SINGAPOREAN UPDATE – Competition Commission of Singapore Amends Merger Guidelines
Highlights:
- The Competition Commission of Singapore (“CCS”) has published its revised Guidelines on Merger Procedures 2012 and they came into effect on 1 July 2012.
- The changes provide further guidance to parties on determining whether a merger is likely to result in a substantial lessening of competition.
- They also set out a new procedure for obtaining the CCS’s confidential advice on the proposed merger, and also explain the CCS’s approach to market intelligence and how confidential information provided to it will be treated.
Main Article:
The Competition Commission of Singapore (“CCS”) has published its revised Guidelines on Merger Procedures 2012 (“2012 Guidelines”). They came into effect on 1 July 2012. The CCS first issued a consultation paper on 20 February 2012 (“Consultation Paper”) seeking feedback on proposed changes to the Guidelines on Merger Procedures. Following the feedback, the CCS modified some of its proposed changes. However, the main changes proposed in the consultation paper remain substantially the same. The changes effected by the 2012 Guidelines are discussed below.
Self-Assessment of a SLC
Given that the merger notification regime in Singapore is a voluntary one, parties to a proposed merger have to determine whether there is a risk of the merger being prohibited under section 54 of the Competition Act for causing a substantial lessening of competition (“SLC”) in the relevant market. In this regard, the 2012 Guidelines provides further guidance to smaller companies by stating that a merger is unlikely to be investigated by the CCS if:
- It involves companies with turnover in Singapore of less than S$5 million; and
- The combined worldwide turnover of the merger parties is less than S$50 million.
This guidance differs slightly from that proposed in the Consultation Paper in the following ways:
- The CCS has suggested that, for the purpose of a self-assessment as to whether the merger is one that results in a SLC, parties use a rule-of-thumb based on their respective shares of supply. This suggestion has not been incorporated into the 2012 Guidelines which retain the market share test for self-assessment.
- Also as regards parties’ self-assessment of their merger, the CCS had proposed stating that a merger of small companies would ordinarily not result in a SLC. It had further proposed that a company would be considered small if, in the financial year preceding the transaction, it had a turnover in Singapore below S$5 million, and a turnover worldwide below S$10 million. The 2012 Guidelines retain the threshold of a S$5 million annual turnover in Singapore. However, the worldwide turnover threshold has been broadened: as mentioned above, it now covers the combined worldwide turnover in the financial year preceding the transaction of all the parties, which must be below S$50 million.
Obtaining a Confidential Opinion from the CCS
A new procedure for obtaining a confidential opinion from the CCS on the parties’ proposed merger is set out. In short, merger parties who are concerned with preserving the confidentiality of a transaction may approach the CCS for confidential advice on whether the proposed merger is likely to raise competition concerns in Singapore. They will be expected to provide information on the merger that is similar to what is required in the Form M1 (the prescribed form for a standard Phase 1 merger notification). The CCS will assess the merger internally without making third party enquiries and at the end of the process, the CCS will issue a letter stating whether it considers that the merger is likely to raise competition concerns in Singapore.
In response to feedback as to the new procedure, the 2012 Guidelines now incorporate the following assurances:
- The CCS will not disclose to other organisations or competition authorities in other jurisdictions the information provided by the party requesting confidential advice, nor the fact that confidential advice has been requested, without first obtaining the relevant waivers.
- Where a party has requested confidential advice, it must meet certain conditions stipulated in the 2012 Guidelines. The CCS has included an assurance that confidential information provided to it for this purpose will be returned to the party making the request if the CCS decides that the conditions for giving confidential advice have not been met.
CCS’s Assessment of a Merger
The 2012 Guidelines provide guidance on what constitutes confidential information for the purposes of making confidentiality claims when merger parties provide information to the CCS for its assessment of the merger. The CCS cautions against overly wide or blanket confidentiality claims and also lists several examples of information which would not be considered confidential, such as:
- Information which relates to the business of the merger parties but is not commercially sensitive in the sense that it would cause harm to the business if disclosed;
- The merger parties’ views of how the competitive effects of the merger could be analysed; and
- Information that is general knowledge within the industry or is likely to be readily ascertainable by any reasonably diligent market participant or trade analyst.
At the end of a Phase 1 review of a merger, the CCS case team may notify the merger parties of any issues giving rise to competition concerns in order to allow the merger parties to address these issues by giving the CCS appropriate commitments. Following feedback, the 2012 Guidelines clarify that, for the purposes of the Singapore Code for Takeovers and Mergers, such a notification does not constitute a decision to proceed to a Phase 2 review. For such merger situations, the CCS will issue a separate letter stating its decision to proceed to a Phase 2 review.
