Court of Appeal · Decided 6 August 2013

Alwie Handoyo v Tjong Very Sumito and another and another appeal

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[2013] SGCA 44Case no. Civil Appeal Nos 82 and 83 of 2012 (Suit No 89 of 2010)

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V K Rajah JA (delivering the judgment of the court):
Introduction
[1] Civil Appeal Nos 82 and 83 of 2012 (“CA 82” and “CA 83” respectively) are appeals against the decision of the High Court in Suit No 89 of 2010 (“Suit 89”). CA 82 is the appeal by the fifth defendant, Alwie Handoyo (“Alwie”). CA 83 is the appeal by the first defendant, Chan Sing En (“Chan”). The first plaintiff, Tjong Very Sumito (“Tjong”), and the second plaintiff, Iman Haryanto (“Iman”), are the respondents (collectively “the Respondents”) in CA 82 and CA83. There was originally a third plaintiff in Suit 89, Herman Tintowo (“Herman”), but he discontinued his action on 13 January 2012 and is not a party to the appeals.
[2] The dispute between the parties is over the payment of the purchase price of US$18m under a sale and purchase agreement (“the first SPA”) for the purchase of shares in an Indonesian company. Tjong, Chan and Alwie were involved in a transaction with several parties, including Magnus Energy Group Ltd (“MEGL”) which is a Singapore public-listed company and its wholly-owned subsidiary Antig Investments Pte Ltd (“Antig”), as well as two offshore shell entities, Aventi Holdings Limited (“Aventi”) and Overseas Alliance Financial Limited (“OAFL”). The first SPA was entered into between the Respondents and Herman (collectively “the Plaintiffs”) as the seller of the shares, and Antig as the purchaser.
[3] The circumstances surrounding the transaction are murky, to say the least. In a nutshell, this was a convoluted transaction the true nature of which appears to have been intentionally masked through the interposition of layers of apparently legitimate transactions. As is often the case with such questionable transactions, when business partners’ relationships sour and disputes arise, the unravelling of the transaction presents considerable legal difficulties. The present case is no different, as the lengthiness of the decision of the High Court judge (“the Judge”) in Tjong Very Sumito and others v Chan Sing En and others [2012] 3 SLR 953 (“the Judgment”) bears testament.
Facts
The protagonists
[4] Tjong is the main protagonist in the dispute. He set up PT Deefu Chemical Indonesia (“PT Deefu”) on 5 December 2000 with Iman. Tjong and Iman are brothers while Herman is their friend. Although the relevant agreements were entered into between Antig and the Plaintiffs, Tjong conducted the negotiations with Chan. Tjong was introduced to Alwie by a mutual acquaintance, and Alwie in turn introduced Tjong to Chan. Tjong claimed that he is not well versed in English. He knows words and phrases but is unable to carry on a full conversation in English. Nevertheless, he has not disclaimed any of the relevant agreements.
[5] Chan played a pivotal role throughout the negotiations and execution of the relevant agreements. He was the managing director of MEGL up till 1 June 2008. He was also a director of Antig up till 15 May 2008 when he resigned. He was the point man for MEGL and Antig in the negotiations and execution of the first SPA. Chan has known Alwie and Johanes Widjaja (“Johanes”), the third defendant in Suit 89, since 1999–2000 and has business dealings with both of them.
[6] Alwie is a businessman based in Jakarta, Indonesia. He holds various directorships and owns shares in a number of Indonesian companies. He was introduced to Tjong sometime in the late 1990s by a mutual acquaintance, one Mr Rahardjo. Alwie has known Johanes since 2000 or 2001 and had business dealings with him prior to this dispute. Alwie and Johanes are key participants in this dispute as they are the directing mind and will of OAFL and Aventi, the two entities which were paid a sizeable portion of the US$18m purchase price.
Background
[7] The dispute arises from a sale and purchase of shares in PT Deefu. In early August 2004, PT Deefu and Tjong paid US$1.2m for 100% of the share capital of PT Batubaraselaras Sapta (“PT Batubara”), the principal value of which resided in the company’s ownership of the right to mine and extract coal from the Kuaro coal formation at Kabupaten Pasir, East Kalimantan, Indonesia (“the Concession”). PT Deefu’s shares were held by Tjong, Iman, and Herman in the percentages 72.7%, 20% and 7.3% respectively. However, for all intents and purposes, the controller of the Concession was Tjong. For ease of reference, the shareholdings in PT Batubara and PT Deefu are represented by the following diagram:
Events prior to the first SPA
[8] It appears that the Plaintiffs did not have the funds to develop and operate the Concession. Even though they had purchased the shares in PT Batubara in early August 2004, by 11 August 2004 thereabouts, they attempted to sell 67% of PT Batubara to one Mr Tjokrosaputro for US$8m. The deal with Mr Tjokrosaputro fell through. Had the deal with Mr Tjokrosaputro materialised, the Plaintiffs would have gained at least US$6.8m almost instantly from the “flipping” of their purchase of PT Batubara, despite at the same time retaining a 33% stake.
The first SPA
[9] The Plaintiffs secured what appears on first blush to be an even “better” deal just three months later. On 23 November 2004, the Plaintiffs entered into the first SPA with Antig under which the Plaintiffs sold a total of 72% of the shareholding in PT Deefu to Antig for US$18m. 72% of PT Deefu translates to roughly 68.4% of PT Batubara, almost identical to the size of the shareholding which the Plaintiffs had tried to sell to Mr Tjokrosaputro. In other words, the Plaintiffs on paper stood to gain approximately US$10m more than what they would have obtained from the failed transaction with Mr Tjokrosaputro in just a space of three months. As we shall elaborate below (see [69]–[83], and [86]–[87]), there is more than meets the eye to this “better” deal.
[10] The deal, which was to be completed on 13 June 2006 (“the Completion Date”), was structured in a way that left Tjong with 28% of the shareholding of PT Deefu after the sale. The purchase price of US$18m was to be paid partly in cash and partly by an allotment and issuance of shares in MEGL, the Singapore-listed parent company of Antig. Of the purchase price of US$18m, US$6m was to be paid to Tjong, US$10m in cash and shares to Aventi, and US$2m in cash and shares to OAFL.
The supplemental agreements and various letters
[11] The Plaintiffs and Antig then entered into four supplemental agreements. The first three supplemental agreements are not particularly significant, but do help to convey a fuller picture of the entire transaction. It is the fourth supplemental agreement which is central to the dispute.
The first supplemental agreement
[12] The terms of the first supplemental agreement dated 3 January 2005 (“the first Supplemental”) are immaterial to the present dispute. It merely provided that MEGL agreed to pay Tjong US$300,000 upon the execution of the first Supplemental and that the due diligence period was extended by a further 30 days.
The second supplemental agreement
[13] The second supplemental agreement dated 18 February 2005 (“the second Supplemental”) was executed to clarify the extent of the Plaintiffs’ shareholding in PT Deefu. It provided that the original number of issued and fully paid-up ordinary shares in PT Deefu as reflected in the first SPA was incorrect.
The 18 February 2005 letter
[14] Prior to the signing of the second Supplemental, there was a meeting between Tjong, Chan and Alwie at Alwie’s office. Tjong claimed that Alwie explained some of the terms of the first SPA at this meeting, including the fact that part of the purchase price would be paid to Aventi and OAFL in order to help Tjong save on tax liabilities to the Indonesian Government. This meeting and the conversation that transpired is critical, as will be evident later.
[15] On the same day that the second Supplemental was signed, Tjong purportedly prepared a letter – with the help of a distant relative, Dr Irwan Sutisna Jahja, who is conversant with the English language, and another brother, Iman Malik, which read (when translated) (“the 18 February 2005 Letter”):
[16] Tjong claimed that he gave the 18 February 2005 Letter to Chan and Alwie in Singapore and Jakarta respectively. He claimed that he personally gave the letter to Chan after the signing of the second Supplemental. Chan and Alwie, however, denied receiving the letter. The 18 February 2005 Letter was allegedly also mailed to Antig on 14 March 2005. Pertinently, both MEGL and Antig filed affidavits on 17 October 2011 stating that they have never received that document. We note that no credible evidence confirming that the 18 February 2005 Letter was received by Antig, MEGL, Chan or Alwie was adduced by Tjong.
[17] It is worth noting that the 18 February 2005 Letter directly contradicts cl 4.02(4) of the first SPA which states:
The 7 March 2005 letter
The third supplemental agreement
[19] The third supplemental agreement dated 19 July 2005 (“the third Supplemental”) set out variations, amendments and modifications to the first SPA as are required to carry out the preliminary extract of coal at a site under the Concession. A key term in the third Supplemental concerned the loans which Antig was to extend to the Plaintiffs for the purpose of the preliminary extraction operations. It was agreed that these loans would not exceed US$2m. Upon completion of the first SPA, any loans would be treated as working capital of PT Batubara. However, if the first SPA was terminated, the Plaintiffs would be liable for the repayment of the loans to Antig.
The fourth supplemental agreement
