Tan Woo Thian v PricewaterhouseCoopers Advisory Services Pte Ltd
| Jurisdiction | Singapore |
| Judge | See Kee Oon J |
| Judgment Date | 13 August 2020 |
| Neutral Citation | [2020] SGHC 171 |
| Court | High Court (Singapore) |
| Docket Number | Suit No 267 of 2017 |
| Published date | 20 August 2020 |
| Year | 2020 |
| Hearing Date | 30 January 2020,10 October 2019,03 June 2020,11 October 2019,09 October 2019,29 January 2020,06 April 2020,07 October 2019,08 November 2019,07 November 2019,06 November 2019,08 October 2019 |
| Plaintiff Counsel | Narayanan Vijya Kumar (M/s Vijay & Co) and Malcolm Tan Ban Hoe (City Law LLC) |
| Defendant Counsel | Ang Peng Koon Patrick, Chew Xiang, Chow Jie Ying, and Cheong Tian Ci Torsten (Rajah & Tann Singapore LLP) |
| Subject Matter | Tort,Negligence,Duty of care,Breach of duty |
| Citation | [2020] SGHC 171 |
The plaintiff, who is a former director and Chief Executive Officer (“CEO”) of SBI Offshore Limited (“SBI”), was involved in a series of transactions pertaining to SBI’s acquisition and subsequent disposal of shares in a Chinese entity known as Jiangyin Neptune Marine Appliance Co Ltd (“NPT”).
In June 2016, SBI engaged the defendant to conduct a fact-finding review on these transactions, the results of which were published in a report (“the PwC Report”) and summarised in an executive summary (“the Executive Summary”). The Executive Summary was issued to SBI’s Board of Directors (“SBI’s Board”) and shareholders.
The plaintiff alleged that the defendant had acted negligently in investigating the NPT-related transactions and/or presenting its findings in the Executive Summary. He argued that the Executive Summary was factually inaccurate and/or misleading, and had caused him to suffer loss including reputational loss, diminution in the value of his SBI shares and loss of influence in SBI.
Having reviewed the evidence put forward at trial as well as the parties’ respective written submissions, I dismissed the plaintiff’s claim in its entirety. The plaintiff has appealed against my decision. I now set out the grounds of my decision in full.
Facts The partiesThe plaintiff is the founder of SBI, which was previously known as Seabreeze International Pte Ltd. SBI carries on business in the marketing and distribution of drilling and related equipment, as well as integrated engineering projects.1 It was listed on the Catalist Board of the Singapore Stock Exchange Securities Trading Limited (“SGX-ST”) on 11 November 2009.2 The plaintiff was SBI’s Managing Director from 1997 till November 2009. He was subsequently appointed as an executive director and the CEO of SBI from 17 August 2012 to 18 March 2016.
The defendant is an international accounting firm which was engaged by SBI to perform an independent fact-finding review on SBI’s 2008 acquisition and 2015 sale of shares in NPT. NPT manufactured lifeboats and davits which were distributed by SBI.3
Background to the dispute The Acquisition TransactionSometime in 2008, SBI acquired a 35% equity interest in NPT (“the Acquisition Transaction”).
Prior to the Acquisition Transaction, NPT had been 65% owned by Jiangyin Wanjia Yacht Co Ltd (“Wanjia”) and 35% owned by a Taiwanese individual, Mr Chen Yen Ting (“Mr Chen”). According to the plaintiff, the Acquisition Transaction was effected by way of a written Equity Transfer Agreement (“ETA”) which provided that SBI would acquire Mr Chen’s equity interest in NPT for the consideration of US$1.75m (“the First Acquisition ETA”).4
The First Acquisition ETA was signed only by Mr Jonathan Hui (“Jonathan Hui”), who was a director and the CEO of SBI at the material time. It was undated save for a reference to the year 2008.5
Subsequently, both Jonathan Hui and the plaintiff signed another ETA relating to the same transaction (“the Second Acquisition ETA”).6 Under the Second Acquisition ETA, which was dated 20 October 2008, Mr Chen agreed to transfer his 35% shareholding in NPT to SBI for US$350,000.7 The plaintiff claimed that he had signed the Second Acquisition ETA (which he described as a “form”) because Ms Hua Huajiang Ollie (“Ollie Hua”), who was a representative of Wanjia, had informed him that this step was necessary for the registration of the share transfer.8
The key differences between the two Acquisition ETAs may be summarised as follows.9
On 11 November 2009, SBI was listed on the SGX-ST. The purchase price of SBI’s 35% equity interest in NPT was disclosed as US$1.75m in SBI’s Offer Document dated 4 November 2009 (“the Prospectus”). However, the acquisition consideration was recorded as US$1.8m in SBI’s financial reports for subsequent financial years.10
The Disposal TransactionOn 18 August 2015, SBI entered into an agreement with Ollie Hua’s father, a People’s Republic of China (“PRC”) national by the name of Mr Hua Hanshou (“Mr Hua”), to dispose of the 35% equity interest in NPT at the price of US$3.5m (“the First Disposal ETA”). The First Disposal ETA was dated 18 August 201511 and was announced by SBI on the same day.12
