Telemedia Pacific Group Ltd and another v Yuanta Asset Management International Ltd and another [2016] SGHC(I) 03

Introduction

These proceedings were transferred into the Singapore International Commercial Court, by consent, on 15 April 2015. They arise from the breakdown of a commercial joint venture relationship between international parties, the agreements in respect of which were executed in Shenzhen in the People’s Republic of China (“PRC”) and in Hong Kong Special Administrative Region (“Hong Kong SAR”) in November 2010.

The first plaintiff, Telemedia Pacific Group Limited (“TPG”), registered in the British Virgin Islands (“BVI”), operates a satellite communications business in Hong Kong. The second plaintiff, Mr Hady Hartanto (to whom I will refer as “the plaintiff”) is a director of TPG and a citizen of Hong Kong SAR. The first defendant, Yuanta Asset Management International Limited (“Yuanta”), is also registered in the BVI. The second defendant, Mr Yeh Mao-Yuan (known as “Jack Yeh”) (to whom I will refer as “the defendant”) is the sole director of Yuanta, resides in China and travels on a Dominican passport.

The joint venture was to carry out securities and other diverse investments through a special purpose vehicle, another BVI registered company, Asia Energy Management Ltd (“AEM”), using funds from loan facilities secured by shares in Next Generation Satellite Communications Limited (“NexGen”) (formerly known as Ban Joo & Company Limited (“Ban Joo”)), a company listed on the Singapore Exchange (“SGX”). Although some of the communications and discussions involve reference to shares in Ban Joo, I will refer to the shares as “NexGen” shares.

In summary the plaintiffs claim that in breach of contract and in breach of their fiduciary obligations, the defendants disposed of a large number of the NexGen shares that were to be pledged as security for the loans obtained for joint venture investments. The defendants deny these claims and counterclaim that the plaintiffs unilaterally dissipated the joint venture loan funds for their personal use.

The plaintiffs also claim that the defendants wrongfully and with intent to injure them by unlawful means, conspired and combined together to defraud the plaintiffs and to conceal the fraud and the proceeds of the fraud from them. The plaintiffs claim that the defendants concealed the disposal and/or sale of 60m NexGen shares in August 2011 and 225m shares in October 2011, the proceeds of which it is alleged the defendant took for his personal use.

The plaintiff and the defendant have been involved in previous litigation in relation to some of the joint venture transactions (“the Earlier Proceedings”). The plaintiff sued Crédit Agricole (Suisse) SA (now known as CA Indosuez (Switzerland) SA) (“Credit Agricole), with which the parties held accounts, for allegedly acting without authority in October 2011 in transferring 225m NexGen shares out of TPG’s account with Crédit Agricole into Yuanta’s account (or that of its subsidiary) with Crédit Agricole. Crédit Agricole joined the defendant as third party. The plaintiff’s claims were dismissed as were Crédit Agricole’s claims against the defendant: Telemedia Pacific Group Limited v Credit Agricole (Suisse) SA [2014] SGHC 235; [2015] 1 SLR 338 (“the Judgment”).

Although they have been able to agree on a chronology of events the parties are at issue on many aspects of their relationships. In the circumstances it is necessary to refer in some detail to the background that has led the parties to this Court.

Background

In August 2008 TPG acquired 51% of the shares in NexGen. At the same time, TPG acquired a number of warrants entitling it to buy NexGen shares for S$0.03 per share. The plaintiff also became the Executive Deputy Chairman of NexGen at about the time of the transaction.

From 2008 the plaintiff was a 75% shareholder in TPG and his business partner at the time, Mr Hardi Koesnadi, held the remaining 25% of the shares through his company, Telemedia Pacific International Inc (“TPI”). In August or September 2010 the plaintiff and Mr Koesnadi decided to part ways and, as a result, TPI’s 900m NexGen shares were available for purchase.

Initial discussions between the plaintiff and the defendant

Having met only socially in either 2003 or 2005, the plaintiff and the defendant met again in 2010. Although the parties are at issue as to the location of the meetings they are agreed that in meetings during the period July to October 2010 they discussed their respective businesses and potential investment opportunities. The plaintiff claimed that the defendant introduced himself as being from a company with the Chinese name for “Yuanta Financial Holdings”, which the plaintiff understood was a large and reputable Taiwanese securities house. The defendant denied that he introduced himself in this manner.

The plaintiff claimed that in one of their discussions in July or August 2010 the defendant tried to convince him to invest in Scorpio East Holdings Limited (“Scorpio East”), a company involved in film production and distribution. The defendant denied this and claimed that it was the plaintiff who was interested in investing in Scorpio East. The plaintiff’s affidavit evidence is that at subsequent meetings with the defendant in August to September 2010 they decided to jointly acquire up to a 30% stake in Scorpio East. The defendant claimed that although he was initially “in the loop” about investing in Scorpio East, he did not receive the final terms and conditions about the transaction and later learned that the plaintiff had gone ahead on his own. It will be necessary to return to the Scorpio East investment in more detail later because the parties are at issue as to whether it was a joint venture investment (as the plaintiffs claim) or a personal investment of the plaintiff, through TPG (as the defendants claim).

The plaintiff claimed that at one of the meetings in July or August 2010 when he informed the defendant of TPG’s recent acquisition of NexGen, the defendant expressed keen interest to collaborate with him and claimed that he was involved with several large Taiwanese funds which he could persuade to invest in NexGen.

The plaintiff claimed that during these discussions he and the defendant agreed that Mr Koesnadi’s/TPI’s 900m NexGen shares would be purchased by Yuanta for S$0.05 each (S$45m in total) and that when the value of the shares increased, Yuanta would then on-sell the shares to three Taiwanese funds. The defendant denied this agreement and claimed that it was initially intended that the NexGen shares would be transferred to Yuanta, for the purposes of securing third party loans and would be held on behalf of Yuanta by the three funds. The defendant claimed that each fund would hold less than 5% of the total share capital of NexGen “in order to avoid having to make an announcement” on the SGX “for a change in substantial shareholding”.

In a meeting in October 2010 the plaintiff and the defendant agreed to undertake the joint investment project of making investments through the joint venture company (later to become AEM) utilising loan funds secured with NexGen shares. The defendant claimed that because NexGen was on the “watch-list” of the SGX and banks were “not keen” to accept its shares as security for financing, it was agreed that TPG would provide the NexGen shares to Yuanta to pledge as security for loans in Yuanta’s name because the defendant and Yuanta enjoyed a good credit rating and reputation. It was also agreed that Yuanta would then provide the loan funds to the joint venture company.

The plaintiff claimed that it was agreed that TPG would transfer NexGen shares to a “Yuanta Trust Account” to be pledged as collateral to Crédit Agricole, and Yuanta would receive loans from Crédit Agricole amounting to 50% to 55% of the market value of the shares. The defendant’s evidence was that the loan moneys were to be obtained from a third party lender, not from Crédit Agricole. The defendant denied that Yuanta’s account with Crédit Agricole was a “trust account” and claimed it was an account that was opened “well before” his relationship with the plaintiff and TPG.

The plaintiff’s affidavit evidence was that during their discussions he and the defendant agreed to a joint arrangement in which: (1) TPG would give 300m warrants in NexGen to AEM (consisting of 225m from the plaintiff and 75m from Mr Koesnadi); (2) the funds to exercise the warrants would be sourced from a further loan from Crédit Agricole, secured by the shares to be received upon exercising the warrants; (3) Yuanta would buy 900m shares in NexGen from TPG, funded by an advance from AEM’s loan moneys to Yuanta, which would be repaid when the shares were on-sold to the three Taiwanese investor funds; and (4) AEM would acquire a 29% stake in Scorpio East (valued at S$4.5 – S$5m).

The plaintiff meets Mr Goh

Mr Goh Teck Wee (known as Brian Goh) was employed by Credit Agricole as a director, Private Banking, between August 2010 and March 2012. Mr Goh met the defendant in 2006 when he became his relationship manager at ABN AMRO. When Mr Goh moved to Credit Agricole in August 2010 the defendant became a client of Credit Agricole.

It was in about October 2010 that the defendant introduced the plaintiff to Mr Goh. The plaintiff claimed that at this meeting the defendant explained their plans to make joint investments through a joint venture company and for it to secure credit facilities from Crédit Agricole in its name for the purpose of such joint investments. The plaintiff claimed that he and the defendant informed Mr Goh that they were looking to secure credit facilities to the tune of about S$100m to fund the joint venture activities and that TPG and Yuanta would each pledge an equal amount of NexGen shares as security. The plaintiff claimed that Mr Goh subsequently advised that it would be difficult for the joint venture vehicle to secure credit facilities of such a large amount because it was a single stock security and the joint venture vehicle was not an existing customer of Crédit Agricole. The plaintiff claimed that Mr Goh suggested that they should use Yuanta’s existing credit facility with Crédit Agricole which the Bank had already approved and for which Yuanta had pledged multiple stocks as security. The plaintiff claimed that Mr Goh suggested that the shares to be pledged would be transferred to an escrow/trust account under Yuanta’s name to be held as collateral for the loan; the loans would be disbursed to the Yuanta account; and then disbursed once every two weeks to the joint venture company.

The plaintiff also claimed that during these meetings with Mr Goh he agreed that 10% of the loan funds to be disbursed to AEM would be retained in the Yuanta account to cover the Bank’s handling charges and interest. The plaintiff claimed that ultimately he and the defendant agreed that: (a) TPG would open an account with Crédit Agricole and deposit NexGen shares into that account; (b) TPG would transfer the NexGen shares to the Yuanta account to be pledged as collateral; (c) on the security of the pledged NexGen shares, Crédit Agricole would provide loans amounting to 50% to 55% of the market value of the shares to the Yuanta account (10% of the loan sum would be retained in the Yuanta account); and (d) the loan funds deposited in the AEM account would be used for the joint investments to be carried out by AEM. The defendant denied that it was agreed that Crédit Agricole was to provide the loans. He claimed that the loans were to be secured from a third party.

The defendant claimed that the third party loans would be used to exercise warrants to buy 300m NexGen shares at S$0.03. He claimed that the warrants were to be converted within 5 days, and then pledged or sold to obtain funds to put into the AEM account for joint management and investment. He also claimed that it was intended that the warrants would be exercised forthwith and 300m shares would be sold for S$0.06 each. At a later stage the defendant claimed that the funds from these sales were to be distributed equally to himself and the plaintiff.

Loan and security agreements

In November 2010 an agreement entitled “Non-Recourse Loan Agreement Complete with Share Delivery, Securities and Re-Delivery Agreement and Securities Co-Operation Agreement” (“the First Loan Agreement”), a second agreement with the same title with the addition “(2)” (“the Second Loan Agreement”) and a third agreement entitled “Supplementary Agreement – Securities Co-operation Agreement” (“the Supplementary Agreement”) were executed by the parties (together “the Agreements”). The plaintiff claimed that the Agreements were signed in Shenzhen and Hong Kong and the defendant claimed that the Agreements were signed in Shenzhen. Nothing turns on this dispute because there is no issue that the Agreements were executed; are binding on the parties; and were understood by the parties at the time of their execution. The Agreements were prepared by the defendant in Mandarin. English translations are in evidence and there is no issue about the accuracy of those translations.

First Loan Agreement

The First Loan Agreement dated 14 November 2010 included the following terms:

At the time this Agreement was signed, TPG had yet to open an account with Credit Agricole. However the parties’ intention in this regard was reflected in Attachment A. Notwithstanding that the Agreement included reference to the Yuanta account with Credit Agricole, it became clear during the trial that Yuanta only opened an account with Credit Agricole sometime on or after 15 November 2010. There is no issue that the reference in cl 1a of the Agreement to “TAISAN Co (F2X–SIN)” was an error and that the parties intended such reference to be to “NexGen” shares.

Second Loan Agreement

The Second Loan Agreement dated 14 November 2010 was in the following terms:

I will refer to the First and Second Loan Agreements together as “the Loan Agreement”.

Supplementary Agreement

The Supplementary Agreement dated 15 November 2010 was in the following terms:

After the Agreements were signed, accounts were opened with Credit Agricole by TPG, Yuanta and AEM.

Yuanta and EFH

On 21 December 2010 Yuanta, as Borrower, entered into a Master Loan Agreement with Equity First Holdings, LLC (“EFH”), as Lender (Y1 [25]). The Master Loan Agreement included the following (C 79):

The “Pledged Collateral” was defined as 15m shares in NexGen (C 59). The “Loan Principal Amount” was defined as funds equal to 50% of the current Fair Market Value of the 15m NexGen shares on three consecutive Exchange Business days on a national or international exchange (C 82 2.1). The “Fair Market Value” was defined as the average of the last sale on three consecutive Exchange Business days (C 58).

The Master Loan Agreement between Yuanta and EFH included the following:

Yuanta agreed that EFH was entitled to utilise the Pledged Collateral: as part of hedging transactions; transferring the shares within or among one or more depository accounts; and creating and trading derivative instruments backed in whole or in part by the Pledged Collateral (C 84 2.6). The Master Loan Agreement also included the following (C 84 2.7):

Yuanta and EFH also agreed that within five business days of Yuanta’s satisfaction of its obligations, EFH would “reassign all right, title, ownership and interest in identical securities in the amount” provided for in the agreement and “redeliver the Pledged Collateral, without recourse or warranty” to Yuanta. The Agreement also provided (C 85 2.11):

Yuanta, as Pledgor, and EFH, as Lender, also entered into a Master Pledge Agreement on 21 December 2010. That Agreement included the following (C 113A):

The Master Pledge Agreement provided for Yuanta to pledge and assign to EFH the 15m NexGen shares (C 113B 2.1). This Agreement also included a similar provision to cl 2.11 of the Master Loan Agreement (extracted above at [32]) for redelivery of the Pledged Collateral to Yuanta at the conclusion of the term of the Agreement (C 113C 4.2).

The defendant was cross-examined in relation to his choice of EFH as a lender of funds for the joint venture project. He gave the following evidence (26-02-2016: tr 1-3):

The “2008 lawsuit” referred to in the defendant’s evidence was a case in which EFH was found to have been in breach of contract in selling pledged shares in a not dissimilar arrangement to the arrangement between Yuanta and EFH. However an important difference was that the contract in that case appears not to have had a provision allowing EFH to sell the shares during the term of the loan: Teresa Serrano Segovia and Grupo Empresarial Seser, S.A. DE C.V. v Equities First Holdings, LLC [2008] C.A. No. 06C-09-149-JRS.

The “addendum” referred to in this cross-examination was mentioned in a letter dated 15 January 2016 from EFH’s solicitors, IceMiller, to the defendants’ solicitors in which IceMiller responded to a suggestion that the sales of the pledged NexGen shares by EFH may have caused a drastic reduction in the share price. That letter included the following (F 170):

However on 17 February 2016 IceMiller wrote to the plaintiffs’ solicitors advising (F 514):

When the defendant was cross-examined about IceMiller’s statement that EFH and Yuanta had “contemplated the fourth addendum”, he denied there was any such discussion (25-02-2016: tr 66-69). He claimed that EFH said that they “will make sure that there was no hole in the market” and that because they could trade the shares “they would not create any impact to the market”. He also claimed they did not say “they would minimise the impact” (25-02-2016: tr 70). The defendant accepted that in the Earlier Proceedings he had described EFH as his “partner” (24-02-2016: tr 92) and said he had “many transactions with EFH, either with Yuanta or with other companies” (25-02-2016: tr 67).

The plaintiffs submitted that the defendant’s denial of the discussions about the addendum should not be accepted. However there is some evidence to support the defendant’s denial. By January 2016 the plaintiffs had been pressing for an answer from the defendants during the Case Management Conferences as to the whereabouts of the shares. This apparently prompted the defendant to write to EFH and to EFH’s solicitors directly.

On 28 January 2016 the defendant wrote to IceMiller, referring to the “addendum” to which IceMiller had referred in their letter of 15 January 2016 and asking for a copy of it. On 5 February 2016 IceMiller wrote to the defendant in the following terms:

It was on 17 February 2016 that IceMiller wrote to the plaintiffs’ solicitors in which the statement was made that EFH and Yuanta had contemplated the fourth addendum but did not execute it. There is nothing in the evidence otherwise to show that the defendant informed IceMiller that Yuanta was contemplating signing a fourth addendum.

Mr Koesnadi’s shares

The plaintiff’s evidence was that the defendant agreed to purchase Mr Koesnadi’s 900m NexGen shares (that were held by TPI) for S$45m but that he wanted a deferral of the date for the payment of the purchase price because he was raising the funds for the acquisition. The plaintiff claimed that the defendant informed him that he wanted the shares to be sold initially to Yuanta and when the share price rose he was going to sell the shares to the three Taiwanese funds that he had mentioned to the plaintiff (which are referred to in cl 9 of the Supplementary Agreement (see [26] above)). The plaintiff claimed that he and Mr Koesnadi agreed to the defendant’s request for a deferral of the date for payment of the purchase price on the condition that Crédit Agricole would provide a letter of “confirmation” that Yuanta would be able to pay the total purchase price of S$45m for the 900m shares.

On 20 December 2010 Mr Goh as a Director of Crédit Agricole Private Banking, wrote to Mr Koesnadi care of Niaga Finance Co Ltd in Hong Kong, in the following terms (“the Confirmation Letter”) (B 118):

On 20 December 2010 Mr Koesnadi wrote to Mr Goh in the following terms:

Mr Goh was cross-examined about his letter to Mr Koesnadi as follows (29-02-2016: tr 49-52):

Scorpio East

On 24 December 2010 the plaintiff forwarded to the defendant financial records and various agreements relating to Scorpio East that he had received the previous day (C 138-322).

On 3 January 2011 the plaintiff and the defendant received an email from Low Shiong Jin on the “Subject: Scorpio East” in the following terms:

Letter of Instruction

On 30 December 2010 TPG wrote to Credit Agricole (Mr Goh) in the following terms:

On 3 January 2011 the plaintiff wrote to Mr Goh in the following terms (C 960):

At this stage the plaintiff apparently understood that the loan was coming from Credit Agricole (see the reference to “your bank” at [49] above). However Mr Goh did not correct the plaintiff’s misapprehension. Rather on 3 January 2011 he wrote to the plaintiff in the following terms (C 960):

Sale and Purchase Agreement

The plaintiffs rely on a Sale and Purchase Agreement (“the SPA”) the cover page of which is dated 14 January 2011 and the following page of which is dated 14 January 2010. There is an issue as to whether Yuanta signed the SPA, a matter to which it will be necessary to return. The SPA was between TPG, as vendor, and Yuanta, as purchaser. The Recitals to the SPA recorded that TPG was or would be the beneficial owner of 300m shares in NexGen, defined as the “Sale Shares”, and that Yuanta had agreed to purchase from TPG and TPG had agreed to sell the Sale Shares on the terms and conditions set out in the SPA which included the following:

The “Purchase Consideration” was defined as “the sum of S$0.05 for each Sale Share making an aggregate of S$15,000,000 payable by the Purchaser to the Vendor for the purchase of the Sale Shares” (B 123 1.1).

Although the date on the SPA is 14 January 2010 it was accepted that this was an error and should have been 2011 (as was stated on the cover page). However it was not until 20 January 2011 that the plaintiff wrote by email to Mr Robert Wong of Straits Law Practice LLC with a copy to the defendant in the following terms (C 324):

On 20 January 2011 Niaga Finance Company Limited (“Niaga Finance”) with which TPG and TPI had accounts, wrote to TPI advising that as per its “instruction” it had paid US$610,000 into its HSBC Hong Kong account by debiting its Niaga account (B 199).

On 21 January 2011 Crédit Agricole wrote to TPG advising that there had been a “Securities Withdrawal” of 300m NexGen shares from its portfolio. The handwritten entry on this document is “to = Yuanta Asset Management” (B 191). There is no issue that on 21 January 2011 300m NexGen shares were transferred from TPG to Yuanta and that at this time they were trading at S$0.06 cents per share.

On 9 February 2011 Niaga Finance wrote to TPI advising that on its “instruction” it had paid US$900,000 into its HSBC Hong Kong account by debiting its Niaga account (B 200).

SGX Announcement – NexGen

On 25 January 2011 the defendant signed a form of notice intended for the SGX to record that Yuanta had become a significant shareholder of 300m NexGen shares. It is not in issue that when the defendant signed the notice it had not been completed. However after the plaintiff completed the form it was faxed back to the defendant in its completed state (H 13-20).

On 25 January 2011 the plaintiff, as Executive Deputy Chairman of NexGen, submitted an announcement, “Notice of a Substantial Shareholder’s Interest” on behalf of NexGen to the SGX (B 129). The Notice recorded: Yuanta as the substantial shareholder; the registered holder as Crédit Agricole; the date of the change of interest as 21 January 2011; the number of shares the subject of the notice as 300m; and the number of shares held after the change as 300m. The footnotes to Part IV of the Notice dealing with the “Holdings of Substantial Shareholder” (Yuanta) were as follows (B 130):

The joint venture project

The parties’ joint venture relationship was, it seems, not disciplined. It appears that the plaintiff and the defendant did not have regular meetings and their written communications were spasmodic. Notwithstanding the millions of dollars that were at stake, it appears there was no written business plan created or if it was, the parties did not rely upon it.

The plaintiffs have painstakingly prepared a very helpful Chart of Transactions (Ex P6) which includes in tabular form the relevant dates from January 2011 to October 2011: the shares transferred into the Yuanta account by TPG; the shares pledged by Yuanta to EFH; the 10 loan tranches from EFH to Yuanta; the sales of the NexGen shares by Yuanta; the repurchases of some of those shares by Yuanta; and the disbursement of the loan proceeds and the proceeds of sale. However it is appropriate at this juncture to set the significant transactions out in narrative form.

February 2011 transactions

On 1 February 2011 Yuanta transferred to EFH 30m of the 300m NexGen shares that TPG had transferred into its account.

On 11 February 2011 Yuanta sold 30m of the NexGen shares in the market at S$0.05 cents for a total amount of S$1,490,287.50. On 14 February 2011 Yuanta sold 1.5m of the NexGen shares in the market at S$0.05 cents for a total amount of S$74,514.37. These amounts were paid into the Yuanta account.

On 14 February 2011 EFH disbursed loan monies to Yuanta in the amount of S$897,880.50 apparently on the security of the 30m NexGen shares that were then trading at S$0.06 cents (loan tranche 1).

On 15 February 2011 S$808,092.45 and S$1.2m was transferred from Yuanta to AEM. On 15 February 2011 S$1,200,000 was transferred from AEM to Phillip Securities. On 18 February 2011 S$800,025.51 was transferred from AEM to Niaga Finance for “further credit” of Mr Koesnadi’s account (B 789).

On 15 February 2011 S$35,940.84 was transferred out of the Yuanta account to ThreeSix Five Capital Ltd; and S$4,515.02 was transferred out of the Yuanta account to LG Legacy Capital Inc. These two companies are associated with the defendant.

On 15 February 2011 the plaintiff wrote by email to the defendant, Ms Chan, and AEM’s accountant, Chung Ho Shing (“Mr Chung”), in the following terms (Y2 Tab 5):

The attached Excel spreadsheet headed “CA – AEM Ltd program” (C 327) included an entry on 5 December 2010 in respect of 300m NexGen shares at S$0.06 with a collateral value of S$18m. It also included an entry for 23 December 2010 which stated “buy from Hardi Koesnadi @ 5cents” 900m NexGen shares and “Get W for free” 225m NexGen shares. The first entry in the Excel spreadsheet for any loan being approved was on 31 January 2011 at S$900,000 with a further approval of an identical amount on 14 February 2011. The reference in the heading to this spreadsheet to “CA” was clearly a reference to Crédit Agricole, consistent with the plaintiff’s then claimed understanding that the loans were to be provided by Crédit Agricole.

On 17 February 2011 Yuanta transferred 45m NexGen shares to EFH.

On 18 February 2011 Yuanta sold 40m of the NexGen shares in the market at S$0.05 cents for a total amount of S$1,987,250 which was paid into the Yuanta account.

On 24 February 2011 S$1.8m was transferred out of the Yuanta account to AEM. On 28 February 2011 S$1,097,622.90 was transferred out of the Yuanta account to AEM.

On 24 February 2011 S$1,800,025 was transferred from AEM to Phillip Securities for “further credit” to TPG’s account (B790).

On 28 February 2011 $1,219,581 was transferred into the Yuanta account from EFH (loan tranche 2). On the same day S$48,808.70 was transferred out of the Yuanta account to ThreeSix Five Capital Ltd and S$6,123.37 was transferred out to LG Legacy Capital Inc.