[20] The fourth supplemental agreement dated 19 August 2005 (“the fourth Supplemental”) is the most crucial to this dispute. Pursuant to cl 2.2 of the fourth Supplemental, the payment terms under cl 4.02(2) in the first SPA were varied. We shall refer to cl 4.02(2) as varied by the fourth Supplemental as “the Amended Clause 4.02(2)”.
[21] In essence, the sums payable to Tjong, Aventi and OAFL remained the same, though Aventi would now receive a larger amount of cash in lieu of MEGL shares. This was, according to Chan, to placate the Singapore Exchange (SGX) which had objected to MEGL’s issuance of shares amounting to US$9.5m to Aventi – which was originally planned under cl 4.02(2) – as that would make Aventi a major shareholder of MEGL. The other significant difference is that the Amended Clause 4.02(2) explicitly referred to Aventi and OAFL as parties “authorised to receive [the sums] for and on behalf of the [Plaintiffs]”. Under the first SPA, the status of Aventi and OAFL as parties authorised to receive the purchase price was only set out in the “Definitions” section and not within cl 4.02(2).
[22] We pause to note that notwithstanding the 18 February 2005 Letter, none of the supplemental agreements, in particular the fourth Supplemental, modified cl 4.02(4) of the first SPA (see [17] above).
Genesis of the dispute
Events on or around Completion Date
[23] The completion of the sale and purchase took place in Indonesia on 13 June 2006. At this meeting which was attended by, inter alios, Tjong, Chan and Alwie, Tjong was given two documents to sign which he did.
[24] The first document was a letter from Antig to the Plaintiffs explaining that the net amount payable to Tjong on the Completion Date was US$1,970,109.65 instead of the agreed US$2.5m. The difference reflected the amount that Antig had loaned to the Plaintiffs pursuant to the 7 March 2005 Letter (see [18] above). The second document was a letter from Tjong to Antig requesting Antig to issue cheques for the sums of S$2,803,009 and S$334,429 as partial settlement of the remaining amounts payable under the first SPA.
[25] Chan then presented two cheques for the sum of S$2,803,009 (equivalent to US$2,289,999) and S$334,429 (equivalent to US$210,000) to Tjong. Tjong claimed that Chan made him sign on the photocopy of the two cheques to make it seem like Tjong had received both cheques. Chan kept the cheque for the equivalent sum of US$210,000, which was made in favour of Coutts Bank, even though Tjong asked for it. Chan asserted that the US$210,000 cheque was made at the request of Tjong and was meant for Alwie as his commission fees for brokering the deal. Tjong denied that there was any agreement to pay a commission to Alwie.
[26] The next day, 14 June 2006, Tjong purportedly gave a letter dated 13 June 2006 to Alwie (“the 13 June 2006 Letter”). According to Tjong, he handed the same letter to Chan in Singapore a few days later at the Hyatt Hotel. The letter reads (when translated):
[27] Tjong claimed that he gave Chan this letter not because of the terms of the fourth Supplemental, but because of the impression he had from the meeting in February 2005 when Chan and Alwie purportedly told him that the payments to Aventi and OAFL were for his (Tjong’s) benefit. However, Chan claimed that the first time he had sight of the 13 June 2006 Letter was in Suit 89. He denied receiving the letter and disputes the authenticity of the letter. Alwie too stated that he did not receive a copy of the 13 June 2006 Letter, and that he only found out about the letter when he received an affidavit filed by Tjong on 8 February 2010 in support of the Plaintiffs’ application for a Mareva injunction against him (“the Mareva Injunction”).
The Guarantee
[28] Sometime in July 2006, Antig requested the Plaintiffs to provide further documents. Tjong said he did not respond as he wanted assurance that the US$12m which was payable to Aventi and OAFL under the first SPA (“the Balance Purchase Price”) would be paid to him. Tjong claimed that he met up with Chan in Singapore at the Hyatt Hotel sometime in September 2006 when he told Chan that he would not provide the documents unless Chan gave an assurance that all the monies would be paid to him, and not to Aventi and OAFL. Tjong said that by this time, he no longer trusted Chan and therefore requested Chan to provide this assurance. Chan allegedly agreed that he would personally guarantee that Tjong would receive the full US$18m. Tjong went to Chan’s office subsequently to pick up the guarantee which Tjong claimed was already signed even before he arrived (“the Guarantee”) (see [169] below). Tjong provided Antig with the requested documents after obtaining the Guarantee.
[29] The enforceability of the Guarantee is a key issue in CA 83. Chan denied executing the Guarantee and averred that the Guarantee was fabricated by Tjong. He also pointed out that the existence of the Guarantee was only revealed at a very late stage of the proceedings on 22 June 2011, when the Plaintiffs applied to amend their Statement of Claim for a second time, which amended Statement of Claim was eventually filed on 13 July 2011 (“the Amended Statement of Claim”). Suit 89 was commenced on 8 February 2010 and there had already been an earlier amendment to the Statement of Claim on 25 August 2010. The absence of any reference to the Guarantee in this earlier version of the Statement of Claim was conspicuous. It was also not referred to or produced in the Plaintiffs’ earlier application for the Mareva Injunction in February 2010.
The second and third SPA
[30] Despite the Guarantee, the Balance Purchase Price was not paid to Tjong. Tjong claimed that when he met Chan in Singapore on one occasion after the Guarantee was provided to him, Chan made it clear to him that if he wanted the Balance Purchase Price, he had to sell his remaining 28% stake in PT Deefu and his 5% stake in PT Batubara (“the Remaining Shares”) to “MEGL/Antig or [Chan’s] group” for US$2m. According to Tjong, Chan further said that if Tjong refused to sell the Remaining Shares, the following may occur:
(a) Tjong would not be paid the Balance Purchase Price; and/or
(b) Chan will cancel the first SPA; and/or
(c) PT Deefu would issue more shares to its shareholders in return for capital injection and Tjong’s remaining 28% stake in PT Deefu would be diluted as he was not in a position to pay for any new PT Deefu shares.
[31] Tjong claimed that under these circumstances, he agreed to sell the Remaining Shares. Two sale and purchase agreements were subsequently entered into on 12 July 2007 (“the second SPA” and “the third SPA”). Under the second SPA, Tjong sold his entire 5% shareholding in PT Batubara to one Jake Pison Hawila (“Jake”) for US$320,000. Under the third SPA, Tjong sold his remaining 28% shareholding in PT Deefu to Advance Assets Management Ltd (“AAML”) for US$1.68m. The sole shareholder and director of AAML was one Edwin Sugiarto (“Edwin”), the ninth defendant in Suit 89. In early 2008, Jake and Edwin (through AAML) sold the PT Batubara and PT Deefu shares they had acquired from Tjong to an Australian listed company, APAC Coal Limited (“APAC”), for AUD$12.64m. APAC is a subsidiary of MEGL. Chan stated that he did not know Jake or Edwin.
[32] The circumstances leading to the entering of the second and third SPAs is another key issue in CA 83. According to Alwie, he had approached Jake and Edwin – his friends and business associates – to purchase the Remaining Shares. Alwie had done so as he had been informed by Chan that Tjong wanted to sell the Remaining Shares for US$2m. Chan in turn claimed that Tjong had first approached him for a US$2m loan from MEGL. According to Chan, Tjong said that he needed the funds for his other investments as well as to settle some legal problems in Indonesia. Chan said that Tjong was willing to pledge the Remaining Shares to MEGL to secure the loan. However, Chan said that MEGL was not interested in increasing its stake in PT Deefu (through Antig) since it already had majority control. Nevertheless, Chan offered to help Tjong ascertain if others were interested in acquiring the Remaining Shares.
Events leading to the commencement of Suit 89
[33] On 2 November 2007, Tjong made two statements (“the Discharge Letters”) which were substantially similar. They provided that Tjong agreed to release and discharge Antig and its affiliated companies and their officers from any and all claims, and that Tjong confirmed that he had no claim against Antig and its affiliated companies or any third party in respect of the acquisition of the shares of PT Batubara. Tjong admitted to signing the Discharge Letters, but stated that the Discharge Letters were prepared by Chan who requested him to sign. According to Tjong, he did not understand what was in the Discharge Letters but signed them anyway as Chan told him that he had to sign them to receive the Balance Purchase Price. Tjong asserted that in any event, the Discharge Letters have no binding effect under either Singapore or Indonesian law.
[34] On 12 November 2007, Chan met up with Tjong in Singapore. At this meeting, Tjong signed more documents given to him by Chan. According to Tjong, he signed those documents as he was told by Chan that they were necessary if he wanted to receive the Balance Purchase Price. After Tjong had signed the documents, Chan handed him a cheque for the sum of S$1,630,038. This was the amount stated in one of the documents signed by Tjong as being the “final amount of the Balance Purchase Price” due to Tjong.
[35] On that same day, Tjong prepared a letter which he gave to Chan the next day (“the 12 November 2007 Letter”). It reads (when translated):
As with the other letters which Tjong purportedly gave, Chan denied receiving the 12 November 2007 Letter.
