High Court · Decided 18 December 2009

Lim Chee Twang v Chan Shuk Kuen Helina and Others

Feedback & support

[2009] SGHC 282Case no. Suit 731/2008, SUM 4652/2008

What happened, in plain English

There is no plain-English summary of this judgment yet.

Ask about this judgment

Laws this judgment relies on

Companies Act 1967

Grounds of decision

Official text from eLitigation

Quentin Loh JC:
[1] The Plaintiff, (“Lim”), a graduate in Science (Computation) from the University of Manchester Institute of Science and Technology, aged 40, claims he is the victim of oppression as a 40% shareholder of a ‘group’ of companies. The alleged oppressor is the only other shareholder, the 1 Defendant, (“Ms. Chan”), who in effect holds 60% of the shares of all the companies, save one.
[2] Lim seeks relief under section 216 of the Companies Act (Cap 50, 2006 Rev Ed) (“the Act”), as well as some other orders which boil down to an account of the inter-company invoicing, the attribution of profits and expenses amongst the companies, the validity of charging commissions by one company to the other companies, accounting practices of the companies, director’s loans, unilateral and unauthorised withdrawals of sums of money by Ms. Chan, the unauthorised use of the name “iPreciation” to set up other companies, the true worth of these companies and their ability to pay dividends. There is also a prayer that Lim be bought out at a fair price by Ms. Chan.
The iPreciation Group of Companies
[3] There are 5 companies within this dispute:
(i) the 2 Defendant, iPreciation Fine Arts Ptd Ltd, (“Fine Arts”), incorporated in Singapore. Lim holds 40% of the shares and Ms Chan holds 60% of the shares. They are the only shareholders and directors;
(ii) the 3 Defendant, iPreciation Contemporary Pte Ltd, (“Contemporary”), incorporated in Singapore. Lim holds 5% (1 share) and Ms Chan holds 95% (19 shares). They are the only shareholders and directors. Ms Chan concedes that Lim should hold 40% of the shares of Contemporary and she should hold 60% of the shares and the paper work therefor has been effected. There is a side issue as to how the shares came to be issued in this 5% - 95% proportion;
(iii) the 4 Defendant, iPreciation Pte Ltd, (“IPL”), a company incorporated in Singapore. Lim holds 1 share or 0.001% and Ms Chan holds 99,999 shares or 99.999% of the issued shares. Lim claims to be entitled to a 40% shareholding, Ms Chan disagrees and asserts Lim is holding this 1 share as a nominee shareholder. Lim and Ms Chan are the only shareholders and directors;
(iv) the 5th Defendant, iPreciation Ltd, (“BVI”), a company incorporated in the British Virgin Islands. Lim holds 40% of the shares and Ms Chan holds 60%. Again they are the only shareholders and directors; and
(v) the 6 Defendant, iPreciation (HK) Limited, (“HK Ltd”), a company incorporated in Hong Kong. Lim holds 40% of the shares and Ms Chan 60%. They are the only shareholders and directors.
For convenience, where appropriate, I shall refer to all these companies collectively as “the iPreciation companies” or “the Companies” as the context may require.
[4] To complete the picture, there are three sole proprietorships:
(i) iPreciation Consultants, (“Consultants”), a sole proprietorship of Ms Chan, registered in Singapore;
(ii) iPreciation Consultants (Hong Kong), (“Consultants HK”), another sole proprietorship of Ms Chan’s registered in Hong Kong; and
(iii) Nexart, (“Nexart”), a sole proprietorship of Lim’s registered in Singapore.
For convenience, I shall refer to these sole proprietorships collectively as “the Sole Proprietorships” and the Companies and these Sole Proprietorships collectively as “iPreciation”, or “the iPreciation entities” or “the entities” as the context may require.
[5] The Writ has not been served on BVI and HK Ltd. Consequently, although named as parties, they have not been brought in as parties to these proceedings. Fine Arts, Contemporary and IPL have not played an active role in these proceedings. Mr. Melvin Lum, who represents these companies, asked to be excused from attendance at the trial as the dispute is really between the shareholders, Lim and Ms Chan.
The Business of the iPreciation Companies
[6] The eight entities are involved in the art business, namely, sourcing for art works, promoting and representing artists, organising exhibitions and holding art fairs and selling art works. Their forte is in representing Asian artists, especially from Taiwan or China, and selling their art works around the world from Singapore and Hong Kong. The various functions or facets mentioned above are divided amongst the companies and sole proprietorships but which functions exactly should be carried out by which company or sole proprietorship are in contention.
Lim’s Case
[7] Lim’s case in brief, alleges an understanding and agreement with Ms Chan arrived at in 1999 that they would both participate in the management and affairs of the companies as working directors and owners of these companies but their exact shareholdings had not been discussed. When Fine Arts was formed in 2003, Lim and Ms Chan agreed that their respective shareholdings in all companies would be on a 40/60 basis, with Lim holding 40% and Ms Chan 60%.
[8] Lim worked hard with Ms Chan to build up the business of the companies right from 1999 to June 2008 when he was excluded. His degree of involvement in the business was substantial, he participated in the affairs and management of the entities and he closed off sales on many occasions.
[10] The business grew after a successful exhibition in 2003. Unfortunately Lim and Ms Chan’s relationship started to deteriorate around the latter half of 2005. It came to a head when Lim was wrongfully terminated on 15 August 2008 from his post as executive director of the ‘group’ and excluded from management and even basic information as to the affairs of the companies. There were other acts of oppression:
(i) Ms Chan admittedly misappropriated S$4.021 million on 23 and 24 April 2008 (which she claims was credited back on 9 June 2008), and S$4.38 million on 23 June 2008 (which she claims she returned on 29 July 2008); information in relation to these misappropriations were not forthcoming and were only admitted when ‘her back was to the wall’ and she had to file her AEIC;
(ii) Ms Chan has wrongfully and without justification refused to pay out dividends from monies held by the companies despite an accumulated cash hoard of about S$10 million;
(iii) Ms Chan has used the iPreciation name for her own purposes in another company from which Lim was excluded;
(iv) Ms Chan procured a Consignment Agreement to be entered into by Fine Arts, Contemporary and HK Ltd with IPL which was unfairly advantageous to IPL;
(v) Ms Chan caused IPL to issue invoices to all the other companies without justification and putting them into negative equity;
(vi) Ms Chan appointed solicitors to act for the companies without proper authority or board resolution authorising her to do so.
[11] Lim claims that the affairs of all the companies and sole proprietorships should be taken as a whole. The entities were run as one entity with a common pool of art work, common employees and run out of one location. The expenses of the art business were borne on a ‘group’ basis. An act of oppression in one entity is relevant to the consideration of whether there has been oppression in all the entities because of the manner in which the business of all the companies and sole proprietorships have been conducted. It is impossible to distinguish the affairs of one company from the others. Lim therefore asks for orders against all the companies and sole proprietorships, whether within or outside Singapore. Lim also seeks an order that he be bought out as well as the ancillary reliefs and orders set out in his Statement of Claim: see [2] above.
Ms Chan’s Case
[12] Ms Chan avers that she is the founder of the art business, the one with the knowledge and expertise. She invested in an art gallery in Hong Kong known as Artpreciation Limited in 1993. The gallery was closed down when her partner fell seriously ill in late 1997. Lim specialises in IT, had a degree in IT and was working at the National Computer Board when she first met him in 1997 at a karaoke session organised by mutual friends. They became friends and later formed a close relationship and stayed together in early 1999. She lent him money for his IT business, which eventually failed and was wound up.
