High Court · Decided 12 October 2010

Oversea-Chinese Banking Corp Ltd v Asia Pacific Links Ltd and another (Abdul Rahman bin Maarip, third party)

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[2010] SGHC 301Case no. Suit No 896 of 2008

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Grounds of decision

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Lai Siu Chiu J:
Background
[1] The present suit arose out of an aborted voluntary conditional cash offer launched in 2008 by the first defendant, Asia Pacific Links Ltd (“APLL”), to acquire at 22.5 cents per share (“the Offer”), all the issued ordinary shares in Jade Technologies Holdings Ltd (“Jade”) which it did not already own or control. The second defendant Soh Guan Cheow Anthony (“Dr Soh”) was, at the material time, the sole shareholder and one of two directors of APLL with the other director being his wife. Dr Soh was also a director and the Group President of Jade.
[2] The plaintiff, Oversea-Chinese Banking Corporation Ltd (“OCBC”) is one of Singapore’s largest local banks. OCBC was appointed as the financial adviser to APLL for the Offer. The terms and conditions of OCBC’s appointment are set out in an agreement dated 1 February 2008 (“the Mandate Letter”). Allen & Gledhill LLP (A&G) was APLL’s legal adviser for the Offer.
[3] On 18 February 2008, following several email exchanges between the parties and also with A&G, and after a meeting on 14 February 2008 to settle the announcement of the Offer (the “First Verification Meeting”), OCBC announced the Offer (the “Offer Announcement”) to the Singapore Stock Exchange Ltd (“SGX”). The Offer Announcement contained a statement that the defendants held 451,172,504 shares representing 46.54% of Jade’s issued capital and a confirmation from OCBC that sufficient financial resources were available to APLL to satisfy full acceptance of the Offer. After the Offer was announced, a verification meeting was held on 5 March 2008 to settle the Offer Document (the “Second Verification Meeting”). On 6 March 2008, APLL and A&G gave clearance for the Offer Document to be printed and issued. OCBC despatched the Offer Document on 10 March 2008. Under the terms of the Offer Document, the Offer would have closed on 7 April 2008.
[4] As proof that APLL had sufficient financial resources to satisfy full acceptance of the Offer, Dr Soh provided OCBC with several documents. These documents (henceforth collectively referred to as the “Documents Evidencing APLL’s Financial Resources”) consisted of (i) a letter dated 18 February 2008 (“the First Letter”), (ii) a fax dated 19 February 2008 which stated that Standard Chartered Bank (“SCB”) Jakarta had indeed issued the First Letter (“the Second Letter”), (iii) a letter dated 1 April 2008 which stated that SCB Jakarta would remit US$100m to OCBC that day (“the Third Letter”) and copies of three SWIFTs of a Bank Guarantee purportedly issued by SCB Jakarta (“the First SWIFT”, “the Second SWIFT” and “the Third SWIFT” respectively). The First and the Third Letters were purportedly signed by one Ng Khok Pheng (“Mr Ng”) and one Lim Bun Tjaij (“Mr Lim”) of SCB Jakarta. The Second Letter was purportedly signed by Mr Ng.
[5] It subsequently transpired that APLL did not in fact hold 46.54% of Jade’s issued capital. Whilst APLL had represented to OCBC and A&G that it retained beneficial ownership in the Jade shares which it held, APLL had, pursuant to an executed document called Global Master Share Lending Agreement (“the GMSLA”), transferred some of its Jade shares to companies in the Merrill Lynch International Group (“Merrill Lynch”) which held the same as custodian for an Australian company, Opes Prime Stock Broking Ltd (“Opes Prime”); title to those shares had in fact been transferred to Opes Prime. The Jade shares transferred pursuant to the GMSLA totalled 300,050,000 shares, representing approximately 30.95% of Jade’s issued capital. Upon Opes Prime’s receivership on 27 March 2008, Merrill Lynch seized some of the Jade shares and sold shares representing approximately 9.82% of Jade’s issued capital on 1 April 2008. Additionally, in March 2008, doubts were cast on the authenticity of the Documents Evidencing APLL’s Financial Resources and the defendants were unable to satisfy OCBC that they had sufficient funds to meet full acceptance of the Offer. On 29 March 2008, A&G discharged itself as legal adviser to APLL in relation to the Offer while OCBC resigned as its financial adviser on 2 April 2008. APLL eventually withdrew the Offer on 4 April 2008.
[6] As a result of the withdrawal of the Offer, the Securities Industry Council (“the SIC”) conducted an inquiry into the circumstances surrounding the Offer. The SIC found that Dr Soh and OCBC had breached various provisions of the Singapore Code on Take-overs and Mergers (“the Code”). All three parties involved in issuing the Offer Document were censured by the SIC with Dr Soh receiving the heaviest penalty – he was prohibited (for five years) from making any take-over offer in Singapore and was denied facilities (for three years) to buy and sell shares through SGX without the consent of the SIC. The SIC hearing committee also considered Dr Soh unsuited to be a director of any listed company in Singapore for a period of five years.
The pleadings
The claim
[7] In its statement of claim, OCBC alleged that APLL had breached the Mandate Letter. OCBC accused the defendants of committing fraud, negligent misrepresentation and conspiracy. OCBC asserted that any failure on its part to fully comply with the Code, and any inaccuracy or omission in the Offer Announcement and Offer Document, was attributable to the fraud and wrongdoing of the defendants.
[8] OCBC alleged that the defendants inter alia misrepresented to OCBC that:
(a) The defendants collectively and beneficially owned 451,172,504 shares representing 46.54% of the issued capital of Jade (the “Shareholding Representation”);
(b) APLL had sufficient financial resources to satisfy full acceptances of the Offer (the “Financial Resources Representation”);
(c) APLL intended, through the Offer, to develop and grow the businesses of Jade and its subsidiaries and pursue opportunities for revenue synergies, particularly in the energy sector (the “Rationale Representation”); and
(d) The directors of APLL had taken all reasonable care to ensure that the facts stated and all opinions expressed in the Offer Announcement and the Offer Document were fair and accurate and that no facts had been omitted from the Offer Announcement and the Offer Document (the “Responsibility Statements”).
In reliance on the above representations, OCBC said it issued the Offer Announcement, despatched the Offer Document and continued acting as the financial adviser to the Offer.
[9] OCBC contended that the Offer was not genuine and that the defendants, faced with rapidly declining prices in the shares and the risk of forced sales of their Jade shares by their financiers, had implemented a fraudulent and illegal scheme to support or ramp up the price of Jade shares. OCBC alleged that the defendants had induced OCBC to act as the financial adviser for the Offer by a web of deceit and forgery. OCBC alleged that the defendants had concealed material facts from OCBC and, inter alia, provided OCBC with false information and sham documents.
(a) $410,094.77 payable under the Mandate Letter for work done in connection with the Offer;
(b) A declaration that OCBC was entitled to terminate the Mandate Letter and discharge itself as the financial adviser to the Offer;
(c) A declaration pursuant to cl 4(b)(ii) of the Mandate Letter that APLL was liable to indemnify and hold OCBC harmless against all actions, claims, liabilities, costs etc. which OCBC may suffer or incur or which may be made, brought or claimed against OCBC in connection with its engagement as financial adviser; and
(d) Costs on an indemnity basis pursuant to cl 4(b) of the Mandate Letter.
as well as the following reliefs against both APLL and Dr Soh:
(e) A declaration that either or both were liable to OCBC for fraudulent or negligent misrepresentation or both;
(f) A declaration that either or both APLL and Dr Soh were liable to indemnify and to hold OCBC harmless against all actions, claims, liabilities, costs, etc. which OCBC may suffer or incur or which may be made, brought or claimed against OCBC arising out of or in connection with the Offer.
[11] The trial was bifurcated pursuant to an order of court dated 12 January 2010 (made in Summons No 6437 of 2009). The trial before this court was only to determine liability.
The defence and counterclaim
[12] The defendants denied OCBC’s claims and alleged that the defendants were themselves victims of a third party’s fraudulent acts. The defendants contended that they had acted in good faith in their dealings with OCBC and had believed (and were reasonable in so believing) in the authenticity of the Documents Evidencing APLL’s Financial Resources which they had forwarded to OCBC, as well as in the veracity of the statements made in those documents. Dr Soh claimed to have relied on one Dr Abdul Rahman bin Maarip (“Dr Rahman”), who was his business associate, to procure those documents. Dr Soh claimed that he had not been able to contact Dr Rahman since October 2008. He joined Dr Rahman as a third party to the present proceedings but was unable to serve the court papers on Dr Rahman even up to the commencement of the trial.
[13] It was the defendants’ case that the failure of the Offer was occasioned by OCBC’s gross neglect, breaches of its contractual obligations to the defendants under the Mandate Letter and breaches of the Code with regard to (i) OCBC’s verification of APLL’s shareholding in Jade and (ii) its confirmation of the adequacy of APLL’s financial resources to fund the Offer. The defendants contended that OCBC should not have released the Offer Announcement on 18 February 2008. The defendants also asserted that OCBC’s termination of its appointment as financial adviser on 2 April 2008 was wrongful.
