Telemedia Pacific Group Ltd v Yuanta Asset Management International Ltd

• Jurisdiction: Singapore
• Judge: Patricia Bergin IJ
• Judgment Date: 07 December 2016
• Neutral Citation: [2016] SGHC(I) 6
• Published date: 23 June 2018
• Date: 07 December 2016
• Year: 2016
• Hearing Date: 07 November 2016
• Plaintiff Counsel: Paul Tan, Yam Wern-Jhien and Josephine Chee (Rajah & Tann Singapore LLP)
• Defendant Counsel: Hee Theng Fong, Toh Wei Yi, Nicklaus Tan and Jaclyn Leong (Harry Elias Partnership LLP)
• Citation: [2016] SGHC(I) 6
• Court: High Court (Singapore)
• Docket Number: Suit No 2 of 2015

Patricia Bergin IJ:

These reasons relate to the form of final orders to be made consequent upon the judgment delivered in these proceedings on 30 June 2016: see Telemedia Pacific Group Ltd and another v Yuanta Asset Management International Ltd and another [2016] SGHC(I) 03 (“the Judgment”). These reasons should be read with the Judgment. For convenience, I will adopt the abbreviations used in the Judgment.

The plaintiffs were successful in their claims for breach of contract, breach of fiduciary duties and conversion. The heads of damage in respect of those claims were agreed to be a shortfall in loan proceeds, the unauthorised sales of 101.5m NexGen shares in February and March 2011, the unauthorised sales of 60m NexGen shares in August 2011 and the unauthorised sales of 225m NexGen shares in October 2011.

The plaintiffs were unsuccessful in the balance of their claims with which I will deal when I deal with the question of costs. The defendants were wholly unsuccessful in their claims in their Counterclaim.

The parties were directed to confer for the purpose of agreeing on the form of final orders, including the outstanding issues relating to the quantum of damages, interest and costs (see the Judgment at [545]). Although the parties communicated between July 2016 and October 2016, it became clear that agreement could not be achieved and the matter was fixed for further hearing on 7 November 2016. On that occasion, short oral submissions were made in addition to the written submissions that had been filed with the Court and judgment in respect of these matters was reserved. Subsequently, the parties have made additional short submissions in correspondence to the Court.

Before turning to the matters for determination in respect of quantum, interest and costs, I should refer to a controversy that arose from [402] of the Judgment which states:

The parties are entitled to share equally in the profits of the joint project and are burdened equally with any losses of the joint project. The only way in which that can be ascertained is by some form of an accounting exercise. However it is reasonably clear that the defendant has taken for himself the sale proceeds of secret sales of the 60 million NexGen shares in August 2011 and the 225 million NexGen shares in October 2011.

The defendants have retained an expert accountant to assist them in ascertaining the profits and/or losses of the joint venture that are to be equally shared. On 7 November 2016 I indicated to the parties that the finalisation of the joint venture relationship as a whole is not part of these proceedings and I did not intend to entertain submissions in relation to that accounting exercise. However I indicated that if the parties wished to include an order in these proceedings finalising their joint venture relationship they should file a Consent Order by 21 November 2016. This did not occur. As has been the habit of these parties, they each wrote to the Court after this date seeking orders in respect of this process, albeit not orders that would finalise their relationship immediately. Although the defendants requested a further delay of 21 days in the delivery of these reasons, I am not satisfied that this is appropriate. However I will grant leave to the parties to relist the matter on seven days’ written notice for the purpose of making any Consent Orders finalising the parties’ relationship.

Quantum of damages

The first head of damage with which the parties have dealt, both in writing and orally, is the shortfall in the loan funds.

Shortfall in loan funds

The retention of the loan funds by the defendants was not in issue at trial, albeit that the entitlement to the funds was in issue. The plaintiffs claimed that an amount of S$850,475.73 had been retained while the defendants claimed that S$1,633,963.87 had been retained (see the Judgment at [418]).