[13] Ms Chan had a company, HR Resources Pte Ltd which was incorporated in 1994. She held 99,999 shares and her nominee shareholder and fellow director, Ms Hanam held 1 share. In January 1999, Ms Hanam wanted to withdraw as a director and nominee shareholder and Lim offered to help by stepping into her shoes. Accordingly, one share was transferred to Lim and he was appointed a director of HR Resources. In late 1999, Ms Chan decided to establish her own art business and changed the name of HR Resources Pte Ltd to iPreciation Pte Ltd. Ms Chan provided all the initial capital for IPL. (Lim does not dispute the fact that he did not contribute any funds, by way of capital or otherwise, for the business of IPL or indeed for any of the other companies).
[14] Ms Chan allowed Lim to operate his IT business out of her IPL offices, whether it was the initial space leased from DP Architects or the subsequent shophouse at Kim Yam Road. Ms Chan also funded the lifestyle of Lim. Lim’s credit card was provided by Ms Chan and she paid for his personal expenses and received expensive gifts from Ms Chan. When Lim needed money, she gave him HK$180,000 to help Lim’s brother buy a bigger flat for his parents. Ms Chan also helped Lim with his IT business. In April 2000, Ms Chan paid Lim S$10,000 for the IT services he provided to IPL. Subsequently Lim’s company, eJazz Pte Ltd, (“eJazz”), started invoicing IPL regularly for IT services. eJazz was wound up in 2001. Lim then helped his brother run another IT company, J Matelwoode Pte Ltd, (“Matelwoode”), which was also eventually wound up. In 1999, Lim set up another company, Inspirative Pte Ltd (“Inspirative”).
[15] Whilst Lim was very involved in his IT business, Ms Chan worked hard to build up the art business of IPL, to build up relationships with artists and to source for artworks. She travelled to meet artists, networking and researching the history of artists and their works. In February 2002, Ms Chan set up her own sole proprietorship, Consultants Singapore, to transact individual sales of artworks. Her efforts paid off in 2003 when she managed to persuade a prominent Taiwanese artist, Ju Ming, to appoint IPL as his agent. Ms Chan had worked hard to build a relationship with Ju Ming and his family for 2 years before she managed to secure this agency rights. At around this time she decided to set up an art gallery in Singapore and wanted to keep the retail aspect of her business separate from her agency business as she was uncertain how the retail business would fare at that time.
[17] Ms Chan gave Lim 40% in Fine Arts because she was concerned over his welfare. eJazz had failed. He was living with her and she was funding his daily expenses. She wanted to help him prove himself. She allowed him to help her with the IT aspects of the retail business. At that time, Lim was helping his brother with the IT business of Matelwoode. Matelwoode ceased business in the middle of 2004.
[18] In early 2005, Ms Chan set up her sole proprietorship in Hong Kong, Consultants HK, for transacting sales of artworks overseas. By late 2005, Ms Chan and Lim were no longer in a personal relationship but Lim did not want to move out of her residence at Fort Road. Ms Chan later arranged for him to stay at an apartment in Miaplace which Fine Arts leased to house business visitors. Notwithstanding the end of the personal relationship, Ms Chan continued to provide Lim with financial support.
[19] In 2005, Ms Chan fell very ill. She was initially misdiagnosed and remained misdiagnosed for quite a while and in the meanwhile she was worried that there would be no one to manage the business if she became incapacitated. She thus set up BVI Ltd in October 2005 and gave Lim 40% of the shares and made him a director of the company and told him that he could help with the business if she was unable to do so. She was correctly diagnosed later and started treatment and made a slow recovery over 2006 and 2007. Despite her illness, she continued to travel to meet artists and clients and attend exhibitions. In April 2007, Ms Chan set up iPreciation (HK) Ltd for conducting sales of artworks in Hong Kong, primarily through staging exhibitions at the Rotunda, Exchange Square in Hong Kong. Ms Chan also gave Lim 40% of the share in HK Ltd. Lim did not pay for any of these shares in BVI Ltd and HK Ltd.
[20] In June 2007, Ms Chan set up iPreciation Contemporary Pte Ltd in Singapore for handling sales of artworks locally without charging Goods and Services Tax. At that time, she wanted to give Lim 40% also, but their relationship was getting very strained. Lim was issued 5% of the shares but Ms Chan is willing to give him 40% and the necessary paperwork had been put in place to do so. This is no longer a live issue.
[21] In April 2008, Ms Chan cancelled Lim’s supplementary credit cards. There was a showdown on 5 May 2008 when Lim demanded to know why his credit cards had been cancelled and Lim demanded to be paid a dividend. A second incident followed on 10 June 2008 when Lim got very angry when he found out Ms Chan setting up a new business in Hong Kong without his involvement. Lim filed his writ on 9 October 2008.
[22] Counsel for Ms Chan, Mr Andrew Yeo, contends that the acts or events which concern BVI and HK Ltd are irrelevant in these proceedings since they are foreign companies and fall outside the ambit of section 216 of the Act. A Singapore court has no jurisdiction under section 216 to order a buy-out of Lim’s shares in the foreign companies. Mr Yeo submits that Lim’s real motive in bringing this action was to engineer a buy-out of his shares in the companies at an inflated value, demanding a sum of S$4.5 million for his 40% shares. There was no quasi-partnership to start with, Lim never contributed a cent to the capital of the entire business, and he was a director only by reason of his close personal relationship with Ms Chan and not because of any ‘business partnership’ which existed between the parties.
The Issues
[23] The issues of fact and law are:
(i) whether there was in fact an agreement and/or understanding between Ms Chan and Lim on the 60:40 shareholding and if so, would it extend to all the companies, including a profit sharing on the same basis for the sole proprietorships Consultants, Consultants HK and Nexart;
(ii) whether the companies have the character of a ‘quasi partnership’ which entitles Lim to certain ‘legitimate expectations,’ ie.,
(a) participation in the management of the companies;
(b) employment by the companies;
(c) accommodation provided by the companies; and
(d) access to information and documents relating to the companies;
and if so, whether Ms Chan is in breach of her obligations;
(iii) whether the conduct of the affairs of BVI and HK Ltd are relevant to the current proceedings and whether they can be taken into account by this court;
(iv) whether the acts complained of amount to oppression within section 216 of the Act. This includes a denial of Lim’s legitimate expectations set out in (ii) above and the:
(a) misappropriation of ‘group’ funds;
(b) failure to pay dividends;
(c) usage of the “iPreciation” name; and
(d) invoicing by IPL of the other Group Companies for Agency Fees and Commissions;
(v) whether the continuance of this action is an abuse of process in view of Ms Chan’s offer to buy out Lim on the terms set out in her solicitor’s letter;
(vi) whether Ms Chan has to account for the sales of artworks carried out through Consultants and Consultants HK;
(vii) whether the entities are to be considered as one economic entity and whether Lim is entitled to the reliefs claimed; and
(viii) whether the court can and if the court does order a buy-out, then the terms upon which it should be carried out including whether such an order can extend to a buy-out of the foreign incorporated companies, BVI and HK Ltd.
There was initially another issue: Ms Chan appointed solicitors for the ‘group’ in her own interests and without proper authority or a board resolution. This issue was not seriously pursued and quite properly dropped by closing submissions.
Findings of Fact
[24] Having heard Lim, Ms Chan and her witnesses and having considered the evidence, my findings of fact are as follows.
[25] I have no doubt in my mind that Ms Chan was the driving force behind the art business of the companies. She was the one with the knowledge, the expertise, the contacts with the artists, the ability to source for art works, the actual and potential clients and the passion for the business. 1DW.6, Rex Chan, an investment manager and director of an investment management company dealing in hedge funds said this:
