Yamashita Tetsuo v See Hup Seng Ltd

JudgeChao Hick Tin JA
Judgment Date30 December 2008
Neutral Citation[2008] SGCA 49
Date30 December 2008
Subject MatterConstruction of deed of settlement,Whether parties could have intended less than 100% of outstanding unconverted loan to be repayable,Deeds,Deeds and Other Instruments,Option granted to convert company's convertible loan into shares in company,Whether outstanding convertible loan not converted to shares must be repaid in cash on repayment date,Interpretation
Docket NumberCivil Appeal No 157 of 2007
Published date05 January 2009
Defendant CounselLiow Wang Wu Joseph (Straits Law Practice LLC)
CourtCourt of Appeal (Singapore)
Plaintiff CounselAndre Maniam, Liew Yik Wee and Koh Swee Yen (WongPartnership LLP)

30 December 2008

Judgment reserved.

Chao Hick Tin JA (delivering the dissenting judgment):


1 This action, commenced before the District Court by the appellant, Mr Tetsuo Yamashita, raises a point of construction as to a deed of settlement dated 29 September 2003 (“the Deed”) entered into between See Hup Seng Ltd (“the Company”), the respondent herein, and one of its major shareholders and creditors, SHS Holding (Pte) Ltd (“SHSH”). The appellant was the assignee of certain rights of SHSH under the Deed.

2 The Company is listed on the main board of the Singapore Exchange Ltd (“SGX”). Apart from SHSH, another major shareholder of the Company was Mr Thomas Lim (“Lim”), who, at the time the Deed was entered into, was also the chairman of the Company.

Factual background

The efforts to rescue the Company

3 In 2003, the Company was on the verge of insolvency. SHSH was a creditor of the Company to the tune of $4,043,337.50. In order to salvage the Company, there was a need to inject fresh capital and make arrangements as to the debts owed by the Company to its creditors. Meadow Springs Enterprises Ltd (“Meadow Springs”) emerged as the white knight which was prepared to rescue the Company by investing in it. To that end, an elaborate arrangement (“the rescue plan”) was worked out. As part of this arrangement, on 29 September 2003, Meadow Springs entered into an agreement with SHSH to acquire some 30,813,440 shares which the latter owned in the Company (“the S&P Shares”), representing approximately 28% of the Company’s issued share capital, at the price of $0.0475 per share on condition that the Company’s debts then owing to SHSH (which debts were repayable upon demand) were restructured. Thus, the Deed, which was intended to effect the debt restructuring, came into being as an indispensable part of the rescue plan. A similar deed was also entered into between Lim and the Company in relation to the debts owed by the Company to him.

4 Furthermore, as part of the rescue plan, Meadow Springs also entered into the following agreements on 29 September 2003:

(a) a call and put option agreement with Lim in respect of all of his 36,112,500 shares in the Company (“the TL Shares”), which constituted approximately 32.82% of the Company’s issued share capital; and

(b) a call and put option agreement with SHSH and Linguafranca Co Ltd (“Linguafranca”) in respect of the shares that each of them owned in the Company (collectively, “the SHSH‑LF Shares”), which, taken together, came up to 22,924,060 shares and represented approximately 20.83% of the Company’s issued share capital.

The actual text of these two call and put option agreements (“the Agreements”) was not disclosed in these proceedings. However, according to the official announcement made by the Company to SGX via MASNET on 29 September 2003, which was tendered to the court,[note: 1] the effect of the Agreements was as follows. First, under the call option aspect of the Agreements, Meadow Springs was entitled, within six months of the date of the Agreements (the “Call Option Period”), to acquire the TL Shares and the SHSH‑LF Shares from Lim and from SHSH and Linguafranca respectively at the price of $0.0475 per share. Second, under the put option aspect of the Agreements, Lim as well as SHSH and Linguafranca were entitled, within a period of five market days immediately after the expiry of the Call Option Period, to require Meadow Springs (if it did not exercise the call option) to buy the said two lots of shares at the same price of $0.0475 per share. Third, Lim and SHSH, being the holders of 10,833,750 detachable warrants and 16,121,250 detachable warrants respectively, which warrants could be converted into the same number of shares in the Company at the price of $0.11 per share, had a right (if the warrants were converted) to offer to sell to Meadow Springs, within seven months from the date of the Agreements, the 10,833,750 shares and the 16,121,250 shares respectively at a price to be determined in accordance with a prescribed formula. If Meadow Springs did not accept the offer, Lim and SHSH could sell those shares in the open market.