[36] According to Tjong, Chan was uncontactable after the 12 November 2007 Letter was given to him. It was around that time that he instructed solicitors to recover the Balance Purchase Price. He was also concerned about the final payment of US$3.7m to Aventi which was supposed to take place on 13 June 2008, being 24 months after the Completion Date. Unknown to Tjong, the US$3.7m payable to Aventi had already been satisfied by a payment of US$3,492,800 by Antig to Aventi on 7 November 2007. Chan claimed that Aventi had requested for early payment and offered Antig a 5.6% discount in return. Antig agreed after considering the prevailing fixed interest rates and pointed to an announcement by MEGL on the SGXNet on 13 November 2007 declaring the early settlement payment to Aventi. However, no evidence has been adduced to show that Aventi had first requested for early payment.
[37] In the dark over the early payment, Tjong’s solicitors, on behalf of the Plaintiffs, wrote to Antig on 9 April 2008:
[38] Despite at least two reminders, there was no response from Antig. The Plaintiffs commenced Suit No 348 of 2008 (“Suit 348”) on 20 May 2008 to prevent Antig from making the US$3.7m payment to Aventi. Upon an application by Antig, this court stayed Suit 348 in favour of arbitration (see Tjong Very Sumito and others v Antig Investments Pte Ltd [2009] 1 SLR(R) 861).
[39] Suit 89 was then commenced by the Plaintiffs on 8 February 2010 against 11 defendants which included Chan, Alwie, Antig, MEGL, Aventi and OAFL. The Plaintiffs’ claims revolved around two main issues: (a) the non-payment of the Balance Purchase Price; and (b) the entrance into the second and third SPAs. It should be noted that in 2011, Antig and MEGL commenced arbitration against the Plaintiffs which ultimately led to a stay of proceedings in Suit 89 against Antig and MEGL. The Plaintiffs subsequently discontinued the court proceedings against Antig and MEGL entirely. Hence, neither Antig nor MEGL filed a defence or took a position in respect of the claims made against Chan and Alwie.
[40] It will be helpful, at this juncture, to summarily recap this complex web of facts:
Parties’ pleaded cases
[41] For the purposes of the present appeals, except where relevant, the claims against the other nine defendants will not be elaborated upon.
The Plaintiffs’ claims
[42] At the outset, it is useful to state that Antig had paid out a total of US$17.7m in cash and shares to Tjong, Aventi and OAFL in the amounts that each were entitled to contractually under the Amended Clause 4.02(2). This is undisputed. The US$300,000 shortfall based on the total purchase price of US$18m was explained by Antig as being due to the discounts given by Aventi for early payment of the amount due to Aventi. The Plaintiffs’ case is that the full US$18m should have been paid to Tjong and not to other parties. They claimed:
(a) The total cash payment of US$550,000 (“OAFL Cash Payment”) and allotment and issuance of 42,102,727 MEGL shares (“OAFL Shares Payment”) (collectively “the OAFL Payments”) to OAFL were not authorised by the Plaintiffs.
(b) The total cash payment of US$5,372,800 (“Aventi Cash Payment”) and the allotment and issuance of 124,856,364 MEGL shares to Aventi (“Aventi Shares Payment”) (collectively “the Aventi Payments”) were also not authorised by the Plaintiffs. In particular, the Plaintiffs neither knew nor consented to the early payment of the Aventi Cash Payment.
[43] Together with the losses Tjong allegedly suffered by selling his Remaining Shares under the second and third SPAs, the Plaintiffs mounted the following claims against Chan and Alwie:
AGAINST CHAN ALONE
(a) The Guarantee Claim: Chan is liable under the Guarantee as the Plaintiffs were not paid and did not receive the Balance Purchase Price.
(b) The Duress Claim: The sale of the Remaining Shares under the second and third SPAs was procured under duress. Chan was one of the parties who had caused the duress and is therefore liable to Tjong for the losses suffered by Tjong in selling the Remaining Shares below value.
(c) The Undue Influence Claim: The sale of the Remaining Shares under the second and third SPAs was procured through undue influence exercised by Chan. Chan is therefore liable to Tjong for the losses suffered by Tjong in selling the Remaining Shares below value.
(d) The second and third SPAs Misrepresentation Claim: Chan had fraudulently misrepresented that Tjong would be paid the Balance Purchase Price if he sold the Remaining Shares according to the terms of the second and third SPAs. Tjong relied on his misrepresentation and sold his Remaining Shares, but was not paid the Balance Purchase Price. Chan is therefore liable to Tjong for the losses suffered by Tjong in selling the Remaining Shares below value, as well as the Balance Purchase Price.
(e) The second and third SPAs Unlawful Means Conspiracy Claim: Chan had conspired with other defendants to cause Tjong to enter into the second and third SPAs through duress, undue influence, deceit and/or fraudulent misrepresentation with the intention of injuring Tjong. Chan is therefore liable to Tjong for the losses suffered by Tjong in selling the Remaining Shares below value.
AGAINST ALWIE ALONE
(a) The OAFL Trust Claim: The OAFL Payments were not intended to be a gift from the Plaintiffs. Further, OAFL knew that the OAFL Payments were not rightfully due to it. It therefore holds the OAFL Payments on either a resulting trust or constructive trust for the Plaintiffs. The corporate veil of OAFL should be lifted to make Alwie personally liable to return the OAFL Payments.
(b) The OAFL Unjust Enrichment Claim: OAFL and/or Alwie are also liable to return the OAFL Cash Payment to the Plaintiffs as money had and received by OAFL.
(c) The OAFL Conversion Claim: The Plaintiffs are the beneficial owners of the 42,102,727 MEGL shares comprising the OAFL Shares Payment. OAFL unlawfully and without consent of the Plaintiffs took into their possession the allotment of the MEGL shares. This amounted to conversion of the Plaintiffs’ right to ownership or immediate possession of the MEGL shares. The corporate veil of OAFL should be lifted and OAFL and/or Alwie are liable in damages for conversion of the MEGL shares.
AGAINST BOTH CHAN AND ALWIE:
(a) The first SPA Misrepresentation Claim: Chan and Alwie had deceived or fraudulently misrepresented to the Plaintiffs the nature and structure of cl 4.02(2) both in its original and amended form. Effectively, the Plaintiffs were led to believe that the US$18m purchase price would be paid to them. Chan and Alwie are therefore liable for the Plaintiffs’ loss of the Balance Purchase Price.
(b) The Unlawful Means Conspiracy Claim: Chan and Alwie had conspired with the other defendants to use unlawful means, namely deceit and fraudulent misrepresentations, to cause damage to the Plaintiffs. They are therefore liable for the Plaintiff’s loss of the Balance Purchase Price.
(c) The US$210,000 Trust Claim: There was no legitimate reason for a payment of US$210,000 to a Coutts Bank account which belonged to Alwie. The US$210,000 was not intended to be a gift to Chan and/or Alwie and therefore Chan and/or Alwie hold(s) the sum on a resulting or constructive trust for the Plaintiffs.
(d) The US$210,000 Unjust Enrichment Claim: Chan and Alwie are also liable to return the US$210,000 as money had and received by Chan and/or Alwie.
Chan’s defence
[44] Chan disputed all the claims made against him:
(a) Chan denied making any of the misrepresentations relating to the first, second and third SPAs alleged by Tjong. He further claimed that none of the Plaintiffs had relied on any of the alleged misrepresentations and did not suffer loss or damage upon such reliance.
(b) Chan denied executing the Guarantee. He claimed that it was fabricated and asserted that in any event, the Guarantee was unenforceable and had no legal effect.
(c) Chan denied that the Balance Purchase Price was payable to Tjong. The sums paid by Antig were in accordance with the Amended Clause 4.02(2).
(d) Chan denied agreeing with any of the other defendants to do an unlawful act or to do a lawful act by unlawful means to injure the Plaintiffs, and asserted that he had no intention and did not cause any person to carry out an act to injure the Plaintiffs.
(e) Chan denied receiving the US$210,000 payment from the Plaintiffs. Thus, he is not liable under any resulting or constructive trust, or claim for unjust enrichment.
(f) Chan denied the allegations of duress and undue influence. He claimed that there was no threat or illegitimate pressure exerted on Tjong to induce him into entering into the second and third SPAs. Tjong exercised his own free will in entering into the agreements.
[45] Chan further relied on the Discharge Letters signed by Tjong. Chan argued that any cause of action which the Plaintiff may have had against him was released or waived pursuant to the Discharge Letters. The Plaintiffs’ claims against him are therefore unsustainable.
Alwie’s defence
[46] Alwie’s defence was straightforward. His main line of defence was that the OAFL Payments as well as the US$210,000 payment were legitimately received by OAFL pursuant to the Amended Clause 4.02(2), in accordance with the first SPA read with the fourth Supplemental. Thus, the claims in respect of these sums founded on trust, unjust enrichment and conversion were unmeritorious. Alwie also denied the claims founded on misrepresentation and conspiracy.
Decision below
[47] The Judge dismissed most of the Plaintiffs’ claims. However, he found in favour of the Plaintiffs in respect of (a) the Guarantee Claim, (b) the second and third SPAs Misrepresentation Claim, (c) the OAFL Unjust Enrichment Claim, and (d) the OAFL Conversion Claim.
[48] Consequently, the Judge held that Chan is liable to Tjong for (a) US$12,471,227, being the difference between the US$18m and what Tjong received, and (b) damages for Tjong’s losses flowing from sale of the Remaining Shares under the second and third SPAs. The Judge also ordered OALF and/or Alwie to pay the Plaintiffs (a) US$550,000, and (b) damages to be assessed for the conversion of the 42,102,727 MEGL shares. Aventi was also ordered to pay the Plaintiffs damages of S$27,468,400 for the conversion of 124,856,364 MEGL shares.
