http://www.businesstimes.com.sg/arch...ption-20130629
Published June 29, 2013
Thomson View case looks at buyer option
Issue of whether en-bloc committee had acted in bad faith
By Grace Leong
[email protected]
THE issue of whether Thomson View's en-bloc sales committee acted in bad faith when it agreed to give the buyer an option to rescind if it has to pay more than $95 million to redevelop the land took centrestage yesterday.
Lawyers for dissenting sellers to the $590 million sale had argued that the Collective Sale Committee (CSC) should not have given the buyer - a joint venture between Wee Hur Development and Lucrum Capital - the option of rescinding within six months of accepting the tender. This is especially so since valuer Chesterton-Suntec International had put the lease upgrading premium to redevelop the 255-unit site at $125 million at the close of tender on Sept 4, 2012, they added.
But Senior Counsel Molly Lim, who represents Thomson View CSC chairman Philomene Ngui and two other CSC members, who represent the consenting owners comprising more than 84 per cent of the share value, called the objection "a red herring".
Wee Hur-Lucrum is likely to have to pay an even higher lease upgrading premium to proceed with its acquisition.
But Justice Andrew Ang asked: "How do you know the 80 per cent are happy with this option to purchase?"
"They gave the CSC a mandate to enter into a binding contract. (But) by allowing a clause where the purchaser can decide whether or not to buy should the lease upgrading premium exceed $95 million, the (CSC) effectively have given the buyer the option to purchase. It's not a binding contract."
According to the dissenting sellers, there was no mention of the amount of lease top-up premium in the original sales contract. If the buyer isn't able to get approval to redevelop the site, the CSC could rescind the deal.
"Ultimately, the overriding mandate is 'please sell'," Ms Lim said.
"In 2008, when 80 per cent wanted to sell, they couldn't. A lot of retirees want to unlock value. They've been wanting out since 2008. They have waited four years. Not that there are so many offers to consider. We have only this one. It's better than selling in the open market."
But Justice Ang said: "If you're saying to give an option is better than having no deal at all, then you could have easily given the same option to two other interested buyers, UIC Ltd and Secure Development Pte Ltd, which is owned by the UOL Group. "
"This is a difficult point because the way the majority subsidiary proprietors might say is: Look I gave you a mandate to enter into a binding contract. But it must be conditional on events not in control of the purchaser... If it is conditional on the purchaser, then this is beyond what I authorised you to do."
Citing uncertain economic conditions, Ms Lim said it isn't a negotiation of parties with equal bargaining power. "The purchaser had better bargaining power," she said. "If it transpires that because of the debt crisis, the market tanks and the upgrading premium is less than $95 million, then the consenting owners will ask us: 'Why didn't we do the deal?'"
In trying to justify the incentive payments made by HSR International Realtors to the owners of four units, Adrian Wong of Rajah & Tann LLP said that HSR, under its terms of engagement, isn't a fiduciary, and therefore doesn't have a duty of evenhandedness.
He also highlighted differences with the Harbour View Gardens en-bloc sale which failed after the High Court found that its CSC breached its fiduciary duties by acquiescing in its marketing agent offer of a $200,000 inducement to sellers. Unlike that case, where the incentive payments were intended to benefit one CSC member at the expense of minority owners who had objected to lowering the sale price below the reserve price, Mr Wong pointed out that, in Thomson View's case, HSR's incentive arrangement has no impact on the sale price.
Reply With Quote