[14] The defendants alleged that OCBC was involved in the process of ramping up the price of Jade shares, through OCBC Securities Pte Ltd (“OCBC Securities”), a wholly-owned subsidiary of OCBC. It was the defendants’ case that the increase in OCBC Securities’ shareholding in Jade in the period between 31 January 2008 and the announcement of the Offer on 18 February 2008 was a breach by OCBC of Rule 11.1 of the Code relating to restrictions on dealings by a professional adviser before an offer.
[15] The defendants counterclaimed against OCBC for loss and damage it allegedly suffered as a consequence of OCBC’s alleged negligence, breach of contract and breaches of the Code in the discharge of its duties as financial adviser for the Offer.
The issue
[16] It was not disputed that OCBC had committed breaches of the Code as found by the SIC, particularly relating to (a) its confirmation of APLL’s financial resources for the Offer; and (b) its verification of APLL’s shareholdings in Jade. The key issue was whether OCBC was responsible for the consequences of its breaches of the Code or whether such breaches resulted from the conduct of APLL and Dr Soh, which conduct OCBC contended was fraudulent and which it had no reason to suspect would be committed by its own client and against which OCBC was not in a position to easily detect or prevent.
The facts
The defendants’ initial acquisition of Jade shares
[17] Apart from Jade and APLL, at the material time, Dr Soh was the sole shareholder and director of another company called Faitheagle Investments Ltd (“Faitheagle”) and was also a director and shareholder of companies such as First Capital Growth Investment Ltd (“FCGIL”), Asia Pacific Venture Capital Ltd (“APVC”) and Asia Growth Capital Pte Ltd (“AGCPL”). Dr Soh was appointed a non-executive director of Jade on 23 May 2007 and Group President of Jade on 8 June 2007. He resigned from these posts on 6 May 2008 and 28 April 2008 respectively.
[18] On 7 May 2007, APLL acquired shares representing approximately 76.2% of the total issued capital of Jade via a mandatory unconditional cash offer made by Daiwa Securities SMBC for and on behalf of APLL. This was triggered by a sale and purchase agreement under which APLL bought Jade shares at $0.015 per share for a total price of $9.7m. Subsequent private placements of Jade shares resulted in APLL’s stake in Jade falling to approximately 45.97% of Jade’s issued capital as at September 2007.
The defendants’ dealings in Jade shares before 30 January 2008 and Faitheagle’s undisclosed dealings in Jade shares
[19] Faitheagle was incorporated on 12 May 2005. According to Dr Soh, its business includes, inter alia, the operation of fund managements for investments. Dr Soh had/has a dual capacity in Faitheagle: he was/is its fund manager and he also holds shares for himself under Faitheagle’s accounts.
[20] Between August and November 2007, Faitheagle purchased 5.5 million shares in Jade. Those shares were subsequently sold in four tranches between 12 February 2008 and 25 February 2008. On 12 February 2008, Faitheagle sold 1 million Jade shares at $0.215 per share. Between 21 and 25 February 2008, Faitheagle sold 4.5 million Jade shares for $0.22 per share. Dr Soh did not inform the market, OCBC or A&G of either the purchase or the disposal of those 5.5 million Jade shares.
APLL’s transfer of Jade shares to SBS Nominees Ltd
[21] On 11 September 2007, APLL transferred 34 million Jade shares to SBS Nominees Ltd, in respect of a loan of $4m granted to APLL by Singapura Finance Ltd (“SFL”). A further transfer of 30 million Jade shares, for no consideration, was made to SBS Nominees Ltd on 25 January 2008 to meet a margin call by SFL. APLL retained beneficial ownership in those shares.
The Global Master Share Lending Agreement with Opes Prime
[22] In September 2007, Dr Soh began negotiations with Opes Prime. On 26 September 2007, APLL entered into the GMSLA with Opes Prime (see [5] above). Laurie Emini (“Emini”) the chief executive of Opes Prime subsequently signed the GMSLA which was dated 12 October 2007. Between 26 September and 18 October 2007, Dr Soh transferred a total of 145,050,000 Jade shares to Merrill Lynch pursuant to the GMSLA, in exchange for a total loan from Opes Prime of $29,698,308.09. The price of Jade shares was $0.37 on 26 September 2007. The loan was based on a 60% loan-to-security value ratio. Accordingly, a margin call would be triggered once the price of Jade shares fell below $0.34. Towards the end of 2007, the price of Jade shares declined. By mid-December 2007, Jade shares were trading below $0.30 per share. The falling prices of Jade shares triggered multiple margin calls from Opes Prime which were settled in cash.
[23] Clause 2.3 of the GMSLA provides:
As such, APLL no longer held title to Jade shares transferred under the GMSLA. However, APLL and Dr Soh did not disclose this fact to SGX or to the market.
[24] On 21 January 2008, the price of Jade shares had declined to $0.16 per share. Dr Soh received a call from a representative of Opes Prime, demanding payment of $500,000 by noon that day to meet a margin call of $1m. He did not make the payment. Since APLL failed to meet the margin call, Opes Prime force-sold 4.6 million Jade shares on 21 January 2008.
[25] The price of Jade shares continued to slide to $0.09 per share on 30 January 2008. On 25 January 2008, APLL transferred a further 155,000,000 Jade shares to Opes Prime as further collateral so as to stop margin calls.
[26] As at 25 January 2008, APLL had transferred to Opes Prime a total of 300,050,000 Jade shares under the GMSLA, of which 4.6 million were force-sold on 21 January 2008. No statutory disclosure of the forced sale of 4.6 million Jade shares was made. Instead, on 21 January 2008, Dr Soh instructed Jade to announce on SGXNET that he had purchased 5.5 million Jade shares in his own name at between $0.175 and $0.225 per share although no such purchase had in fact taken place. In the result, Dr Soh represented (incorrectly) to the market that APLL continued to hold a 45.97% stake in Jade and that collectively, he and APLL held 46.54% of the issued capital of Jade.
APLL’s engagement of OCBC as financial adviser for the Offer
The meeting on 31 January 2008 (the “First Meeting”)
[27] On 31 January 2008, Dr Soh met with OCBC’s officers (“the OCBC team”) for the first time, where he disclosed his intention to launch the Offer. The price of Jade shares as of 31 January 2008 was $0.10 per share. The Offer price was set at 22.5 cents at the First Meeting as Dr Soh informed OCBC that 22.5 cents was the highest price he had paid for Jade shares in the 3 months before 31 January 2008. Dr Soh also informed OCBC that the defendants held 46.54% of Jade’s issued capital.
[28] The parties disagreed on what was discussed at the First Meeting. According to Dr Soh, the meeting was preceded by a briefing on Jade’s activities. Dr Soh claimed that a presentation was given on an oil deal involving FCGIL and one of Jade’s wholly-owned subsidiaries. In his affidavit of evidence-in-chief (“AEIC”), Dr Soh deposed that he had shown to the OCBC team some documents relating to the oil deal (which funding was by way of a bank guarantee from FCGIL’s account with SCB Jakarta to UBS Singapore) and had informed the OCBC team that the FCGIL funds could not be remitted to Singapore but that a bank guarantee could be issued against the funds to back borrowings from the receiving bank. In Dr Soh’s version of events, he had also explained to the OCBC team that the bank account was in the name of FCGIL rather than APLL and that Dr Soh held one-third of the shares in FCGIL. Dr Soh claimed that it was only after the briefing that Jade’s staff left the room and he then disclosed to the OCBC team his intention to launch the Offer. According to Dr Soh, the OCBC team confirmed to him that he could use a similar arrangement as that used for the oil deal to prove that he had sufficient financial resources for the Offer. Under this arrangement, SCB Jakarta would issue a bank guarantee in favour of APLL and send it to OCBC. OCBC would, however, require a letter from SCB Jakarta indicating funds had been earmarked for the Offer.
[29] OCBC disagreed that a briefing had taken place before Dr Soh announced his intention to launch the Offer. OCBC denied that Dr Soh had made any mention of FCGIL at the meeting. Whilst OCBC accepted that Dr Soh had mentioned that APLL had pledged approximately 30 million Jade shares, OCBC asserted that Dr Soh had not provided further details of the same and that Dr Soh had assured the OCBC team that he still owned the pledged shares. Moreover, Dr Soh had informed the OCBC team that, in addition to procuring a letter from another bank confirming APLL’s access to the requisite funds to satisfy full acceptance of the Offer, he would be procuring a banker’s guarantee from UBS AG as proof that APLL had sufficient funds for the Offer. OCBC asserted that Dr Soh did not request and OCBC did not provide any advice. According to OCBC, it was never contemplated, or indicated to Dr Soh at the First Meeting and throughout their dealings with him regarding the Offer, that OCBC would be responsible for providing APLL with any financing for the Offer.
[30] It appears from handwritten notes taken at the First Meeting by Ang Suat Ching (“Ang”), a member of the OCBC team, that some discussion had taken place regarding an oil/coal refinery but there was no record of any mention having been made of FCGIL, SCB Jakarta, or the manner in which an oil deal had been funded. There was also no record, in the handwritten notes, that SCB Jakarta would issue a bank guarantee in favour of APLL and send it to OCBC or that SCB Jakarta would issue a letter to OCBC to indicate that funds had been earmarked for the Offer. The following notes were also taken:
