Tan Eck Hong v Maxz Universal Development Group Pte Ltd

• Jurisdiction: Singapore
• Court: High Court (Singapore)
• Judge: Judith Prakash JA
• Judgment Date: 17 February 2017
• Neutral Citation: [2017] SGHC 309
• Citation: [2017] SGHC 309
• Hearing Date: 10 August 2016,26 August 2016,19 July 2016,06 November 2015,21 July 2016,20 July 2016,23 August 2016,05 November 2015,02 November 2015,22 July 2016,16 September 2016,17 February 2017,25 August 2016,12 July 2016,12 August 2016,14 July 2016,20 November 2015,03 August 2016,04 August 2016,11 August 2016,05 August 2016,18 July 2016,21 September 2016,03 November 2015,11 November 2015,19 November 2015,18 November 2015,16 November 2015,17 November 2015,30 October 2015,04 November 2015,20 September 2016,19 September 2016,30 November 2015,09 November 2015,12 November 2015,23 September 2016,22 August 2016,24 August 2016,22 September 2016,15 July 2016,13 July 2016
• Published date: 13 November 2018
• Year: 2017
• Date: 17 February 2017
• Docket Number: Suit No 581 of 2007
• Subject Matter: Oppression,Minority Shareholders,Companies
• Plaintiff Counsel: Alvin Tan and Os Agarwal (Wong Thomas & Leong)
• Defendant Counsel: Philip Fong, Lynn Wong, Kevin Lim and Sui Yi Siong (Harry Elias Partnership LLP),Suresh s/o Damodara and Clement Ong (Damodara Hazra LLP),Third defendant in person,Kenneth Pereira and Eugenia Chan (Aldgate Chambers LLC),Thrumurgan s/o Ramapiram and A Sangeetha (Trident Law Corporation),Ashok Kumar Balakrishnan, Darius Tay and Cephas Yee Xiang (BlackOak LLC),Gregory Vijayendran, Benjamin Smith, Dhiviya Mohan, Ronald Wong and Evelyn Chua (Rajah & Tann Singapore LLP)

Judith Prakash JA: Introduction Summary and parties

This is a long and involved case. It arises from the development of a piece of land in Sentosa from being the site of a former military barracks into a small hotel-cum-club and then into a multi-million-dollar resort hotel run by an international hotel group. The plaintiff, who is a minority shareholder of the company that owns and runs the hotel, complains that along the journey to this otherwise desirable outcome, the majority shareholder and many of the directors of the company carried on the affairs of the company in a manner which oppressed, and was prejudicial to, his interests. The defendants resist the claims and allege that the plaintiff is trying to force them to buy out his shareholding at an inflated price.

I start by introducing the parties. These are: Treasure Resort Pte Ltd (“the Company”), a company incorporated in Singapore in 2005 and the second defendant in this action. The alleged oppressive actions took place in relation to the management of the Company; Tan Eck Hong (“the plaintiff”), the plaintiff in this action, who is the dissatisfied minority shareholder of the Company, holding less than 7% of its issued share capital; Maxz Universal Development Group Pte Ltd (“MDG”), a company incorporated in Singapore, which is the first defendant and the majority shareholder of the Company, holding 93.9% of its issued share capital; Seeto Keong (“Mr Seeto”), who is the third defendant and was a shareholder and director of MDG, and subsequently became a director of the Company; Tan Boon Kian (“Rodney Tan”), who is the fourth defendant and the majority shareholder of MDG and a director of both MDG and the Company since around June 2007; Poh Ban Leng (“Mdm Poh”), who is the fifth defendant and was a director of the Company between 24 May 2007 and 13 January 2010; Lim Kwee Wah (“Mr Lim”), who is the eighth defendant and is a director of both MDG and the Company (holding the latter position from March 2009); and Gn Hiang Meng (“Mr Gn”), who is the ninth defendant and has been a director of the Company from March 2009. I will sometimes hereafter refer to Mr Seeto, Rodney Tan, Mdm Poh, Mr Lim and Mr Gn collectively as “the defendant-directors”. Further for completeness, I note that the current plaintiff was, at the inception of the action in 2007, the seventh defendant but, after the original plaintiff dropped out, Tan Eck Hong took his place as the plaintiff and was removed as the seventh defendant. The sixth defendant was one Wong Choon Hoy but he passed away in the course of the proceedings and the action against him was not continued.

The background

Of necessity what follows is a very brief account of what happened over the years, intended to set the scene and promote understanding of the claims.

In late1994, by way of a Building Agreement, the Sentosa Development Corporation (“SDC”), leased certain land and premises on Sentosa Island to a company called Sijori Resort Pte Ltd (“Sijori RPL”) which developed the buildings on the land (two blocks of old British Army barracks) into a small hotel and club (“Sijori Resort”). The Sijori Resort took in casual guests and also offered memberships (“Sijori Memberships”) which entitled the members to a certain number of free days’ stay at the Sijori Resort each year. Due to its location, the Sijori Resort had considerable potential for development.

