Columbia Asia v Hong: Share Purchase Agreement Dispute over Hospital Acquisition

Columbia Asia Healthcare Sdn Bhd sued Edward Hong Hin Kit and Albert Hong Hin Kay in the Court of Appeal of Singapore, regarding breaches of a Share Sale Agreement (SSA) related to the purchase of Gleni International Hospital. Columbia claimed damages for breaches of the SSA, including failure to ensure unencumbered land title and indemnification for tax liabilities. The court dismissed Columbia's appeal regarding the diminution in value of the Sale Shares (CA 68) and allowed Columbia's appeal regarding the MRI debt (CA 69), finding the Hongs liable to indemnify Columbia for the MRI debt.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeal in Civil Appeal No 68 dismissed; appeal in Civil Appeal No 69 allowed.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Columbia Asia sued Hong for breaches of a Share Sale Agreement related to a hospital purchase. The court addressed damages and indemnification.

1.7 Decision Date

21 January 2015

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Columbia Asia Healthcare Sdn Bhd	Appellant, Respondent	Corporation	Appeal dismissed in part, Appeal allowed in part	Partial	Harish Kumar of Rajah & Tann Singapore LLP Jonathan Toh of Rajah & Tann Singapore LLP
Edward Hong Hin Kit	Respondent, Appellant	Individual	Appeal dismissed in part, Appeal allowed in part	Partial	Liew Teck Huat of Global Law Alliance LLC Niru Pillai of Global Law Alliance LLC Jason Yeo of Global Law Alliance LLC
Albert Hong Hin Kay	Respondent, Appellant	Individual	Appeal dismissed in part, Appeal allowed in part	Partial	Liew Teck Huat of Global Law Alliance LLC Niru Pillai of Global Law Alliance LLC Jason Yeo of Global Law Alliance LLC
P T NUSAUTAMA MEDICALINDO	Other	Corporation

3. Judges

Judge Name	Title	Delivered Judgment
Sundaresh Menon	Chief Justice	No
Andrew Phang Boon Leong	Justice of the Court of Appeal	Yes
Judith Prakash	Judge	No

4. Counsels

Counsel Name	Organization
Harish Kumar	Rajah & Tann Singapore LLP
Jonathan Toh	Rajah & Tann Singapore LLP
Liew Teck Huat	Global Law Alliance LLC
Niru Pillai	Global Law Alliance LLC
Jason Yeo	Global Law Alliance LLC

4. Facts

Columbia agreed to purchase 99% of the shares in UMPL from the Hongs and Muliadi via a Share Sale Agreement (SSA).
The Hospital and the Land were owned by PTNM, which was wholly owned by UMPL.
Columbia brought Suit 964 against the Hongs for alleged breaches of the SSA.
The purchase price of the Sale Shares was to be paid in Singapore Dollars at an agreed exchange rate of US$1 to S$1.45 which worked out to be S$43,730,550.
Columbia discovered under-declaration and under-payment of tax by the Hospital whilst under the management of the vendors.
Thermal International shipped an MRI machine to PTNM for use in the Hospital in early October 2002.
An invoice for the machine in the sum of S$656,000 was issued by Thermal International to PTNM on 10 October 2002.

5. Formal Citations

Columbia Asia Healthcare Sdn Bhd v Hong Hin Kit Edward and another and another appeal, Civil Appeals Nos 68 and 69 of 2014, [2015] SGCA 3

6. Timeline

Date	Event
2007-10-19	Rick Evans visited the hospital in Medan and met Edward Hong
2007-10-22	Rick Evans made an initial conditional offer of US$30m for the Hospital and the Land
2007-10-27	Rick Evans and Edward Hong met at Columbia’s facility in Kuala Lumpur
2007-10-29	Edward Hong tacitly accepted the second conditional offer
2007-12-01	Short-Form Agreement signed by Edward Hong and Rick Evans
2007-12-07	Meeting held in Singapore to finalise and sign the SSA
2007-12-13	MKP sent Alan Lim four undated copies of the Call Option Agreement signed by Edward Hong
2007-12-24	SSA and the Call Option Agreement were dated
2008-01-22	Completion took place at MKP’s office
2008-05-16	Columbia exercised its option under the Call Option Agreement
2008-05-30	Rick Evans and Edward Hong met to discuss the tax issue
2008-06-02	Edward Hong emailed Rick Evans warning him about a back-assessment of taxes
2008-07-01	Shares were transferred
2008-06-11	Rick Evans wrote to Edward Hong stating the vendors were bound by the SSA
2008-01-01	PTNM underwent a tax audit by the ITA
2008-01-01	Suit No 861 of 2008 filed
2008-01-01	Suit No 862 of 2008 filed
2009-01-01	Suit No 964 of 2009 filed
2012-05-15	Columbia paid the additional tax to the ITA for the 2004 tax assessment
2012-09-14	Columbia paid the additional tax to the ITA for the 2005 to 2007 tax assessments
2014-10-02	Hearing on the four appeals
2015-01-22	Judgment reserved
2015-01-22	Judgment delivered