There was no mention of any proposed arrangement by which OCBC would finance the Offer. Moreover, the handwritten notes referred to a BG from UBS as proof of funds. There was no mention of a bank guarantee from SCB Jakarta.
The preparation of the Offer Announcement
The due diligence conducted by Tan
[31] On 31 January 2008, Tan Wei Ping, (“Tan”) another member of the OCBC team emailed Jocelyn Hoi (“Hoi”), the relationship manager at OCBC’s Enterprise Banking Department who was in charge of APLL’s account, to inquire if there was any adverse information or issues relating to APLL’s account with OCBC. Hoi replied to say that there was none. Tan (PW1) did not ascertain the status of APLL’s account with OCBC as he saw no need to do so. On the following day, Tan verified Dr Soh and APLL’s shareholdings in Jade against the information in Jade’s annual report for the financial year ending 30 September 2007 as well as Jade’s announcements on 18 July 2007 and 21 January 2008 on SGXNET. The annual report stated that APLL was a substantial shareholder with a 45.97% direct interest in Jade’s shares. Tan recognised that some of those shares could be beneficially owned by APLL but held by nominees as APLL’s custodian. However, he saw no need to verify who those nominees were. The announcement on SGXNET stated that Dr Soh held direct and indirect shareholdings in Jade of 5,500,000 (0.57%) and 445,672,504 (45.97%) shares respectively. Tan also conducted searches on OCBC’s internal anti-money laundering database and found no adverse records on APLL. On 1 February 2008, Tan sent an over-the-wall memorandum to officers at OCBC Securities to ensure that they observed strict confidentiality with regard to information acquired in the course of the preparation for the Offer. Tan also sent a “no conflict” memorandum to the Head of OCBC’s Group Investment Unit and OCBC’s General Counsel both of whom confirmed that they had no objections to OCBC’s appointment as APLL’s financial adviser for the Offer. Tan also carried out checks, on 31 January 2008, 14 February 2008 and 6 March 2008, on SGXNET for the shareholdings of APLL and Dr Soh. The results were consistent with Dr Soh’s representations to OCBC that the defendants held a total of 46.54% of Jade shares.
[32] After the due diligence checks were conducted, OCBC provided Dr Soh with the Mandate Letter dated 1 February 2008 for OCBC’s appointment as APLL’s financial adviser which Dr Soh signed and returned on 11 February 2008. On 1 February 2008, A&G was appointed APLL’s legal adviser for the Offer.
The meeting on 4 February 2008 (the “Kick-off Meeting”)
[33] A Kick-off Meeting was held on 4 February 2008 at which lawyers from A&G were present. Tan and Ang (PW3) made handwritten notes at this meeting. Tan’s notes recorded that Dr Soh informed the meeting that he had purchased 5.5 million Jade shares at $0.225 per share on 21 January 2008 (even though Dr Soh had not in fact made the purchase) and that the defendants held 46.54% of Jade’s issued capital. The notes taken by Tan and Ang also recorded that 140 million of APLL’s Jade shares were pledged to Opes Prime or lent to them as custodian, in exchange for a $20m loan to invest in E3 Holdings Ltd (“E3”) and Netelusion, and that the collateral was cash. Contrary to the position taken by OCBC that Dr Soh had informed the meeting that he had pledged 140 million Jade shares under the GMSLA, Dr Soh claimed that he had told OCBC that APLL had pledged 300,050,000 Jade shares to Opes Prime. However, it is not disputed that Dr Soh did not tell OCBC about Opes Prime’s forced sale of 4.6 million Jade shares on 21 January 2008 or Faitheagle’s purchase of 5.5 million Jade shares in 2007.
[34] Whilst Tan agreed that Dr Soh had mentioned that the pledge was pursuant to a “cash as collateral” agreement, Tan admitted that it did not occur to him then that the shares (and not the cash) would normally be held as collateral in a share pledge agreement. Tan also stated that nobody at the meeting clarified what was meant by “cash as collateral” nor did anyone in the OCBC team ask Dr Soh about the terms of the GMSLA agreement. According to OCBC, A&G requested Dr Soh for a copy of the GMSLA agreement and OCBC left it to A&G to highlight any issues arising therefrom. Indeed, A&G sent an email request to Dr Soh on 5 February 2008 for documents including a copy of the GMSLA, but the GMSLA was not forwarded to A&G. Neither OCBC nor A&G saw the GMSLA until much later (on 29 March 2008).
[35] OCBC’s position was that at the meeting and at all material times, it never made any representation to Dr Soh that it would provide the requisite funding for the Offer. Instead, according to Ang, at that meeting, OCBC had requested that Dr Soh provide a letter from a financial institution in a specified format (“the Financial Resources Confirmation Letter”) before OCBC would give its confirmation that APLL had sufficient financial resources to satisfy full acceptance of the Offer and Dr Soh had requested for a template of this letter. Ang deposed that she had instructed Tan to send the requested template to Dr Soh.
[36] The template of the Financial Resources Confirmation Letter was indeed provided by Tan to Dr Soh by email on 4 February 2008. The text of the template stated:
[37] On 12 February 2008, Tan sent an email to Dr Soh’s assistant Norman Phua (“Norman”). The text of Tan’s email sheds some light on the understanding between the parties as to the manner in which the defendants would prove to OCBC that APLL had sufficient funds to satisfy the Offer. It reads:
According to Tan, he called Norman shortly after sending the email. After the telephone conversation, Tan sent Norman another copy of the template of the Financial Resources Confirmation Letter as an attachment to a second email sent on 12 February 2008. This email stated:
[38] It appeared from Tan’s two emails of 12 February 2008 that the understanding between the parties was that Dr Soh would transfer to APLL a bank guarantee which had been granted to one of his other companies. Moreover, APLL still had to liaise with its banker to provide OCBC with a Financial Resources Confirmation Letter. There was no mention that OCBC would finance the Offer as Dr Soh claimed.
Emails between the parties with regard to preparing for the Offer Announcement
[39] On 5 February 2008(see [34]), A&G requested documents including the GMSLA from Dr Soh. On the same day, A&G emailed a draft Offer Announcement to Dr Soh and OCBC (wherein it was stated at para 1.2 that APLL and its concert parties held an aggregate of 46.54% of Jade’s issued shares or 451,172,504 shares). On 6 February 2008, A&G sent another email to Dr Soh, copied to the OCBC team, attaching a draft Directors’ Board Resolution to be signed by APLL’s directors approving the release of the Offer Announcement.
[40] OCBC emailed Dr Soh and A&G with a revised copy of the draft Offer Announcement (the “revised draft Offer Announcement”) on 6 February 2008 but did not amend the figures stated in the draft Offer Announcement relating to APLL and its concert parties’ shareholdings in Jade.
[41] On 11 February 2008, Dr Soh sent an email to OCBC acknowledging receipt of the revised draft Offer Announcement. In the email, Dr Soh informed OCBC that Norman would assist him in the preparation of the Offer. Dr Soh did not comment on or qualify the information in the revised draft Offer Announcement relating to the shareholdings in Jade of APLL and its concert parties.
[42] A&G circulated a draft letter to the SIC on the ring-fencing of concert parties on 12 February 2008. On 13 February 2008, the Assistant Vice-President of OCBC’s Group Finance confirmed to Tan that as of 31 December 2007, OCBC and its group companies did not hold any shares in Jade. OCBC made amendments to A&G’s draft letter, and the amended letter was sent to the SIC on 15 February 2008.
[43] Jade’s share price rose from $0.09 on 31 January 2008 to $0.20 just before 13 February 2008. Between 13 and 18 February 2008, Jade shares were suspended pending various announcements by Jade which were unrelated to the Offer.
The First Verification Meeting on 14 February 2008
[44] On 14 February 2008, Dr Soh and Norman met with OCBC’s team and A&G to review the contents of the draft Offer Announcement. At the meeting, A&G went through the contents of the draft Offer Announcement with the attendees to confirm the accuracy of the statements made therein.
[45] At the First Verification Meeting, Dr Soh confirmed to OCBC and A&G that APLL and he collectively and beneficially owned 451,172,504 shares representing 46.54% of the issued capital of Jade. He then certified on the verification notes for the First Verification Meeting that he accepted full responsibility for the accuracy of the information given in the Offer Announcement, and confirmed that he had made all reasonable enquiries such that to the best of his knowledge and belief, each statement of fact in the Offer Announcement was true and that there were no other material facts the omission of which would make any statement in the Offer Announcement misleading.
[46] It was reflected in the minutes of the First Verification Meeting, as recorded by A&G, that OCBC had confirmed, at the meeting, that sufficient financial resources were available to APLL to satisfy full acceptance of the Offer. However, OCBC claimed that this was inaccurate and that the OCBC team had informed A&G that OCBC had yet to receive a Financial Resources Confirmation Letter from APLL. As such, OCBC could not confirm that sufficient financial resources were available to APLL to satisfy full acceptance of the Offer. According to OCBC, Dr Soh had indicated that the Financial Resources Confirmation Letter was pending and that he would provide OCBC with the same once it arrived. Although OCBC’s officer, Tsai Ai Liang (“Tsai”), had signed the notes of the meeting on 14 February 2008 to confirm its contents, it was OCBC’s position that no issue was raised regarding this discrepancy because the minutes of the meeting were only circulated on 24 March 2008, by which time OCBC had received the requisite Financial Resources Confirmation Letter from APLL.
