Say Chong Lim & Ors. v Chee Kong Ong & Ors.

The claimants sued in relation to a series of property investments managed by the first defendant and Greenacre companies, alleging fraud, breaches of directors' duties, knowing receipt, breach of trust (including a Quistclose trust), failure to account and related equitable relief. The court relied heavily on the contemporaneous documentary record and an expert account to conclude that key sums were diverted from the intended purposes and that the defendants had not discharged their evidential burdens.

On the principal issues the judge held that: (a) Hyson House established fraudulent breach of director's duties by the first defendant and knowing receipt by him and Greenacre companies in respect of an Arbuthnot Latham loan (ss.171–177 Companies Act cited); (b) GCL breached a Quistclose trust in relation to £1.2m advanced for the CGW acquisition and the first defendant dishonestly assisted that breach; (c) Lapland was entitled to repayment of development capital and net rental sums retained by GPL; and (d) GCPL was entitled to have GCL's shareholdings in the project SPVs treated on constructive trust for GCPL, with specific performance of share transfers and issue and an interpretation of the distribution waterfall giving effect to the parties' bargain. The unlawful means conspiracy claims were rejected.

This was a first instance Chancery trial of complex claims arising from multiple property investments made by Mr Say Chong Lim (through corporate vehicles) into projects identified and run by Mr Chee Kong Ong and companies within the Greenacre group between 2012 and 2019.

Parties and procedural posture

• Claimants: Mr Lim (by litigation friend), City Success Investments Limited, Greenacre Capital (Hyson House) Limited and Lapland Limited.
• Defendants: Mr Ong and Greenacre group companies (including GCL, GPL, GCPL, GC180 and CGW). Several defendants were debarred from defending the trial after a series of unless orders; CGW was in liquidation. Evidence at trial therefore comprised affidavits, witness statements and an expert report rather than oral witness testimony in chief from most witnesses.
• The claimants had obtained a worldwide freezing order and later an interim injunction in relation to the Thanet proceeds.

Nature of the claims and relief sought

• Claims included fraudulent breach of directors' duties, knowing receipt, breach of trust (including a Quistclose trust), dishonest assistance, failure to account and claims for specific performance and declaratory relief under the GCPL shareholders' agreement, together with information claims and unlawful means conspiracy. Remedies sought included equitable compensation, restitution, an order for payment of rents, specific performance of share transfers and orders requiring disclosure/information.

Issues framed

• Whether the ALB loan taken by Hyson House was diverted and whether those diversions amounted to breaches of directors' duties and knowing receipt;
• whether £1.2m advanced for the CGW acquisition was subject to a Quistclose trust and if so whether GCL breached it and whether Mr Ong dishonestly assisted;
• whether GPL had properly accounted for development capital and rents for Lapland;
• construction and effect of the GCPL shareholders' agreement (ownership of SPVs, distribution waterfall and proportionate contributions) and whether GCL held SPV shares on constructive trust for GCPL;
• whether Mr Ong or the SPVs owed and breached information obligations; and
• whether the unlawful means conspiracy was established.

Court's reasoning and findings (concise)

• Hyson House: documentary evidence and contemporaneous communications showed the ALB loan had been drawn and largely channelled to GCL, GPL and to Mr Ong, without Mr Lim's knowledge or authority; that conduct breached statutory directors' duties (ss.171–177 Companies Act) and supported claims of fraudulent breach and knowing receipt; equitable compensation and restitution were ordered and GCL ordered to pay rental sums retained.
• CGW: the contemporaneous correspondence and the Quantuma account showed the £1.2m was transferred for the specified purpose of acquiring the CGW portfolio but was mixed and mainly used for other Greenacre expenditure; GCL therefore breached a Quistclose trust and Mr Ong, as controlling mind, was liable for dishonest assistance.
• Lapland: GPL failed to produce admissible supporting evidence for the development costs it claimed; in equity Lapland was entitled to repayment of the development capital and to the net rental receipts actually received by GPL (after third‑party agent deductions), less no further management fee.
• GCPL: the shareholders' agreement, although poorly drafted, was construed (in light of the background) as effecting a 50/50 issued share capital in GCPL between CSI and Mr Ong, with GCPL intended to own the SPVs; constructive trusts were declared over GCL's SPV holdings for GCPL; specific performance of share transfers and share issue was ordered in principle; distributions under the waterfall were to be calculated on the parties' actual initial contributions (found to be overwhelmingly in CSI's favour, c.94:6).
• Information: Mr Ong was ordered to provide further information about the Bermondsey, Dublin and Cooks Road projects (but not GC180).
• Conspiracy: unlawful means conspiracy was not established on the facts.

The judge reserved certain consequential matters (date of arising of constructive trusts and interest) for further submissions.

First instance disposal: the court allowed the claim in part. Key holdings were that (a) Hyson House established fraudulent breach of directors' duties by Mr Ong and knowing receipt by Mr Ong, GCL and GPL in relation to the ALB loan and was awarded equitable compensation and restitution and an order for unpaid rents; (b) GCL breached a Quistclose trust in respect of the £1.2m for CGW and Mr Ong was liable for dishonest assistance; (c) Lapland was entitled to repayment of development capital and net rentals from GPL; (d) the GCPL shareholders' agreement was construed so that GCPL should own the project SPVs, GCL holds SPV shares on constructive trust for GCPL and orders for specific performance (share issue and transfers) and distributions under the waterfall were to be calculated on the parties' actual contributions; (e) information orders were made against Mr Ong in relation to Bermondsey, Dublin and Cooks Road; and (f) unlawful means conspiracy claims were dismissed. The court relied on the contemporaneous documentary record, the Quantuma account analysis and legal principles on directors' duties, constructive and Quistclose trusts, knowing receipt and dishonest assistance, and contractual construction. Further submissions were ordered on certain remedies and interest.