MDG was incorporated as a property development company in March 2000. In about May 2003, Mr Seeto became the chief executive officer of MDG and held shares in the MDG from then till May 2007. He ran MDG with one Sebastian Wong Cheen Pong (“Sebastian Wong”) whose wife was a shareholder but who could not himself hold office as he was a bankrupt. They saw potential in the Sijori Resort as Sentosa Island itself was being developed into a leisure and tourist hub. In 2005, MDG negotiated with SDC for permission to acquire both the Sijori Resort and also an additional piece of land from SDC in order to develop a 200-room, five-star hotel (“the Project”). The Project had two phases. Under the first phase, the existing buildings housing the Sijori Resort would be refurbished and outfitted to a much higher standard. Under the second phase, a new multi-storey building would be constructed on the additional plot and outfitted to five-star standards. At some point, MDG entered into a contract with Movenpick Hotels & Resorts Management AG (“Movenpick AG”) under which the completed new hotel would be run as a “Movenpick Hotel”.

In June 2005, the Company was incorporated to be the owner and operator of the hotel and to run the Project. MDG was the Company’s majority shareholder and there were some minority shareholders including one Shen Yixuan (“Mr Shen”). The plaintiff met Mr Seeto sometime in mid-2005 when the latter was searching for investors to help the Company develop the Project. The plaintiff agreed to invest $720,000 and was allotted 65,600 shares in the Company in October 2005.

The Company had to pay Sijori RPL for the acquisition of the Sijori Resort and the transfer of the Building Agreement. Part of the purchase price was to be paid by settling the debts of Sijori RPL. In June 2006, MDG obtained credit facilities, from what was later called VTB Bank, of up to $8m to be used towards the purchase, renovation and refurbishment of the Sijori Resort. I will refer to this as the “VTB Facility”. About half the facility limit was to be used to settle Sijori RPL’s debts to the Bank of China and SDC, to wit, the sums of $3,657,144 and $342,856 respectively. The security for the facility comprised: A mortgage over the lease of the Sijori Resort to the Company from SDC; A fixed and floating charge over all the Company’s assets; A legal assignment of all tenancy proceeds of the lease and an equitable assignment of all monthly membership subscriptions payable to Sijori Resort; and A corporate guarantee from the Company and a personal guarantee from Mr Seeto.

On 27 September 2006, MDG gave notice to VTB Bank that it wished to make a drawdown of $4m on 29 September 2006 by way of a cashier’s order for $3,657,144 payable to the Bank of China and another cashier’s order for $342,856 payable to SDC. These cashier’s orders were duly issued on 29 September 2006 but were not released to MDG and, accordingly, could not be handed over to either the Bank of China or SDC. Nevertheless, MDG considered that it had applied $4m to settle payments on behalf of the Company to Bank of China and SDC and that therefore the Company was indebted to it in this amount. Concurrently, the debt of $4m to MDG was entered in the Company’s books.

One of the conditions that SDC had imposed for the transfer of the Sijori Resort from Sijori RPL and for the lease of the additional plot was that the Company should have and maintain a minimum issued paid-up capital of $4.5m. At that time, however, the Company’s total issued share capital was only $820,000. On 12 October 2006, an extraordinary general meeting of the Company was held to authorise its directors to issue and allot new shares. On 13 October 2006, a directors’ resolution was passed to allot an additional four million shares in the Company to MDG and to approve payment of the allotment moneys being satisfied by offsetting the debt of $4m that the Company owed MDG by reason of the book entries referred in to [8] above. The additional four million shares were duly issued and allotted to MDG and the Company’s indebtedness to MDG was duly capitalised.

On 14 November 2006, completion of the acquisition took place. The cashier’s orders from VTB Bank were released to SDC and the Bank of China. The Building Agreement between SDC and Sijori RPL was novated to the Company pursuant to a Deed of Novation and the Company leased an additional plot of land pursuant to a Supplemental Agreement with SDC. The combined plots of land and premises thereon are now known as 23 Beach View, Sentosa (“the Property”). The Supplemental Agreement with SDC contained the Company’s obligations to refurbish the Sijori Resort and to build a new wing with the temporary occupation permit for the same being obtained by 30 June 2008. Upon completion, the Company took over the running of the Sijori Resort and Mr Seeto and Sebastian Wong looked around for further funds with which to implement the Project. Under the agreement with SDC, Phase 1 of the Project was supposed to be completed by the end of May 2007.

Enter Rodney Tan – he was approached in or around May 2007 to invest in the Company. Rodney Tan was then, and still is, the Group Chairman of the Cairnhill Group of Companies, including Cairnhill Group Holdings Pte Ltd (“CGH”) which would become a major player in the development of the Project. Rodney Tan is, indirectly, practically the sole owner of CGH. He comes from a hotelier background – his father having owned and managed the Cairnhill Hotel in Singapore. Under the CGH banner, Rodney Tan was involved in running a 34-storey hotel in Tianjin, China, and a 28-storey block of service apartments in Hong Kong. According to Rodney Tan, it was because of his substantial personal net worth, good reputation and experience in the hotel management and hospitality industry generally, and his strong relationships with banks, that Mr Seeto approached him to invest in the Company.

Rodney Tan saw the investment potential in the Property and the Project; he was confident that he and his team could convert Sijori Resort from a run-down “zero-star dying hotel” into a five-star hotel. In May 2007, he invested in MDG through a British Virgin Island corporate vehicle, Roscent Group Ltd, by buying 54% of the shares in MDG, including Mr Seeto’s shares. On 1 June 2007, Rodney Tan was appointed a director of MDG, having been appointed a director of the Company slightly earlier, on 24 May 2007. I should state that various changes of...