TYN Investment Group Pte Ltd v ERC Holdings Pte Ltd and another

• Jurisdiction: Singapore
• Judge: Vinodh Coomaraswamy J
• Judgment Date: 28 July 2020
• Neutral Citation: [2020] SGHC 157
• Plaintiff Counsel: Benjamin Koh, Daniel Seow and Victor Leong (Allen & Gledhill LLP)
• Date: 28 July 2020
• Docket Number: Originating Summons No 1363 of 2019
• Hearing Date: 27 November 2019,23 March 2020,15 May 2020,19 February 2020
• Subject Matter: Civil Procedure,Mareva injunctions
• Year: 2020
• Defendant Counsel: Daniel Koh and Ng Jia En (Eldan Law LLP),Nawaz Kamil, Danny Quah and Kenny Lau (Providence Law Asia LLC)
• Court: High Court (Singapore)
• Citation: [2020] SGHC 157
• Published date: 20 August 2020

Vinodh Coomaraswamy J: Introduction

The plaintiff brings this application under s 31 of the Arbitration Act (Cap 10, 2002 Rev Ed) (“the Act”). By this application, the plaintiff seeks a mareva injunction against the first defendant in aid of an arbitration. The plaintiff also initially sought a mareva injunction against the second defendant. The plaintiff and the second defendant have however reached a global settlement of their disputes. As a result, the plaintiff has discontinued this application as against the second defendant.¹

I have considered the plaintiff’s and the first defendant’s evidence and submissions. I allow the plaintiff’s application and grant a mareva injunction against the first defendant. I now grant that injunction in the terms set out in Annex A. These terms are substantially, but not entirely, the terms sought by the plaintiff. This judgment sets out the reasons for my decision.

Background The Agreement

The dispute between the plaintiff and the first defendant in the arbitration arises out of certain express representations and warranties² which the first defendant, as the vendor, made and gave to the plaintiff in a sale and purchase agreement between the parties in September 2013³ (“the Agreement”). Under the Agreement, the plaintiff bought from the first defendant all of the shares in the first defendant’s wholly-owned subsidiary (“the Company”) at a price of $73.8m. The Company is a special purpose vehicle which acquired a single asset in September 2012:⁴ a substantial property of historical importance on Penang Road in Singapore (“the Property”).⁵

The first defendant is a vehicle of Mr Ong Siew Kwee (also known as Andy Ong) (“Mr Ong”). Mr Ong was the first defendant’s overwhelming majority shareholder at all times.⁶ He was a director of the first defendant until February 2016. He was a director of the Company until the plaintiff acquired it in November 2013.

The oppression proceedings

Five days after the plaintiff acquired the Company in November 2013, a minority shareholder of the second defendant commenced proceedings against Mr Ong and the second defendant seeking relief under s 216 of the Companies Act (Cap 50, 2006 Rev Ed) (“the Oppression Suit”). The minority shareholder made a number of claims against Mr Ong in the Oppression Suit. The claim which is relevant for present purposes was that Mr Ong had wrongfully diverted the corporate opportunity to acquire the Property away from the second defendant to himself, ie through the first defendant and the Company as its wholly-owned subsidiary. Nine other individuals and companies associated with Mr Ong were also named as defendants in the Oppression Suit. These additional defendants included the first defendant and the Company.

The Oppression Suit concluded at first instance in April 2017 with a judgment by Judith Prakash JA. That judgment can be found at Sakae Holdings Ltd v Gryphon Real Estate Investment Corp Pte Ltd and others (Foo Peow Yong Douglas, third party) and another suit [2017] SGHC 73 (“Sakae Holdings”). The outcome of the Oppression Suit is relevant to this application for four reasons. First, Prakash JA ordered the second defendant to be wound up (Sakae Holdings at [293]). The second defendant thus went into solvent liquidation in April 2017.⁷ Second, Prakash JA found as a fact that Mr Ong was a shadow director of the second defendant up until the end of 2012 at least (Sakae Holdings at [45]). Third, she held that Mr Ong – at a time when he was a de jure director of both the first defendant and of the Company and a de facto director of the second defendant – had wrongfully procured the second defendant to transfer $14.3m to the Company in 2012 which the Company then used to purchase the Property (Sakae Holdings at [106]). Fourth, Prakash JA expressed the opinion, albeit obiter, that the second defendant quite clearly had a claim against the Company to recover the $14.3m (Sakae Holdings at [320]).

The further proceedings

Following up on Prakash JA’s findings against Mr Ong and the Company in the Oppression Suit, the second defendant’s liquidators commenced proceedings against the Company in August 2018 to recover the $14.3m that had been wrongfully diverted to the Company. In argument before me, the parties referred to the second defendant by the acronym GREIH. I shall therefore refer to this suit as “the GREIH Suit”.