[49] The Judge provided that if the Plaintiffs recovered damages from Aventi and OAFL and/or Alwie in respect of the conversion of the MEGL shares, the Plaintiffs shall refund to Chan such amount representing double recovery, up to a maximum of US$5.75m which is the original value of the total number of MEGL shares which were issued. Curiously, the Judge did not provide that if the Plaintiffs recovered the US$550,000 from OAFL and/or Alwie, that same amount shall be refunded to Chan to prevent double recovery.
Parties’ submissions on appeal
CA 83
Chan’s submissions
[50] Chan’s submissions in this appeal focuses on two aspects, namely the Guarantee Claim and the second and third SPAs Misrepresentation Claim. With regard to the Guarantee Claim, counsel for Chan, Mr Ang Cheng Hock SC (“Mr Ang”), raised the following arguments:
(a) First, the Guarantee was fabricated by Tjong. It was unconventional in form and highly irregular, and the text in the Guarantee was superimposed onto the document which bore Chan’s signature (“Superimposition Argument”). The expert evidence by Ms Michelle Novotny (“Ms Novotny”), which included two reports (“Novotny’s first Report” and “Novotny’s second Report”), supported the Superimposition Argument.
(b) Second, even if the Guarantee was genuine, it should be construed as a guarantee for Antig’s performance of its obligations under the first SPA and not as an indemnity which the Judge found. The construction of the Guarantee as a guarantee and not an indemnity is consistent with (a) the commercial context and payment structure of the first SPA, (b) the plain words used in the Guarantee, and (c) the contemporaneous evidence and conduct of the Tjong and Chan.
(c) Third, the Discharge Letters released Chan from any further liability under the first SPA in respect of payments which had already been paid out by Antig. In other words, the Discharge Letters ratified all payments made by Antig as of 2 November 2007, the date of the Discharge Letters, and confirmed that such payments were in accordance with Antig’s obligations under the first SPA. Thus, Chan was no longer liable to Tjong as at 2 November 2007.
[51] With regard to the second and third SPAs Misrepresentation Claim, Mr Ang canvassed the following arguments:
(a) First, Chan did not represent that he would ensure that Tjong would be paid the Balance Purchase Price if Tjong entered into the second and third SPAs (“the Representation”).
(b) Second, the Representation is not even actionable as a misrepresentation as it is a statement of what Chan would do in the future. Such a statement of a future act is not actionable but is, at best, a promise which is not enforceable for want of, amongst other things, consideration and intention to enter into binding legal relations.
(c) Third, even if the Representation is actionable, it was not fraudulently made as Chan honestly believed that Tjong would receive “full payment” under the first SPA, and did subsequently take steps to ensure that payment would be made. The fact that Chan had procured Antig to pay Aventi is not evidence of dishonesty as the first SPA provided that Aventi was authorised to receive payments on behalf of the Plaintiffs.
(d) Fourth, in any event, Tjong had not been induced into entering into the second and third SPAs by the Representation. Tjong had access to independent lawyers and other sources of advice at the material time. Further, as the Judge had found, there is nothing to show that Tjong had intended to sell the Remaining Shares for more than US$2m but was instead coerced by Chan into selling them for US$2m. Tjong’s decision to sell the Remaining Shares at US$2m was an independent and conscious decision motivated by his desire to “flip” the Concession for a quick profit.
(e) Last but not least, the Remaining Shares were not sold below value. The Remaining Shares were effectively minority stakes and a minority discount must be applied accordingly when compared to the US$18m purchase price under the first SPA. The price of the Remaining Shares subsequently sold to APAC is also not reflective of the value of the Remaining Shares.
Respondents’ submissions
[52] Counsel for the Respondents, Mr Peter Gabriel (“Mr Gabriel”), basically rehashed the reasons provided by the Judge. On the Guarantee Claim, Mr Gabriel argued:
(a) The Guarantee is genuine and not fabricated by Tjong. Novotny’s first Report does not assist Chan as it does not meet the standard of proof required to establish forgery. Novotny’s second Report should not be admitted.
(b) Even if Ms Novotny’s expert reports are admitted, all they show is that there was superimposition of the signature and text in the Guarantee. It does not show that this superimposition was done by Tjong. Thus, forgery or fabrication is not made out.
(c) The Guarantee is in the nature of an indemnity. It was meant to ensure that Tjong received the full purchase price if Antig, Aventi and/or OAFL failed to pay Tjong.
(d) The Discharge Letters do not assist Chan because they were not related to the sale and purchase of the PT Deefu shares.
[53] Mr Gabriel’s arguments on the second and third SPAs Misrepresentation Claim are:
(a) The Judge’s factual finding that Chan had made the Representation was based on his observation that Chan was not a credible witness. The Judge believed Tjong’s testimony and this should not be disturbed.
(b) The Representation is a statement of intention which Chan did not honestly hold. Chan could not have honestly believed that the Respondents would receive the full US$18m if Tjong sold his Remaining Shares under the second and third SPAs. Such a representation is actionable.
(c) The Representation induced Tjong into selling the Remaining Shares and this is actionable even if it was not the sole reason. As long as the Representation was actively present in Chan’s mind, which it was, the Representation is actionable. In the present case, the Judge had found that the Representation was a “significant factor” that induced Tjong to sell, and this finding should not be reversed.
CA 82
Alwie’s submissions
[54] In CA 82, Mr Sivakumar Murugaiyan (“Mr Murugaiyan”) and Dr Tang Hang Wu (“Dr Tang”), counsel for Alwie, made the following submissions:
(a) First, Tjong is not entitled to sue in relation to shares held in the name of Herman as Herman had discontinued his action and was not a party before the Judge. An equitable owner cannot maintain an action without the legal owner being a party to the action.
(b) Second, OAFL and/or Alwie are not liable for the OAFL Unjust Enrichment Claim as (i) there is no unjust factor in OAFL’s receipt of the OAFL Cash Payment, and (ii) OAFL’s enrichment from the OAFL Cash Payment was not at the Respondents’ expense. On the first point, the Judge’s finding of an absence of authority on the part of OAFL to retain the OAFL Cash Payment does not constitute an unjust factor. On the second point, the enrichment was not at the Respondents’ expense as OAFL Cash Payment came from Antig, not the Respondents.
(c) Third, the OAFL Conversion Claim fails because (i) the MEGL shares from the OAFL Shares Payment are not capable of being converted, and (ii) the Respondents did not have a right of immediate possession to the MEGL shares. On the first point, conversion only applies to tangible property and not intangible rights. The exception to this rule is “documentary intangibles” such as cheques. Only bearer shares and share certificates together with indorsed blank transfer forms are regarded as “documentary intangibles”. The 42,102,727 MEGL shares are neither and hence cannot be converted. On the second point, the Respondents do not have a right to immediate possession as their claim against OAFL is a chose in action for a right of transfer of the MEGL shares, and choses in action cannot be possessed. Further, the Respondents cannot be considered as bailors as they do not have a proprietary right in the shares. Lastly, there was no agency relationship between OAFL and the Respondents which gave rise to an immediate right of possession.
(d) Fourth, the corporate veil should not have been lifted as the Judge had not found that OAFL was a mere device, sham or façade used by Alwie.
Respondents’ submissions
[55] Mr Gabriel contended:
(a) First, Herman had executed a Power of Attorney which authorised Tjong to commence proceedings in respect of the shares in PT Deefu which were legally owned by Herman.
(b) Second, the four elements required to establish a claim in unjust enrichment were found to be met by the Judge. The “unjust factor” in this case is that OAFL “cannot in conscience retain the money [the OAFL Cash Payment]”. This unjust enrichment was at the expense of the Respondents as OAFL received the OAFL Cash Payment knowing that it belonged to the Respondents.
(c) Third, the MEGL shares can be converted as they are supported by physical share certificates held in the Central Depository (“the CDP”). The Respondents have the requisite standing to sue for conversion as they had a right to immediate possession of the MEGL shares as the owner of the MEGL shares, or alternatively, as the principal of OAFL, who acted as its agent in receiving the MEGL shares.
(d) Fourth, there is no dispute that Alwie is the directing mind and will of OAFL. Given that OAFL had been abused to further an improper purpose by wrongfully converting and misappropriating the OAFL Payments, the corporate veil ought to be lifted.
Issues
[56] In the light of the parties’ submissions, there are two main issues in CA 83:
(a) whether the Guarantee is enforceable against Chan and if so, whether the Guarantee is in the nature of a guarantee or an indemnity (the “Guarantee Issue”); and
