The Wellness Group Pte Ltd and another v OSIM International Ltd and others and another suit

• Jurisdiction: Singapore
• Judge: Chua Lee Ming JC
• Judgment Date: 22 April 2016
• Neutral Citation: [2016] SGHC 64
• Plaintiff Counsel: Prakash Pillai, Koh Junxiang, Yip Tai Meng Marcus and Debby Ratnasari (Clasis LLC)
• Docket Number: Suit No 187 of 2014 and Suit No 545 of 2014
• Date: 22 April 2016
• Hearing Date: 25 August 2015,12 August 2015,28 August 2015,31 August 2015,06 August 2015,05 August 2015,19 August 2015,27 August 2015,11 August 2015,20 August 2015,18 August 2015,17 August 2015,23 October 2015,26 August 2015,13 August 2015,21 October 2015,01 September 2015,21 August 2015,04 August 2015,14 August 2015
• Subject Matter: Companies,Defamatory statements,Contractual terms,Contract,Minority shareholders,Tort,Fair comment,Unlawful means conspiracy,Publication,Implied terms,Conspiracy,Qualified privilege,Defamation,Oppression
• Year: 2016
• Citation: [2016] SGHC 64
• Defendant Counsel: Davinder Singh SC, Jaikanth Shankar, Loh Hsiu Lien, Tan Liyun Samantha, Teo Meijie Cheryl and Tham Yeying Melissa (Drew & Napier LLC),Siraj Omar and Chew Liying Joanna (Premier Law LLC)
• Court: High Court (Singapore)
• Published date: 14 January 2017

Chua Lee Ming JC: Introduction

The TWG Tea Company Pte Ltd (“TWG Tea”) brand is well known for its fine luxury teas and features the letters “TWG” as well as the year “1837” on its logo. One would be forgiven for thinking that TWG Tea was established in 1837. However, according to TWG Tea, the reference to 1837 actually celebrates the year Singapore became a trading post for teas, spices and fine epicurean products. TWG Tea was established only in 2007 but by 2010, it had already achieved some measure of success in Singapore. This led TWG Tea to look for investors so that it could expand its business beyond Singapore. In 2011, OSIM International Ltd (“OSIM”), itself a successful brand for healthy lifestyle products, invested in TWG Tea. Unfortunately, disagreements soon started brewing between the two men at the helms of TWG Tea and OSIM. These disagreements have boiled over and spilled into this court.

The plaintiffs in both Suit 187 of 2014 (“S187/2014”) and Suit 545 of 2014 (“S545/2014”) are the same. The defendants in S187/2014 and S545/2014 are not all the same but both actions are connected to each other. These proceedings involve four separate claims – three in S187/2014, and one in S545/2014.

In S187/2014, the 1st plaintiff, The Wellness Group Pte Ltd (“TWG”) is suing the 1st to 6th defendants for oppressive conduct under s 216 of the Companies Act (Cap 50, 2006 Rev Ed), conspiracy to injure and breach of contract. The 2nd plaintiff, Mr Manoj Mohan Murjani (“Manoj”) is suing the 1st to 3rd defendants for conspiracy to injure. The 1st to 6th defendants have a counterclaim against the plaintiffs for defamation.

S545/2014 is a separate defamation claim by the plaintiffs against OSIM and its directors. It is related to S187/2014.

Both suits were heard before me at the same trial, with evidence led in S187/2014 being treated as evidence led in both suits.

The parties in S187/2014

The 2nd plaintiff, Manoj, is the chairman of the 1st plaintiff, TWG. TWG is a shareholder of TWG Tea.