Market Intelligence and Complaints from Third Parties
Finally, the 2012 Guidelines clarify the CCS’s approach to market intelligence and the role of complainants and third parties in the context of merger control. The 2012 Guidelines make it clear that the CCS keeps markets under review to ascertain what mergers or acquisitions are taking place, and will approach merger parties and other third parties to gather further information where it identifies transactions that may potentially raise competition concerns. The CCS has also indicated that it may publish a notice on its website indicating that it is considering whether or not a completed or anticipated merger that has not been notified to it may raise competition concerns.
SINGAPOREAN UPDATE: Changes to the Singapore Code on Take-Overs and Mergers
Highlights:
- The Singapore Code on Take-overs and Mergers was amended with effect from 9 April 2012.
- The main changes include updating the Code to incorporate current practices on the takeover of real estate investment trusts and business trusts, setting out when collective shareholder action amounts to acting in concert, and dealing with joint offers and the acquisition of derivatives.
MAIN ARTICLE
The Monetary Authority of Singapore (“MAS”) has amended the Singapore Code on Take-overs and Mergers (“Code”). The revised Code has taken effect as from 9 April 2012. The changes were first the subject of a consultation by the Securities Industry Council (“SIC”) in October 2011. We had reported on the consultation in an earlier update. Following the consultation, the SIC amended some of its proposed changes. The details of the finalised changes are set out in this update.
Executive Summary
The changes to the Code include the following:
- An option or derivative transaction has been made subject to Rule 14 on mandatory offers. Persons who would cross the mandatory offer thresholds had such transactions involved the transfer of shares must consult the SIC beforehand.
- Dealings in long options and derivatives over offeree company shares during the offer period by associates who hold 5% or more in the offeree company must be disclosed.
- An offeror and its concert parties must disclose the number and percentage of their shareholdings which have been charged as security, borrowed, or lent.
- The shareholding threshold for a shareholder to disclose dealings in the offeree company shares during the offer period has been lowered from 10% to 5%.
- Shareholders of a company that is buying back its shares are provided with a class exemption from the requirement to make a mandatory offer as a result of the share buy-back subject to conditions.
- The factors which the SIC would consider in determining whether to permit an offeree company shareholder to invest in the bid company to the exclusion of all other offeree company shareholders have been set out.
- The circumstances where shareholders voting together on a board control-seeking resolution might be regarded as parties acting in concert have been set out.
Other changes made clarify certain powers of the SIC to take action in respect of breaches of the Code, as well as the application of the Code to real estate investment trusts and business trusts.
Lending, Borrowing, and Charging of Shares
In October 2008, the takeover of a Singapore listed company ran into problems when it transpired that the offeror had lent his shares to a third party that subsequently became insolvent and consequently failed to return equivalent shares to the offeror. The share lending was not disclosed by the offeror during the takeover bid. The takeover offer was subsequently aborted as the offeror was no longer able to fulfil its takeover obligations.
To prevent a recurrence of such a situation, the Code now expressly stipulates that offerors and their concert parties must disclose if the offeree company shares that they hold have been charged as security, borrowed, or lent. In addition, the following clarifications have been included (pursuant to feedback after the consultation):
- When making disclosure, the offeror should specify both the number and the percentage of the shares in the offeree company held by the relevant person which have been charged as a security interest, borrowed, or lent.
- If the offeror has borrowed shares which he has on-lent or sold, these should not be included when disclosing the number of shares held by him.
- In determining the number of acceptances received during a general offer, shares borrowed by the offeror may not normally be counted towards fulfilling the acceptance condition. In addition, where the mandatory bid obligation was triggered as a result of share borrowing, the borrower should consult the SIC on how the borrowed shares should be treated for the purpose of the acceptance condition.
Collective Shareholder Action
The Code has been amended to provide greater clarity as to when the action of shareholders voting together on particular resolutions at one general meeting might be regarded as acting in concert. It now expressly makes clear that shareholders may be presumed to be acting in concert where they have an agreement or understanding to requisition or threaten to requisition resolutions at a general meeting that have the purpose of seeking control of the board. Once the presumption arises, subsequent acquisitions of interests in shares by any member of the group could give rise to an obligation to make a general offer.
