AXIS MEGALINK SDN BHD & Anor v FAR EAST MINING PTE LTD
21 cases cited
(11 SG, 10 foreign)
Cited by 1 case
Catchwords
Contract — Misrepresentation — Inducement — Whether representee was induced to enter into contract Contract — Misrepresentation — Rescission — Whether rescission is available in respect of contract for services where services have been rendered thereunder Contract — Mistake — Unilateral mistake as to identity of contracting counterparty — Whether doctrine of mistaken identity extends to attributes of contracting counterparty
Practice Areas
Counsel (11)
David Lim & Partners LLP Firm Eldan Law LLP Firm WongPartnership LLP Firm Chng Zi Zhao Joel (Zhuang Zizhao) Counsel Respondent Felicia Soong Wanyi Counsel Respondent G Kiran Counsel Respondent Joshua Ang Zhao Neng (Hong Zhaoneng) Counsel Appellant Koh Choon Guan Daniel Counsel Appellant Koh Swee Yen Counsel Respondent Koong Len Sheng Counsel Appellant Toh Yong Xiang Counsel Respondent
Case Significance
Axis Megalink Sdn Bhd and another v Far East Mining Pte Ltd [2024] SGHC(A) 15 was decided by the Appellate Division of the High Court of Singapore on 10 May 2024, with the judgment of the court delivered by Philip Jeyaretnam J on behalf of a coram of Belinda Ang Saw Ean JCA, Kannan Ramesh JAD and Philip Jeyaretnam J, after a hearing on 2 April 2024 in Civil Appeal No 107 of 2023. The appeal concerned a contract entered into between an arranger and an acquirer, under which the arranger was engaged to assist with a hoped-for reverse takeover of an identified publicly listed target in return for shares in that entity once the acquirer had injected its assets into it. The relevant contracts between the acquirer and the target were entered into, and almost two years passed without complaint, but when the arranger attempted to enforce its contract and have the shares issued, the acquirer resisted. The catchwords identify issues of misrepresentation (inducement and rescission) and unilateral mistake as to the identity of a contracting counterparty.
Summary
SUPREME COURT OF SINGAPORE
10 May 2024
Case summary
Axis Megalink Sdn Bhd and another v Far East Mining Pte Ltd [2024] SGHC(A) 15
Civil Appeal No 107 of 2023
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Decision of the Appellate Division of the High Court (delivered by Justice Philip Jeyaretnam):
Outcome: The court allows the appeal in part and overturns the lower court’s declaration that a contract was void ab initio under the doctrine of unilateral mistake but upholds the lower court’s finding that the appellants had made a fraudulent misrepresentation which induced the respondent to enter into that contract. However, the court denies the respondent’s plea of rescission on the ground that restitution is not possible given the first appellant’s performance of its services under the contract.
Pertinent and significant points of the judgment
• Mistakes concerning characteristics or attributes of the counterparty would not ordinarily go to identity, unless this resulted in confusion concerning who the counterparty was. Where a contract is formed in writing, intended parties to that contract are identified by reference to the written correspondence: at [72] and [75].
• Once a contract of services or for service has run its course, it cannot be rescinded because it is impossible to undo the services which had been rendered: at [123].
• Where a false representation is made by a non-disclosure, it is not sufficient for the representee to assert a counterfactual of what the representee would have done had he known the truth to satisfy the requirement of inducement. The representation must have in fact operated on the mind of the representee at the time of contracting though the false representation need not be the sole reason for the representee’s decision to enter into the transaction: at [135]–[140].
Background
1 The first appellant, Axis Megalink Sdn Bhd (“Axis”) is a Malaysian company, while the respondent, Far East Mining Pte Ltd (“FEM”) is a private Singapore company. At all material times, Mr Syed Abdel Nasser bin Syed Hassan Aljunied (“Mr Aljunied”) and Mr Hong Kah Ing (“Mr Hong”) were directors and shareholders of FEM.
2 FEM and Axis entered into a contract (or a putative contract) dated 16 August 2016 (“the Engagement Letter”) for the former to engage the latter as an introducer and arranger for a reverse takeover of a then-listed Singaporean company (“the RTO Transaction”), China Bearing (Singapore) Ltd (later renamed to Silkroad Nickel Ltd) (“CBL”). In exchange, Axis was to receive a fee of US$2 million to be paid in the form of new ordinary shares in CBL (“the Consideration Sum”) to be issued only after the injection by FEM of its nickel mine, located in Sulawesi, Indonesia, into CBL.
3 Axis brought its claim for the Consideration Sum against FEM in HC/S 342/2023 (“Suit 342”). FEM then counterclaimed against Axis, the second appellant, Mr Lee Kien Han (“Mr Lee”), along with two other defendants in counterclaim (against whom the claims were either dismissed or discontinued and in respect of which there has been no appeal) for among other things fraudulent misrepresentation.
4 Mr Lee has been the beneficial owner of Axis since 22 July 2016. He had a close working relationship as a lawyer and advisor to Datuk Lim Kean Tin (“Datuk Lim”), former non-executive Chairman of the Board and controlling shareholder of CBL (prior to the completion of the reverse takeover).
