High Court · Decided 18 November 2004

Bayerische Hypo- und Vereinsbank AG v C K Tang Ltd

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[2004] SGHC 254Case no. Suit 732/2003

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Laws this judgment relies on

Stamp Duties Act 1929

Grounds of decision

Official text from eLitigation

MPH Rubin J:
Background facts and pleadings
[1] The plaintiff, Bayerische Hypo- und Vereinsbank Aktiengesellschaft (“HVB”) is reportedly the second largest bank incorporated in Germany. It carries on business as an offshore bank through a branch in Singapore. The defendant, C K Tang Limited (“CKT”), is a household name in Singapore. It is a public listed company incorporated in Singapore and owns the building at 310 and 320 Orchard Road (“the property”). It is in the business of department stores and wholesale trade.
[2] The dispute at hand revolves around a contract (“the contract”) entered into between the parties as constituted or evidenced by a letter of engagement (“the mandate letter”) dated 24 January 2003 with an indicative term sheet attached (“the Indicative Term Sheet”).[1] The said letter bears the signatures of one Mr Nicholas Hamilton (“Hamilton”), Head of Securitisation & Credit Engineering, Asia of HVB, currently holding the position of Managing Director, Asia Management Committee Asia of HVB, and Mr Foo Tiang Sooi (“Foo”), the Chief Operating Officer of CKT. Under the terms of the contract, CKT engaged HVB as the lead manager and underwriter (“the arranger”) to a proposed $136.8m CKT Commercial Rental Receivables Backed Securitisation Transaction (“the transaction”).
(a) a transferable loan facility of $68m from the United Overseas Bank (“UOB”) and $42m in principal amount of secured bonds; and
(b) a working capital line of $39m granted by a consortium of banks comprising the Oversea-Chinese Banking Corporation (“OCBC”), the Development Bank of Singapore (“DBS”), UOB, Bank of China and the Hongkong and Shanghai Banking Corporation (“HSBC”).
In so far as is material, the mandate letter provides as follows:
[4] Whilst HVB was on course and pushing ahead with the transaction, CKT decided to terminate the appointment of HVB. The notice of the termination was contained in CKT’s letter dated 8 May 2003. In so far as is material, the said letter reads:
[5] HVB regarded the termination letter from CKT as a repudiatory breach. HVB’s stand[2] was that it had, prior to 20 February 2003, completed its due diligence exercise (“due diligence”) and the right to terminate the appointment of HVB by CKT under cl (g) of the mandate letter (“cl (g)”) could only be exercised within a reasonable time after HVB’s completion of its due diligence. Its further contention was that it was an express or alternatively implied term of the contract that CKT’s right to terminate under cl (g), after due diligence, could only be exercised with payment, or alternatively, an offer of payment, of the break-up fee. In the main, HVB averred that CKT did not exercise its right under cl (g) within a reasonable time after HVB had completed its due diligence. CKT had, through its adviser and agent, one Primepartners Corporate Finance Pte Ltd (“PPCF”), further represented to HVB that it would not be exercising its right to terminate HVB’s appointment, and CKT’s right to terminate under the said clause had consequently lapsed.[3] In the event, by this action, HVB claimed against CKT damages for wrongful termination of contract in the sum of $1,725,672,[4] or alternatively, reasonable fees for work done (quantum meruit) for a sum of $688,350,[5] or alternatively, for the break-up fee of $165,000, in addition to or in lieu of damages or a reasonable fee for work done.[6] HVB also claimed a further sum of US$135,018 and $23,951.20 on account of out-of-pocket expenses.[7]
[6] CKT’s defence was that it had exercised its right to terminate the appointment of HVB as the arranger of the transaction, fully in accordance with the terms of the mandate letter.[8] Its other contentions, as appear from the Re-Amended Defence (“the Defence”), were that:
(a) under cl (g), HVB was not entitled to anything more than the break-up fee as stated in the said clause, provided that HVB had completed its due diligence and that it had not indicated that the funding spreads would be higher than ten basis points above those set out in the Indicative Term Sheet;[9]
(b) HVB had not, contrary to its claim, completed its due diligence prior to 20 February 2003;[10]
(c) it was neither provided in the mandate letter nor could it be implied from any clauses therein that CKT’s right to terminate the appointment of HVB could only be exercised within a reasonable time after HVB’s completion of its due diligence;[11] and
(d) neither CKT nor PPCF had ever represented to HVB that CKT would not be exercising its right to terminate the appointment of HVB as the arranger of the transaction.
[7] CKT averred that on or about 29 April 2003, it received an unsolicited bilateral term offer from OCBC, the terms of which were substantially more attractive than the terms obtainable under the mandate letter, and hence its decision to accept the new proposals and terminate HVB’s engagement.[12] Paragraph 5 of the Defence, by and large, seems to capture the essence, if not all, of CKT’s defence. It reads:
[8] It should be mentioned at this stage that with regard to the out-of-pocket expenses claim by HVB for US$135,018 and $23,951.20, the dispute was only in relation to a sum of US$30,000. HVB demanded US$80,000 as being fees payable to Fitch Ratings (“Fitch”), whereas CKT contended that it should be only US$50,000.
Evidence
[9] Three witnesses, Hamilton ([2] supra), Mr John Pang Yik Yu (“Pang”), HVB’s Director, Securitisation, and Mr Richard John Downer (“Downer”), a senior managing director, currently in the employ of Bear, Stearns International Limited, UK, testified on behalf of HVB. Four witnesses, Ms Angie Ng Chui Guat (“Angie Ng”), Vice President – Group Finance of CKT, Mr Gerald Ong Chong Keng (“Gerald Ong”), Managing Director of PPCF, Foo ([2] supra), and Ms Debbie Leong Sook Ching (“Debbie Leong”), Director, Corporate Finance of K&N Kenanga Berhad, Malaysia, gave evidence on behalf of CKT. Their testimonies are adequately summarised in the respective closing submissions of both counsel. In so far as is material, the relevant segments of their evidence are as follows.
The plaintiff’s evidence
Hamilton
[10] Hamilton’s evidence was to the following effect.
[11] He was the Managing Director, Asia Management Committee Asia of HVB and exercised general supervision over HVB’s work on the transaction. HVB is widely regarded as having one of the top securitisation practices in Singapore and the region, as well as internationally.
[13] Dealing with the terms of the mandate letter, he said that the only clause conferring the right of termination on CKT was cl (g), which in turn only entitled CKT to terminate upon completion of HVB’s due diligence.
[16] He explained that the amount of the break-up fee was negotiated and eventually fixed at $165,000.00, which amount reflected the fact that it would essentially compensate HVB for about three weeks’ work (ie, the period that HVB expected to take for its due diligence). HVB felt that $165,000 was slightly lower than what would be fair compensation, and that was why the original figure of $275,000 was proposed, but HVB did not spend too much time trying to negotiate on this because it was pretty confident that the transaction was going to be completed.
[17] He also stated that if CKT had suggested that it wanted the right to terminate the transaction at the eleventh hour after HVB had put in months of work, and be paid for only three weeks of work, he would have not have agreed to the break-up fee of $165,000.00.[13]
