ASIDOKONA MINING RESOURCES PTE LTD & Anor v ALTERNATIVE ADVISORS INVESTMENTS PTE LTD

Facts

In 2016 Soh Sai Kiang asked Wong Joo Wan to arrange a $2m loan for Asidokona Mining Resources Pte Ltd, of which Mr Soh was sole shareholder and director. Mr Wong approached Jeffrey Ong, a solicitor at JLC Advisors, who said a client would put up $1m; Mr Wong raised the other $1m himself and from others. The loan documents, prepared at JLC Advisors, named only Supreme Star Investments (SSI), a British Virgin Islands company owned by Ms Lou Swee Lan, as lender and chargee, with a personal guarantee from Mr Soh and a charge over his shares. Mr Soh signed on 22 July 2016 and $1.69m was paid out from the law firm's client account. SSI did not sign.

Asidokona defaulted after paying about $900,000 in interest. In 2018 Mr Wong signed the loan documents and two deeds assigning SSI's rights to Alternative Advisors Investments Pte Ltd (AAI), a company he controlled, purportedly on SSI's behalf. AAI sued Asidokona and Mr Soh in Suit No 734 of 2018. Ms Lou said she only learned of the loan and the suit in 2020; on 26 July 2021 SSI passed a resolution ratifying Mr Wong's acts and the suit. The trial judge held the ratification valid and gave judgment for AAI. Asidokona and Mr Soh appealed to the Appellate Division of the High Court in Civil Appeal No 28 of 2022; Mr Soh was made bankrupt before the hearing.

Issues

1. Whether AAI proved that SSI could validly ratify the loan documents and the assignments.
2. Whether a ratification made after the suit began could supply a cause of action that did not exist when it started.
3. Whether the suit failed for want of SSI as a party, or for maintenance and champerty.
4. Whether the loan was tainted by illegality or the default interest was a penalty.

Holding

The court allowed the appeal, holding that AAI's successful action below could not stand. Although the appellants succeeded, it ordered each party to bear its own costs of the appeal and the trial, because of how the appellants had run their case and because they received an unintended windfall from not having to repay the loan.

Reasoning

Ratification. Since AAI did not pursue its case that Mr Wong had authority, it had to prove a valid ratification. That required showing that Mr Wong had purported to act for SSI and that SSI had performed the loan. Neither was shown. Ms Lou said SSI never authorised the loan, and Mr Wong said he did not know of any authority until 2018 and did not know who acted for SSI before then; only Mr Ong said otherwise, without documents. A message from Mr Wong in 2020 showed he was unsure of his authority. There was no proof that SSI funded the loan or received any interest, and only $1.69m was paid out, against the $1m each said to come from Mr Wong and SSI. A principal cannot adopt as its own money not shown to be its own. With no rights under the loan documents, the assignments passed nothing.

Timing. A plaintiff must have a valid cause of action when the action begins. Before ratification there was no enforceable contract or assignment, so the suit was void from the start, and a later ratification could not cure a nullity. The court endorsed Wittenbrock v Bellmer (1880) 57 Cal 12 and distinguished English cases where a valid cause of action already existed but the suit was brought without authority.

Other defences. The court rejected these. SSI, having ratified and assigned, could not sue again, so the double recovery concern was overstated. An assignment of a defaulted debt together with the right to sue for it is not champertous merely because litigation was contemplated, and Mr Wong had a real stake. The appellants did not prove that the funds were misappropriated from other clients, a serious allegation requiring a high standard of proof. AAI did not pursue the extra 1% default interest, so the penalty point did not need deciding.

From the judgment