Teo Lay Gek and another v Hoang Trong Binh and others

• Jurisdiction: Singapore
• Judge: Tan Siong Thye J
• Judgment Date: 27 March 2019
• Neutral Citation: [2019] SGHC 84
• Court: High Court (Singapore)
• Hearing Date: 08 February 2019
• Docket Number: Originating Summons No 935 of 2018
• Plaintiff Counsel: Lee Ee Yang and Wong En Hui, Charis (Covenant Chambers LLC)
• Defendant Counsel: Hing Shan Shan Blossom, Tan Yi Yin, Amy and Chin Tian Hui, Joshua (Drew & Napier LLC)
• Subject Matter: Professions,Valuer,Judicial review of valuation
• Published date: 17 October 2019

Tan Siong Thye J: Introduction

This case arose from a dispute in a settlement agreement between the plaintiffs and the defendants dated 16 June 2017 (“the Settlement Agreement”) regarding the valuation of the plaintiffs’ shares in Agape Holdings Pte Ltd (“the Company”), a company incorporated in Singapore, that were sold to the defendants.¹ The plaintiffs hold 19% shareholding in the Company² while the defendants hold the remainder of the shares.³ Pursuant to cl 1.1 of the Settlement Agreement, the parties had agreed to appoint an independent valuer to value and assess the fair market value of the plaintiffs’ 19% shareholding in the Company.⁴ The purpose of this valuation was for the defendants to purchase all of the plaintiffs’ shares based on the fair market value (cl 1.5 of the Settlement Agreement).⁵

On 14 August 2017, the parties agreed to appoint Ernst & Young Solutions LLP (“EY”) as the independent valuer of the Company’s shares.⁶ EY’s valuation report dated 2 January 2018 (“the EY Report”) was sent to the parties on 10 January 2018.⁷ The EY Report assessed the fair market value of the plaintiffs’ shares to be US$4,165,675 as at 31 December 2016 (“the Valuation Date”).⁸ For the payment of this “Settlement Sum”, the defendants were required to make two instalment payments to the plaintiffs in April 2018 and June 2018 respectively (cl 1.6 of the Settlement Agreement).⁹

The defendants did not make any payment to the plaintiffs. Accordingly, the plaintiffs commenced Originating Summons No 935 of 2018 (“OS 935/2018”) which, inter alia, sought the following orders: A declaration that the EY Report be final and binding upon the parties; and An order that the defendants are jointly and severally liable to pay the sum of US$4,165,675 (plus accrued interest) to the plaintiffs for the purchase of the plaintiffs’ 19% shareholding in the Company, within 14 days of the orders made.

In contrast, the defendants submitted that the EY Report was not final and binding upon the parties. For these submissions the defendants postulated two main grounds. Firstly, EY had exceeded the scope of its contractual mandate. Secondly, the EY Report was marred by manifest errors. Therefore, the EY Report was liable to be set aside.

On 8 February 2019, after hearing the parties’ arguments, I granted the plaintiffs’ application in OS 935/2018. The defendants are dissatisfied with my decision and filed a notice of appeal on 6 March 2019. I shall now give the reasons for my decision.

Background Events leading up to the Settlement Agreement

On 14 July 2016, the plaintiffs commenced an action against the defendants for minority oppression in Suit No 754 of 2016 (“S 754/2016”).¹⁰ Subsequently, the parties attended a mediation session at the Singapore Mediation Centre on 16 June 2017 and entered into the Settlement Agreement in full and final settlement of all matters in S 754/2016.¹¹ The relevant clauses of the Settlement Agreement are reproduced for ease of reference:¹² 1. Settlement Terms 1.1 The Parties have agreed, without admission of any liability, to jointly appoint (i) Ernst & Young LLP, PricewaterhouseCoopers LLP or Deloitte & Touche LLP, subject to conflict clearance and in that order of priority, or (ii) any other valuer as the Parties may jointly agree in writing, as an independent valuer (IV) to value and assess the fair market value of the Shares (Value). 1.2 The Parties agree that the IV shall assess the Value on a net tangible assets (NTA) basis, incorporating the value of the shares of Agape Vietnam on a NTA basis and taking into account the value of the real estate in the Project, as at 31 December 2016 without any discount for minority shareholding.

…

1.5 The Majority Shareholders shall purchase the Shares held by the Minority Shareholders at a price of 19% of the Value (Settlement Sum).