[18] He understood that HVB had completed its due diligence by mid-February 2003 and no issues had cropped up that would adversely affect the indicated spreads. At CKT’s request, Hamilton sent a letter dated 20 February 2003 to CKT[14] confirming that the transaction would proceed to closing (subject to the usual caveats).
[19] By a letter dated 8 May 2003 (but sent to HVB on 9 May 2004), CKT terminated the transaction and HVB’s engagement as the arranger.[15] This letter was accompanied by a letter from PPCF to HVB dated 9 May 2003.[16]
[21] Unlike CKT, HVB’s position with regard to termination had always been that the only clause conferring the right to termination to CKT was cl (g), which only entitled CKT to terminate after (ie upon or a reasonable time after) the completion of due diligence on or about mid-February 2003. By 8 May 2003, the transaction had moved far beyond that stage and CKT had lost its right to rely on cl (g).
[22] Hamilton claimed that HVB had already paid the third party fees and expenses for DTZ Debenham Tie Leung (SEA) Pte Ltd (“DTZ”) and Ernst & Young. HVB had not paid the fees and expenses for Fitch and for Standard & Poor’s (“S&P”) because the rating agencies had agreed, in light of their relationship with HVB, to wait until the outcome of this action before being paid by HVB. However, HVB owed the rating agencies the fees and expenses charged by them and certainly would be paying those fees and expenses.
[23] He stated that HVB would pay Fitch’s full fee of US$80,000 and not just the break fee of US$50,000. He stated that Fitch had indeed completed all its work in relation to assignment of a rating for the transaction, and this was Fitch’s position as well.
Pang
[24] Pang appeared to be the key witness for the plaintiff. His evidence requires reproduction somewhat at length.
[25] Pang was HVB’s principal director and team leader for the transaction, and was involved in the transaction from its inception to the termination. Hamilton exercised general supervision over HVB’s work on the transaction.
[26] His evidence as to how HVB structured the transaction was as follows. CKT’s property, ie its flagship Tangs Department Store on 320 Orchard Road (the intended security backing the bond issuance) was to be sold to a wholly-owned subsidiary of CKT, namely, Tangs Properties, and leased back by CKT. The sale of Tangs Department Store to Tangs Properties would be financed partly by a sub-shareholders’ loan from CKT and loans from a special purpose vehicle (“SPV”). The SPV is an independent bankruptcy-remote entity held by a charitable trust set up to issue bonds to the capital market. The bonds issued by the SPV are to be backed by the loan to Tangs Properties, whereby Tangs Properties would pledge the Tangs Department Store to the SPV as security for the loan. Thus the bonds would ultimately be backed by the Tangs Department Store and the cash flows generated by the department store operations.
[28] At no time prior to signing the mandate letter and entering into the contract did CKT or its advisers, Gerald Ong and Debbie Leong (then with the Bank of Tokyo-Mitsubishi), inform HVB that the UOB Loan had been converted to bonds. Pang’s evidence was that he had asked Gerald Ong specifically about this and was informed that there were no bonds issued, and further that PPCF would take care of the redemption of the UOB Loan and HVB should concentrate on the transaction.
[29] Under the mandate letter, CKT engaged HVB to provide professional services as the arranger of the transaction. HVB’s remuneration for such services would have amounted to about $1.7m.
[30] On cl (g), he said that the only provision in the contract allowing CKT to terminate the transaction and HVB’s appointment as the arranger was cl (g).
[31] Pang’s understanding of cl (g) was similar to that of Hamilton in that CKT was only allowed to terminate upon HVB’s completion of its due diligence or a reasonable time thereafter, which, in Pang’s opinion, was one or two weeks after HVB had completed its due diligence.
[32] Pang stated that he understood the words “while” and “after” to mean “upon”. In this respect, when he did the first draft of the said clause,[17] it was not vetted by HVB’s in-house counsel who was on vacation and not in the office. According to him, cl (g) did not confer upon CKT the right to terminate at any time after HVB had completed its due diligence.
[33] According to Pang, cl (g) was inserted into the mandate letter specifically at the request of CKT made on or about 13 January 2003 in the discussions on the terms of the mandate letter. In an e-mail dated 13 January 2003 from PPCF’s Debbie Leong to Pang, it was stated:
Prior to CKT’s request on or about 13 January 2003, there was no cl (g) or its equivalent.
[34] He said that CKT’s concern behind the request for the insertion of cl (g) was that it should have an escape route in the event that HVB’s due diligence revealed that the estimated funding spreads would not be achievable. Clause (g) was thus inserted specifically to allow CKT to terminate the transaction after (ie when) HVB had completed its due diligence to ascertain whether the estimated funding spreads for the notes would be achievable. In the event the due diligence revealed that the estimated spreads would be missed by more than ten basis points, CKT would be entitled to terminate, instead of proceeding with the transaction, without having to pay HVB anything. However, if the due diligence revealed that the indicative spreads would be achievable within ten basis points of the indicative spreads (ie that HVB had not been inaccurate in its indicative spreads), CKT would have to pay the plaintiff the break-up fee if it decided to terminate then.
[36] He said that the break-up fee of $165,000.00 was intended to be an estimate of the likely fees that HVB would have incurred for its due diligence, which was expected to take about two to three weeks in the life of a transaction that was expected to take about eight weeks. It was also Pang’s evidence that he had specifically told Debbie Leong, in one of the telephone discussions that he had with her, that the $165,000.00 was an estimate to cover two to three weeks of due diligence.
[37] HVB commenced its due diligence to ascertain the achievable funding spreads immediately after the signing of the mandate letter on 24 January 2003 and completed its due diligence in or about mid-February 2003.
[38] At the same time, pursuant to its duties as the arranger, HVB proceeded to liaise with Fitch and S&P, the rating agencies for the rated notes under the transaction. Fitch and S&P also had to conduct their own respective due diligence for this purpose. CKT appointed Knight Frank to conduct a valuation of CKT’s property and produce a report thereon in support of the transaction process. M/s Allen & Overy Shook Lin & Bok (“AOSLB”) were appointed as the transaction counsel on or about 5 February 2003. Dexia Trust Services Singapore Limited was appointed as the trustee for the noteholders under the transaction.
[39] Pang asserted that the transaction process was very interactive as there were daily discussions between HVB and CKT or PPCF, where HVB updated PPCF or CKT on the progress of the transaction.
[40] On 10 February 2003, HVB first learnt that, contrary to what CKT and its advisers had represented to HVB, the UOB Loan had apparently been converted to about $42m worth of bonds that had been sold to third parties (“the existing bonds”), and that these existing bonds had to be redeemed in connection with the repayment of the UOB Loan.
