Nishiki Holdings v Sankaty: Conflict of Interest, Loan Agreements & Valuation
In Nishiki Holdings Pte Ltd v Sankaty European Investments S.A.R.L, the Singapore High Court addressed a dispute arising from a loan agreement between Nishiki Holdings Pte Ltd, Nishiki Real Estate Pte Ltd, and Nishiki International Investments Pte Ltd (Plaintiffs) and Sankaty European Investments S.A.R.L (Defendant). The plaintiffs sought to invalidate the loan agreement, particularly the 'Additional Interest' provisions, citing a conflict of interest. Alternatively, they challenged the appointment of Houlihan Lokey (China) Limited as the appraiser. The court found the loan agreement valid but ruled the appraiser's appointment invalid, setting aside the valuation report and the subsequent appointment of receivers.
1. Case Overview
1.1 Court
General Division of the High Court of the Republic of Singapore1.2 Outcome
Appointment of Houlihan Lokey as appraiser and the Houlihan Lokey Valuation Report is set aside. The appointment of the Receivers is consequently invalid and void.
1.3 Case Type
Civil
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
Singapore court case regarding a loan agreement, conflict of interest, and the validity of an appraiser's appointment. Judgment for the defendant in part.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Nishiki Holdings Pte Ltd | Plaintiff | Corporation | Appointment of HL China as Appraiser and the HL China Valuation Report is set aside | Partial | Khoo Ching Shin Shem, Ahn Mi Mi, Teo Jia Hui Veronica, Tham Lijing |
| Nishiki Real Estate Pte Ltd | Plaintiff | Corporation | Appointment of HL China as Appraiser and the HL China Valuation Report is set aside | Partial | Khoo Ching Shin Shem, Ahn Mi Mi, Teo Jia Hui Veronica, Tham Lijing |
| Nishiki International Investments Pte Ltd | Plaintiff | Corporation | Appointment of HL China as Appraiser and the HL China Valuation Report is set aside | Partial | Khoo Ching Shin Shem, Ahn Mi Mi, Teo Jia Hui Veronica, Tham Lijing |
| Sankaty European Investments S.A.R.L | Defendant | Corporation | Appointment of HL China as Appraiser and the HL China Valuation Report is set aside | Lost | Lem Jit Min Andy, Selvaratnam Sharmini Sharon, Farrah Joelle Isaac |
| Sajjad Ahmad Akhtar | Defendant | Individual | Claim Dismissed | Dismissed | Ong Boon Hwee William, Chua Xinying |
| Chin Sek Peng Michael | Defendant | Individual | Claim Dismissed | Dismissed | Ong Boon Hwee William, Chua Xinying |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Kwek Mean Luck | Judicial Commissioner | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Khoo Ching Shin Shem | Focus Law Asia LLC |
| Ahn Mi Mi | Focus Law Asia LLC |
| Teo Jia Hui Veronica | Focus Law Asia LLC |
| Tham Lijing | Tham Lijing LLC |
| Lem Jit Min Andy | Harry Elias Partnership LLP |
| Selvaratnam Sharmini Sharon | Harry Elias Partnership LLP |
| Farrah Joelle Isaac | Harry Elias Partnership LLP |
| Ong Boon Hwee William | Allen & Gledhill LLP |
| Chua Xinying | Allen & Gledhill LLP |
4. Facts
- Nishiki TMK had to raise senior, mezzanine, and equity financing to finance the purchase of properties from KMC.
- The Loan Agreement was entered into by the plaintiffs and the 1st defendant, concluded on the plaintiffs’ behalf by Mr Theodore Meegan.
- The Loan was repayable in full by the Maturity Date, with Fixed Interest accruing at 10% per annum.
- The plaintiffs sought to set aside the Loan Agreement and the Additional Interest provisions, alleging a conflict of interest.
- The plaintiffs challenged the appointment of HL China as the appraiser, arguing it did not comply with the Loan Agreement.
- The 1st defendant appointed the 2nd and 3rd defendants as joint receivers.
- The plaintiffs claim the Receivers failed to discharge their duties in good faith and/or are biased.
