Strategic Worldwide Assets Ltd v Sandz Solutions (Singapore) Pte Ltd

• Jurisdiction: Singapore
• Judgment Date: 26 August 2013
• Date: 26 August 2013
• Docket Number: Suit No 506 of 2009
• Court: High Court (Singapore)

Strategic Worldwide Assets Ltd

Plaintiff

and

Sandz Solutions (Singapore) Pte Ltd and others (Tan Choon Wee and another, third parties)

Defendant

[2013] SGHC 162

Judith Prakash J

Suit No 506 of 2009

High Court

Agency—Evidence of agency—First third party having personal interest in plaintiff or in transactions involving plaintiff—Whether, on facts, first third party had authority to negotiate with second defendant on behalf of plaintiff

Agency—Evidence of agency—Second defendant purchasing shares in first defendant using funds provided by plaintiff—Purchased shares subsequently transferred from second defendant to plaintiff for no consideration—Second defendant and first third party used various synonyms in their correspondence but never used word ‘agent’—Whether principal-agency relationship was grounded on consent to de jure relationship or merely on consent to state of facts upon which law imposed consequences—Whether second defendant purchased shares in capacity as agent for plaintiff

Contract—Estoppel—First defendant declaring dividends of $4m while plaintiff had 25% beneficial ownership in first defendant due to principal-agent relationship between plaintiff and second defendant—Whether said dividends were declared pursuant to representations or understanding that plaintiff would not claim its share of dividends—Whether plaintiff was entitled to 25% of declared dividends

Tort—Conspiracy—Defendants alleging that this action was commenced pursuant to conspiracy involving plaintiff and third parties—Whether commencing law suit constituted unlawful means—Whether plaintiff had conspired with third parties to commence this action with sole or predominant intent to injure defendants

Lawrence Liaw Shoo Khen (‘Mr Liaw’) founded and ran Sandz Solutions (Singapore) Pte Ltd (‘Sandz’), a company providing professional services in information technology. By 2007, Sandz had a paid-up capital of $3m. Liaw and his associates (‘the Liaw Group’) held 75% of the paid-up capital. The remaining 25% was held by SES Systems Pte Ltd (‘SES’). Mr Liaw wanted to expand Sandz and needed further working capital in order to do so. On 19 January 2007, Mr Liaw was introduced to Tan Choon Wee (‘Mr Tan’), who was a venture capitalist, for the purpose of investigating the possibility of injecting Sandz into a listed company.

Over the next few weeks, discussions took place between Mr Tan and Mr Liaw regarding the terms of the transaction. At some point before 2 February 2007, Mr Tan told Mr Liaw that Sandz could be injected into The Lexicon Group Limited (‘Lexicon’), a listed company of which Mr Tan was a director.

Strategic Worldwide Assets Limited (‘Strategic’) came into the picture in February 2007; it was originally incorporated as an investment vehicle by John Poon Seng Fatt (‘Mr Poon’), who subsequently transferred his interest to Mr Benjamin Ng Chee Yong. Mr Tan told Mr Poon that Mr Poon could buy shares in Sandz and then sell them at a profit to Lexicon. On 12 March 2007, Mr Liaw made an offer to SES to purchase its stake for $2.5m and on 26 March 2007, Strategic paid Mr Liaw this sum in order to fund the purchase. Eventually Mr Liaw paid $2.7 m for the SES stake and the shares were transferred to him on 9 April 2007. On 20 April 2007, these shares were in turn transferred to Strategic. Mr Liaw alleged that Mr Tan asked him to transfer the SES stake to Strategic on the understanding that Strategic would owe him $200,000 and that, inter alia, Strategic would not have any claim or interest in or against Sandz, its profits, or cash or money, including any entitlement to dividends. Mr Tan denied making any representation that Strategic would have had no interest in any dividends declared by Sandz.

Two dividend declarations were made. The first one, in the sum of $2.5m, was purportedly declared on 11 April 2007 (the Liaw Group held all the shares in Sandz on this date). It was unclear if the declaration of this tranche was backdated. The second one, in the sum of $1.5 m, was admitted by the Liaw Group to have been declared sometime between 14 and 22 June 2007 but backdated to 16 April 2007.

The sale and purchase agreement between Lexicon and the Sandz shareholders (‘the Lexicon SPA’) was signed on 30 May 2007, and was completed on 2 October 2007. Soon thereafter, disagreements arose between Lexicon and Strategic (along with Mr Tan and Mr Poon) and this resulted in an unwinding of the Lexicon SPA. Consequently, Strategic and the Liaw Group regained their shares in Sandz. In May 2009, Strategic's solicitors wrote to Sandz asking for a full and complete account of all the dividends which had been declared and paid by Sandz from the time at which Strategic became a shareholder until the date of the letter. The present action was commenced soon after.

