Legal battle for Tipsy Collective continues, defendants claim firm owes millions in debt

SINGAPORE – The cost of developing the Tipsy Unicorn beach club in Sentosa had in 2023 overrun its budget, doubling from $3 million to $6 million, despite warnings from shareholders that the project was financially risky.

This instance of alleged financial mismanagement emerged in new court documents from a lawsuit involving the control of home-grown hospitality group Tipsy Collective.

The Straits Times had earlier in September reported that the group’s co-founder and executive chairman

David Gan Jia Liang was suing eight parties,

which included shareholders and investors, for attempting to seize control of the company.

The defendants – including Indonesian investors Reino Ramaputra Barack and Santosa Kadiman, Singaporean Rudy Hartono Widjaja and four shareholders – recently filed court papers outlining their defence, which ST has obtained.

The four shareholders named in the lawsuit are Steady Property Trading, Novus International Enterprises, Whiterock Asia Resources and Mr Tora Widjaja – the son of Mr Rudy Hartono Widjaja. Together, the shareholders own 59.39 per cent of shares, a majority stake in the company.

In their court filings, the defendants said they had opposed developing Tipsy Unicorn – a 19,000 sq ft beach club on Sentosa’s Siloso Beach that opened in September 2023 – from the start because it was “too financially risky”.

In addition to the budget overruns, other examples of alleged mismanagement cited included non-disclosure of financial information, failing to conduct timely audits, and debts to suppliers, contractors and creditors amounting to some $5.2 million.

The company also purportedly owes Sentosa Development Corporation a separate sum of around $1 million.

The defendants also said Mr Gan had caused the company to take out loans amounting to $8.7 million between January 2021 and November 2023, of which $6 million is still outstanding.

Some of these financial irregularities were uncovered after Mr Alex Phua, Tipsy Collective’s former chief executive and group chief financial officer, joined the company in June 2023.

Another point of contention involved the payment of around $1.4 million in dividends to group co-founder Derek Ong and Mr Gan between December 2020 and January 2021, which the defendants claim was made without their knowledge.

Founded in 2019, Tipsy Collective runs 10 restaurants and bars in Singapore, four of which are located in the heartland. In January, the company opened its first overseas outlet, Tipsy Flamingo, in Kuala Lumpur.

The current lawsuit comes nearly a year after

Mr Ong’s sudden death in August 2023

.

Tipsy Collective was also named a nominal defendant in the suit as the company would be bound by any judgment.

In his defence, Mr Kadiman, who is represented by lawyers from WongPartnership, said he and the majority shareholders were concerned over Mr Gan and Mr Ong’s management of the company and the decisions taken by them, particularly over the debts and liabilities taken by the company and its subsidiaries.

The other defendants are represented by lawyers from Morgan Lewis Stamford.

Mr Kadiman, who is the beneficial owner of Novus and a non-executive director of Tipsy Collective, also raised issues over the lack of transparency involving the company’s ventures, including its expansion into Kuala Lumpur and the development of the Tipsy Unicorn beach club.

Mr Gan had in his statement of claim filed earlier with the courts said the defendants had tried to remove him as a director of the company. He argued the affairs of the company are regulated by a shareholders’ agreement that provides him with veto power over board decisions, meaning no significant resolutions can be approved without his consent – including the removal of directors.

This was disputed by the defendants, arguing that the veto provision is no longer applicable following Mr Ong’s death as the shareholders’ agreement was premised upon the existence of the two founders, who together used to hold a majority share in the company.

After Mr Ong’s death, his widow sold his shares to Steady Property, Novus and Whiterock in March. This eventually resulted in the four shareholders increasing their collective stake in the company from 31.74 per cent to 59.39 per cent. Mr Gan, 32, owns a stake of 25.06 per cent in the company, with the remaining 15.55 per cent owned by Mr Reuben Low Kok Cherng, a director of the firm and its former chief operating officer.

Mr Gan is represented by lawyers from Selvam.

The defendants claim that the majority stake would grant the four shareholders the right to appoint their own directors under the company’s Constitution and the Companies Act. The defendants had wanted to appoint Mr Barack – the beneficial owner of Steady Property, one of the defendants – as a director of Tipsy Collective.

They pointed to the alleged lapses in management by Mr Gan, and an alleged affair that Mr Low had with a subordinate, to bolster their assertions that the two men were not fit and proper to continue as directors of the company.

A mediation session was held on Aug 24 in an attempt to resolve the dispute, but no agreement was reached between the parties.

Mr Gan has applied for an interim court injunction to maintain control over the company’s board and the matter will be heard in court on Oct 15.