According to the plaintiff, Mr Hua insisted that one half of the purchase price (US$1.75m) should be paid out of the PRC, and that the other half (US$1.75m) should be paid out of Hong Kong.13
On 17 September 2015, Ollie Hua sent an e-mail to the plaintiff, copying Ms Amy Soh (“Amy Soh”), who was SBI’s then-Chief Financial Officer, and Mr Chan Lai Thong (“John Chan”), who was SBI’s then-Executive Chairman. In this e-mail, which was titled “Payment for Equity Transfer USD 1,750,000”, Ollie Hua wrote:14
The amount of USD1,750,000.00 according to our agreement has been paid from Jiangyin Vangard Boating Co., Ltd to SBI Offshore Limited on Sept 14. The tax as per PRC tax law shall be deducted in the payment directly and tax amount is calculated by Tax Bureau of Jiangyin City as below: USD1,750,000.00 – USD350,000.00(Registered Investment) = USD1,400,000 @10% = USD140,000.00 …
On 22 September 2015, Amy Soh e-mailed Ollie Hua, copying the plaintiff and John Chan, stating that the withholding tax ought to be US$175,000 rather than US$140,000. This sum was calculated on the basis that the original purchase price was US$1.75m (as stated under the First Acquisition ETA) and the stipulated sale price was US$3.5m (as stated under the First Disposal ETA).15
The plaintiff alleged that subsequently, in early October 2015, Mr Hua proposed to the plaintiff that a second disposal ETA be executed between SBI and Wanjia for the transfer of SBI’s 35% equity interest in NPT to Wanjia for the sum of US$1.75m, purportedly because (a) a Chinese national could not own shares in a joint venture company; and (b) Mr Hua wanted SBI to execute an agreement which reflected the sum of money being paid out of PRC and not the sum being paid out of Hong Kong. Mr Hua also claimed that the proposed document was required for Wanjia’s internal purposes.16 The plaintiff thus presented Mr Hua’s request to SBI.
On 10 October 2015, Wanjia wrote a letter to SBI stating that Wanjia’s payment of US$1.75m to SBI for SBI’s 35% equity interest in NPT had been made from within China, and that Wanjia was therefore required to pay 10% withholding tax on behalf of SBI. The withholding tax amount was calculated by Wanjia to be US$140,000. Wanjia claimed that it had already made payment on behalf of SBI to the local tax bureau at Jiangyin for the amount of US$140,000. It also stated that it “guarantee[d]” that SBI’s liability to pay withholding tax would not exceed US$175,000, and that any excess would be paid by Wanjia.17
On 30 October 2015, Amy Soh produced a report to SBI’s Audit and Risk Management Committee (“Audit Committee”) addressing the withholding tax issues surrounding SBI’s disposal of the NPT shares (“Amy Soh’s Report”).18 In this report, Amy Soh referred to the fact that there were two ETAs with different prices, and stated her opinion that the PRC tax authority would insist on the tax payable being US$315,000 even though the correct amount ought (in her view) to be US$175,000 instead. She also noted that SBI had been asked to enter into a new ETA with Wanjia for the purchase price of US$1.75m, and that Wanjia’s legal representative had provided SBI with a letter of assurance on SBI’s tax liability.
On 11 November 2015, SBI’s Board had a meeting, during which it rejected the plaintiff’s proposal to execute a second disposal ETA.19
According to the plaintiff, John Chan subsequently approached him towards the end of November 2015 to inform him that he (the plaintiff) would be given a power of attorney authorising him to sign a novation agreement so that Mr Hua’s requests could be met. John Chan also allegedly told the plaintiff that he (the plaintiff) would be given a general power of attorney to do all that was necessary to complete the transfer of SBI’s 35% equity interest in NPT.20 The defendant’s position was that this conversation never took place.21
On 1 December 2015, SBI’s Board met again to consider the possibility that a novation agreement be entered into between SBI, Wanjia and Mr Hua. The intended purpose of this novation agreement was to transfer the First Disposal ETA from Mr Hua to Wanjia, such that Wanjia would take Mr Hua’s place as purchaser. The Board resolved,
The Novation Agreement was signed on 1 December 2015.23
On 8 December 2015, John Chan and the plaintiff attended at the Notary Public’s office to execute a power of attorney authorising the plaintiff to execute the Novation Agreement. It was subsequently discovered that John Chan and the plaintiff had apparently signed
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Tan Woo Thian v PricewaterhouseCoopers Advisory Services Pte Ltd
...the appellant’s claim for negligence in HC/S 267/2017 (“Suit 267”): see Tan Woo Thian v PricewaterhouseCoopers Advisory Services Pte Ltd [2020] SGHC 171. The Judge found that the respondent did not owe the appellant any duty of care. Even if such a duty of care was owed, the respondent had ......