5 A key plank of FEM’s defence and counterclaim was that Mr Lee had acted as both introducer/arranger for FEM while also acting as a representative of Datuk Lim and CBL which placed him in a position of a conflict of interest between FEM and CBL in relation to the terms of the RTO Transaction.
6 The Judge found in favour of FEM in Suit 342. The Judge held that FEM had been unilaterally mistaken about an important characteristic of the counterparty to the Engagement Letter, as it was not aware that Mr Lee was the beneficial owner of Axis when the Engagement Letter was entered into. He also found Axis and Mr Lee liable for fraudulent misrepresentation to FEM by failing to disclose that Mr Lee was the beneficial owner of Axis while giving the misleading impression that Mr Lee was only involved in the RTO Transaction in his capacity as a representative on the side of Datuk Lim and CBL.
7 In addition, as Mr Lee and Axis were both liable for fraudulent misrepresentation, they were also liable in damages for the losses flowing from their misrepresentation, amounting to S$10,210 in expenses that were incurred by FEM to investigate Axis’ beneficial ownership.
8 In the alternative, the Judge also found that Axis was not entitled to the Consideration Sum as it had not performed the services under the Engagement Letter. This was mainly because all actions undertaken by Mr Lee in relation to the RTO Transaction were performed in his capacity as representative and advisor of Datuk Lim and CBL, not as FEM’s introducer and arranger.
9 Axis and Mr Lee appealed.
Decision
Unilateral mistake
10 FEM’s mistake concerning the independence of the beneficial owner of Axis did not render the Engagement Letter void ab initio. A unilateral mistake of identity arises from a confusion of one person with another. No such confusion happened here. The contract was in writing, and the persons signing on behalf of FEM both knew that the counterparty was Axis. They did not think that FEM was contracting with a different company. Even if they believed that Axis was not owned by Mr Lee when it was, this does not equate to a mistaken belief concerning the entity with whom FEM was contracting. Accordingly, FEM objectively intended to contract with Axis because Axis was the party named on the written Engagement Letter that it signed. Offer and acceptance matched: at [67], [69] and [73].
11 The doctrine of unilateral mistake could not be extended to mistakes regarding the fundamental attributes of a counterparty as mistakes concerning characteristics or attributes of the counterparty would not ordinarily go to identity, unless this resulted in confusion concerning who the counterparty was: at [74]–[75].
12 The independence of Axis’ beneficial owner was not a fundamental term of the contract. The Letter of Engagement did not contain any term concerning Axis’ independence nor did FEM mistakenly believe that there was such a term. Even if Axis had warranted that it was independent, and FEM mistakenly believed it was so when it was not, this would not mean the contract was void for mistake. It would only mean that Axis was in breach of a term of the contract. In this regard, the distinction between a mistake that motivates a party to enter into a contract and a mistake as to a term of that contract is critical: at [78]–[80].
13 The Court rejected FEM’s alternative argument that the Engagement Letter was voidable in equity due to its unilateral mistake because in either common law unilateral mistake or equitable unilateral mistake, the mistake must still relate to a term of the contract, and not merely a material fact that induced them to enter into it, but the independence of Axis’ beneficial owner was never a term of the Engagement Letter nor did FEM mistakenly believe there was such a term: at [82].
Axis’ performance of the services
14 FEM’s contention that Axis did not in fact perform the services set out in the Engagement Letter appeared to be an afterthought. In the main, if Mr Aljunied or Mr Hong had believed that the services had not been performed, this point would have been raised by the date of the share and purchase agreement for the RTO Transaction. They would not have waited until after the RTO Transaction was completed: at [86]–[90].
15 While Mr Lee might have already made the contemplated introduction at an introductory dinner on 20 July 2016, two days before he became Axis’ beneficial owner and about a month before the Engagement Letter was signed, it is commonplace for services to be performed prior to the signing of a contract in anticipation of that contract. Nor was it an obstacle that Mr Lee did not yet own or control Axis at the time of the introductory dinner. The question was what the objective intention of the contracting parties was at the time that they signed the Engagement Letter on 16 August 2016: at [90]–[91].
16 The fact that Mr Lee was acting in the conflicting roles of Datuk Lim’s or CBL’s lawyer and FEM’s arranger did not mean that Mr Lee could not have provided the services in the Engagement Letter. There might be legal consequences that follow when something was done in conflict of interest but that did not mean that the thing was not done at all pursuant to the contract: at [93]–[94].
17 There was no obligation on the part of Axis under the Engagement Letter to strike the best arrangement for FEM to maximise its gains. Given the absence of a specific term to this effect, Axis had no obligation to negotiate or conclude the RTO Transaction and neither was it FEM’s agent. FEM itself did the negotiating and signed the resulting agreements: at [95].
18 Mr Lee’s ability to introduce Datuk Lim to Mr Aljunied and Mr Hong was not impaired by his holding a prior working relationship with Datuk Lim. Nor was his ability to liaise with Mr Lim of FEM on such matters as the board presentation or draft term sheet in preparation for the CBL Board Meeting prejudiced by his relationship with CBL: at [96].
