Teo Chong Nghee Patrick and others v Han Cheng Fong and another appeal

• Judge: Sundaresh Menon CJ
• Judgment Date: 23 May 2014
• Neutral Citation: [2014] SGCA 29
• Citation: [2014] SGCA 29
• Subject Matter: Conspiracy,TORT,Directors,removal,COMPANIES
• Published date: 04 June 2014
• Hearing Date: 05 September 2013
• Docket Number: Civil Appeal Nos 36 and 37 of 2013
• Plaintiff Counsel: Chan Kia Pheng, Tan Wei Ming and Neo Ming Wei Douglas (KhattarWong LLP)
• Defendant Counsel: Lee Hwee Khiam Anthony and Pua Lee Siang (Bih Li & Lee)
• Court: Court of Three Judges (Singapore)

V K Rajah JA (delivering the grounds of decision of the court): Introduction

These two appeals arose from a falling out between joint venture partners in respect of a project in Hangzhou, China, as a result of which one of the chief protagonists, Dr Han Cheng Fong (“Dr Han”), was removed, along with a key lieutenant, from his posts in the joint venture company. Aggrieved, Dr Han sued members of the other faction for wrongful removal and conspiracy; there was a counter-suit against Dr Han and other co-directors for breach of fiduciary duties and conspiracy.

Both suits were heard together before Tan Lee Meng J (“the Judge”) over 27 days from July to October 2012. In Suit No 908 of 2010 (“Suit 908”), the Judge ruled that Dr Han was wrongfully dismissed and was entitled to damages for losses to be assessed. Key to the Judge’s decision was his finding that a document signed on 1 March 2010 between the parties (“the 1 March document”) constituted a binding shareholders’ agreement that granted Dr Han an enforceable right to his positions in the joint venture company (see Han Cheng Fong v Teo Chong Nghee Patrick and others [2013] SGHC 51 (“[2013] SGHC 51”)). In Suit No 266 of 2011 (“Suit 266”), the Judge dismissed the counter suit against Dr Han for conspiracy and breach of fiduciary duties (see Cleantech Partners Hangzhou Pte Ltd and another v Han Cheng Fong and others [2013] SGHC 52 (“[2013] SGHC 52”)).

The appellants, the losing faction at trial, appealed against the decisions in both suits: Civil Appeal No 36 of 2013 (“CA 36”) was the appeal in respect of Suit 908 and Civil Appeal No 37 of 2013 (“CA 37”) was the appeal in respect of Suit 266. This losing faction comprised Teo Chong Nghee Patrick (“Patrick”), Lim Shih Hsi (“Richard”) and Michael Heng Swee Hai (“Michael”), respectively the first three appellants in CA 36. Patrick, Richard and Michael were founder directors of Cleantech Partners Pte Ltd (“CTP”), the fourth appellant in CA 36 and the fifth appellant, Cleantech Partners Hangzhou Pte Ltd (“CTP-HZ”) was the parties’ joint-venture vehicle in respect of the Hangzhou project.

CTP and CTP-HZ were also the appellants (and plaintiffs) in CA 37; the respondents therein were Dr Han, his lieutenant Liew Sok Kuan (“Christine”) and Low Soo Chee (“Robin”), also a founder-director of CTP but who had chosen to throw in his lot with Dr Han. The fourth respondent in CA 37 was International Eco-City Pte Ltd (“IEC”), a company incorporated by Christine and Robin after relations between the parties had soured.

We heard submissions on both appeals on 5 September 2013 and allowed the appeal in CA 36 and dismissed CA 37. At the close of the hearing we gave brief oral grounds for our decision. With respect to CA 36, we were of the view that while there was no basis to alter or interfere with the Judge’s findings of fact, it was clear that much turned on the legal effect of the 1 March document and for the reasons that follow, we disagreed with the Judge’s finding that the 1 March document constituted a legally enforceable agreement. We were additionally of the view that Dr Han was unable to show that he had suffered any legally recoverable loss. As for CA 37, we were unable to see any basis whatsoever for overturning the factual findings of the Judge and therefore for allowing the appeal. These are the written grounds of our decisions in both appeals amplifying the oral reasons given at the conclusion of the hearing.