Rex Chan had stated in his AEIC that it was clear to him that Ms Chan was far more knowledgeable than Lim on matters relating to the art pieces and the artists. He felt more comfortable speaking with Ms Chan before deciding to invest in any particular art piece. He recalled that on several occasions Lim was not able to address his queries adequately in relation to the art pieces, the artists or the art market in general. I find Rex Chan to be a truthful and objective witness of fact and accept his evidence. He gave credit where it was due, eg, he said when he first visited the art gallery at the Fullerton Hotel, he did not know who Ju Ming was and it was Lim who introduced him to Ju Ming and his art work. He did not know the difference between the Arch and the figurine statue and Lim was very helpful in that respect. Lim also told him of the free insurance if Rex Chan bought a piece through iPreciation. But that was about the level of Lim’s knowledge. It was suggested to Rex Chan that he was perhaps beholden to Ms Chan because his company handled iPreciation’s investments. Rex Chan refuted this and pointed out that although he managed a hedge fund in which the iPreciation companies had invested in, his fees from the iPreciation companies was less than S$6,000 per annum and he explained that his main clients were large institutional clients, insurance companies, endowments, foundations and not individuals. In comparison, his purchases of the 3 Ju Ming art works alone came to S$342,250, (Taichi Arch (bronze) edition: S$130,000; Taichi Arch (wood) unique: S$160,000 and Taichi (bronze) edition: S$52,250). He also purchased two other paintings by Gao Xingjian and Cheung Yee from iPreciation. In the overall relationship, Rex Chan was more an art collector and not insignificant customer of iPreciation than iPreciation a client of Rex Chan. He gave his evidence very fairly, very clearly, taking neither side and was unshakeable. His evidence was also corroborated by the evidence of 1DW1.Lee Ka Kei, Mandy (“Mandy Lee”), at [16] of her AEIC which was not really challenged.
[26] On the other hand, there is no evidence that Lim’s knowledge of art, artists and the art market was anywhere near Ms Chan’s level. At 5AB3249 and 3250 there is a telling fact, even when it came to framing of the picture, it was Ms Chan’s views that were sought even though the email correspondence was between Rex Chan and Lim. Lim passed on Ms Chan’s suggestion, and Wanni, (Rex Chan’s wife and for whose study one painting was destined) says: “Please go ahead and frame the Gao Xinjiang work for us according to Helina’s suggestion.” I find that Lim has little or no contracts in the art market and does not possess the knowledge, ability or capability to source art works nor the capability to sustain such a business on his own. I find that his knowledge and ability in these areas are accurately described by Rex Chan, viz, basic and his role in the past development of the business as “peripheral”. The evidence also shows that Rex Chan knows Ms Chan and Lim very well as the couples met and dined socially as well. In coming to this conclusion, I put to one side the evidence of the other witnesses which I shall come to, which corroborates from the business aspect, the evidence of Rex Chan. Under cross-examination, Lim effectively conceded that without Ms Chan’s relationship with the artists, IPL’s business would not have taken off.
[27] I also find that Ms Chan provided all the funding for the companies and their operating capital. This was not disputed by Lim. I accept Ms Chan’s evidence at [13] above and find them as proved.
Relationship Between Ms Chan and Lim up to 1999
[28] It is necessary, given the issues that have arisen, to trace how Lim and Ms Chan came together, how and when the iPreciation entities came into being and their entry into the art business.
[29] Most of the following facts were not really disputed. Ms Chan met Lim in late 1997 at a karaoke session organised by mutual friends. She did not exchange contacts with Lim at their first meeting. Sometime in 1998, Ms Chan met Lim by chance at a restaurant at International Plaza where Ms Chan was having lunch with another friend. She noticed a man who kept looking at her. Lim then approached her table and had a short conversation asking whether she remembered meeting him at the karaoke session. The next day, Ms Chan was having some food whilst at the Raffles Hotel, waiting for a friend to attend a concert. By chance, Lim came by and since he too was waiting for a friend, they started chatting and exchanged contacts. They kept in touch and became good friends in 1998. Although the evidence is not clear on time lines, Ms Chan was recently divorced. Their relationship developed further and so Lim, who was some 6 years younger than she was, came into her life, after her divorce and she fell in love with him. By the early part of 1999, they had formed a close personal relationship and started staying together. I am prepared to find Lim had some feelings for her initially, but they were certainly nowhere as deep as her love for him. When Lim wanted to set up his own company to carry on an IT business selling electronic equipment online in mid-1998, eJazz, she lent him S$8,000 to do so. She supported his IT ventures and businesses, paid for his living expenses, provided him a credit card, paid his mobile telephone bills and gave him expensive gifts. To his credit, Lim did not deny this. Ms Chan’s evidence in her AEIC on the sums she lavished on him were not challenged and I find them proved. The extent of his dependence on Ms Chan can be seen by some of the bills paid by her on his behalf: a SingTel bill (made out to Lim’s brother) for S$166.82; loans of S$3,000 to S$11,000 for October, November and December 1998, March and May 1999; similar loans continued through 2002 to 2004 and numerous credit card bills ranging from S$867.65 to S$2,649.91. In addition, he kept being paid ad hoc sums for ‘director’s fees’ or ‘bonuses’, eg, S$2,000 on 29 December 2000, S$1,000 on 3 May 2001, S$2,000 on 31 May 2001, S$3,000 on 2 July 2003, S$3,000 on 4 August 2003, S$5,000 on 25 September 2003, S$5,000 on 24 November 2003 and S$20,000 on 5 December 2003. It will be readily seen that these sums are not true director’s fees or bonuses, because Lim did very little work in the art business/IPL up to December 2003 and they were obviously sums of money given by Ms Chan to him to maintain himself. He accepted that Ms Chan had always treated him with great kindness, had provided him financial sustenance and was supportive in more ways than one. Unfortunately after about 7 years of this relationship, his feelings for her were no longer there. Yet she still continued to show him nothing but kindness and generosity. She continued to give him expensive gifts, she did not immediately ask that he leave her Fort Road residence when he pleaded that he would lose face before his parents, who thought he was doing well in life, and she later allowed him to stay in the company apartment.
[30] Ms Chan bought a shelf company in Singapore, HR Resources Pte Ltd (“HR Resources”, and formerly known as Globaluck International Pte Ltd) around 1994. In the beginning of 1999, in the circumstances set out at [13] above, her other director and nominee shareholder, Ms. Hanam, resigned as director and Ms Hanam’s 1 nominee share was transferred to Lim. I find that Lim had the 1 share transferred to him as a nominee of Ms Chan, paid nothing for that 1 share and took over the directorship from Ms Hanam as a favour to and measure of convenience for Ms Chan. All these occurred between 12 to 18 January 1999. Lim does not dispute that at that time, he assisted Ms Chan by lending his name to be a nominee director and shareholder; (see [16] of Lim’s AEIC and he also admitted this under cross-examination).
[31] In the middle of 1999, she decided to set up her own art business and terminated her consultancy with her former employer, Casual Time Ltd, a garment manufacturing business in Hong Kong. In or around September 1999, she organised an art exhibition in Singapore for a Hong Kong artist, Cheung Yee, at the Alliance Francaise de Singapour. This exhibition was quite popular with the press and the public and it encouraged her to embark on her art business. She decided to use HR Resources as her vehicle to do so.