[41] Pang’s evidence was that he had asked PPCF’s Gerald Ong whether there were any bonds outstanding. The reason why he had asked Gerald Ong this question specifically was that he was in the bond business and knew how difficult it was to identify bondholders in the market. Pang stated that he did not look for any references to bonds in the documents given to HVB for its due diligence because Gerald Ong had told him specifically (in response to his specific question) that there were no bonds outstanding.
[42] On 18 February 2003, HVB learnt that the next earliest date for redemption of the existing bonds was 21 May 2003, which meant that the notice for redemption (which required three months’ notice) would have to be given at the latest on 21 February 2003 (three days away).
[43] Pang maintained that HVB was not responsible under the transaction for the redemption of the existing bonds nor for the redemption of the UOB Loan, as this was not part of the transaction. This issue had not been discussed in the talks leading up to the mandate letter and there was no provision in the mandate letter for this.
[44] Prior to 20 February 2003, in or about mid-February 2003, HVB completed its due diligence and concluded that the funding spreads would be realisable within ten basis points of the estimated spreads, as indicated on the Indicative Term Sheet.
[45] It was Pang’s evidence that in a securitisation transaction, there was no general requirement for the arranging bank to provide a formal notification of the completion of its due diligence to the client, as the nature of the transaction was an interactive one and the client would be updated on the progress of the transaction. Further, in this case, there was also no obligation on HVB to provide a formal notification of the completion of HVB’s due diligence to ascertain whether the estimated spreads were achievable.
[46] Nonetheless, CKT was aware that HVB had completed its due diligence for the purposes of ascertaining whether the estimated spreads would be achievable.
[47] HVB wrote a letter on 20 February 2003 at the specific request of Gerald Ong for and on behalf of CKT, because CKT needed to assure HSBC Trustee that HVB’s due diligence had been satisfactorily completed and that therefore CKT would be in a position to finance (via the transaction that would therefore proceed to completion) the early redemption of the existing bonds. This letter was therefore issued on 20 February 2003 prior to the meeting with HSBC Trustee on 20 February 2003.
[48] Pang stated that CKT and PPCF knew that HVB’s letter of 20 February 2003 was a clear notification of the completion of the plaintiff’s due diligence and that the indicated spreads were achievable.
[49] According to Pang, the due diligence by the rating agencies (Fitch and S&P) was completed on 10 February 2003 and 11 February 2003 respectively. Although there were outstanding issues relating to the valuation of, and the insurance coverage for, the property, these were, in Pang’s view, not deal killers and were merely issues which had to be followed up with subsequent to the due diligence meetings held on 10 and 11 February 2003 as part of the rating agencies’ process.
[50] Pang explained that as rating reports would only be issued on the date of the settlement of the bonds, Fitch and S&P never issued their rating reports because of the termination.
[51] Pang said that HVB took steps to obtain investors for the unrated bonds (the C and D notes) as early as right after the mandate letter was signed, by commencing discussions on a confidential basis with certain investors. Pang claimed that he had, in assessing the potential for unrated investors, spoken to about three different unrated investors in April or May 2003. He had given them all the details about the size, quality of the bond, and of the location and kind of property that was involved. Pang’s evidence was that based on the interest in the market, HVB could indicate that the spread for the unrated notes could be achieved. Pang said in re-examination that immediately prior to 8 May 2003, HVB was confident of selling all its unrated bonds, and that was why HVB was claiming the loss of selling commission in full.
[52] Pang said in cross-examination that prior to 20 February 2003, HVB did not at that point in time have to go to the market to sound out the interest level for the rated bonds because the rated bonds were underwritten by HVB. HVB’s due diligence for the rated notes was to ensure that the underlying property and whole financial structure would work and HVB could present this to the rating agency to achieve a certain rating for the rated notes. Pang further said that based on experience, this was achievable.
[53] He claimed that HVB had also effectively obtained its internal credit committee’s approval for its underwriting obligations under the mandate letter. HVB had intended to submit its internal credit request on 19 February 2003, after it completed its due diligence, but because of the issues relating to the redemption of the bonds, the internal credit request was only submitted on 15 April 2003. The credit committee gave its approval by circulation to its members from 8 to 13 May 2003 in ignorance of CKT’s termination.
[54] Pang explained the sequence of events following credit approval being given, conditional upon the rating agency issuing a report confirming the ratings in the Indicative Term Sheet. He said that after the arranger got a verbal approval from the rating agency, the deal would be launched with an information memorandum and the deal would be sold. After the arranger received money from the investor and delivered it to the originator, the arranger would then put its (the arranger’s) money on the unsold rated bonds. The rating agency would then issue a rating letter, which the arranger would give to the internal credit committee to fulfil the committee’s condition. Pang explained that this was why the rating report or letter from the rating agencies would only be produced to the internal credit committee after HVB had already underwritten the bonds and sold the bonds in the market.
[55] As at 8 May 2003, in terms of rated securities, Pang gave evidence that HVB had in fact got a rating of $15m more than what was indicated in the Indicative Term Sheet.
[56] In relation to the underwriting fee for the rated bonds, Pang’s evidence was that regardless of whether the rated bonds were sold, HVB would still underwrite the bonds. Therefore, it would still earn its underwriting fee.
[57] He said that immediately after HVB had issued its letter dated 20 February 2003, on 21 February 2003, the transaction came to a halt whilst CKT decided whether or not to proceed with the transaction.
[58] On or about 24 February 2003, Pang learnt from Gerald Ong that CKT had conducted a board meeting on the issue of the redemption of the existing bonds, and to discuss whether to proceed with the transaction. On 25 February 2003, Pang requested Gerald Ong by e-mail at 9.22am[18] for an update on CKT’s decision following its board meeting, and enquired whether the transaction was to proceed. On 26 February 2003, Pang informed his team by internal e-mail[19] of his belief that the transaction would be proceeding and informed the team to be prepared to start intensive work on the transaction again.
[59] According to Pang, subsequent to HVB’s letter dated 20 February 2003, CKT by itself and its adviser, PPCF, constantly impressed upon HVB the urgency in moving the transaction forward.
[60] Pang referred to the minutes of CKT’s board meeting held on 27 February 2003[20] which stated[21] that CKT’s board of directors had decided unanimously to proceed with “HVB on condition that HVB was able to deliver the interest rate spreads as indicated in their Term Sheets”.