The 1st defendant is OSIM. OSIM was established in 1980 and was listed on the Singapore Stock Exchange in 2000. The 2nd defendant, Mr Ron Sim Chye Hock (“Ron Sim”) is its founder, chairman and Chief Executive Officer (“CEO”). He is also a director of TWG Tea and the 4th defendant, Paris Investment Pte Ltd (“Paris”). Paris is wholly owned by OSIM and is also a shareholder of TWG.ⁱ

The 3rd defendant, Mr Taha Bou Qdib (“Taha”) is a director and CEO of TWG Tea, and a former director of Paris. The 5th defendant, Mr Khor Peng Soon (“Peng Soon”) is a former director of OSIM and is presently a director of Paris and TWG Tea. The 6th defendant, Mr Lee Hwai Kiat (“Peter Lee”) is a director of OSIM, Paris and TWG Tea. He is also the Chief Financial Officer (“CFO”) of OSIM.

TWG Tea is the 7th defendant in S187/2014.

The parties in S545/2014

The 1st and 2nd plaintiffs are TWG and Manoj respectively.

The 1st defendant is OSIM. The 2nd defendant is Ron Sim. The 3rd defendant, Mr Teo Chay Lee, is an executive director and the Chief Operating Officer (South Asia) of OSIM. The 4th defendant, Mr Leow Lian Soon, is an executive director and the Chief Operating Officer (China) of OSIM. The 5th defendant is Peter Lee. The 6th defendant, Ms Teo Sway Heong, is a non-executive director of OSIM. The 7th defendant (Mr Tan Soo Nan @ Tan Soo Nam), 8th defendant (Mr Colin Low Tock Cheong), and 9th director (Mr Sin Boon Ann) are independent non-executive directors of OSIM.

The 2nd to 9th defendants form the board of directors of OSIM (“the OSIM Board”).

The undisputed facts

TWG was incorporated in 2003 by Manoj to invest in and promote spas and products relating to health and wellness. Taha and his wife, Maranda Barnes Bou Qdib (“Maranda”), joined TWG in February 2007. Taha was employed as CEO of TWG’s newly-formed tea division. Maranda was employed as director of TWG’s tea division.

In October 2007, the tea division was corporatized. TWG Tea was incorporated as a wholly-owned subsidiary of TWG. In June 2008, TWG transferred about 20% of its shares in TWG Tea to Taha, Mr Rithyrith Aum-Stievenard (“Rith”), and Mr Philippe Gerard Langlois (“Philippe”). Rith and Philippe were employees of TWG Tea. Taha, Rith and Philippe each paid a nominal consideration of $1 for the shares. Taha transferred some of his shares in TWG Tea to Maranda.

In July 2008, the first TWG Tea salon opened at Republic Plaza in Singapore. In August 2008, TWG invested an additional $1,742,000 in TWG Tea. In return, TWG was allotted an additional 8,710 shares (which worked out to $200 per share). Subsequently, TWG Tea allotted additional shares to Taha, Maranda, Rith and Philippe at $0.10 per share.

In 2008, Ron Sim invested US$4,500,005ⁱⁱ in TWG by subscribing for shares in TWG through EQ Capital Investments Ltd (“EQ Capital”).ⁱⁱⁱ Ron Sim is the principal of EQ Capital.

On 8 February 2010, Paris was incorporated. The shareholders of Paris were as follows:^iv

Taha	68.2%
Rith	22.7%
Philippe	9.1%.

Taha, Maranda, Rith and Philippe transferred their shares in TWG Tea to Paris. With this, the shareholders of TWG Tea were TWG (84.2%) and Paris (15.8%).^v

Between late 2010 and mid-February 2011, TWG Tea was in negotiations with the Unilever Group (“Unilever”) in relation to a potential investment by Unilever into TWG Tea. In a letter of intent dated 8 February 2011, Unilever made an indicative non-binding offer to invest US$51m (or S$65.3m) in TWG Tea in return for a 51% equity stake in TWG Tea and a licence to use the TWG trademark.

Whilst negotiations with Unilever were still ongoing, Manoj and his team started discussions with Ron Sim and his team in January 2011 in relation to an investment by OSIM into TWG Tea. Profit projections for TWG Tea were presented to Ron Sim and his team (“the Original Projections”), showing projected Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) of $34.4m for the financial year ending 31 March 2013 (“FY2013”). At some point in the discussions, the parties switched to using profit before tax and minority interests (“PBT”) instead of EBITDA in the Original Projections. Manoj’s projection was that TWG Tea would achieve PBT of $29m for FY2013.