[32] In November 1999, Ms Chan changed the name of HR Resources Pte Ltd to “iPreciation Pte Ltd”.
[33] During this period from 1997 to 1999, I find that Lim was carrying on his IT business and was not involved in Ms Chan’s art business. He was working on projects with the National Computer Board and SingTel and he was busy trying to build up eJazz’s business. Later on, when eJazz faltered, he got involved in his brother’s company, Matelwoode. As they started staying together in 1999, I accept that Lim had some interest in Ms Chan’s art business, but it was as her very close friend and companion, just as Ms Chan would have some interest in Lim’s IT business and activities, as his very close friend and companion. They would not be, by any measure, considered a ‘business’ partner of the other. Lim attempted to claim he had an interest in art whilst he was an undergraduate, but other than this bald statement, which I find to be self serving, he never elaborated on that ‘interest’ or how it developed over the years. As noted before, there is an absence of any evidence of his knowledge or passion for art or the art business. On the other hand, in his AEIC, he tried to portray Ms Chan as someone working in the garment industry, without mentioning her previous gallery or passion for the arts. I find this quite misleading on his part.
The “iPreciation” Name
[34] There is a dispute as to who came up with the ‘iPreciation’ name. I accept Ms Chan’s version that this name came from her. It was her idea to use the name of her previous business in Hong Kong, ‘Artpreciation’, with a change to ‘iPreciation’ to symbolise her appreciation of art and a play on the Chinese name of ‘Artpreciation’, which when translated literally into English means: “He who discovers first”. Ms Chan exhibited at “CSK-5” of her AEIC her name cards for both her previous Artpreciation Gallery and iPreciation with the Fullerton Hotel address and both cards contained the Chinese characters. Lim’s evidence was that ‘iPreciation’ was picked to denote Ms Chan’s and his intention to launch an art business through the internet and simply states in his AEIC: “We picked the name “iPreciation” to denote this…” Whilst that may explain the letter “i” in the lower case, he does not lay any claim to the choice of the “Preciation” portion of the name or how it or the Chinese characters came to be picked. I do not accept his evidence on this and find this claim rather opportunistic.
[35] It is not disputed that Lim assisted Ms Chan register the domain name “iPreciation.com” as she did not know how to go about it. It was Lim’s idea that they could sell art on the internet. Lim conceded this never took off and no sales were effected through this medium. Ms Chan’s evidence, which I accept, is that she only wanted a simple website. She is not computer savvy and Ms Chan does not strike me as someone who believes art can be sold through the internet and without the personal touch. The important point to note is that this domain name was registered under IPL, there being no other entity in being in November 1999.
The “Understanding” or “Agreement” in 1999
[36] Lim’s case is that Ms Chan engaged him to carry out a feasibility survey on the application of internet technology to the business of sale of artwork and when his study was completed, Lim alleges Ms Chan wanted to launch a website for her fledgling art sales business and expressly asked him to join IPL as her business partner to launch this project. I do not accept the evidence of Lim for a number of reasons.
[37] Under cross examination, Lim admitted that Ms Chan did not expressly ask him to join IPL as her business partner and that there was no express agreement between them that Lim shall be a partner of the business. He claimed that it was his understanding that he was Ms Chan’s business partner. He was therefore forced to admit that his evidence was inconsistent with his pleaded case:
Having admitted there was no oral statement from Ms Chan he finally was forced to admit:
[39] The evidence clearly shows that during this period, from 1999 to 2003, Lim was spending his time on his IT business although he did help out in the business, it was mainly in relation to IT services. He also helped by drafting proposals and correcting draft documents and letters because of his better facility in English, (not that it was that extremely good), and he did accompany Ms Chan on some of her trips abroad. He also helped in some liaison work in contacting statutory bodies and ministries when it came to finding a wider platform by way of exhibitions for their art business. However I find that this was more Ms Chan finding something for him to do than something that she needed him to do. That work could have been outsourced. I also find that he did so more as a companion than a business partner contributing to the growth of the art business. I accept Ms Chan’s evidence that she did not want him to feel like her ‘toy boy’ and wanted to help him build up his self worth. It is noteworthy that Lim provided IT services through his IT companies or personally and/or with other IT providers, and that he was paid for this work. To me this shows Ms Chan actually creating work, and therefore revenue, for Lim and his IT business.
[40] The evidence of a number of witnesses, which I accept, was that Lim was often out of the office doing his own IT projects and project work. Ms Chan says Lim was concurrently running his own IT businesses with his ‘role’ in IPL, and later Fine Arts, until 2004/2005 and I accept her evidence. From 1999 to 2003, I find that Lim took very little part in the art business. This was clearly borne out by the evidence of Mandy Lee who worked with Ms Chan from around April 2001 to May 2003. Mandy Lee was from Hong Kong, a former colleague or Ms Chan at Casual Time Ltd, and I find her a truthful and forthright witness who had no agenda and nothing to gain. When she joined IPL, it was operating out of space sublet from DP Architect Pte Ltd and Lim used a space within IPL’s premises for his IT business. When IPL moved to larger premises, a shophouse at Kim Yan Road, Lim had the use of a room on the second floor for his ‘office’. There was no one else other than Ms Chan, Mandy Lee and Lim. Mandy Lee did most of the administrative work, helping Ms Chan with the communications with artists and clients, the setting up of exhibitions, the proposals, the invoicing and she was ‘Man Friday’ to Ms Chan and involved in almost every aspect of IPL’s day-to-day affairs. This even included IT matters. Mandy Lee confirmed that all decisions were made by Ms Chan. Mandy Lee only asked Lim for his comments now and then because she had no other colleague at IPL and Lim was Ms Chan’s boyfriend, but she would never take any action or decision on any matter without Ms Chan’s express approval or instructions. Although Lim’s contribution was supposedly with the IT issues, the job of liaising with other IT providers in the setting up of the website fell to Mandy Lee who was at the business premises all the time. Mandy Lee’s evidence, which I accept, was that Lim was out most of the day; at times he would go for meetings for hours or go to the gym, using Ms Chan’s car. It was clear to Mandy Lee that “the moneys used by Lim himself were given to him by [Ms Chan]” whereas all the funding of IPL was by Ms Chan and it was Ms Chan who often travelled overseas, spending a lot of time sourcing for and getting in touch with artists, building up relationships with them and building up her contacts and name in the international art world. On the other hand, it emerged from some minutes of meetings that Lim was openly nicknamed “slave” in these minutes or notes of meetings because he was so beholden to Ms Chan.
[41] I therefore find there was no such understanding of a quasi partnership between Ms Chan and the Lim in 1999 as alleged by him. Neither was there any legitimate expectation of management or decision making powers, employment in IPL or the sharing in profits or of a right to accommodation. His activities, ran out of IPL’s office, were consistent with his doing his own IT business and not taking any meaningful or active part in IPL’s business as a partner or employee for this period. He did so only as a companion to Ms Chan.
The ‘Agreement’ or ‘Understanding’ in 2003
[42] Lim also alleged that he and Ms Chan agreed, when Fine Arts was “formed in 2003”, that their respective shareholdings would be on a 60:40 basis and this included IPL. I do not find this to be made out at all by Lim.
