The Enterprise Fund II Ltd v Jong Hee Sen: Breach of Contract & Mitigation of Damages

In The Enterprise Fund II Ltd v Jong Hee Sen, the High Court of Singapore heard a case regarding a breach of contract claim by The Enterprise Fund II Ltd (EFII) against Jong Hee Sen (Jong) for breaching his obligation as a warrantor under a deed of undertaking (DOU) related to a sale and purchase agreement (SPA) for EFII to purchase shares in International Healthway Corporation Limited (IHC). Jong counterclaimed against EFII for wrongful conversion of shares in Healthway Medical Corporation Limited (HMC). The court found in favor of the plaintiff, The Enterprise Fund II Ltd, allowing their claim for $3,338,281.95 and disallowing Jong's counterclaim.

1. Case Overview

1.1 Court

High Court of the Republic of Singapore

1.2 Outcome

Judgment for Plaintiff

1.3 Case Type

Civil

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

The Enterprise Fund II Ltd sued Jong Hee Sen for breach of contract related to a share purchase agreement. The court found in favor of the plaintiff.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
The Enterprise Fund II LtdPlaintiffCorporationJudgment for PlaintiffWon
Jong Hee SenDefendantIndividualClaim DismissedLost

3. Judges

Judge NameTitleDelivered Judgment
Hoo Sheau PengJudgeYes

4. Counsels

Counsel NameOrganization
Chng Zi Zhao JoelWongPartnership LLP
Siah Jiayi VivianWongPartnership LLP
Nigel TeoWongPartnership LLP
Wong YipingPinnacle Law LLC
Aqbal Singh a/l Kuldip SinghPinnacle Law LLC

4. Facts

  1. EFII agreed to purchase 20,833,000 ordinary shares of IHC from HMC for $9,999,840.
  2. Jong, along with other warrantors, executed a DOU in favor of EFII.
  3. The DOU stipulated that the warrantors would procure purchasers for the shares at a minimum price of $0.576 per share.
  4. If the sale of shares did not reach $11,999,808, the warrantors would purchase the remaining shares.
  5. Jong assigned 40,500,000 ordinary shares in HMC to EFII as security.
  6. No shares were sold during the sale period, and EFII did not receive the target amount.
  7. EFII eventually recovered $6,661,526.04 through sales from March 2016 to April 2016.

5. Formal Citations

  1. The Enterprise Fund II Ltd v Jong Hee Sen, Suit No 72 of 2016, [2019] SGHC 87

6. Timeline

DateEvent
HMC incorporated
HMC listed on the Singapore Exchange Limited
Jong became a non-executive director and non-independent director of HMC
IHC incorporated
Email sent summarizing the proposed transaction
Email sent discussing the draft SPA
Email sent describing the transaction
SPA and DOU executed
Email sent highlighting details about the DOU
IHC listed on the SGX
SPA completion date
Sum of $2,000,000 repaid through Golden Cliff
Sale Period expired
Warrantors should have performed obligations under cl 2.1(b) of the DOU
SGX issued an advisory warning investors to trade with caution when dealing in IHC shares
EFII's previous lawyers sent a letter of demand to Jong and OOL
EFII began to find buyers
Sales effected
Sales effected
Jong resigned as director of IHC
Trial began
Judgment reserved

7. Legal Issues

  1. Breach of Contract
    • Outcome: The court found that Jong Hee Sen breached his obligations under the deed of undertaking.
    • Category: Substantive
  2. Contractual Interpretation
    • Outcome: The court interpreted clause 2.1(b) of the deed of undertaking to mean that the warrantors' obligations arose even if no shares were sold during the sale period.
    • Category: Substantive
    • Related Cases:
      • [2008] 3 SLR(R) 1029
  3. Admissibility of Extrinsic Evidence
    • Outcome: The court held that the pre-contractual emails were admissible as extrinsic evidence for the interpretation of the deed of undertaking.
    • Category: Procedural
    • Related Cases:
      • [2008] 3 SLR(R) 1029
      • [2016] 3 SLR 1280
  4. Illegality of Contract
    • Outcome: The court found that the transaction did not contravene the Securities and Futures Act and was not void for illegality.
    • Category: Substantive
  5. Mitigation of Damages
    • Outcome: The court held that EFII did not breach its duty to mitigate its losses.
    • Category: Substantive
    • Related Cases:
      • [2010] 2 SLR 1154
      • [1997] 3 SLR(R) 906
      • [1932] AC 452
      • [1996] 1 SLR(R) 397
      • [1993] 1 SLR(R) 609
  6. Wrongful Conversion
    • Outcome: The court dismissed Jong Hee Sen's counterclaim for wrongful conversion.
    • Category: Substantive