[61] CKT appointed a new transaction counsel, M/s Allen & Gledhill (“A&G”), on or about 3 or 4 March 2003 in place of AOSLB. CKT terminated AOSLB’s appointment on or about 28 February 2003, as CKT took the position that AOSLB had failed to advise or properly advise CKT about the notice that was required to be given for redemption of the existing bonds.
[62] At a meeting on 3 March 2003, PPCF informed HVB that CKT had given approval for the transaction to be completed as soon as possible, regardless of any issues in connection with the notice period for redemption of the existing bonds. HVB subsequently targeted 23 April 2003 as the completion date for the transaction. Pang conveyed this to the rating agencies on 4 March 2003, and HVB drew up a revised “Critical Path and Estimated Schedule”. PPCF also drew up a tentative timetable for the redemption process, taking into account HVB’s proposed deal launch and underwriting date of 16 April 2003.
[63] On or about 12 March 2003, HVB, on behalf of CKT, engaged DTZ as independent valuer to produce a new valuation report on CKT’s property as required by the rating agencies. This was because the rating agencies were dissatisfied with Knight Frank’s valuation report prepared for the rating agencies’ due diligence.
[64] According to Pang, the DTZ report was “pretty much all done” on or about 14 April 2003.
[65] HVB also appointed Ernst & Young as the transaction accountants on behalf of CKT.
[66] On 7 March 2003, CKT’s Angie Ng sent an e-mail to Pang stating that CKT had requested to pre-pay the UOB Loan to UOB and its banking consortium. As HVB was not aware that CKT was in talks with any other bank or financial institution to arrange for alternative financing, or that CKT was considering, or interested in seeking, any alternative means of financing other than the transaction, he regarded the request by CKT to pre-pay the UOB Loan under its previous obligations as a clear and unequivocal representation to HVB that CKT wanted to proceed with the transaction to completion. This was because, as far as HVB was aware, the pre-payment of the UOB Loan could only be made with the proceeds from the transaction.
[67] Relying on CKT’s representations, from about early March 2003 until the termination of the transaction on or about 8 May 2003, HVB worked and communicated extensively with CKT, PPCF, A&G and CKT’s other transaction counterparts, on a continuing and almost-daily basis, for the expeditious progress and furtherance of the transaction.
[68] On or about 2 April 2003, HVB learnt from A&G that Debbie Leong had orally requested A&G on or about 2 April 2003 to slow down the progress of the work for the transaction without informing the other parties involved in the transaction.
[69] On 2 April 2003, Pang called Gerald Ong, who was Debbie Leong’s superior at PPCF, to clarify the position. Gerald Ong agreed with Pang that Debbie Leong’s request was inappropriate and assured Pang that Debbie Leong’s request was due to a misunderstanding and requested Pang to ignore Debbie Leong’s request.
[70] He said that the transaction attracted stamp duty since it involved transfer of ownership of CKT’s property to a special purpose company (“SPC”). To facilitate the waiver of stamp duty, HVB agreed to interpose itself into the transaction as a financial institution to provide a bridging loan so as to relieve CKT of the need to seek a ministerial waiver of stamp duty pursuant to s 74 of the Stamp Duties Act (Cap 312, 2000 Rev Ed) and facilitate instead a waiver pursuant to s 15 of the Stamp Duties Act.
[71] The waiver of stamp duty was the responsibility of the transaction counsel and not of HVB, since AOSLB’s engagement letter dated 5 February 2003[22] stated unequivocally that AOSLB’s duties included “applying for an exemption from stamp duty in relation to the sale under Section 15 of the Stamp Duties Act”. In contrast, HVB’s obligations under the mandate letter did not include work in connection with, or facilitating, the waiver of stamp duty. Notwithstanding this, HVB agreed out of goodwill to assist CKT to secure a waiver of stamp duty.
[72] Pang claimed that by 8 May 2003, HVB had done the following:
(a) It had completed structuring of the transaction.
(b) It had obtained in-principle rating committee approval from the rating agencies of the Indicative Term Sheet capital structure for the notes.
(c) It had obtained the valuation report by DTZ.
(d) It had been involved in discussions on the insurance policy (which were in their advanced stage) and the policy would have been issued in time for the scheduled closing date of 30 June 2003. Further, it was not HVB’s responsibility to procure the insurance policy for the transaction but that of Acclaim Insurance Brokers Pte Ltd, which was engaged by CKT.
(e) It had effectively obtained its internal credit committee’s approval for its underwriting obligations under the mandate letter, including its role in providing a bridging loan to facilitate the waiver of stamp duty.
(f) It had conducted confidential and advanced discussions with possible “placees” for the majority of the bonds.
(g) It had also performed work in relation to the moneylender licence waiver requirement.
(h) It had supported and co-ordinated with A&G in relation to the transaction structure for the application for stamp duty waiver.
(i) It had also performed work in connection with the second and penultimate transaction documents with input from CKT’s other transaction counterparts.
[74] On or about 8 May 2003, CKT terminated the transaction and HVB’s engagement as arranger by way of a letter from CKT dated 8 May 2003 and addressed to HVB, which was sent to HVB on 9 May 2003.
Downer
[75] Downer’s evidence was in relation to the following aspects:
(a) securitisation practice in general;
(b) the typical elements of due diligence by the arranger; and
(c) the typical elements of structuring and underwriting.
[76] According to Downer, securitisation is a method of raising funds by which cash flows are converted into securities. The cash flows backing the bonds are typically originated by the company seeking finance (known as the originator) or a subsidiary or affiliate within its corporate group structure. The cash flows can be generated from different assets such as property, loans or sales receivables. Thus, investors who purchase bonds issued in a securitisation transaction will rely mainly on the cash flows as security, rather than the originator’s credit and its existence. On the other hand, the bond investors would typically have no recourse to the originator in the event of default on the notes where such default is due to the poor or under-performance of the cash flows. Such examples of poor or under-performance would be due to certain credit events within the cash-flow pool. The main source of investors for securitisation would be from the capital market rather than the bank loan market. One advantage of financing through securitisation is that it typically involves less reliance on a single financier as would be the case in a bank loan. In addition, securitisation investors only have access to the securitised cash flows; a capital market investor who loses money in buying a bond backed by these cash flows would normally not be able to sue the originator for such losses. This is to be contrasted this with a bank loan, where the bank lender would ultimately be able to put the borrower into bankruptcy in the event of a loss or potential loss on a bank loan.