19 FEM’s contention that there was an introduction made and arrangement carried out but that all this work was not attributable to Axis because it was done by Mr Lee was highly artificial when at the time the work was actually being performed FEM did not raise the point that it was not Axis doing this but Mr Lee: at [97].
20 The Judge’s finding that Axis had not performed the services under the Engagement Letter was therefore set aside as being against the weight of the evidence: at [98].
Restitutio in integrum (restitution to the original position)
21 It would not unfairly prejudice FEM if Axis and Mr Lee were permitted to run their arguments as to the impossibility of restitutio in integrum preventing the rescission of the Engagement Letter. The point of fact underlying Axis’ argument that restitutio in integrum was impossible was that it had rendered services under the Engagement Letter which cannot be taken back or undone. That was always Axis’ case at the trial below. Axis could not have sued for the Consideration Sum without showing that it had performed the requisite services in exchange. More importantly, FEM had the opportunity of contesting that averment and pleading that the services had not been performed by Axis: at [105] and [110]–[111].
22 It was no longer possible to effect restitutio in integrum between the parties to the Engagement Letter as Axis has rendered the contracted services to FEM. Once a contract of services or for service has run its course, it cannot be rescinded because it is impossible to undo the services which had been rendered. Accordingly, the remedy of rescission of the Engagement Letter was not available to FEM, even if all the ingredients of fraudulent misrepresentation were made out in law: at [117] and [122]–[124].
Fraudulent misrepresentation
23 Where a false representation is made by a non-disclosure, it is not sufficient for the representee to assert a counterfactual of what the representee would have done had he known the truth to satisfy the requirement of inducement. The representation must have in fact operated on the mind of the representee at the time of contracting though the false representation need not be the sole reason for the representee’s decision to enter into the transaction: at [135]–[140].
24 Taken at face value, Mr Aljunied’s evidence indicated that he did have in mind Mr Lee’s prior representation implied from his conduct that he was acting only as Datuk Lim’s adviser when Mr Aljunied accepted “Mr Lim’s assurance that Axis would be able to assist FEM in the Proposed Transaction”. Moreover, the stance taken by Axis and Mr Lee – that the independence of the arranger was never material to FEM – was not enough to displace Mr Aljunied’s evidence. The Judge’s conclusion that FEM relied on this misrepresentation was therefore affirmed: at [146]–[147].
25 The Judge’s award of damages for fraudulent misrepresentation in the amount of S$10,210 in respect of FEM’s investigation expenses was accordingly upheld. However, even though the Judge’s finding of fraudulent misrepresentation was upheld, there was no basis to award FEM damages of US$2 million to offset its liability to pay the Consideration Sum in addition to the S$10,210 investigation expenses. In comparing the position FEM was in now with the position it would have been in had the Engagement Letter not been entered into, the benefits that FEM had received must be considered. FEM did not contend that if Axis had indeed performed the services under the Engagement Letter the value of those services would have been reduced by virtue of Mr Lee’s undisclosed beneficial ownership of Axis. Neither did FEM lead evidence that even if it had not entered into the Engagement Letter it would still have received the benefits of the RTO Transaction: at [131]–[133] and [148].
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 Axis Megalink Sdn Bhd v Far East Mining Pte Ltd [2024] SGHC(A) 15 about?
Decided by the Appellate Division on 10 May 2024, the appeal concerned a contract between an arranger and an acquirer for a hoped-for reverse takeover of a listed target in return for shares, raising issues of misrepresentation and unilateral mistake as to a counterparty's identity.
Who delivered the judgment in Axis Megalink Sdn Bhd v Far East Mining Pte Ltd [2024] SGHC(A) 15?
Philip Jeyaretnam J delivered the judgment of the court in [2024] SGHC(A) 15, sitting with Belinda Ang Saw Ean JCA and Kannan Ramesh JAD. Civil Appeal No 107 of 2023 was heard on 2 April 2024 and decided on 10 May 2024.
Statutes Cited
Cases Cited (21)
SG (3)
[2008] SGHC 31 [2021] SGHC 193 [2023] SGHC 243
SLR (8)
[2000] 2 SLR(R) 407 [2001] 2 SLR(R) 435 [2005] 1 SLR(R) 502 [2008] 2 SLR(R) 909 [2013] 3 SLR 801 [2020] 1 SLR 606 [2020] 2 SLR 20 [2021] 5 SLR 405
UK (10)
[1918] AC 626 [1939] 3 All ER 566 [1974] AC 254 [1980] AC 614 [1985] QB 428 [1998] 3 All ER 876 [2003] UKHL 62 [2008] EWHC 2257 [2015] EWCA Civ 745 [2023] EWHC 2759
Cited By (1)
Referenced in
Statutes interpreted in this judgment
Legal concepts & references
Judgment
Read the full judgment on the official Singapore Courts portal.
Read on eLitigationSource: eLitigation ([2024] SGHC(A) 15)