Acquisition of shares in Scorpio East

In March 2011 TPG acquired 37m shares in Scorpio East for a sum of S$4,179,829.95. These shares were purchased using margin facilities that TPG had with Phillip Securities.

On 29 April 2011 and 29 June 2011 the sums of S$1,200,024.50 and S$1,800,024.70 were withdrawn from the AEM account as “repayment” to TPG for its use of the margin facilities in Phillip Securities for the purchase of the Scorpio East shares.

March 2011 transactions

On 1 March 2011 Yuanta transferred 65m NexGen shares to EFH.

On 4 March 2011 S$500,000 was transferred from Yuanta to AEM.

On 4 March 2011 S$1,500,025.34 was transferred from AEM to Phillip Securities for “further credit” to TPG’s account (B 791).

On 10 March 2011 S$1,377,874.90 was transferred from Yuanta to AEM.

On 10 March 2011 S$1,530,972.11 was transferred from EFH into the Yuanta account (loan tranche 3). On the same day S$7,680.27 was transferred from the Yuanta account to LG Legacy Capital Inc and S$61,264.29 was transferred from the Yuanta account to Gift Capital Inc, another company associated with the defendant.

On 10 March 2011 S$220,766.60 was transferred from AEM to Straits Law Practice LLC Clients account. TPG was the “ordering customer” in respect of this transaction (B 793). A further transaction was made on 10 March 2011 from AEM to NKC (or NRC) Corporation for S$1,279,233.40. Again TPG was the “ordering customer” for this transaction (B 792).

On 11 March 2011 TPG transferred 225m NexGen shares to the Yuanta account.

On 14 March 2011 Yuanta transferred 65m NexGen shares to EFH.

On 15 March 2011 Mr Chung produced a set of draft financial records for AEM including a “Summary of Facts” in the following terms (B 220-221):

The plaintiff and the defendant are at issue as to who was instructing or providing information to Mr Chung. In any event it is clear that these records included reference to “the company” (AEM) selling 55m NexGen shares in February 2011. It is not clear where that understanding came from, nor is it clear where Mr Chung obtained the information about AEM acquiring 18.742m NexGen shares in February. It is not in issue that 18.742m NexGen shares were repurchased on 18 March 2011 by Yuanta. However the defendant claims that the plaintiff instructed him and Mr Goh to sell shares to provide the plaintiff with urgently needed funds The plaintiff claims that he only became aware of the sales after they had occurred and instructed the defendant and Mr Goh to repurchase them as they had been sold without his authority. I will return to these issues later.

On 16 April 2011 Mr Chung wrote to the plaintiff and the defendant on the subject of “cash movement” for AEM. Mr Chung identified a number of “discrepancies” in respect of the loans to AEM that clearly he thought were coming from Credit Agricole. He reiterated the earlier statement that in February 2011 AEM had sold 55m NexGen shares but noted there was no corresponding deposit in respect of the sale of the shares. He questioned whether the incoming transfers totalling S$3m (S$1.2m on 15 February 2011 and S$1.8m on 24 February 2011) related to such sale. He also sought clarification in respect of payments that appeared to have been made to Phillip Securities and Niaga Finance.

On 22 March 2011 S$1,529,277.75 was transferred into the Yuanta account from EFH (loan tranche 4).

On 22 March 2011 there were two transfers out of AEM’s accounts. The first was to TPG for S$384,972. The second was to Mr Chan Keng Chun for S$365,025.28 (B 794-795).

Although the plaintiff claimed that he instructed the defendant and Mr Goh to repurchase the shares, there was a further sale of 30m of the NexGen shares in the Yuanta account on 29 March 2011 at S$0.045 cents for a total price of S$1,341,258.75 which was paid into the Yuanta account.

On 30 March 2011 S$1m was transferred from the Yuanta account to TPI.

Scorpio East announcement

On 25 March 2011 Scorpio East announced the proposed appointment of Special Auditors, Stone Forest Corporate Advisory Pte Ltd (“Stone Forest”), who were to “ascertain the veracity” of “several material contracts” that had been entered into and/or terminated and report to the Audit Committee and the Singapore Exchange Securities Trading Limited (“SGX–ST”). That announcement recorded that Scorpio East wished “to apply to convert its trading halt into a trading suspension”.

NexGen announcement

On 31 March 2011 NexGen announced that it had acquired China and Unifiednet Holdings Limited giving it a “100% stake in China Unifiednet, and access to 55% of the economic rights of a joint-venture company Hughes Unifiednet Holding (China) Company Limited” (“Hughes”) (Ex D 3). That announcement recorded that the “deal” was worth S$52.13m with NexGen paying S$34.13m in cash and issuing 300m NexGen shares to the vendor at a price of S$0.06 each, subject to the fulfilment of various conditions.

The plaintiff was recorded as having said that the acquisition was in line with NexGen’s plan “to establish our footprint in developing countries like China and Indonesia, where demand and growth potential for voice and broadband data services is vast”. There was also reference to Hughes having entered into a 5 year agreement with a subsidiary of China Telecom to boost the satellite broadband infrastructure in the Sichuan Province of the PRC.

April 2011 transactions

On 4 April 2011 S$1,928,282.40 was transferred into the Yuanta account from EFH (loan tranche 5).

On 4 April 2011 S$288,677.67 was transferred out of the Yuanta account to an unknown party. On the same day S$1,552,832.02 was transferred out of the Yuanta account to AEM. On the same day S$77,156.51 and S$9,666.62 was transferred to Gift Capital Inc. On 5 April 2011 S$200,025.22 was transferred out of the Yuanta account to LG Legacy Capital Inc.

On 6 April 2011 Yuanta transferred 80m NexGen shares to EFH.

On 15 April 2011 S$1,693,418.40 was transferred from EFH to Yuanta (loan tranche 6). On the same day two amounts, S$8,491.99 and S$67,761.64, were transferred out of the Yuanta account to Gift Capital Inc.

On 25 April 2011 Yuanta transferred 100m NexGen shares to EFH. On 29 April 2011 Yuanta transferred S$1.2m to AEM.

On 29 April 2011 S$1,200,024.50 was transferred from AEM to Phillips Securities for “further credit” to TPG.

May 2011 transactions

On 4 May 2011 TPG transferred 300m NexGen shares to Yuanta. On the same day EFH transferred S$1,828,587.54 to Yuanta (loan tranche 7). Also on 4 May 2011 Yuanta paid Gift Capital Inc two amounts, S$9,167.52 and S$73,168.07.

On 9 May 2011 Yuanta transferred 100m NexGen shares to EFH.

On 13 May 2011 Yuanta made a payment of S$500,000 to an unknown party. On 18 May 2011 a further payment of S$87,147.46 was transferred out of the Yuanta account to an unknown party.

On 18 May 2011 EFH transferred S$1,584,499.28 to Yuanta (loan tranche 8). On the same day Yuanta paid out two amounts, S$7,947.31 and S$63,404.78, to Gift Capital Inc.

On 20 May 2011 Yuanta transferred 100m NexGen shares to EFH.

On 30 May 2011 EFH transferred S$1,114,550.86 to Yuanta (loan tranche 9). On the same day Yuanta paid out S$61,300.30 to an unknown party and two payments of S$5,597.44 and S$44,606.72 to Gift Capital Inc.

June 2011 transactions

On 15 June 2011 EFH made a final transfer of S$1,047,281.84 to Yuanta (loan tranche 10). On the same day Yuanta paid out S$5,261.03 and S$41,915.89 to Gift Capital Inc; S$200,024.68 to LG Legacy Capital Inc; and S$1,000,024.68 to the defendant.

The S$1.8m transaction

On 22 June 2011 Crédit Agricole wrote to NexGen, the plaintiff and Mr Goh enclosing an instruction letter to transfer “the 700million shares”. Crédit Agricole requested NexGen to give the instruction to the remitting bank accordingly (B 1165-1166).

On 24 June 2011 Crédit Agricole requested NexGen to “check on the status of the shares transfer” (B 1164-1165).

On 27 June 2011 the plaintiff wrote to the defendant in the following terms (B 1164):

On 27 June 2011 the plaintiff wrote again to the defendant and Mr Goh in the following terms:

On 29 June 2011 Yuanta transferred S$1.8m to AEM (C473). On the same day the defendant, as authorised signatory of AEM, instructed Crédit Agricole to debit its account for S$1.8m and remit that amount to TPI’s account with DBS Bank Ltd in Singapore.

Relationship sours

It appears that at about this time the relationship between the plaintiff and the defendant started to sour. It is not possible to pinpoint with any accuracy the date or the specific event that caused this. However the defendant gave evidence that it was after 30 June 2011 that the relationship broke down because of the plaintiff’s failure to carry out what he referred to as the “promises” contained within the plaintiff’s email of 27 June 2011.

On 10 August 2011 the defendant wrote to the plaintiff, with a copy to Mr Goh, in the following terms (C 339-340):

The plaintiff seeks information about the shares

On 17 August 2011 the plaintiff’s personal assistant, Ms Chan, wrote to Mr Goh consequent upon a conversation between the plaintiff and Mr Goh on 16 August 2011. That communication was in the following terms (B 1170):

On 17 August 2011 very shortly after receiving Ms Chan’s email Mr Goh responded in the following terms (B 1169):

Secret sale of 60m NexGen shares

The defendant then embarked on a process of selling the 60m NexGen shares that remained in the Yuanta account. On 19 August 2011, 10m NexGen shares were sold at S$0.024 cents for a total of S$238,472.60. On 22 August 2011, 16.740m NexGen shares were sold at S$0.0231 cents for a total price of S$384,232.97. On 23 August 2011, 17.924m NexGen shares were sold at S$0.023 cents for a total price of S$409,582.67. On 25 August 2011, there were two sales, the first of 7.171m NexGen shares at S$0.023 cents for a total price of S$163,865.06 and the second of 8.165m NexGen shares at S$0.022 cents for a total price of S$178,466.90.

Defendant presses for shares transfer

On 25 August 2011 the defendant wrote again to the plaintiff, with a copy to Mr Goh, in the following terms (C 338):

Undisclosed payments

There was no disclosure in this communication of the sale of the 60m NexGen shares. Nor was there any indication given to the plaintiff that the defendant had been transferring monies out of the Yuanta account to his business associates, his associated companies and his relative. In addition to the payments to his associated companies mentioned earlier the defendant made numerous payments out of the Yuanta account between 21 June and 5 September 2011. They included S$100,024.69 to Yeh I Hsiang (the defendant’s nephew) on 21 June 2011; S$800,024.85 to the defendant on 27 June 2011; S$139,939.40 to Las Vegas De Palace Pte Ltd (apparently a “nightclub”: 24-02-2016: tr 128) on 7 July 2011; S$248,024.09 to OCBC Securities on 24 August 2011; and a further three payments to OCBC Securities in the amounts of S$248,024.13, S$190,024.13 and S$240,024.13 on 29 August 2011. A further payment was made to the defendant on 29 August 2011 in the amount of S$180,024.13. Another payment of S$42,024.06 was made to Kok Wei Jian Alex (a friend of the defendant: 24-02-2016: tr 128) on 31 August 2011; and a further payment of S$250,024.12 was made to Kim Eng Securities Pte Ltd on 5 September 2011.

It is not in issue that the only funds (except for approximately S$20,000) that were in and/or paid into the Yuanta account were from the loans that were provided to it by EFH or from the sales by Yuanta of the NexGen shares in the Yuanta account.

Dispute about transfer of 225m shares

On 12 September 2011 Crédit Agricole wrote to the plaintiff advising that it had received an instruction from the defendant to transfer 225m NexGen shares from TPG to Yuanta on that day. Crédit Agricole advised that it would carry out the defendant’s instruction accordingly as “he is one of the signatory of the account”. Crédit Agricole also reminded the plaintiff to make “your own annoucement (sic) on SGX accordingly for the above mentioned transfer” (B 271).

The plaintiff responded to Credit Agricole on 12 September 2011 advising that the defendant was not the signatory for TPG and informing it that he would make contact and come to Singapore and prepare all the documents “pending for this issue” (B 271). On the same day Crédit Agricole responded further to the plaintiff advising that from the time the TPG account was opened the defendant had been an authorised signatory and accordingly it was able to accept the defendant’s instruction. Crédit Agricole suggested that the plaintiff should liaise with the defendant in respect of the share transfer (B 271). The plaintiff responded on the same day claiming that Credit Agricole was “wrong”; the defendant was not a director of TPG; and that he regarded it as “wrong” that he was a signatory for TPG (B 270).

Later in the afternoon of 12 September 2011 the plaintiff wrote to Crédit Agricole in the following terms:

On 13 September 2011 Credit Agricole wrote to the plaintiff enclosing a transfer of securities instructions for his signature (B 269-271). In response the plaintiff advised that he was in Hong Kong and that it was a holiday that day and he would follow it up the following day. The plaintiff also asked:

In response to the plaintiff’s request for the copy of the share transfer to Deutsche Bank (“DB”) Crédit Agricole advised the plaintiff that he should obtain the details directly from the defendant (B 269). The plaintiff did not sign the transfer of securities instruction and the transfer of the 225m NexGen shares did not take place at this time.

Margin calls

In September 2011 the plaintiff received from the defendant three margin call letters, referred to by him as “top-up notices”, directed to TPG dated 9 September 2011, 13 September 2011 and 26 September 2011 (B 275-283). These notices were not sent to the plaintiffs on the dates they bear but were sent to them by email on the later dates, referred to below. Each notice referred to the existence of an “Event of Default” under the provisions of the Loan Agreement (cl 5(b)(i)).

The notice dated 9 September 2011 called for a deposit of cash in the amount of USD$30,000 or 1,666,667 additional free-trading shares to be lodged with the Yuanta account within 3 business days. The notice dated 13 September 2011 called for USD$45,000 or a deposit of 2,647,059 additional free-trading shares into the Yuanta account within 3 business days. The notice dated 26 September 2011 called for USD$80,000 or a deposit of 6,153,846 additional free-trading shares into the Yuanta account within 3 business days.

On 24 September 2011 the plaintiff wrote to the defendant in the following terms (B285):

It is reasonable to conclude from the language used in this email that the plaintiff was under the impression that the original margin call had come from “the bank” and he was asking the defendant to cure the margin calls by using the amount that stood in the Yuanta account.

On 28 September 2011 the defendant responded to the plaintiff’s communication of 24 September 2011 in the following terms:

This letter of 28 September 2011 was within weeks of the defendant’s secret sale of the 60m NexGen shares that had been in the Yuanta account. It was within weeks of the defendant paying hundreds of thousands of dollars out of the Yuanta account to various entities referred to above, including amounts that could have easily rectified or cured the margin calls that were attached to the email. No mention was made of these matters in this email.

In cross-examination the defendant accepted that if Yuanta was going to terminate the Loan Agreement and forfeit the shares on the basis of the margin calls, it had to give notice to TPG and give it an opportunity to rectify the default. The defendant also accepted that Yuanta could only terminate the Loan Agreement and enforce the security upon the failure to rectify the default (24-02-2016: tr 38). The defendant accepted that the first top-up notice dated 9 September 2011 was sent by email and not by overnight delivery (24-02-2016: tr 40). He accepted he did not comply with cl 6 of the Loan Agreement (see [22] above) which required the notice to be sent by registered post together with an acknowledgement of the receipt (24-02-2016: tr 40-41). He also accepted that this was the position in respect of the notice dated 13 September 2011 (24-02-2016: tr 42). In addition to the top-up notices referred to by the plaintiff, the defendant was cross-examined about three further notices dated 27 September 2011, 28 September 2011 and 30 September 2011 (B 847-851) (24-02-2016: tr 42-43).

The defendant agreed that he copied the EFH margin call letters removing all references to EFH and pasted them into the emails that he sent to the plaintiff. He agreed that he did this so that the plaintiff would not know that EFH was the lender (24-02-2016: tr 81).

The email dated 16 September 2011 (C 363-366) is rather confused. It refers to remedying the default within “10 business days” and later to affecting a remedy within “5 business days”. The defendant was cross-examined as follows (24-02-2016: tr 46-49):

The defendant was also cross-examined as to whether he had notified TPG that Yuanta had terminated the Agreements. His evidence in this regard was as follows (24-02-2016: tr 44):

SGX announcement

On 24 September 2011 NexGen announced an “Update of Watch-List Status” (E 165). That announcement recorded that NexGen had submitted an application to SGX-ST on 12 August 2011 for its removal from the Watch-List. NexGen announced that on 23 September 2011 SGX-ST rejected NexGen’s application for removal from the Watch-List because there was “uncertainty over whether the Company’s profit achieved in FY2011 would be sustainable”.

Meeting 27 September 2011

The plaintiff claimed in his affidavit evidence that he and the defendant (accompanied by his secretary, Ms Helen Sun) met at Marina Bay Sands in Singapore on 27 September 2011. The plaintiff claimed that he wanted the defendant to sign a statement confirming how many NexGen shares he had pledged for the loans and the amount of the loans that had been obtained. He also claimed that there was a break in the meeting so that the defendant’s secretary could prepare documents that the plaintiff had requested. The meeting resumed a few hours later and the defendant’s secretary provided two written statements to be signed by the defendant and by the plaintiff. The first statement dated 27 September 2011, signed by the defendant was in the following terms (“the Yuanta document”) (B 287-288):

The second statement, also dated 27 September 2011, signed by the plaintiff was in the following terms (“the TPG document”) (B 289-290):

The plaintiff claimed that when the defendant handed him the signed Yuanta document at this meeting, the defendant said that he was no longer interested in investing in Scorpio East because of the investigations by the Commercial Affairs Department “which resulted in a sharp fall in the share price of Scorpio East”. It is not clear from the plaintiff’s affidavit whether the defendant said that the investigation had caused the “sharp fall” in the Scorpio East share price, or whether this was the plaintiff’s observation. The plaintiff claimed that the defendant said that the plaintiff could keep the Scorpio East shares for himself.

The plaintiff was not cross-examined about his evidence in relation to the meeting on 27 September 2011 or the documents that he claimed were signed at this meeting. The defendant’s evidence in his reply affidavit was that although his signature is on the Yuanta document, he did not recall “when or why” he signed it. However he claimed he was “certain” that he did not meet with the plaintiff on 27 September 2011, because at that time the plaintiff was avoiding him because he had been demanding that the plaintiff meet the margin calls.

It is curious that neither party was cross-examined about this meeting or the content of these documents. It is also curious that neither party referred to the meeting or the documents in their final submissions. The parties did not include this meeting in their agreed chronology. The Yuanta document (see [138] above) contains a representation that Crédit Agricole transferred 765m NexGen shares to the Bank of New York. There was no reference to EFH in the document. The Yuanta document also contains a representation that there were 60m NexGen shares in the Yuanta account. This of course was well after the defendant had sold those shares.

The TPG document (see [139] above) is not free from ambiguity. It suggests that the plaintiff contributed S$4,451,035 to the purchase price (presumably of NexGen shares) of S$6.75m and the defendant contributed S$1,811,898. Those two figures add up to S$6,262,933 some S$487,067 less than S$6.75m.

It is perhaps not surprising that the parties did not mention this meeting or these documents again.

Further disputation

On 1 October 2011 the defendant wrote to the plaintiff requesting him to reply to his email with an “official letter” and advising that the “contract will become void if the deadline for the margin call is missed” (B 298).

On 3 October 2011 the plaintiff responded to the defendant’s email of 1 October 2011 under the heading “Margin Call Notice”, with a copy to Mr Goh. That email was in the following terms (B 295-298):

On 4 October 2011 the plaintiff wrote to the defendant in the following terms (B 295):

Also on 4 October 2011 the plaintiff wrote again to the defendant in the following terms:

Sale of 225m NexGen shares

On 10 October 2011 the defendant transferred 112.5m NexGen shares from the TPG account to the Crédit Agricole account of Yuanta’s subsidiary, Fullerton Capital Enterprises Limited (“Fullerton”). The defendant then embarked upon a sale process of those shares between 10 October 2011 and 13 October 2011 in four tranches; 61.528m on 10 October 2011 at S$0.0103 cents for a price of S$629,634.94; 16.972m shares on 11 October 2011 at S$0.01 cents for a total price of S$168,621.06; 2.756m shares on 12 October 2011 at S$0.01 cents for a total price of S$27,381.55 and 31.244m shares at S$0.0094 cents on 13 October 2011 for a total price of S$291,791.93. All of these amounts were paid into the Yuanta account.

On 14 October 2011, 112.5m NexGen shares were transferred from the TPG account to the Fullerton account.

Notwithstanding that the defendant had secretly sold the 60m NexGen shares in August 2011, he wrote to the plaintiff on 14 October 2011, with a copy to Mr Goh, in the following terms (B 808):

The defendant then embarked on the sale of the balance of the 112.5m NexGen shares in four further tranches: on 17 October 2011, 15.438m shares at S$0.009 cents for a total price of $138,042.35; on 18 October 2011, 43.766m shares at S$0.008 cents for S$347,860.92; on 19 October 2011, 18.472m shares at S$0.008 cents for a total price of S$146,819.15; and on 20 October 2011, 34.824m shares at S$0.007 cents for S$242,189.60. All of these funds went into the Fullerton account.

On 14 October 2011 S$798,025.41 was transferred out of the Fullerton account to the defendant. On 20 October 2011 S$100,025.41 was transferred out of the Fullerton account to to one Teo Cheng Kwee (said to be the defendant’s business partner). On 21 October 2011 S$1,000,025.55 was transferred out of the Fullerton account to the defendant.

Scorpio East SGX reprimand

On 20 October 2011 the SGX issued a reprimand in respect of Scorpio East and its directors and management (“the SGX Reprimand”). It included the following (B 1158):

TPG Account closed

On 31 October 2011 Crédit Agricole wrote to the plaintiff in the following terms:

On 31 October 2011 the plaintiff responded to the email from Crédit Agricole in the following terms:

On 1 November 2011 Mr Goh responded to the plaintiff in the following terms:

Present proceedings

The plaintiffs commenced the present proceedings in the High Court of Singapore by way of Writ of Summons filed on 26 May 2014 during the hearing of the Earlier Proceedings. There was no evidence to explain the delay in bringing these proceedings. However it appears that it was only during the Earlier Proceedings that the plaintiff discovered that the loans had been provided by EFH and that the shares had been pledged to it.

On 15 April 2015 the proceedings were consensually transferred from the High Court to the Singapore International Commercial Court under O 110 r 12 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed). Although the proceedings had originally been set down for hearing in late 2015, the plaintiffs changed their legal representation and sought a later trial date, to which the defendants did not object.

The proceedings were heard on 22, 23, 24, 25, 26 and 29 February 2016. Thereafter the parties filed extensive written submissions and final oral submissions were heard on 22 April 2016, at the conclusion of which judgment was reserved. Subsequently the plaintiffs were granted leave to rely upon a further written submission dated 25 April 2016. The plaintiffs were represented by Mr Paul Tan, Mr Yam Wern-Jhien, Ms Josephine Chee, Ms Wong Shi Yun and Mr Pradeep Nair. The defendants were represented by Mr Hee Theng Fong, Ms Toh Wei Yi, Mr Nicklaus Tan and Ms Jaclyn Leong.

The plaintiffs relied upon the plaintiff’s three affidavits sworn on 20 November 2015, 23 December 2015 and 22 February 2016. The defendants relied upon the defendant’s two affidavits sworn on 3 November 2015 and 6 January 2016. The defendant also relied upon the affidavit of Mr Goh sworn on 21 January 2016. The plaintiff, the defendant and Mr Goh were cross-examined.

The plaintiffs relied upon the expert opinions of Mr Tan Boon Hoo (“Mr Tan”), of TBH International Consulting and Mr Richard Hayler (Mr Hayler), of FTI Consulting. The defendants relied upon the expert opinion of Mr Tam Chee Chong (“Mr Tam”), of Deloitte & Touche. The experts gave their evidence in concurrent session on 29 February 2016. This evidence related to the impact that the trading of the NexGen shares by Yuanta and/or EFH may have had on the NexGen share price.

Issues for determination

There are numerous competing claims between the parties. Although the plaintiffs sought to expand their claims against the defendants in their Opening Statement at the commencement of the trial, including a claim of fraud (separately from all other claims originally pleaded), this was not permitted. The claims for determination are those that are pleaded.