To safeguard its interests – both its own interests and its interests through the Company – if the second defendant were to succeed in the GREIH Suit, the plaintiff commenced four sets of proceedings: The plaintiff caused the Company to commence third-party proceedings in the GREIH Suit against Mr Ong and two of his associates seeking contribution or an indemnity from the third parties if the Company were found liable to the second defendant in the GREIH Suit (“the Third Party Proceedings”).⁸ The plaintiff commenced the arbitration against the first defendant out of which this application arises. Its case in the arbitration is that the Oppression Suit has revealed that the first defendant made several representations and warranties about the Company’s financial position in the Agreement which have proven to be false. The plaintiff sued Mr Ong on a guarantee which he executed in favour of the plaintiff at the same time that the first defendant entered into the Agreement (“the Guarantee Suit”). Under the guarantee, Mr Ong guaranteed the due performance and observance by the first defendant of all of its obligations under the Agreement.⁹ The plaintiff sued Mr Ong and the second defendant in the tort of conspiracy (“the Conspiracy Suit”). Its case is that Mr Ong and the second defendant conspired to cause loss to the plaintiff by unlawful means, ie by deceiving the plaintiff into acquiring the Company by fraudulently misrepresenting or deliberately concealing the truth about the Company’s $14.3m liability to the second defendant as revealed in the Oppression Suit.¹⁰

The settlement

In April 2020, the plaintiff, the Company and the second defendant arrived at a global settlement of their disputes. Under the settlement, the Company paid the second defendant $1.5m in full and final satisfaction of the GREIH Suit. The GREIH Suit has accordingly been discontinued. As part of the settlement, the plaintiff also agreed to discontinue the Conspiracy Suit as against the second defendant¹¹ (see [8(b)] above) and to withdraw these proceedings as against the second defendant.

In May 2020, the parties agreed to resolve the plaintiff’s claim on the representations and warranties in the Agreement through litigation in the High Court instead of arbitration. The arbitration is accordingly to be stayed on terms, although the parties disagree on whether they have agreed those terms. In any event, the first defendant has itself applied to the arbitrator to stay the arbitration. The parties’ intention now is for the plaintiff to commence an action against the first defendant and then to have that action consolidated with the Third Party Proceedings against Mr Ong and the Guarantee Suit so that all the claims be tried together.¹² The Conspiracy Suit has fallen away because it has now been entirely discontinued, even as against Mr Ong.¹³

Preliminary point The defendant alleges this application is now irregular

When the plaintiff commenced these proceedings, it limited the mareva injunction it sought to $17.4m.¹⁴ That sum comprised $14.3m – being the sum wrongfully transferred to the Company and claimed by the second defendant in the GREIH Suit – plus $3.1m being an estimate of the plaintiff’s costs and expenses of the arbitration, these proceedings and the GREIH Suit.¹⁵

The effect of the settlement is to place a cap on the sum which the plaintiff can recover in respect of the wrongful transfer of $14.3m. As a result, the plaintiff now reduces the limit of the mareva injunction to just under $2.7m.¹⁶ That sum comprises the $1.5m settlement sum which the Company paid to the second defendant and $1.2m in anticipated costs and expenses.

The first defendant relies on this adjustment to the plaintiff’s case to take a preliminary point. The preliminary point is that the plaintiff’s application is now irregular in that it no longer comes within the scope of s 31(1)(d) of the Act. Section 31(1)(d) of the Act gives the court the power to grant an interim injunction “for the purpose of and in relation to an arbitration to which [the] Act applies”. The preliminary point proceeds as follows.¹⁷ The plaintiff premised its substantive claim in the arbitration on the second defendant’s claim against the plaintiff in the GREIH Suit. But the plaintiff now premises its substantive claim instead on the $1.5m settlement sum. The plaintiff has failed to amend its notice of arbitration to plead the settlement, to plead the new premise of its substantive claim and to plead the reduced quantum which it now claims.¹⁸ The injunction which the plaintiff seeks in this application is therefore no longer “for the purpose of and in relation to” the arbitration. It is accordingly outside the scope of s 31(1)(d).¹⁹ The application is therefore irregular and ought to be dismissed in limine.²⁰

The defendant does not rely on the stay for its preliminary point

The first defendant does not take the point that the plaintiff’s application is no longer “for the purpose of and in relation to” the arbitration – and therefore outside the scope of s 31(1)(d) – simply because the parties now want to stay the arbitration (see [10] above). In any event, even if the first defendant had taken the point, I would have rejected it. The critical points to my mind are that: (a) it is undisputed that the parties have an arbitration agreement; and (b) when the plaintiff commenced the arbitration in September 2019 and when it filed this application in October 2019, there is nothing before me to suggest that...