Joint Offerors
In some takeover offers, it is proposed that certain offeree company shareholders are to retain an interest in the offeree company following the offer through the exchange of their offeree company shares for shares in the bid vehicle. Where it was previously silent, the Code now makes clear that such arrangements would not be regarded as a special deal under the Code if the offeror and the offeree company shareholder had come together to form a consortium on such terms and in such circumstances that each of them can be considered to be a joint offeror.
In order to determine whether a person is a joint offeror, the SIC will look to the following factors:
- The proportion of equity share capital of the bid vehicle the person will own after completion of the acquisition;
- Whether the person will be able to exert a significant influence over the future management and direction of the bid vehicle;
- The contribution the person is making to the consortium;
- Whether the person will be able to influence significantly the conduct of the bid; and
- Whether there are arrangements in place to enable the person to exit from his investment in the bid vehicle within a short time or at a time when other equity investors cannot.
Definition of “Associate”
Currently, one of the categories of persons listed as associate is a holder of 10% or more of the equity share capital of the offeror or offeree company. The Code has been amended to lower the threshold to 5%.
Options and Derivatives
While as a matter of practice the SIC requires persons who acquire long options or derivatives which might cause them to cross the mandatory offer thresholds to consult it before entering into such transactions, the Code itself does not currently address the question. Following the amendment, it now specifies that a person who acquires or writes an option or derivative which causes him to have a long economic exposure would normally be regarded as having acquired shares for the purposes of determining whether the specified thresholds for making a mandatory general offer have been crossed. He will have a long economic exposure if he would benefit economically if the price of the security goes up and will suffer economically if the price of the security goes down.
In addition, the acquisition or writing of an option or derivative will include situations where the option or derivative is acquired as part of a derivatives reference basket or index. The rule will not apply if, at the time of dealing, relevant securities to which the derivative is referenced represent less than 1% of the class in issue and less than 20% of the referenced securities by value. This is, however, only a guideline and is not determinative of whether the rule is excluded.
The Code will also require disclosure of dealings in long options and derivatives during the offer period by persons holding 5% or more in the offeree company’s issued share capital. “Dealings in relation to derivatives” is defined widely to include taking, granting, acquisition, disposal, exercising (by either party), lapsing, closing out, conversion, or variation.
Share Buy-backs
When a company buys back its shares, any resulting increase in the percentage of voting rights held by a shareholder and persons acting in concert with him is treated as an acquisition for the purpose of triggering the obligation to make a mandatory general offer. Currently, however, parties may apply for an exemption from the SIC provided they can demonstrate that the share buy-back meets certain specified conditions. As the grant of such exemptions have been routine and straightforward, the Code will now dispense with the requirement for parties to seek an exemption so long as they comply with these conditions.
SINGAPOREAN UPDATE – Proposed Changes to Singapore’s Guidelines for Merger Control
Highlights:
- Changes have been proposed to the Competition Commission of Singapore’s Guidelines on Merger Procedures.
- The changes give parties greater guidance on the self-assessment of mergers, obtaining a confidential opinion, and the treatment of confidential information.
MAIN ARTICLE
On 20 February 2012, the Competition Commission of Singapore (“CCS”) issued a consultation paper (“Consultation Paper”) proposing various changes to its Guidelines on Merger Procedures (“Guidelines”). The Guidelines essentially set out the procedures that are followed by the CCS in its review of notified mergers. This set of proposed changes (“Proposed Guidelines”) are intended to update the Guidelines to reflect the experience in merger control gained by the CCS over the last four and a half years. The CCS is not proposing any changes to the Guidelines on the Substantive Assessment of Mergers at this juncture
The main changes to the Guidelines that have been proposed are as follows:
- A new section provides parties with guidance when considering whether their merger is likely to be a prohibited merger under section 54 of the Competition Act and should therefore be notified to the CCS for approval;
- The CCS’s approach to market intelligence and the role of complainants and third parties in the context of merger control is clarified;
- A new procedure for obtaining a confidential opinion from the CSS on the parties’ proposed merger is set out; and
- Guidance is provided on what constitutes confidential information for the purposes of providing information to the CCS for its assessment of the merger.
Guidance for the Self-Assessment of Mergers
By way of background, it should be noted that the Competition Act does not require the approval of the CCS before a merger may be undertaken. However, where a merger results in a substantial lessening of competition (“SLC”) within any market in Singapore for goods or services, that merger is prohibited. If the CCS has reasonable grounds for suspecting that a merger has infringed, or that an anticipated merger if carried into effect will infringe, this prohibition, it may open an investigation on its own initiative. Ultimately, if the CCS determines that there has indeed been a SLC, it can require parties to split up the merged entity and/or impose financial penalties on them.