[47] Dr Soh on the other hand claimed that the minutes of the meeting were accurate and that since OCBC had confirmed that APLL had sufficient financial resources available to satisfy full acceptances of the Offer, he was entitled to assume that OCBC had carried out its own independent verification.
Demands by Opes Prime against APLL in February 2008
[48] On 7 February 2008, Opes Prime made a further margin call of $2,134,118 on Dr Soh. This margin call was eventually cancelled on 12 February 2008 as the price of Jade shares had risen.
[49] On or about 15 February 2008, Dr Soh became concerned when a statement issued by the Central Depository (Pte) Limited showed that Merrill Lynch held 258,802,000 Jade shares (as nominee for Opes Prime) while a statement issued by Opes Prime dated 5 February 2008 showed that it held 295,450,000 Jade shares. He suspected that Opes Prime may have force-sold more Jade shares after the first forced sale of 4.6 million Jade shares on 21 January 2008. On or about 27 February 2008, Dr Soh travelled to Australia to seek an explanation from Opes Prime. In an email to Opes Prime dated 4 March 2008, Dr Soh (falsely) claimed that the SIC was inquiring into APLL’s beneficial ownership of the Jade shares and pressed Opes Prime to explain the discrepancies in the number of Jade shares reflected in the two statements.
[50] Dr Soh concealed from OCBC his communications with Opes Prime and his concerns over the “missing” Jade shares.
The First Letter from SCB Jakarta
[51] On 18 February 2008, Dr Soh emailed OCBC to say that the “proof of fund bank letter just arrived, original is being mailed to your office”. This proof of fund bank letter appeared to be the First Letter from SCB Jakarta (at [4] above). The First Letter was attached to Dr Soh’s email. However, as OCBC was unable to open the soft copy of the document, Norman delivered a hard copy of the First Letter to OCBC’s office that afternoon. Dr Soh had certified, on that copy of the First Letter, that it was a true copy. OCBC claimed that by presenting the copy of the First Letter to OCBC and certifying that it was a true copy, Dr Soh and/or APLL had represented to OCBC that APLL had sufficient financial resources to satisfy full acceptance of the Offer. On the other hand, Dr Soh claimed that the First Letter was procured by Dr Rahman, who was his business associate, and since the letter was addressed to OCBC, OCBC should have known that certification by Dr Soh could not have been of the original of the First Letter. Moreover, Dr Soh added, OCBC should have ensured that the First Letter was received by means of a secure system since the words “SWIFT: OCBCSGSG” appeared on the same.
[52] The First Letter stated:
[53] When cross-examined if it had struck her that the letter referred to US$100m as opposed to the S$100m that was required by OCBC, Ang replied that she was not concerned as US$100m easily translated to S$140m-S$150m which was still in excess of what was needed for the Offer.
[54] In the afternoon of 18 February 2008, Tan called the telephone number stated on the First Letter and managed to speak to a person who identified himself as “Mr Ng” and who orally confirmed that SCB Jakarta had issued the First Letter. “Mr Ng” undertook to send a written confirmation as well as the original of the First Letter to OCBC. Tan then sent a message to an email address that “Mr Ng” had given to him, in which Tan requested confirmation that SCB Jakarta had earmarked US$100m from APLL’s current account for the Offer. “Mr Ng” promised to send the letter the following morning. A fax was indeed transmitted by “Mr Ng” to OCBC on 19 February 2008 (see [62] below).
The release of the Offer Announcement
[55] After receiving approvals from Dr Soh and A&G, OCBC issued the Offer Announcement to SGX at 7.30pm on 18 February 2008. Up to 18 February 2008, neither Dr Soh nor Norman had made any changes to the statements of shareholdings of APLL and Dr Soh in paras 1.2, 9.1 and Appendix 5 of the draft Offer Announcement.
[56] I note that it was Dr Soh, in his reply dated 18 February 2008 to Tan’s email of the same date (which merely attached a revised draft Offer Announcement for Norman’s clearance but did not state when the Offer Announcement would be released), who had asked for the Offer Announcement to be released at 7.30 pm that day. Dr Soh’s email stated:
[57] The Offer Announcement included the Shareholding Representation, the Financial Resources Representation and the Responsibility Statements (see [8] above). It further stated that the rationale for the Offer was for the Offeror to acquire an increased stake in Jade as part of its strategic investment in companies with growth potential Based on the information stated in the Offer Document regarding the defendants’ shareholdings in Jade, APLL would require $116.7m to satisfy full acceptance of the Offer at the Offer price of $0.225 per Jade share.
Statements made by Dr Soh without prior consultation with OCBC or A&G
[58] On 18 February 2008, at 7.47 pm, A&G sent an email to Dr Soh to emphasise that neither Dr Soh nor APLL should take any unilateral action in relation to the Offer without first consulting OCBC or A&G. According to Ang, she had also called Dr Soh later that night to remind him not to make any unilateral comments on the Offer without first seeking the advice of A&G and OCBC. The catalyst for the issuance of these reminders to Dr Soh was the discovery by OCBC and A&G, that Dr Soh had, on or before 16 February 2008 and without prior consultation with either of them, issued a letter to Jade stating his intention to make the Offer.
[59] On 19 February 2008, an article appeared in the Business Times newspaper stating that Dr Soh would be making a $117m cash offer to acquire the remaining 53.46% of Jade’s shares. The article quoted Dr Soh in extenso on the potential of Jade’s businesses and his profit forecast in relation to Jade. Dr Soh was also quoted as saying, with reference to an Indonesian coal mine project undertaken by Jade, that Jade was sitting on a “gold mine”. Dr Soh was further quoted as saying that he was making the Offer for Jade as he believed that the coal mine project would increase the value of Jade several-fold. The article was based on an interview that Dr Soh had given to a Business Times journalist on the evening of 18 February 2008. In response to this article, an announcement dated 20 February 2008 had to be made by OCBC on behalf of APLL to clarify and withdraw the statements made by Dr Soh in the article. This was subsequently published in the Business Times and sent to Jade’s shareholders.
[60] Neither OCBC nor A&G were informed, prior to Dr Soh’s interview by the Business Times journalist, that he would be giving the interview. Ang also testified that during her telephone conversation with Dr Soh on the evening of 18 February 2008, Dr Soh did not at any time mention or allude to his interview with any reporter. When cross-examined on why he had given the interview despite Ang’s telephone call to him, Dr Soh claimed that the interview had been scheduled sometime earlier. However, when asked to confirm that he already knew that he was going to be interviewed by the journalist when he spoke to Ang over the telephone, Dr Soh claimed that the journalist had only contacted him an hour after the Offer Announcement was made. In any event, Dr Soh did not inform the journalist that he was not in a position to give the interview.
[61] In an email sent at 9.30 am on 19 February 2008, in reply to A&G’s email to him the previous evening, Dr Soh informed A&G that he had spoken to Ang on 18 February 2008 and that “[he] wished that [he] had sought advice prior to ... speaking to [the Business Times reporter] in [his] capacity as Group President of Jade (not as offeror)”. In the email, Dr Soh also stated that the Business Times had taken advantage of the information he had given to its journalist in the interview by reporting the information together with the takeover news. I note that Dr Soh’s statements in this email were inconsistent with his conduct of giving the interview after he had read A&G’s email earlier that evening reminding him not to take any unilateral action relating to the Offer without consulting A&G or OCBC, and after his telephone conversation with Ang.
The Second Letter from SCB Jakarta
[62] On 19 February 2008, OCBC received by fax the Second Letter. The Second Letter purported to confirm that SCB Jakarta had indeed issued the First Letter and the authenticity of the contents of the First Letter. However, OCBC did not notice that the fax header displayed an incorrect spelling of SCB Jakarta’s name as “STANDART CHARTERED BANK” instead of “STANDARD CHARTERED BANK”. On 27 February 2008, Tan called “Mr Ng” at the number stated in the Second Letter as OCBC had not received the originals of the First and Second Letters. “Mr Ng” told him that the letters had been sent. Tan then called Norman who informed him that APLL had also not received the originals of the letters but assured Tan that he would follow up on the matter.
[63] In his email to OCBC on 18 February 2008 (see [51] above), Dr Soh had, in addition to attaching the First Letter, stated that:
On 25 February 2008, Tan emailed Norman to check if the banker’s guarantee referred to in Dr Soh’s email was ready. Dr Soh replied on 27 February 2008 stating that, based on his understanding of the Mandate Letter issued by APLL to OCBC, the First Letter was all that was required to satisfy OCBC that there were sufficient funds for the purposes of the Offer. He also expressed reluctance to obtain a banker’s guarantee because of the additional expense which it would incur. In particular, Dr Soh stated that:
