Visionhealthone Corp Pte Ltd v HD Holdings Pte Ltd and others and another appeal

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 02 September 2013
• Neutral Citation: [2013] SGCA 47
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeals Nos 89 and 99 of 2012
• Year: 2013
• Published date: 02 September 2013
• Hearing Date: 17 January 2013
• Plaintiff Counsel: Dinesh Dhillon and Lim Dao Kai (Allen & Gledhill LLP)
• Defendant Counsel: Tan Chee Meng SC, Josephine Choo and Emily Su (WongPartnership LLP),Lee Yih Gia (Veritas Law Corporation)
• Subject Matter: Tort,Conspiracy,Misrepresentation
• Citation: [2013] SGCA 47

Quentin Loh J (delivering the judgment of the court): Introduction

This is an appeal and cross-appeal (“CA 89/2012” and “CA 99/2012” respectively) from the decision of the learned trial judge (“the Judge”) in Suit No 678 of 2009 (“the Suit”). The dispute centres on a sum of S$2.125m (“the Sum”) which the appellant in CA 89/2012, Visionhealthone Corporation Pte Ltd (“VH1”), transferred or caused to be transferred to the second respondent in CA 89/2012, Xing Rong Pte Ltd (formerly known as Huadi Projects Pte Ltd) (“HPPL”), but which none of the parties are now able to locate. The crux of the dispute is the purpose for which the Sum was transferred to HPPL.

The parties

VH1 is a company incorporated in Singapore. At the material times, its directors were one Chan Wai Chuen (“CWC”) and one Chan Siang Khing alias Roy Chan (“RC”). RC and CWC were added as third parties to the Suit. VH1, CWC and RC are also the respondents in the cross-appeal, CA 99/2012. HPPL and the first respondent in CA 89/2012, HD Holdings Pte Ltd (“HDH”), are both companies incorporated in Singapore. The third respondent in CA 89/2012, Liu Chunlin (“LCL”), is a Singaporean who was formerly a Chinese national from Fuzhou. He is the director and sole shareholder of HDH. He was also a director of HPPL between March 2006 and February 2007.¹

The fourth respondent in CA 89/2012, Vision Corporation Holdings Pte Ltd (in liquidation) (“VCH”), is a company incorporated in Singapore on 5 November 2003 for the purpose of a joint venture between VH1 and HPPL to set up a network of medical and healthcare centres in China (“the Joint Venture”). A creditors’ winding up of VCH was ordered on 9 January 2009. VCH is not a party to the cross-appeal in CA 99/2012. HDH, HPPL and LCL (collectively, “the CA 99 appellants”) are the first, second and third appellants respectively in CA 99/2012.

Background to the dispute Entering into the Joint Venture

CWC and RC were introduced to LCL by one Jonathan Lim Chee Yong (“LCY”), who was a key initiator of the Joint Venture. LCY had worked in a management company in China prior to 2003. He stated on affidavit that after leaving the company, he was keen to enter into a joint venture to set up a chain of medical and healthcare centres in Shanghai, and to that end, approached CWC and RC in mid-2003 with a view to having VH1 join him. Concurrently, VH1 was also keen to explore healthcare opportunities in Xi’an and Fuzhou.² It is not disputed that LCY then shared VH1’s investment plans with LCL,³ and sought VH1’s and LCL’s collaboration. On 2 October 2003, LCY sent an email to LCL stating that “[a]fter extensive discussion about the Political/Economic Risks, VH1 has decided to proceed with the [Joint Venture] but cautiously”.⁴ The email then set out three alternative plans for the Joint Venture. Attached to the email was a detailed costing plan for the Joint Venture.⁵ On 18 October 2003, while CWC, RC and LCL were on a visit to China, VH1 and HPPL entered into the Joint Venture by executing a co-operation agreement (“the Agreement”). The Agreement was signed by CWC on behalf of VH1, and by LCL on behalf of HPPL. RC and LCY witnessed the Agreement. The Agreement provided for the formation of a joint venture company, and stated that VH1 was to be the “sole cash contributor”⁶ and “[p]rovide cash capital of up to RMB15 million or equivalent in foreign exchange”,⁷ while HPPL was, inter alia, to “[s]afeguard all equity shareholdings directly or indirectly as per [the] Agreement”⁸ and “[f]acilitate business opportunities and speedy establishment of Joint Medical Facilities in China”.⁹ On 5 November 2003, VCH was incorporated pursuant to the Agreement, with VH1 and HPPL holding, respectively, 60% and 40% of the shares in VCH as stipulated by the Agreement. A VCH board meeting was held on 2 December 2003, at which RC, CWC, LCL and LCL’s sister, Liu Yun, were appointed as directors of VCH. At the same meeting, RC was appointed to “coord[inate] transferring RMB11m by Dec 03 to [HPPL] to facilitate the investment in Xian according to [the] Agreement”.¹⁰ It was also decided at that meeting that RC would set up a subsidiary of VCH, Fuzhou Vision Huadi Consultancy Co, Ltd (“FVH”), in Fuzhou by December 2003, with a paid-up capital of RMB1m.¹¹

On or around 9 December 2003, LCY circulated to LCL, CWC and RC an agreement which provided for VCH’s transfer of RMB11m to HPPL for investment in establishing a chain of clinics in Xi’an (“the Transfer Agreement”).¹² Under the Transfer Agreement, the RMB11m was to be transferred in four tranches between 10 December 2003 and 24 January 2004. However, the Transfer Agreement was never signed.

