Park Hotel Management, liquidators sue director over disposal of assets

Park Hotel Management (PHMPL) and its liquidators have filed a lawsuit against PHMPL’s sole director and shareholder Allen Law Ching Hung and 3 other companies over matters relating to assets sold to entities related to Law before PHMPL was placed into winding up.

The 3 other defendents named in the suit are Park Hotel Group Management (PHG), BVI-incorporated Good Movement Holdings and Singapore Institute of Hospitality (SIOH). PHG and SIOH are owned by Good Movement, which in turn is wholly owned by Law.

According to the Statement of Claim (SOC) filed by the plaintiffs, Law allegedly “caused PHMPL to dispose of its assets at an undervalue”. Aw Eng Hai and Kon Yin Tong of accountancy firm Foo Kon Tan are PHMPL’s liquidators. Law, PHG, Good Movement and SIOH denied the plaintiffs’ claims.

In July 2021, PHMPL was ordered by the High Court to be wound up. It is the sole parent of the former operators of the Grand Park Orchard and Park Hotel Clarke Quay hotels, which were unable to pay their debts. A separate case has been filed by Park Hotel CQ (PHCQ), along with its liquidators, against Law over some S$6.5 million in funds that were transferred out of PHCQ.

The plaintiff’s SOC stated, among other things, that “PHMPL did not receive any consideration for the substantial assets it disposed of”. This included a sum of S$2.7 million for assets sold to PHG under an asset share and transfer agreement (ASTA) dated Mar 8, 2021. Among the assets in question under the ASTA were said to be 12 hotel management agreements, 3 licence agreements, business names, 135 registered or pending trademarks across various markets and IT systems.

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PHMPL was also the sole shareholder of hotel management company Park Hotel Management (Maldives), restaurant operator Yan as well as Singapore-incorporated Park Hotel Affiliates (PHA).

The 100 per cent shareholding in Park Hotel Maldives was purchased by PHG and Good Movement for US$40,000, while the entire shareholding in Yan was purchased by Good Movement for S$500,000.

Meanwhile, the business and assets of the Singapore Institute of Hospitality were sold by PHMPL to SIOH for S$200,000.

However, the consideration of S$500,000 for Yan, along with the S$200,000 for the business and assets of the Singapore Institute of Hospitality, were “not paid to PHMPL but were instead set off against the amounts allegedly owing to Law under his directors’ account with PHMPL”, the SOC stated. This was also the case for Park Hotel Maldives.

In his defence, Law argued that the assets were sold to PHG were done so at fair value. Law said he had extended “substantial loans” to PHMPL over the course of 16 years, and the sums owed for the assets transferred were legitimately settled by way of set-offs against the loans.

Law is the son of Hong Kong-based billionaire Law Kar Po, who is No 14 on Forbes’ list of the 50 richest Hong Kongers. Forbes puts Law Kar Po’s net worth at about US$6.6 billion.

The plaintiffs also alleged that Law “acted in breach of his fiduciary duties when he put himself in a position of conflict and acted in breach of the rule against self-dealing when he procured PHMPL to dispose of its assets to PHG, Good Movement and SIOH, which are companies he owned directly or indirectly.”

In addition, the SOC alleged that cash payments between January 2021 and March 2021 amounting to about S$14.13 million as well as an interim dividend of S$5.9 million for the financial year ended Dec 31, 2020 were paid by PHMPL to Law. This allegedly came at a time when “PHMPL was unable to pay its debts and was in a parlous financial state”.

In his defence, Law alleged that over 16 years and in his capacity as a director of PHMPL, he had extended “substantial loans to PHMPL”. In addition, as “PHMPL was not insolvent or ... in a financially parlous position as at March 2021 and had sufficient retained earnings”, Law performed a set-off of the sums owed to him by PHMPL against the S$2.7 million payable from PHG to PHMPL; and PHMPL declared and paid the dividends around March 2021.

In addition, Law argued in his defence that he “did not act in breach of his fiduciary duties” as a director of PHMPL, nor did he act in breach of the rule against self-dealing and the no-conflict rule.

For its part, PHG denied the plaintiffs’ allegations in the SOC, and stated in its defence that the transactions between PHG and PHMPL were conducted at fair value. Tan Shin Hui — who is Law’s wife and granddaughter of banking tycoon Wee Cho Yaw — was the sole director of PHG.

On projecting the management fees payable for the hotel management contracts, PHG highlighted that the ASTA had been entered into at the height of the pandemic, at a point where there was uncertainty over the future performance of the hotels.

In its defence, Good Movement asserted that in valuing Yan’s shares, consideration was given to the fact that the profits forecasted for 2021 were negative, while profits of S$688,326 in 2020 were aided by government grants and rental relief. Yan declared an interim dividend of over S$891,160 for FY21 to its sole parent PHMPL in January 2021. Yan earned profits of S$976,947 and about S$1.07 million for the FY 2018 and 2019 respectively.

Good Movement also alleged that the shares in Park Hotel Maldives were correctly valued as they were based on its net asset value as at February 2021. At the time, Park Hotel Maldives was said to have no other source of revenue besides a hotel management agreement, that was “separately valued and sold to PHG” under the ASTA.

In its defence, SIOH highlighted that PHMPL had wanted to divest its non-core business, and that it was believed that the Singapore Institute of Hospitality would “perform better if it was not tied to PHMPL” since other hotel brands might be less inclined to send their staff to a training institute linked to another brand.

While plans to sell the institute to a separate company had been first broached in 2018, it was only put into motion during the pandemic when hotels were facing “temporary downtime” as it seemed to be a good time for the divestment, SIOH stated. SIOH also asserted the transfer of assets from PHMPL were done at a fair valuation, noting the Institute’s profits for FY20 and the first 7 months of 2021 were due to government grants.

Allen & Gledhill partners William Ong and Lee Bik Wei are acting for the plaintiffs, while Law, PHG, Good Movement and SIOH are represented by TSMP Law’s senior counsel Thio Shen Yi.