[64] Dr Soh sought to provide OCBC with additional comfort by relying on the following attachments: a US$500m banker’s guarantee that was issued by SCB Jakarta via SWIFT in favour of a UBS AG bank account belonging to Faitheagle, a register of directors of Faitheagle, and a share certificate of Faitheagle. Alternatively, he stated that if it was absolutely necessary, he could request UBS to issue a separate bank guarantee from his Faitheagle account at UBS to his APLL account at OCBC provided OCBC was willing to accept and give him a credit line.
[65] According to Tan, as at 27 February 2008, he had not informed Dr Soh or Norman of the telephone calls that he had made to verify the contents of the First and the Second Letters. In fact, Dr Soh was only told that Tan had made the calls to “Mr Ng” to verify the contents of the First and the Second Letters at a conference call between Dr Soh, OCBC and A&G on 27 March 2008 (see [77] below). The relevant extract from a transcript of this conference call (at p 3) is as follows:
[66] It is clear from Dr Soh’s email dated 27 February 2008 that Dr Soh was aware that he had to provide the Financial Resources Confirmation Letter to OCBC to prove that APLL had sufficient funds for the Offer. Moreover, a bank guarantee was not the means by which APLL would demonstrate to OCBC that it had sufficient funds to carry out the Offer. OCBC’s team (Tan, Tsai and Ang) claimed that whilst they were surprised by the contents of Dr Soh’s email as he had voluntarily offered to provide a banker’s guarantee for the Offer at the initial meeting on 31 January 2008 and again in his email of 18 February 2008, they were not overly concerned with Dr Soh’s sudden change of mind since the OCBC team was relying on the First Letter as satisfaction of the Financial Resources Confirmation Letter requirement and a banker’s guarantee was not required from an offeror for a takeover.
[67] In the event, Dr Soh did not provide any banker’s guarantee to OCBC as proof that APLL had sufficient funds to satisfy full acceptance of the Offer.
The preparation of the Offer Document
[68] On 20 February 2008, A&G circulated a first draft of the Offer Document to OCBC, Dr Soh and Norman. Information relating to APLL and Dr Soh’s shareholdings in Jade were left blank in the draft. Revisions were made to the draft by Tan and A&G and further drafts were circulated amongst the parties. On 4 March 2008, A&G sent a revised draft of the Offer Document to Dr Soh and OCBC. Appendix 5 of the draft set out APLL and Dr Soh’s direct shareholdings in Jade as 445,672,504 shares and 5.5 million shares respectively. It also reflected that the only dealing in Jade shares by Dr Soh during the three month period immediately preceding the Offer Announcement Date and ending on 4 March 2008 was an acquisition of 5.5 million Jade shares by Dr Soh on 21 January 2008. Dr Soh replied to A&G’s email dated 4 March 2008 instructing that out of the 45.97% Jade shares owned by APLL, 8.42% were held by APLL as direct shareholder and that APLL’s deemed interest in the remaining Jade shares was 37.55%. He further stated that 37.55% of the Jade shareholding was held by nominees such as Merrill Lynch, Morgan Stanley and SBS Nominees. However, he stated that the “total interest [wa]s still the same as 445,672,504 (45.97%)”.
[69] Further, on 6 March 2008, Tan sent an email to Dr Soh in which he drew Dr Soh’s attention to, inter alia, Appendix 5 of the Offer Document. Although the information set out in the Appendix was inaccurate, in his reply email to OCBC and A&G on 6 March 2008, Dr Soh did not point out the inaccuracies to OCBC or A&G.
The Second Verification Meeting
[70] The Second Verification Meeting took place on 5 March 2008 and was attended by OCBC, A&G, Dr Soh and Norman. In the verification notes, Dr Soh certified, inter alia, that he accepted full responsibility for the accuracy of the information given in the Offer Document and that there were no material omissions.
The despatch of the Offer Document
[71] The Offer Document was despatched by OCBC on 10 March 2008. It repeated the Shareholding Representation, the Financial Resources Representation, the Rationale Representation and the Responsibility Statements.
Reminders to Dr Soh of his responsibilities during the Offer
[72] On 26 February 2008, A&G sent Dr Soh and Norman an email (copied to OCBC), annexing a copy of the Guidelines on Dealing Restrictions, Reporting Obligations and Public Statements (the “Guidelines”). A notice (marked “IMPORTANT NOTICE”) on the first page of the Guidelines stated that Dr Soh was under certain restrictions in respect of trading in Jade shares and went on to emphasise that he was not to buy or sell Jade shares during the Offer period. Paragraph 4 of the Guidelines expressly stated that no “Relevant Person” (which would include Dr Soh) was to either purchase or dispose of Jade shares for the duration of the Offer without the prior written consent of an Authorised Person (which included OCBC). On 27 February 2008, Tan called Norman to remind Dr Soh not to trade in Jade shares during the offer period. In that telephone conversation, Norman confirmed that Dr Soh had not traded in Jade shares since the Offer Announcement. This was despite the fact that Dr Soh had disposed of 5.5 million Jade shares in Faitheagle between 12 and 25 February 2008 (see [20] above). The telephone conversation between Tan and Norman was documented in an email from Tan to Ang on 27 February 2008 (see [197] below).
[73] The defendants admitted that on 7 March 2008, Dr Soh had transferred 50 million Jade shares from APLL to Faitheagle. He subsequently disposed of 45.7 million of these 50 million shares in the following manner:
[74] According to the defendants, this disposal of Jade shares by Faitheagle after the Offer Document was despatched on 10 March 2008 was in consequence of an email that Dr Soh had received from A&G dated 11 March 2008 which stated:
However, contrary to A&G’s instructions, Dr Soh did not disclose on SGXNET his transfer of Jade shares to Faitheagle and subsequent disposal of most of those shares. It is also noteworthy that Tan had sent a separate email to Dr Soh and Norman on 11 March 2008 to clarify A&G’s email above and to remind them that Dr Soh should consult A&G and OCBC prior to any dealings in Jade shares. Dr Soh had disposed of 15 million Jade shares on the previous day prior to his receipt of A&G’s email.
Requests by OCBC for funding for the Offer
[75] Under the terms of the Offer Document, the Offer would have closed on 7 April 2008. As such, OCBC started making requests to APLL in mid-March 2008 for funds to be made available to settle acceptances of the Offer. According to OCBC, APLL informed OCBC that the funds would be in the form of a banker’s guarantee. On or about 19 March 2008, Dr Soh informed OCBC that APLL had procured a bank guarantee (purportedly issued by SCB Jakarta) to pay for acceptances of the Offer (“the Bank Guarantee”); that SCB Jakarta would be sending a funds confirmation to OCBC via SWIFT for this purpose and that SCB Jakarta would issue the Bank Guarantee (which was for US$50m) and a second bank guarantee (for US$50m) to settle the Offer. However, from 19 March to 25 March 2008, OCBC, despite making numerous attempts, was unable to locate the SWIFT for the Bank Guarantee. On 26 March 2008, Dr Soh provided OCBC with a copy of the SWIFT of the Bank Guarantee (the First SWIFT). However, OCBC was still unable to locate the First SWIFT in its system. The OCBC team were subsequently informed, on 27 March 2008, by OCBC’s SWIFT Operations Department that there were several irregularities in the copy of the First SWIFT which Dr Soh had provided to OCBC.
The calls to SCB Jakarta
[76] On 27 March 2008, Tan telephoned a person who identified himself as “Mr Ng” using the “direct dial” number on the First Letter. This person informed Tan that SCB Jakarta’s SWIFT Operations Department would contact OCBC’s SWIFT Operations Department. However, OCBC’s SWIFT Operations Department did not receive any communication from SCB Jakarta. Tan also called the main line of SCB Jakarta to enquire about the status of the Bank Guarantee and managed to speak to one Mr Ng (one of the purported signatories of the First Letter). According to Tan, this was a different person from the one who had identified himself as “Mr Ng” when OCBC called the number on the First Letter. This Mr Ng informed OCBC that he did not sign the First Letter and that Mr Lim, the other purported signatory of the First Letter, had retired from SCB Jakarta in January 2008. OCBC was then referred to Kuncahyo Bangun (“Bangun”) of the trade services department of SCB Jakarta, who handled bankers’ guarantees issued by SCB Jakarta. Bangun verbally informed OCBC that SCB Jakarta had never issued the First or the Second Letters or the Bank Guarantee. Subsequently, OCBC received two emails from Bangun (dated 27 March 2008 and 28 March 2008) which stated that SCB Jakarta had never issued the First Letter, the Second Letter and the Bank Guarantee.
The telephone conference with Dr Soh on 27 March 2008
[77] In the evening of 27 March 2008, OCBC and A&G conducted a telephone conference with Dr Soh and informed him of the telephone call to the main line of SCB Jakarta. Dr Soh sounded alarmed at the news and suggested that he may have been a victim of fraud. He assured OCBC and A&G that he would clarify the matter and agreed to meet OCBC and A&G to further discuss the matter the following day. This conference call on 27 March 2008 was recorded. From the transcript, it appeared that it was at this telephone conference that Dr Soh mentioned Dr Rahman and FCGIL to OCBC and A&G for the first time. This is clear from the following extract (p 2) of the transcript of the telephone conference:
At the trial, Tsai (PW2) testified that she only heard about FCGIL and its account in SCB Jakarta on 27 March 2008.
[78] It is also apparent from the transcript of the conference call that Dr Soh stated during this conference call that, inter alia:
(a) He still held the original of the Second Letter as well as the copy of the First SWIFT which he had provided to OCBC;
