ESR GROUP LIMITED & 2 Ors v HSBC INSTITUTIONAL TRUST SERVICES (SINGAPORE) LIMITED & Anor

[2024] SGHC(A) 25 High Court (Appellate Division) 4 September 2024 • AD/CA 37/2024 ( AD/SUM 31/2024 ) • 36 min read

5 cases cited (3 SG, 2 foreign)

Outcome

Appeal dismissed

We therefore dismissed the appeal.

Source: [2024] SGHC(A) 25, High Court (Appellate Division), decided 4 September 2024. Read directly from the judgment.

Key facts

Court	High Court (Appellate Division)
Decided	4 September 2024
Judges	Debbie Ong Siew Ling, Kannan Ramesh, See Kee Oon
Charges / claim	Trusts, Deeds and Other Instruments
Outcome	Appeal dismissed
Counsel	Davinder Singh Chambers LLC, Providence Law Asia LLC, Rajah & Tann Singapore LLP, WongPartnership LLP, Davinder Singh s/o Amar Singh, Ho Linming, Jaikanth Shankar, Jodi Siah Be Koen, Koh Swee Yen, Ngo Wei Shing, Ong Pei Chin, Poon Kin Mun Kelvin, Quek Yi Zhi Joel, Sim Jek Sok Disa, Tai Yuanmin Estelle, Timothy Hew Zhao Yi, Zhuo Jiaxiang

Source: [2024] SGHC(A) 25, High Court (Appellate Division), decided 4 September 2024 — eLitigation. Updated 25 June 2026.

Catchwords

Trusts — Trust deed — Interpretation — Whether the trust deed prohibits certain unitholders of the trust from voting at an extraordinary general meeting Deeds and Other Instruments — Deeds — Interpretation — Whether the trust deed prohibits certain unitholders of the trust from voting at an extraordinary general meeting

Practice Areas

Trusts Deeds and Other Instruments

Judges (3)

Debbie Ong Siew Ling Coram Kannan Ramesh Delivered See Kee Oon Coram

Counsel (17)

Davinder Singh Chambers LLC Firm Providence Law Asia LLC Firm Rajah & Tann Singapore LLP Firm WongPartnership LLP Firm Davinder Singh s/o Amar Singh Counsel Appellant Ho Linming Counsel Respondent Jaikanth Shankar Counsel Appellant Jodi Siah Be Koen Counsel Respondent Koh Swee Yen Counsel Appellant Ngo Wei Shing Counsel Respondent Ong Pei Chin Counsel Appellant Poon Kin Mun Kelvin Counsel Respondent Quek Yi Zhi Joel Counsel Appellant Sim Jek Sok Disa Counsel Respondent Tai Yuanmin Estelle Counsel Appellant Timothy Hew Zhao Yi Counsel Respondent Zhuo Jiaxiang Counsel Respondent

Parties (5)

E-SHANG Infinity Cayman Ltd Appellant E-SHANG Jupiter Cayman Ltd Appellant ESR Group Ltd Appellant HSBC Institutional Trust Services (Singapore) Ltd Respondent Quarz Capital Asia (Singapore) Pte Ltd Respondent

Case Significance

ESR Group Ltd and others v HSBC Institutional Trust Services (Singapore) Ltd and another and another matter [2024] SGHC(A) 25 was decided in the Appellate Division of the High Court of the Republic of Singapore by Kannan Ramesh JAD, Debbie Ong Siew Ling JAD and See Kee Oon JAD, with Kannan Ramesh JAD delivering the grounds of decision of the court. The matter, comprising Civil Appeal No 37 of 2024 and Summons No 31 of 2024 (arising from Originating Application No 19 of 2024), was heard on 25 July 2024 with the grounds delivered on 4 September 2024. The appellants were ESR Group Ltd, E-SHANG Jupiter Cayman Ltd and E-SHANG Infinity Cayman Ltd; the respondents were HSBC Institutional Trust Services (Singapore) Ltd and Quarz Capital Asia (Singapore) Pte Ltd.