(b) whether Chan is liable for fraudulently misrepresenting to Tjong that he would be paid the Balance Purchase Price if he entered into the second and third SPAs (the “Misrepresentation Issue”).
[57] In respect of CA 82, the three main issues are:
(a) whether the Respondents are entitled to sue in relation to shares held in the name of Herman given that Herman had already discontinued his action; and whether the corporate veil of OAFL should be lifted such that Alwie would be personally liable for orders made against OAFL (the “Gateway Issues”);
(b) whether OAFL was unjustly enriched by the OAFL Cash Payment (the “Unjust Enrichment Issue”); and
(c) whether OAFL had converted the 42,102,727 MEGL shares from the OAFL Shares Payment (the “Conversion Issue”).
[58] As all the parties premised their submissions on Singapore law being the applicable law for all the issues, we shall address these issues using Singapore law.
Preliminary issues
Credibility of witnesses
[59] The court should be wary of the maxim falsus in uno, falsus in omnibus – false in one thing, false in everything. That the evidence of a witness need not be rejected in toto simply because it is unreliable or untrue in some parts is firmly established. In Chai Chien Wei Kelvin v Public Prosecutor [1998] 3 SLR(R) 619 at [72], this court cited with approval the dicta of Raja Azlan Shah FJ (as he then was) in Public Prosecutor v Datuk Haji Harun bin Haji Idris (No 2) [1977] 1 MLJ 15 at 19:
[60] In Khoon Chye Hin v Public Prosecutor [1961] MLJ 105.1 (“Khoon Chye Hin”), Thomson CJ stated (at 107):
This principle, though applied usually in criminal proceedings, no doubt has equal application in civil cases. Khoon Chye Hin was cited with approval by Yong CJ in Teo Geok Fong v Lim Eng Hock [1996] 2 SLR(R) 957 at [44], which was in turn recently applied by Belinda Ang J in Trans-World (Aluminium) Ltd v Cornelder China (Singapore) [2003] 3 SLR(R) 501 at [22].
[61] The correct approach that the court should adopt in such cases is to appraise the witness’s entire evidence in the context of all the other evidence and circumstances of the case. A flawed witness may be telling the truth on some matters: Public Prosecutor v Chee Cheong Hin Constance [2006] 2 SLR(R) 24 at [103]. It is only where the grain and the chaff are so inextricably linked that evidence from a witness who has been shown to be extremely unreliable may perhaps be discarded in toto; the mere fact that some part of a witness’s evidence is found to be deficient, unreliable or simply untrue is usually insufficient to justify the rejection of his or her evidence in toto.
[62] As noted by the Judge, Chan was a deeply unsatisfactory and unhelpful witness who no doubt was untruthful on certain issues. However, that does not warrant a complete rejection of Chan’s evidence. This Court must objectively scrutinise his evidence to separate the grain from the chaff. At the same time, we note that the Judge had relatively little to comment on Tjong’s credibility as a factual witness. From our reading of the evidence on record, we are of the view that Tjong was as unsatisfactory a witness as Chan, if not more. We provide three non-exhaustive examples.
[63] First, Tjong stated on numerous occasions that he is not well-versed in English and has difficulty understanding the key documents such as the first SPA and the supplemental agreements which are recorded in English. The evidence suggested otherwise. One of Tjong’s former solicitors, Mr Manjit Singh, gave evidence that Tjong is in fact able to understand English. There was written correspondence between Mr Manjit Singh and Tjong in English. There is no suggestion that Tjong had given the impression to Mr Manjit Singh that the correspondence should be written in another language or that the correspondence should be translated. Further, Tjong did not just sign one or even two documents; he signed the first SPA, the four supplemental agreements, and several other letters, most of which were in English. Most of these documents were signed without the presence of lawyers. If Tjong really had difficulty with the English language, he would have sought assistance in deciphering the documents before signing any of them. A businessman signing commercial documents written in a language in which he is not competent would ordinarily seek professional assistance. The fact that Tjong did not do so lends credence to the suggestion that his command of the English language is not as poor as he has portrayed it to be. Tjong was, after all, a seasoned businessman.
[64] Second, Tjong’s explication of his understanding of the role of Aventi and OAFL in the transaction shifted numerous times in the course of the proceedings. At one point, he claimed that no payments were to be made to Aventi and OAFL. That does not square with the fact that even under the original cl 4.02(2), Aventi and OAFL were already expressly included as recipients of the purchase price. Then, at some later point, Tjong claimed that he was amenable to payments being made to him through Aventi and OAFL to enable him to save on tax expenses which he would otherwise have incurred in Indonesia. His case in the end, elucidated by Mr Gabriel during oral arguments, was that he did not care whether monies were routed to or through Aventi and OAFL, as long as he ultimately received US$18m. We find Tjong’s inability to give a consistent version of his position discomforting.
[65] Third, Tjong’s explanation for raising the Guarantee at a relatively late stage of proceedings is more than implausible. He claimed that the Guarantee had been locked away in an “iron safe” in Jakarta, and that he had been unable to retrieve it as Chan had made a police report against him in Indonesia which prevented him from returning. There was no evidence of the alleged police report made against Tjong. In the end, the Guarantee was purportedly retrieved by Tjong’s wife who brought it to Singapore. Evidently, Tjong did not have to be present in Indonesia to retrieve the Guarantee. His explanation for the delay in producing the Guarantee is nothing short of being incredible. We should point out that the Judge, too, appeared to disbelieve his evidence on this point (see the Judgment at [194]).
[66] With such patent inconsistencies inherent in his evidence, there is no clear reason for the court to prefer Tjong’s evidence over Chan’s or even Alwie’s for that matter. We stress once again that the court should always test witnesses’ testimonies against the objective evidence to distinguish fact from fiction, truth from falsity. In the present case, given that the credibility of each of the key witnesses is, to some extent, suspect, the objective evidence therefore plays a crucial role in ascertaining what could have taken place. We turn now to what we consider to be the most decisive piece of objective evidence, the first SPA.
Construction of the Amended Clause 4.02(2)
[67] Although the construction of the payment obligations under the Amended Clause 4.02(2) of the first SPA is not one of the five main issues in CA 82 and CA 83, it is pivotal to the resolution of both appeals. It sets out what the Plaintiffs had agreed to in terms of the structuring of the payment of the purchase price and, in particular, to whom certain sums should be paid.
Plain meaning of the Amended Clause 4.02(2)
[68] For ease of reference, the Amended Clause 4.02(2) reads:
[69] Chan and Alwie’s explanation of the Amended Clause 4.02(2) was this. Tjong was only supposed to receive US$6m, and the remaining US$2m and US$10m payments to OAFL and Aventi were profits to Alwie and Johanes respectively. In short, Alwie and Johanes were assisting Tjong in “flipping” the Concession by helping to find buyers. The arrangement between the three of them was that Tjong would only get US$6m from any eventual sale and Alwie and Johanes would pocket the difference. Aventi and OAFL were, in that sense, receiving part of the purchase price for and on behalf of the Plaintiffs.
[70] The Judge rejected this interpretation of the Amended Clause 4.02(2). He thought that a plain reading of the Amended Clause 4.02(2) meant just what it said – that Aventi and OAFL were to hold such payments “for and on behalf of” the Plaintiffs. In other words, the Plaintiffs were entitled to receive the full US$18m purchase price, albeit through Aventi and OAFL as intermediaries. The Judge’s difficulty with Chan and Alwie’s contention was apparent during the cross-examination of Chan:
[71] We respectfully disagree with the Judge’s interpretation. The plain meaning of “for and on behalf” does not necessarily imply that Aventi and OAFL were holding the payments as agents of the Plaintiffs. We are not persuaded that the plain meaning of “for and on behalf” in the Amended Clause 4.02(2) imports the understanding that Tjong would be entitled to the full US$18m under the first SPA. In fact, the word “receive” preceding the phrase “for and on behalf” supports Chan and Alwie’s interpretation that Aventi and OAFL were entitled to receive the payments as third party beneficiaries to the first SPA.
[72] The first SPA is not a lengthy document; it is not drafted with excessive legal verbiage; and the crucial payment terms are expressly and clearly worded. Specifically, the Amended Clause 4.02(2) spells out the values of the cash payments and MEGL share payments due to both Aventi and OAFL. Tjong must therefore have known that a substantial portion of the US$18m would be paid to Aventi and OAFL. That is not in doubt. He may not have known who the controlling minds of Aventi and OAFL were, but he would have certainly assumed that the two entities must have been connected to Chan and Alwie, the two people that he had been negotiating with. Why these payments were made to Aventi and OAFL and the nature of Aventi and OAFL’s entitlement to retain these payments become clearer when one turns to the context of the entire transaction, from the events that took place prior to the signing of the first SPA to the amendments in the fourth Supplemental.