Strategic, qua shareholder, claimed for its share of the declared dividends from Sandz and the Liaw Group and also claimed that the same persons had tortiously conspired to injure it. Sandz and the Liaw Group had two main defences: first that Strategic was not a shareholder at the time the first dividend declaration was made and second that Mr Tan had represented that Strategic would not have any claim or interest in Sandz. Sandz and the Liaw Group in turn brought third party proceedings against Mr Tan and Mr Poon for contribution and/or indemnity. Sandz and the Liaw Group also counterclaimed against Mr Tan, Mr Poon and Strategic for damages arising out of the tort of conspiracy.

Held, allowing Strategic's claim for the dividends, disallowing Sandz and the Liaw Group's claim for an indemnity, and disallowing Sandz and the Liaw Group's counterclaim in conspiracy:

(1) Although Mr Tan was not the legal owner of Strategic, at all material times he had either a personal interest either in Strategic or in the transactions whereby Strategic acquired the SES stake and subsequently sold the SES stake on to Lexicon. Mr Poon continued to have an interest in Strategic although he had, on paper, transferred Strategic to Mr Ng. Any gains the Strategic realised from the SES stake would have been shared with Mr Poon and Mr Tan. Mr Tan had actual authority to negotiate with Mr Liaw on behalf of Strategic: at [43] and [61] .

(2) Mr Tan was a director of Lexicon and once he conceived the idea of injecting Sandz into Lexicon, his duty was to get Lexicon the best possible price, and he thus should have had nothing to do with the SES stake: at [54] .

(3) Mr Tan did not represent that Strategic would not claim its share of the dividends. Whilst the Liaw Group had pleaded that there were express representations, when it came to putting his case on oath, Mr Liaw was only willing to say that there was an understanding that the representations applied. It was also arguable that the use of the word ‘accordingly’ indicated that one of the representations was self-wrought. When cross-examined, Mr Liaw was evasive, did not definitively assert that Mr Tan was the person who made the representations and was not able to say when the representations were made: at [67] to [71] and [78] .

(4) While agency had to ultimately derive from consent, the consent need not necessarily be to the relationship of principal and agent itself (indeed the existence of it might be denied) but might be to a state of facts upon which the law imposed the consequences which resulted from agency: at [83] .

(5) Mr Liaw's acquisition of the SES stake was pursuant to an arrangement between himself and Strategic. Mr Tan and Mr Liaw used various synonyms in their correspondence, but the intention was clear: Mr Liaw was to purchase the SES stake as agent on behalf of Strategic. All but $200,000 of the purchase price was remitted by a law corporation which represented Strategic; the SES stake was also transferred for no consideration. Due to the principal-agent relationship between Strategic and Mr Liaw, Strategic's interest in the dividends arose the moment the SES stake was transferred to Liaw on 9 April 2007. The legal ownership structure of Strategic on the dates when the dividends were declared (both after 9 April) was thus immaterial. The issue of backdating was likewise moot. Strategic qua principal was ultimately entitled to 25% of the total declared dividends: at [81] and [84] .

(6) As Strategic was entitled to 25% of the dividends, the basis of the Liaw Group's conspiracy counterclaim had fallen away. In any case, there was nothing unlawful about commencing a law suit. The only damage that the Liaw Group claimed to have suffered by reason of the commencement of the action was the cost incurred to defend it and this was a cost that every defendant incurred. If a claim had no basis, a defendant would be entitled to recover costs as a matter of course from the plaintiff. A defendant was not entitled to allege that there was a conspiracy against him simply because a claim he thought was bad had been brought against him: at [93] .

(7) The Liaw Group's alternative counterclaim in lawful means conspiracy was also not made out. Strategic's predominant purpose in starting the action was to benefit itself not to injure the Liaw Group. It reached a separate settlement with Lexicon to get better terms than the Liaw Group had. There was no evidence whatsoever of bad faith: at [94] .

Branwhite v Worcester Works Finance Ltd [1969] 1 AC 552 (refd)

Crawford Adjusters v Sagicor General Insurance (Cayman) Ltd [2013] UKPC 17 (refd)

Devinder Rai (ACIES Law Corporation) for the plaintiff

Low Chai Chong, Daryl Ong and Benjamin Yam (Rodyk & Davidson LLP) for the first to fourth defendants

Rajendran Kumaresan and Ronnie Tan (Central Chambers Law Corporation) for the first third party

Kelly Yap and Morgan Chng (Oon & Bazul LLP) for the second third party.

Judgment reserved.

Judith Prakash J

1 The plaintiff's claim in these proceedings was, ostensibly, a simple one by a shareholder for payment of...