Because notification of a merger is voluntary, parties have to assess for themselves whether the merger is likely to result in a SLC and would hence need to be notified to the CCS. To enable parties and their counsels to engage in this self-assessment, the Proposed Guidelines provide guidance on the types of mergers that would raise concerns.
On the one hand, a new minimum threshold is introduced. The Proposed Guidelines indicate that mergers involving small companies are unlikely to give rise to a SLC. Small companies, in turn, are defined as companies who, in the financial year preceding the transaction, had a turnover in Singapore below S$5 million, and a turnover worldwide below S$10 million.
On the other hand, merger parties are strongly encouraged to notify the CCS where the following two conditions are met:
- The merger parties supply goods or services of the same description to customers in Singapore. In this regard, the Proposed Guidelines advise that the merger parties should have regard to the narrowest reasonable description of goods or services. Furthermore, there is no need for merger parties to consider the degree of supply and demand side substitution in order to define the relevant market.
- In addition, the merger parties’ combined share of the supply of the overlapping goods or services in Singapore exceeds 40%. In relation to determining whether or not the 40% share is met, the parties can refer to sales by value, volume, number of (retail) outlets, number of bids won, etc.
It should be noted that the Proposed Guidelines refer to a test based on the parties’ share of the supply of goods or services and not the parties’ share of the market.
Market Intelligence and Role of Third Parties
Where a merger is not notified, the Consultation Paper reminds parties that the CCS may conduct an investigation if there are reasonable grounds for suspecting that a merger has infringed, or that an anticipated merger if carried into effect will infringe, the prohibition against mergers that result in a SLC. Such reasonable grounds may be provided from the CCS’s own market intelligence or as a result of complaints received.
The Proposed Guidelines also clarify the role of third parties and complainants. They explain that the CCS is under no obligation to follow-up or investigate all complaints relating to non-notified mergers. This is in line with the voluntary nature of the merger regime in Singapore, and also aims at discouraging speculative complaints. As regards third parties, the Proposed Guidelines reiterate the position that they can express their views on notified mergers and on commitments, and can also apply to the courts for review.
Confidential Opinion from the CCS
The Proposed Guidelines set out a new process whereby merger parties may obtain a confidential opinion from the CCS whether a merger is likely to raise anti-competition concerns. It is proposed that parties may approach the CCS for such an opinion in the following circumstances:
- The merger must not be completed but there must be a good faith intention to proceed with the transaction, as evidenced to the satisfaction of the CCS by the party or parties requesting the confidential advice.
- The merger must not be in the public domain. In exceptional circumstances, the CCS may consider giving confidential advice in relation to mergers that are no longer confidential, but the requesting party or parties must provide good reasons why they wish to receive confidential advice.
When confidential advice has been sought, the CCS reserves the right to investigate the merger situation where the statutory test for doing so is met. The Proposed Guidelines also clarify that the requesting party or parties are expected to keep the CCS informed of significant developments in relation to the merger situation in respect of which confidential advice was obtained, for example, the completion date or the abandonment of the merger.
Confidential Information
The Proposed Guidelines set out the CCS’s practice of requiring parties to provide two versions of their notification filings: a version with confidential information redacted, and another setting out the confidential information. The redacted version may be used by the CCS to approach third parties, while the unredacted version will be kept confidential by the CCS.
The Proposed Guidelines warn, however, that the CCS can stop the indicative timeframe of its review if it considers the confidentiality claims made by the parties to be excessive or unreasonable. They also clarify that the following types of information are not likely to be considered confidential by the CCS:
- Information that relates to the business of any of the merger parties but is not commercially sensitive in the sense that disclosure would cause harm to the business;
- Information that reflects the merger parties’ views of how the competitivity effects of the merger could be analysed—this type of information can be produced by any reasonably well-informed market participants, trade analysts, or legal/economic advisors; and
- Information that is general knowledge within the industry, or is likely to be readily ascertainable by any reasonably diligent market participant or trade analyst.
Finally, the Proposed Guidelines state that while the CCS usually publishes only non-confidential merger decisions, it may disclose confidential information when necessary. This may occur, for example, in the context of third party enquiries or to explain the CCS’s reasoning in its final decisions.
