SINGAPORE – A businessman who personally undertook to buy back shares for $8 million later tried to back out of the obligation, arguing the deal was not legally binding and involved a foreign-worker dormitory that exceeded its approved capacity.
The High Court on Aug 18 rejected businessman Li Hua’s arguments and ordered him to pay $7.01 million in damages.
The case centred on a 2015 deal in which businessman Oon Koon Cheng sold his company that owned, among other properties, a dormitory at Woodlands Industrial Park.
The dormitory was approved to house 320 workers, but was, in fact, housing about 500 workers.
High Court Justice Mohamed Faizal said in a written judgment that the higher occupancy was known, or at least “rather obvious”, to those involved in the transaction. It also made the dormitory business more profitable.
But when the time came for Li to honour his undertaking to buy back shares that Oon had received as part of the deal, Li refused.
Li argued that the undertaking was not binding and that the transaction was tainted by the illegality of the dormitory housing more workers than its approved capacity
Justice Faizal rejected his arguments, finding that Li had entered into a commercially advantageous deal and could not later walk away when it became less favourable to him.
“Having taken the upside of the transaction, the defendant ought to be made to live with its downsides,” he said.
The judge awarded Oon $7,013,157.95 in damages.
The dispute arose from the sale of Koon Cheng Development (KCD), which was wholly owned by Oon’s company, Sin Hong Hwa.
KCD owned three properties at Woodlands Industrial Park – a four-storey factory, a two-storey warehouse and a four-storey dormitory, which generated a large part of the company’s rental income.
In 2015, Oon agreed to sell KCD to Singapore Exchange-listed USP Group, of which Li was the executive chairman and chief executive officer, as well as one of its 20 largest shareholders.
The $32 million deal comprised $24 million in cash and $8 million in USP Group shares.
As Oon was concerned about receiving shares instead of cash, Li personally signed a letter of undertaking (LOU) in December 2015 agreeing to buy back the shares for $8 million after three years if Oon exercised the option.
The deal was completed in February 2016, but by 2019, the value of USP Group’s shares had fallen sharply.
Oon exercised his option in February 2019, asking Li to buy the shares back for $8 million, but Li did not do so.
Oon’s lawyers gave Li further time to comply, but he still did not buy the shares. Oon subsequently sued Li in the High Court in September 2019.
Li raised several defences in the High Court suit, including that the LOU was not a legally binding contract.
He also argued that Oon had misled him about the dormitory’s regulatory position, and that the underlying sale was tainted by illegality because the dormitory was housing substantially more workers than its approved capacity.
But Justice Faizal found that Li knew about the discrepancy. The sale agreement itself referred to the dormitory as being approved for 320 workers but “currently” housing about 500.
The judge said the wording highlighted the difference between the approved capacity and the actual number of workers staying there.
Li nevertheless proceeded with the transaction.
The evidence also showed that KCD later applied to increase the dormitory’s approved capacity to 670 workers, but the application was rejected.
Justice Faizal said it was more plausible that Li understood the additional workers as a source of extra revenue and was prepared to accept the regulatory risk.
The judge also rejected Li’s claim that Oon had misrepresented the regulatory position.
Li’s case was that Oon had told him the higher occupancy was not a problem because he had never faced enforcement action from the authorities.
But the judge found this was not an actionable misrepresentation.
Li and USP Group had already identified the discrepancy during their due diligence, and there was evidence that their lawyers had regarded the mismatch between the approved and actual number of workers as material.
Justice Faizal said Li had proceeded with the transaction “knowing full well” that the approvals covered only 320 workers.
He also rejected the argument that the alleged illegality surrounding the dormitory made the $8 million buyback undertaking unenforceable.
The judge noted that the LOU did not require either party to house excess numbers of workers or commit any unlawful act. It was simply a promise by Li to buy back the shares at a fixed price.
“Whatever, therefore, one may say about the dormitory’s occupancy levels, the LOU remained, in substance, a standalone promise as to the future repurchase of shares,” Justice Faizal said.
He also found that the terms of the undertaking were sufficiently clear and that the parties intended to create legal relations.
The judge was critical of Li’s changing defences during the litigation.
He said the dispute was, at its heart, about whether the court should accept what appeared to be a “self-interested retrospective narrative constructed after the fact”, or the simpler inference that the parties had knowingly entered into a commercially advantageous arrangement and Li was now seeking to escape a bargain that had become disadvantageous.
Justice Faizal preferred the latter.
Li had failed to buy back the shares by Aug 2, 2019, and was therefore in breach of the undertaking.
The court then had to determine how much Oon had lost.
The agreed buyback price was $8 million. But by Aug 3, 2019, when Li was in breach, USP Group shares were trading at 7.5 cents each.
The shares Oon held were worth about $986,842.
Justice Faizal awarded the difference between the $8 million promised and the market value of the shares at the date of breach – $7,013,157.95.
Oon had sought a larger sum of about $7.43 million, based on the lower share price when he commenced the lawsuit in September 2019.
But the judge said the normal rule was to assess the loss at the date of breach and found no reason to depart from it.
The court will deal with costs separately if the parties cannot agree on them.
Oon was represented in the lawsuit by lawyers Chu Hua Yi and Goh Jia Jie from FC Legal Asia, while Li represented himself.
USP Group shares were suspended from SGX trading on Feb 23, 2024, after the company said it was unable to continue as a going concern and subsequently entered court-supervised judicial management.
On Aug 4, 2026, the company announced it had been discharged from judicial management with effect from July 18, 2026, and had appointed SAC Capital as its financial adviser to work on a proposal to resume trading on the SGX.
USP Group shares, which last traded at 4.2 cents before the suspension, remain suspended.
