Case Summaries

Turf Club Auto Emporium Pte Ltd and others v Yeo Boong Hua and others and another appeal [2018] SGCA 79

SUPREME COURT OF SINGAPORE

22 November 2018

Case summary

Turf Club Auto Emporium Pte Ltd and others v Yeo Boong Hua and others and another appeal [2018] SGCA 79
Civil Appeals Nos 168 and 171 of 2015

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Decision of the Court of Appeal (delivered by Judge of Appeal Andrew Phang Boon Leong):

Outcome: CoA awards damages of $1.3m and costs of $315k to respondents for appellants’ breaches of consent order intended to settle dispute on Turf City joint venture

Background

1          Civil Appeals Nos 168 and 171 of 2015 (“CA 168” and “CA 171” respectively) arose out of a dispute between two groups of parties which entered into a joint venture to develop a site in Bukit Timah referred to as “Turf City”. Two companies were incorporated pursuant to this joint venture (“the JV Companies”).

2          In 2001, the Turf City site was leased from the Singapore Land Authority (“SLA”) by Singapore Agro Agricultural Pte Ltd (“SAA”), a company controlled by the group comprising five of the Appellants: Tan Huat Chye (“Tan Senior”), Tan Chee Beng (“Tan CB”), Koh Khong Meng (“Koh KM”), Ng Chye Samuel and Ong Cher Keong (collectively, “the SAA Group”). SAA granted sub-tenancies to the JV Companies, which in turn granted sub-sub-tenancies to ultimate tenants. The rent or fees payable by the ultimate tenants was the main source of revenue for the JV Companies. In 2004, this head lease expired and was renewed for another three years through a fresh head lease (“the 2004 Head Lease”).

3          Subsequently, disputes arose. Parties reached a settlement that was recorded by the High Court in a consent order (“the Consent Order”). The Consent Order provided for a bidding exercise to be conducted within certain timelines so as to end the joint venture by extricating either the Respondents or the SAA Group from the JV Companies. The higher bidder would purchase the shares of the lower bidder, and those behind the lower bid would resign as directors of the JV Companies. Two external entities (“the KPMG Entities”) were engaged to conduct a valuation of the shares of the JV Companies and supervise the bidding exercise.

4          However, there was a delay in the issuance of the valuation reports. During this period, unbeknownst to both the KPMG Entities and the Respondents, SAA renewed the 2004 Head Lease with the SLA for another three years (“the 2007 Head Lease”). Crucially, unlike in the cases of the previous head leases, SAA did not grant corresponding sub-tenancies to the JV Companies. As a result, the valuation reports prepared by the KPMG Entities did not take into account the 2007 Head Lease and the earning capacities of the JV Companies in the period after the expiry of the 2004 Head Lease, and thus reflected a very pessimistic outlook. Eventually, the 2007 Head Lease came to light. The Respondents called for revised valuation reports to be issued but the SAA Group refused to do so.

5          Subsequently, the Respondents commenced High Court Suit No 27 against the Appellants, claiming the following:

  1. contractual breaches of the Consent Order, namely, cl 11 (which required parties to preserve the status quo during the implementation of the Consent Order); an implied term that SAA would not appropriate for itself the benefit of the 2007 Head Lease pending full performance of the Consent Order; and cl 5 (which required the parties not to interfere or hinder the KPMG Entities’ discharge of their duties in respect of the valuation exercise);

  2. in the alternative, breaches of fiduciary duties owed to the Respondents; and

  3. in the alternative, liability in tort for conspiring to breach the Consent Order and/or inducing the breaches of the Consent Order.

6          In its decision delivered on 2 August 2018, the Court of Appeal held as follows (see Turf Club Auto Emporium Pte Ltd and others v Yeo Boon Hua and others and another appeal [2018] 2 SLR 655):

  1. The Respondents’ claim that the Appellants had breached their fiduciary duties was dismissed.

  2. SAA and Koh KM were liable for the repudiatory breaches of the Consent Order. SAA breached cl 11 and the implied term by acquiring the 2007 Head Lease without subsequently granting sub-tenancies to the JV Companies. Both SAA and Koh KM breached cl 5 by failing to disclose the existence of the 2007 Head Lease to the KPMG Entities.

