Yashwant Bajaj v Toru Ueda

• Jurisdiction: Singapore
• Judge: Judith Prakash JA
• Judgment Date: 18 November 2019
• Neutral Citation: [2019] SGCA 69
• Plaintiff Counsel: Jaikanth Shankar, Tan Ruo Yu, Darren Low Jun Jie and Yee Guang Yi (Davinder Singh Chambers LLC)
• Docket Number: Civil Appeal No 121 of 2018
• Date: 18 November 2019
• Hearing Date: 18 July 2019
• Subject Matter: Insolvency Law,Bankruptcy,Statutory demand
• Year: 2019
• Citation: [2019] SGCA 69
• Defendant Counsel: Jeremy Leong Zhi Jia and Mohamed Najib Bin Mohamed Yunos (Acton Law LLC)
• Court: Court of Appeal (Singapore)
• Published date: 21 November 2019

Chao Hick Tin SJ (delivering the grounds of decision of the court): Introduction

The appeal concerned the question of whether a statutory demand should be set aside on the ground that the debts which formed the subject matter of the statutory demand had not accrued as of the date of that demand. The debts allegedly arose out of a report by an independent accountant whom the parties had appointed pursuant to a settlement agreement to resolve their dispute. The parties had tasked the independent accountant to calculate and populate certain values to reach a final sum to be paid by one party to the other. However, in his report, the independent accountant qualified the values he reached, stating that the values were subject to adjustments. The qualified character of these values led to the central issue in this appeal: whether these values were valid for the purposes of the parties’ settlement agreement such that debts based on these values had accrued.

At the conclusion of the oral hearing before us, we could not agree with the decision of the judge below (“the Judge”) when she held that the statutory demand was correctly issued. Accordingly, we allowed the appeal and set aside the statutory demand. We now give the reasons for our decision.

Facts Background to the dispute

The appellant, Yashwant Bajaj (“Mr Bajaj”) and the respondent, Toru Ueda (“Mr Ueda”) were partners in a fund management business. They were the sole directors and equal shareholders of Hachiman Capital Management (“HCM”), incorporated in the Cayman Islands, which managed a hedge fund in Japan, known as the Hachiman Japan Fund (“the Fund”). From 2004 to 2009, Mr Bajaj and Mr Ueda managed the Fund from Japan. From 2009 to 2011, they managed the Fund in Singapore, and for that purpose, they incorporated in Singapore Hachiman Capital Management Private Limited (“HCM Singapore”), a wholly-owned subsidiary of HCM.

Mr Bajaj and Mr Ueda were also directors and equal shareholders in TY Advisors, which was incorporated in the Cayman Islands. From 2004 to 2009, when the Fund was managed in Japan, the business activities were conducted through TY Advisors Japan, a branch of TY Advisors registered in Japan. TY Advisors Japan provided sub-advisory services to HCM to run the Fund.

Tricor Singapore Pte Ltd (“Tricor”), an unrelated company, provided services, including book keeping and running a trust account, for HCM Singapore. Kaneyama & Associates (“Kaneyama”), also an unrelated company, handled the financial records of TY Advisors Japan and managed a trust account for it.

In September 2010, the parties decided to close the business of the Fund, and they entered into an agreement on the division of the business assets. Unfortunately, they could not agree on some subsequent transactions and business decisions as well as the nature and scope of their agreement. In the midst of the dispute, Mr Bajaj resigned as a director of the TY entities in March 2011 and also resigned as a director of the HCM entities in May 2011.

The Settlement Agreement

In March 2013, Mr Ueda commenced a suit against Mr Bajaj and Mr Bajaj in turn filed a counterclaim. Eventually, the parties brought the litigation to an end by entering into a settlement agreement on 19 August 2014 (the “Settlement Agreement”). By the Settlement Agreement, the parties agreed that a neutral evaluation of the assets by an independent accountant (“the assessor”) be undertaken. It was also agreed that the assessor’s calculations would be final and binding. The important terms of the Settlement Agreement were the following: 1. The parties are to jointly appoint an Independent Accountant to calculate and populate the entries in the enclosed Tables X and Y; 2. The Settlement Amount is to be calculated as follows with reference to the enclosed Tables X and Y: a. Add the amounts at (i) Table X(E)(4) and (ii) Table Y(E)(8); and b. Divide the above sum [at 2(a)] by 2;

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6. All costs, fees and expenses of the Independent Accountant are to be borne by the parties equally, whether appointed by the parties or by SMC. SMC’s fees for appointing the Independent Accountant (if any) shall also be borne by the parties equally;

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8. All parties will take all necessary steps to procure that the parties and the Independent Accountant are to be given free and unfettered access to all documents of Hachiman Capital Management and all related entities for the purposes of [1] above; 9. The Independent Accountant’s calculations shall be final and binding on both parties; 10. The Defendant is to pay the Plaintiff USD50,000;