[emphasis in original]

The Vietnam Project

At this juncture, it is necessary to provide further details of the Company in order to better understand EY’s valuation exercise. The Company is a holding company and owns 100% of the shares in Agape Vietnam Company Limited (“Agape Vietnam”). Agape Vietnam was incorporated for the purpose of investing in a waterfront city project in Vietnam (“the Vietnam Project”). Since the Vietnam Project was critical to EY’s valuation exercise, EY appointed CBRE (Vietnam) Co., Ltd (“CBRE”), a property valuer in Vietnam, to assess the market value of the Vietnam Project. For the purposes of this dispute, one significant fact is that under Vietnam laws, Agape Vietnam has an obligation to set aside part of the residential land in the Vietnam Project to build social houses.¹³

CBRE’s report was duly completed on 14 November 2017 (“the CBRE Report”) and was included in the EY Report.¹⁴ The defendants’ arguments focused on the CBRE Report to allege that EY had departed from its contractual mandate and that the EY Report contained manifest errors.

Events subsequent to the EY Report

On 29 March 2018, after EY had completed its valuation, the defendants wrote to EY as they were of the view that EY did not have the benefit of all the relevant documents and information required for the purposes of its valuation (“the Additional Documents”).¹⁵ Therefore, the defendants invited EY to reassess the valuation of the Company’s shares. I note that this letter was sent four days before the deadline for the defendants to make their first instalment payment to the plaintiffs.

EY maintained the position that it could only take into account the Additional Documents and conduct a reassessment with the approval of both parties.¹⁶ This position was taken by EY as the parties had already agreed with the timetable to provide all relevant information.

The plaintiffs did not consent to a reassessment of the Company’s shares.¹⁷ The plaintiffs highlighted that the defendants had sufficient time to submit the Additional Documents during EY’s valuation exercise. In fact, EY had granted the defendants’ repeated requests for extension of time to submit relevant documents and information.¹⁸ EY also conducted an in-person explanation session with Agape Vietnam’s management to explain the information and documents required by EY.¹⁹

Pursuant to cl 12.1 of the Settlement Agreement, the parties attended a mediation session on 9 July 2018 in the light of the defendants’ request for reassessment. The attempt at mediation was unsuccessful. Thereafter, the plaintiffs commenced OS 935/2018 on 1 August 2018. In the course of filing their affidavits, the defendants also presented a report prepared by Savills Vietnam Co., Ltd (“Savills”) dated 26 September 2018 (“the Savills Report”).²⁰ Savills, like CBRE, is a property valuer in Vietnam. The defendants relied primarily on the Savills Report to convince the court that EY had departed from its contractual mandate and that the EY Report was marred by manifest errors. I shall now elaborate on the parties’ cases.

The parties’ cases The defendants’ case There were manifest errors in the EY Report

The defendants contended that there were manifest errors in the EY Report. Thus, the EY Report was liable to be set aside. I should emphasise that, strictly speaking, the alleged errors identified by the defendants were in relation to the CBRE Report which, in turn, was relied on by EY in the EY Report.

Firstly, the defendants submitted that there were assumptions and statements made in the EY Report that were inaccurate and in contravention of Vietnam laws.²¹ The alleged errors were as follows: CBRE had assumed that all the social houses in the Vietnam Project were to be “sold”, when Vietnam’s Housing Law No. 65/2014/QH13 (“Housing Law 2014”) required at least 20% of the social houses to be “leased” for at least five years. In this regard, the defendants relied on the expert opinion of a Vietnamese lawyer, Mr Nguyen Ba Son (“Mr Nguyen”).²² CBRE had failed to apply the statutorily prescribed formula for determining the maximum selling price of the social houses (“the Sale Price Formula”). Instead, CBRE merely referred to two comparable projects, made certain adjustments and arrived at the average selling price of US$550 per sqm.²³ The defendants, similarly, relied on Mr Nguyen’s expert opinion. The defendants also relied on the Savills Report which applied the Sale Price Formula to determine the maximum selling price of the social houses at US$391 per sqm.²⁴

Secondly, the defendants submitted that the EY Report was also marred by manifest errors of fact. The purported errors were as follows: Agape Vietnam had to pay the relevant authority “Land Costs” with respect to the land that had been allocated and handed over to Agape Vietnam. As at the Valuation Date, there was still “Residual Land” which had yet to be handed over to Agape Vietnam. CBRE failed to take into account the Land Costs for the Residual Land, which were yet to be ascertained by the relevant authority.²⁵ Agape Vietnam had sold 244 units in the Vietnam Project through a marketing agent known as Mai Anh Co., Ltd (“MACL”) as at the Valuation Date. CBRE did not fully take into account all the commission expenses that were payable by Agape Vietnam to MACL which were not recorded in Agape Vietnam’s books.²⁶ Furthermore, it was not clear if CBRE had accounted for part of the commission expenses which were on Agape Vietnam’s books.²⁷ CBRE had identified several similar properties to derive the value of the school land in the Vietnam Project (“the Direct Comparison Approach”).²⁸ However, these properties were “wholly dissimilar from the [Vietnam Project] in terms of both location and development type”.²⁹ The defendants highlighted that Savills had calculated the value of the school land in the Vietnam Project based on residual land value (“RLV”) and attributed a negative value of US$3.3m to the school land in the Vietnam Project.³⁰

Thirdly, the...