[43] It is important to note that in February 2002, Ms Chan set up the second entity, her own sole proprietorship, Consultants, in Singapore for the providing of art related services such as art consultancy and art framing services. Lim must have known of this, as they were living together at that time, and he did not object to its being set up or that some of the art business would be parked under Ms Chan’s own sole proprietorship. Nor was there any objection all this time until the commencement of these proceedings. Any claim by him of this entity, Consultants, must therefore fail in limine.
[44] In 2003, Ms Chan’s efforts began to pay off after her successful Ju Ming exhibition. I accept her evidence that she wanted to keep her growing retail business separate from the Agency business and decided to set up an entity in Singapore as her art gallery. She had identified her gallery space at the Fullerton Hotel. This would be her second company in Singapore and with her sole proprietorship, Consultants, her third entity in Singapore.
[46] The following is noteworthy. Lim was admittedly the person behind Inspirative, but because he did not want the directors of eJazz to know he had another company, he arranged for nominees - his father, Lim Shoo Toon and his friend, Lim Tow Kwong to be the first directors and subscribers to the Memorandum of Association. In May 2000 further shares were allotted. Lim Shoo Toon and Lim Tow Kwong each held 1,000 shares and one Tan Wee Chiew was allotted 1,000 shares.
[47] In May 2003, it was Lim who arranged for his nominees, his father and his friend, to transfer 1,800 shares of his company, Inspirative, to Ms Chan for $2 and arranged the transfer of 1,200 shares in his name. It was not Ms Chan forming a company and giving Lim 40% of the shares, strictly speaking it was the other way around. In contrast, for IPL, Ms Chan only transferred one nominee share to Lim in 1999. Further when this exercise was taking place with Inspirative, if there truly was such an agreement as alleged by Lim, and especially given their close personal relationship at that time in May 2003, I would have expected the shareholding in IPL to be regularised as well. The facts that the shareholding of IPL was left unchanged and the existence of Consultants left unaltered, speak for themselves.
[48] In his AEIC, Lim talks about their decision to set up another company for the retail sales, (whilst IPL was more for the corporate sales), to hold the lease and employ the staff. He then claims that with the ‘formation’ of Fine Arts he discussed the shareholding with Ms Chan and it was agreed that his share of the business would be 40% and Ms Chan’s 60% since she funded the business and she had the ‘initial’ contacts in the art world which got them started. Lim completely leaves out the details in [45] – [47] above. I find this recitation in his AEIC beguiling.
[49] Under cross-examination Lim conceded, again, that Ms Chan did not expressly tell him that he was entitled to 40% shares in IPL and there was no express agreement between the parties. Lim also agreed he did not ask Ms Chan to give him 40% of the shares in IPL. He conceded, yet again, that it was his “understanding” unexpressed to Ms Chan and agreed further that his AEIC to the effect that there was an express agreement between the parties was incorrect.
[50] I accept Ms Chan’s evidence that she was very concerned over his welfare at this point in time in May 2003; his IT projects failed one by one and she wanted to do something for him to bolster his self worth. So around 2003 when she took over Fine Art from Lim and when her art business look set to grow, she gave him a 40% shareholding in Fine Arts. But, it is important to note, she did not give him a 40% shareholding in IPL or Consultants which remained under her sole ownership. With her greater business acumen, she could see that his IT projects were all languishing or failing. eJazz was wound up in 2001 with debts amounting to some S$213,000. Lim’s brother’s Matelwoode ceased business around 2004. So whilst Lim still trying hard to develop his IT business or projects through 2003 and 2004, he played a very minor role in the iPreciation art business. What little he did in Fine Arts was linked to IT issues and helping out in drafting and correcting their English. I find that Lim has failed to establish any agreement or understanding as to the 60:40 shareholding nor has he established any quasi partnership in 2003 as alleged by him.
[51] It is also important to note that in early 2005, Ms Chan set up another sole proprietorship, Consultants HK. There was similarly no protest from Lim and it is only when he brought this action that he claims a 40% share in this entity as well. There is no doubt on the evidence, and Lim has acknowledged this, that IPL and Ms Chan was the source of all the art work for the entities. For example, there were the following major artist agency agreements and they were all secured by Ms Chan and entered into by IPL:
(a) Agency Agreement with the well known Ju Ming of Taiwan (some of whose works can be sold for hundreds of thousands) to be his exclusive agent in Singapore, Malaysia, Vietnam, Indonesia, Thailand, Brunei and the Philippines from 1 May 2004 to 30 April 2009;
(b) Worldwide Sole and Exclusive Agency Agreement with Ye Jian Qing of China dated 1 September 2004 for a period of 8 years or 18 months from the last exhibition, with a further 8 year option;
(c) Agency Contract with Gao Xingjian of France, covering Singapore, Malaysia, Vietnam, Indonesia, Thailand, Brunei and the Philippines, from 1 January 2008 to 31 December 2013; and
(d) Worldwide Exclusive Agency Contract with Tse Yim On of Hong Kong, 1 June 2008 to 31 May 2014.
Developments in 2005 to 2007
[52] Sometime in the beginning of 2005 Ms Chan fell ill. She had developed severe hypothyroidism but she was misdiagnosed for a whole year. She also developed Sjorgren’s syndrome (an auto immune disorder). Her doctors treated her for all kinds of maladies but the right one. She started having symptoms of asthma, difficulty in breathing, feeling ill, bouts of fever, feeling very cold, her voice started getting husky, she started getting rashes everywhere, she would just fall unexpectedly while walking, parts of her body went numb, she had bouts of blurred vision, she started losing hair, putting on weight and ballooned out with water retention. By June 2005 Ms Chan and Lim started drifting apart. There were no quarrels or disagreements, just an increasing distance. Ms Chan was trying to cope with her misdiagnosed illness and Lim must have been trying to cope with his businesses and projects all ending in nothing.
[53] In the meanwhile, the art business was growing. Ms Chan still travelled, but with difficulty, to meet artists, clients, attend exhibitions and keep in contact with the international art world. As the art business flourished, she saw a need to set up a BVI corporation to book the sales of artworks overseas. She therefore incorporated BVI around 17 October 2005 and allotted 40% of the shares to Lim and 60% to herself.
[54] I have considered the evidence surrounding this event carefully, including the possibility that this allocation of 60:40 shares in October 2005 in BVI was perhaps evidence supporting Lim’s allegations of a 60:40 understanding or agreement. Having heard Ms Chan’s evidence on this aspect, including her answers to questions put to her by me, I accept her evidence that as the doctors did not seem to be able to find out what was wrong with her throughout 2005, she began to worry about what would happen to the business if she became incapacitated or could not travel and she therefore gave Lim a 40% stake in the business and made him a director because if she could no longer travel, at least he could do so and attend to the business. Also by this time, his IT businesses and projects had all come to naught.