[78] According to him, the due diligence conducted by the arranger is different from the due diligence undertaken by other participants, such as the legal advisers and the rating agencies. The arranger’s due diligence will not include the legal advisers’ check on the contracts in relation to the originator’s cash flow or receivables; that task is performed by lawyers who report any adverse findings to the arranger. Nor does it include the rating agency’s comparison of performance figures of the originator as compared to other originators within its peer group, or in the absence of a peer group member, other such suitable benchmarks as may be determined by the rating agencies. The arranger’s due diligence is normally completed before the rating agency gives its indication of the rating. It is quite often the case that the arranger, using its skill and experience, can provide an accurate assessment of the likely transaction structure long before the rating agencies have even been contacted.
[79] He mentioned that the fact that the underwriting commitment of an arranger remains unsigned prior to the launch date does not mean that the arranger has not completed its due diligence. It will normally be the case that an underwriting agreement is signed after the transaction has been priced or “launched” into the market. However, market practice across the globe for this type of transaction dictates that a transaction is only launched once the transaction parties have agreed verbally to proceed to complete the transaction.
[80] Downer explained that structuring of a securitisation transaction includes:
(a) evaluating and determining the optimal financing structure;
(b) analysing financial data and forecasts;
(c) formulating a cash-flow model for the transaction;
(d) negotiating with the rating agencies;
(e) liaising with transaction legal counsel on all aspects of the transaction;
(f) proposing credit enhancement structure and alternatives; and
(g) co-ordinating with other professionals such as security trustee, note trustee, corporate administrator, servicer, accountant, tax adviser and any other technical advisers in relation to the transaction.
[81] Downer added that the structuring of a securitisation transaction is completed when the rating agencies indicate how much debt from the transaction can be rated at specific categories of rating within the transaction cash-flow structure, and when documentation is well progressed.
[82] He said further that the underwriting obligations in a securitisation transaction include obligations:
(a) to subscribe for the bond issuance at the settlement as the primary subscriber for the whole issuance size;
(b) to sell the note issuance to capital market investors;
(c) to create market awareness for the placement of the notes;
(d) to obtain internal credit approval for the bond underwriting; and
(e) to determine final pricing prior to the settlement of the transaction.
[83] Further, according to Downer, the principal work done in relation to underwriting is the identification of potential buyers of the notes and obtaining in-principle indications of interest from them. This process is known as a book-building process and can take anything from one to four weeks depending on transaction size, sophistication of underlying structure and market conditions. Once this has been done, the bulk of the underwriter’s work is done.
[85] He added that at the due diligence phase, he would not expect the arranger to independently verify the information that has been received by them, for example, financial information.[25]
[86] In re-examination, Downer said that the concept of due diligence had to be separated into segments of initial due diligence and ongoing due diligence. He explained that:
(a) Initial due diligence is for planning purposes, to try and ascertain whether the transaction should go ahead.
(b) After the initial decision to go ahead is made, there is then the process of ongoing due diligence to address the issues that are uncovered in the initial due diligence phase by the rating agency, or other issues that may be raised during the course of the transaction process by the lawyers, the rating agencies, the arranger or the originator of the transaction. The process of ongoing due diligence may, at some point, lead to the transaction not going ahead if an obstacle that was identified in the initial due diligence phase of the transaction was viewed then as something that could be resolved but subsequently is not able to be resolved. Ongoing due diligence would continue even beyond the closing of the transaction.[26]
[87] Downer was also of the view that obtaining internal credit approval would be post-due diligence.[27]
The defendant’s evidence
Angie Ng
[88] Angie Ng’s testimony was as follows.
[89] On 24 January 2003, CKT engaged HVB to be the arranger for a securitisation transaction for the purpose of refinancing CKT’s existing debt obligations comprising a transferable loan facility in the amount of $68m, and $42m in principal amount of secured bonds. The securitisation transaction involved the issuance of notes in the sum of $136.8m, which was to be backed by commercial rental receivables.
[90] CKT decided to accept the securitisation proposal from HVB, and to appoint HVB as the arranger, as HVB’s proposal was at that time commercially the most attractive to CKT.
[91] The terms of the appointment of HVB as the arranger were set out in the letter of appointment (ie, the mandate letter) dated 24 January 2003.
[92] The mandate letter was prepared by HVB. Sometime in early January 2003, HVB and CKT, together with CKT’s advisers, PPCF, commenced discussions on the draft terms of the mandate letter. At CKT’s request, HVB agreed to insert a break-up fee clause in the draft mandate letter. On 14 January 2003, HVB sent a revised draft mandate letter to her and to Debbie Leong of PPCF. This revised draft included a clause which provided for the payment of a break-up fee in the event that the transaction was terminated. Clause (g) of the draft mandate letter dated 14 January 2003 stated that:
[93] On 16 January 2003, Debbie Leong, on CKT’s behalf, provided her comments on the draft mandate letter by e-mail. Her comments on the clause relating to the payment of a break-up fee were as follows:
[94] Angie Ng also made reference to an e-mail dated 20 January 2003 from Lee Sze Sze of HVB where the latter had summarised her discussions with Debbie Leong with respect to the break-up fee as follows:
[95] Angie Ng averred that CKT wanted to negotiate for a reduction in the break-up fee from the originally proposed sum of $275,000, which was around half the structuring fee payable upon completion of the transaction, to $165,000, which was about 10% of the aggregate of the structuring fee and selling commission that would be payable to HVB had the transaction been completed. On 21 January 2003, Debbie Leong, on CKT’s behalf, followed up with additional comments on the draft mandate letter by way of an e-mail to HVB:
[96] Thereafter, HVB agreed to incorporate CKT’s comments into the mandate letter, and also agreed to CKT’s proposed reduction of the break-up fee. On 21 January 2003, HVB sent a revised copy of the draft mandate letter with the clause on the payment of a break-up fee amended as proposed by CKT.
[97] Angie Ng maintained that HVB and CKT did fully address their minds on the clause in the mandate letter that provided for the payment of the break-up fee. HVB had agreed to insert the break-up fee clause at CKT’s request, and had also agreed to the amount of the break-up fee payable by CKT in the event that the transaction and HVB’s appointment as the arranger were to be terminated.
[98] Retracing the developments concerning the termination of the transaction, Angie Ng said as follows.