5. Formal Citations
- Nishiki Holdings Pte Ltd and others v Sankaty European Investments Sarl and others, Suit No 84 of 2020, [2021] SGHC 286
6. Timeline
| Date | Event |
|---|---|
| KMC restructured its corporate structure. | |
| Ownership of KMC’s nine Osaka medical properties were transferred to Nishiki TMK. | |
| KMC and Nishiki TMK entered into a Sale Leaseback Transaction. | |
| NRE Director’s Resolution was signed. | |
| NRE Director’s Certificate was presented to the 1st defendant. | |
| Investment Management Deed was signed. | |
| L&W Opinion was issued. | |
| Lease agreement between Nishiki TMK and KMC was executed. | |
| The 1st defendant advanced the Loan to NRE. | |
| NRE repaid the Loan and the accrued Fixed Interest in full. | |
| Lease agreement was amended. | |
| Mr Meegan emailed Dr Yabumoto regarding covenants with the 1st defendant. | |
| Mr Meegan was dismissed as sole director of the plaintiffs. | |
| The 1st defendant emailed the plaintiffs a “Demand for Payment of Additional Interest Amount”. | |
| Ms Lee suggested the appointment of Appraiser. | |
| The 1st defendant appointed HL China as the Appraiser. | |
| HL China issued a valuation report. | |
| The 1st defendant wrote a letter of demand to the plaintiffs. | |
| Meeting between the 1st defendant’s representatives, Dr Yabumoto, Nishiki Corporation representatives and senior lenders. | |
| NRE’s letter was sent. | |
| Mr Matsuda met with Mr Okamoto. | |
| Mr Okamoto emailed Mr Matsuda regarding the valuation process. | |
| The 1st defendant appointed the 2nd and 3rd defendants as joint receivers. | |
| The 2nd and 3rd defendants wrote to each of the plaintiffs informing that they have been appointed Receivers over the plaintiffs’ charged assets. | |
| The Plaintiffs informed the 2nd and 3rd Defendants that the Plaintiffs denied Sankaty’s demand for Additional Interest. | |
| The 2nd and 3rd Defendants replied to say inter alia that they took the position that the Additional Interest as quantified by Sankaty was due and owing. | |
| HL China Valuation Report was issued. | |
| The 2nd and 3rd Defendants wrote to the Plaintiffs’ directors threatening legal action. | |
| The Plaintiffs’ directors wrote to the 2nd and 3rd Defendants and alleged that they were Sankaty’s “cat’s paw”. | |
| The 2nd and 3rd Defendants sent a letter to Nishiki TMK notifying Nishiki TMK of their purported appointment as joint receivers of NRE and NII. | |
| Hearing began. | |
| Judgment reserved. | |
| Judgment was delivered. |
7. Legal Issues
- Conflict of Interest
- Outcome: The court found that the weight of the documentary evidence is such that the 1st defendant was entitled to think that Dr Yabumoto knew about the Loan Agreement, including the Additional Interest provision, and Mr Meegan’s potential conflict of interest, and that Dr Yabumoto approved the execution of the Loan Agreement with such knowledge.
- Category: Substantive
- Sub-Issues:
- Breach of fiduciary duty
- Self-authorisation of breach
- Validity of Loan Agreement
- Outcome: The court found the Loan Agreement to be valid and enforceable.
- Category: Substantive
- Appointment of Appraiser
- Outcome: The court found that the 1st defendant did not consult NRE as required under Schedule 1 of the Loan Agreement on the appointment of the Appraiser. Consequently, the appointment of HL China and the HL China Valuation Report is invalid.
- Category: Procedural
- Sub-Issues:
- Compliance with contractual conditions
- Consultation with borrower agent
- Duties of Receivers
- Outcome: The court found no basis to the plaintiffs’ alternative claim against the Receivers for failure to discharge their duties in good faith and/or being biased, and hence dismissed their alternative claim against the Receivers.
- Category: Substantive
- Sub-Issues:
- Duty of care
- Good faith
- Impartiality
- Valuation
- Outcome: The court found that Enrix has made a manifest error, in making an unjustified assumption that the hospitals in Properties 2 and 5 would be demolished and the land converted for residential use.