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15. Parties undertake to take all reasonable endeavours to give effect to and implement the terms of this Settlement Agreement; 16. Parties undertake to return before Mr George Lim SC [ie, the mediator] for further mediation to resolve any disputes or issues arising out of the performance of this Settlement Agreement;

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It was clear from the wording of the Settlement Agreement that the assessor was directed to calculate the value of each party’s share of HCM as at the end of 2011 on the sub-portfolio basis (Table X) and on the 50/50 basis (Table Y). Tables X and Y were included in the Settlement Agreement. The tables included inputs such as the Net Asset Value (“NAV”) of HCM as at 31 December 2010, the trading loss and the effect of certain specified transactions, to arrive at the final position at the end of 2011. The settlement amount was to be the value of Mr Bajaj’s share of HCM at the end of 2011, taken to be the average of the value of his share based on the sub-portfolio basis and the value based on the 50/50 basis (“the Settlement Amount”). The Settlement Agreement provided that if the Settlement Amount was a negative sum, Mr Bajaj was to make payment of the sum to Mr Ueda, and vice versa if the Settlement Amount was a positive sum.

On 4 November 2014, the parties signed a neutral evaluation agreement (the “Neutral Evaluation Agreement”), by which they consented to the appointment of Mr Sajjad Akhtar as the “Neutral” to provide the required neutral evaluation service. It was not disputed that this amounted to appointing Mr Akhtar as the assessor under the Settlement Agreement. The parties agreed to a “Documents-only Neutral Evaluation” to be governed by the Singapore Mediation Centre (“SMC”) Neutral Evaluation Rules (the “Evaluation Rules”).

The neutral evaluation process

The assessor only managed to finish his evaluation report (the “Evaluation Report”) in November 2017. An amendment was released on 14 March 2018 to correct a typographical error. Evidently, there was a very long delay in the neutral evaluation process, and this delay was due mostly, if not entirely, to Mr Bajaj’s conduct. As counsel for Mr Bajaj, Mr Jaikanth Shankar, acknowledged on appeal, his client could have behaved better. The delay was traced by the assessor in Annexure 1 to the Evaluation Report.

The case statements of the parties were submitted to the assessor in January 2015 and the replies were submitted by early February 2015. Mr Ueda submitted documents comprising various transaction records, bank statements from 2011 and management accounts provided by Tricor. In view of the complexity surrounding the submission of the documents, the assessor arranged a clarification hearing in April 2015. Mr Ueda duly attended the hearing but Mr Bajaj did not show up. Mr Bajaj claimed that he was overseas and did not receive any email notification, even though he had earlier agreed to the hearing date. The assessor expressed doubts about the genuineness of his claims. That was the beginning of Mr Bajaj’s delaying tactics.

The assessor attempted to arrange a separate meeting with Mr Bajaj, and this attempt lasted from April to October 2015 because of Mr Bajaj’s various delays in responding. The assessor emailed the parties in October 2015 indicating that given the lack of response from Mr Bajaj and his refusal to provide reasonable alternative dates to attend a clarification hearing, he would issue his opinion on the documents submitted to date. Mr Bajaj was quick to lodge his objection the next day, stating that he would not accept the opinion without being given a chance to be heard. In subsequent emails, he alleged that the assessor was biased, and declined to accept him as the assessor on the ground that he was allegedly not given an opportunity by the assessor to be heard. The assessor attempted again to schedule a hearing for Mr Bajaj, but again to no avail. Mr Bajaj continued alleging bias on the part of the assessor. On 16 November 2015, the assessor gave Mr Bajaj a final opportunity to be heard before the assessor issued his report. Instead, Mr Bajaj proposed that the assessor be replaced or the matter be referred back to the mediator. However, the SMC and Mr Ueda rejected his proposals.

Mr Bajaj finally attended the clarification hearing on 25 November 2015. He raised queries in relation to the accounts and documents submitted by Mr Ueda and also added that he had no access to the documents of HCM as they were in the possession and control of Mr Ueda. At this point, and for the first time, Mr Bajaj expressed a concern that the accounting records did not reflect a loan given by HCM to TY Advisors Japan. In his affidavit filed in the court below, Mr Bajaj explained that 50 million Yen was transferred from HCM to TY Advisors Japan, out of which 35 million Yen should still be in the accounts of TY Advisors Japan after part of the loan was used for the latter’s liquidation. Mr Bajaj wanted an account of this 35 million Yen and specifically queried whether it was transferred back to HCM. To address the concerns, in January 2016, the assessor visited Tricor and performed a limited review of the documents of HCM. He reported back to the parties in February 2016, and provided a detailed breakdown of the loan...