ARI INVESTMENT LIMITED & Anor v ACCELERA PRECIOUS TIMBER AND STRATEGIC AGRICULTURE LIMITED & 3 Ors

Facts

Asian Infrastructure Limited (AIL) had lent Perfect Earth Management Pte Ltd (PEM) USD 500,000 and USD 650,000 in 2013 and 2014 as working capital for PT Aceh Rubber Industries (PT ARI), an Indonesian rubber processor majority owned by Accelera Precious Timber and Strategic Agriculture Limited (APTSA). Mr Dennis Kam personally guaranteed the loans. When they were not repaid, AIL and ARI Investment Limited entered a restructuring agreement in September 2015 with APTSA, PT ARI and PEM: ARI would fund APTSA in exchange for a 70% stake, the loans would be novated, and Mr Kam's guarantees discharged. ARI, through an associated company, paid USD 320,000 into APTSA. PT ARI was later placed in liquidation in 2019.

AIL then sued Mr Kam on the guarantees in HC/S 397/2017, also alleging misrepresentation about production capacity and use of the loan funds. It succeeded at first instance on the guarantees, but the Court of Appeal allowed Mr Kam's appeal. In that suit, AIL's application for specific discovery of tax documents was dismissed, and its application to amend to plead tax misrepresentations was disallowed for want of particulars; it did not appeal either.

In Suit No 1229 of 2020, AIL and ARI sued APTSA, PEM, Mr Kam and Ms Eileen Tan. After striking out, two issues remained for trial: whether PT ARI breached the agreement by failing to disclose outstanding tax matters, and whether the defendants should not have wound up PT ARI because it prejudiced ARI's goodwill. The plaintiffs said they obtained the incriminating tax notices only after the earlier litigation ended, and that the defendants had concealed them.

Issues

1. Whether the extended doctrine of res judicata barred the plaintiffs from raising the tax issues, or whether special circumstances allowed them to do so.
2. Whether the winding up of PT ARI breached the agreement's warranties on goodwill and carrying on business as usual.

Holding

Choo Han Teck J dismissed the plaintiffs' claims. The plaintiffs were estopped from raising the tax issues, and the claim based on the winding up of PT ARI failed on the evidence. Costs were to be heard later if not agreed.

Reasoning

The judge found that the plaintiffs were trying to recover what AIL had failed to obtain in the earlier suit. The tax issues were within their knowledge then. Mr Chang, their director, had confirmed on affidavit that he learned of an unofficial tax notice from PT ARI's managing director in the last quarter of 2016. ARI's letter to APTSA of 22 September 2017 expressly alleged breaches of Indonesian tax codes and said ARI would not have entered the agreement but for the misrepresentations. Mr Chang had also testified at the earlier trial that tax issues had not been disclosed. His later claim that the unofficial notice was inconclusive was inconsistent with this.

Shortcomings in the plaintiffs' own conduct of the earlier suit were not special circumstances. They had sought discovery before pleading the tax issues, gave no particulars when seeking to amend, and appealed neither refusal. The tax notices were not new material unavailable at the time; they would have been obtained had the case been properly pleaded and discovery then sought. Arnold v National Westminster Bank, which concerned a later change in the law, did not help them. Nor could Mr Kam have breached his discovery obligations over issues that had never been pleaded.

On the winding up, the plaintiffs made no real submissions. There was no evidence that it affected ARI by the time of closing in 2015, no evidence of what goodwill ARI had, no compromise of major contractual liabilities, and, on the plaintiffs' own witnesses, no dividends had ever been paid.

From the judgment