(b) The First SWIFT could still be held up at the office of JP Morgan or the Monetary Authority of Singapore since it involved US dollars and that might be the reason why the Plaintiff’s SWIFT operations was unable to locate it;
(c) The US$100m was held in the SCB Jakarta bank account of FCGIL which had a total of approximately US$300m to which Dr Soh had a one-third share;
(d) He might have been a victim of fraud;
(e) He could arrange for the remittance of S$10m-S$20m from his accounts with other banks to OCBC to satisfy acceptances of the Offer once it turned conditional;
(f) He held 46% of Jade’s shareholding;
(g) He did not want OCBC to report the matter to the SIC immediately and needed some time to resolve the issue;
(h) He would get Dr Rahman down to Singapore to meet with all parties and clarify the matter;
(i) He wanted to meet OCBC and A&G the next day when he would then have the opportunity to verify whether there were indeed two Mr Ngs and if so, to confront Dr Rahman about the different versions of facts presented by the two Mr Ngs.
The meeting in the morning on 28 March 2008
[79] OCBC, A&G and Dr Soh attended a meeting in the morning on 28 March 2008. Dr Rahman was absent. Dr Soh informed the parties at the meeting that Opes Prime had been placed under receivership and that this would affect his shareholding in Jade as a result of the arrangement he had with Opes Prime under the GMSLA. According to OCBC, to the surprise of OCBC’s team, A&G informed Dr Soh that it had not yet received a copy of the GMSLA. OCBC claimed but which Dr Soh denied, that at the meeting, Dr Soh had suggested to OCBC and A&G that APLL rely on Opes Prime’s receivership as a basis to withdraw the Offer.
[80] At the meeting, Dr Soh also claimed that he was arranging for a credit facility from Deutsche Bank. However, OCBC was unable to verify Dr Soh’s claim because the officer at Deutsche Bank with whom OCBC’s team spoke (on the telephone) was unwilling to reveal any details to OCBC on grounds of banking secrecy. Although Dr Soh was present with OCBC when the call to Deutsche Bank was placed, he remained silent when OCBC was on the telephone with Deutsche Bank’s officer. Subsequently, OCBC requested for and Dr Soh agreed to provide, a list of assets which Dr Soh owned that could be liquidated for cash to support full acceptances of the Offer. This list was provided to OCBC the following morning. In the list, Dr Soh declared that he had the following assets:
[81] Thereafter, OCBC made telephone calls, in Dr Soh’s presence, to Mr Ng (using the SCB Jakarta main line) and to the person who identified himself as “Mr Ng” (using the telephone number indicated on the First letter). The latter “Mr Ng” insisted that the funding from SCB Jakarta for the Offer was still in place whilst the former denied having sent the First Letter or the Second Letter. Dr Soh also called Dr Rahman on speaker phone to inform him that OCBC had not received the First SWIFT and that Mr Ng, who was contacted through the SCB Jakarta main line, denied that the First and Second Letters and the First SWIFT were issued by SCB Jakarta. In this telephone conversation, Dr Rahman told Dr Soh that he would check and follow up accordingly. According to Dr Soh (but disputed by OCBC), Dr Rahman also informed Dr Soh that someone had tried to “disturb the deal”.
[82] At around 11am, OCBC decided to send a SWIFT message to SCB Jakarta through OCBC’s SWIFT system to seek confirmation that:
[83] Just before the meeting ended, Dr Soh provided OCBC with the original of the Second Letter but stated that he had not received the original of the First Letter from SCB Jakarta.
The meeting in the evening on 28 March 2008
[84] A meeting, attended by OCBC, A&G and Dr Soh, was reconvened at 5pm on 28 March 2008. Halfway through this meeting, a letter was received from Deutsche Bank stating that there was an understanding that Dr Soh would be transferring US$50m – US$100m from SCB Jakarta to APLL’s account with Deutsche Bank and, out of those funds, US$10m would be used to satisfy acceptances of the Offer. It was emphasised in the letter that the letter should not be construed as the grant of a credit facility. OCBC was of the view that the letter was insufficient confirmation of APLL’s financial resources.
[85] At this meeting, calls were made to the two “Mr Ng”s again to check if they had received OCBC’s SWIFT. The Mr Ng whom OCBC called using the number on the First Letter claimed that he had not received any SWIFT from OCBC and that he would check again with Dr Rahman on the SWIFT from OCBC. When he was asked about SCB Jakarta’s address, this Mr Ng was unable to give a clear answer and could only provide the street name of SCB Jakarta after a while. He then claimed that he was at a meeting with clients and hung up abruptly. OCBC was unable to contact the other Mr Ng through the main line of SCB Jakarta.
[86] Towards the end of the meeting, A&G informed Dr Soh that they would be advising OCBC to inform the SIC of the events that had transpired. Dr Soh asked for more time to resolve the issue of his proof of funds.
[87] Immediately after the meeting and after Dr Soh had left, OCBC and A&G called the SIC and informed it of the events that had transpired.
[88] A&G discharged themselves as legal advisers to APLL on 29 March 2008 and, on 30 March 2008, APLL appointed Rodyk & Davidson LLP (“Rodyk”) in place of A&G.
Dr Soh’s further attempts to show that he had the financial resources for the Offer
[89] On 29 March 2008, Dr Soh had a conference call with the OCBC team in which he claimed that he was arranging for a US$80m credit line from Deutsche Bank on the backing of a US$100m banker’s guarantee to be sent by SCB Jakarta to Deutsche Bank. Dr Soh also said that as a back-up plan, he was concurrently arranging a US$100m banker’s guarantee from HSBC London to Deutsche Bank.
[90] In the evening on 29 March 2008, OCBC received an email from Dr Soh in which Dr Soh explained that Dr Rahman had discussed the matter with the President of SCB Jakarta and that the First SWIFT did not reach OCBC due to the use of an improper format. He further stated that SCB Jakarta would resend the necessary SWIFT confirmation using the correct format.
[91] On the morning of 31 March 2008, OCBC and its newly appointed solicitors, Rajah & Tann LLP (“R&T”) met with Dr Soh. According to OCBC, at the meeting, Dr Soh informed OCBC that, in addition to the 140 million shares that had been pledged to Opes Prime, a further (approximately) 155 million Jade shares had been pledged to Opes Prime under the GMSLA. (Dr Soh disputed this point and asserted that he had made full disclosure of the transfer of 300,050,000 Jade shares to Opes Prime under the GMSLA as early as 31 January 2008). Further, Dr Soh made the following statements at this meeting:
(a) The First SWIFT was not sent by SCB Jakarta due to a “human factor”. Dr Rahman had made a complaint to the President of SCB Jakarta and expected the SWIFT Confirmation to reach OCBC by the end of the current or following day;
(b) The most realistic option for the provision of funds would be for APLL to obtain a credit line from Deutsche Bank;
(c) Dr Soh expected his current financial resources to be sufficient to settle acceptances should the Offer turn unconditional and was not counting on OCBC to provide financing for the Offer;
(d) Dr Soh had reasons to believe that he owned 46% of the Jade shares up until Opes Prime was placed into receivership and that he was currently in the process of establishing whether he still retained beneficial interest in the 295 million Jade shares;
(e) Dr Soh planned to instruct his Australian lawyers to apply for an injunction to restrain Merrill Lynch from selling the Jade shares. His lawyers were going to submit representations to the Opes Prime receivers to state that the shares belonged to him. Furthermore, Dr Soh said that he planned to redeem the Jade shares and repay the outstanding loan of US$27m through a financing facility with UBS Bank using the “pledged” Jade shares as collateral.
[92] At the same meeting, Dr Soh gave OCBC a copy of a letter apparently issued by SCB Jakarta on 10 August 2007 to FCGIL, confirming that FCGIL had US$625m in an account with the London branch of SCB and that Dr Soh and Dr Rahman were the authorised signatories of that account. Dr Soh relied on the letter to claim that he had sufficient financial resources to satisfy the Offer as he was a one-third shareholder of FCGIL.
The Second SWIFT
[93] On 1 April 2008, Rodyk sent an email to OCBC attaching a copy of a purported confirmation from SCB Jakarta that the SWIFT remittance of US$100m would be effected that day (the Second SWIFT). By the close of business on 1 April 2008, OCBC still had not received the Second SWIFT. Dr Soh called Tan twice on 1 April 2008 to inform Tan that SCB Jakarta had already sent the Second SWIFT to OCBC and that someone from OCBC’s SWIFT Operations Department by the name of “Jessica Tan Wei Sze” had acknowledged receipt of the Second SWIFT. Dr Soh also promised Tan that he would provide OCBC with a copy of the Second SWIFT the next morning. However, OCBC was unable to locate either the Second SWIFT or any employee by the name of “Jessica Tan Wei Sze”.
The Third Letter from SCB Jakarta
[94] On 2 April 2008, Dr Soh emailed to Tan a copy of a letter dated 1 April 2008 purportedly issued by SCB Jakarta to FCGIL enclosing a statement of account as of 31 March 2008 in respect of FCGIL’s account with SCB Jakarta (the Third Letter). The purported signatories of the Third Letter were “Mr Ng” and “Mr Lim”. The Third Letter stated that SCB Jakarta was “transmitting [FCGIL’s] instrument amounting to United States Dollars One hundred (US$100) millions to OCBC Bank in Singapore today”. Tan called OCBC’s SWIFT Operations Department to check if there were any SWIFT messages received from SCB Jakarta in favour of APLL on 1 April 2008 but was informed that no such messages had been received as of 2 April 2008.