[99] In an e-mail dated 28 April 2003, Gerald Ong, the managing director of PCF, asked Pang to provide an update of the progress of the transaction and whether there were any issues that could delay or prevent the completion of the transaction by 30 June 2003. Pang replied by e-mail on 30 April 2003 that HVB expected to complete the transaction by 30 June 2003. Pang had stated in his e-mail that there were some minor issues to be resolved but there was no major issue that would delay the transaction.
[100] On or about 29 April 2003, CKT received an unsolicited offer from OCBC for a bilateral term loan. The bilateral term loan was for the amount of $140m for a five-year duration. After reviewing the terms of this bilateral term loan offer, the board of directors of CKT considered the terms to be substantially more attractive than the transaction. This was because the bilateral term loan from OCBC allowed CKT greater flexibility in cash-flow management and was a cheaper alternative for refinancing CKT’s existing debt obligations.
[101] The board of directors of CKT, pursuant to its duty to act in the best interests of the company, decided on or about 2 May 2003 to accept the bilateral term loan offer from OCBC.
[102] On 7 May 2003, Gerald Ong, on CKT’s behalf, met with Pang and informed him of CKT’s decision to terminate the transaction and HVB’s appointment as the arranger. Subsequently, Foo also wrote to Hamilton on 8 May 2003 to inform HVB that:
[103] In the same letter, Foo stated that notwithstanding the termination, CKT would honour its obligations as outlined in the mandate letter.
[104] Angie Ng maintained that from the outset, and as stated in CKT’s letter dated 8 May 2003, CKT had always taken the position that it was prepared to pay the break-up fee to HVB in accordance with cl (g), and to reimburse HVB for reasonable out-of-pocket and professional expenses in accordance with cll (h) and (i) of the mandate letter.
[105] Angie Ng added that the only payment that HVB was entitled to upon the termination of the transaction and its appointment as the arranger was the break-up fee as agreed between the parties.
[106] Angie Ng further said that CKT had also always taken the position that it was prepared, in accordance with the terms of the mandate letter, to pay for the reasonable out-of-pocket expenses and fees of the professionals engaged for the transaction. Under cll (h) and (i) of the mandate letter, CKT was only liable to pay for such expenses and fees for which it had granted its prior approval.
[107] Angie Ng mentioned that for the purposes of the transaction, HVB had engaged S&P and Fitch as the rating agencies, Ernst & Young as tax accountants, and DTZ to provide an independent valuation of the property. CKT was prepared to pay for the fees charged by S&P and Ernst & Young. CKT was also prepared to pay the fee charged by DTZ, provided that its finalised valuation report would be furnished to CKT. To date, CKT had not received DTZ’s finalised valuation report. On the other hand, CKT was not prepared to pay for the fee now charged by Fitch. This was because the fee now charged by Fitch, in the sum of US$80,000, was the full fee payable only upon completion of the transaction. The letter of appointment of Fitch provides that “should the transaction progress beyond the initial feedback stage but not close, break fees of US$50,000 will be payable”. Given that the transaction had been terminated, the only fee that Fitch was entitled to was the break fee in the sum of US$50,000.
[108] On the question of due diligence, Angie Ng disagreed that it had been completed prior to 20 February 2003. She claimed that CKT had never been notified by HVB that due diligence had been completed and that the letter from HVB to CKT dated 20 February 2003 did not in any way amount to a notification of due diligence.
[109] According to Angie Ng, the background to HVB’s letter to CKT dated 20 February 2003 was as follows. The main purpose of the transaction was to refinance CKT’s debt obligations, comprising a transferable loan facility in the sum of $68m and secured bonds in the principal sum of $42m. The refinancing exercise would accordingly involve the redemption of such bonds. However, the legal counsel, AOSLB overlooked giving the required three months’ advance notice of redemption to the bondholders.
[110] As a result, A&G was appointed, in place of AOSLB, as legal counsel for the transaction. To assure CKT that, notwithstanding the complication that had arisen with respect to the redemption of the secured bonds, HVB remained confident in the transaction, Hamilton wrote the letter dated 20 February 2003 to CKT. After that letter and up till the letter of termination of the transaction dated 8 May 2003, CKT was never informed by HVB, in writing or otherwise, that the due diligence for the transaction had been completed.
[111] She maintained that, in any event, for the purposes of cl (g), it was irrelevant whether or not due diligence had been completed. Even if it had been completed, cl (g) allowed CKT to terminate the transaction and the appointment of HVB as the arranger upon payment of the agreed break-up fee.
[112] As regards CKT’s instruction to HVB to obtain a new valuation from DTZ, she disagreed that such instruction amounted to a representation that CKT would not exercise its right under cl (g). On or about 28 February 2003, Fitch and S&P, the rating agencies, indicated that they did not find the previous valuation conducted by Knight Frank to be satisfactory. For the purpose of obtaining a valuation report satisfactory to the rating agencies, HVB appointed DTZ to be the alternative valuer for the transaction.
[113] She regarded the appointment of an alternative valuer as being part of HVB’s duties under the terms of the mandate letter, and this appointment could not be regarded as amounting to a representation, or as giving rise to any assumption, that CKT would not be exercising its right under cl (g).
[114] On the subject of the waiver of stamp duty, Angie Ng said that it was not an additional task undertaken by HVB. All parties were aware at all material times that the waiver of stamp duty was a critical part of the transaction, without which the transaction would not have been commercially feasible. Based on the estimated value of the property of around $240m, stamp duty assessed at about 3% of the value would amount to approximately $7.2m.
[115] She claimed that at various meetings between CKT, PPCF and HVB from around September 2002 to around April 2003, CKT and PPCF had emphasised to HVB that it was crucial to obtain a waiver of the stamp duty, for the transaction would not be commercially feasible to CKT without it. Thus, even though the mandate letter did not expressly state that HVB had to obtain a waiver of stamp duty, it was the common understanding of HVB, PPCF and CKT that waiver of stamp duty must be obtained. According to her, up till CKT’s letter of termination sent to HVB on 8 May 2003, CKT was not informed by HVB as to whether the waiver of stamp duty had been obtained.
[116] Dealing with the query contained in Gerald Ong’s e-mail to HVB dated 28 April 2003 whether the transaction could be completed by 30 June 2003, she said that it was merely a request for an update of the progress of the transaction, and for confirmation on whether there were any outstanding issues that needed to be resolved before the transaction could be completed, so that PPCF could update CKT accordingly. Such a request, in her view, could not be regarded as amounting to any representation, or as giving rise to any assumption, that CKT would not be exercising its right under cl (g).