The appeal concerned the interpretation of a trust deed constituting a real estate investment trust, and turned on the scope and application of a conflict-of-interest clause in the trust deed — specifically whether the trust deed prohibits certain unitholders from voting at an extraordinary general meeting (catchwords: Trusts — Trust deed — Interpretation; and Deeds and Other Instruments — Deeds — Interpretation). The appellants were represented by Davinder Singh s/o Amar Singh of Davinder Singh Chambers LLC and by Koh Swee Yen, Ong Pei Chin, Quek Yi Zhi Joel and Tai Yuanmin Estelle of WongPartnership LLP, with Jaikanth Shankar also appearing. The respondents were represented by counsel from Providence Law Asia LLC and Rajah & Tann Singapore LLP, including Poon Kin Mun Kelvin, Sim Jek Sok Disa, Ho Linming, Jodi Siah Be Koen, Ngo Wei Shing, Timothy Hew Zhao Yi and Zhuo Jiaxiang.

Summary

SUPREME COURT OF SINGAPORE

4 September 2024

Case summary

ESR Group Ltd and others v HSBC Institutional Trust Services (Singapore) Ltd and another and another matter [2024] SGHC(A) 25
Civil Appeal No 37 of 2024 and Summons No 31 of 2024

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Decision of the Appellate Division of the High Court (delivered by Justice Kannan Ramesh):

Outcome: The Appellate Division of the High Court (“Appellate Division”) dismissed an appeal concerning the interpretation of the trust deed constituting a real estate investment trust (“Sabana REIT”) and held that a conflict-of-interest clause found in the trust deed barred the appellants, who were a major unitholding group in the trust, from voting on proposed amendments to the trust deed.

Pertinent and significant points of the decision

• The appellants were disqualified from voting on proposed amendments to the trust deed under the conflict-of-interest clause because of their material interest in the matter. In view of resolutions passed at an extraordinary general meeting of Sabana REIT for the removal and replacement of Sabana REIT’s manager (the “External Manager”) with a new internal manager which would be beneficially owned by the unitholders of Sabana REIT, the External Manager would lose its significant management fees once removed in the internalisation process. An entity (“Property Manager”) owned by the External Manager might face removal too, which placed its fees at risk. By extension, the ESR Entities would lose their dividend stream, which they received as the ultimate owners of the External Manager. A vote supporting the resolution to accept the Proposed Amendments would facilitate the removal of the External Manager. On the other hand, a vote against could delay that outcome: at [58].

• The appellants’ attempt to show that the revenue and profit contribution of the External Manager relative to the appellants’ parent company’s total revenue and profit was not significant was not relevant. The relevant inquiry was whether the contribution of the profits from the External Manager and the Property Manager to the appellants was significant when viewed objectively: at [59].

• For costs payable to trustees where an appellant beneficiary’s appeal was unsuccessful, the appellant beneficiary would normally be ordered to pay costs of the respondents on the standard basis, with the respondent trustee being allowed the difference between his standard basis costs and indemnity basis costs out of the trust fund: at [65] and [66].

Background

1 This dispute pertained to the internalisation of the management of Sabana Industrial Real Estate Investment Trust (“Sabana REIT”). Sabana REIT was managed by an external manager (the “External Manager”). The External Manager was indirectly wholly owned by the appellants (ESR Group Ltd, E-SHANG Jupiter Cayman Ltd and E-SHANG Infinity Cayman Ltd (collectively the “ESR Entities”)). The ESR Entities were unitholders in Sabana REIT, collectively holding about 21% of the units. Since 2020, the External Manager had received a significant fee for its services on an annual basis from Sabana REIT. In addition, the External Manager owned Sabana Property Management Pte Ltd (the “Property Manager”), an entity that managed the properties of Sabana REIT which also earned a not insignificant fee for doing so.

2 The first respondent, HSBC Institutional Trust Services (Singapore) Ltd (“Trustee”), was the trustee of Sabana REIT. The second respondent, Quarz Capital Asia (Singapore) Pte Ltd (“Quarz”), was a unitholder holding about 14% of the units in Sabana REIT, and was the main driver of the internalisation effort.

3 The internalisation was a result of ordinary resolutions (“7 August Resolutions”) passed at an Extraordinary General Meeting (“EGM”) on 7 August 2023 providing, amongst other things, for the removal and replacement of the External Manager with a new internal manager which would be beneficially owned by the unitholders of Sabana REIT.

4 The Trustee was of the view that amendments (the “Proposed Amendments”) to the trust deed dated 29 October 2010 (the “Trust Deed”) constituting Sabana REIT were necessary to give effect to the 7 August Resolutions. This required extraordinary resolutions to be passed at a duly convened meeting of the unitholders. Quarz disagreed with this approach, which led the Trustee to take out the originating application below to seek declarations in relation to the method of implementation of the internalisation.