Context of the transaction
(1) Tjong wanted to “flip” the Concession
[73] Tjong admitted during cross-examination that he was looking to “flip” the Concession for a quick profit. From the sequence of events, it is apparent to us that that was indeed Tjong’s motivation. Led by Tjong, the Plaintiffs had purchased the Concession through the purchase of shares in PT Batubara in August 2004. They then tried to sell a majority stake in PT Batubara to Mr Tjokrosaputro almost immediately (see [8]–[9] above). The Plaintiffs clearly had little or no interest in holding on to a controlling stake in the Concession. When that transaction was aborted, Tjong then put word out that the Plaintiffs owned a Concession and were looking to sell it. Alwie introduced Tjong to Chan, and the first SPA with Antig was entered into shortly thereafter. All this happened within a short span of three months from the time the Plaintiffs purchased the Concession. The inference which the factual matrix invites us to draw is that Tjong was keen to “flip” the Concession. After the failure to close the sale to Mr Tjokrosaputro, Antig presented itself as the perfect buyer.
[74] Given that the proposed deal with Mr Tjokrosaputro was only worth US$8m, if the entire purchase price of US$18m under the first SPA was to be paid to the Plaintiffs, it would have been nothing short of a massive windfall for them. Nothing had changed in the short span of time between the failed deal with Mr Tjokrosaputro and the new deal with Antig that would have justified such a large premium. It was for this reason that Alwie contended that what had happened was that he had already obtained a commitment from Tjong that the Plaintiffs would sell 72% of PT Deefu (which works out to 68.4% of PT Batubara) for US$6m. However, the contractual purchase price would be inflated to US$18m. Alwie and Johanes would then pocket the difference, for their role as facilitators, by structuring U$12m of the purchase price to be paid through OAFL and Aventi, which they respectively controlled. We find this arrangement suggested by Alwie to be entirely plausible. Tjong’s counsel could not even begin to explain why such an elaborate scheme had been conjured merely to ease his client’s alleged tax liabilities without any corresponding benefit to the other counter parties. It bears mention that even at US$6m, the Plaintiffs would still have made a huge profit – more than five times their capital outlay – in a matter of three months. Granted, they would have received US$2m less than they would have under the aborted deal with Mr Tjokrosaputro; however, Tjong still received a handsome profit while retaining a slightly over 30% stake in PT Batubara. Against this backdrop, Tjong would have ample reason to be content to let Chan and Alwie resolve the details regarding the payment of the remainder of the inflated price. That was perhaps why he signed with alacrity the first SPA and the subsequent supplemental agreements despite his alleged lack of proficiency in English and, more importantly, apparently without taking legal advice. As far as Tjong was concerned, his share of the deal was US$6m. How the other parties wanted to apportion the balance US$12m and via what mechanism was immaterial to Tjong. Even if they stood to gain a larger share of the purchase price, that was the necessary condition for Tjong’s US$6m and he consented to that arrangement. That, as we see it, was the basis of the deal.
[75] Against this context, the phrase “for and on behalf” in the Amended Clause 4.02(2) becomes clearer. The Plaintiffs would, on paper, be selling their stake in PT Deefu for US$18m. In reality, the understanding was that Tjong would only receive US$6m. The remainder would be paid to Aventi and OAFL. It is in this sense that Aventi and OAFL were receiving the US$12m “for and on behalf” of the Plaintiffs (see also [146], [152] and [157] below). To put it another way, as far as Antig was concerned, the payment to Aventi and OAFL would be deemed to be a payment made to the Plaintiffs.
(2) Tjong’s inconsistent explanations
[76] Tjong’s inconsistent explanations as to why he agreed to the Amended Clause 4.02(2) do not assist the Respondents’ cause. When the first SPA was signed, Tjong claimed that he did not read the terms. He claimed that he only found out about the channelling of payments to Aventi and OAFL in a meeting in February 2005 where Alwie explained the payment terms under original cl 4.02(2) to him. It was then that he learnt of the alleged tax benefits. According to Tjong, he told Alwie at the meeting that he disagreed that the payments should go to (or through) Aventi and OAFL. Yet, in the same breath, he claimed that Chan told him that the two companies belonged to Chan, and that these payments were to help Tjong save on taxes. Yet, around the same time but presumably after this meeting, Tjong then purportedly gave Chan and Alwie the 18 February 2005 Letter which stated, inter alia, that he was not associated to Aventi and OAFL, did not owe them any debt, and had never instructed Antig to pay them any part of the purchase price (see [15] above). Inexplicably, Tjong signed the second Supplemental on that same day.
[77] Finally, in spite of all these protestations, he subsequently agreed to the fourth Supplemental on 19 August 2005, six months later, which reaffirmed that payments were to be made to Aventi and OAFL. This chain of events seriously undermines Tjong’s credibility on this issue. If Tjong had already stated in the 18 February 2005 Letter that the purchase price should not go through Aventi and OAFL, why was this not reflected in the fourth Supplemental? More unusually, why did he agree to the Amended Clause 4.02(2) which on its plain wording required Antig to do precisely the thing that Tjong had told Chan and Alwie not to do in his 18 February 2005 Letter? Why did he not seek independent legal (or other) advice and verify the contents of the documents he signed? Mr Gabriel conceded when pressed by us that there was “no logical answer”.
[78] At the very least, Tjong’s case vacillated uneasily between one where he accepted Chan’s purported assurance that the payments were for tax reasons and one where he flatly denied that any payments should be made to Aventi and OAFL, even though he has chosen not to plead non est factum in respect of the first SPA or the fourth Supplemental. These two explanations are mutually exclusive. Tjong’s testimony raises more red flags than it provides answers; it is unclear what his case really is at the end of the day. Indeed, during oral arguments, Mr Gabriel suggested yet another explanation: it was Chan who had inserted the phrase “for and on behalf” in the Amended Clause 4.02(2) in order to comply with the SGX requirements. Tjong’s clumsy and inconsistent explanations of the nature of the transaction at various stages of the proceedings appear to be desperate attempts to claw back monies which he had expressly agreed Antig should pay to Aventi and OAFL.
(3) Reducing Tjong’s tax liabilities
[79] To dispel any residual doubts, we also address Tjong’s case at its highest, ie, that by the time the fourth Supplemental was signed, he had agreed to the payments to Aventi and OAFL as reflected in the Amended Clause 4.02(2) on the purported understanding that it would reduce his tax liabilities.
[80] In the first place, there is little commercial reason for a buyer to gratuitously advise the seller on how to avoid taxes, especially when there is no indication that such advice contributed to a reduction of the negotiated purchase price. Moreover, it is Tjong’s own evidence that he did not hire Indonesian lawyers to determine if the arrangement with Aventi and OAFL indeed helped him to save tax. Tjong claimed that he trusted Chan, but it should be noted that Tjong is a seasoned businessman who had not met Chan or dealt with him in any previous capacity. There is simply no sensible reason for Tjong, dealing with Chan on an arm’s length basis, to believe Chan to such a great extent. There is also no credible evidence suggesting that Tjong believed that Chan had some special knowledge of the tax regime in Indonesia which Tjong, being an Indonesian businessman himself, did not possess.
[81] Those considerations aside, even if we accept that Tjong’s alleged potential tax savings was the basis for his entering into the fourth Supplemental, on what basis was he expecting Aventi and OAFL to return to him the payments made to them? If this was a pass-through arrangement, when and how was payment to be made to Tjong? This is a serious flaw in Tjong’s case. There is nothing in the first SPA or any of the supplemental agreements providing for a return of the payments from Aventi and OAFL. It must be remembered that Aventi and OAFL are not parties to the first SPA or any of the supplemental agreements. There is no evidence of any extraneous agreements for the repayment of the monies and shares which were to be paid to Aventi and OAFL.