The resignation of OCBC and Rodyk and the withdrawal of the Offer
[95] On 31 March 2008, Tsai flew to Jakarta and met the president-director of OCBC’s subsidiary, PT Bank OCBC Indonesia, Lo Nyen Khing (“Lo”). Lo informed Tsai that the signatures of “Mr Ng” and “Mr Lim” on the First Letter did not match the specimen signatures in the authorised signatories book in PT Bank OCBC Indonesia, and that “Mr Lim” was no longer with SCB Jakarta.
[96] On 1 April 2008, Dr Soh, through Rodyk, provided OCBC with a circular dated 1 April 2008 from Deloitte Touche Tohmatsu (the receivers and managers of Opes Prime) (the “Deloitte Circular”). The Deloitte Circular explained that the title to the shares “lent” to Opes Prime was in fact fully transferred to Opes Prime. This meant that APLL only held 16% and not 46% of Jade’s shareholding. In a telephone call at 7 pm on 1 April 2008, Rodyk informed OCBC that APLL would not have sufficient funds to pay for full acceptance of the Offer if it transpired that APLL did not own the 30% block of shares which were “pledged” to Opes Prime. Later that evening, APLL wrote to the Board of Jade informing that:
On the basis of APLL’s letter, Jade called for a trading halt with immediate effect.
[97] As of 2 April 2008, OCBC was still unable to locate any SWIFT messages received from SCB Jakarta in favour of APLL. In the light of the developments, OCBC resigned as financial adviser to APLL. According to Ang, she informed Dr Soh of this resignation which news Dr Soh accepted without raising any objections. Tan then delivered a copy of OCBC’s discharge letter to Dr Soh’s residence. At 7 pm, OCBC sent an email to Dr Soh and Rodyk to inform them that OCBC was discharging itself as financial adviser to APLL and to attach a copy of OCBC’s discharge letter.
[98] On 3 April 2008, Rodyk also resigned as legal adviser to APLL in relation to the Offer.
The withdrawal of the Offer
[99] Although OCBC had resigned as Dr Soh’s financial adviser, Dr Soh still contacted the OCBC team on 3 April 2008 to inform OCBC that the SIC had requested that he provide OCBC with a confirmation of his financial capacity to complete the Offer by noon on 4 April 2008 via a SWIFT confirmation, failing which the SIC would require APLL to withdraw the Offer. Dr Soh also informed OCBC that he had cancelled the Second SWIFT and had instructed SCB Jakarta to send another SWIFT confirmation to OCBC (the Third SWIFT). By the expiry of SIC’s deadline, OCBC’s SWIFT Operations Department was still unable to locate the Third SWIFT. At the suggestion of the SIC, Tan made another inquiry with SCB Jakarta to confirm whether SCB Jakarta had issued any SWIFT messages to OCBC during the relevant period of time. The bank officer that Tan spoke to confirmed that SCB Jakarta had not issued any SWIFT messages to OCBC.
[100] On 4 April 2008, APLL withdrew the Offer with the consent of the SIC. Jade announced that the Offer was withdrawn with immediate effect. On 9 April 2008, Jade announced on SGXNET that Merrill Lynch had reduced its stake in Jade from 26.49% to 16.66% on 1 April 2008 and that the decrease was due to a sale of Jade shares pursuant to Merrill Lynch’s rights under the GMSLA. On 7 April 2008, 16 April 2008 and 30 April 2008, SFL force-sold 8 million, 12 million and 17 million Jade shares respectively.
[101] On 17 April 2008, in response to a query by R&T, SCB Jakarta confirmed that various documents, including the First, Second and Third Letters and the First, Second and Third SWIFTs were never issued by them and that Mr Ng could not be reached at the “direct dial” number displayed on the First Letter. This was further confirmed by an exchange of SWIFT messages between OCBC and SCB Jakarta on 22 and 29 April 2008.
The Letter dated 8 October 2008 (“the Fourth Letter”)
[102] A letter dated 8 October 2008 was addressed to the Securities Commission of Kuala Lumpur, Malaysia, and was apparently issued by one “Felix Berdhi Santoso” who purported to confirm that:
(a) FCGIL used to maintain a “satisfactory account” with SCB Jakarta which had since been closed;
The Securities Industry Council inquiry
[103] The matter was first brought to the attention of the SIC by OCBC’s in-house legal counsel on 28 May 2008. The SIC hearing committee issued a report on 14 October 2008, after conducting an inquiry to determine if any party had breached the Code in relation to the withdrawal of the Offer by APLL for Jade. The findings of the SIC hearing committee were not disputed by either party.
(1) Findings in relation to Dr Soh
[104] The SIC hearing committee found that Dr Soh had committed multiple and serious breaches of the Code. In particular, he had breached General Principle 6 and Rules 3.5(c), 8.2, 23.3(c) and 11.2 of the Code.
[105] The SIC hearing committee found no indication from OCBC that Dr Soh could reasonably have relied upon to conclude that OCBC would provide Dr Soh with the necessary financing to satisfy acceptances of the Offer. The SIC hearing committee further stated that assuming arrangements were in place for a credit line to be available for Dr Soh to draw upon to satisfy acceptances, it was still ultimately dependent on receipt of an acceptable banker’s guarantee. The SIC hearing committee found that ultimately, all the reasonable measures that Dr Soh claimed to have taken to secure the necessary funding for the Offer boiled down to a mere verbal agreement with Dr Rahman for the banker’s guarantee. Further, it stated that Dr Soh had a separate and distinct obligation from his advisers to satisfy himself that he could implement the Offer in full and he was not relieved of this obligation by OCBC’s confirmation of APLL’s financial resources.
[106] The SIC hearing committee found that Dr Soh did not present the information on his shareholdings accurately and fairly under Rule 8.2 of the Code by his bare statement that he had a deemed interest in the shares affected by the GMSLA.
[107] The SIC hearing committee found Dr Soh to be in breach of Rules 3.5(c), 23.3(c) and 8.2 of the Code in failing to disclose Faitheagle’s sales of Jade shares in February 2008 and Opes Prime’s forced sale on 21 January 2008. As for the sale of 50.2 million Jade shares by Faitheagle during the Offer period between 21 February 2008 and 31 March 2008, the SIC hearing committee held that this contravened Rule 11.2 of the Code.
(2) The findings in relation to OCBC
[108] OCBC was found to have breached Rules 3.5 and 23.8 of the Code in respect of its financial resources confirmation and Rules 3.5(c), 23.3(c) and 8.2 of the Code in respect of the disclosure of shareholdings.
[109] The SIC hearing committee held that OCBC should have independently verified the contents of the First Letter by calling the main line of SCB Jakarta.
[110] The SIC hearing committee noted that OCBC never followed up with A&G on whether A&G had reviewed the GMSLA. OCBC should have sought but failed to seek, clarification from A&G on the ownership status of the Jade shares under the GMSLA.
[111] The SIC hearing committee accepted that Dr Soh’s reticence and breaches of the Code deprived OCBC of the opportunity to detect his failings and to advise him properly. It held that OCBC’s breaches were relatively less culpable than Dr Soh’s overall conduct. Although there might have been a deception on OCBC in respect of the confirmation letters purportedly issued by SCB Jakarta, the SIC hearing committee was unable to express an opinion as to whether Dr Soh was complicit in this deception.
The witnesses
OCBC’s witnesses
[112] OCBC had seven factual witnesses and one expert witness. Tan, Tsai and Ang were from the OCBC team who liaised with Dr Soh regarding the Offer. At the material time, Tan was a manager in, Tsai was the head of and Ang was the Vice President of, OCBC’s Corporate Finance Department. Tsai left the daily management of the Offer to Tan and Ang. Whilst Tan was not present at the meeting on 31 January 2008, he was instructed by Ang to conduct due diligence checks on APLL, Dr Soh and Jade, and to assist with the Offer thereafter. All three witnesses had consistent testimonies of what had occurred throughout their dealings with Dr Soh and APLL. More importantly, their accounts of what transpired at their meetings with Dr Soh corresponded with the minutes taken by Ang at those meetings as well as the transcripts of such meetings, where available.
(a) In particular, all three witnesses were adamant that Dr Soh had never requested a loan and OCBC had never offered to provide APLL with the requisite funding for the Offer.
(b) They also consistently emphasised that during the First Meeting, Dr Soh never mentioned FCGIL, Faitheagle or Dr Rahman and did not inform OCBC about the margin calls by Opes Prime and SFL, the forced sale of Jade shares by Opes Prime, and the provision of further collateral to those financiers, even though the events took place just a few days prior to that meeting.
(c) All three witnesses also took the position that Dr Soh never disclosed to OCBC the various dealings in Jade shares by APLL and Faitheagle from January to March 2008.
(d) Additionally, Tan and Ang claimed that Dr Soh had stated at the Kick-off Meeting that APLL had transferred 140,000,000 (and not 300,050,000) Jade shares to Opes Prime and had retained full beneficial ownership over those Jade shares.
(e) The witnesses also stated that there was no reason for OCBC to disbelieve Dr Soh’s representations on shareholdings, financial resources and the motivations for making the Offer, and they did not suspect that any of those representations were untrue.
[113] Dina Artarini (“Artarini”) is currently the Head of Legal and Head of Wholesale Banking Legal in SCB Jakarta. At the trial, she testified that, having searched through SCB Jakarta’s register of outgoing letters and list of authorised signatories and having conducted checks on “Felix Berdhi Santoso”, she could confirm that the Fourth Letter was never issued with the authority of SCB Jakarta.