5 The judge below (the “Judge”) held that the ESR Entities were prohibited from voting on the Proposed Amendments (to the extent that they were necessary to effect internalisation) pursuant to paragraph 4 of Schedule 1 of the Trust Deed (“Paragraph 4”). The material portions of Paragraph 4 stated:

For so long as the Trust is Listed, the Manager or (being a Holder), the controlling shareholders (as defined in the Listing Rules) of the Manager and any Associate thereof shall be entitled to receive notice of and attend at any such meeting but shall subject to paragraph 5(ii) of this Schedule, not be entitled to vote or be counted in the quorum thereof at a meeting convened to consider a matter in respect of which the relevant controlling shareholders of the Manager or any Associate has a material interest (including, for the avoidance of doubt, interested person transactions (as defined in the Listing Rules and/or the listing rules of other relevant Recognised Stock Exchange) and interested party transactions (as defined in the Property Funds Appendix) …

6 The Judge held that the ESR Entities were barred from voting on account of their material interest in delaying or frustrating the internalisation so that the External Manager would retain its principal business as manager to Sabana REIT and continue receiving management fees. The Judge further observed that Paragraph 4 dealt with an interest that was extraneous or separate from an interest qua unitholder, ie, an interest other than as a unitholder. The Judge also held that the voting prohibition applied to the External Manager or its controlling shareholders and any “Associate” (defined in the Trust Deed as bearing the same meaning as that in the SGX Mainboard Listing Rules (“Listing Rules”)) thereof, even where only the controlling shareholders or any Associate had a material interest (ie, the interest of one of them is treated as an interest of all of them).

7 The ESR Entities appealed to the Appellate Division, and argued that they should be allowed to vote on the Proposed Amendments, because (a) they had a fundamental proprietary right to vote in their own interest and their reasons and motives for voting on any matter were irrelevant; (b) the foreign legal provisions and cases relied on by the Judge in interpreting Paragraph 4 were irrelevant; (c) the ESR Entities did not have any interest in the Proposed Amendments over and above the interest of all other unitholders, especially when the value of their unitholding in Sabana REIT and ESR Group Ltd’s total revenue were considered; (d) more weight should have been given to a letter (the “SGX Letter”) from Singapore Exchange Regulation Pte Ltd (“SGX”) stating its view that the ESR Entities did not have a material interest in the Proposed Amendments that prohibited them from voting; and (e) the analysis of whether the ESR Entities were in a position of conflict of interest should only consider the specific resolution that was tabled for approval at a meeting, and not the outcome, effect and consequence of the resolution. In support of the ESR Entities’ argument that the overall financial position of ESR Group Ltd (as ultimate parent company of the ESR Entities) rendered any interest that the ESR Entities might have had in the revenue generated by the External Manager and the Property Manager immaterial, the ESR Entities took out AD/SUM 31/2024 (“SUM 31”) to adduce further evidence for the appeal, which comprised the financial statements of ESR Group Ltd for the financial year ending 31 December 2023.

Decision

SUM 31

8 On the footing that Quarz and the Trustee did not contest SUM 31, subject to costs, the court allowed SUM 31 at the start of the hearing of the appeal, subject to costs being reserved pending the outcome of the appeal: at [34].

Meaning of “material interest” and “matter”

9 The interpretation of Paragraph 4 required consideration of two sub-issues raised by the phrase “meeting convened to consider a matter in respect of which the relevant controlling shareholders of the Manager or any Associate has a material interest”: (a) what “material interest” meant; and (b) what “matter” meant: at [36].

10 The purpose of Paragraph 4 was to disqualify the classified persons named therein – the Manager (ie, the External Manager), the controlling shareholder(s) (as defined in the Listing Rules) of the Manager and any Associate (as defined in the Listing Rules) (collectively, the “classified persons”) – from voting or being counted in the quorum. Disqualification only arose if the controlling shareholder(s) or Associate had an interest in the subject matter under consideration at the meeting which was sufficiently material to impact or influence the manner in which such party exercised its vote: at [37].

11 The word “matter” in Paragraph 4 must broadly be construed to mean the subject of the meeting, and the object of the meeting in terms of the outcome or result that it sought to achieve. The word “matter” did not only refer to the specific resolution that was tabled before the meeting: at [38].

