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Asia Hotel wins appeal against Starwood in Us$53m lawsuit

Singapore’s Court of Appeal has ruled in favour of Asia Hotel Investments Ltd for damages to be assessed in a US$53 million lawsuit against international hotel company Starwood…

Singapore’s Court of Appeal has ruled in favour of Asia Hotel Investments Ltd for damages to be assessed in a US$53 million lawsuit against international hotel company Starwood for the breach of an agreement. The Court found Starwood not only guilty of breach of the agreement but also guilty of causing Asia Hotel Investments to lose the chance to purchase the majority stake in the Westin Grande Sukhumvit hotel in Bangkok.

The High Court of Singapore had earlier handed down a guilty verdict against Starwood for breach of a non-circumvention agreement that it had signed with Asia Hotel. This was an agreement signed between both parties in connection with Asia Hotel’s proposed purchase of a majority stake in the company which owned the hotel (then known as the Grand Pacific Hotel).

However, the High Court awarded only nominal damages to Asia Hotel, a leisure investment company of luxury hotels and golf courses, as the High Court was of the view that the breach did not result in Asia Hotel losing the chance to acquire this majority stake.

In a written majority judgment handed down on Monday, the Court of Appeal viewed that the trial judge had erred in making this finding, and ordered that damages be assessed for Starwood`s breach.

It also awarded Asia Hotel costs of the trial, and the bulk of the appeal. There is no further avenue of appeal for Starwood.

Asia Hotel was seeking to purchase Lai Sun Development Co Ltd`s stake in the owner of the hotel, and have it managed by Starwood. Under the terms of the agreement entered into with Asia Hotel, Starwood bound itself for a period of 12 months not to deal with or enter into any management contract for the hotel with any other bidders.

The agreement was set to expire in late 2002. However, just three months after signing its agreement with Asia Hotel, Starwood teamed up with the Narula family –owners of Starwood’s flagship, Sheraton Grande Sukhumvit Hotel—to buy the Grand Pacific.

In handing down the verdict, the Court of Appeal said: “It does not lie in the mouth of Starwood, a party who was in blatant breach of its contractual commitment, to make bald assertions that its involvement was inconsequential when the objective facts show that the purchase of the Lai Sun stake by the Narulas was completed only with Starwood, in breach of its contractual obligation, agreeing to be the operator and offering its five-star ‘Westin’ brand.”

It also described Gary Murray, President of Asia Hotel, as an “experienced investor in the luxury hotel business” who had made a study of the situation and knew that he had the crown jewel in his pocket in the form of a commitment from Starwood not to deal with any other potential purchaser in relation to the management of this hotel.

In chiding Starwood, the Court of Appeal said that “this is a case of a party who, having brazenly disregarded its contractual obligation to a second party…has the temerity to allege that its acts did not cause the second party to lose a real chance of acquiring the asset”.

The Court found that Starwood’s blatant disregard of its obligation in spite of repeated warnings by Mr Murray, and Starwood’s “very own deliberate wrongful acts which shattered the appellant’s dream”, had led to Asia Hotel losing the chance to complete the deal.

On the verdict, Mr Murray said: “We are extremely pleased and feel vindicated that the Court of Appeal of Singapore has ruled in favour of Asia Hotel and ordered damages to be assessed. This decision has justified our steadfast position that Starwood’s breach did cause us to lose an opportunity to acquire the hotel.

“Taking Starwood to court was a last resort for us, and the first time that we have been driven to do so with a hotel management partner. In fact, we have an excellent relationship with all our partners, which include Hilton International and other international operators.

“In today`s world, as a hotel investor, we take risks every day. Our business is based on trust and confidence in our partners. In this case, we had brought the deal to Starwood, and had hoped to develop a long term partnership that would be mutually beneficial to both parties. We had never expected that it would turn out this way, especially with a large SEC regulated international and public-listed company like Starwood. Of course, we are disappointed with their actions and the way things have turned out.

“Going forward, we will be even more vigilant regarding the people whom we do business with.”

On Starwood’s press release (dated September 22) which focused on the lone dissenting judge’s view, Mr Murray said: “I am surprised at the slanted impression given in Starwood’s statement. Starwood had chosen to obscure the fact that the majority of the Court of Appeal — the highest Court in Singapore—has over-ruled the trial judge and decided that Starwood’s blatant breach of contract had caused Asia Hotel to lose the opportunity to buy over the hotel.

“Instead, they deliberately quoted extracts from the sole dissenting judgment, which is not binding upon the parties. Maybe this is Starwood’s way of distracting others from the simple fact that they have lost and Asia Hotel has won its lawsuit against them, and that all four judges in Singapore who have heard this case have decided that Starwood has breached its contractual obligations.”

Asia Hotel was represented by Wong Partnership in the trial and appeal.

Asia Hotel Investments is in the business of investing in four- and five-star hotels and golf courses in Southeast Asia. The Company identifies suitable hotels, secures majority control and puts together a program to renovate, re-brand, reposition and secure professional management.

Asia Hotel and its principals have completed hotel development and investment transactions with Marriott International, Hilton Hotel Corporation, Hilton International PLC, and Holiday Inn. It owns the Hilton Hua Hin Resort & Spa which it purchased in 2000, renovated and rebranded as a five-star hotel. Through its subsidiary Siam Golf Properties Co Ltd, Asia Hotel also owns and manages the Muang Kaew Golf Club in Bangkok and Country Club and Sriracha International Golf Club in Pattaya.

Vicky Karantzavelou
Co-Founder & Chief Editor - TravelDailyNews Media Network

Vicky is the co-founder of TravelDailyNews Media Network where she is the Editor-in Chief. She is also responsible for the daily operation and the financial policy. She holds a Bachelor's degree in Tourism Business Administration from the Technical University of Athens and a Master in Business Administration (MBA) from the University of Wales. She has many years of both academic and industrial experience within the travel industry. She has written/edited numerous articles in various tourism magazines.