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

Oversea-Chinese Banking Corp Ltd v Asia Pacific Links Ltd and another (Abdul Rahman bin Maarip, third party)

Grounds of decision

Background

The pleadings

The claim

The defence and counterclaim

The issue

The facts

The defendants’ initial acquisition of Jade shares

The defendants’ dealings in Jade shares before 30 January 2008 and Faitheagle’s undisclosed dealings in Jade shares

APLL’s transfer of Jade shares to SBS Nominees Ltd

The Global Master Share Lending Agreement with Opes Prime

APLL’s engagement of OCBC as financial adviser for the Offer

The meeting on 31 January 2008 (the “First Meeting”)

The preparation of the Offer Announcement

The due diligence conducted by Tan

The meeting on 4 February 2008 (the “Kick-off Meeting”)

Emails between the parties with regard to preparing for the Offer Announcement

The First Verification Meeting on 14 February 2008

Demands by Opes Prime against APLL in February 2008

The First Letter from SCB Jakarta

The release of the Offer Announcement

Statements made by Dr Soh without prior consultation with OCBC or A&G

The Second Letter from SCB Jakarta

The preparation of the Offer Document

The Second Verification Meeting

The despatch of the Offer Document

Reminders to Dr Soh of his responsibilities during the Offer

Requests by OCBC for funding for the Offer

The calls to SCB Jakarta

The telephone conference with Dr Soh on 27 March 2008

The meeting in the morning on 28 March 2008

The meeting in the evening on 28 March 2008

Dr Soh’s further attempts to show that he had the financial resources for the Offer

The Second SWIFT

The Third Letter from SCB Jakarta

The resignation of OCBC and Rodyk and the withdrawal of the Offer

The withdrawal of the Offer

The Letter dated 8 October 2008 (“the Fourth Letter”)

The Securities Industry Council inquiry

(1) Findings in relation to Dr Soh

(2) The findings in relation to OCBC

The witnesses

OCBC’s witnesses