During the parties’ post-Judgment communications the plaintiffs advised the defendants on 21 July 2016 that they had re-calculated the shortfall to be S$1,693,785.47. On 16 August 2016 the plaintiffs advised the defendants that “at the very least” they were entitled to S$850,475.73 for the shortfall in the loan funds. On 18 October 2016 the plaintiffs’ submissions to the Court explained the difference between these two figures as follows:(a)Out of the sums that were transferred from Yuanta to AEM said to be loan proceeds, a sum of $1,459,710.82 was re-transferred back to Yuanta on 13 April 2011 and was used for the re-purchase of 36.258m NexGen shares that the Defendants had wrongfully sold. The cost of the re-purchase should be borne by the Defendants, and the sum of S$1,459,710.82 that AEM re-transferred back to Yuanta for the purpose of the share re-purchase should thus be deducted from the loan proceeds said to have been provided by Yuanta to AEM. AEM never had the benefit of this amount;(b)Further, the sum of S$850,475.73 stated in the Plaintiffs’ Closing Submissions was calculated on the basis that the Defendants was [sic] entitled to withhold 10% out of the loan amount that EFH paid to Yuanta as its commission. Upon a further review of the evidence, however, the Plaintiffs have come to realise that the amount that EFH paid to Yuanta did not represent 100% of the loan proceeds, but merely 97% of the loan proceeds. This was because EFH had deducted 3% from all loan proceeds as its loan fee at the outset, before transferring the remainder 97% of the loan proceeds to Yuanta. The Plaintiffs’ previous calculation (S$850,475.73) erroneously overstated the amount of commission the Defendants were entitled to deduct from the loan proceeds, because it excluded the 3% loan that EFH had deducted from the outset. This 3% should be charged to the Defendants, or otherwise taken from the Defendants’ share of the 10% commission. The Defendants was [sic] only entitled to withhold the remainder 7% of the loan proceedings (sic) as its share of the commissions (3% having already been deducted by EFH at the outset). This is consistent with clause 3 of the Non-Recourse Loan Agreement (see C-19) which stipulates that the fees and charges associated with any loan shall be within 10% of the loan amount.

In their written submissions filed on 3 November 2016 the defendants took issue with the plaintiffs’ entitlement to any amount, submitting that the shortfall should be paid to the joint venture vehicle, AEM. The defendants also submitted that the shortfall figure should be S$1,293,710.82.

During oral submissions on 7 November 2016, the plaintiffs claimed that the findings made in the Judgment entitled them to the proceeds in respect of the shortfall. That submission cannot be sustained. These were funds that were destined for the joint venture vehicle for investment and were funds made available by EFH on the pledging of the NexGen shares less the 3% fee charged by EFH. In addition, the defendants were entitled to retain 10% of the loan funds by way of commission (see the Judgment at [425]).

The submissions and the calculation by the defendants is to be preferred. It provides for the reduction of the S$1.8m paid to the plaintiff on 29 June 2011 but brings to account the amount for the repurchase of the shares of S$1,459,710.82. Subject to what is said below in relation to interest, the defendants will be ordered to pay that amount into a joint trust account held by the solicitors for the respective parties pending the finalisation of the joint venture accounting exercise between the parties. This is necessary having regard to the fact that Crédit Agricole closed the AEM account in October 2011 (see the Judgment at [155]-[157]).

Unauthorised sales in February/March 2011

The amount claimed by the plaintiffs for the unauthorised sales of the NexGen shares in February and March 2011 is S$1,774,733.20. On 8 August 2016, the defendants notified the plaintiffs of their contention that the profits obtained from the sale and re-purchase of the 101.5m NexGen shares were made using funds from the joint venture and therefore the plaintiffs were only entitled to 50% of that alleged profit.

The plaintiffs’ written submissions of 18 October 2016 included a contention that when the 101.5m NexGen shares were sold, they had not at that time been pledged to EFH. In this regard, the plaintiffs relied upon the finding that the defendants were not authorised to sell or otherwise deal with the shares that had not yet been pledged against any loan (see the Judgment at [214]). The sale proceeds from the unauthorised sales of the 101.5m NexGen shares were not funds of the joint venture, but were funds generated from the sale of shares that belonged to the plaintiffs. The plaintiffs submitted that they have already given a credit for the cost of re-purchase of those shares in their final calculation. The plaintiffs claimed that the amount of S$1,774,733.20 represents the net profit.

In their written submissions of 3 November 2016 the defendants relied upon the following passage of the Judgment, at [403]:

… The plaintiffs are entitled to any profit made from the sale of its shares in February and March 2011, except they are only entitled to 50% of the profits from the sale of any shares treated as converted from the warrants that became an asset of the joint venture when the plaintiff was “reimbursed”.

The defendants claim that the damages in respect of the sale of the NexGen shares in February and March should be S$871,521.94. That calculation is based on the sale proceeds of S$4,893,310.62 less the purchase price of S$3,150,266.75 rendering an overall profit of S$1,743,043.87 with 50% of the profits of S$871,521.94 being the plaintiffs’ entitlement.

In their oral submissions, the plaintiffs accepted that the defendants were entitled to 50% of the proceeds of 30m NexGen shares which was equivalent to S$225,000. This should be deducted from S$1,774,733.20,...