On 15 February 2011, the discussions with Unilever were terminated.

On 18 March 2011, TWG, OSIM and Paris signed a Sale and Purchase Agreement (“the SPA”)^vi, pursuant to which OSIM bought a 35% stake^vii in TWG Tea from TWG and Paris for $31.36m^viii (“the OSIM Transaction”); $26,396,435 went to TWG^ix and $4,963,565 went to Paris^x. Thereafter, the shareholding structure of TWG Tea was as follows:

TWG	54.7%
Paris	10.3%
OSIM	35%

Under clause 4.4 of the SPA, OSIM undertook to provide a loan of $12.8m to TWG Tea (“the OSIM Loan”).^xi The OSIM Loan was to be disbursed in one lump sum on closing which took place on 24 March 2011. As events panned out, OSIM disbursed the $12.8m loan in two tranches, $7m on 24 March 2011 and $5.8m a few days later on 29 March 2011.^xii

Clause 4.5 of the SPA (“the Profit Swing Clause”) provided for the shareholding of TWG and Paris to be diluted in favour of OSIM, or for the shareholding of OSIM to be diluted in favour of TWG and Paris, depending on the audited net PBT for FY2013.^xiii There were some drafting errors in the clause and these are dealt with later at [97] – [106]. In brief, clause 4.5 was intended to operate as follows: for every $1m that the PBT for FY2013 fell below $17m, TWG and Paris would together have to transfer 1% of TWG Tea shares to OSIM, up to a maximum of 10%, at a nominal price of $1; conversely, for every $1m that the PBT for FY2013 exceeded $27m, OSIM would have to transfer 1% of TWG Tea shares to TWG and Paris, up to a maximum of 10%, at a nominal price of $1; and if the PBT for FY2013 fell between $17m and $27m, there would be no adjustment. The Profit Swing Clause was based broadly on the Original Projections.

On the same day (18 March 2011), TWG, OSIM, Paris and TWG Tea signed a Shareholders Agreement (“SHA”).^xiv Under clause 4.2.1 of the SHA, it was contemplated that joint ventures between TWG Tea and OSIM would be set up in China, Hong Kong, Taiwan and South Korea within three months or such other period as may be agreed. OSIM would hold 60% and TWG Tea would hold 40% of the shares in each joint venture. OSIM would have management control of each joint venture.

At this time, TWG Tea owed The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) more than $7m (“the HSBC Loan”). On 25 March 2011, Manoj informed HSBC of OSIM’s investment and told HSBC that TWG Tea was in a position to repay the HSBC Loan.^xv HSBC was surprised that the investor was OSIM as HSBC knew of the negotiations with Unilever but had not been told of the negotiations with OSIM.^xvi HSBC asked TWG Tea to repay the outstanding loan. On 29 March 2011, Manoj committed to repaying HSBC $3m immediately and the balance by 15 April 2011.^xvii Manoj eventually used $7m from the OSIM Loan to repay HSBC.

At a meeting on 1 June 2011, Manoj informed Ron Sim, Taha, Peng Soon and Peter Lee that TWG Tea was two quarters behind schedule in terms of its projected profits.^xviii

On the same day, OSIM and TWG Tea incorporated the first joint venture, OSIM-TWG Tea (North Asia) Pte Ltd (“the JV Co”).^xix As provided in the SHA, OSIM held 60% and TWG Tea held 40% of the shares in the JV Co. A few days later, disagreement arose between Ron Sim and Manoj over the price that TWG Tea was to charge the JV Co for its products (“the Transfer Pricing Issue”). Manoj wanted to charge the JV Co the same price at which franchisees were charged (“the Franchise Price”). The Franchise Price was equal to 40% of the retail price of the item. This gave the franchisees a margin of 60% of the...