in Bermuda, is the holding company of a group of companies which are in the business of manufacturing, distributing, and selling audio related products. This group is known as the MUSIC Group (formerly the BEHRINGER Group). Music Group Services SG (Pte) Ltd (formerly Behringer Holdings Pte Ltd) (“the second defendant”), is one such company within the MUSIC Group and is also the wholly-owned Singapore subsidiary of the third defendant. The MUSIC Group was founded by one Ulrich Bernhard Behringer (“Ulrich”) who is the chairman and current chief executive officer (“CEO”) of the second and third defendants (collectively “the Companies”).

The first defendant, Michael Deeb (“Deeb”), was the former managing director and CEO of the second and third defendants respectively. At the commencement of trial, he was no longer employed by the Companies.

The facts The aborted SGX IPO

Sometime in late 2004 or early 2005, the third defendant decided to pursue a listing of its shares on the Singapore Exchange (“the SGX IPO”). In connection with this, the third defendant submitted a draft prospectus (“the Preliminary Prospectus”)1 to the SGX. It was not disputed that the academic qualifications of Deeb and one Stephen Fraser (“Fraser”), the then chief operating officer (“COO”) of the third defendant, were misleadingly represented in the Preliminary Prospectus. Whilst Deeb was stated as holding a “Bachelor of Science & Technology Degree from the American University, Cairo”,2 he admitted in these proceedings to having only attended, without graduating from, the said university.3 As for Fraser, he was stated as holding a “Bachelor of Arts Degree (Economics) from Canterbury University”,4 but Canterbury University is in fact an unaccredited institution that essentially sold degrees online; the defendants have not contested this.5

After lodging the Preliminary Prospectus with the SGX, the third defendant was granted a conditional eligibility-to-list (“ETL”) letter6 which contained certain conditions that had to be complied with before it could list on the SGX. Thereafter, the third defendant embarked on a book building roadshow to generate and record investor interest in its contemplated IPO.

Shortly after the conclusion of the roadshow, the third defendant decided to abort the SGX IPO. The precise reason for doing so was disputed. The defendants claimed that the decision to abort was reached based on purely commercial considerations which related primarily to the third defendant’s inability to “fill the books” during the roadshow. The defendants were thus fearful that the third defendant’s shares would receive an unacceptably low valuation by listing on the SGX.7 In contrast, the plaintiff suggested that, for Deeb at least, the decision to abort was motivated by his own sense of self-preservation as he wished to avoid having his false qualifications uncovered by the relevant regulatory authorities upon a successful listing.8

The pre-contractual negotiations relating to the NASDAQ IPO

Sometime in November 2005 and shortly after the SGX IPO had been aborted, Deeb approached Dominic on behalf of the Companies. The purpose for doing so was to request for the plaintiff’s assistance in preparing the third defendant for an IPO on the NASDAQ securities exchange in the United States of America (“the NASDAQ IPO”),9 where the defendants believed a higher valuation for the third defendant’s shares could be achieved.10 In its pursuit of the NASDAQ IPO, the Companies also engaged the professional services of Jones Day and JP Morgan to provide legal advice and to perform the role of lead manager respectively.

In these proceedings, Dominic claimed that during a particular meeting at the Companies’ Singapore office on 21 November 2005, Deeb made certain specific oral representations concerning, inter alia, the prospects of the NASDAQ IPO and the Companies’ commitment towards the same (“the Representations”).11 The Representations (set out at [48]) were the subject of the plaintiff’s first misrepresentation claim (“the 1st Misrepresentation Claim”). It suffices to say for now that Dominic claimed that the Representations had induced him to believe that the NASDAQ IPO would be completed successfully in a relatively short period of time,12 thus he was willing to accept the engagement on behalf of the plaintiff.

The plaintiff also claimed that the Preliminary Prospectus, and hence the false qualifications of Deeb and Fraser contained therein, had been presented to it during these pre-contractual negotiations.13 In this regard, the plaintiff submitted that the negligence of the third defendant’s board of directors in verifying the accuracy of the Preliminary Prospectus had induced it to accept the engagement on the basis of incorrect information and it thereby suffered loss and damage (“the 1st Negligence Claim”).14 By accepting the engagement as a result of the Representations and/or the third defendant’s board of directors’ negligence, the plaintiff claimed that it gave up the opportunity of setting up certain private equity funds which would have generated income of US$2m to US$3m per annum each on a recurring basis (“the Opportunity Loss”).15

The Original Agreements

In any event, the plaintiff entered into a contractual relationship with the Companies under which two of the plaintiff’s personnel, namely Dominic himself and one Ricardo Villanueva (“Villanueva”), would provide services to the Companies in different capacities. This was done by the concurrent execution of four documents (collectively “the Original Agreements”), dated 11 January 2006, which are each described in brief terms as follows: a letter between the plaintiff and the Companies releasing Dominic from the plaintiff’s services to enable him to act as the group chief financial officer (“Group CFO”) of the Companies (“the Release Letter”);16 a letter between the plaintiff and the Companies clarifying the terms of the Release Letter (“the Side Letter”);17 an employment agreement between Dominic and the Companies appointing Dominic as Group CFO of the Companies (“the Employment Agreement”);18 and a secondment agreement between the plaintiff and the Companies providing for the secondment of Villanueva to the Companies to act as head of...

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1 cases
  • A co and others v D and another
    • Singapore
    • High Court (Singapore)
    • 20 Junio 2018
    ...Growth Fund v ACTAtek Inc [2017] SGHC 251 at [87] and Straits Advisors Pte Ltd v Michael Deeb (alias Magdi Salah El-Deeb) and others [2014] SGHC 94 at [115]. D & E submitted that they “arguably could not bring arguments premised on the CRTPA” as D & E enjoyed only an incidental benefit. Whe......
1 books & journal articles
  • Tort Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2014, December 2014
    • 1 Diciembre 2014
    ...claim against them was well founded or not. 25.26 The plaintiff in Straits Advisors Pte Ltd v Michael Deeb (alias Magdi Salah El-Deeb)[2014] SGHC 94 (Straits Advisors Pte Ltd) had entered into an agreement with the second and third defendants (related companies) to provide corporate finance......

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