7. Legal Issues

Breach of Contract
- Outcome: The court found that the vendors had breached the warranty that PTNM’s management accounts were true and accurate.
- Category: Substantive
- Sub-Issues:
  - Breach of warranty regarding accuracy of management accounts
  - Failure to ensure unencumbered land title
Indemnification
- Outcome: The court found that the MRI Debt does not fall within the Trade Debt Exclusion and the Hongs are therefore obliged to indemnify Columbia for the sum of S$393,399.70.
- Category: Substantive
- Sub-Issues:
  - Liability for MRI debt
  - Trade Vendor Exclusion
Valuation of Shares
- Outcome: The court found that Columbia has not discharged its burden of proving that there has been a diminution in value of the Sale Shares to be calculated with reference to the Columbia formula.
- Category: Substantive
- Sub-Issues:
  - Diminution in value of sale shares
  - Application of multiplier to EBITDA

8. Remedies Sought

Damages
Indemnification

9. Cause of Actions

Breach of Contract
Breach of Warranty

10. Practice Areas

Commercial Litigation
Mergers and Acquisitions

11. Industries

Healthcare

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Columbia Asia Healthcare Sdn Bhd and another v Hong Hin Kit Edward and another and other suits	High Court	Yes	[2014] 3 SLR 87	Singapore	Sets out the full background to the dispute.
Columbia Asia Healthcare Sdn Bhd and another v Hong Hin Kit Edward and another and other suits	High Court	Yes	[2014] 3 SLR 164	Singapore	Supplementary judgment making formal orders.
Infiniteland Ltd and another v Artisan Contracting Ltd and another	English Court of Appeal	Yes	[2006] 1 BCLC 632	England and Wales	Cited for the principle that the court will have to determine the appropriate way to value the shares in the absence of contractual machinery to value the shares.
Eastgate Group Ltd v Lindsey Morden Group Inc	English Court of Appeal	Yes	[2002] 1 WLR 642	England and Wales	Cited for the principle that the value as warranted of shares is presumed to be the actual price paid for the shares unless rebutted.
Sycamore Bidco Ltd v Breslin and another	English High Court	Yes	[2012] EWHC 3443	England and Wales	Cited for the approach to valuing shares when accounting errors are discovered after completion.
Holland Leedon Pte Ltd (in liquidation) v Metalform Asia Pte Ltd	Singapore High Court	Yes	[2012] 3 SLR 377	Singapore	Cited for the principle that the actual price agreed upon between a willing purchaser and vendor was prima facie evidence of the market value as warranted.
Senate Electrical Wholesalers v Alcatel Submarine Networks	Court of Appeal	Yes	[1999] 2 Lloyd’s Rep 423	England and Wales	Cited for the principle that the evidential starting point of the inquiry was how the actual purchaser had valued the shares and that the expert evidence on the appropriate valuation method cannot stand alone if it is significantly at variance with evidence of what actually happened.
ADT Ltd v BDO Binder Hamlyn	English High Court	Yes	[1996] BCC 808	England and Wales	Cited for the principle that it would be appropriate to depart from the actual purchaser’s valuation approach, particularly where the valuation experts had agreed on an alternative approach.
Thomas Witter Ltd v TBP Industries Ltd	English High Court	Yes	[1996] 2 All ER 573	England and Wales	Cited as an interesting decision where the judge declined to accept not only the experts’ opinion but also the formula allegedly relied on by the purchaser to derive the price.
ABD Pte Ltd v Comptroller of Income Tax	Singapore High Court	Yes	[2010] 3 SLR 609	Singapore	Cited for the approach to determine whether an expenditure is capital or revenue in nature.
BFC v Comptroller of Income Tax	Court of Appeal	Yes	[2014] 4 SLR 33	Singapore	Cited to note that the various tests for determining whether a given item of expenditure is to be regarded as capital or revenue in nature were discussed comprehensively in ABD.
Robertson Quay Investment Pte Ltd v Steen Consultants Pte Ltd and another	Court of Appeal	Yes	[2008] 2 SLR(R) 623	Singapore	Cited for the threshold requirement that the claimant must place before the court sufficient evidence of the loss it claims it suffered.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
No applicable statutes

15. Key Terms and Keywords

15.1 Key Terms

Share Sale Agreement
EBITDA
Trade Vendor Exclusion
MRI debt
Diminution in value
Multiplier
Tax exposure
Indemnification

15.2 Keywords

Share Purchase Agreement
Hospital Acquisition
Breach of Contract
Damages
Indemnification
Singapore
Columbia Asia
Hong
MRI Debt
EBITDA

17. Areas of Law

Area Name	Relevance Score
Contract Law	75
Commercial Disputes	70
Warranties	65
Company Law	60
Share Purchase Agreement	55
Misrepresentation	50
Indemnification	45
Damages	40
Estoppel	25

16. Subjects

Contract Law
Mergers and Acquisitions
Corporate Law