Background to the dispute

The facts were set out in sufficient detail in the judgments of the Judge below. We set out only those facts necessary for the present appeals.

In September 2009, Michael, Patrick, Richard and Robin decided to undertake a project to develop a low carbon eco-park in Hangzhou known as the Hangzhou Singapore Eco-Park Development Project. CTP was the company to be used for this purpose. CTP-HZ was a wholly owned subsidiary of CTP and was to be used as a special purpose vehicle, principally as a corporate vehicle in a funding arrangement with two Chinese partners: Hangzhou Vanwarm Holdings Group Ltd (“Vanwarm”), a Chinese company, and the Hangzhou Qianjiang Economic Development Area Management Committee (“HQEDA”), which had been set up to manage the development of the eco-park.

The four of them felt that they needed someone with particular expertise in the property market in China and invited Dr Han to participate. Dr Han was formerly chief executive officer of Fraser & Neave Ltd and deputy chairman of DBS Land and had much experience in the property sector. Dr Han agreed to be involved, and Christine was brought in at his request to assist him. They wanted the terms of their involvement recorded and the 1 March document, which was signed on 1 March 2010, was the result.

The 1 March document was headed with the name of CTP and was declared to be a “DIRECTORS’ RESOLUTION IN WRITING PASSED PURSUANT TO THE COMPANY’S ARTICLES OF ASSOCIATION”. Its terms in full are as follows:

Resolved and confirmed the following number of ordinary shareholders, no of ordinary shares to be issued to each shareholder and the appointment of [Dr Han] and [Christine] as Company Directors, [Dr Han] as Deputy Chairman of CTP, CleanTech Ventures Asia Pte Ltd as Manager, is hereby accepted with effect from 1st March 2010.

Name	Designation	Ordinary Shareholding
[Patrick]	Chairman	2 shares
[Dr Han]	Deputy Chairman	2 shares
[Richard]	Managing Director	2 shares
[Robin]	Director	2 shares
[Michael]	Director	2 shares
[Christine]	Director	2 shares
CleanTech Ventures Asia Pte Ltd	Manager	4 shares
Total		16 shares

# The directors will review the value of [CTP’s] equity interest in Hangzhou-Singapore Eco-Park (HSEP) pursuant to the conclusion of all completion documents and independent valuation of the development site in HSEP to determine a more realistic share value of [CTP’s] shares.

The Board of Directors also resolved that the following companies will be set up by [CTP]:

1. [CTP-HZ] as 100% subsidiary company of CTP and will be the Special Purpose Vehicle (SPV) for rolling out the Hangzhou Singapore Eco-Park Development Project in Hangzhou: 1.1 CTP-HZ Board of Directors will consist of all the six Directors of CTP and [Dr Han] as Chairman and [Christine] as CEO; 1.2 CTP-HZ Board of Directors has decided that the net income split between CTP-HZ and CTP will be 67% / 33% respectively. 1.3 It was also decided that of the remaining 67% held by CTP-HZ, 33% of the 67% is to be distributed to the CTP-HZ Board of Directors. The remaining 67% (ie 67% of 67%) is to be distributed to CTP-HZ Management headed by [Dr Han] and [Christine]. The distribution of the profit to the Management of CTP-HZ shall be decided by [Dr Han] at his sole discretion. 1.4 CTP-HZ will in due course enter into joint venture agreement to set up Hangzhou Singapore Eco-Park Investment & Development Co Ltd (HSEPID) in Hangzhou with the local partner [Vanwarm] where [Dr Han] will be appointed as Chairman and [Christine] will be appointed as CEO / GM respectively on the Board of Directors. 2. CTP Technology Pte Ltd (CTPT) as 100% subsidiary company of CTP and...