Evercore’s bid to wind up Hwa Hong over S$8.7 million disputed fees dismissed

CORPORATE financial adviser Evercore Asia (Singapore) has failed in its attempt to wind up Hwa Hong Corporation over an alleged debt of S$8.7 million it is claiming as professional fees. It was ordered to pay S$25,000 in legal costs to the property company for the unsuccessful liquidation bid.

Justice Hoo Sheau Peng, in dismissing the winding-up application after a hearing on Monday (Mar 20), said that there are triable issues with respect to the debt that is being disputed by Hwa Hong and therefore would require determination by the court.

Jaikanth Shankar of Davinder Singh Chambers had tried to persuade the court that Evercore is entitled to the debt but “has been unfortunately dragged into the dispute” between the Ong family members behind Hwa Hong.

Besides the company winding-up application, Evercore and Hwa Hong, as well as four former directors of the previously listed company are facing off in a litigation over Evercore’s disputed professional fees as its exclusive corporate financial adviser.

Hwa Hong is seeking to have the contract with Evercore declared invalid, naming the adviser and the four former directors – Ong Eng Hui David, Ong Eng Loke, Ong Eng Keong and Ong Mui Eng – as defendants.

Hwa Hong was delisted last September after being taken over by Sanjuro United, a consortium that included Hwa Hong’s other shareholders Ong Choo Eng and his son Ong Eng Yaw.

Ong Choo Eng and Ong Eng Yaw now sit on the current board.

Shankar rubbished the allegation that Hwa Hong’s engagement of Evercore was improper and thus invalid.

Instead, the current board was unhappy and refused to honour its contractual obligation to Evercore because the adviser had created competitive tension and was soliciting other bids while the acquisition was ongoing, thereby forcing the offerors to raise their price from S$0.37 to S$0.40 a share, Shankar argued.

Hwa Hong’s solvency was also called into question as Shankar referred to its balance sheet as at Dec 31, 2022 that showed its current liabilities of S$47.1 million exceeded its current assets of S$46.1 million by about S$1 million.

However, Hwa Hong’s lawyer Jason Chan of Allen and Gledhill pointed out Evercore knew that the engagement letter signed by Dr David Ong on behalf of Hwa Hong as adviser in May 2022 was not valid because Dr Ong, Ong Eng Loke and Ong Eng Keong who passed the directors’ resolution were acting in conflict of interest.

Chan said that Dr Ong had earlier, in September 2021, engaged Evercore to find buyers for his shares in Hwa Hong, with Ong Eng Loke and Ong Eng Keong shouldering the burden of Evercore’s fees if their stakes were sold as well.

Despite that contract not yielding any share sale when it was terminated before Hwa Hong’s engagement of Evercore, Dr Ong and the other two Ongs would be liable to pay for Evercore’s fees if they managed to sell their shares within a year after termination of the contract.

However, misleading statements were made to Hwa Hong and the Securities Industry Council when the impression was given that no fee was payable by Dr Ong simply because his contract was terminated, Chan noted.

Due to Hwa Hong’s subsequent engagement of Evercore, Dr Ong and the other two Ongs were able to save S$1.5 million to S$2 million as this was waived by Evercore. The adviser was able to earn a higher fee – as much as S$7.8 million – as Hwa Hong’s adviser. It would have earned up to only S$2.9 million from Dr Ong and party, otherwise.

Calling Evercore’s bid to wind up Hwa Hong “an abuse of process”, Chan said that it knows the winding-up would not be granted when the debt is being disputed and also that Hwa Hong is not unable to pay.

The senior counsel pointed out that the Hwa Hong group has S$40 million in cash, of which S$10 million has been earmarked to settle any liability owed to Evercore if it is found liable.