[55] By the end of 2005, Lim and Ms Chan were no longer in a close personal relationship. I accept her evidence that she asked him to move out when their close relationship ended but held off when he pleaded with her that he did not want to lose face before his parents, who thought he was doing well. Eventually, she let him stay at an apartment in the Miaplace condominium which iPreciation kept for visiting artists, clients and staff. He occupied one room and had to share the apartment with guests and overseas staff of iPreciation. I do not find that it was a term of his employment or of any legitimate expectation that iPreciation would provide him accommodation. I find he has no continuing right to accommodation. He found accommodation at Kim Yam Road and later at Fort Road as the close companion of Ms Chan, when their close personal relationship ended, she found it hard to move him out of her Fort Road residence, she asked him to move into Miaplace as a temporary measure to get him out of her residence. I find and hold that when the lease of Miaplace runs out, he has to find his own accommodation.
[56] Ms Chan’s illness was properly diagnosed around the end of 2005, appropriate treatment began and she made a slow recovery over 2006 and 2007. Meanwhile the art business continued to grow, and 2006 and 2007 were the best years in terms of sales.
[57] Ms Chan found a need to set up the 6 entity in Hong Kong to handle sales affected mainly through exhibitions at the Rotunda in Exchange Square. She set up HK Ltd in April 2007 and again gave Lim 40% shareholding. On the 12 June 2007, she set up the 7 entity, Contemporary, in Singapore and again gave Lim 40% of the shareholding as well.
[58] I must say I found this puzzling at first. In October 2005, Ms Chan had a reason to give Lim 40% in BVI and make him a director. But by 2007, when she set up the 6 and 7 entities, HK Ltd and Contemporary, she and Lim had not been in a close personal relationship for almost two years. By 2007, she must have made some recovery from her illness. On balance however, I accepted her reasons. She was still not 100% physically and still found being incapacitated a possibility.
[59] In addition, I find that the stronger and real reason was that Ms Chan still had strong and deep feelings for Lim. She let him stay (albeit as a temporary expedient to get him out of her residence at Fort Road) at the company apartment. She still bought him expensive gifts, they were still together at the offices of Fine Arts and according to her, they were still good friends. They often travelled to the office together in her car. Lim was beginning to spend more time there as his IT projects had fizzled out. As late at June 2007, she speculated profitably in an IPO of Map Technology Holdings Ltd and gave Lim half of the gains. This came to $107,175.25. I accept her evidence that Lim wanted a bonus in 2007 and because he wanted to deduct some of his expenses, she set up NexArt in October 2007 for him as his sole proprietorship, she arranged for 2 pieces of Ju Ming artworks to be consigned from Consultants HK to NexArt, sold the pieces through Nexart and after paying Consultants HK S$128,000.40, left Lim around S$85,333.60 in Nexart. His income tax returns bear out some of his expenses he put into NexArt. It is also significant that he never had any complaints at that time. I also accept her evidence, which was not denied by Lim, that knowing his love for branded goods, she bought him a branded watch for about HK$100,000 in November 2005 and another in February 2006 for HK$17,000. Ms Chan had always provided for him. She created work and paid him and/or his company for IT services and then, as noted above, gave him sums of money every now and then.
[60] Weighing all these factors, I find that Ms Chan made gifts of the 40% shareholding in HK Ltd and Contemporary to Lim, but she was also clearly keeping IPL, Consultants, Consultants HK for herself. It is not disputed that Lim did not pay for any of the shares in Fine Arts, BVI Ltd, HK Ltd and Contemporary. Lim also did not contribute anything towards their working capital and got his shares for free. Lim did not even pay for the setting up of NexArt.
[61] There is one aspect of Ms Chan’s evidence that I do not accept. She said she made it a condition of her gift of the 40% shares in Fine Arts, BVI, HK Ltd and Contemporary that if their relationship did not work out, Lim was to return those shares to her. I find this difficult to accept. When she gave Lim the shares in Fine Arts, they were staying together. I find it difficult to and therefore do not accept that she made the gift conditional. When BVI was formed in October 2005, they had already started to drift apart but were still on friendly terms; but she was not well and on her own evidence gave Lim his 40% shares and made him a director in case she could not travel and attend to the business abroad. I cannot accept her attaching a modified condition, ie, if their friendship did not work out, he would return the shares to her, in the circumstances. Further in 2007 she was no longer in a close relationship with Lim for some time. It does not make sense to attach a similarly modified condition. If that was indeed true, then there was no reason to give Lim the shares in HK Ltd and Contemporary (although at that time the issued capital in Contemporary was not in the 60:40 proportion, but nothing turns on this fact). I note that neither Mr Tan nor Mr Yeo wasted much time on this ‘condition’.
Lim’s True Role in iPreciation
[62] There is an abundance of evidence that except for what I have noted above, Lim did very little in iPreciation until 2005. When his IT ventures all came to naught and Ms Chan fell ill in 2005, he did gradually spend more of his time at the Fullerton Hotel Gallery. That was where Rex Chan met him. I find that Lim did close some sales in the later years, but they were relatively few in number compared to the overall number of sales each year. Mr Tan was only able to point to a handful of them.
[63] 1DW.4, Ms. Amy Chan Yuen Kwan, (“Amy Chan”), joined HK Ltd around March 2007. I find her to be a truthful witness too and I accept her evidence. She was based in Hong Kong and testified that very soon after joining she realised that Ms Chan made all the decisions in the companies. Lim was known to her as the ex-boyfriend. Lim was largely concerned with IT but was also into the administration work and liaising with clients. When she did attend meetings in Singapore, Lim’s work was largely related to IT. Amy Chan’s evidence was also given clearly and in a matter-of-fact manner. She was firm that whilst she may seek Lim’s advice, since she was at an overseas office, the final decision would always come from Ms Chan and this included the entity that was to bill any artwork that was sold. She also said that Ms Chan was energetic, charismatic and was the heart and soul behind IPL. Ms Chan often travelled overseas to source for artists and cultivated relationships with them. She did her research, her networking and building up of contacts. All the artists IPL who signed up with IPL had a good relationship with Ms Chan. This part of Amy Chan’s evidence was not challenged. Her testimony was not shaken by cross-examination. Ms Amy Chan was quite clear in her mind on her facts and did not hesitate in answering her questions.
[64] 1DW.5, Ms Jacqueline Lau Poh Leng (“Jacqueline”), joined Fine Arts around May 2005 as an administrative assistant. She was promoted to Assistant Manager in January 2006. Jacqueline handled the bulk of the administrative work, correspondence with artists and clients, preparing reports, cheques, invoices and related documents. Jacqueline corroborated a lot of Amy Chan and Ms Chan’s evidence. I also found her to be a truthful witness on the whole but some of her answers did exhibit an understandable measure of loyalty to Ms Chan. However she was not dishonest in any of her answers and overall her testimony was also unshaken in cross-examination. She confirmed Ms Chan was the one who made all the decisions in relation to the management of the business. Jacqueline said Lim himself recognised that no action could be taken in the business without Ms Chan’s approval and often Lim would himself tell Jacqueline to check with Ms Chan on various matters in relation to the business before taking any action thereon. She was also aware that Ms Chan had been lending money to the art business whenever it was needed because Jacqueline prepared the cheques from Ms Chan’s personal UOB account. She too confirmed that Lim’s work was mainly the IT related issues but said that he did do administrative work, liaising with clients but he had to defer all decision making to Ms Chan. I find his utility to and role in the companies to be peripheral.