5 Under the Deed, the debts owed by the Company to SHSH were apportioned into two parts, one part consisting of the sum of $1,773,337.50 (“the Warrant Liability Amount”) and the other part consisting of $2,270,000 (“the SHSH Convertible Loan”). In this appeal, we are only concerned with the SHSH Convertible Loan. Clause 5.5 of the Deed set out a feature (“the Conversion Feature”) whereby SHSH could convert the SHSH Convertible Loan, either in whole or in part, into shares in the Company at the conversion price of $0.15 per share, with “the relevant principal amount from the SHSH Convertible Loan [to] be utilised and applied to meet such conversion price” (see cl 5.5(a) of the Deed). Clause 5.5 also provided that a minimum of 25% of the SHSH Convertible Loan must be converted into shares in the Company within three years from the date of the Deed, ie, by 29 September 2006 (“the Repayment Date”). The present action centred entirely on the construction of the provisions in the Deed, which I will examine more closely in a moment.

How the dispute between the Company and the appellant arose

6 In March 2004, SHSH was placed under voluntary liquidation. At the time, Lim owned 32% of SHSH, with Linguafranca owning the remaining 68%. Following its liquidation, the assets of SHSH were distributed between its two shareholders in the following proportions:[note: 2]

The Warrant Liability Amount

The SHSH Convertible Loan


(approximately 32%)

(approximately 79%)


(approximately 68%)

(approximately 21%)

7 Subsequently, Linguafranca assigned its right to its share of the SHSH Convertible Loan (viz, $473,238.40 (“the Assigned Amount”)) to the appellant. Of course, this assignment only meant that the appellant stepped into the shoes of Linguafranca as far as the Assigned Amount was concerned, but, other than that, the rights and obligations of the original parties under the Deed would remain the same as before. By way of a notice of assignment dated 21 March 2006, the Company was informed of the assignment.

8 On 28 April 2006, the Company mistakenly notified Linguafranca’s Ms Carmen So (a representative of and the holder of a power of attorney from the appellant) that, as the option to convert the SHSH Convertible Loan into shares vested in the Company, the latter intended to convert the whole of the loan into shares in the Company. Upon the appellant’s objection, on 8 May 2006, the Company clarified as follows:[note: 3]

[The appellant] has the choice of converting the Assigned Loan [ie, the Assigned Amount of $473,238.40] into shares in the Company at the issue price of $0.15 per share at any time prior to the ... Repayment Date on 29 September 2006 or to receive an amount equal to 75% of the Assigned Loan as full repayment of the Assigned Loan on 29 September 2006.

The appellant replied stating that he would prefer that the whole of the Assigned Amount of $473,238.40 be repaid to him in cash.

9 On 17 May 2006, Lim opted to convert part of the loans due to him, amounting in total to $2,849,700.00 (which presumably included his entire interest in the Warrant Liability Amount and the SHSH Convertible Loan), into shares in the Company. The Company repaid Lim a balance sum of $75.59 in cash to avoid creating an odd lot of shares. With this conversion, approximately 79% of the SHSH Convertible Loan had been converted into shares in the Company by the Repayment Date.

10 On 22 May 2006, the chief financial officer of the Company notified the appellant (through his solicitors) that he would be entitled to repayment of only 75% of the Assigned Amount if he chose not to convert that entire amount into shares in the Company. Further correspondence ensued between the parties, but the differences between them remained. On the Repayment Date (ie, 29 September 2006, three years from the date of the Deed), the Company repaid the appellant only the sum of $354,928.80 (ie, 75% of $473,238.40). This set the stage for the present proceedings, in which the appellant sought, inter alia, an order that the Company pay him the sum of $118,309.60, being the difference between the Assigned Amount (viz, $473,238.40) and the actual sum repaid (viz, $354,928.80).

The relevant provisions of the Deed

11 I will now set out the clauses in the Deed which are germane to the issue in hand:

1.1 In this Deed (including the Schedules), unless the context otherwise requires, the following expressions shall bear the following meanings respectively:



issued and paid-up ordinary shares of S$0.10 each in the capital of the Company;

SHSH Convertible Loan

the loan of principal amount of S$2,270,000 referred to in clause 2.2(ii) ...


2.2 ...

(ii) [T]he … amount of S$2,270,000.00 ... (“SHSH Convertible Loan”) shall be constituted and deemed [to be] a loan owing by the Company to SHSH with effect from the date of this Deed and on the terms and conditions set out in clause 5.


5.1 The SHSH Convertible Loan is interest-free ...

5.2 Subject to [c]lause 5.3 below, 75% of the SHSH Convertible Loan shall be repaid in cash on the Repayment Date.

5.3 In the event [that] the Company is unable to obtain all relevant approvals for the Conversion Feature or SHSH is unable to exercise the Conversion Feature by reason of such Conversion Feature not being valid or enforceable or otherwise not in full force and effect for any reason whatsoever, the SHSH Convertible Loan, 100% of the SHSH Convertible Loan shall be repaid in cash on the Repayment Date.

5.4 Notwithstanding anything in this [c]lause 5, the whole of the SHSH Convertible Loan shall become due and payable immediately in cash upon the occurrence of any one or more of the following events:–

(i) if any step is...

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