I should record that although the Miscellaneous provisions of the Loan Agreement (cl 9) provided that it was to be construed in accordance with the laws of the Bahamas, it is agreed between the parties that there is no relevant difference with the laws of Singapore and they have addressed the claims on that basis. Those provisions also included an agreement to have disputes resolved by arbitration under the jurisdiction of Nassau. The parties apparently decided that they would waive any rights in this regard at the time the proceedings were commenced.

Construction of Agreements

A number of issues arise in respect of the construction of the Agreements. The plaintiffs contend that although the Loan Agreement expressly provides that the plaintiffs authorised Yuanta to “sell, trade or pledge” the NexGen shares “at its discretion” (see [22] above), when the Agreements are read together it can be seen that Yuanta was not authorised to sell the shares unless it was the “ultimate lender” and/or unless the plaintiffs were in default. The defendants contend that Yuanta had unfettered discretion to deal with the shares during the term of the Agreements, including by selling the shares.

The plaintiffs contend that on a reasonable reading of the Agreements it is clear the parties were in a joint venture relationship and owed fiduciary obligations to each other. The defendants contend that the only obligations between the parties under the Agreements are contractual and the parties did not owe any fiduciary obligation to each other.

Breach of contract

The plaintiffs claim that the defendants are in breach of the Agreements in disposing of the NexGen shares and keeping the proceeds of those sales. The plaintiffs also claim that the defendant induced Yuanta to breach the Agreements in this regard.

In response to these claims the defendants claim that they were instructed or requested by the plaintiff to sell 101.5m NexGen shares between February and March 2011. They also claim that the plaintiffs are in breach of the Agreements by using S$11,302,934.13 of the loan funds obtained for the joint venture project for their own purposes, without the knowledge or authority of the defendants. They claim that it was an implied term of the Agreements that the plaintiff and the defendant would each be entitled to, or entitled to use, 50% of the loan funds in AEM’s account and that the plaintiff’s conduct has prevented the defendant from enjoying that entitlement.

The plaintiffs also claim that Yuanta is in breach of the SPA, having paid only S$1.8m of the S$15m purchase price for the 300m NexGen shares. The defendants deny that the parties entered into the SPA and claim that if there were such an agreement, the plaintiffs have failed to bring to account amounts already paid by the defendants.

Fiduciary breaches

The plaintiffs claim that in selling the NexGen shares and keeping the proceeds of those sales, the defendants are in breach of their fiduciary obligations to them. The plaintiffs also claim that the defendant assisted Yuanta in its breach of fiduciary obligations owed to them.

Conversion

The plaintiffs claim the defendants are liable in conversion for disposing of the NexGen shares.

Conspiracy

The plaintiffs claim that with intent to injure the plaintiffs by unlawful means, the defendants conspired and combined together to defraud them and to conceal such fraud and the proceeds of such fraud from them.

Portfolio claim

As part of their claim for damages the plaintiffs claim that a consequence of the defendants’ conduct was a fall in the price of the NexGen shares, causing a significant reduction in the value of the plaintiffs’ NexGen share portfolio. The plaintiffs allege that the defendants knew, or ought to have known, that the disposal of the large amount of NexGen shares within a short period of time in 2011 would result in “the drastic fall of the price” of the NexGen shares for which the defendants are liable to the plaintiffs.

Issues on counterclaim

The defendants claim that the parties agreed that one of the joint investments of the project was the purchase of the warrant which was to be converted to 225m NexGen shares which were to be pledged for loans to be deposited into the AEM account for joint investment. The defendants allege that the plaintiffs were obliged to transfer the 225m NexGen shares converted from the warrant for pledging or to transfer 112.5m NexGen shares to Yuanta’s account.

The defendants allege that on or around 30 June 2011, the plaintiff represented to the defendant that he would arrange for the transfer of the 225m NexGen shares or deposit 112.5m NexGen shares into the Yuanta account. The defendants claim that because the plaintiff failed, refused or neglected to transfer the 225m, or 112.5m, NexGen shares to Yuanta, the defendant instructed Credit Agricole on or around 6 October 2011 and 10 October 2011 to transfer the totality of the 225m NexGen shares to the Fullerton Account. The defendants claim that the plaintiff’s failure, refusal or neglect in transferring the 225m, or 112.5m, NexGen shares has led to Yuanta suffering loss and damage (“the Warrant Claim”).

The defendants also claim that pursuant to cl 3 of the Supplementary Agreement the NexGen shares obtained from the warrant were to be “cashed out”. They claim that the plaintiff and the defendant were entitled to sell the 225m NexGen shares at a price of S$0.06 per share for the total sum of S$13.5m. It is alleged that because the plaintiff failed, refused or neglected to transfer the 225m NexGen shares converted from the warrant, the defendant was prevented from selling the shares at that price and could only sell them in November 2011 from the Fullerton Account at S$0.007per share, for the total sum of S$1.575m. The defendants claim loss and damage in the amount of S$5.175m in respect of this aspect of the Warrant Claim.

The defendants also claim that the plaintiff and the defendant entered into an oral loan agreement in June 2011 pursuant to which the defendant (or Yuanta) would provide an additional loan of S$1.8m to the plaintiff in consideration of which the plaintiff agreed to transfer an additional 700m NexGen shares to Yuanta. The defendants claim that Yuanta provided the sum of S$1.8m by way of transfer from Yuanta’s account to the AEM account and then to TPG’s account with DBS Bank Ltd on 29 June 2011. The defendants claim that the plaintiff has refused and/or neglected to transfer the 700m NexGen shares in breach of the oral agreement (“the Oral Loan Agreement Claim”).

Construction of the Agreements

There are two matters for determination in construing the Agreements. The first is whether the defendant’s discretion to sell the pledged NexGen shares was unfettered. The second is whether the parties’ contractual relationship gave rise to fiduciary obligations and, if so, the nature of those obligations.

Discretion to sell the pledged shares

In construing commercial contracts, the Court has regard to the language used by the parties, the commercial circumstances that the contracts address and the objects they were intended to secure. It is also permissible to have regard to the events and circumstances known to the parties at the time: see, eg, Lucky Realty Co Pte Ltd v HSBC Trustee (Singapore) Ltd [2016] 1 SLR 1069; Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR (R) 1029; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 325 ALR 188 (at [47]). Commercial contracts should be given a businesslike interpretation: McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579(at [22]).

The Loan Agreement was between Yuanta, as Grantor of the non-recourse loan and the plaintiffs, as Grantee (see [22] above). The Supplementary Agreement was between the plaintiff and the defendant (see [26] above). The clear intention of the parties was that the Agreements should be read together as they agreed expressly that the Loan Agreement formed “an irrevocable part” of the Supplementary Agreement (cl 6 Supplementary Agreement).

The parties recorded that the plaintiffs were “desirous of delivering” the NexGen shares “as pledge for a non-recourse loan” (Recital Loan Agreement). The plaintiffs agreed to deliver 200m NexGen shares for pledging (adjusted to 3.6 billion shares in the Supplementary Agreement) as security for loans totalling US$50m. The plaintiffs expressly authorised Yuanta to sell, trade or pledge the NexGen shares “at its discretion” (cl 1(c)); and to hold or deposit the shares with various institutions, including any local or overseas depository institution or liquidation company or custodians at any local or overseas bank (cl 1(d) Loan Agreement). The parties also agreed on a mechanism pursuant to which the Loan amount was to be fixed (cl 2(a) Loan Agreement).

Yuanta agreed that upon receipt of the NexGen shares, as collateral, it would grant the plaintiffs a non-recourse loan for 36 months, the plaintiffs having the right to extend the loan for an additional 1 to 2 years (cl 7 Supplementary Agreement).

Clause 4 of the Loan Agreement took on a degree of importance in the debate about the extent of Yuanta’s entitlement to sell the shares during the term of the agreement, the provisions of which are repeated here for convenience:

The defendants submitted that Yuanta would only be required to return the NexGen shares or money of the same value when the plaintiffs wished to redeem the loan. Although it would appear that Yuanta was entitled to “fix the re-delivery price” based on the value of shares at the time of notice of repayment under cl 4(b)(i) or the date of re-delivery in accordance with cl 4(e), the defendant submitted that Yuanta was obliged to re-deliver cash equivalent to the value of the shares at the date they were pledged. The defendants did not explore this submission any further and although the plaintiffs were in agreement with this submission (understandably because the share price had fallen) it is not necessary to take this matter any further.

The defendants submitted that how and when the pledged shares would be sold before redemption was a matter for Yuanta in the exercise of its discretion. They emphasised the significance of cl 4(b) contending that the defendants had the option to decide whether to return the shares or cash equivalent to the value of the shares when pledged.

Notwithstanding the emphasis placed upon cl 4(b) by the defendants throughout the trial, the plaintiffs made no mention of it in their final written submissions. When pressed during oral submissions as to how cl 4(b) should be construed in the circumstances, the plaintiffs finally submitted that the parties did not intend cl 4(b) “to be operative” (22-04-2016: tr 15-24). I should deal with one aspect the plaintiffs’ final written submissions in respect of Yuanta’s obligation of re-delivery. Those submissions included a claim that the defendant “accepted that he was obliged to return the NexGen shares to the Plaintiffs” (par [62]). In support of this claim the plaintiffs relied upon a section of the transcript of the defendant’s evidence in which he was referred to the provisions of the Supplementary Agreement which recorded that the plaintiff was proceeding “to loan” 3.6 billion NexGen shares to the defendant and gave the following evidence (26-02-2016: tr 41):

Notwithstanding the provisions of the Loan Agreement, the plaintiffs contend that this was an admission that the defendant and/or Yuanta were obliged to return the shares to the plaintiffs on maturity of the loan. This fails to address the provisions of the Loan Agreement which provided the discretion to the defendant to return the “relevant portion” of the shares or the “relevant amount” to the plaintiffs on the maturity of the loan. There was no submission that the discretion only related to whether the amount was in Singapore dollars or US dollars. That is understandable having regard to the other provisions in cll 4(e) and (f). I do not accept that the defendant admitted that he was obliged to return the shares to the plaintiff. The defendant’s case is that if the plaintiffs repaid the loan Yuanta had the discretion to return either the shares or the cash equivalent.

The Loan Agreement also provided:

Clearly the parties intended that if TPG breached the terms of the Loan Agreement it would lose all its right, claims or benefits in respect of the pledged NexGen shares and would be obliged to execute the “transfer document” transferring the pledged NexGen shares to Yuanta.

The parties agreed to proceed “in the spirit of goodwill and other desires deemed worthy of respect” (chapeau Loan Agreement) and recorded that they would not “harm the legitimate interests” of each other (cl 8(b) Loan Agreement). They also agreed to the applicability of the “requirements of the co-operation” if the plaintiffs wished to increase the term of the loan (cl 7 Supplementary Agreement) and that their agreement was “concluded with the principle of integrity” (cl 12 Supplementary Agreement).

The first paragraph of the Supplementary Agreement referred to the loan that was to be obtained “through friendly negotiations” to be taken out by the plaintiff from the defendant or institutions by guarantee of the defendant or in co-operation with the defendant and a bank. The parties agreed that the loans were to be secured by the NexGen shares that were held by the plaintiff in TPG’s name “with full control and discretion in the pledge or transfer thereof”.

The Supplementary Agreement set out the “division of work” between the plaintiff and the defendant. The plaintiffs authorised the defendant to be “the consultant and representative of the project”, a role that was to continue until the termination of the Supplementary Agreement “upon the completion of the project” (cl 7 Loan Agreement). The “project” was not defined in the Loan Agreement. The expression “project” is not found anywhere else in the Loan Agreement and is not used in the singular or defined in the Supplementary Agreement. However the first paragraph of the Supplementary Agreement provides that the purpose of the loan was “to enable the Parties to carry out diverse investments”. The parties agreed to set up “a BVI company to carry out securities and other investments” with the loans being deposited into the “joint account of the Parties for joint management and investment” (cll 2 and 3 Supplementary Agreement). The parties made provision for profit realisation and distribution when they formed the view that “the joint investments in securities or other projects have reached a certain profit margin” (cl 4 Supplementary Agreement). They also agreed that they could utilise the loan funds “for other investments” that they approved (cl 5 Supplementary Agreement). The parties also agreed that the loan funds “shall be for carrying out securities and other investments, operating on the account to be signed by” the plaintiff and the defendant “on behalf of the Parties” (cl 7 Supplementary Agreement).

The object of the Agreements was to facilitate the “project” which involved: the plaintiffs delivering the NexGen shares into Yuanta’s account; the provision of loans by Yuanta secured by the NexGen shares; or the procuring of loans by Yuanta and/or the defendant from a third party, or parties, utilising the NexGen shares as security; and the depositing of the loan funds into AEM’s account to enable the parties to: (a) comply with the requirement in the Agreements in respect of the exercise of the 300m (reduced to 225m) warrants; and (b) to carry out securities and other investments with equal sharing in the profits or losses of the project.

The commercial circumstances included that at the outset of their negotiations a short time before the Agreements were executed, the plaintiff and the defendant were mere acquaintances and had not transacted any business together. They each had the desire and made the decision to pursue a business venture together obviously with the aim of making a profit. This included combining their respective commercial attributes; the defendant’s so-called good credit rating and capacity to source US$50m in loans for the venture; and the plaintiff’s capacity to provide the collateral for those loans in the form of 3.6 billion NexGen shares in a non-recourse loan arrangement.

Limited liability loan agreements have been “part of the repertoire of financiers for centuries”: BHP Billiton Finance Limited v Commissioner of Taxation [2009] FCA 276 at [205]-[207]. The nature of the obligations and the manner in which liability may be limited will depend upon the provisions of the contracts into which the parties have entered. In Commissioner of Taxation v Firth (2002 120 FCR 450 such circumstances were described as follows (at [74]):

The loans were to be provided by either Yuanta or a third party arranged by the defendant. As it turned out the funds for the loans from Yuanta were provided by EFH. The security for the loans (the NexGen shares) was provided by the plaintiffs through TPG’s account. The loans were ultimately for the joint benefit of the plaintiff and the defendant through their investment operations. If the loans could not be repaid, the risk did not rest with the defendants or AEM. The defendants could not be sued for the debt by EFH unless Yuanta had engaged in fraudulent conduct. True it is that TPG could not be sued by Yuanta for the debt as Yuanta could only have recourse to the shares, but the risk in respect of any breach of the Loan Agreement or failure to repay the loans was the plaintiffs’ risk – the loss of the NexGen shares.

Yuanta would only obtain “absolute ownership” of the NexGen shares “with full unrestricted rights” if the plaintiffs failed to repay the loans (cl 4(a) Loan Agreement). If that occurred the plaintiffs were obliged to execute the “transfer document” pursuant to which they would “no longer be entitled to any rights, claims or benefits” in relation to the NexGen shares as pledged (cll 5(a) and (b) Loan Agreement). This has been referred to as the difference between obtaining “special property” and “general property”, albeit that such expressions have been referred to as an “unfortunate peculiarity” of English terminology: The Odessa [1916] 1 AC 145 at 159.

The purpose of the delivery of the NexGen shares to Yuanta was as a “pledge” and “as collateral” for the loans. In Hilton v Tucker (1888) 39 Ch D 669 Kekewich J said at 673:

In Re Morritt, Ex Parte Official Receiver (1886) 18 QBD 222 Fry LJ analysed the provisions of a bill of sale by way of security as a mortgage of chattels and compared it to a pledge. His Lordship said at 234-235 (although in dissent, it was not relevantly in respect of this point):

In The Odessa Lord Mersey, delivering the judgments of their Lordships (Lord Parker of Waddington, Lord Sumner, Lord Parmoor and Sir Edmund Barton) said at 159:

In Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249, McHugh, Gummow, Hayne and Heydon JJ said at 257 (footnotes omitted):

The parties agreed on a mechanism to remedy any “erroneous condition” of the value of the collateral falling below 55% of the total sum of the loan (cll 2(b) and 5(b)(i) Loan Agreement). If this occurred Yuanta was entitled to make a margin call and TPG was given the option of making repayment or transferring additional shares (cl 5(b)(i) Loan Agreement). Clearly this is what was envisaged by the parties if the share price of the NexGen shares fell below the relevant value of the loan. In fact the margin calls made by Yuanta called for the payment of cash or the delivery of additional NexGen shares.

In submitting that Yuanta’s entitlement to sell the pledged NexGen shares was unfettered, the defendants have placed emphasis upon cl 4(b) of the Loan Agreement pursuant to which Yuanta agreed to return “the relevant portion” of the NexGen shares “or the relevant amount” to the plaintiffs if they complied with the Agreement (cl 4(b)). Although not specifically emphasised by the defendants I apprehend that the language of cl 4(e) of the Loan Agreement referring to the “event of redelivery of cash in part or in full” is also relied upon in support of this contention.

The plaintiffs rely upon the abovementioned provisions of the Loan Agreement in relation to the absolute ownership of the pledged shares as support for the contention that Yuanta could not sell the pledged shares unless TPG was in breach of the Agreements. Although not specifically relied upon, it may be thought that cl 4(d) which provides that the current or future bonuses from the pledged shares were to be retained by Yuanta “to make up for the said Loan” also supports an intention that Yuanta was to retain (not sell) the pledged shares.

The defendants contended that the very commercial nature of the non-recourse loan is that the lender, Yuanta, can only look to the shares for recourse if there is default by the borrower, the plaintiffs. They submitted that it was clearly commercially sensible from Yuanta’s perspective that it had the option of selling, trading, or pledging the NexGen shares in order to protect its interests. It submitted that it is not commercially sensible that Yuanta would be unable to protect its interests by a requirement to hold on to pledged shares with diminishing value for the duration of the loan term. Yuanta was obliged to provide, directly or indirectly, that is by itself or from a third party through Yuanta, loans to the plaintiffs at 50% of the stock market value of the pledged shares.

Although the Loan Agreement was between the plaintiffs and Yuanta, the Supplementary Agreement provided that the plaintiff was to cover any short positions in respect of the shares (cl 5 Supplementary Agreement). It also provided that the plaintiff agreed to progressively increase the total cumulative value of the shares so that the loan did not fall below US$50m (cl 6 Supplementary Agreement). The defendant agreed to be responsible for the “revaluation of the shares” so as to increase the amount of the loan “as and when the value per share” increased up to “a certain price”. The parties recorded that such “cycle” was to be repeated “to ensure adequate funds are available for the investments” (cl 10 Supplementary Agreement).

The plaintiffs submitted that the provisions of cl 1(c) of the Loan Agreement authorising Yuanta “to sell, trade or pledge the Pledged Securities at its discretion” in the context of the Agreements read together, only applied in instances where Yuanta was the ultimate lender. The plaintiffs also submitted that cll 1(d) (Yuanta’s entitlement to hold or deposit the shares in a certain manner) and 4(c) (Yuanta’s entitlement to carry out various trading and hedging strategies) only applied if Yuanta was the ultimate lender.

I understand the plaintiffs’ submissions to mean that these clauses only applied if Yuanta was providing its own funds for the loans under the Loan Agreement. Yuanta was clearly authorised under the Agreements to obtain the funding from a third party. The plaintiffs’ submissions effectively amount to a contention that there should be implied into the Loan Agreement a term that provides that cll 1(c) and 4(c), (e) and (f) do not apply unless Yuanta provides its own funds for the loans under the Loan Agreement. As attractive as this may be to the plaintiffs, such term is not so obvious that it goes without saying; it is not necessary to give the Loan Agreement business efficacy; and it is inconsistent with the express terms of the Loan Agreement: B.P. Refinery (Westernport) Pty. Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266 at 282-3; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337.

It is clear that the parties had in mind that the whole of the 3.6 billion NexGen shares would be “progressively” transferred from the plaintiff to TPG’s account with Crédit Agricole and then into Yuanta’s account with Crédit Agricole. It is also clear that the loans to be obtained by the defendant were also to be obtained progressively as shares were pledged. It was not anticipated that US$50m would be provided in one tranche. This much is clear from the parties’ use of the expression “multiple-times fund raising amounting to US$3,000,000.00 each time” in cl 1(a) of the Loan Agreement.

The expression “relevant portion” of the shares in cl 4(b) of the Loan Agreement was intended to refer to the amount of shares that were pledged in respect of the particular tranche of loan provided under the Loan Agreement. If the plaintiffs decided to repay a loan tranche, Yuanta was obliged to redeliver to the plaintiffs that portion of the shares that were pledged in respect of that particular loan tranche (“the relevant portion”). However Yuanta had the discretion to redeliver to the plaintiffs a cash equivalent to the relevant loan tranche (“the relevant amount”). The loan tranche would only be 50% of the value of the security. If the loan were S$1m Yuanta would be obliged to return S$2m on maturity although the parties would probably set the repayment off against the redelivery and Yuanta would simply redeliver S$1m cash or a combination of shares and cash to the value of S$1m to the plaintiffs.

The parties agreed that Yuanta was entitled to sell, pledge or trade the shares during the course of the Loan Agreement and to engage in hedging and trading strategies. In those circumstances it is understandable that Yuanta was provided with the discretion to return a relevant amount of cash at the time of the loan repayment because the portion of the shares relevant to the loan may have been pledged elsewhere or the subject of its trading strategies or they may have been sold.

However this does not mean that the parties intended that Yuanta was entitled to sell the shares that it held irrespective of whether a loan had been provided to the plaintiffs. The parties intended that Yuanta could only deal with the shares in respect of which it was at risk of non-payment of the loan. If for instance Yuanta held 15m NexGen shares in its account but only 7m were collateral for a particular loan, Yuanta could not deal with the balance of the shares (8m) that it was holding as available to be pledged or used as collateral for future loans. It was only the shares that had been collateralised in respect of any particular loan that could be used by Yuanta in the various strategies that it may have wished to adopt to protect its position in the non-recourse environment.

The fact is that Yuanta obtained the funds from EFH so that it could make the loans under the Loan Agreement. However the NexGen shares that were pledged as security for the loan tranches were pledged by Yuanta to EFH. Those shares that remained in the Yuanta account that were not pledged as security for loans but were available for pledging when loans were to be made were cocooned from any dealing by Yuanta until such a loan was made either by use of its own funds or from funds sourced from EFH. Yuanta was not entitled to sell, pledge or trade the NexGen shares or adopt hedging strategies with the NexGen shares unless it held them in exchange for a loan that had been made and in respect of which it was at risk. It was not at risk in respect of its arrangements with EFH because EFH held the shares and would have recourse to the shares if a margin call was not met, or interest on the loan was not met, or the loan was not repaid.

I am satisfied that Yuanta was authorised to sell the NexGen shares if they had been pledged against loans that had been provided under the Loan Agreement. It was not authorised to sell or otherwise deal with the shares that it held in its account that had not yet been pledged against a loan. As it turned out, the authority Yuanta had under the Loan Agreement to sell the shares was irrelevant because EFH held the pledged NexGen shares against the loans it provided to Yuanta.

Fiduciary obligations

The next question for determination is whether the parties owed each other any fiduciary obligations.

The plaintiff accepted in his evidence that he understood the Agreements into which he and TPG entered. There is no complaint of unfairness of the provisions of the Agreements. However, on one view of the commercial circumstances of these parties, it is rather extraordinary that the plaintiff would proceed to enter into a joint venture where his co-venturer makes no financial contribution and the risk of losing millions, possibly billions, of NexGen shares and possibly some cash (if used to remedy margin calls) is to be borne only by the plaintiffs. The only burden placed on the defendants was for losses suffered in the project. The defendants’ reliance upon the following passage of Dawson J’s judgment in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 (“Hospital ProductsLtd”) at 147 is apt:

Where there is an underlying contractual relationship between the parties, the extent and nature of any fiduciary obligations owed in any particular case are determined by reference to the terms of the underlying contract: Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323 at [367]. In addition to the principles of construction of commercial agreements referred to earlier it is also important in this analysis to have regard to the extent, if any, that a party is entrusted with the power and authority to act in the interests of the other party with the power to affect those interests in a legal and practical sense: Hospital Products Ltd at 68, per Gibbs CJ.

It is not in issue that while not all fiduciaries owe the same duties in all circumstances, the core duties of good faith and loyalty lie at the heart of a fiduciary relationship: Quality Assurance Management Asia Pte Ltd v Zhang Qing and others [2013] 3 SLR 631 at [28]. Equally it is not in issue that a fiduciary is prohibited from making profits for himself out of his position as a co-joint venturer: Kumagai-Zenecon Construction Pte Ltd and another v Low Hua Kin [1999] 3 SLR (R) 1049 at [14].