[65] Lim admitted that he could only give a discount up to 8% on any art piece. Anything more had to be cleared with Ms Chan. Lim even conceded under cross-examination that he needed Ms Chan’s approval to renew a credit card terminal, which he accepts was a “fairly minor aspect” of the business. As for Lim’s IT services to the companies from 2005, I find that it was not satisfactory as the CRM system, which was his responsibility, did not work very well nor serve its purpose, even in something as basic as duplicating entries in the inventory. His IT draft documents reveal someone who is prone to pipe dreams; they contain great hype on the huge potential of selling art through the internet. Like his IT businesses and projects, it came to naught. As noted above, there is no evidence at all of Lim’s passion for or any ability in the business or in art. Lim’s own description in his ‘Feasibility Study’ (S/No.5 of Exhibit “LCT-38”) is telling. He describes “The People Behind iPreciation”. Ms Chan is described as the “founder of iPreciation … [who] has been actively involved in Asian Art since 1991 …[and] is currently the exclusive manager of renowned artists like Cheung Yee, Koo Mei and others … and has conducted numerous successful art exhibitions worldwide.” In contrast, in the same document he describes himself as follows: “CT Lim is the co-founder of eJazz.com & currently serves as its CTO. CT Lim have [sic] an extensive experience in the formation of Internet start-ups & is responsible for many of the eJazz.com initiatives.” There is no claim to any art experience or knowledge. In Exhibit “1.D-2”, a proposal which Lim prepared, entitled “Sculpture City 2003”, which was sent to Chairman of the Singapore Art Museum and the National Heritage Board, he describes himself as the IT and operations director “who joined the team two years ago and immediately seek [sic] to establish a [sic] internet presence for iPreciation.” He makes no claim that he is a business partner of Ms Chan whereas she is described managing director of iPreciation who set up Artpreciation Ltd (Fine Art Gallery) in Hong Kong till she shifted her operations to Singapore in 1994 and importantly - set up iPreciation as its founding director. There is no reference to any partnership with Lim.
How iPreciation was run
[66] Quite some time was spent on how illogical the billing, expenses and profits attribution of the iPreciation companies were. Mr Tan submits that it appeared quite random or arbitrary. There is some truth to that – there were allocations of expenditure to one entity but the sale being booked into another. Having considered the same and having gone through the evidence, it seems clear to me that first, as noted above, the source of all the artwork was IPL/Ms Chan’s; it was entirely from her passion and efforts that the business was built. She made frequent trips overseas, sourcing for work and reaching out and getting to know the artists that counted. The major artists in iPreciation’s books all had personal relationships with her. She therefore had the absolute discretion to decide which entity would sell a particular piece of art work. Lim admitted in cross-examination that “she called the shots.” He also admitted under cross-examination that she has the right to consign the artworks under the agency agreements and as the managing director, she could decide which of the iPreciation entities would sell the artwork. Secondly, Ms Chan also made the decision as to which company bore the expenses like freight forwarding, exhibition and promotion expenses, insurance and the like. Jacqueline Lau’s evidence, which I accept, is that sometimes an allocation of expenses is made to an entity because it has the cash or sales to pay that expense; hence an allocation may be made to an entity with the funds to pay and sometimes this mismatch of expenses and sales are later corrected and sometimes it is not.
[67] Thirdly, I find that Ms Chan had her own way of and reasons for allocating expenses and profits to the entities, depending on her sole decision as to how much revenue an entity would get for the year and what expenses that entity would or could bear for the year and in accordance with her own plan to grow the business. This is best illustrated by Amy Chan - when referred to an email at 4AB.3177 and asked why the invoices in relation to two paintings, “Rain in the City” and “Hutong: the Lonely Wall”, were issued to IPL and not HK Ltd, she said categorically without hesitation: “The invoices to be issued to which party will be decided by the boss..”, ie, Ms Chan. Jacqueline also gave evidence to the same effect, evidence which I also accept. Jacqueline gave an example in or around June 2007 at 4DBD pages 788-789, 791-792. IPL sold 2 water colours on paper, “Ambush” and “The Final Showdown” by Wang Wei Xin, but it was Consultants HK that paid artist. (A similar example appears at 4DBD page 794 where a Cheung Yee: Cast Paper on Wood entitled “Big Fortune 070101” was sold by IPL but Consultants HK paid the artist). When she was asked why Consultants HK was paying the artist for a paintings sold by IPL, she said: “Sorry, I got no idea.” This also shows Ms Chan was not unfairly putting expenses all into Fine Arts, she was allocating expenses to other entities as well. In this case it was an entity where Lim had no share. Fourthly, Lim had absolutely no say in this. He accepted this fact under cross-examination. Fifthly, and very significantly, for well nigh to 10 years and until this action was commenced, he knew what was going on and how the entities were being run; he not only witnessed the allocation of sales and expenditure, he implemented or relayed Ms Chan’s instructions on some of them and he never protested at any time or try or insist or change anything in Ms Chan’s decisions. It was in truth and in fact, Ms Chan’s business and he was the beneficiary of her kindness and largesse, but not her partner in the business, nor an employee who had any meaningful decision making powers. It is clear to me, and I so find, that the art business of the entities would still continue or even thrive, whether Lim was there or not.
[68] I do not agree with the criticism by Lim that Ms Chan’s allocation of sales and expenses was completely arbitrary. I find she had her own system and reasoning, which included expediency as she grew the art business completely with her own funds and efforts. It is instructive to trace some financial history of IPL and the entities. From 1999 to 2003, IPL was the only entity until, (Consultants was set up in February 2002 and Fine Arts in May 2003), and its audited accounts show:
(a) IPL’s accounts for the financial year end of 31 December 1999 (IPL’s YE 1999) show sales of S$88,201 with the cost of sales at S$46,481 and operating expenses of S$32,311 leaving a very modest profit of S$9,409. The accumulated losses were S$207,140, (down from S$279,862 for YE 1998) and Ms Chan’s loan to IPL stood at S$122,464.
(b) IPL’s YE 2000 show sales of S$97,725 with the cost of sales at S$49,615 and operating expenses of S$68,908 leaving a loss of S$20,798. The accumulated losses increased to S$227,938 and Ms Chan’s loans to IPL increased to S$204,558.
(c) IPL’s YE 2001 show sales of S$83,555 with the cost of sales at S$46,758 and operating expenses of S$135,317, (including rental of premises at S$45,587), leading to a loss of S$98,520. The accumulated losses increased further to S$326,458 and Ms Chan’s loan to IPL increased to S$296,265.
These figures corroborate the evidence of Ms Chan, and I so find, that she struggled to build up the business, pumping in money at about S$100,000 a year, and working hard to lay the foundations for her art business. This began to bear fruit as the figures from the next 2 years will show.
(d) IPL’s YE 2002 show sales jumping five-fold to S$445,816, but with corresponding increases in the cost of sales and operating expenses at S$651,329 leaving an even larger loss for the year of S$205,513 and an accumulated loss of S$531,971. Ms Chan’s loan to IPL increased to S$442,168.
(e) IPL’s YE 2003 show increased sales of S$784,638 with the cost of sales at S$451,833 and operating expenses of S$202,458 resulting in a profit of S$141,532. The accounts list exhibition expenses amounting to S$37,962 and purchases reaching S$404,184. Ms Chan’s loan to IPL increased to S$504,758.
Ms Chan ploughs back considerable sums into the business by her purchases and expenses and increases her loan to IPL yet further. No accounts for Consultants have been put in evidence. Fine Arts was launched around May 2003 and at financial year end of 31 December 2003 its audited accounts show:
