SembMarine loses fight for remaining PPLS stake
High Court judge dismisses its claims in their entirety,
orders it to pay defendants' costs
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High Court judge dismisses its claims in their entirety, orders it to pay defendants' costs
Joyce Hooi
01 June 2012
Sembcorp Marine (SembMarine) has lost its legal tussle with PPL Holdings (PPLH) for a 15 per cent stake in PPL Shipyard.
High Court Judge Tay Yong Kwang dismissed SembMarine's claims in their entirety yesterday.
He allowed some of the counterclaims of the defendants - PPLH and its subsidiary E-Interface Holdings - ruling that Anthony Aurol was not validly removed as a director of the shipyard.
Mr Aurol is also the COO of Baker Technology, which owned PPLH. PPLH in turn owns the 15 per cent stake in PPL Shipyard that was at the heart of the dispute.
SembMarine said that it was getting legal advice "with a view of appealing the decision", in a filing with the Singapore Exchange yesterday.
This legal battle erupted in 2010, after Baker agreed to sell PPLH to a consortium including Chinese firm Yangzijiang Shipbuilding (YZJ) for US$155 million. This meant that the sale would make the consortium the owner of the 15 per cent stake in the shipyard.
In response, SembMarine, which owns 85 per cent of the shipyard, made a counter-offer of S$59.4 million - about one-third the consortium's offer. After SembMarine's offer was rejected, it contested the sale in court, claiming first right of refusal over the remaining 15 per cent stake.
In the wake of the lawsuit, the US$155 million that the consortium had been willing to pay dropped to US$116.25 million. As the legal battle raged on, Baker deferred the gain of S$58.2 million from the sale, pending the outcome of the lawsuit.
"If the court's ruling is not appealed against or is upheld on appeal, the company will then recognise its gain on the disposal," Baker said in a statement yesterday.
In its lawsuit, SembMarine asked the court to make PPLH and its subsidiary transfer the 15 per cent stake to it, against its counter-offer of S$59.4 million, among other things.
SembMarine said that the joint venture agreement that it had with PPLH meant that it had the right of refusal before PPLH could offer its shares in the shipyard to anyone else.
The sale of PPLH, however, had been conducted one level above PPLH - between its then-parent or principal Baker and the consortium.
Justice Tay dismissed SembMarine's claim, noting in his judgment that "the only parties in the joint venture agreement are Sembcorp and PPL Holdings, without mention of the principals . . . behind these parties . . . There was a gap in the joint venture agreement in that it did not provide for the situation where one of the principals of the parties lost control of that party".
SembMarine had also argued that when it was notified by PPLH's lawyers that Baker had accepted YZJ's offer, this triggered a put option that allowed it to buy the 15 per cent stake.
Then, SembMarine had responded to the news by offering about S$59.4 million for the stake in question. On that point, Justice Tay ruled that the put option was not, in fact, triggered. "(SembMarine) was not entitled to the 15 per cent shareholding in PPL Shipyard on that basis and the cheque of S$59,433,522 that it tendered is of no consequence." SembMarine also claimed that it should be allowed to end its joint venture agreement with PPLH because of - among other things - a breach of confidentiality when Mr Aurol disclosed PPL Shipyard's accounts to Yangzijiang and Baker on April 13, 2010.
Justice Tay said that the accounts lost their confidentiality by April 12, 2010 at the latest and even if there had been a breach, it would have been a "very minor technical one of a few days and certainly would not justify the extreme remedy of termination of the joint venture agreement".
Justice Tay did, however, reject the defendants' request for relief for minority shareholders on the grounds of oppression.
SembMarine was ordered to pay the defendants' costs for the lawsuit that it launched and also for the counterclaims, with "appropriate deductions" for the counterclaims in which the defendants failed.
PPLH was represented by Kenneth Tan of Kenneth Tan Partnership, who was instructed by N Sreenivasan and Valerie Ang of Straits Law Practice. SembMarine was represented by Drew & Napier.