[117] On the topic of regular communication with A&G and a request for pre-payment of the UOB Loan, she did not see how any communications with A&G on the transaction, or CKT’s communications with UOB on the pre-payment of its loan, could be regarded as a representation, or as giving rise to an assumption, that CKT would not be exercising its right under cl (g).
[118] Angie Ng averred that under the terms of the mandate letter, CKT was not prohibited from discussing with any other bank or financial institution on the possibility of alternative arrangements for refinancing. As such, she could not see how any such discussions could be regarded as a representation or as giving rise to an assumption that CKT would not be exercising its right under cl (g).
[119] She added that, even if the transaction had been completed, HVB might not be entitled to claim for fees in the sum of $1,725,672, which was the aggregate of the structuring fee, the underwriting fee for the A and B notes, and the selling commission for the C and D notes. According to her, there were two reasons for this. First, under the mandate letter, HVB had agreed to underwrite the A and B notes. However, HVB only agreed to place the C and D notes on a best effort basis. There was thus no guarantee that the C and D notes would be placed out. Accordingly, there was no guarantee that HVB would be entitled to the selling commission in the sum of $463,500 with respect to the C and D notes.
Foo
[120] Foo’s evidence was to the following effect.
[121] He testified that Angie Ng was the key person from CKT involved in the transaction. She had, however, consistently kept him informed on the status and progress of the transaction. E-mails exchanged between CKT, HVB, PPCF and A&G relating to the transaction were also copied to him.
[122] After associating himself with the testimony of Angie Ng, almost in its entirety, Foo mentioned that on or about 29 April 2003, CKT received an unsolicited offer from OCBC for a bilateral term loan. The bilateral term loan was for the amount of $140m and for a five-year duration. The terms of this bilateral term loan offer were substantially more attractive than the transaction. This was because the bilateral term loan from OCBC gave CKT greater flexibility in cash-flow management and was a cheaper refinancing alternative as compared with the transaction.
[123] Consequently, on 30 April 2003, he informed Gerald Ong of the bilateral term loan offer from OCBC. On 2 May 2003, this bilateral term loan offer was discussed by the majority of the members of the board of CKT. After deliberation, there was consensus among the majority of the members of the board to accept the bilateral term loan offer from OCBC and to terminate the transaction.
[124] Consequently, on 8 May 2003, Foo wrote a letter to Hamilton to notify him of CKT’s decision to terminate the transaction. In his letter, he made it clear that notwithstanding the termination, CKT would honour its obligations as outlined in the mandate letter, which was to pay the break-up fee in accordance with cl (g).
[125] According to Foo, CKT had always taken the position that it was prepared to pay the break-up fee to HVB in accordance with cl (g) and to reimburse HVB for reasonable out-of-pocket and professional expenses in accordance with cll (h) and (i) of the mandate letter. Foo said that he did reiterate CKT’s position at a meeting with Hamilton on 9 May 2003, as well as in subsequent correspondence to HVB.
Gerald Ong
[126] Gerald Ong in his testimony associated himself with the averments contained in the affidavits of evidence-in-chief of Angie Ng and Debbie Leong.
[127] He averred that PPCF was the principal adviser to CKT for the transaction. In that regard, he worked closely with Debbie Leong, then Associate Director of PPCF, in advising CKT on the transaction.
[128] He said that before Debbie Leong and he joined PPCF in January 2003, both of them were with Tokyo Mitsubishi International (Singapore) Ltd (“TMIS”). On or around 16 August 2002, both met with Pang and Christine Tan of HVB at the office of HVB, to discuss a potential transaction involving CKT and the proposed structure of the transaction. In the course of their discussion, they asked Pang whether stamp duty would be payable on the proposed transaction. Based on the estimated value of the property, the issue of whether stamp duty was payable would have a significant impact on CKT’s decision on whether to proceed with the proposed securitisation transaction. Pang told them in their discussion that no stamp duty would be payable on the ground that the proposed transaction would be regarded as secured lending and did not involve a true sale. Debbie Leong and he continued to advise CKT on the transaction after they left TMIS to join PPCF.
[129] Gerald Ong mentioned that CKT decided to accept the proposal put forward by HVB after considering various refinancing options. Thereafter, HVB and CKT commenced discussions on the terms of the mandate letter and fully addressed their minds to the effect of cl (g), including the amount of the break-up fee payable in the event of CKT terminating the transaction and HVB’s appointment as the arranger after HVB had completed the due diligence.
[130] On the issue of waiver of stamp duty, he said that even before the signing of the mandate letter, Debbie Leong and he had discussed the matter with HVB. Pang represented to him that based on HVB’s prior experience, it would succeed in obtaining a waiver of stamp duty even if it was payable. In various discussions between HVB, CKT, Debbie Leong and himself from around September 2002 to April 2003, both he and Debbie Leong had emphasised to HVB the importance of obtaining waiver of stamp duty.
[132] It was on or around 7 April 2003 that Pang brought up the idea of having a new structure for the transaction whereby HVB would, by providing a bridging loan to finance the purchase of the property by SPC 1 (as set out in the Indicative Term Sheet), interpose itself between SPC 1 and SPC 2 to facilitate the waiver of stamp duty. Pang then communicated this proposed new structure to CKT on or around 10 April 2003.
[133] In A&G’s e-mail dated 14 April 2003, A&G mentioned that it was still unable to discuss with the stamp duty office about the waiver of stamp duty, and that A&G was then also discussing with HVB on the need to proceed with an application to the Minister for Finance for ministerial remission for the original structure of the transaction.
[134] On or around 23 April 2003, A&G applied to the stamp duty office for waiver of stamp duty based on the new proposed structure of the transaction whereby HVB would provide a bridging loan. Thereafter, and up till the letter of termination sent by CKT to HVB on 8 May 2003, Gerald Ong was not informed by HVB as to whether the application for waiver of stamp duty was successful.
[135] On 28 April 2003, Gerald Ong sent an e-mail to HVB, Ernst & Young and A&G to say that the cut-off date for the completion of the redemption of the bonds was 30 June 2003 and that, in accordance with the notice to the bondholders, CKT was obliged to redeem the bonds in their entirety by 30 June 2003 without exception. He asked HVB, A&G and Ernst & Young to confirm if all the outstanding issues relating to the transaction could be resolved by 30 June 2003, and whether there was any issue likely to hinder the completion of the transaction by that date. On 30 April 2003, Pang replied that HVB expected to complete the transaction by 30 June 2003, save for some minor issues to be resolved.