The Further and Better Particulars of the Reply and Defence to Counterclaim (“Particulars”) filed by the plaintiffs on 23 December 2015 alleged that the defendant owed the following fiduciary duties to the plaintiffs: (1) a duty to act in good faith and in the best interests of the plaintiffs; (2) a duty not to place themselves in a position in which their interests may conflict with the plaintiff’s interests; (3) a duty to hold the NexGen shares on trust for the plaintiffs and deal with them in a way that the defendants honestly considered was for the joint benefit of the joint investment arrangement entered into between the parties; (4) a duty to maintain a proper system of account in respect of the shares and to render accounts; and (5) a duty to act in good faith and obtain the best possible price in relation to the defendants’ sale of the pledged shares in exercising their discretion to sell those shares.

The defendants contended in their Opening Statement that the plaintiffs unjustifiably sought to expand the fiduciary duties allegedly owed by the defendants beyond those contained in the Particulars, namely: (1) a duty not to make or retain secret profits; (2) a duty to preserve the collateral and its value, which included taking reasonable steps to monitor, forestall and resolve the margin calls and later interest payments; (3) a duty to ensure that any trading of the pledged NexGen shares and any enforcement against the security would be done in a manner not to disturb the value of the shares; and (4) a duty to take reasonable care in all its dealings relating to the NexGen shares and in procuring and managing the finance (Bundle A par 88).

Although the plaintiffs made submissions about the various categories into which the parties’ relationship may fit (principal/agent; trustee/beneficiary; mortgagee/mortgagor; pledgee/pledgor; partnership; and joint venturers) it is clear that they were co-joint venturers. That relationship included Yuanta acting as trustee of the plaintiffs’ NexGen shares that had been transferred into its account and had not been pledged against a loan.

The defendants contended that the presence of joint venture relationship does not automatically create fiduciary duties between the parties. In this regard the defendants relied upon the decision in Ross River Limited & Anor v Waveley Commercial Ltd & Others [2013] EWCA Civ 910 WL. In that case Ross River and Waveley Commercial entered into a joint venture agreement to develop land. Ross River’s role was to provide finance. Wavely Commercial’s role was to manage the development. On reviewing the provisions of the joint venture agreement and after referring to a number of cases cited by the primary judge, Lord Justice Lloyd said at [34]:

The defendant agreed that he and the plaintiff were joint venture “partners” (26-02-2016: tr 43). He did not dispute that the Agreements contain provisions which provide for the overarching spirit of goodwill and integrity to govern the joint venture business arrangement entered into between the parties (26-02-2016: tr 42-43). He accepted that the loan funds raised would be put towards the joint investments from which the parties would share equally in the profits and be equally responsible for any losses.

The plaintiff placed a great deal of trust in the defendants in transferring 825m NexGen shares to Yuanta to be pledged for the loans without receiving any payment from the defendants (by way of any initial contribution or otherwise). The plaintiffs submitted that the manner in which the defendants structured their dealings with them (namely, firewalling information through the device of the Yuanta account) caused them to be entirely dependent on the defendants in respect of the financing arrangements and the location of the NexGen shares that had been transferred to the Yuanta account.

The plaintiffs were entitled to expect that the defendants would act in the best interests of the joint venture. They appointed the defendant to act as the consultant and representative of the project throughout the period of the Agreements and were dependent upon him acting with integrity and goodwill. Equally the plaintiff had similar obligations and in particular an obligation to ensure that the investments were only for the purposes of the joint venture project and not for any personal investments. The defendant was dependent on the plaintiff in this regard. Each party was exercising power or discretion for and on behalf of the other party to the joint venture.

Although the defendant did not contribute any shares at the outset of the project, it was anticipated that his claimed good credit rating would be used to facilitate the loans. There is no doubt that the parties were in agreement that the project was a joint project and that the “division of work” outlined in the Supplementary Agreement required goodwill between them, ensuring that neither would harm the legitimate interests of the other. Those provisions combined with the parties’ recognition of the application of the “principle of integrity” to their joint project, was a basis for mutual trust between them in the relevant work they performed.

I am satisfied that there were aspects to the parties’ relationship in which each owed the other fiduciary obligations. The plaintiffs owed to the defendant an obligation to ensure that the investments that were made for the joint project were for the mutual benefit and profit of each of the parties and that the plaintiffs would not make secret profits for themselves. Equally the defendant and Yuanta owed the plaintiffs an obligation to use the pledged shares as collateral or security for loans for the benefit of the joint venture. The defendant was obliged not to make profits from the shares that were held on trust prior to them being pledged against the loans that were obtained from EFH. I am satisfied that the plaintiff and the defendant owed each other a duty not to make or retain secret profits.

The plaintiffs’ claim that the defendants owed them a duty to preserve the collateral and its value including taking reasonable steps to forestall and resolve the margin calls and later interest payments does not arise in the contractual setting. Certainly there were contractual obligations between the parties in respect of the margin calls and if the defendant did not provide to the plaintiff a proper opportunity to meet the margin call then there may be a breach of contract sounding in damages. I am not satisfied that any fiduciary obligation should be overlaid on that contractual obligation.

There were other duties claimed by the plaintiffs that are not necessary for consideration having regard to the construction of the Agreements relating to the defendants’ capacity to sell the shares. Clearly the defendants were not entitled to sell the NexGen shares that had not been pledged against a loan as those shares were held on trust for the plaintiffs until such loan was arranged and such security provided.

Determination of factual disputes

The determination of the parties’ competing claims depends in part on the reliability or credibility of the plaintiff and the defendant and to a lesser extent, although not unimportantly, the reliability or credibility of Mr Goh. In determining the reliability of the evidence of a witness, the Court is assessing whether their “genuine recollection truly describes what was said, done, heard, seen or thought”; and in determining the credibility of a witness, the Court is assessing whether the evidence is “genuine”. In other words assessing whether a witness is accurate in the former case or truthful in the latter case: The Hon. Justice R. D. Giles (as Giles IJ then was), “The Assessment of Reliability and Credibility” [1996] 2 Judicial Review 281.

As was the case in the Earlier Proceedings (J [87]), the parties’ versions of events and conversations on various aspects of their respective claims are diametrically opposed. Although these parties were entering into a joint venture relationship in which multi-million dollar transactions were contemplated, using shares in a publicly listed company on the SGX as security, there was no real precision in the identification of the joint venture project or in keeping records to allow a transparent overview or review of the project. The assessment of the reliability of the evidence and the credibility of the parties and Mr Goh is affected by this lack of precision and records. I will now turn to the various factual disputes the determination of which will in large measure determine the parties’ pleaded claims.

Sales of NexGen shares

There is a significant factual issue between the plaintiff on the one hand and the defendant and Mr Goh on the other, as to whether the plaintiff instructed the defendant and/or Mr Goh to sell some of the 300m NexGen shares that TPG had transferred into the Yuanta account on 21 January 2011 (for pledging as security for the loans to be utilised for the joint venture project) because he was in urgent need of funds to pay down a loan amount due to Phillip Securities before TPG could transfer any more NexGen shares to Yuanta. It is not in issue that the plaintiff instructed the defendant to repurchase the shares that had been sold. Nor is it in issue that the shares were repurchased.

Although it is now clear that in August 2011 without notice to the plaintiff the defendant sold 60m of the NexGen shares that TPG had transferred to Yuanta for pledging as security for loans for the project, it is necessary to decide whether to accept the defendant’s explanation about those sales. Similarly it is necessary to determine whether the defendant’s evidence about the sale of the 225m NexGen shares in October 2011 should be accepted.

It was in their Defence and Counterclaim that the defendants alleged that from February 2011 to July 2011 Yuanta had sold 101.5m NexGen shares at the request or instruction of the plaintiff. It was also alleged that the 101.5m shares were repurchased in the same period “as the Shares were needed as collateral for the loans”. It was claimed that the shares were repurchased “primarily” using the loan funds (A 23).

The original particulars to this claim alleged that the plaintiff’s requests or instructions to sell the shares were given in two conversations between the plaintiff and the defendant: (A 23-24). The first was alleged to have occurred on 11 February 2011 when the plaintiff telephoned the defendant and instructed him to sell “some of the NexGen shares” that were held in the Yuanta account (A 24). It was alleged that on 18 February 2011 a “second” telephone conversation occurred between the plaintiff and the defendant in which the plaintiff instructed the defendant to sell “additional” NexGen shares in the Yuanta account (A 24). However these particulars were abandoned. In the amended particulars, the defendants alleged that there were “several occasions” (unspecified) on which the plaintiff “by way of telephone conversation” requested and/or instructed the defendant to sell part of the shares because the plaintiff was “in urgent need of funds” (A24-25).

In any event the defendants claim that the shares were sold and then repurchased between 18 March 2011 and 17 June 2011 and even if they were sold without instructions or requests from the plaintiff, Yuanta was entitled to do so at its sole discretion pursuant to the provisions of the Agreements (A 26-28).

Mr Goh’s affidavit evidence was that in or around October 2010 the defendant introduced the plaintiff to him as one of his “business associates”. His evidence included the following:

The defendant’s affidavit evidence in respect of the sale of shares during February and also in March 2011 included the following:

The plaintiff denied that he provided any instructions for the sale of the NexGen shares from the Yuanta account in this period. He claimed that when he found out that the shares had been sold, he instructed the defendant and/or Mr Goh to repurchase the shares. The defendant claimed that it was always the plan to repurchase the shares so that they could be used as collateral for the loan. The plaintiffs argued that it was illogical for the plaintiff to instruct the defendant and/or Mr Goh to sell the shares and then instruct them to repurchase them. They argued that if the plaintiff wished to raise funds on an urgent basis he could have sold the shares that he held without interfering with the shares in the Yuanta account that were to be pledged to obtain the loans for the joint venture project investments.

Like so many other aspects of this case, the plaintiff’s and the defendant’s affidavit evidence as filed was diametrically opposed. However in January 2016 the defendants made a decision to make an application to call Mr Goh to give evidence in the trial. The defendants were granted leave to call Mr Goh (over the plaintiffs’ objections) on the condition that the plaintiffs had leave to have a subpoena issued to Crédit Agricole for the production of various documents including any tape recordings of conversations between the defendant and Mr Goh and the plaintiff and Mr Goh in the relevant period. The plaintiffs wished to pursue this course notwithstanding that during the Case Management Conference on 11 January 2016 the defendants’ counsel said that “the defendants are certain that there are no such documents because the conversations were made through Mr Brian Goh’s mobile phone and not with – and so, therefore, there would not be any phone recordings that will usually be made” (11-01-2016: tr 30-31). Mr Goh’s affidavit included claims that the relevant conversation with the plaintiff was on his mobile phone and that his conversations with the defendant were usually on his mobile telephone. The significance of those claims is that such telephone conversations were not recorded, whereas any conversations that took place on Crédit Agricole’s telephone system were recorded.

The subpoena was issued and Crédit Agricole produced tape recordings of conversations between the defendant and Mr Goh and the plaintiff and Mr Goh. Those tapes were transcribed by the plaintiffs’ lawyers and were in evidence in the proceedings (Bundle G). Before referring to the content of those conversations, I should record that Mr Goh resiled from his evidence in paragraph 18 of his affidavit (which affects his claim in paragraph 19 of his affidavit) (see [237] above). Not only did Mr Goh claim in paragraph 18 that he was given instructions by the defendant to ensure that the share price would not be depressed through the share sales; he emphasised in paragraph 19 that he kept that instruction “in mind” in arranging for the sale of the NexGen shares to be done in batches. Mr Goh was cross-examined on this aspect of his affidavit evidence as follows (29-02-2016: tr 30-31):

Apart from what appears in this portion of the transcript, there was no explanation of how such evidence found its way into Mr Goh’s affidavit. He was not cross-examined in respect of his claim in paragraph 19. However, it is difficult to understand how Mr Goh could have given evidence that he kept the so-called “instruction” in mind when it did not occur.

The transcript of the conversations between the defendant and Mr Goh on 11 February 2011 at 5.25 pm includes the following (G 65-67):

This conversation was on 11 February 2011, the day that the defendant had originally claimed in his abandoned particulars that the plaintiff had telephoned him and instructed him to sell the NexGen shares to obtain urgently needed funds. It was the morning after the plaintiff allegedly telephoned Mr Goh around midnight the previous evening, 10 February 2011, on his mobile phone to instruct him to sell the NexGen shares. It is at the very least odd that neither the defendant nor Mr Goh refer in this conversation to the very recent conversations with the plaintiff in which he claimed he was in urgent need of funds and that such funds should come from the sale of the shares that TPG had recently transferred to Yuanta to pledge for loans for the joint venture project.

Mr Goh was cross-examined about this conversation as follows (29-02-2016: tr 22-23):

Mr Goh was also referred to the transcript of his conversation with the defendant on 14 February 2011 at 5.48 pm which included the following (G 68):

Mr Goh was cross-examined about this conversation as follows (29-02-2016: tr 23):

On 14 February 2011 the plaintiff wrote by email to Mr Goh’s assistant at Crédit Agricole, Ms Teo, with a copy to Mr Goh and the defendant’s personal assistant in the following terms:

Mr Goh was cross-examined in respect of a further conversation recorded on 18 March 2011 in which he discussed with the defendant the repurchase of the shares using the money in the Yuanta account (G 70-71) as follows (29-02-2016: tr 25-28):

One difference between the evidence given by Mr Goh and that given by the defendant in relation to these sales of the NexGen shares is that Mr Goh only referred to the sales in February 2011, whereas the defendant included reference to the sales in late March 2011. Mr Goh was cross-examined in relation to the absence of any reference in his affidavit to the sales on 29 March 2011 as follows (26-02-2016: tr 115):

Mr Goh was then referred to the transcript of the conversation with the defendant on 18 March 2011 and was cross-examined as follows (26-02-2016: tr 116-117):

The plaintiffs claim that notwithstanding the overwhelming evidence that the plaintiff requested the defendant and Mr Goh to buy back the NexGen shares that had been sold without his instructions, the defendant and Mr Goh proceeded to sell further shares on 29 March 2011, once again, they claim, without the plaintiff’s instructions.

The evidence relating to the secret sales of the 60m NexGen shares by the defendant in August 2011 and the 225m NexGen shares in October 2011 is relevant in determining whether I prefer the evidence of the plaintiff or the defendant generally and in particular in respect of the sale of the shares in February and March 2011. The defendant embarked upon the process of selling the remaining 60m NexGen shares that were held in the Yuanta account over a period from 19 August 2011 to 25 August 2011. He also embarked upon a process of selling a further 225m NexGen shares between 10 October 2011 and 20 October 2011 in eight tranches. Accordingly, between 19 August 2011 and 20 October 2011 the defendant sold 285m NexGen shares. It is not in issue that the defendant distributed the proceeds of the sale of all of those shares to himself, his business partners and a relative.

The whereabouts of the shares was certainly in issue during the preparation of the proceedings and in the defendant’s affidavits. In the defendant’s affidavit sworn on 3 November 2015 he described a process that he referred to as “email chasers” sent to the plaintiff to respond to the margin call letters. He claimed that on 3 October 2011 the plaintiff finally responded to his email but “failed to give any satisfactory answer as to how he was going to meet the Margin calls”. The defendant went on to claim (par 71): “Instead he became defensive and accused me of selling the Pledged Securities which is untrue and a baseless accusation”. The defendant went further and claimed that on the following day, 4 October 2011, the plaintiff had emailed him again “to demand an answer to his ridiculous accusation” and also asked him “why 60million Next-Gen shares had been transferred out of the Yuanta account”.

As late as November 2015 the defendant was claiming that the plaintiff’s allegations that he had wrongfully sold the NexGen shares that had been provided by the plaintiff were “ridiculous”, “untrue” and “baseless”. The defendant was referred to an email dated 10 October 2011 that he wrote to the plaintiff with a copy to Mr Goh which included the following (C 393):

The defendant was cross-examined about this communication as follows (24-02-2016: tr 75-77):

The defendant was then referred to another email that he wrote to the plaintiff on 14 October 2011, with a copy to Mr Goh, that included the following (C 403):

The defendant was cross-examined about this email and gave the following evidence (24-02-2016: tr 77-80):

In re-examination the defendant was taken to an email that was sent by the plaintiff to Crédit Agricole dated 12 September 2011, on which he was copied (C 357). In that email the plaintiff recorded his understanding that the 60m NexGen shares were still in the Crédit Agricole account. In re-examination the defendant was asked to describe the circumstances which led to such an email. His evidence was as follows (26-02-2016: tr 84-85):

Mr Goh was cross-examined about the defendant’s communications with the plaintiff (into which he was copied) in which he was advised that the 60m NexGen shares had been moved to another of Yuanta’s custody accounts. That evidence included the following (26-02-2016: tr 124-126):

Even on the basis that Mr Goh’s position was that he would have been constrained from advising the plaintiff that the defendant’s email contained an untruth was justified, there was absolutely nothing preventing Mr Goh from informing the defendant that his statements in his emails to the plaintiff about the whereabouts of the 60m NexGen shares were not accurate (to use a neutral term). Mr Goh did not do so but conceded that he should have done so (29-02-2016: tr 61).

The defendant’s evidence in relation to the sale of the 60m NexGen shares in August 2011 was most unimpressive. The fact that he would inform the plaintiff that the 60m NexGen shares had been moved to a custodian account when, I am satisfied he was fully cognisant that he had sold the shares and distributed the profits from those sales to himself, his associates or relatives, demonstrates that he was willing to be dishonest with the plaintiff. Mr Goh’s willingness to stand by as TPG’s banker knowing that the defendant and/or Yuanta were misleading TPG into believing that the shares were still with Credit Agricole was equally unimpressive.

The defendant seems to have thought that he was entitled to help himself to the pledged shares because the plaintiff had failed to transfer 700m NexGen shares referred to in the email of 27 June 2011. Irrespective of the rights and wrongs of the plaintiff’s failure to transfer those additional NexGen shares, I regard the defendant’s conduct in selling the 60m NexGen shares in August 2011 and the 225m NexGen shares in October 2011 and his communications with the plaintiff about the whereabouts of the NexGen shares as dishonest.

The plaintiffs submitted that the defendant’s version of events in relation to the plaintiff instructing him to sell the NexGen shares because he was in urgent need of funds began “falling apart” when the defendant was cross-examined. It was submitted that the defendant gave contradictory evidence during his cross-examination in relation to the alleged phone calls as follows (25-02-2016: tr 103-105):

The plaintiffs submitted that the defendant has no credibility on this issue. The change in the particulars is of some significance. The defendants removed the date of the alleged telephone calls which accommodated the claim by Mr Goh that the plaintiff had telephoned him around midnight on 10 February 2011 albeit that the particulars were amended before Mr Goh’s affidavit was filed. The looseness of the amended particulars, changing from two specific dates on which the plaintiff allegedly telephoned the defendant, to a rather nebulous “several occasions” certainly allowed some room for movement.

The plaintiffs submitted that if the sales were legitimate and pursuant to the plaintiff’s instructions, it was “curious” that a statement of account sent to the plaintiff on 5 October 2011 did not disclose any of those sales or incoming funds from those sales. It is appropriate at this juncture to set out the chronology in respect of that account.

On 18 July 2011 at the defendant’s request Credit Agricole (Ms Teo) forwarded to him a table setting out the details of the loans. That table referred to the incoming funds and bringing to account the reduction by 10% for “charges” and adding “shares sold (55 mil @ 0.05 SGD2,732,468.75)” (C 332). When the plaintiff requested details of the account activity for AEM up to 5 October 2011 from Credit Agricole, Ms Teo sent him a table, with a copy to Mr Goh, in which those share sales were not recorded (C 391). The plaintiffs submitted that the table was “incomplete” in that the incoming cash transfers to the AEM account after 4 April 2011 were not displayed. They also submitted that the table was “conspicuously silent” on whether NexGen shares from the Yuanta account had been sold. The plaintiffs claimed that the defendant had instructed Credit Agricole to issue the table to the plaintiff in that form so as to ensure that the NexGen share sales were disguised and not brought to his attention. Mr Goh accepted during cross-examination that it was “possible” that the defendant asked him to prepare the table in this incomplete form (26-02-2016: tr 113).

The plaintiffs’ submission is understandable in the circumstances of the later sales. However the plaintiff’s own case is that he discovered that sales were taking place and instructed the defendant and Mr Goh to desist. It is also to be remembered that the shares were repurchased by June 2011.

I think it is far more significant that the table did not include the sale of 60m NexGen shares in August 2011.

The plaintiffs submitted that it is significant that Mr Goh did not defend the sale of 30m NexGen shares by Yuanta on 29 March 2011 as being one made on the plaintiff’s instructions. The plaintiffs also relied upon the conversation between Mr Goh and the defendant on 18 March 2011 in which they were discussing the fact that Yuanta’s funds were used to buy back the shares that had been sold (G 70-71). It was submitted that it was illogical that on 18 March 2011 there was an instruction to buy back the shares and yet a further sale of 30m NexGen shares on 29 March 2011. The plaintiffs submitted that the idea of the plaintiff requesting the defendant to sell the shares defied logic and that it became increasingly clear as the trial continued that this was a “desperately assembled afterthought”.

The defendant’s explanation for the sale of the 60m NexGen shares in August 2011 was first given in his affidavit filed in November 2015 as follows (B 651):

One of the so-called “subsequent breaches” relied upon by the defendant in his affidavit that he seemed to think justified him selling the 60m NexGen shares was the plaintiff’s “failure to meet the various Margin Calls” (B 651: par 56b). The defendant did not use the 60m NexGen shares to respond to the margin calls. In any event the margin call notices were not issued to the plaintiffs until September 2011. I agree with the plaintiffs’ submission that the meeting of the margin calls had no bearing on the defendant’s decision to dispose of the 60m NexGen shares left in the Yuanta account.

The other reasons that the defendant gave for selling the 60m NexGen shares were that the plaintiff had utilised the loan proceeds himself; that he failed to keep his promise to transfer 225m NexGen shares; and he failed to transfer the 700m NexGen shares pursuant to the alleged oral loan agreement. In response, the plaintiff relies upon the transfer of 225m NexGen shares on 11 March 2011. In any event it is important to remember that the defendant caused Yuanta to help itself to the additional 225m NexGen shares in October 2011. If the defendant really intended the sale of the 60m NexGen shares to have some connection to the plaintiff’s failure to transfer the 225m NexGen shares then Yuanta should only have transferred 225m NexGen shares less those 60m NexGen shares in October 2011.

It is necessary to decide whether I prefer the plaintiff’s evidence or that of the defendant and Mr Goh in respect of whether the plaintiff instructed them to sell the pledged shares in February 2011. There are aspects to the whole process of what was occurring in February 2011 that are very unsatisfactory. It is not clear how it was that Mr Chung became aware that 55m NexGen shares had been sold (see [85] above). There are no records to support the proposition that the plaintiff/TPG were not in a position to deliver further NexGen shares to Yuanta for pledging without the so-called urgently needed funds being paid to Phillip Securities. It is obvious that there was a relationship between the plaintiff and Phillip Securities and that margin facilities were being used for various investments by the plaintiff independently of any joint project with the defendants. If the plaintiff had sought from the defendant an advance of a personal loan to meet liabilities to Phillip Securities, it would be expected that the defendant would have sought to have the plaintiff repay those funds advanced for that purpose. The only mention of a personal loan was on the instruction in respect of the payment of S$1.2m on 29 April 2011 from AEM’s account to Phillip Securities (C 471). This is well after the alleged instructions to sell the shares to provide the urgently needed funds to the plaintiff. It is also well after the further transfer of 225m NexGen shares by TPG to Yuanta on 11 March 2011. The suggestion that payments had to be made before any further shares could be transferred is therefore not supported by the conduct of the parties.

I regard the plaintiffs’ submissions in relation to the illogicality of the sale of the pledged shares as powerful. The plaintiff’s transfer of 300m NexGen shares in January 2011 and a further 225m NexGen shares in March 2011 to the Yuanta account when he was apparently instructing the defendant to sell the shares makes little or no commercial sense. The plaintiff could have sold the 225m NexGen shares to obtain the urgently needed funds rather than transferring them into the Yuanta account. Although it was suggested to the plaintiff that he needed funds in January 2011, his evidence that he converted 61m warrants for S$1.68m (or S$1.83m) was not challenged.