[82] We acknowledge that it may appear somewhat odd that Tjong would willingly give up US$12m of the purchase price to Alwie and Johanes (and, by extension, possibly Chan) for their role in helping to find a buyer. This curiosity, however, presupposes that Tjong was strongly convicted that he would have been able to find another buyer willing to pay a similar price. Taking into account the circumstances leading up to the deal with Antig (see [74] above), it is commercially understandable that Tjong wanted to realise the Plaintiffs’ paper profit, even if the condition was that part of the purchase price would be paid to Alwie and Johanes for their involvement in securing the buyer. It is worth noting that Tjong was no stranger to giving commissions. He admitted giving a US$90,000 commission to Mr Rahardjo, who had introduced him to Alwie. Against that inference, we find it more unbelievable that Tjong, a seasoned businessman, would agree to have two-thirds of the purchase price paid to two entities which he admitted he had no prior connection to, without first having a firm arrangement with the entities as to how the monies and shares would be returned to him, simply because he was told by the representative of the other contracting party that this mechanism would help him save tax. This conclusion requires one to believe that Alwie, Johanes and Chan were altruistic and wanted to act in the best interests of Tjong without obtaining any benefit in return. There is no reason why Alwie, the middleman broker who introduced Chan to Tjong and is himself a businessman, would have voluntarily set up a deal without first extracting a substantial benefit for himself. Tjong’s case is all the more fantastical given that he was not advised by lawyers during the negotiations and at the time of the signing of the first SPA and supplemental agreements. He could not have, at the relevant time of contracting, conceived of the causes of action in trust, conversion and unjust enrichment – which he adroitly mounted in Suit 89 – should Aventi and OAFL abscond with “his” monies.
[83] In our view, for all the above reasons, we find that it is more likely that the Amended Clause 4.02(2) reflected the parties’ intention that the US$12m was to be paid to Aventi and OAFL as third party beneficiaries nominated by the Plaintiffs as opposed to agents of the Plaintiffs. The US$12m was never intended to be paid to the Plaintiffs.
Clause 4.02(4)
[84] Our interpretation of the Amended Clause 4.02(2) is buttressed when read with cl 4.02(4) of the first SPA (see [17] above). Read alone, cl 4.02(4) is fairly straightforward. It states that payments made to Aventi and OAFL shall be deemed to be payments made to the Plaintiffs. Why was this necessary, we ask? If the Amended Clause 4.02(2) is to be interpreted as imposing an obligation on Aventi and OAFL to hold the monies on behalf of the Plaintiffs as their agents, cl 4.02(4) would be redundant as payments to agents of a principal would obviously count as payment to the principal. If a superfluous interpretation of cl 4.02(4) is to be avoided (see Travista Development Pte Ltd v Tan Kim Swee Augustine and others [2008] 2 SLR(R) 474 at [20]), the interpretation of the Amended Clause 4.02(2) found by the Judge and advocated by the Respondents cannot be accepted. In our view, cl 4.02(4) confirms – for the benefit of Antig in particular – that notwithstanding a total of US$12m was to be paid to Aventi and OAFL as beneficiaries nominated by the Plaintiffs, those payments shall be deemed as payment to the Plaintiffs of the full US$18m purchase price.
Subsequent conduct as an interpretative aid
[85] Before we leave the interpretation of the Amended Clause 4.02(2), we note that the Judge arrived at his interpretation of the Amended Clause 4.02(2) partlyin reliance on evidence relating to events that occurred after the parties entered into the first SPA and fourth Supplemental. In this regard, we are unable to accept that the six subsequent events relied upon by the Judge (see the Judgment at [106]–[119]) are unequivocal. First, the probative value of the subsequent events is premised to a large extent on the Judge’s assessment of the credibility (or the lack thereof) of Tjong, Chan and Alwie. As we have clarified, Tjong appears to be no less reliable that Chan or Alwie for that matter. Second, the Judge’s reliance on the Guarantee was misplaced, as we shall elaborate later (see [162]–[181] below). Third and most crucially, there is minimal connection, if any, between the subsequent events relied upon and the elucidation of the parties’ intentions supporting the interpretation that under the Amended Clause 4.02(2), Aventi and OAFL were not entitled to keep any payments made to it, ie they were to hold such payments “for and on behalf of” the Plaintiffs. For instance, the Judge was correct in highlighting the irregularity of the two sums of US$1.88m and US$3.49m which were prematurely paid by Antig to Aventi on the written or oral instructions of Chan. The fact that these two sums were paid into a Credit Agricole account without specifying the account holder made the payments even more dubious. However, notwithstanding the oddities surrounding the payments, it is unclear how this particular subsequent event sheds light on the parties’ intentions in relation to the nature of the payments to Aventi and OAFL under the Amended Clause 4.02(2). It does not assist in the illumination of the intentions of Antig and the Plaintiffs as to whether Aventi and OAFL were entitled to keep the payments made to them.
Conclusion on the Amended Clause 4.02(2)
[86] In the end, notwithstanding the questionable assertions from Tjong that he did not understand English and the unmistakable insinuation that he had been tricked into signing documents, it must be emphasised that the Respondents elected not to plead the defence of non est factum. It may very well have been the case that Tjong did not understand crucial aspects of the first SPA. However, as long as the Respondents stand by the Amended Clause 4.02(2), which Mr Gabriel affirmed in the course of oral arguments, they are bound by an objective construction of that clause.
[87] It is undeniable that the structuring of the transaction is anything but normal and straightforward, as the Judge rightly observed. Many of the arrangements between Tjong and Chan, Alwie and Johanes were said to be premised on “trust” and “relationship”. There is very little documentary and physical evidence, only wavering testimonies from all the parties. At best, it was a shady – or in the Judge’s words – irregular transaction. Any reproachable conduct by Chan, Alwie and/or Johanes may well have been prosecutable under Tjong’s other claims based on fraud, deceit and conspiracy, but Tjong has chosen not to appeal against the Judge’s decision to dismiss those claims. From a contractual perspective, having chosen not to disclaim the first SPA and the fourth Supplemental, Tjong must accept the terms of the agreements for what they appear to mean to an objective person.
[88] Our interpretation of the Amended Clause 4.02(2) disposes of CA 82, namely, the Unjust Enrichment Issue and the Conversion Issue. If the payments to Aventi and OAFL under the Amended Clause 4.02(2) were intended to be for the benefit of the two entities, it follows that the Respondents have no basis to claim for unjust enrichment and conversion against OAFL. Nevertheless, in deference to the extensive arguments presented by counsel on the issues in CA 82, and given that CA 82 raises a number of novel and important questions of law, we shall address the issues in CA 82 in some detail.
Analysis for CA 82
The Gateway Issues
[89] There are two gateway issues which must be resolved before the main issues of unjust enrichment and conversion can be considered: first, whether the Respondents have the locus standi to bring the claims even though Herman discontinued his action halfway; and second, whether the corporate veil of OAFL should be pierced such that liability could be imposed on its controlling mind, Alwie.
Respondents’ locus standi
[90] Mr Murugaiyan contended that the Respondents have no locus standi to continue claims against OAFL for Herman’s 7.3% stake in PT Deefu as Herman had dropped out of Suit 89. The Judge found that Herman’s discontinuation did not prevent Tjong from continuing Suit 89 in respect of the shares held by Herman on trust for Tjong. He relied on a Power of Attorney dated 21 June 2010 executed by Herman in Tjong’s favour. The Power of Attorney authorised Tjong to “[f]ile a lawsuit in courts of Jakarta and Singapore against Richard Chan, [MEGL]/[Antig], [Aventi], Johanes Widjaja, [OAFL], Alwie Handoyo, Susiana Chandra, Jake Pison Hawila, [AAML], Edwin Sugiarto and others”.
[91] Without even considering the Power of Attorney, this contention is a non-starter. Mr Murugaiyan’s reliance on the House of Lords decision in Performing Right Society, Ld v London Theatre of Varieties, Ld [1924] AC 1 (“Performing Right”) is misplaced. It was held in Performing Right (at 14) that “when a plaintiff has only an equitable right in the thing demanded, the person having the legal right to demand it must in due course be made a party to the action”. The significance of the nature of the rights upon which the action is founded is well-illustrated in Alliance Entertainment Singapore Pte Ltd v Sim Kay Teck and another [2007] 2 SLR(R) 869. In that case, the plaintiff claimed to be the “exclusive licensee” in Singapore of the copyright in certain works as a result of some contractual arrangements. It commenced proceedings against the defendants for alleged breach of copyright. However, the court found (at [48]) that the plaintiff was not an “exclusive licensee” within the meaning of s 7 of the Copyright Act (Cap 63, 2006 Rev Ed) and thus the action under the Copyright Act could not be maintained. Referring to Performing Right, the plaintiff there argued that this defect would be remedied so long as original copyright owners are joined. The court dismissed this argument (at [63]):
[92] It is incorrect to characterise the present dispute as one solely involving Herman’s proprietary rights in PT Deefu. In so far as CA 82 is concerned, the OAFL Unjust Enrichment Claim and the OAFL Conversion Claim are not premised on the vindication of proprietary rights; they arise out of the Respondents’ contractual rights under the first SPA. There is no dispute or claim founded on the ownership of the PT Deefu shares in Suit 89. The “thing demanded” – to borrow the phrase from Performing Right – is not a proprietary right relating to Herman’s 7.3% stake in PT Deefu.