12 The subject of the meeting which formed the foundation of the present dispute was the implementation of the internalisation process to give effect to the 7 August Resolutions to replace the External Manager. The object of the meeting was to achieve that result by the passage of the Proposed Amendments by a supermajority of the unitholders present and voting. “Matter” should therefore be understood as the implementation of the internalisation process for the purpose of replacing the External Manager, with the Proposed Amendments being related to that process and purpose and not independent of them: at [39].

Collective interests by association

13 In relation to the Judge’s obiter decision (the “Collective Interests Decision”) that the voting prohibition applied to the External Manager or its controlling shareholders and any Associate thereof, even where only the controlling shareholders or any Associate had a material interest, this decision required a re-writing of the text of Paragraph 4 to substitute the word “or” in “meeting convened to consider a matter in respect of which the relevant controlling shareholders of the Manager or any Associate has a material interest” with “and”: at [42].

14 It was open to question whether, in construing a trust deed, it was permissible to substitute “or” with “and”, and open to question whether Paragraph 4 could be read as importing a concept of collective interests by association when the touchstone of Paragraph 4 was the disqualifying effect of the material interest that the classified persons named in Paragraph 4 possessed: at [43].

15 On the other hand, the Collective Interests Decision had parallels with Rule 919 of the Listing Rules which provided that in a meeting to obtain shareholder approval for an interested person transaction, the interested person and any associate of the interested person must not vote on the resolution, nor accept appointments as proxies unless specific instructions as to voting were given. Rule 919 might be relevant to the extent that Paragraph 4 referred to interested person transactions as defined in the Listing Rules as one of the various types of matters to which the Paragraph 4 prohibition applied. Rule 748(5) of the Listing Rules also contained a variant of the principle of collective interests by association by providing that the custodian, investment manager, any of their connected persons and any director of the investment fund and investment manager, was prohibited from voting their own shares at, or being part of a quorum for, any meeting to approve any matter in which they had a material interest: at [44] and [45].

16 The court declined to reach a conclusion on the correctness of the Collective Interests Decision as it was obiter and best left for future consideration in an appropriate case: at [41] and [46].

Extraneous interests

17 The material interest in the subject matter contemplated by Paragraph 4 must be extraneous to any interest qua unitholder. The issue was a material interest in the subject under consideration at the meeting which might impact or influence the vote by the classified persons. Paragraph 4 prevented a situation where the classified persons could use their unitholding to carry their extraneous interest through: at [47].

18 Paragraph 4 was a departure from the general position that unitholders/shareholders were entitled to vote in their own selfish interests, and constituted a curtailment of certain unitholders’ voting rights in certain situations. Such curtailments, being found in the charter or other instrument by which an entity was incorporated, were ones which the ESR Entities had agreed to as unitholders, and should be respected and given full effect: at [49].

Reliance on extrinsic materials

19 The references made by the Judge and parties to extrinsic materials, including Australian law and provisions from various sets of rules in Singapore, were not helpful in interpreting Paragraph 4: at [50].

20 While it was agreed between the parties that, at a high level of abstraction, Paragraph 4 was meant to address conflicts of interest, there was no reason why the regime implemented by statutes and rules to deal with such conflicts of interest must necessarily be imputed to the Trust Deed in order to determine the intention of the parties: at [51].

21 The court did not agree with the Judge’s approach in relying on Australian law in reaching the Collective Interests Decision. The language of the Australian legislation referred to was different from that of Paragraph 4, and, moreover, an exercise in interpretation of a trust deed was different from an exercise in statutory interpretation. As a matter of the interpretation of deeds which required application of principles of contractual interpretation with its stringent rules on reliance on extrinsic materials, the legislative history and statutory purpose of textually-different foreign legislation was scarcely relevant: at [52] and [53].

The letter from SGX

22 The SGX Letter did not have any bearing on the proper construction of Paragraph 4: at [54].

23 The SGX Letter was not binding on the parties and certainly not on the court: at [55].

24 The SGX Letter dealt with the Listing Rules. While there were undoubtedly common themes between Paragraph 4 and the Listing Rules, an exercise by a regulatory body in interpreting and applying regulatory rules was different from an exercise in interpretation of the Trust Deed using contractual interpretation principles: at [56].

