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Park Hotel Management director sued over series of fund transfers at subsidiary Park Hotel CQ

Park Hotel Management director sued over series of fund transfers at subsidiary Park Hotel CQ

Source: Business Times
Article Date: 24 Jun 2022
Author: Nisha Ramchandani

On Nov 19, 2021, the High Court ruled that PHCQ could be wound up after it was unable to pay its debts amounting to some S$6.3 million.

Park Hotel CQ (PHCQ), along with its liquidators, have filed a lawsuit against Park Hotel Management (PHMPL) director, Allen Law Ching Hung, over some S$6.5 million in funds that were transferred out of PHCQ.

Law was the sole director of PHCQ - which is fully owned by PHMPL - from Apr 3, 2013 until Mar 16, 2021 when he stepped down as director. Lim Kang-Ling, previously general manager of the Park Hotel Clarke Quay property, was appointed the sole director on the same day. The sole shareholder and director of PHMPL, Law is the son of Hong Kong billionaire Law Kar Po, who is worth some US$6.6 billion, according to Forbes.

On Nov 19, 2021, the High Court ruled that PHCQ be wound up after it was unable to pay its debts amounting to some S$6.3 million. The bulk of that debt stemmed from monies owed to Ascendas Hospitality Reit, the landlord of the former Park Hotel Clarke Quay property at Unity Street.

According to the statement of claim dated Mar 31 and filed in the High Court by the plaintiffs, the liquidators found that PHCQ had transferred S$4 million to PHMPL in 2 tranches - S$2 million each on Dec 9, 2020 and on Jan 4, 2021.  Aw Eng Hai and Kon Yin Tong of accountancy firm Foo Kon Tan are the joint liquidators.

Prior to that, on Nov 30, 2020, recorded loans of S$6.1 million owed by PHCQ to Law were transferred via journal entries over to PHMPL; as a result, it was recorded that PHCQ owed PHMPL instead of Law. The S$4 million was then transferred by PHCQ to PHMPL in December 2020 and January 2021 respectively. On Jan 8, 2021, PHMPL allegedly paid Law about S$4.41 million.

The statement of claim also stated that the liquidators found withdrawals of S$2.5 million from PHCQ’s bank accounts. Citing approval from PHCQ’s landlord, Law had on Mar 30, 2021 instructed PHCQ’s company secretary and the Park Hotel Group’s group finance director, Tang Buck Kiau, to transfer S$2 million from PHCQ’s furniture, fixtures and equipment (FF&E) account to its operating account; this was said to be used to pay rent and FF&E under a master lease agreement.

Law “represented to Tang... that PHCQ as tenant would put back the S$2 million into the FF&E account at the end of the lease”, the plaintiffs alleged.

However, no payment was made by PHCQ to the landlord. On Apr 12, 2021, S$2.5 million was transferred from PHCQ’s operating account to PHMPL. The S$2.5 million was then used to partially repay a loan of S$7.7 million - of which Law was the guarantor - that PHMPL owed to United Overseas Bank (UOB).

“At all times, the landlord did not approve of the transfer of S$2 million from PHCQ’s FF&E account, whether verbally or via email,” the plaintiffs alleged.

The plaintiffs went on to allege that at the time when the S$4 million in funds was transferred out of PHCQ, “PHCQ was unable to pay its debts and/or was financially in a perilous state”. They also highlighted that at the time the S$2.5 million was transferred out of PHCQ in April 2021, PHCQ owed its landlord an outstanding sum of about S$5.38 million, citing a letter of demand from the landlord’s lawyers dated Mar 29, 2021.

As at Jun 17, 2021, PHCQ owed its landlord about S$12.78 million, although this was reduced to about S$5.92 million after offsetting the security deposit.

The plaintiffs alleged that Law acted in “breach of (his) duties and/or (in) breach of trust” and is liable to account for at least S$6.5 million after PHCQ suffered loss and damages.

In his defence filed on May 6, Law denied the allegations in the statement of claim. He clarified that the S$6.1 million loan was initially a S$4.8 million loan from him to PHCQ and a S$1.3 million loan from PHMPL to PHCQ. Law also alleged that around November 2020, “as part of (an) internal reorganisation...inter-company loans to subsidiaries were consolidated through PHMPL instead of through the directors. At the time, PHMPL and PHCQ were not in a financially parlous position or insolvent”.

Denying the plaintiffs’ allegations that he had made “fraudulent misrepresentations” to PHCQ’s company secretary, Law alleged that the landlord’s approval for the transfer of funds from the FF&E account was granted by the landlord’s representative Beh Siew Kim via an email dated Oct 30, 2020, as well as verbally in a meeting.

In his defence, Law also asserted that the funds transferred were not for his personal benefit, and denied the plaintiffs’ claims that he was liable to account to PHCQ for the S$6.5 million sum on the grounds of breach of duties and/or breach of trust.

In a reply to Law’s defence dated May 23, the plaintiffs again alleged there was “no approval given by the landlord to PHCQ in the Oct 30 2020 email, or verbally at any meeting prior to Mar 30, 2021, which allowed PHCQ to withdraw S$2 million from PHCQ’s FF&E account”. They also alleged that no approval was given to Law or to PHCQ to withdraw that sum for the purpose of transferring S$2.5 million to PHMPL to pare PHMPL’s outstanding loan with UOB.

Law is represented by TSMP Law’s senior counsel Thio Shen Yi, while the plaintiffs are represented by Allen & Gledhill partners William Ong and Lee Bik Wei.

PHMPL was placed under winding up by the Court in July last year after its subsidiary Grand Park OR - the former operator of the Grand Park Orchard hotel - was unable to pay debts of over S$5.2 million. PHMPL and its liquidators have also filed a suit against Law, along with 3 other firms, over assets disposed by PHMPL to entities linked to Law.

Source: Business Times © SPH Media Limited. Permission required for reproduction.

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