There were deficiencies in the evidence of the plaintiff, the defendant and Mr Goh. However I regard the defendant’s evidence as lacking credibility. I do not accept his explanations of remembering incorrectly as genuine. I do not accept his suggestion that his emails to the plaintiff advising that the 60m NexGen shares were in a custodian account were “negligent”. I regard his claims as an attempt to deflect the Court from reaching a conclusion that his conduct in this regard was dishonest. I am satisfied that the defendant secretly sold the 60m NexGen shares and intended to dupe the plaintiff into believing that they had not been sold.

The dearth of documentary material supporting the alleged instructions from the plaintiff: the change in particulars in respect of those instructions; the absence of any mention of the instructions in the conversation within hours of when the instruction is alleged to have occurred; the fact that the defendant was willing to and did behave dishonestly in respect of the sale of the 60m NexGen shares in August 2011; and the fact that Mr Goh was willing to stand by and let Yuanta and the defendant give the plaintiffs information about the 60m NexGen shares that was untrue; are all matters I have taken into account in reaching the conclusion that I prefer the plaintiff’s evidence over that of the defendant and Mr Goh in respect of this issue.

I do not accept the defendant’s evidence that the plaintiff instructed him on the so-called “several occasions” to sell the NexGen shares in February and March 2011 to obtain urgently needed funds. I do not accept Mr Goh’s evidence that the plaintiff telephoned him around midnight on 10 February 2011 to give such an instruction.

Identity of the lender

There is also a factual dispute about whether the defendant and/or Mr Goh made statements orally and/or in writing for the purpose of misleading the plaintiff into believing that the loans for the joint venture project were to be provided by Credit Agricole. At this point it is appropriate to say something about the Earlier Proceedings.

The real issues in dispute in the Earlier Proceedings related to whether Credit Agricole had acted in breach of its mandate from TPG; whether the defendant’s authority was revoked prior to the transfer of the 225m NexGen shares in October 2011; whether Credit Agricole was in breach of its implied or common law duty of care owed to TPG; whether TPG was contractually estopped from claiming against Credit Agricole; and whether TPG was estopped by representation from claiming against Credit Agricole: see the Judgment at [176].

Although there was reference to the Loan Agreement and the Supplementary Agreement in the Judgment in the Earlier Proceedings, the Court was not asked to construe those Agreements. However the trial judge did not accept the plaintiff’s “suggestion that Credit Agricole was intended to be approached as a lender and advisor for the joint-investment arrangement”: (Judgment at [146]); and did not accept the plaintiff’s “position that Credit Agricole was intended to fund the joint investment”: (Judgment at [148]). His Honour’s findings in this regard related to whether Credit Agricole had breached its mandate from TPG.

It has not been suggested in the present proceedings that Credit Agricole was to be an “advisor” for the joint investment project. However, the plaintiff’s case in the present proceedings was that he was led to believe that Credit Agricole was the lender of the funds for the joint venture project. The parties proceeded on the basis that the findings made by the trial judge in the Earlier Proceedings did not preclude either party from dealing with the question of whether the defendant and/or Mr Goh induced the plaintiff into a belief that the lender was Credit Agricole. Indeed the defendant gave the following evidence in cross-examination without objection (24-02-2016: tr 100-101):

It is not in issue between the parties in the present proceedings that it was possible that Credit Agricole might have been a lender for the joint venture project. However, it was acknowledged by the plaintiff that discretion was afforded to the defendant under the Agreements to source the funding from other institutions. The plaintiffs claim that the defendant directly and/or through Mr Goh, made statements (or remained silent) to suggest that Credit Agricole was the lender and intentionally kept the identity of the true lender, EFH, secret from the plaintiff to ensure that he would continue to transfer NexGen shares to Yuanta. This is denied by the defendant.

The letter of instruction from the defendant to Mr Goh on 30 December 2010 referred expressly to the “loan from your bank” (see [49] above). Clearly Mr Goh must have understood that there was a real prospect that the plaintiff was under the impression that Credit Agricole was the lender of the funds for the joint venture project. Neither the defendant nor Mr Goh responded to this letter to inform the plaintiff that the bank was not the lender or that the lender was EFH.

It was suggested by the defendants that the plaintiff may have simply reached the erroneous conclusion that Credit Agricole was the lender without the defendant and/or Mr Goh causing him to reach such conclusion. The defendant was cross-examined about the email correspondence with the plaintiff in which the plaintiff was seeking an “official letter from the bank”, regarding the top-up notices (see [129] above). In response the defendant had written to the plaintiff that it was “impossible for the bank to issue a letter” (see [131] above). The defendant gave the following evidence in cross-examination (24-02-2016: tr 65-68):

The defendant was also cross-examined about Mr Chung’s apparent impression that Credit Agricole was the lender (24-02-2016: tr 68-69). He then gave the following evidence (24-02-2016: tr 70-71):

In re-examination the defendant was asked about his evidence in cross-examination relating to Mr Chung’s misapprehension. He gave the following evidence (26-02-2016: tr 81):

I am satisfied that up to 30 June 2011 the plaintiff formed the belief that Crédit Agricole was the lender, not from any express statement by the defendant but from the correspondence about Mr Koesnadi’s shares on 20 December 2010 and the process of setting up the bank accounts for TPG and AEM with Crédit Agricole.

The plaintiff’s affidavit evidence was that he was “shocked” when he was informed in the meeting with the defendant on 30 June 2011 that the 725m NexGen shares had been pledged to three banks, Deutsche Bank, JP Morgan and Bank of New York. Clearly from that time the plaintiff could not have been under the impression that Crédit Agricole held those shares, although he claimed that the defendant advised him that 60m NexGen shares were with Crédit Agricole. It must have been obvious to the defendant and Mr Goh when the plaintiff was seeking copies of the official letter from “the bank” in respect of the margin calls, that he was under the misapprehension that Crédit Agricole and/or the three other banks to which reference was made on 30 June 2011 were the lenders of the funds for the joint venture project. The responses given by Mr Goh (with the defendant’s knowledge) in his correspondence with the plaintiff ensured that the identity of the true lender, EFH, was never disclosed to the plaintiff.

I accept that up to 30 June 2011 the plaintiff believed that the funds were coming from Crédit Agricole and thereafter from that bank and the others named in the meeting on 30 June 2011. I am satisfied that the defendant and Mr Goh were aware that the plaintiff held that belief and kept EFH’s identity as the lender secret from the plaintiff.

Was Scorpio East a joint investment?

There is a further factual dispute between the parties as to whether they agreed to jointly invest in Scorpio East. The outcome of the defendant’s claim that the plaintiff misused the loan funds for such investment depends upon the determination of this issue.

The plaintiff’s affidavit evidence was that when he and the defendant met in the period August to September 2010 they spoke about plans to jointly invest in and acquire up to a 30% stake in Scorpio East. They also discussed the potential management changes and the plaintiff claimed that the defendant shortlisted potential candidates to be nominated as a director of Scorpio East. The plaintiff also claimed that they discussed plans to raise capital for an investment in Scorpio East.

The plaintiff claimed that there were two payments made from AEM’s account to fund TPG’s purchase of the shares in Scorpio East and that the defendant was informed of these payments. In this regard he gave the following evidence (23-02-2016: tr 98):

The plaintiff claimed that the first payment of S$1.2m was made on 29 April 2011 by transfer from AEM’s account with Crédit Agricole to Phillips Securities. The defendant’s signature appears on the debit instruction that authorised the transfer. That instruction stated “For Mr. Hady personal temporary loan”. The second payment of S$1.8m was made on 29 June 2011 by transfer from AEM’s account at Credit Agricole to TPI directly. Again only the defendant’s signature appears on the debit instruction that authorised the transfer.

The plaintiff claimed in cross-examination that he could not recall whether at the time of the withdrawals he informed the defendant that they were for the purpose of buying Scorpio East shares and gave the following evidence (23-02-2016: tr 99):

The plaintiff was also asked why the defendant was not included in the board of directors or in the purchase arrangements in respect of Scorpio East if it was meant to be a joint investment. The plaintiff said that this was their agreement and that the defendant had proposed one candidate to be a director in the future. He was cross-examined as follows (23-02-2016: tr 99-101):

The plaintiff claimed in his Reply Affidavit that the defendant informed him that he was no longer interested in the Scorpio East shares and that he could keep the shares for himself. According to the plaintiff, the defendant lost interest in Scorpio East because it was being investigated by the Commercial Affairs Department in Singapore and its share price had fallen sharply (B 46 [99]).

The plaintiff brought defamation proceedings after the publication of the Stone Forest report that was referred to in the SGX Reprimand (see [154] above). That defamation suit was unsuccessful as was the appeal (23-02-2016: tr 104).

The reference in the SGX Reprimand to “round-tripping” in March 2011 was never explained in the evidence. However the plaintiff was cross-examined as follows (23-02-2016: tr 105-106):

While the defendant conceded in his affidavit that he was initially “kept in the loop” regarding the Scorpio East investment he claimed that he did not receive the final terms and conditions and therefore did not proceed with the investment. He claimed that he only realised that the plaintiff had proceeded with the investment when Mr Goh alerted him to a newspaper article reporting that Scorpio East was in trouble with the SGX. The defendant claimed that he was under the impression that the plaintiff had invested in Scorpio East using his own funds and had only found out that AEM funds were used when the plaintiff filed his Reply affidavit in these proceedings.

The defendant was cross-examined in relation to his claims in his affidavit about his lack of knowledge that the Scorpio East investment was part of the joint project. His evidence in this regard included the following (25-02-2016: tr 23):

The defendant was then referred to his email to the plaintiff of 25 August 2011 in which he referred to one of the plaintiff’s alleged promises made on 30 June 2011 in respect of the documents for the transfer of the Scorpio East shares having to be signed and passed to Crédit Agricole (C 338). He was cross-examined as follows (25-02-2016: tr 24):

The defendant was then referred to his email of 28 September 2011 to the plaintiff in which he explained why he could not use the S$1.81m in the Yuanta account to remedy the top-up notices. In that email the defendant had written that it could not be utilised “at the moment as you have fulfilled none of your promises, and the Scorpio East case is still under investigations!!!” (C 372). The defendant was cross-examined about this communication as follows (25-02-2016: tr 26-28):

The defendants submitted that the email of 25 August 2011 was a “chaser” for the Scorpio East shares as part of the arrangement for the defendant’s loan to the plaintiff of S$1.8m in June 2011 rather than any recognition that Scorpio East was a joint investment. The defendants also relied upon the plaintiffs’ failure to inform Stone Forest that the investment in Scorpio East was a joint investment. The plaintiff was a director of Scorpio East and was being investigated for his role in that regard. It is understandable that he would not advise Stone Forest of the joint investment; the defendant was not an officer of Scorpio East and the contracts the subject of Stone Forest’s investigation did not involve the defendant.

I regard the email of 28 September 2011 and the earlier email relating to the prospect of utilising the funds in the Yuanta account to cure the top-up notice as important contemporaneous records to test the veracity of the defendant’s claims that he did not know that Scorpio East was an investment in the joint project. The defendant’s agreement in cross-examination that the Scorpio East investment was a joint investment “at the beginning” was an important concession. Clearly if the plaintiff had been using his own funds to invest in Scorpio East then it was quite illogical to suggest that the S$1.81m in the Yuanta account could be withheld on the basis that the Scorpio East shares had not been transferred to Credit Agricole and/or Scorpio East was the subject of investigation. It would have little to do with the parties’ interest in the money in the Yuanta account if the plaintiff was off on a frolic of his own. These communications support the conclusion that the defendant was well aware that he had agreed to the investment and that the investment had been made in Scorpio East utilising the joint funds from the AEM account. That is why he used the Scorpio East situation as one of the reasons to withhold utilisation of the S$1.81m to cure the top-up notices.

I do not accept the defendant’s evidence that he did not agree to a joint investment in Scorpio East. I do not regard his affidavit evidence and his evidence in cross-examination in denying such a joint investment as credible.

Mr Koesnadi’s shares/the SPA

There is also a significant factual dispute about whether the defendant or Yuanta agreed to purchase Mr Koesnadi’s 900m NexGen shares that were held by TPI.

As referred to earlier the plaintiffs claimed that the defendant/Yuanta agreed to the purchase and they relied on the Confirmation Letter dated 20 December 2010 and Mr Koesnadi’s letter to Mr Goh of the same date as evidencing the fact of that agreement (see [43]–[45] above).

The plaintiff claimed that the defendant asked him for a deferral of the date for the payment of the purchase price because he was raising the funds for the acquisition. The plaintiff also claimed that he and Mr Koesnadi agreed to the defendant’s request for a deferral of the date for payment of the purchase price on the condition that Crédit Agricole would provide the Confirmation Letter that Yuanta would be able to pay the total purchase price of S$45m for the 900m NexGen shares.

He also claimed that the defendant subsequently asked if the acquisition could be split into three tranches of 300m NexGen shares. He claimed that he and Mr Koesnadi agreed to that occurring and he instructed his lawyers to prepare the SPA and to “arrange for it to be duly executed” (B 20).

The plaintiff claimed that shortly before the first tranche of 300m NexGen shares were transferred from TPG to the Yuanta account on 21 January 2011, the defendant informed him that there would be a delay in the first loan disbursement. The plaintiff claimed that when he informed Mr Koesnadi of this delay, he became concerned about Yuanta’s ability to make payment of the full purchase price of S$45m. The plaintiff claimed that Mr Koesnadi insisted that the defendant had to pay a deposit of S$2.7m for the first tranche of 300m NexGen shares. The plaintiff claimed that he spoke to the defendant who agreed to pay the S$2.7m deposit, but that he said that he would need help in raising that sum. He claimed that the defendant advised him that the expected amount of the first loan disbursement would be about S$900,000; and that he advised the defendant that TPG would provide a bridging loan of S$1.8m to be paid to Mr Koesnadi on Yuanta’s behalf leaving the remainder of S$900,000 to be paid out of the first loan disbursement to Mr Koesnadi.

The plaintiff claimed he then spoke with Mr Koesnadi who said that due to the delay he had changed his mind about the Warrants and was no longer agreeable for his share of the Warrants (75m) to be contributed as part of the transaction. The plaintiff claimed that this is why there were only 225m Warrants available for exercise, rather than 300m Warrants referred to in the Supplementary Agreement. The fact that there was a reduction in the available warrants from 300m to 225m is not in issue.

The plaintiffs relied upon what they described as “part-payments” in respect of this transaction. The first was a payment of S$800,000 on 18 February 2011 paid by AEM to Mr Koesnadi via TPG’s account with Niaga Finance in Hong Kong. The plaintiffs claim that this amount was paid by AEM “on Yuanta’s behalf”. The second payment occurred on 30 March 2011 when S$1m was paid by Yuanta to TPI’s account with HSBC in Hong Kong. Although the plaintiff was cross-examined in respect of whether there was any receipt from Mr Koesnadi, there are numerous documents that the plaintiffs claim support the payments being made to Mr Koesnadi. The first group of documents are email exchanges between the plaintiff and Mr Goh on 14 February 2011 confirming that the plaintiff has spoken to the defendant who confirmed that S$800,000 was to be paid to Mr Koesnadi into his account with Niaga Finance (B 1223). There is also a debit instruction note dated 15 February 2011 which was faxed to and co-signed by the defendant instructing Credit Agricole to transfer the S$800,000 to Niaga Finance with the message that it was for further credit to Mr Koesnadi’s account. There is also the Debit Advice dated 22 February 2011 to Mr Koesnadi confirming the amount had been transferred to TPI (C 453-455). The plaintiffs also rely upon the Debit Instruction Note dated 30 March 2011 signed by the defendant as sole signatory for Yuanta instructing Credit Agricole to transfer the sum of S$1m to TPI (C 462).

The plaintiff claimed that he arranged for the transfer of the sums of US$610,000 and US$900,000 on 20 January 2011 and 9 February 2011 respectively from TPG’s account to Niaga Finance, Mr Koesnadi’s account with HSBC Hong Kong. The two sums transferred amounted to a total of US$1,510,000 or about S$1.9m at that time. The plaintiff claimed that these sums were meant to include TPG’s S$1.8m bridging loan to Yuanta and other sums that were due as between Mr Koesnadi and himself.

The anticipated loan disbursement of S$900,000 was only S$808,092.45. This occurred on 15 February 2011 and shortly thereafter S$800,000 was transferred from the AEM account into TPG’s account with Niaga Finance for further credit to Mr Koesnadi. The plaintiff claimed that by mid-February 2011 Mr Koesnadi had received S$1.8m from TPG, allegedly on Yuanta’s account, and S$800,000 from AEM totalling $2.6m.

The defendant agreed that the plaintiff asked him if he was interested in purchasing Mr Koesnadi’s shares but claimed that he informed the plaintiff that “if we made some profits in our Joint Venture, we could then consider using the said profits to purchase” those shares (B 661-662 [90]). The defendant denied that he asked the plaintiff to split the purchase of Mr Koesnadi’s shares into three tranches. He claimed that the 300m NexGen shares that were to be pledged for the loans were to be held by three different corporate entities instead of one corporate entity for the benefit of the joint venture investment. He explained that this was to avoid attracting the reporting obligations under the SGX rules.

The defendant also denied that he agreed to pay a deposit of S$2.7m to Mr Koesnadi. He claimed that the plaintiff’s claim that TPG had provided a bridging loan in the sum of S$1.8m on Yuanta’s behalf for the purchase of Mr Koesnadi’s shares was “certainly untrue” (B 951).

The defendant denied ever seeing the SPA or being asked to sign it. He denied ever reaching the agreement recorded within it. He claimed that he only became aware of its existence during the course of these proceedings. The defendant emphasised that neither TPG nor the plaintiff had ever made any demands against Yuanta for the allegedly outstanding sum of S$15m (or S$13.2m) even though it was suggested that this sum was due on 31 May 2011 (or later, 31 December 2011). The defendant highlighted the fact that the bank transfer instruction forms in relation to the two sums of US$610,000 and US$900,000 provide no indication of the reasons for those transfers.

The defendants submitted that the sequence of events relied upon by the plaintiffs is simply not coherent. On the one hand the plaintiffs rely upon the email of 20 January 2011 from the plaintiff to his solicitors to draft an agreement. On the other hand they rely upon the SPA which is dated before the email, on 14 January 2011. The SPA was not between Mr Koesnadi and Yuanta but between TPG and Yuanta. It also had a number of blanks within it including the number of days to fix the “Completion Date” (cl 1.1) (B 123).

Once again the parties’ versions of events and conversations are diametrically opposed. In those circumstances it is important to have regard to the contemporaneous documents. The first set of documents is the Confirmation Letter and Mr Koesnadi’s letter to Mr Goh of 20 December 2010. At this time it appears the plan was for Yuanta to purchase Mr Koesnadi’s 900m NexGen shares.

The next document is the email from the plaintiff to his lawyers on 20 January 2011 in which he instructed them to prepare the “buy and sell agreement 300m shares @5 cents” between TPG and Yuanta, and “transfer the share now, and payment on or before May 2011” (C 324). The SPA is peculiarly dated “14 January 2010”. Even on the basis that the year should have been 2011, it is still nearly a week before the plaintiff gives instructions to his lawyers for its preparation. There is nothing in the SPA in relation to the payment of a deposit of S$2.7m or indeed any deposit. The SPA provided for the whole of the S$15m to be paid on or before 31 May 2011 by delivery of a cashier’s order for that amount (cl 2).

There is also the SGX Announcement dated 25 January 2011, four days after 300m NexGen shares were transferred from TPG to Yuanta on 21 January 2011 (see [59] above). The Announcement referred to the “married deal” without any reference to the SPA. The Announcement also referred to the date of change of interest as 21 January 2011, not 14 January 2011. Although the defendant denied any knowledge of the Announcement in his affidavit, it is clear that that he signed the blank form for it and received a copy of the completed form. Irrespective of the defendant’s lack of recollection about having signed the form, the Announcement makes no mention of the SPA and refers to a date different from the date of the SPA.

There is also the plaintiff’s email of 15 February 2011 to the defendant and Mr Chung. Although it is extracted in full earlier (see [67]above) it is convenient to set out here those portions of the email relevant to this issue. They are as follows:

This email also asked the recipients to “record the transaction”. There is no mention of any payment of a deposit of S$2.7m. Nor is there mention of a sale of 300m NexGen shares. Rather it is a transaction for AEM, not Yuanta, to buy 900m NexGen shares from Mr Koesnadi in respect of which AEM will get 225m warrants “for free”. The “first payment” (whatever that may have been intended to mean) for AEM’s purchase of Mr Koesnadi’s shares is recorded as S$4.5m of which S$2.5m is recorded as having been paid; S$1.7m having been paid by “Had” (which I am satisfied was intended to be a reference to “Hady”, the plaintiff) and S$800,000 by AEM “fro[m] the loan”. The balance was to be paid, as recorded, by a loan from Crédit Agricole.

There is also Mr Chung’s report dated 15 March 2011 in which he referred to the S$800,000 payment by the defendant at “the very beginning” for the purchase of Mr Koesnadi’s shares (see [84] above). Mr Chung recorded that the “transaction has cancelled” and that there should be a “refund” to the defendant. The payment was in fact made by Yuanta rather than the defendant and it would appear that Mr Chung did not bring the contents of the plaintiff’s email of 15 February 2011 to account in this report.

In the light of these contemporaneous documents and the lack of any communication from the plaintiff during the period from January 2011 onwards to the commencement of these proceedings seeking payment under the SPA, I prefer the defendant’s evidence over the plaintiff’s evidence on these issues. Although the parties had originally discussed the prospect of Yuanta purchasing Mr Koesnadi’s shares, I am satisfied that there was no binding agreement between TPG and Yuanta for such purchase. I am satisfied that the parties agreed that AEM would purchase those shares as recorded in the plaintiff’s email to the defendant and Mr Chung on 15 February 2011 and appeared to agree on such a plan.

Exercise of the warrants/S$1.8m transaction June 2011

The parties are also in dispute in relation to the exercise of the warrants and about the nature of the S$1.8m transaction in June 2011. It is appropriate to deal with these two areas of dispute together as there is some overlap of the facts in each area.

The provisions of the Supplementary Agreement relevant to the exercise of the warrants is as follows:

It is not in issue that the original intention to exercise the warrants to purchase 300m warrants was reduced to 225m warrants. This was because Mr Koesnadi withdrew his 75m warrants, that had apparently been part of the original arrangement for the purchase of his 900m NexGen shares, after the arrangement changed.

The plaintiff’s affidavit in relation to the exercise of the warrants to purchase the 225m NexGen shares was that between 15 February 2011 and 22 March 2011, S$6.75m was withdrawn from the AEM account “for purposes of the exercise of the 225 million Warrants”. The plaintiff set this out in tabular form as follows:

Table 3: Amounts withdrawn from AEM Account for purposes of conversion of 225 million Warrants.

Note: S$6,750,000/$0.03 per share = 225,000,000 shares.

The plaintiff’s affidavit evidence also included the following:

At this point of the evidence as served it was reasonable for the defendant to conclude that the plaintiff was claiming that he had withdrawn S$6.75m “for purposes of conversion” of the 225m warrants.

The defendant’s affidavit included the following response to this part of the plaintiff’s evidence:

The defendant’s complaint in paragraph 75 of his affidavit extracted above that the plaintiff had failed to exercise the warrant within “5 days of the Supplementary Agreement” that is, by 20 November 2010, is based on a misconception of the provisions of that Agreement. The plaintiff was not so obliged. Rather cl 3 provided that the parties agreed that part of the loan was to be used to exercise the warrant; and the stipulation that this was to occur “within 5 days” related to the time after the loan was provided and not 5 days from the date of the Supplementary Agreement.

It was in his affidavit in reply that the plaintiff claimed that in January 2011 TPG exercised 61m warrants on behalf of AEM and that because there was a delay in AEM receiving the loan funds, TPG used its own funds and paid NexGen an amount of S$1.68m for the exercise of the 61m warrants. That affidavit included the following:

The claim to which the plaintiff was referring in paragraph 9 is the defendants’ contention in the Counterclaim that: (a) pursuant to cll 3 and 8 of the Supplementary Agreement the loan was to be utilised to exercise warrants for 300m (now 225m) NexGen shares at S$0.03 per share and to convert them into tradable shares within 5 days of the Supplementary Agreement (although, as referred to above (at [334]), this was within 5 days of the receipt of the loan); and (b) that the plaintiff and the defendant orally agreed that the shares would be sold in the market forthwith after the exercise of the warrants (the market price of the NexGen shares at the time being about S$0.06) and the profits would be shared equally between the parties (“the 225m Shares Agreement”).

