The Enterprise Fund III Ltd v CNPLaw LLP: Negligence Claim Against Lawyers for Flawed Loan Facility Agreement

In Suit No 355 of 2021, The Enterprise Fund III Ltd and Value Monetization III Ltd (the Lenders) sued CNPLaw LLP (CNP) in the General Division of the High Court of Singapore, alleging negligence in advising on a loan facility agreement with International Healthway Corporation Ltd. The Lenders claimed CNP failed to properly advise them about the legal implications of the loan facility under s 76 of the Companies Act, leading to financial losses. Choo Han Teck J dismissed the Lenders' claim, finding that CNP had advised against using the loan facility for purchasing the Borrower's shares and that the Lenders' actions contradicted the terms of the facility agreement.

1. Case Overview

1.1 Court

General Division of the High Court

1.2 Outcome

The Lenders’ claim against CNP is dismissed.

1.3 Case Type

Civil

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Singapore court dismisses negligence claim against CNPLaw LLP. The Enterprise Fund III Ltd alleged CNPLaw failed to properly advise on a loan facility agreement.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
The Enterprise Fund III LtdPlaintiffCorporationClaim DismissedLostSiraj Omar, Allister Tan, Joelle Tan, Richard Yeoh Kar Hoe, Ng Wei Jin
Value Monetization III LtdPlaintiffCorporationClaim DismissedLostSiraj Omar, Allister Tan, Joelle Tan, Richard Yeoh Kar Hoe, Ng Wei Jin
CNPLaw LLP (formerly known as Colin Ng & Partnership)DefendantLimited Liability PartnershipJudgment for DefendantWonNarayanan Sreenivasan, Ang Mei-Ling Valerie Freda, Lim Wei Liang Jason, Tan Kai Ning Claire

3. Judges

Judge NameTitleDelivered Judgment
Choo Han TeckJudge of the High CourtYes

4. Counsels

Counsel NameOrganization
Siraj OmarDavid Lim & Partners LLP
Allister TanDavid Lim & Partners LLP
Joelle TanDavid Lim & Partners LLP
Richard Yeoh Kar HoeDavid Lim & Partners LLP
Ng Wei JinDavid Lim & Partners LLP
Narayanan SreenivasanK&L Gates Straits Law LLC
Ang Mei-Ling Valerie FredaK&L Gates Straits Law LLC
Lim Wei Liang JasonK&L Gates Straits Law LLC
Tan Kai Ning ClaireK&L Gates Straits Law LLC

4. Facts

  1. The Enterprise Fund III Ltd and Value Monetization III Ltd are investment funds managed by Crest Capital Asia Fund Management Pte Ltd.
  2. CNPLaw LLP were the lawyers for Crest and its affiliates since 2008.
  3. The Lenders executed a loan facility agreement with International Healthway Corporation Ltd in 2015.
  4. EFIII used the facility’s funds to purchase shares in the Borrower in the open market.
  5. The Singapore Exchange issued a notice of suspicious trading activities in relation to the Borrower’s shares.
  6. The Borrower repudiated the facility agreement on the basis of illegality.
  7. The Court of Appeal held that the entire transaction violated s 76(1A)(a) of the Companies Act.

5. Formal Citations

  1. The Enterprise Fund III Ltd and another v CNPLaw LLP (formerly known as Colin Ng & Partnership), Suit No 355 of 2021, [2023] SGHC 345
  2. Crest Capital Asia Pte Ltd and others v OUE Lippo Healthcare Ltd (formerly known as International Healthway Corp Ltd) and another and other appeals, , [2021] 1 SLR 1337
  3. International Healthway Corp Ltd v The Enterprise Fund III Ltd and others, , [2018] SGHC 246

6. Timeline

DateEvent
Steven Soh became a partner at CNP.
CNPLaw LLP became the lawyers for Crest and its affiliates.
First draft of the loan facility agreement was drawn up.
EFIII began purchasing shares in the Borrower.
CNP sent the revised draft and execution versions of the facility agreement to the Lenders.
Loan facility agreement was executed and backdated to 16 April 2015.
Loan facility agreement was refinanced and superseded by another substantially similar facility agreement.
EFIII completed purchasing shares in the Borrower.
Singapore Exchange issued a notice of suspicious trading activities in relation to the Borrower’s shares.
Borrower defaulted.
CNP was instructed to demand repayment of the loan from the Borrower.
Borrower removed the incumbent board of directors and appointed a new board.
Borrower repudiated the facility agreement.
Proceedings commenced (OS 380 of 2017).
Steven Soh left CNP.
EFIII commenced an action (Suit 357 of 2021) against Glendon Tan.
Glendon Tan brought a third-party action against Mr Chan and CNP.
Action in Suit 355 of 2021 continues to trial.
Trial began.
Trial continued.
Judgment reserved.

7. Legal Issues

  1. Negligence
    • Outcome: The court found that CNP was not negligent in advising the Lenders.
    • Category: Substantive
    • Sub-Issues:
      • Breach of duty of care
      • Causation of loss
    • Related Cases:
      • [2021] 1 SLR 1337
      • [2018] SGHC 246

8. Remedies Sought

  1. Monetary Damages

9. Cause of Actions

  • Negligence

10. Practice Areas

  • Commercial Litigation

11. Industries

  • Finance
  • Legal

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Crest Capital Asia Pte Ltd and others v OUE Lippo Healthcare Ltd (formerly known as International Healthway Corp Ltd) and another and other appealsCourt of AppealYes[2021] 1 SLR 1337SingaporeCited for findings relating to Glendon Tan's knowledge of the statutory prohibition against share buyback and its contravention, and that his knowledge was attributable to Crest and EFIII.
International Healthway Corp Ltd v The Enterprise Fund III Ltd and othersHigh CourtYes[2018] SGHC 246SingaporeCited to highlight the Lenders' previous position that the loan facility did not state that funds had to be used for the acquisition of the Borrower's shares, which is inconsistent with their current claim.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap 50, 2006 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Loan facility agreement
  • General working capital
  • Share buyback
  • s 76 Companies Act
  • Negligence
  • Breach of duty

15.2 Keywords

  • Negligence
  • Lawyers
  • Loan Facility Agreement
  • Companies Act
  • Share Buyback
  • Financial Assistance

16. Subjects

  • Professional Negligence
  • Financial Law
  • Corporate Law

17. Areas of Law

  • Tort
  • Negligence
  • Lawyers' Professional Liability