SINGAPOREAN UPDATE – Proposed Changes to the Singapore Code on Takeovers and Mergers
Highlights:
- Changes have been proposed to the Singapore Code on Take-overs and Mergers (“Code”).
- The main changes include updating the language of the Code to incorporate current practices on the takeover of real estate investment trusts and business trusts, setting out when collective shareholder action amounts to acting in concert, and dealing with joint offers and the acquisition of derivatives.
MAIN ARTICLE
The Securities Industry Council (“SIC”) is the body that administers and enforces the Code. In October 2011, it issued a consultation paper, “Consultation Paper on Revision of the Singapore Code on Take-overs and Mergers” (“Consultation Paper”), for public consultation.
The Consultation Paper proposed various changes to the Code. These fell into the following four general areas:
- Expanding and clarifying the SIC’s powers to impose sanctions on offerors and their advisers;
- Rationalising the language of the Code to deal with the takeover of real estate investment trusts and business trusts, both of which have structures unlike that of a company;
- Codifying its practice statements on real estate investment trusts, trust schemes, and merger procedures by incorporating them into the body of the Code; and
- Proposing new rules to deal with developments in mergers and acquisitions over the last few years.
The new rules that have been proposed are the subject of this update.
Lending, Borrowing and Charging of Shares
In October 2008, the takeover of a Singapore listed company ran into problems when it transpired that the offeror had lent his shares to a third party that subsequently became insolvent and consequently failed to return equivalent shares to the offeror. The share lending was not disclosed by the offeror during the takeover bid. The takeover offer was subsequently aborted as the offeror was no longer able to fulfil its takeover obligations. To prevent a recurrence of such a situation, the SIC has proposed that the Code expressly stipulate that offerors must disclose if the offeree company shares that they hold have been charged as security, borrowed or lent.
Collective Shareholder Action
It is proposed that where shareholders have an agreement or understanding to requisition or threaten to requisition resolutions at a general meeting that have the purpose of seeking control of the board, they may be presumed to be acting in concert. Once the presumption arises, subsequent acquisitions of interests in shares by any member of the group could give rise to an obligation to make a general offer.
Joint Offerors
In some takeover offers, it is proposed that certain offeree company shareholders (other than management) are to retain an interest in the offeree company following the offer through the exchange of their offeree company shares for shares in the bid vehicle. In order to determine whether such arrangements would be regarded as a special deal under the Code, the SIC has proposed that they would not be considered as such if the offeror and the offeree company shareholder had come together to form a consortium on such terms and in such circumstances that each of them can be considered to be a joint offeror.
It has further proposed stipulating the following factors as being factors relevant to determining whether a person is a joint offeror:
- The proportion of equity share capital of the bid vehicle the person will own after completion of the acquisition;
- Whether the person will be able to exert a significant influence over the future management and direction of the bid vehicle;
- The contribution the person is making to the consortium;
- Whether the person will be able to influence significantly the conduct of the bid; and
- Whether there are arrangements in place to enable the person to exit from his investment in the bid vehicle within a short time or at a time when other equity investors cannot.
Definition of “Associate”
Currently, one of the categories of persons listed as associate is a holder of 10% or more of the equity share capital of the offeror or offeree company. The SIC has proposed lowering the threshold to 5%.
Options and Derivatives
While as a matter of practice the SIC requires persons who acquire long options or derivatives which might cause them to cross the mandatory offer thresholds to consult it before entering into such transactions, the Code itself does not currently address the question. It has proposed that Code stipulate that all acquisitions of long options or derivatives (i.e. without offsetting the value of short positions) would normally be regarded as acquisitions of shares for the purposes of determining whether the specified thresholds for making an mandatory general offer have been crossed. In addition, it is also proposed that the Code require disclosure of dealings in long options and derivatives during the offer period by persons holding 5% or more in the offeree company’s issued share capital.
Share Buy-backs
When a company buys back its shares, any resulting increase in the percentage of voting rights held by a shareholder and persons acting in concert with him is treated as an acquisition for the purpose of triggering the obligation to make a mandatory general offer. Currently, however, parties may apply for an exemption from the SIC provided they can demonstrate that the share buy-back meets certain specified conditions. As the grant of such exemptions have been routine and straightforward, the SIC has proposed streamlining the process by dispensing with the requirement for parties to seek an exemption so long as they comply with these conditions.