The change in the plaintiff’s evidence from his original claim that S$6.75m was withdrawn from the AEM account “for purposes of the exercise” of the 225m warrants to his claim that only 61m warrants were exercised was rather extraordinary, particularly having regard to his email to the defendant and Mr Chung on 15 February 2011. In cross-examination in respect of this email the plaintiff gave the following evidence (22-02-2016: tr 136-138):

“Point 3” to which the plaintiff was referring in this evidence in cross-examination was as follows:

In later evidence referred to below, the plaintiff explained that the “profit of W” was an estimate or “paper profit” and the plan was to pledge the shares converted from the warrants to obtain a loan (with the shares purchased at S$0.03 but valued at approximately S$0.05 for a “profit” of S$4.5m) and purchase Mr Koesnadi’s shares.

There is nothing in the email correspondence that amounts to a disclosure by the plaintiff to the defendant that he had decided to transfer TPG’s NexGen shares rather than exercising the warrants to purchase the NexGen shares at S$0.03 per share. It is clear from the defendant’s affidavit (par 75) that he understood that the plaintiff had exercised the warrants to purchase the 225m NexGen shares that were transferred to Yuanta on 11 March 2011. It is also clear from the defendant’s email to the plaintiff on 25 August 2011 that he understood that the 225m NexGen shares had been converted from the warrants when he requested the transfer of 112.5m NexGen shares into the Yuanta account (see [119] above).

In later cross-examination on the content of the 15 February 2011 email, the plaintiff described the reference to “sin$4.5m to sin$6.5m” as “already paper profit” (22-02-2016: tr 142-145). He gave the following further evidence (tr 143):

The plaintiff did not exercise the warrants to purchase 225m NexGen shares at S$0.03 per share. The 225m NexGen shares were transferred from TPG to Yuanta on 11 March 2011 for pledging for loans for the joint venture.

The plaintiffs described this transaction in final submissions as follows (par 277(b)):

I do not accept that the plaintiff informed the defendant that he was withdrawing the funds from the AEM account to reimburse TPG for transferring 225m NexGen shares to AEM on 11 March 2011. It is clear from the table that was created by the plaintiff, extracted earlier (see [330] above), that S$6m was withdrawn prior to the transfer of the 225m shares to Yuanta on 11 March 2011. It is understandable that such withdrawals might be made if the warrants had to be converted to shares prior to 11 March 2011, but this did not happen. There was no need for any “reimbursement” of the plaintiff or TPG at any time prior to 11 March 2011.

In any event it appears that the defendant presumed that the 225m NexGen shares transferred into the Yuanta account on 11 March 2011 were shares converted from the warrants. Although the defendants claimed that there was an agreement that the converted shares were to be sold immediately and the proceeds shared equally between the parties this was not done and there was no demand on the plaintiffs at this time to sell those shares.

This leads into the June 2011 S$1.8m transaction. The defendants alleged that the plaintiff entered into an oral agreement with the defendant in June 2011 for the defendant to provide him with a loan of S$1.8m and that in consideration of that loan the plaintiff would transfer 700m NexGen shares to Yuanta.

On 29 June 2011 S$1.8m was transferred from the Yuanta account to the AEM account and then to TPI’s account with DBS Bank.

The plaintiffs alleged that TPG, on Yuanta’s behalf, paid (by way of bridging loan) S$1.8m to Mr Koesnadi in two amounts, one on 20 January 2011 and the other on 9 February 2011 “as part payment of the S$2.7m deposit for the first tranche of 300m shares”. The plaintiffs claimed that the S$1.8m transaction in June 2011 was a repayment of the bridging loan.

The plaintiff’s affidavit evidence in respect of this transaction included the following:

The plaintiffs submitted that at the time the plaintiff was preparing his affidavit evidence he did not have the benefit of knowing that all of the funds in the Yuanta account (except for about S$20,000) were from loan or sale proceeds arising from the NexGen shares pledged by TPG; and that the S$1.8m transfer on 29 June 2011 could not have been a repayment by Yuanta of the bridging loan nor the provision of a further loan by Yuanta to TPG. Accordingly it was submitted that the S$1.8m transferred on 29 June 2011 were not Yuanta’s own funds, but funds belonging to AEM.

The plaintiffs submitted that the defendant had attempted to mislead the plaintiff into believing that the S$1.8m were not funds to which the plaintiff had any entitlement but were loan funds, a position that he maintained in the proceedings and on which he instructed his lawyers to cross-examine the plaintiff.

The defendant was cross-examined in relation to the source of the funds in the Yuanta account as follows (25-02-2016: tr 10-12):

Notwithstanding the defendant’s evidence in this regard, it is clear that the funds in the Yuanta account had come from the loans secured by the pledging of the NexGen shares or from sales of the NexGen shares. It is very difficult to understand how the defendant could maintain that this was a personal loan or even a loan from Yuanta to either the plaintiff or TPG in the circumstances.

The plaintiffs highlighted the fact that the funds were routed to AEM rather than paid directly to TPG. They also submitted that if the transaction were to be characterised as a loan of S$1.8m, then the consideration of an outright transfer of 700m NexGen shares would seem “a ludicrous deal”. A conservative estimate of the value of those shares at the time was S$10.5m. It was submitted that even on the basis that the 700m NexGen shares were meant as collateral or security, the loan sum was exceedingly minuscule in comparison.

The plaintiffs also submitted that if the plaintiff was truly in need of funds he could simply have sold his own shares to raise funds or he could have asked the defendant to sell the 60m NexGen shares that were still in the Yuanta account. The plaintiffs highlighted an inconsistency between the defendants’ Defence and Counterclaim and the defendant’s affidavit. In the pleading the defendants had claimed that the consideration for the alleged loan was 700m NexGen shares. The defendant claimed in his affidavit that the consideration was not only the 700m NexGen shares but also the Scorpio East shares and shares in Courage Marine.

The plaintiffs also submitted that the payment instruction in respect of the S$1.8m was dated 29 June 2011 but that the alleged promise for the consideration was only made on 30 June 2011. When confronted with this chronology the defendant said that he thought that the evidence he had given in respect of the date of the promise was that it should be “around that time” (30 June 2011) (25-02-2016: tr 6-7).

The email of 27 June 2011 from the plaintiff to Mr Goh recorded that as soon as TPG received S$1.8m, 700m NexGen shares would be transferred immediately. That email also made reference to Courage Marine shares which needed to be dealt with in Hong Kong.

If the S$1.8m was, as the plaintiff claimed, a repayment to TPG, then it is very difficult to understand why there was any need for any consideration to flow to Yuanta. In their further written submission dated 25 April 2016 the plaintiffs dealt with the question as to how the Court should characterise the email of 27 June 2011 in the light of the parties’ competing claims. That further submission was as follows:

There are deficiencies in both parties’ evidence. However on balance I am satisfied that the payment of S$1.8m from Yuanta to AEM to TPI, Mr Koesnadi’s company, was in accordance with the plan referred to in the 15 February 2011 email for AEM to purchase Mr Koesnadi’s shares. On balance I am satisfied that the proposal to transfer the 700m NexGen shares to Yuanta was, as the plaintiff claimed, for further pledging for loans. I am also satisfied that the plaintiff delayed that transfer because he was trying to find out from the defendant where the 765m NexGen shares that had been transferred to Yuanta were located. It is not possible to know exactly what the parties were intending in respect of the Scorpio East shares and the Courage Marine shares in this transaction but it is probable that they too were to be used as collateral.

I do not accept that the S$1.8m was a loan from the defendant to the plaintiff or TPG. Those funds were in the Yuanta account and were part of the joint venture project monies.

Yuanta account

There is a further issue in respect of the defendant’s claim both to the plaintiff during their initial discussions and in his affidavit evidence that Yuanta had good standing or a good relationship with Crédit Agricole.

In his first affidavit the defendant claimed that at the time of his discussions with the plaintiff and at the time that he and the plaintiff met with Mr Goh, but prior to entry into the Agreements on 14 and 15 November 2010 Yuanta had an existing account with Crédit Agricole (B 630 [12]). The defendant went to the extent of highlighting that fact. In his affidavit in reply the defendant went further claiming that the “Yuanta Account was opened with Credit Agricole before Yuanta/my joint venture with TPG/Hady” (B 954 [32]). Indeed in responding to the plaintiff’s claims in his affidavit that sums of money belonging to TPG were transferred out of the Yuanta account to other entities, the defendant claimed that this was a “baseless allegation”. He once again said that the Yuanta account “was opened with Credit Agricole before Yuanta/my joint venture with TPG/Hady” and that it had “always been utilised by Yuanta and myself for other business transactions as well”.

On being shown the BVI Financial Services Commission Register of Companies Search Report in respect of Yuanta, the defendant accepted Yuanta was only incorporated on 15 November 2010 (24-02-2016: tr 103). He was cross-examined further in relation to this aspect of his evidence as follows (24-02-2016: tr 105-115):

The explanation that the defendant gave in his affidavits in support of his denial that he had taken monies out of the Yuanta account inappropriately, was that the Yuanta account had been set up long before he entered into the Agreements with the plaintiffs and some of the monies in the account had been generated from his other business activities. It is now not in issue that the only funds that were transferred into the Yuanta account (except for S$20,000) were either funds raised from the loans from EFH or funds from the sales of the NexGen shares by the defendant.

The defendant’s evidence in his affidavit was clearly inaccurate. His explanation in his cross-examination that he mixed up the two companies was most unimpressive. The defendant’s willingness to give inaccurate affidavit evidence and emphasise it and then repeat it as he did in respect of this issue leads me to the conclusion that his evidence is very unreliable. This was compounded in his oral evidence when he suggested that there must have been a mix up of entities in his mind but then could not remember the name of the other entity in the so-called mix up. I do not regard the defendant as a credible witness in respect of this issue.

Breaches of contract claims

In their final submissions the plaintiffs contended that the defendants had committed the following breaches of the Agreements: (1) failing to obtain the requisite loans from Crédit Agricole; (2) transferring the NexGen shares to EFH; (3) selling the 101.5m NexGen shares in February and March 2011; (4) selling the 60m NexGen shares in August 2011; and (5) failing to notify the plaintiffs of the margin calls from EFH and wrongful termination of the Agreements. The plaintiffs also claimed that the defendants are in breach of the Agreements by failing to service the interest on the EFH Loan Tranche 8 to 10; and concealing or failing to disclose material facts.

The plaintiffs also claim that the defendants are in breach of the SPA.

Failure to obtain loans from Crédit Agricole

The plaintiffs contended that it was a fundamental term of the Agreements that the loans were to come from Crédit Agricole. They claimed that the defendant accepted that both parties “had in mind” that Crédit Agricole would be the lender. They submitted that the elaborate lengths to which the defendants went in concealing EFH’s identity, including during the course of the proceedings, betrays any suggestion that the identity of the lender was unimportant to the parties.

The defendants accepted that when he introduced the plaintiff to Mr Goh in late 2010 there was still a possibility that Crédit Agricole would be the lender (24-02-2016: tr 100-101). The plaintiff’s evidence was that the reason that Crédit Agricole was not expressly referred to in the Agreements was because he gave the defendant “freedom” in respect of obtaining the loan (22-02-2016: tr 75). That so-called “freedom” was for the loan to be obtained from the defendant or institutions by guarantee or in co-operation with the defendant and the bank to be secured by shares (chapeau & cl 5 Supplementary Agreement). However the plaintiffs submitted that the Supplementary Agreement constrains the defendant to obtain the loans from an “institution” that was “guaranteed by” or “in co-operation” with him. The plaintiffs submitted that this constraint shows that the parties placed importance on the identity and standing of the lender.

The plaintiffs also submitted that the expression “institution” must be read contextually in the light of the facts known to the parties at the time of the contract because such context and circumstances would reflect the intention of the parties when they entered into the contract and utilised such language: Sandar Aung v Parkway Hospitals Singapore Pte Ltd (trading as Mount Elizabeth Hospital) and another [2007] 2 SLR (R) 891 at [29]. It is true that the only “institution” made known to the plaintiff at the time of the execution of the Agreements with whom the defendant was working in co-operation was Crédit Agricole. The defendant agreed that he wanted to use Crédit Agricole “as a platform for our cooperation” (24-02-2016: tr 101). The plaintiffs submitted that there would have been no need for the elaborate arrangements of opening accounts for TPG and AEM and Yuanta with Crédit Agricole if it was not going to be the lender.

The plaintiffs’ claim is that it was a fundamental term of the Agreements that the defendants were obliged to source the loans for the joint venture from Crédit Agricole. Having regard to the express terms of the Agreements and plaintiff’s concession that the defendant had the freedom to obtain the loans from elsewhere I am not satisfied that there was such a fundamental term. The plaintiffs claim that the defendants are in breach of the fundamental term of the Agreements in failing to source the loans from Credit Agricole must fail.

Transferring the shares to EFH

The plaintiffs claimed that Yuanta and the defendant were in breach of the Agreements by failing to ensure that the terms of the lending arrangements with EFH were similar to the terms of the Loan Agreement with TPG. The plaintiffs relied upon what they submitted was an acceptance by the defendants that they had an obligation, in particular, to ensure that the margin call provisions of the agreement with EFH would be similar or the same as the margin call provisions with TPG. In this regard, the defendant gave affidavit evidence of his understanding of his obligations under the Agreements and was cross-examined as follows (25-02-2016: tr 106):

The Master Loan Agreement between Yuanta and EFH, set the margin call at a threshold that was 20 percentage points below the value of the loan provided (C 81). Under the Loan Agreement the margin call was set at a threshold equal to the value of the loan provided. The defendant was cross-examined as to whether he accepted that there was a significant difference between the provisions of the Loan Agreement between Yuanta and TPG and the Master Loan Agreement between Yuanta and EFH. He accepted that the effect of the Loan Agreement between Yuanta and TPG was that the margin call was set at exactly the value of the loan (25-02-2016: tr 107). He also accepted that under that agreement Yuanta was protected against any fall in the value of the collateral, because once it hit the loan value, the lender could enforce the security (25-02-2016: tr 108). The defendant also accepted that under the EFH agreement, EFH was exposed up to a certain amount because it could only call on the collateral when it fell below the loan value. He also accepted that a sensible lender in such an arrangement who wanted to protect its position would start trading with the shares in order to hedge the exposure (25-02-2016: tr 109). The defendant was cross-examined further as follows (25-02-2016: tr 111):

The plaintiffs contend that the provisions of the Master Loan Agreement between EFH and Yuanta, would incentivise EFH to start selling the collateral the moment it received it so it could cover its position should the share price fall. The plaintiffs claimed that the defendant’s decision to pledge the shares to EFH and to pledge them on the terms that it did, exposed the collateral to unnecessary risk and to its inevitable disposal in the market the moment the shares were transferred to EFH.

It was submitted that despite the knowledge that the defendants had that EFH was trading with the collateral, they continued to pledge the shares to EFH and continued to do so even after being instructed not to pledge any further shares in April 2011. The plaintiffs also submitted that the defendants concealed these further pledges from them. The plaintiffs contended that in pledging the shares to EFH knowing that the shares would be sold immediately, the defendants breached their obligations to redeliver the shares upon maturity, to take reasonable care of the collateral, and to act in good faith and protect the legitimate interests of the plaintiffs.

EFH was entitled to sell the pledged NexGen shares but it also had redelivery obligations on repayment of the loans to “reassign all right, title, ownership and interest in identical securities in the amount” as pledged (cl 4.2 Master Pledge Agreement) (C 103).

Although the expert evidence (referred to later) suggested that lenders in non-recourse loan arrangements would act to protect themselves from a diminution in the value of the asset pledged, the plaintiffs have not established that EFH sold all the shares when they were pledged to it between February and June 2011. I am not satisfied that the plaintiffs have established that the defendants knew that EFH was selling the NexGen shares in that period.

There is a difference between the margin call provisions in the TPG and Yuanta agreements compared to the Yuanta and EFH agreements. However I am not satisfied that the difference is as described by the plaintiffs. The plaintiffs entered into a non-recourse loan agreement that expressly authorised the defendants to sell the shares during the term of the loan agreement in respect of which the shares were pledged. They allowed Yuanta to redeliver the cash equivalent and were thus protected if the shares were not available.

I am not satisfied that the defendants were in breach of the Agreements by pledging the shares to EFH to obtain the loans for the joint venture.

Selling 101.5m NexGen shares in February and March 2011

The defendants’ defence in respect of the sales of the NexGen shares in February and March 2011 is based on their claims that the defendant and Mr Goh were instructed to sell the shares to provide the plaintiff with urgently needed funds. I have found earlier that I do not accept the evidence of the defendant and Mr Goh that such instructions were given.

I am satisfied that the plaintiff instructed the defendant and Mr Goh to repurchase the shares that were sold and to bring them to account in the joint venture project. Those shares were to be available for pledging for loans to be secured for the joint venture investments.

The defendants’ contention that even if the plaintiff did not instruct them to sell the shares, such sales were authorised under the Agreements is not sustainable. The only basis upon which the defendant explained the sales was that the plaintiff had requested and instructed him to make them. There was no explanation proffered as to why those sales would take place at the outset of the joint venture project with no instructions having been given by the plaintiff. In any event the shares that were sold were not pledged against a loan at the time of the sale. The defendants were not authorised to sell those shares that were held on trust by Yuanta until they were pledged against a specific loan.

I am satisfied that the defendants were in breach of the Agreements in selling the 101.5m NexGen shares. True it is that those shares were repurchased. Although some of the shares were repurchased at a lower share price, it is clear that the additional funds from the sale of the shares in the first place were used by the defendant to pay to the associated companies ThreeSix Five Capital Ltd, LG Legacy Capital Inc and Gift Capital Inc. Those amounts are to be brought to account in due course.

Selling 60m NexGen shares in August 2011

In August 2011 the parties’ relationship was souring and each was making claims upon the other. It seemed that each had become suspicious of the other. On the one hand the plaintiff was seeking information about the whereabouts of the NexGen shares and an account in respect of the shares that had been pledged and the loans that had been secured on the pledging of the shares. On the other hand the defendant was pressing the plaintiff for the transfer of the 700m NexGen shares that had been referred to in the email in June 2011.

The defendant sold the 60m NexGen shares and then used the monies from those sales to pay to the third parties referred to earlier in these reasons.

Having regard to my findings referred to earlier that I do not accept the defendant’s explanation in respect of the sale of the 60m NexGen shares in August 2011, I am satisfied that the defendants were in breach of the Agreements in selling those shares. They had not been pledged against any loan made under the Loan Agreement and the defendant was not entitled to sell them.

The plaintiffs did not refer to the sale of the 225m NexGen shares by the defendant in October 2011 as part of the claims for damages for breach of the Agreements. The plaintiffs claimed that the defendants were in breach of their fiduciary duties in making secret profits from the sale of these shares. However I apprehended from the final oral submissions that the parties had also dealt with these sales as a breach of the Agreements. These shares were not pledged against any loan and the defendants were not entitled to sell them. However I have dealt with this claim below in relation to the alleged breaches of fiduciary duties.

Failing to notify the plaintiffs of the margin calls

It is not in issue that the defendant did not disclose to the plaintiffs that Yuanta was obliged to remedy margin calls from EFH. If the circumstances had been that Yuanta did not remedy the margin calls from EFH and the plaintiffs remedied the margin calls from Yuanta, Yuanta would still have been obliged to maintain its relationship with the plaintiffs and honour its obligations under the Loan Agreement notwithstanding that EFH could enforce the security under its Agreements with Yuanta. Yuanta would still have been obliged to comply with its redelivery obligations to the plaintiffs if the loans were repaid by them by the redelivery of NexGen shares (by repurchase if they were no longer available) or the cash equivalent.

There is no doubt that the plaintiffs were well aware of the need to remedy the margin calls that were served on them by Yuanta under the Loan Agreement. This is evidenced in the plaintiff’s request that the defendant use the shares or the cash in Yuanta’s account to remedy the calls.

The defendant accepted in his oral evidence that Yuanta’s margin call notices did not comply with the notice requirements under the Agreements that they be sent by registered mail. The plaintiffs claim that the defendant’s failure to notify them of the margin calls in a timely fashion was significant because it deprived them of an opportunity to cure the margins. This submission does not have force in light of the fact that the plaintiffs did not take the necessary steps to remedy the margin calls. There was no suggestion at the relevant time that the notices were not valid or that they were not served in accordance with the Agreements. The plaintiffs recognised that there was a need to top up the security and once the plaintiff was advised that Yuanta was not in a position to use the funds or the shares in the Yuanta account in that regard (even if that was unreasonable), nothing further was done by the plaintiffs to remedy the margin calls. There were no claims made against the defendants until two and a half years later in May 2014, after they sued Crédit Agricole only in respect of the 225m NexGen shares that were transferred from TPG’s account to Yuanta’s account in October 2011. There was no explanation given in these proceedings for that delay and the trial judge in the Earlier Proceedings described the decision to sue Crédit Agricole without suing the defendants as “bizarre”.

I am not satisfied that there was any breach of contract in the defendants’ failure to serve the margin call notices within the time frame of the notice period in the EFH margin call notices. Yuanta was obliged to honour its contract with the plaintiffs irrespective of its obligations to EFH.

Failing to service the interest on EFH loans

The plaintiffs claimed that the defendants had no excuse for failing to pay the interest on EFH’s Loan Tranches 8 to 10. That may be so. However the failure to pay the interest did not relieve Yuanta from its obligations to TPG to redeliver the shares or the equivalent in cash on maturity of the loans. I am not satisfied that Yuanta’s breach of the EFH agreement was a breach of the Agreements with the plaintiffs.

Concealing or failing to disclose material facts

The plaintiffs claimed that the “non-disclosures” in relation to the identity of the lender, the terms of the lending and the unauthorised sales and trades, are breaches of the defendants’ contractual obligation of good faith.

I have already found that the defendants were in breach of the Agreements in relation to the sale of the plaintiffs’ shares. The failure to disclose those sales to the plaintiffs was also a breach of the defendants’ contractual obligation of good faith.

The failure to provide an accurate and honest answer to the plaintiff when he was clearly under the impression that the shares were held by Crédit Agricole was also a breach of the defendants’ contractual obligations of good faith.

I am not satisfied that the failure by the defendants to inform the plaintiff of the terms of the lending arrangements between Yuanta and EFH was a breach of the contractual obligation of good faith.

Inducement of Yuanta’s breaches

The plaintiffs claimed that any breaches of the Agreements by Yuanta were induced by the defendant. There does not seem to be any issue that the defendant was the controlling mind of Yuanta and that the breaches committed by it were induced by him. I am satisfied the defendant induced Yuanta’s breaches of the Agreements.

The SPA claim

Having regard to my findings (see [307]–[326] above), I am satisfied that the parties did not enter into the SPA. The plaintiff’s claim in respect of the SPA will be dismissed.

Damages

The plaintiffs claim they have suffered loss and damage by reason of the defendant’s breaches of contract, for which the defendants are liable to pay damages.

The plaintiffs claim that the 825m NexGen shares that were transferred into the Yuanta account have been “lost”. The loans from EFH to Yuanta totalling S$14,374,331.68 have been used. The plaintiff has used S$10,286,422.27 for the purposes of the joint project. Yuanta has kept the balance of those loan proceeds and has utilised the sale proceeds from the sale of the 60m NexGen shares in August 2011 and the sale of 225m NexGen shares in October 2011.

The parties are entitled to share equally in the profits of the joint project and are burdened equally with any losses of the joint project. The only way in which that can be ascertained is by some form of an accounting exercise. However it is reasonably clear that the defendant has taken for himself the sale proceeds of secret sales of the 60m NexGen shares in August 2011 and the 225m NexGen shares in October 2011.

The defendant was not entitled to sell the NexGen shares that had not been pledged against a particular loan. The plaintiffs are entitled to any profit made from the sale of its shares in February and March 2011, except they are only entitled to 50% of the profits from the sale of any shares treated as converted from the warrants that became an asset of the joint venture when the plaintiff was “reimbursed”.

Neither the 60m NexGen shares sold in August 2011 nor the 225m NexGen shares sold in October 2011 were pledged against any loan. They remained in the Yuanta account held on trust until they were pledged against a loan. The plaintiffs are entitled to damages for the defendants’ breaches in selling those shares. I will hear the parties on quantum.

The plaintiffs also make the portfolio claim with which I will deal later.