(f) Sales or Revenue of S$53,365, cost of sales at S$27,250, operating expenses at S$82,042 resulting in a loss for the year at S$56,197. The rental of premises amounted to S$28,739 and staff salaries and bonuses were booked at S$22,119. Ms Chan’s loan to Fine Arts amounted to S$27, 003.
FY2004, which followed upon the successful exhibition in 2003, was a good year. The respective figures for IPL and Fine Arts are as follows:
(g) IPL’s YE 2004: Sales of S$1,232,549 a combined figure of cost of sales and operating expenses at S$1,203,103 leading to a modest profit of S$29,446. Ms Chan’s loan to IPL increased to S$627,348. The purchases came to S$442,698 and there were significant exhibition costs of S$544,636 incurred.
(h) Fine Arts’s YE 2004: sales amounted to S$1,283,942, the combined cost of sales and operating expenses came to S$1,285,074 resulting in a slight loss of S$1,132. For some unknown reason, the accounts for this year are simplified without much detail. However, two items stand out, purchases came to S$841,068 and Director’s fees of S$250,000 were paid out and added together amounted to S$1,091,068 or about 85% of the cost of sales and operating expenses. There were no exhibition costs or significant freight costs incurred (only S$3,700) by Fine Arts.
This shows, and I so find, that when Ms Chan decided to make a payout to Lim and herself, she booked enough revenue into Fine Arts to enable this payment to be made without declaring dividends. Ms Chan split the revenue from sales and operating expenses booked into both companies about equally although Fine Arts was only in its 2 year of operations. It is noteworthy that she could have, but did not, make this payment from IPL. The purchases are also a significant figure but based on counsel’s submissions that no agency fees were booked until 2008/2009, it appears from the cost of sales figures that significant purchases of art work were made through Fine Arts. For the FY2005, which was the year Ms Chan fell ill, it is also instructive to put the accounts of IPL and Fine Arts side by side for comparison:
(i) IPL’s YE 2005: sales/revenue of S$628,673 and a government grant of S$104,739; cost of sales at S$506,810 and operating expenses of S$291,667 resulting in a loss of S$65,065. Purchases amounted to S$392,472, exhibition costs came up to S$57,003 and freight and handling charges came up to S$107,254. Ms Chan’s loans to IPL increased to S$727,792.
(j) Fine Arts’ YE 2005: sales/revenue amounted to S$1,048,000; the cost of sales came to S$560,712 and operating expenses amounted to S$472,647 giving a total of S$1,003,359 and resulting in a slight profit of S$15,643. Exhibition expenses came to S$35,884, rental of premises came to S$99,354 and freight and handling charges came to S$23,890. Ms Chan’s loan to Fine Arts came to S$53,565.
It can be seen from the FY2005 figures that Ms Chan routed more sales through Fine Arts than through IPL. Fine Arts bore the rental of S$99,354 but the government grant of S$104,739 was booked into IPL. This was because IPL bore a larger portion of the exhibition and promotional expenses and the freight and handling charges. By this time, Fine Arts was housed at the Fullerton Hotel and had its gallery there. In early 2005, Ms Chan set up another sole proprietorship Consultants Hong Kong, again without protest from Lim. 2005 was also the year that Ms Chan set up BVI on 17 October 2005 because of her illness. On a balance of probabilities, it is unlikely that there was a strict attribution of expenses to the entity that sold the piece or artwork. I find there were discrepancies or mis-matching of sales and expenditure, but the majority of the expenses were correctly attributed or were attributed by Ms Chan according to her own system of allocation and business plans. I also find that some exhibition costs although borne by one entity would benefit the rest, eg, the Exhibition of Ju Ming’s works at the Beijing Museum. Similarly with promotional expenses, like the exhibition costs and/or costs of producing brochures or catalogues, there could not be any strict demarcation; an exhibition, brochure or booklet on a particular artist would benefit all the entities but to a varying extent depending on how many brochures the entity distributed and how many art pieces of that artist were sold through it. There was also a time element involved. Ms Chan held an exhibition for the Hong Kong artist Cheung Yee in September 1999, but she was still selling his works to Rex Chan in 2005. Left over catalogues and brochures are still of utility to art dealers and collectors years later. But the production or exhibition costs have to be paid at the time they were produced or held. There could not therefore be a ‘proper’ allocation in the financial sense. In the present case, there would be a large subjective element. No accounts of BVI or HK Ltd have been put in evidence. Going forward from the eventful year of 2005, the results of the FY2006 are:
(k) IPL’s YE 2006: sales amounted to S$987,948 which together with other income of S$20,000 created a total revenue of S$1,007,948; cost of sales came to S$676,640 and operating expenses of S$323,331 resulted in a small profit of S$7,977. Purchases amounted to a modest S$382,592, but exhibition costs came up to S$103,453, freight and handling charges came up to S$140,676 and advertisement costs amounted to S$22,488. Ms Chan’s loans to IPL decreased slightly by S$7,005 to S$720,787.
(l) Fine Arts’ YE 2006: sales/revenue amounted to S$666,262, (this included the rendering of services to S$39,409 to a corporate client); the cost of sales came to S$380,167 and operating expenses amounted to S$622,222 giving a total expenditure of S$1,002,389 and resulted in a loss of S$329,127. Purchases dropped to S$293,700. Other significant items of expenditure were rental of premises amounting to S$191,709, staff salaries and bonuses of S$95,788, travelling expenses of S$107,230, freight and handling charges of S$49,228, exhibition expenses of S$36,719 and directors’ salary increased to S$36,000 (from S$4,000 in the previous year). Staff salaries and bonuses came to S$95,788. Ms Chan’s loan to Fine Arts came to S$53,565 and the amount owing to a related company was S$486,500 and there was S$113,063 owing by a director but I was unable to tell which director owed this sum.
Again a rough and ready balancing of expenditure is evident. IPL bore the higher exhibition and freight costs and Fine Arts bore the rental, travelling and staff salaries and bonuses. According to Ms Chan, 2006 and 2007 were their good years. The financial results for FY2007 are:
(m) IPL’s YE 2007: sales/revenue amounted to S$950,228, there were also sponsorships and a government grant of S$46,250; cost of sales came to S$878,538 and operating expenses of S$188,977 resulted in a loss of S$71,037. Purchases increased to S$757,078. Significant items of expenditure were freight and handling charges which came up to S$95,715 but exhibition costs dropped to S$25,745. Ms Chan’s loans to IPL decreased slightly to S$710,623 and S$88,293 was owing to a related company. The accumulated losses of IPL stood at S$798,916.
(n) Fine Arts’s YE 2007: revenue amounted to S$873,107, (excluding a small sum of S$7,000 from other operating income); the cost of sales came to S$209,913 and operating expenses amounted to S$706,149 giving a total expenditure of S$1,002,389 and resulted in a loss of S$35,955. Purchases dropped to S$154,425. Significant items of expenditure were rental of premises amounting to S$190,044, staff salaries and bonuses which increased to S$173,125, travelling expenses amounting to S$92,986, freight and handling charges of S$49,167 and directors’ salary and bonuses increased to S$68,000 (from S$36,000 in the previous year). Ms Chan’s loan to Fine Arts dropped to S$30,256.

The judgment continues past this page. Read the rest at eLitigation.

Lim Chee Twang v Chan Shuk Kuen Helina and Others

Laws this judgment relies on

Grounds of decision

The iPreciation Group of Companies

The Business of the iPreciation Companies

Lim’s Case

Ms Chan’s Case

The Issues

Findings of Fact

Relationship Between Ms Chan and Lim up to 1999

The “iPreciation” Name

The “Understanding” or “Agreement” in 1999

The ‘Agreement’ or ‘Understanding’ in 2003

Developments in 2005 to 2007

Lim’s True Role in iPreciation

How iPreciation was run