[136] He claimed that his e-mail of 28 April 2003 was merely a request for an update of the progress of the transaction and for confirmation of the outstanding issues which remained unresolved. He added that when he sent the e-mail on 28 April 2003 to all the parties, he had no knowledge of the bilateral term loan offer that CKT had received from OCBC. On 30 April 2003, Foo informed him of this bilateral term loan offer. Sometime in the morning of 7 May 2003, Foo informed him that CKT had on 2 May 2003 decided to accept the OCBC term loan offer and to terminate the transaction and HVB’s appointment as the arranger. In the afternoon of 7 May 2003, he met Pang and informed him of CKT’s decision to terminate the transaction and HVB’s appointment as the arranger.
[137] On 9 May 2003, he sent a letter to HVB setting out the following milestones which the transaction had yet to cross as at 8 May 2003:
(a) confirmation of the completion of due diligence conducted by HVB;
(b) execution of the underwriting agreement or any formal documentation in that regard; and
(c) formal receipts of any reports from rating agencies for the rated bonds pursuant to the transaction.
Debbie Leong
[139] Debbie Leong’s testimony, by and large, was same as that of Gerald Ong as to substance and material averments in relation to the negotiations prior to the signing of the mandate letter, the break-up fee, the need for waiver of stamp duty and the termination. However, as regards matters on the waiver of stamp duty and the termination of the transaction, the highlights of her evidence were as follows.
[140] She was in full agreement with Angie Ng that it was the common understanding of all parties that waiver of stamp duty had to be obtained for the transaction.
[141] A&G, in the event, advised by its e-mail dated 7 March 2003 that there might be difficulties in satisfying the conditions for obtaining a waiver of stamp duty as the stamp duty office had queried the structure of the transaction. On or around 31 March 2003, Debbie Leong sent an e-mail to all parties to suggest that a meeting be held among all parties to discuss the possibility that the current structure of the transaction might not satisfy the conditions for a waiver of stamp duty. By an e-mail to her on the same day, Pang asked her why a meeting was needed. In her reply e-mail, she explained that the purpose of the meeting was to discuss whether there was any alternative, including amending the structure of the transaction, so as to satisfy both the objectives of the transaction and the conditions for waiver of stamp duty. She added in her e-mail that, “As you know, we have been working on the basis that there is no stamp duty.”
[142] In his e-mail reply on the same day, Pang acknowledged that he knew that was the case, but requested that A&G provide an update on the status of the application for waiver of stamp duty before calling for a meeting.
[143] On 1 April 2003, Debbie Leong received an e-mail from A&G stating that the stamp duty office had not yet responded to the application for waiver of stamp duty as the matter was still under consideration. Pang then sent an e-mail to her on 2 April 2003 to say that HVB would contact the stamp duty office to expedite the process from a different angle and that he would explore the feasibility for a “plan B” internally to tackle the issue. Pang did not, however, provide any details of the said “plan B”.
[145] On or about 11 April 2003, she was informed by an e-mail from Pang that HVB was proposing a new structure for the transaction whereby HVB would by providing a bridging loan to finance the purchase of the property by SPC 1, by interposing itself between SPC 1 and SPC 2 to facilitate the waiver of stamp duty. Pang mentioned in his e-mail that the indication from the stamp duty office on this new proposed structure appeared to be positive. He also proposed that, simultaneously, an application be made to the Minister for Finance for ministerial remission for the original structure of the transaction.
[146] On 14 April 2003, she sent an e-mail to A&G and HVB to summarise the outstanding matters with regard to the transaction. At this time, the targeted date for the redemption of the bonds was 21 May 2003. She noted in her e-mail that there was no guarantee that the 21 May 2003 redemption date would be achievable in view of outstanding issues like the application for waiver of stamp duty. As such, PPCF proposed a “stop date” of end July 2003 to be stated as the redemption date in the notice to bondholders. In A&G’s e-mail reply dated 14 April 2003, A&G mentioned that it was still unable to discuss the waiver of stamp duty with the stamp duty office, and that A&G was then also discussing with HVB on the need to proceed with an application to the Minister for Finance for ministerial remission for the original structure of the transaction. She learnt later that on or around 23 April 2003, A&G applied to the stamp duty office for waiver of stamp duty based on the new proposed structure of the transaction whereby HVB would provide a bridging loan. Thereafter and up till the letter of termination sent by CKT to HVB on 8 May 2003, she did not hear from HVB on whether the application for waiver of stamp duty was successful.
[147] On 29 April 2003, Edwin Hsu of PPCF sent an e-mail to CKT and A&G to provide an update of the status of the valuation report to be issued by DTZ for the property for the purposes of the transaction. As stated in his e-mail, the valuation report to be issued by DTZ had not been finalised yet, pending a final round of comments from the rating agencies.
[148] According to Debbie Leong, apart from the outstanding issue on the waiver of stamp duty, as at 8 May 2003, the transaction had yet to cross the milestones mentioned by Gerald Ong in his evidence.
Issues
[149] The main issues identified by counsel for the defendant are:
(a) whether the termination of the transaction by CKT was a breach of contract;
(b) whether CKT had waived, elected not to, or is estopped from exercising its right to terminate; and
(c) what amount, if any, is payable to HVB by CKT for the termination of the transaction.
[150] The issues framed by HVB’s counsel are a little more elaborate. Although they traverse the same area as that of the defendant, the sub-issues raised relate to, amongst other things, the meaning of the word “after”, the definition and dichotomy of the phrase “due diligence”, the question of waiver, election and/or estoppel and whether HVB is entitled to reasonable fees apart from the break-up fee. It is not necessary to reproduce HVB’s entire list. Suffice it to say that I propose to deal with the issues raised by both counsel on an all-inclusive basis.
Arguments and conclusion
[151] As regards the issues whether the termination of the transaction by CKT was a breach of contract and whether CKT had a right to terminate the transaction apart from cl (g), HVB in para 8 of the Statement of Claim averred that “[it] was an express, or alternatively, implied, term of the contract that [CKT’s] right to terminate under clause (g) could only be exercised within a reasonable time after [HVB’s] completion of its due diligence process to the knowledge of [CKT]”. HVB’s alternative plea was that “it was an express or alternatively implied term of the Contract that [CKT’s] right to terminate under clause (g) after [HVB’s] completion of its due diligence process could only be exercised with payment alternatively offer of payment of the break-up Fee”.

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Bayerische Hypo- und Vereinsbank AG v C K Tang Ltd

Laws this judgment relies on

Grounds of decision

Background facts and pleadings

(b) HVB had not, contrary to its claim, completed its due diligence prior to 20 February 2003;[10]

Evidence

The plaintiff’s evidence

Hamilton

Pang

Downer

The defendant’s evidence

Angie Ng

Foo

Gerald Ong

Debbie Leong

Issues

Arguments and conclusion