  3. With regard to the remedies available for these breaches, neither an award of Wrotham Park damages nor AG v Blake damages (these terms originating from the English High Court decision of Wrotham Park Estate Co Ltd v Parkside Homes Ltd and Others [1974] 1 WLR 798 and the UK House of Lords decision of Attorney-General v Blake [2001] AC 268, respectively) was appropriate on the facts of the case. Rather, the Respondents were to be awarded compensatory damages assessed by reference to their 37.5% shareholding in the JV Companies at the time of the repudiatory breaches, with a premium of 15% to more accurately reflect their expectation loss.

  4. Tan CB, Tan Senior and Koh KM were liable for the torts of conspiracy and inducing breaches of contract by causing SAA to appropriate the benefit of the 2007 Head Lease for itself, in breach of the Consent Order. The quantum of damages due to the Respondents under these tortious claims was identical to that due under the contractual claim.

  5. Accordingly, SAA, Koh KM, Tan CB and Tan Senior were jointly and severally liable to the Respondents for compensatory damages assessed by reference to the value of their 37.5% shareholding in the JV Companies at the time of the repudiatory breaches, with a premium of 15%.

7          There were two remaining issues to be dealt with: (a) the quantum of damages payable to the Respondents; and (b) the costs of the two appeals.

Decision

8          In respect of the two issues mentioned above, the Court of Appeal held as follows:

  1. Tan CB, Tan Senior, SAA and Koh KM are jointly and severally liable to pay the Respondents damages in the amount of $1,338,312.50.

  2. The Respondents are entitled to $189,000 and $126,000 in costs (inclusive of disbursements) for CA 168 and CA 171 (and their related summonses), respectively.

Quantum of damages payable to the Respondents

9          This issue turned on which of the two competing valuations of the JV Companies should be accepted. The Respondents relied on an expert report (“the Ferrier Hodgson report”) while the Appellants relied on the valuation carried out by the KPMG Entities pursuant to the Consent Order (“the KPMG CF reports”). The Court noted that the Ferrier Hodgson report was very heavily based on the Respondents’ instructions regarding the JV Companies’ revenue streams, and that these instructions were inadmissible by reason of being opinion and/or hearsay evidence (at [8]). Further, such instructions were unreliable and self-serving (at [9]–[11]). Overall, the Court concluded that the Ferrier Hodgson report was no more than a conduit for the Respondents’ speculative and self-serving assertions, and thus rejected that valuation in favour of the KPMG CF reports. While the Court acknowledged that the KPMG CF reports provided a significant under-valuation of the JV Companies due to the omission to take into consideration the 2007 Head Lease (at [14]), the KPMG CF reports were nonetheless the best of the limited evidence before the Court (at [15]).

10        Using the valuation in the KPMG CF reports as the basis for quantification, the Court then applied a proportionate upward adjustment to account for the fact that the three head leases in fact spanned a total of 10.5 years rather than the 9 years originally contemplated (at [18]–[19]). Finally, applying the 15% premium, the total quantum of damages payable to the Respondents amounted to $1,338,312.50 (at [22]).

Costs of the appeals

11        The Respondents were entitled to the costs of CA 168 and CA 171 as they were the successful parties in these appeals (at [26]). As to the appropriate quantum of costs, given that the appeals had unfolded in an unusual manner and were highly exceptional in their complexity and length, a significant deviation from the cost guidelines was justified (at [27]–[28]). However, taking into account the fact that the Respondents had failed in their argument on Wrotham Park damages and on the fiduciary duties issue, it was appropriate to apply a downward adjustment of 30%. The Respondents were thus awarded $189,000 and $126,000 in costs (inclusive of disbursements) for CA 168 and CA 171 (and their related summonses), respectively (at [29]).

 

This summary is provided to assist in the understanding of the Court’s judgment. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s judgment.

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