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Alwie Handoyo v Tjong Very Sumito and another and another appeal

Laws this judgment relies on

Grounds of decision

Introduction

Facts

The protagonists

Background

Events prior to the first SPA

The first SPA

The supplemental agreements and various letters

The first supplemental agreement

The second supplemental agreement

The 18 February 2005 letter

The 7 March 2005 letter

The third supplemental agreement

The fourth supplemental agreement

Genesis of the dispute

Events on or around Completion Date

The Guarantee

The second and third SPA

(a) Tjong would not be paid the Balance Purchase Price; and/or

(b) Chan will cancel the first SPA; and/or

Events leading to the commencement of Suit 89

Parties’ pleaded cases

The Plaintiffs’ claims

AGAINST CHAN ALONE

AGAINST ALWIE ALONE

Chan’s defence

Alwie’s defence

Decision below

Parties’ submissions on appeal

CA 83

Chan’s submissions

Respondents’ submissions

CA 82

Alwie’s submissions

Respondents’ submissions

Issues

Preliminary issues

Credibility of witnesses

Construction of the Amended Clause 4.02(2)

Plain meaning of the Amended Clause 4.02(2)

Context of the transaction

(1) Tjong wanted to “flip” the Concession

(2) Tjong’s inconsistent explanations

(3) Reducing Tjong’s tax liabilities

Clause 4.02(4)

Subsequent conduct as an interpretative aid

Conclusion on the Amended Clause 4.02(2)

Analysis for CA 82

The Gateway Issues

Respondents’ locus standi