The transfer of the Sum

It was not disputed that between 5 November 2003 and 10 January 2004, VH1 and CWC transferred the Sum to HPPL’s Bank of China account (“the HPPL Account”) in three tranches by way of cheques in the following manner: S$1.1m was transferred from VH1 to VCH on 5 November 2003.¹³ This was then transferred from VCH to HPPL on 24 December 2003.¹⁴ S$400,000 was transferred by CWC directly to HPPL on 24 December 2003.¹⁵ S$630,000 was transferred from VH1 to VCH on 6 January 2004.¹⁶ S$625,000 was then transferred from VCH to HPPL on 10 January 2004.¹⁷

Shortly after the above transfers to HPPL, the Sum was gradually withdrawn from the HPPL Account (see [35] below).

Events after the transfer

In or around April 2004, VCH’s wholly-owned subsidiary, FVH, was incorporated in China pursuant to the agreement at the VCH board meeting of 2 December 2003¹⁸ (see [4] above). Two more subsidiaries of VCH, namely, Vision Corporation Shanghai Co (“VCS”) and Shanghai Fudan Vision Medical and Health Care Centre (“SFVM”), were incorporated on or around 5 February 2004 and August 2004 respectively.¹⁹

On 26 March 2004, LCL incorporated HDH in Singapore and became its 99% shareholder and co-director together with Liu Shi. Liu Shi held the remaining 1% of HDH’s shares. Liu Shi resigned from his directorship on 9 April 2005, leaving LCL as the sole director and 100% shareholder of HDH. On 16 February 2005, HPPL transferred its 40% shareholding in VCH to HDH.

Relations between the parties soured in the second half of 2004 due to LCL’s failure to respond to LCY’s inquires as to the whereabouts of the Sum, as well as tension concerning LCL’s involvement of Liu Shi and the financial controller of the Huadi group of companies (“the Huadi Group”), one Yu Yunzhuang (“YYZ”), in the corporate governance of VCH and FVH.²⁰ The ensuing tension resulted in LCY ceasing involvement in VCH and in the Joint Venture after 28 August 2004.²¹

LCL’s inability to account for the Sum

The simmering tensions over LCL’s failure to account for the Sum came to a head at a VCH management meeting held on 24 February 2007,²² when CWC asked LCL to assist in procuring the remittance of a portion of the Sum to China for use in a project between one of VCH’s subsidiaries, PacificVision Medical Pte Ltd (“PacificVision”), and Marsa Guer Chained Enterprise Ltd to develop certain health and wellness clinics in China (“the Marsa Project”). CWC’s evidence was that LCL then baldly stated that the Sum was no longer available for investment in China.²³ LCL’s evidence was that as a director of HDH and not HPPL after February 2007, he had nothing to do with the Sum and had no knowledge of its whereabouts, and he claimed as much in the flurry of correspondence exchanged amongst CWC, VCH, LCL, HPPL and HDH following the VCH management meeting on 24 February 2007.²⁴

The parties then engaged in myriad legal skirmishes, mostly to obtain court orders pertaining to the management of VCH and the appointment of its directors.²⁵ On 24 October 2008, VH1 served a statutory demand on VCH for a judgment debt from an earlier suit representing shareholder’s advances made by VH1 to VCH. HDH immediately filed Originating Summons No 1478 of 2008 to obtain an injunction restraining VH1 from commencing winding-up proceedings against VCH. Despite this, VH1 applied successfully on 12 December 2008 to wind up VCH, resulting in VCH being placed in liquidation on 9 January 2009. Tam Chee Chong was appointed as VCH’s liquidator (“the Liquidator”).²⁶ On the same day, HPPL filed an application to be struck off from the register of companies. It was struck off on 6 June 2009. VH1 then successfully applied in Originating Summons No 1077 of 2009 for HPPL to be restored to the register of companies, and that occurred on 28 October 2009.

HDH also wrote to the Liquidator on 14 April 2009 alleging that CWC and RC had mismanaged VCS and SFVM, diverted business from the Marsa Project and dissipated the Sum²⁷ – allegations which CWC and RC denied in their reply to the Liquidator’s subsequent inquiries of them.²⁸ Pursuant to the winding up of VCH, the Liquidator took out Originating Summons No 383 of 2009 on 31 March 2009 seeking answers, which had not been forthcoming, to interrogatories concerning the whereabouts and purpose of the Sum, as well as discovery of all documents relating to HPPL’s possession or payment out of the Sum to one of the companies in the Huadi Group, Fuzhou Huadi Hebang Construction Renovation Engineering Company Limited (“FHH”), or any other parties. HPPL successfully resisted the Liquidator’s application.

On 4 August 2009, VH1 commenced the Suit from which this appeal and cross-appeal arise. Pursuant to this, VH1 applied for third-party discovery against Bank of China (“BOC”) on 16 November 2009 seeking documents relating to the movement of the Sum after its deposit in the HPPL Account. HPPL resisted the proceedings all the way to this court in Civil Appeal No 14 of 2010. It was ultimately unsuccessful as this court agreed on 5 July 2010 that the documents sought by VH1 were relevant and necessary for the disposal of the Suit (see Xing Rong Pte Ltd (formerly known as Huadi Projects Pte Ltd) v Visionhealthone Corp Pte...