JS FILM INVESTMENT PTY LTD v YAO LIANG & 2 Ors

Facts

JS Film Investment Pty Ltd, an Australian company, sued Mr Yao Liang and Yaoo Capital Pte Ltd in Originating Claim No 253 of 2024 for repayment of a loan. Mr Yao Liang was a director and shareholder of Yaoo Capital. The claim against a second individual defendant, Mr Yao Yilun, was discontinued.

On 30 September 2019 the parties signed a Loan Agreement, an Option to Purchase Shares and an Implementation Deed. Together these provided that the claimant would lend S$4.5 million with interest and could convert the loan into 4.5 billion shares in LionGold Corp Ltd. A Share Sale Agreement for Yaoo Capital to transfer 4.5 billion LionGold shares to the claimant was also signed by Mr Yao Liang and Mr Li Xu, a director of the claimant, but the circumstances were disputed: the claimant said Mr Li Xu signed it by mistake on the same day, while the defendants said it was signed later when the option was exercised.

The claimant transferred AUD4,950,000 to Mr Yao Liang in October 2019. Mr Yao Liang then handed Mr Li Xu a share certificate for 5 billion LionGold shares, which Mr Li Xu acknowledged in the name of "JS International holdings". On 5 December 2019 the two men executed a transfer of those shares to Sheng Investment. In March 2024 the claimant demanded repayment. The defendants said the transfer had discharged the loan; they also counterclaimed S$500,000 for an additional 0.5 billion shares, which they said Mr Cheung, the claimant's former director and majority owner, had proposed.

Issues

1. Whether the Share Sale Agreement was signed by mistake.
2. Whether the transfer of the LionGold shares to Sheng Investment discharged the defendants' loan obligation.
3. Whether the defendants proved their counterclaim for S$500,000 for additional shares.

Holding

Choo Han Teck J dismissed both the claim and the counterclaim. The court found that the transfer to Sheng Investment discharged the loan obligation, and that the defendants had not proved the agreement on which their counterclaim rested. Parties were directed to make costs submissions within 10 days.

Reasoning

The court rejected Mr Li Xu's account that he signed the Share Sale Agreement by mistake as part of a package. All the other agreements had been signed by Mr Cheung and hand-dated 30 September 2019, but the Share Sale Agreement bore neither his signature nor a date, which pointed to a separate occasion. The explanation also appeared for the first time in Mr Li Xu's affidavit of evidence-in-chief, not in the pleadings. The agreement's recitals showed the parties proceeded on the footing that the option had been exercised and the loan would be discharged by a transfer of shares.

On the transfer, the claimant argued that because the shares went to Sheng Investment rather than to the claimant, they belonged to a separate transaction. The court found no good reason why the defendants would transfer shares to Sheng Investment except at the claimant's direction in discharge of the loan. Mr Li Xu, a director of Sheng Investment, produced no document of any other transaction and no evidence of consideration from Sheng Investment. He had also signed for the certificate in the name of JS International Holdings, which appeared related to the claimant and had no link to Sheng Investment. Commercial logic favoured the defendants.

The counterclaim failed because it depended on a proposal said to have come from Mr Cheung, who was not called to give evidence. The court could not make a finding on the alleged agreement.

From the judgment