Breaches of fiduciary duties

The plaintiffs’ claims, as pleaded, are that the defendant breached his fiduciary duties to the plaintiffs in the following ways: (1) by encouraging the plaintiff’s mistaken belief that Crédit Agricole was the lender; (2) by instructing Mr Goh to encourage the plaintiff’s mistaken belief that Crédit Agricole was the lender; (3) by failing to disclose their sales and trades, in particular the 60m shares in August 2011 and the 225m shares in October 2011; (4) by making secret profits; and (5) by keeping the loan monies that were for the benefit of both parties.

In final submission the plaintiffs alleged that the defendants breached their fiduciary duties by transferring the NexGen shares to EFH; selling some of the NexGen shares and retaining secret profits; retaining the full 10% of the loan when the EFH expense was only 3%; and failing to pre-empt, arrest and resolve the purported margin calls or defaults in interest payments (additional claims).

Encouraging the plaintiff’s mistaken belief that Crédit Agricole was the lender

As I have said it was never made clear by the defendant why there was such secrecy in relation to the identity of the true lender. His evidence that he had entered into a confidential agreement with EFH was not a proper explanation for the secrecy. Any arrangement that he entered into for the purposes of obtaining loans for the project, even if there were confidentiality arrangements, did not exclude the plaintiff from knowing about such arrangements. The plaintiffs submitted that the real reason the defendant (and Mr Goh) kept the identity of the true lender secret was that it was in accordance with their desire to encourage the plaintiff to continue under the misapprehension that Crédit Agricole was the lender.

It is apparent that EFH may have had a reputation as a fringe lender that had been found to be in breach of contract in respect of arrangements that were not dissimilar to the ones that were being entered into to obtain loans for the joint venture project. It was suggested to the defendant that the reason he did not inform the plaintiff of the identity of EFH was because the plaintiff may not have endorsed such an arrangement. However he denied that this was his motivation. The plaintiff did not give evidence that had he known that EFH was the true lender he would not have gone ahead with such an arrangement to obtain the loans. The highest he put it, sensibly in my view, was that he would have performed further checks in respect of EFH and that perhaps there may not have been a deal.

As I have found earlier the plaintiff was advised on 30 June 2011 that there were three other banks involved in holding the NexGen shares (see [289] above). He was never advised that the shares had been pledged to EFH even when he asked the direct questions as to the location of the pledged shares and the loan amounts that had been provided against the pledged shares.

The plaintiff could not have been under the impression that Crédit Agricole was the only lender after the meeting of 30 June 2011. Even so, the defendants owed a fiduciary duty of good faith to the plaintiffs in respect of the NexGen shares that were held on trust by Yuanta that had not been pledged against a loan. That included the 60m shares that were secretly sold in August 2011. When the plaintiff asked about those shares being used to remedy the margin calls, the defendant advised him, dishonestly, that he had moved them to a custodian account. In this correspondence the defendant encouraged the plaintiff’s belief that Crédit Agricole was involved in the loan arrangements. This was in breach of defendant’s duty of good faith.

I am satisfied that the plaintiffs have established that the defendant was in breach of his fiduciary duty to the plaintiffs in encouraging the plaintiff’s belief that Crédit Agricole was a lender.

Failure to disclose the sales and trades

The defendant owed fiduciary obligations to the plaintiffs not to mislead them in relation to the trades or sales of the shares that were held by Yuanta and were not pledged against a loan. The defendant’s conduct in secretly selling the 60m NexGen shares in August 2011 and then suggesting to the plaintiff that the shares were still under his control was clearly in breach of his fiduciary duty to the plaintiff. The sale of the 225m NexGen shares in October 2011 and failing to account to the plaintiff in this regard was also conduct in clear breach of his fiduciary obligations to his co-venturer.

These breaches enabled the defendant to obtain the sale proceeds and use them for his own purposes.

Secret profits from the sales of shares

It is clear that the proceeds from the sale of the 60m NexGen shares in August 2011 were diverted to the defendant and his associates. Total sale proceeds from these sales amounted to S$1,374,620.20. Subsequently a sum of S$1,150,144.70 was transferred from the Yuanta account to the recipients referred to earlier including the defendant. It is not disputed that these accounts did not relate to the joint venture.

The defendants were in breach of their fiduciary obligations to the plaintiffs in making secret profits by selling the plaintiffs’ NexGen shares.

Retaining loan funds

The plaintiffs also claim that the defendants withheld some of the loan funds. The defendants claim that Yuanta received S$12,936,898 in loan funds from EFH, (after deducting their 10% fee). They claim that they only transferred S$11,302,934.13, mostly to the AEM account. The plaintiffs claim that even on the defendants’ case that leaves a shortfall of S$1,633,963.87 in loan monies that should have been made available under the Loan Agreement.

However the plaintiffs claim that the defendants transferred a total of S$12,086,422.27 to AEM, leaving a shortfall of S$850,475.73 that the defendants have withheld and are liable to disgorge. The plaintiffs claim that on either view there will be a shortfall in the loan monies amounting to either S$1,633,963.87 (on the defendants’ calculation) or S$850,475.73 (on the plaintiffs’ calculation).

The defendants did not keep the plaintiffs informed of the progressive amounts of NexGen shares that were pledged to EFH as security for the loans. Nor did they advise the plaintiffs of the total loan funds that were provided on the security of the NexGen shares. The plaintiffs were dependent upon and trusted the defendant to provide the appropriate amount of the loans under the Loan Agreement. The failure to do so was in breach of the defendants’ fiduciary obligations to the plaintiffs.

System of account and proper records

There is no doubt that the plaintiffs have been put to inconvenience, expense and effort in trying to identify the location of the NexGen shares that it transferred to Yuanta’s account. Although the defendant claimed in the Earlier Proceedings that he regarded EFH as his “partner”, he claimed that he could not obtain any further information from EFH in respect of the whereabouts of the pledged shares.

There were records kept from which the plaintiffs have now been able to construct the Chart of Transactions (Ex P6). Crédit Agricole kept records for the defendants, some of which were provided to the plaintiffs. However the form in which they were provided to the plaintiffs was “incomplete” because the defendant apparently instructed Mr Goh to produce the records in that form. That does not mean that there was a failure to keep proper records.

I am not satisfied that the plaintiffs have established that the defendants failed to keep proper records.

Additional claims

Although the plaintiffs’ additional claims included matters with which I have dealt in relation to the sale of the NexGen shares and retaining the secret profits, the two claims that remain are the retention of the full 10% of the loans and the failure to pre-empt, arrest and resolve the EFH margin calls.

I am not satisfied that there is any basis upon which the plaintiffs can succeed in a claim that the defendants owed a fiduciary duty not to retain 10% of the loan funds. There was a clear contractual right for the defendant to retain that amount irrespective of any expense that was incurred by EFH, or for that matter any other lender with whom the defendants may have dealt.

I am not satisfied that the plaintiffs have established that the defendants owed a fiduciary duty to them to pre-empt or resolve or arrest the EFH margin calls. As I have said, the plaintiffs agreed that the defendants could re-deliver NexGen shares or the cash equivalent. The defendants were not contractually obliged to re-deliver the shares. In those circumstances they did not owe a fiduciary duty to the plaintiffs to pre-empt or arrest the EFH margin calls. The defendants’ contractual obligations to the plaintiffs to re-deliver either NexGen shares or cash continued irrespective of whether the EFH margin calls were met.

Equitable compensation

The plaintiffs claim the net value of 1.05 billion “lost” shares. The calculation includes the value of the 825m pledged shares at S$41.625m at the time of their transfer, less loan sums transferred to AEM of S$11,302,934.13 leading to a net value of the 825m lost shares at S$30,322,065.87. The plaintiffs seek to add to that the 225m shares that the defendants transferred from the TPG account and sold in October 2011 valued at S$0.06 per share, totalling S$13.5m. Accordingly the plaintiffs claim equitable compensation in the amount of S$43,822,065.87.

Yuanta transferred a total of 765m NexGen shares to EFH. Those shares were progressively pledged against loans provided to the joint venture project by Yuanta. It appears that EFH loaned Yuanta approximately 50% of the value of the pledged shares in each of the 10 loan tranches it provided. The plaintiffs claim that Yuanta had an obligation to obtain loans from third parties or provide loans from its own funds, based on the value of the shares at the time they were transferred into the Yuanta account. I am not satisfied that this is a reasonable claim. The loans were to be obtained or provided progressively. If the value of the shares had fallen by the time the loan was provided or obtained from a third party, it is unreasonable to require Yuanta to provide a loan at a higher valuation than the price at which the shares were trading at the time the loan was made.

The plaintiffs are to be compensated for the amount to which they would have been entitled had the defendants not breached their fiduciary obligations to them. That compensation is the profits made from the sale of the shares in February 2011 and the value of the 285m NexGen shares (60m in August 2011 and 225m in October 2011) that the defendants sold in breach of their fiduciary obligations (or the profits from those sales). I will hear the parties on quantum.

The plaintiffs also claim equitable compensation in respect of the portfolio claim with which I will deal later.

Conversion case

The plaintiffs claim that they had the immediate right to possession of the 1.05 billion NexGen shares (being the 825m transferred before June 2011 and the 225m transferred out of the TPG account in October 2011). The plaintiffs claim that they were entitled to the re-delivery of the shares upon the maturity of the loans and accordingly the title to the shares was always vested in the plaintiffs. Accordingly the plaintiffs claim that they had a right to immediate possession notwithstanding that the shares had been transferred from the TPG account to the Yuanta account.

Once Yuanta provided a loan that was secured by pledged shares, it was entitled at its discretion to sell the shares and/or to re-deliver a cash equivalent to the plaintiffs on maturity rather than re-delivering the NexGen shares. Accordingly I am satisfied that the plaintiffs’ claim in conversion in respect of those shares that were pledged against a loan must fail.

However the plaintiffs’ claim in conversion in respect of the shares that were not pledged against a loan is justified. Yuanta and/or the defendant had no entitlement to sell those shares being the 60m NexGen shares in August 2011 and the 225m NexGen shares in October 2011.

The plaintiffs are entitled to damages for the conversion of these shares by the defendants.

Conspiracy claim

The claim for conspiracy by unlawful means requires proof of the following elements: (a) that there was a combination of two or more persons to do certain acts; (b) the acts were unlawful and performed in furtherance of the agreement between the combination of persons; (c) the alleged conspirators had the intention to cause damage or injury to the plaintiffs by those acts; and (d) the plaintiffs suffered loss as a result of the conspiracy: EFT Holdings, Inc and another v Marinteknik Ship Builders (S) Pte Ltd and another [2014] 1 SLR 860 at [112].

The conspiracy alleged by the plaintiffs is between Yuanta and the defendant. The mere fact that a controlling director of the co-conspirator, the company, may be the moving spirit of the company, does not negate what would otherwise be a conspiracy: Nagase Singapore Pte Ltd v Ching Kai Huat and others [2008] 1 SLR(R) 80 at [17] and [22].

Although the civil standard of proof is to be applied in respect of the claim the plaintiffs bear the burden “that is higher than on a balance of probabilities, but lower than proof beyond reasonable doubt”: Tang Yoke Kheng (trading as Niklex Supply Co) v Lek Benedict and others [2005] 3 SLR 263 at [14]. Such a standard requires the tribunal of fact to act with “much care and caution before finding that a serious allegation” such as fraud has been established: Briginshaw v Briginshaw (1938) 60 CLR 336 at 347. It is accepted that “cogent and compelling evidence commensurate with the seriousness of the allegation” is required before the Court concludes that the allegations are established on the balance of probabilities: EFT Holdings, Inc and another v Marinteknik Shipbuilders (S) Pte Ltd and others [2013] 1 SLR 1254 at [72].

The plaintiffs accept that they must prove that the defendants had an intention to injure the plaintiffs. That intention does not have to be the “predominant” intention of the defendants. It suffices if it is a necessary corollary of the defendants’ wrongful acts: Chew Kong Huat v Ricwil (Singapore) Pte Ltd [1999] 3 SLR(R) 1167 at [35].

The plaintiffs provided Particulars of the alleged unlawful acts or means by which they claimed they were injured (A 54-55). They alleged that those unlawful acts or means were false misrepresentations made by the defendant to the plaintiff that: (a) the defendants were linked to Yuanta Financial Holdings in Taiwan; (b) the defendants would be pledging the NexGen shares to obtain loans specifically from Crédit Agricole; and (c) Crédit Agricole would charge a handling fee and interest amounting to 10% of the loan sums to be disbursed to the AEM account.

The evidence in relation to the first alleged misrepresentation ebbed and flowed to the point that Counsel for the plaintiff was asked whether it was still a real issue in the proceedings (22-02-2016: tr 115). Counsel advised that such a link to Yuanta Financial Holdings in Taiwan “might be background”. In those circumstances it is difficult for the plaintiffs to rely upon this allegation as part of the underlying unlawful means in their conspiracy claims against the defendants. The defendants submitted that in any event the plaintiffs had not adduced any credible evidence in support of this allegation. The defendants relied upon the following cross-examination of the plaintiff in this regard (22-02-2016: tr 111-114):

The defendants submitted that the plaintiff’s answer that the defendant “represented himself to be, since he was a Taiwanese” shows that the plaintiff thought that Yuanta and/or the defendant were linked to Yuanta Financial Holdings simply because the defendant was Taiwanese and not because the defendant positively represented that he was linked to that institution.

I am not satisfied that the defendant claimed or represented to the plaintiff that he or Yuanta was linked to Yuanta Financial Holdings in Taiwan.

The defendants also submitted that the plaintiffs’ case in respect of the second alleged misrepresentation has not been proved. In this regard the plaintiff’s evidence in cross-examination was important. It was as follows (22-02-2016: tr 72-75):

The plaintiff’s reference to giving the defendant “freedom” is understandable having regard to the terms of the Agreements. The choices were set out clearly and Crédit Agricole was not named as the only bank or institution from which the loans could be sourced.

There is a difference between an allegation of an express false misrepresentation that Crédit Agricole was the lender and a failure to advise the plaintiffs of the true identity of the lender. It is the former that the plaintiffs alleged was the unlawful act. The plaintiff admitted that the defendant had the freedom to arrange the loans from other institutions. If the defendant had promised or represented that Crédit Agricole was the lender he would not have needed such freedom.

I am not satisfied that the defendant made a false misrepresentation to the plaintiff that the defendants would be pledging the NexGen shares to obtain loans specifically from Crédit Agricole.

The final alleged unlawful act was that the defendant made a false representation that Crédit Agricole would charge a handling fee and interest amounting to 10% of the loan sums to be disbursed to the AEM account.

The defendants relied on cl 3(a) of the Loan Agreement in which the parties agreed that the total sum of the loan interest, application fees and other charges “shall be within 10%” and deducted when the Yuanta account had been credited with the loan funds. The amendment to the Loan Agreement (the Second Loan Agreement) also referred to fees being so deducted during “the one-time fund allocation” at “10%/year”. The defendants also relied upon cl 1 of the Supplementary Agreement which provided that the expenses “shall not exceed 10%” of the loan expenses to be deducted at the time the funds are disbursed. Additionally the defendant relied upon the plaintiff’s evidence that he was fully aware that Yuanta/the defendant was entitled to 10% of the loan amounts as a handling fee. He gave the following evidence (23-02-2016: tr 107-108):

The defendant submitted that given the clear terms of the Agreements that the defendants, in particular Yuanta, would be charging the 10% fees, it is impossible that the plaintiffs would have been misled into thinking that Crédit Agricole would be the party charging the 10% fees. I agree.

The plaintiffs have failed to establish that this representation was made.

The plaintiffs claimed that the defendants conspired together from the outset of their relationship with the plaintiffs to harm the plaintiffs. It was submitted that the defendants never intended to perform or take part in the joint venture project; and that from the outset the defendants had the intention of using the plaintiffs’ NexGen shares for their own gain. I do not accept that the defendants never intended to carry out the joint venture project. Clearly they obtained loans and provided them pursuant to the Loan Agreement.

I should record that in final submissions the plaintiffs sought to rely on other unlawful acts or means being: misleading the plaintiff into believing that the lender was Crédit Agricole; committing a series of wrongful acts to conceal the identity of EFH; and the wrongful trading with the pledged shares. I have dealt with each of these claims elsewhere in respect of the plaintiffs’ claims for damages for breach of contract and/or fiduciary duty. The plaintiffs have proved that the defendants failed to disclose the identity of the true lender to them and they also established that the defendants sold a number of NexGen shares in breach of the Agreements and in breach of the defendant’s fiduciary duties. However it is not appropriate to set out to prove these breaches and then characterise them as the unlawful acts or means of a conspiracy claim that was not previously pleaded in reliance on such acts or means. In such a serious claim of conspiracy the plaintiffs are to be held to their pleadings.

The unlawful means alleged were the express representations allegedly made to the plaintiff prior to the entry into the Agreements. The plaintiffs have failed to prove those express representations were made. The plaintiffs’ failure to establish any of the unlawful acts or means as particularised puts an end to their claim in conspiracy and it will be dismissed.

Portfolio claim

The parties relied upon the expert evidence to prove, or disprove, the link between the disposals of the shares and the market impact. I agree with the plaintiffs’ submissions that ultimately very little divided the expert opinions. All of the experts agreed that the disposals of the shares had an impact on the share price. The difference between the experts relied upon by the plaintiffs, Mr Tan and Mr Hayler and the expert relied upon by the defendants, Mr Tam, was the degree of that impact.

It is appropriate, at this juncture, to refer in some detail to the expert evidence.

The experts prepared a Joint Report dated 12 February 2016 (“the Report”). The Report defines “Admitted Share Sales” as sales of NexGen shares admitted by the defendant in his affidavit dated 3 November 2015; and “Disputed Share Transfers” as those transactions that the defendants claim were transfers of NexGen shares to EFH, but which the plaintiffs claim were wrongful disposals or otherwise resulted in shares being made available on the open market.

The Report deals with the questions: (1) whether the Admitted Share Sales could have caused a reduction of the NexGen share price (“Issue 1”); and/or (2) whether the Disputed Share Transfers could have caused a reduction of the NexGen share price if they were “disposed of” during the periods: (a) February to June 2011 at around the time that each tranche of shares was transferred to EFH; and (b) September to October 2011 at around the same time that each tranche was purportedly defaulted on (where the dates for tranches 1 to 7 are based on the last day for top-up payment; and the dates for tranches 8 to 10 are taken as 125 days from the Closing Date) (“Issue 2”).

The experts assumed that up to 90% of the actual volume traded on each day was sales by EFH. On days when there was overlap of Admitted Share Sales and Disputed Share Transfers the combined volume traded on each day is capped at 90% notwithstanding that the Admitted Share Sales alone represented more than 90% of the traded volume on two of the sixteen days of relevant trading (11 February 2011 and 25 August 2011).

The experts agreed that the movement in share prices in public companies may be broadly attributed to “market, industry or company (fundamental and technical) factors”.

Messrs Tan and Hayler (“Tan/Hayler”) considered that the impact of both the Admitted Share Sales and the Disputed Share Transfers can most easily be identified by comparing the movements in the NexGen share price with the movements in the market and/or industry over the same period. In this regard they applied a two stage process: a comparison of the movements in the NexGen share price with movements in the SGX, measured by the Straits Times Index (“STI”) and the Financial Times Stock Exchange ST Small Cap Index (“FSTS”) (“Stage 1”); and if the NexGen share price underperformed the market/industry in any relevant period, they looked for negative news items relevant to company specific fundamental factors that may explain the share price movements (“Stage 2”).

August 2011 Admitted Shares Sales

The NexGen share price decreased by 8% on the four near consecutive days of trading 19, 22, 23 and 25 August 2011 (no shares were said to have been traded on 24 August 2011). The shares sold on these days represented about 50% of the total volume traded over the five days.

Stage 1: the proxy for the industry was up over the relevant period and Tan/Hayler expressed the opinion that “industry factors” did not appear to explain the underperformance in the NexGen share price as against the industry performance: the Report at [4.20]–[4.21].

Stage 2: There was a positive announcement by NexGen on 12 August 2011 of its results for the quarter ended 30 June 2011 of a large increase in revenue (albeit from a low base) and a further announcement on 19 August 2011 that all of its resolutions had been passed at its annual general meeting and extraordinary general meeting. There were no negative company specific news items in the period 19 to 25 August 2011 or the week preceding that period: the Report at [4.22]–[4.23].

Tan/Hayler concluded that the Admitted Share Sales in August 2011 “appear to have depressed” the NexGen share price: the Report at [4.24].

Mr Tam looked at the intra-day price movement of the NexGen share price on these days to see if there was any material movement in the share price with the sale of each tranche by Yuanta. He also looked at the share price 5 trading days after each sale to see if there was any material movement in the share price: the Report at [5.1.1]–[5.1.3]. He concluded that there was “no material movement” in the NexGen share price at either time: the Report at [5.1.4].

October 2011 Admitted Share Sales

Tan/Hayler observed that the NexGen share price decreased by about 42% over the whole period of Admitted Share Sales from 10 to 20 October 2011(except for 14 October 2011 when no shares were said to have been traded): the Report at [4.25]–[4.26]. The shares sold on these days represented about 65% of the total volume of shares traded: the Report at [4.27].

Stage 1: the proxy for the industry was slightly up over the period: the Report at [4.29]-[4.30]. The NexGen shares underperformed the industry and Tan/Hayler considered that industry factors did not explain the underperformance: the Report at [4.30]–[4.31].

Stage 2: Tan/Hayler considered announcements by NexGen and by Scorpio East to determine whether there was an impact on the NexGen share price.

These included the announcement by Scorpio East on 25 March 2011 of the appointment of a special auditor to investigate certain transactions and the creation and termination of contracts by the Group; Scorpio East’s announcement on 7 September 2011 that the special auditor had determined that certain terminated contracts should have been disclosed and that the plaintiff was a party to the termination without prior approval of the board; the NexGen announcement on 24 September 2011 that its application to be removed from the SGX Watch List had been rejected; Scorpio East’s announcement on 10 October 2011 that the plaintiff had commenced defamation proceedings against certain Scorpio East directors; and the SGX announcement on 20 October 2011 of a breach of rules by Scorpio East and a reprimand against the company and two directors including the plaintiff: the Report at [4.33]-[4.45].

Tan/Hayler concluded that the 24 September 2011 announcement by NexGen would have had “minimal, if any” impact on the share price: the Report at [4.35]; that the Scorpio East announcement on 25 March 2011 appeared “unlikely” to have had an impact on the share price; that the Scorpio East announcement on 7 September 2011 did not negatively impact the share price; and that the SGX announcement on 20 October 2011 would not be a reason for underperformance on that day. Tan/Hayler considered that the Admitted Share Sales in October 2011 “appear to have depressed the share price”: the Report at [4.49]. I will refer to Mr Tam’s opinion in respect of these announcements below.

Disputed Share Transfers

The experts considered a scenario in which EFH sold the shares as quickly as possible from the dates of transfer, referred to as the “ASAP scenario”: the Report at [4.50]. Although Tan/Hayler considered a second scenario, referred to as the “Volume Constraint scenario” this is no longer relevant having regard to the letter from EFH in which it has been made clear that there was no volume constraint agreement between Yuanta and EFH (the addendum).

Tan/Hayler concluded that the NexGen share price in the ASAP scenario generally underperformed the industry: the Report at [4.57]. They considered that industry factors did not explain such underperformance in the period 1 February 2011 to 13 June 2011 and to 28 July 2011: the Report at [4.62]–[4.63].

Tan/Hayler reported that they were not aware of significant company-specific news having been reported over the relevant period. Indeed on 14 February 2011 NexGen announced positive results for the quarter ended 31 December 2010 and made several announcements during April to June 2011 relating to its efforts to acquire a satellite business in China and data centre business in Indonesia. Tan/Hayler reiterated their views that the Scorpio East announcement in March 2011 did not appear to have any negative impact on the NexGen share price. They concluded that the Disputed Share Transfers “appear to have depressed the share price of NexGen, if sales were made from the dates of transfer”: the Report at [4.64]–[4.67].

Tan/Hayler also considered a number of other matters: the relative scale of trading; block trading; and “0” price and “0” volume data points. The amount received by the defendants from the Admitted Share Sales in relation to the collateral shares it sold directly, net of repurchases was around S$3.1m. The amount received by the defendants from Admitted Share Sales in relation to the 225m NexGen shares in October was around S$1.5m. The value of the 765m NexGen shares transferred by the defendants to EFH was around S$28.8m at the time of transfer. If EFH sold the shares from the dates of transfer the value to EFH would be around S$27.7m in the ASAP scenario. Tan/Hayler concluded that it appeared “with hindsight” that if EFH sold the shares from the dates of transfer the amounts it would have received would have been materially greater than the amount of the loan to the plaintiffs: the Report at [4.87]–[4.92].