- Category: Substantive
- Sub-Issues:
- Manifest error
- Deviation from appraisal standards
8. Remedies Sought
- Declaration that appointment of receivers was invalid
- Order for account of transactions
- Damages
- Equitable compensation
9. Cause of Actions
- Breach of Contract
- Trespass
- Wrongful Interference
10. Practice Areas
- Commercial Litigation
- Receivership
- Corporate Law
11. Industries
- Healthcare
- Finance
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Skandinaviska Enskilada Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd and another and another appeal | Singapore Court of Appeal | Yes | [2011] 3 SLR 540 | Singapore | Cited for the principle that a fiduciary cannot self-authorise his own breach of fiduciary duty. |
| Regal (Hastings) Ltd v Gulliver and Others | House of Lords | Yes | [1942] 1 All ER 378 | England and Wales | Cited regarding the full knowledge and consent of the company when purchasing shares. |
| Leiman, Ricardo and another v Noble Resources Ltd and another | Singapore Court of Appeal | Yes | [2020] 2 SLR 386 | Singapore | Cited for the principles on contractual interpretation. |
| Newall v Lewis | Unknown | Yes | [2008] 4 Costs LR 626 | Unknown | Cited for the principle that phrases should be given effect where possible rather than rendered inoperative. |
| Dwr Cymru Cyfyngedig (Welsh Water) v Corus UK Ltd | England and Wales Court of Appeal | Yes | [2007] EWCA Civ 285 | England and Wales | Cited for the principle that phrases should be given effect where possible rather than rendered inoperative. |
| Jani-Kang (GB) Ltd v Pula Enterprises Ltd | Unknown | Yes | [2008] 1 All ER (Comm) 451 | Unknown | Cited for the principle that phrases should be given effect where possible rather than rendered inoperative. |
| HSBC Institutional Trust Services (Singapore) Ltd (trustee of Starhill Global Real Estate Investment Trust) v Toshin Development Singapore Pte Ltd | Singapore Court of Appeal | Yes | [2012] 4 SLR 738 | Singapore | Cited regarding the disclosure of prior engagements by experts or adjudicators. |
| Viking Engineering Pte Ltd v Feen, Bjornar and others and another matter | Singapore High Court | Yes | [2020] SGHC 78 | Singapore | Cited for the definition of 'manifest error'. |
| Poh Cheng Chew v K P Poh & Partners Pte Ltd and another | Singapore High Court | Yes | [2014] 2 SLR 573 | Singapore | Cited for the consequence of a successful challenge to an expert’s determination. |
| Grande Corp Pte Ltd v Cubix International Pte Ltd and others | Singapore High Court | Yes | [2018] SGHC 13 | Singapore | Cited regarding striking out claims under O 24 r 16 of the Rules of Court. |
| Batrouney v Forster (No 2) | Supreme Court of Victoria | Yes | [2015] VSC 541 | Australia | Cited regarding the duties of receivers. |
| Sudha Natrajan v The Bank of East Asia Ltd | Singapore High Court | Yes | [2017] 1 SLR 141 | Singapore | Cited regarding drawing adverse inferences. |
| Goh Nellie v Goh Lian Teck and others | Singapore Court of Appeal | Yes | [2007] 1 SLR(R) 453 | Singapore | Cited regarding issue estoppel. |
| TMT Asia Ltd v BHP Billiton Marketing AG (Singapore Branch) and another | Singapore Court of Appeal | Yes | [2019] 2 SLR 710 | Singapore | Cited regarding issue estoppel. |
| Banque Cantonale Vaudoise v Fujitrans (Singapore) Pte Ltd | Singapore High Court | Yes | [2007] 1 SLR(R) 570 | Singapore | Cited regarding issue estoppel. |
| Transpac Capital Pte Ltd v Lam Soon (Thailand) Co Ltd | Singapore High Court | Yes | [1999] 3 SLR (R) 454 | Singapore | Cited regarding issue estoppel. |
13. Applicable Rules
| Rule Name |
|---|
| Rules of Court (2014 Rev Ed) |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
| Evidence Act (Cap 97, 1997 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Additional Interest
- Sale Leaseback Transaction
- Loan Agreement
- Appraiser
- Exit Proceeds
- Maturity Date
- Receivers
- HL China Valuation Report
- Nishiki TMK Financing Obligations
- Fixed Interest
15.2 Keywords
- Loan Agreement
- Conflict of Interest
- Valuation
- Receivership
- Singapore Law
- Commercial Dispute
16. Subjects
- Agency
- Companies
- Professions
- Valuation
- Insolvency
17. Areas of Law
- Agency Law
- Company Law
- Valuation Law
- Contract Law
- Insolvency Law