SINGAPOREAN UPDATE – Court Held That Terminology “Subject to contract” Indicated Intent Not to Be Bound Until a Formal Agreement Was Negotiated and Executed
Highlights:
- Offer and acceptance letters’ inclusion of phrase “subject to contract” was , in the context of the factual matrix, found to make clear the intent of the parties that they were not to be contractually bound until a formal agreement was negotiated and executed.
- While the Court in this case found that no contract had arisen, it is important to note that the phrase “subject to contract” is not a magic formula; merely including it on a document does not automatically preclude a binding contract from arising. Ultimately, a Singapore court will look at all the facts of the case and the presence of the phrase is only one factor, albeit an important one, that a court will take into account.
Facts
In Norwest Holdings Pte Ltd (in liquidation) v Newport Mining Ltd [2011] SGCA 42 (Singapore, Court of Appeal, 23 August 2011)), the liquidator of the plaintiff company, Norwest Holdings Pte Ltd, sought to sell the entire share capital of its wholly-owned subsidiary, Norwest Chemicals Pte Ltd (“Norwest Chemicals“).
Norwest Chemicals was the holding company of Sichuan Mianzhu Norwest Phosphate Chemical Company Limited (“Norwest Sichuan“). Norwest Sichuan’s assets were:
- the mining rights to two phosphate rock mines (“Mines“) for a period up to 2015; and
- production facilities for the production of sodium and potassium phosphate and phosphoric acid (“Facilities“).
The defendant, Newport Mining Ltd, was interested in purchasing the shares. On 2 May 2008, it submitted a Firm Letter of Offer for S$10 million. This was followed by a second Firm Letter of Offer for S$10.25 million on 9 May 2008.
On 12 May 2008, an earthquake struck the region where the Mines and Facilities were located and they suffered extensive damage. Two hours after the earthquake, the liquidator accepted the offer. The letter accepting the offer also stated that a formal sale and purchase agreement was to be negotiated and executed between the plaintiff and the defendant. It was not disputed on the facts that at the time of acceptance, the liquidator had not yet found out about the earthquake.
The plaintiff claimed that a binding sale and purchase contract for the sale of the Norwest Chemical shares had arisen. The defendant claimed that there was no binding contract. It was argued that the offers and acceptance were clearly made “subject to contract”, and accordingly, as no contract had been entered into, none had arisen. Alternatively, it argued that the offer had been made and accepted on the premise that the Mines and Facilities were sold in substantially the condition that they had been in when the offer was made, and that the damage to the same therefore vitiated the contract.
Decision
The High Court had found in favour of the defendant. On appeal, the Court of Appeal also found in the defendant’s favour.
The Court of Appeal held that the inclusion of the stock phrase “subject to contract” was not conclusive of the intention of the parties. Instead, it held that the better view was that the question whether there is a binding contract between the parties should be determined by considering all the circumstances. These would include what was communicated between the parties by words or conduct.
The Court noted that the key documents exchanged between the parties (i.e., the Information Memorandum, the letters of offer, and the letter of acceptance) had all referred to any agreement being “subject to contract”. This made clear the intent that parties were not to be contractually bound until a formal agreement was negotiated and executed. In addition, there had been no subsequent conduct that indicated that parties had changed this position:
- While the plaintiff pointed to the defendant finalising funding for the purchase, the Court noted the finalisation of the funding had not been communicated to the plaintiff.
- The plaintiff also noted that the defendant, a listed company, had announced the purchase and declared a trading halt in trading in its shares. The Court, however, held that this was not indicative of an intent to proceed with the purchase as this announcement had also been accompanied by a subsequent statement as to the earthquake and the need for time to ascertain the extent of the damage.
- Finally, the plaintiff noted that the defendant had, upon the liquidator’s request, topped up the purchase deposit despite knowing by then about the earthquake. The Court noted that this payment had only been made to preserve the defendant’s position while the extent of damage to the Mines and Facilities was investigated.
The Court accordingly held that, for all these reasons, the plain meaning of the “subject to contract” provisions in the Information Memorandum, the First Firm Letter of Offer, the Second Firm Letter of Offer, and the Acceptance Letter should be applied in this case. In the circumstances, therefore, the Court held that there was no binding contract entered into between the parties.
Comment
While the Court in this case found that no contract had arisen, it is important to note that the phrase “subject to contract” is not a magic formula; merely including it on a document does not automatically preclude a binding contract from arising. Ultimately, a Singapore court will look at all the facts of the case and the presence of the phrase is only one factor, albeit an important one, that a court will take into account.