Although Tan/Hayler attempted to analyse any block trades their evidence was ultimately of little assistance in respect of the impact that the defendant’s conduct may have had on the NexGen share price. Similarly their analysis in respect of the “0” price and “0” volume data points does not assist.

Tan/Hayler’s conclusions are that the NexGen share price decline is “likely attributable” to the Admitted Share Sales: the Report at [4.109]; and that, absent other factors, the Disputed Share Transfers depressed the NexGen share price if sales were made from the dates of transfer in the ASAP scenario: the Report at [4.112].

Mr Tam expressed the view that the NexGen announcement on 24 September 2011 was “an important and potentially price sensitive announcement” because NexGen was facing the prospect of delisting if it did not comply with the requirements to exit from the Watch List by 1 June 2012: the Report at [5.1.7]. He concluded that it was probable that irrespective of the share sales in October 2011 that the NexGen share price “may have continued its decline” into October 2011: the Report at [5.1.8]. He also concluded that the impact of the October share sales on the NexGen share price was “uncertain” because the price was already on the decline and the SGX’s reprimand appeared to have further impact on the share price causing it to reach a “new low”: the Report at [5.1.9]. This opinion needs to be viewed in light of the fact that the SGX announcement was not made until after the trade closing time on 20 October 2011, a matter that Mr Tam accepted when giving oral evidence.

Mr Tam analysed the share price during the period of the share sales. It decreased substantially over seven of the ten “windows”; it increased over two of the ten “windows”; and remained unchanged in one of the ten “windows”. He concluded that it declined by 67% over the period 1 February 2011 to 13 June 2011. He also concluded that if the shares were sold on the dates under the ASAP scenario they would have represented 35% of the total volume trades. He expressed the opinion that to assume that 35% of the volume of trades caused a decline in the share price is to ignore how the balance shares (over 1.4 billion) were traded and their impact: the Report at [5.2.14].

Mr Tam emphasised that there were no queries from the SGX for unusual trading activities from which absence he concluded that it was unlikely that EFH would have “dumped” NexGen shares during September 2011 to January 2012.

The experts concluded that the sale of the NexGen shares in February and March 2011 did not cause the share price to fall: the Report at [4.13] and [5.1.4]. Tan/Hayler concluded that the balance of the share sales after this period caused the NexGen share price to fall. Mr Tam’s view was that it is not possible to conclude that such sales caused the share price to fall. Rather he suggested that the outcome is “inconclusive” given the presence of various other factors that probably had a negative impact on the share price at the time.

The defendants submitted that Mr Tam’s view in this regard should be preferred given the various uncertainties in the experts’ assumptions and the presence of the other factors that had a negative impact on the price. These other factors included the negative company news, a falling market and NexGen’s poor financial performance.

The experts were asked to assume that EFH would have sold the pledged shares very soon after Yuanta transferred them. EFH’s correspondence in respect of the NexGen shares did not disclose unequivocally that it had sold the shares. It is unsatisfactory that the plaintiff has had to expend money and effort in trying to find out from the defendant where the shares might be. The defendant clearly had a close business relationship with EFH, referring to it as its “partner”. The rapidity with which he was able to enter into the Master Loan Agreement and the Master Pledge Agreement with EFH within weeks of entering into the Agreements with the plaintiffs is indicative of his close relationship with EFH. However the defendant claimed that he was not able to find out whether EFH had sold the pledged shares, albeit that during his evidence he gave an indication that he might be able to have a discussion with EFH in this regard as late as February 2016.

The defendants submitted that the numerous possibilities and permutations by which EFH could have sold the shares, if at all, render the assumptions the experts were asked to make meaningless and dangerously speculative. The defendants submitted that it is inconclusive whether the conduct of EFH’s disposals of the NexGen shares could have caused the price decline in 2011.

Mr Tam’s opinion was that the defendant’s sales of the 60m NexGen shares in August 2011 did not cause a decline in the share price. There was no material intra-day movement in the price of the shares on the dates of the sales. The fluctuation between the highest price and the lowest price for each day was not more than S$0.002. The total price movement between 19 August 2011 and 25 August 2011 was a decline of S$0.002. The defendants submitted that this is no more than the usual fluctuation caused by regular share trading activity and is not material or significant enough to be considered as underperformance.

Mr Tam also noted that there was no material movement in the share price 5 trading days after each sale (Ex D 1). He expressed the view that the NexGen share price was already on the decline from late September 2011 because of the significant negative and price-sensitive news that was announced in that month. That decline continued into October and coincided with the October 2011 sales.

The defendants emphasised the SGX announcement released on 24 September 2011 rejecting NexGen’s application to be removed from the watchlist. That announcement recorded the SGX view that there was “uncertainty over whether the Company’s profit achieved in FY2011 would be sustainable”. The defendants submitted that this reason would cast serious doubts in investor’s minds as to the financial performance of the company in general and also in respect of the projected profit being achievable. The defendants submitted that Mr Hayler’s attempts to downplay the implication of this announcement should be rejected. Mr Hayler described the announcement as demonstrating that the SGX was being cautious. Be that as it may, I agree with the defendants’ submissions that this SGX announcement was material and significant negative news in relation to NexGen at that time.

The experts’ opinions are based on the two sets of assumptions provided to them. It is obvious that if those assumptions turn out to be incorrect, or if partially incorrect, then such opinions would need adjustment.

It is not in issue that the agreement between EFH and Yuanta entitled EFH to sell any number of the pledged NexGen shares at any time. The defendants contended that EFH may have sold them in tranches immediately after the transfer from Yuanta and other tranches only after the default in the margin call. They submitted that EFH could have sold the 10 tranches of shares in any order or sold a portion of the tranche or more than one tranche at each transaction. Alternatively EFH could have sold some of the shares in 2012, as opposed to 2011 or within a period with which the experts were not asked to deal. It was submitted that the numerous possibilities and permutations by which EFH could have sold the shares, if at all, make the assumptions the experts were asked to adopt meaningless and dangerously speculative for the purpose of determining whether such conduct caused the NexGen share price decline in 2011. For these reasons the defendants submitted that it is inconclusive whether such disposals could have caused the decline in the NexGen share price.

Mr Tam expressed the view that the sale of the 60m NexGen shares by the defendants in August 2011 did not cause a decline in the NexGen share price because: there was no material intra-day movement in the price on the days of the sales; and there was no material movement in the share price 5 trading days after each sale. The share price in that period ranged between S$0.024 and S$0.022.

Tan/Hayler on the other hand expressed the opinion that the August 2011 sales had caused an underperformance of the NexGen shares against the market because the NexGen share price underperformed the share market from 19 to 25 August 2011; and there was no negative company news to which such underperformance could be attributed.

One of the aspects of the Tan/Hayler measurement of the underperformance was a comparison with other telecommunication companies being Singtel and M1. There is no issue that those two entities are large blue chip companies that are quite different from NexGen. The reverse takeover of NexGen was for the purpose of delivering the satellite business into that company. Prior to that takeover NexGen had been a textile manufacturer wholesaler/retailer. Thus the telecommunications business in NexGen was very young and it was far smaller than Singtel and M1. Additionally NexGen was on the watchlist of SGX. It was submitted that comparing NexGen’s performance with that of Singtel, with its market capitalisation of approximately S$59 billion and M1 with its market capitalisation of around S$2.4 billion is inapt. Similarly it was submitted that Tan/Hayler’s use of the STI and FSTS was inapt because each index is made up of companies that are larger than NexGen with shares trading at higher prices than NexGen.

It was also submitted that it is far too simplistic to conclude that the NexGen shares underperformed the market just because the percentage increase registered by NexGen is less than the percentage increase registered by the comparable companies (the proxy indicators). The defendants highlighted the fact that because the NexGen shares were trading at such low prices, the most minute price fluctuation would be amplified in terms of percentage. For instance, if the share price were trading in the range of S$2.00, a decrease of S$0.001 would result in a percentage decrease of 0.05%.

Mr Tan noted that the proxy indicators performance increased in the period 19 to 25 August 2011 whereas the NexGen price decreased by 8%. He then concluded that the NexGen shares had underperformed against the market. In reaching this conclusion Mr Tan considered the 5 sales as a whole and did not analyse each tranche on its own.

The defendants analysed each sale during the period 19 to 25 August 2011. In respect of the first sale on 19 August 2011 there was a decrease of S$0.001 which amounted to a decrease of 4%. The STI and FSTS also registered the decrease although at a smaller percentage of 0.80% and 1.44% respectively. The defendants submitted that the decrease of the NexGen price of S$0.001 was consistent with the trend of the decrease in the market performance for the day. They emphasised that the volume of the trade of NexGen shares accounted for only 22.8% of the total shares traded that day.

On 22 August 2011 when the second tranche of NexGen shares were sold there was a decrease of S$0.001 or 4.17% in the NexGen share price. The FSTS registered a drop of 0.32% and the STI registered a slight increase of 0.39%. It was submitted in this circumstance the comparison with the FSTS and STI is inconclusive as to whether the market had gone up or down. In any event it was submitted that the minute decrease in the NexGen share price of S$0.001 in both the first and second tranches should not be considered a material or significant decline in price and they do not reflect that the NexGen shares had underperformed the market.

The final three tranches on 23 August 2011 and 25 August 2011 did not register any movement in the NexGen share price. Whereas the STI and the FSTS each registered a small percentage increase. The defendants submitted that given there was no price decline on those two days it would be unreasonable to conclude that these sales had caused the NexGen share price to decline. It was submitted that it is speculative to assume that the NexGen share price would have increased without those three sales.

The defendants relied upon the fact that in August 2011 there was a sharp drop in stock prices in stock exchanges throughout the world. They submitted that thereafter severe volatility continued for the balance of the year. Correspondingly the STI Index and FTSE ST All-Share Index recorded a decline from August 2011 reaching its lowest point in October 2011.

In this regard the defendants relied upon a number of articles annexed to their Written Submissions (Annexure 2). The first is entitled “Investors lose a trillion dollars in one day” written by Steve Hargreaves on 9 August 2011, for Cable News Network. That article included the following:

In a similar article entitled “S&P 500 Extends Worst Slump Since 2008 Bear Market on Downgrade” written by Rita Nazareth for Bloomberg reference was made to “cheapness in the stock market” including “Treasuries”. The final article relied upon by the defendants was “Dow plunges after S&P downgrade” written by Ken Sweet on 8 August 2011 for Cable News Network which referred to Wall Street having its “worst day” since the 2008 financial crisis.

The defendants submitted that in all the circumstances Mr Tam’s opinion that the position is inconclusive should be preferred.

The experts differed in respect of the effect of the October 2011 sales on the NexGen share price. Once again the defendants were critical of Mr Tan for taking the October sales as a whole without analysing the individual tranches. It was submitted that Mr Tan’s approach was “too simplistic”. The defendants’ analysis of the sales showed that on 10, 18 and 20 October 2011 a price decrease of S$0.002 had occurred. On those same days the market had also decreased based on the decrease of the STI and FSTS. As they submitted in respect of the August 2011 sales, the defendants submitted that there would be a larger percentage movement of the NexGen shares simply by reason of the volume of shares and the low price at which the shares were traded. They submitted that the NexGen share price trend was consistent with the market trend on 10, 18 and 20 October 2011.

The sales on 11, 13 and 19 October 2011 registered no price movement for the NexGen shares, whereas the STI registered a decrease. In a further sale on 17 October 2011 the STI registered an increase whereas there was no movement in the NexGen share price. The only sale in which the NexGen share price declined even though the STI and the FSTS registered an increase occurred on 12 October 2011.

Tan/Hayler also expressed the view that the NexGen share price declined after 24 September 2011 but stabilised before 10 October 2011. Prior to 24 September 2011, the NexGen shares had been trading at prices above S$0.002. On 26 September 2011 the price declined to S$0.017. The price continued to decline from 27 September 2011 to 7 October 2011.

Mr Tan expressed the view that the NexGen share price fluctuated “from 3 October to 7 October but remained around SGD $0.012 until the start of the October Admitted Share Sales on 10 October 2011”. The defendants highlighted the fact that there was no trading between 7 October 2011 and 10 October 2011 and that Mr Tan’s opinion must be considered in this context.

It is not in issue that the NexGen share price continued to decline from 10 to 20 October 2011. However the defendants submitted that the gradient of decline in that period was no steeper than the gradient of decline registered in the period between 26 September 2011 and 7 October 2011. The defendants contended that if the October sales added to the impact of the 24 September 2011 announcement, one would expect the prices would register a steeper decline than during the period prior to the commencement of the October sales.

The defendants submitted that given the very material negative impact of the 24 September 2011 announcement and the poor-performing market in October 2011 the evidence is “inconclusive” that the price decline from 10 to 20 October 2011 was caused by the October 2011 sales.

Mr Tam expressed the opinion that the numerous announcements between 16 September 2011 and 20 December 2011 were negative in nature and could well have caused the NexGen share price decline during the latter part of 2011. It was submitted that there was a compounding effect of the 24 September 2011 announcement rejecting NexGen’s application to be removed from the watch list; the SGX announcement on 20 October 2011 reprimanding the plaintiff in respect of his conduct at Scorpio East; the NexGen announcement on 30 October 2011 of the resignation of the plaintiff as Executive Director; the profit warning issued by NexGen on 5 November 2011 in respect of the results for the second quarter ended 30 September 2011; and the NexGen announcement on 19 November 2011 of the cessation of one Tan Jooi Boon’s employment as executive director.

It was submitted that Mr Tan failed to consider the announcements after 20 October 2011 in his analysis given the obvious negative impact of them. Mr Tan took the view that it was inappropriate to consider announcements after the sale period of 10 to 20 October 2011.

The defendants also made submissions in relation to NexGen’s financial performance generally. Mr Tam expressed the opinion that NexGen’s financial position had deteriorated between 31 March 2011 and 31 March 2013. It made a substantial loss of S$66.7m for the year ending 31 March 2013. The defendants submitted that this poor financial performance renders the position even more inconclusive.

There is no issue that the NexGen share price has not recovered. The defendants rely upon this fact to contend that if the August and October 2011 share sales caused the price decline in 2011, one would expect the share price would recover after those sales. However Mr Hayler expressed the opinion that when a share price is driven down, it may be difficult for it to recover because the company may not be in as favourable position to raise equity because banks may be doubtful about the company’s prospects if it is unable to explain the cause of the fall in the share price. The defendants contend that this is not a case in which a company would not have been able to explain the fall in the share price. They relied upon NexGen’s inability to recover and to exit the watch list submitting that this was due to its poor financial performance.

Finally the defendants submitted that even if it were permissible to entertain the plaintiffs’ portfolio claim, no actual loss has been suffered by the plaintiffs because the plaintiffs have not sold their NexGen shares. It was submitted that the loss of profits from share trading must be assessed at the time of realisation of the loss of profit. Where there has been no realisation, it is nothing more than a paper loss and not an actual loss of which the plaintiffs complain. The defendants referred to the scenario where a party succeeds in claiming for alleged portfolio losses and then in the subsequent year the prices of the shares skyrocket and the party may reap a profit. This, it was submitted, would result in an unjustified windfall to that party.

The experts gave evidence concurrently on 29 February 2016 (tr 73-216). Consensus between the experts was reached in respect of the following matters: (a) the way in which shares are sold can impact the price of shares; (2) a number of other things as well as the share sales in October 2011 did have an impact on the price of the NexGen shares (although the experts were not in agreement about the percentage contribution of the “other things” to that decline); and (3) obviously if the share price declines the value of large portfolios of those shares will decline (tr 152-153).

The plaintiffs’ claim that the defendants are liable for the reduction of the value of the plaintiffs’ share portfolio is not straightforward. Irrespective of whether they can establish that the defendant knew or ought to have known that his conduct would cause the decline in the share price, they must first establish that the defendants’ or EFH’s trading of the shares caused the decline in the share price.

The plaintiffs’ difficulties in ascertaining from EFH what actually happened to the shares have an impact on the assumptions that the experts were asked to make about the sales by EFH. Leaving to one side the cause of such difficulties, the plaintiffs have not established a proper basis for the assumptions. It is not in issue that a lender in a non-recourse loan transaction would be motivated to protect itself from a decline in the value of the asset to which it may have recourse if there is default. However to assume, as the experts were asked to do so, that the lender would sell all the shares immediately on receipt is problematic. The combinations and permutations of possible sales to which the defendants referred are realistic and the experts were not asked to address these alternatives. Although the plaintiffs submitted that the defendant and Mr Goh knew that EFH was trading immediately on receipt of the shares, this was not supported by the evidence. Certainly Mr Goh was aware that others in the market were following him as he traded; it was not established that this was EFH.

I am satisfied that the 24 September 2011 announcement was seriously negative and I prefer Mr Tam’s evidence in this regard over that of Mr Tan and Mr Hayler. I am also satisfied that there was a crisis in the market in August 2011 and that the market was on a downward trend during August 2011 and for some period beyond August 2011.

I am satisfied that the evidence is inconclusive in respect of whether the August 2011 and October 2011 sales caused the reduction in the NexGen share price. I am not satisfied on the balance of probabilities that those sales were the cause of the reduction.

There was a debate between the parties in respect of the portfolio claim as to whether the plaintiffs had to show a causal connection between the breaches of fiduciary duty and the loss in order to recover equitable compensation. Having regard to my findings it is not necessary to pursue that debate further other than to say that had it been necessary I would have preferred the view that there has to be some causal link between the breach and the loss for which compensation is awarded: Ohm Pacific Sdn Bhd v Ng Hwee Cheng Doreen [1994] 2 SLR (R)633 at [27]; Schonk Antonius Martinus Mattheus and another v Enholco Pte Ltd and another appeal [2016] 2 SLR 881 at [22]; AIB Group (UK) plc v Mark Redler & Co Solicitors [2014] 3 WLR 1367 at [135]–[136].

The plaintiffs’ Portfolio Claim fails.

Counterclaims

The defendants claim that they are entitled to or entitled to utilise 50% of the loan proceeds that were paid by Yuanta to the plaintiffs/AEM pursuant to the Loan Agreement. The defendants also claim that the plaintiffs are in breach of the Agreements by failing to use the loans to exercise the warrant to obtain the 225m NexGen shares. They also claim that the plaintiffs are in breach of the oral loan agreement into which the parties allegedly entered in June 2011.

Before turning to those particular claims I should record that the defendants claimed that the plaintiffs withdrew “most of” the loan funds from the AEM account for their “own purposes without the knowledge, consent and/or agreement” of the defendants (A32 [25]). Part of this claim related to the funds that were utilised to take up an interest in Scorpio East. I have found that this was a joint investment. The balance of the funds were paid in respect of the reimbursement of the plaintiff for the provision of 225m NexGen shares treated as having been converted from the warrants. The relevant documents in respect of the withdrawals from the AEM account include the defendant’s signature. I am not satisfied that the defendants’ claims in this regard are made out.

The loan proceeds claim

The defendants alleged in their Defence and Counterclaim filed on 22 October 2015 that there should be implied into the Agreements a term that the plaintiff and the defendant were each entitled to and/or entitled to utilise 50% of the loan funds obtained under the Loan Agreement at all material times.

In their Opening Statement the defendants alleged that the implied term was that the plaintiff and the defendant were entitled to and/or entitled to utilise 50% of the loan funds in the event that such funds were not used for the joint investments.

There is no gap in the Agreements that would permit such an implication: Sembcorp Marine Ltd v PPL Holdings Pte Ltd [2013] 4 SLR 193 at [29]. The express terms of the Agreements provide for the manner in which the loan funds were to be utilised and distributed (cll 5 and 8 Supplementary Agreement). As I have said, the “project” was not defined in the Agreements but it was clearly the investment activities upon which the parties would agree upon from time to time (cl 5 Supplementary Agreement).

The parties clearly intended that the loan funds would be utilised for their joint investment activities; that any profit from those joint activities would be shared equally; and any losses suffered would be borne equally by the parties. The parties did not intend and there is no basis to imply such an intention that they would each have access to 50% of the loan funds. They went to the trouble of setting out the division of work in the Supplementary Agreement, requiring the plaintiff to manage the investments of the project and requiring the defendant to obtain the loans to be utilised in those investments.

The defendants claim in respect of their entitlement to 50% of the loan proceeds will be dismissed. However that does not affect the defendants’ entitlement to share equally in the profits of the project or to bear 50% of the losses of the project.

The warrant claim

The defendants claim that the plaintiffs were in breach of the Agreements in failing to convert the 225m warrants to shares as agreed.

The Supplementary Agreement provided that the 225m warrants would be converted for pledging for loans to be obtained for the joint investment project (cl 3 Supplementary Agreement). The Supplementary Agreement also provided that the loans would be used to exercise the warrant to acquire the shares at S$0.03 and to acquire 25% of the shares of the plaintiff’s “original shareholders” (cl 8 Supplementary Agreement). This was at a time when the parties anticipated that Mr Koesnadi’s shares would be acquired either by the defendant or by AEM. As I have found earlier, that plan changed so that it was AEM that would obtain 225m warrants “for free” and acquire Mr Koesnadi’s shares.

It seems that the defendants claim that the plaintiff was obliged to provide 225m NexGen shares, converted from the warrants, without any consideration irrespective of whether Mr Koesnadi’s shares were purchased.

The plaintiff utilised the loans to ‘pay for’ for the 225m NexGen shares. That meant that S$6.75m was paid to the plaintiff for the provision of 225m NexGen shares to Yuanta for pledging for loans for the joint venture.

This aspect of the defendants’ counterclaim appears to be in support of the defendants’ alleged entitlement to have sold the 225m NexGen shares in October 2011 the proceeds of sale of which they kept.

The plaintiffs claim that this aspect of the defendants’ case is very confused. They submitted that the defendants cannot possibly challenge the utilisation of S$6.75m from the AEM account towards the conversion of 225m warrants.

The shares were then pledged for loans for the joint venture project. Ultimately that asset, should it have been extant at the time of the completion of the project, was to be shared equally by the parties.

I am not satisfied that the defendants are entitled to any relief in respect of the plaintiff’s conduct in providing his own 225m NexGen shares to the joint venture rather than converting the warrants to provide them.

225m warrants oral agreement

Although the defendants claimed that the parties entered into an agreement pursuant to which the 225m NexGen shares converted from the warrant were to be “cashed out” as opposed to being made available for pledging for further loans, I am not satisfied that such an agreement was reached.

The email relied upon by the defendants refers to AEM receiving 225m warrants “for free” and that there was a “target profit” of between “sin$4.5m to sin$6.75m” (see [67] above). The email certainly refers to selling “at 5 cents up” to reach that target profit. However that email needs to be considered in the context of the express agreement in the Supplementary Agreement that the parties would convert the warrant into shares for the purpose of obtaining future loans. As I have said earlier, the defendant believed that the 225m NexGen shares transferred into the Yuanta account on 11 March 2011 had been converted from the warrants. If there was an agreement that the converted shares were to be sold immediately and the proceeds shared equally between the parties it is reasonable to expect that the defendant would have sold those shares and shared the proceeds with the plaintiff. This did not happen and no demand was made on the plaintiffs at this time to sell those shares.

I am not satisfied that a separate agreement was entered into pursuant to which those shares were to be “cashed out” and the proceeds shared immediately between the parties.

This aspect of the defendants’ claims will be dismissed.

The S$1.8m loan oral agreement

Having regard to my findings in relation to the competing claims in respect of the S$1.8m in June 2011, the defendants’ claim in respect of this agreement will be dismissed.

Conclusion

The plaintiffs have established that the defendants’ conduct in selling the NexGen Shares in February and March 2011; August 2011 and October 2011 was in breach of the Agreements and also in breach of the defendant’s fiduciary duties. The plaintiff’s claim in conversion in respect of these sales is also established. The plaintiffs are entitled to damages for these breaches and for the conversion of the shares. I will hear the parties on quantum.

The plaintiffs also made a claim for aggravated damages and punitive damages. Having regard to the outcome of the various claims I will hear the plaintiffs on whether they continue to press these claims and if so on what basis.

The plaintiffs’ claim in conspiracy will be dismissed as will all other claims of breaches of contract including the SPA claim, breaches of fiduciary duty and the portfolio claim.

The defendants’ Counterclaim will be dismissed.