Application of Paragraph 4 to facts

25 The ESR Entities were disqualified from voting on the Proposed Amendments under Paragraph 4 because of their material interest in the matter. In view of the 7 August Resolutions, the External Manager would lose its significant management fees once removed in the internalisation process. The Property Manager, which was wholly owned by the External Manager, might face removal too, which placed its fees at risk. By extension, the ESR Entities would lose their dividend stream, which they received as the ultimate owners of the External Manager. A vote supporting the resolution to accept the Proposed Amendments would facilitate the removal of the External Manager. On the other hand, a vote against could delay that outcome: at [58].

26 The ESR Entities’ attempt to show that the revenue and profit contribution of the External Manager relative to ESR Group Ltd’s total revenue and profit was not significant through the evidence adduced in SUM 31 was not relevant because it was not a relative inquiry. The relevant inquiry was whether the contribution of the profits from the External Manager and the Property Manager to the ESR Entities was significant when viewed objectively: at [59].

27 The appeal was therefore dismissed: at [60].

Costs

28 In relation to costs awards for appeals from decisions concerning the proper construction of a trust instrument, the general position was that a trustee or beneficiary who unsuccessfully appealed a decision concerning the proper construction of the trust instrument might well not receive costs out of the estate, and might indeed be ordered to pay costs, unless there were circumstances which warranted a relaxation of the general rule. But in special circumstances the appeal court might allow the appellant beneficiary’s costs (as well as costs of other parties) out of the trust fund, and such circumstances would arise if large interests were at stake, particularly the interests of unborn persons and so on, and the appeal court was satisfied that the point in the appeal admitted of sufficient difficulty as to make it proper for a second opinion to be taken. On the other hand, if an appeal succeeded, the costs incurred by the successful appellant could be seen to have been necessarily incurred in order to obtain the correct administration of the trust and a successful appellant, whether trustee or beneficiary, would normally therefore receive his costs out of the fund. The costs of other parties to the appeal, even if unsuccessful, might also in such a case be regarded as incurred for the benefit of the estate and paid out of the trust fund, albeit with a caution against an assumption that it was always appropriate for the costs of unsuccessful respondents to be met out of the estate: at [61], [62] and [64].

29 In contrast, in first instance proceedings brought to have the guidance of the court as to the construction of the trust instrument or some other question of law arising in the administration of the trust or in relation to the trusts on which the trust property was held, the costs of all parties were, whatever the outcome, usually treated as necessarily incurred for the benefit of the trust fund and ordered to be paid out of it. On the other hand, for first instance proceedings that had the character of a hostile claim founded on a point of construction or law with the claim brought not in substance for the benefit of the trust fund, but for the benefit of the claimant, and was resisted for a similar reason, the general principles as to costs of hostile litigation applied between the claimant and the party against whom the claim was directed, and so the general rule was that the unsuccessful party would be ordered to pay the costs of the successful party, subject to the general qualifications which applied in ordinary hostile litigation: at [63].

30 A caveat for costs payable to trustees where an appellant beneficiary’s appeal was unsuccessful was that the appellant beneficiary would normally be ordered to pay costs of the respondents on the standard basis, the respondent trustee being allowed the difference between his standard basis costs and indemnity basis costs out of the trust fund: at [65] and [66].

31 The court thus ordered the ESR Entities to pay costs of $50,000 and disbursements of $4,218 to Quarz on a standard basis for the appeal and SUM 31. The court ordered the ESR Entities to pay the Trustee costs of $15,000 and disbursements of $1,119.80 on a standard basis, with the Trustee being allowed to recover the difference between this sum and their costs based on the indemnity from Sabana REIT: at [67].

This summary is provided to assist in the understanding of the Court’s grounds of decision. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s grounds of decision.

What was the central issue in ESR Group Ltd v HSBC Institutional Trust Services (Singapore) Ltd [2024] SGHC(A) 25?

The appeal concerned interpretation of a trust deed constituting a real estate investment trust, turning on a conflict-of-interest clause and whether the deed prohibited certain unitholders from voting at an extraordinary general meeting. Kannan Ramesh JAD delivered the court's grounds on 4 September 2024.

Which judges decided ESR Group Ltd v HSBC Institutional Trust Services (Singapore) Ltd ([2024] SGHC(A) 25)?

The Appellate Division of the High Court comprised Kannan Ramesh JAD, Debbie Ong Siew Ling JAD and See Kee Oon JAD, with Kannan Ramesh JAD delivering the grounds of decision, in Civil Appeal No 37 of 2024 and Summons No 31 of 2024.