8. Remedies Sought

  1. Monetary Damages
  2. Damages to be assessed

9. Cause of Actions

  • Breach of Contract
  • Wrongful Conversion

10. Practice Areas

  • Commercial Litigation

11. Industries

  • Finance
  • Healthcare

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte LtdHigh CourtYes[2008] 3 SLR(R) 1029SingaporeCited for the requirements of admissibility of extrinsic evidence in contract interpretation.
The “Star Quest” and other mattersHigh CourtYes[2016] 3 SLR 1280SingaporeCited for the application of the Zurich Insurance requirements in determining reasonable availability of extrinsic evidence.
Yolarno Pty Ltd v Transglobal Capital Pty Ltd & Ors (No 2)Supreme Court of New South WalesYes[2003] NSWSC 1004New South WalesCited for the interpretation of securities regulations regarding carrying on a securities business.
Fairway Estates Pty Ltd v Federal Commissioner of TaxationHigh Court of AustraliaYes[1970] 123 CLR 153AustraliaCited regarding whether a single transaction may constitute a business if there was an intention to repeat the transactions.
Ting Siew May v Boon Lay Choo and anotherHigh CourtYes[2014] 3 SLR 609SingaporeCited for the principle that a contract is void for illegality where the statutory prohibition is intended to prohibit the contract.
Ochroid Trading Ltd and another v Chua Siok Lui (trading as VIE Import & Export) and anotherCourt of AppealYes[2018] 1 SLR 363SingaporeCited for the principle that a contract is void for illegality where the statutory prohibition is intended to prohibit the contract.
Subramaniam Dhanapakiam v GhaanthimathiHigh CourtYes[1991] 1 SLR(R) 164SingaporeCited for the test to be employed in the context of the prohibition of the business of moneylending in the Moneylenders Act.
Sheagar s/o T M Veloo v Belfield International (Hong Kong) LtdHigh CourtYes[2014] 3 SLR 524SingaporeCited for the test to be employed in the context of the revised Moneylenders Act 2008.
Chinpo Shipping Co (Pte) Ltd v Public ProsecutorCourt of AppealYes[2017] 4 SLR 983SingaporeCited for affirming the test in Subramaniam in the context of s 6 of the Money-changing and Remittance Business Act.
Litchfield v DreyfusKing's Bench DivisionYes[1906] 1 KB 584England and WalesCited regarding the test for carrying on a business.
The “Asia Star”Court of AppealYes[2010] 2 SLR 1154SingaporeCited for the law on the duty to mitigate loss.
OCBC Securities Pte Ltd v Phang Yul Cher YeowHigh CourtYes[1997] 3 SLR(R) 906SingaporeCited for the standard of reasonableness to be applied to the innocent party in mitigating loss.
Banco de Portugal v Waterlow & Sons LtdHouse of LordsYes[1932] AC 452United KingdomCited for the principle that the measures which the innocent party may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty.
China Resources Purchasing Co Ltd v Yue Xiu Enterprises (S) Pte Ltd and anotherCourt of AppealYes[1996] 1 SLR(R) 397SingaporeCited for the principle that the measures which the innocent party may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty.
Klerk-Elias Liza v K T Chan Clinic Pte LtdHigh CourtYes[1993] 1 SLR(R) 609SingaporeCited for the principle that the evaluation of the aggrieved party’s conduct in mitigation ought to start from the date of the defaulting party’s breach.
ARS v ART and anotherHigh CourtYes[2015] SGHC 78SingaporeCited for the principle that witnesses possibly having “conflicting interests” has been regarded as a “plausible reason” that a party can fairly decide against calling such witnesses in civil matters.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Securities and Futures Act (Cap 289, 2006 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Deed of Undertaking
  • Sale and Purchase Agreement
  • Sale Shares
  • Sale Proceeds Target
  • Warrantors
  • Minimum Sale Price
  • Security Shares
  • International Healthway Corporation Limited
  • Healthway Medical Corporation Limited

15.2 Keywords

  • breach of contract
  • mitigation of damages
  • securities
  • shares
  • undertaking
  • warrantors
  • illegality

17. Areas of Law

Area NameRelevance Score
Contract Law90
Breach of Contract80
Warranties70
Securities Law40
Misrepresentation30
Company Law20
Banking and Finance10

16. Subjects

  • Contract Law
  • Securities Law
  • Commercial Law