LO YEW SENG v ASTRAWATI ALUWI

1 The respondent agreed to purchase a residential apartment unit ("Unit") in a housing development to be built in Niseko, Japan called Tellus Hirafu ("Development"). The respondent claimed that the appellant made false representations to her which induced her to purchase the Unit.

2 The Development was overseen by a group called the “Infinity Group”, which included three companies – LC Capital Ltd (“LC Capital”), Infinity Capital Group Ltd (“Infinity Capital”), and Infinity Capital Group Japan Development Godo Kaisha. The Infinity Group was controlled and largely owned by Jonathan. YC handled the day-to-day management of the group.

3 The appellant was linked to the Infinity Group through several investments, including a loan of S$680,000 to LC Capital (“First Loan”) and a loan of A$200,000 to Infinity Capital, for which a bond certificate was issued by Infinity Capital to him (“Bond Certificate”).

4 In January 2019, the appellant met Ms Serene Wan ("Serene"), the property agent acting for the respondent, and told her about the Development. On 31 January 2019 and 1 February 2019, the appellant sent Serene two brochures for the Development over WhatsApp. The brochures stated, among other things, that Infinity Capital was the developer, the tenure of the Development was freehold, and the target completion date was in December 2021. Serene forwarded these brochures to the respondent.

5 Between 1 February 2019 and 28 April 2019, Serene negotiated with the appellant on behalf of the respondent on the potential purchase of a unit in the Development. After the key commercial terms were agreed, the appellant referred Serene to YC and Jonathan to finalise the purchase of the Unit. The respondent executed a Commitment Agreement on 28 May 2019 and a Contract for Sale on 29 May 2019, pursuant to which she paid US$1,786,000 in six progress payments between 31 May 2019 and 19 May 2021.

6 In truth, the Infinity Group never owned the land on which the Development was to be built ("Land"), and no application was ever submitted for a permit to commence construction. A Land Sale and Purchase Agreement (“Land S&P”) dated 9 February 2018 showed that Infinity Capital had agreed to purchase the Land from its owner but never completed the purchase. A Deed of Settlement and Release (“Settlement Deed”) dated 30 January 2020 confirmed that Infinity Capital had paid only US$3,320,888.37 to the owner of the Land (inclusive of deposits and penalties), when the purchase price was US$10,500,000.

7 The respondent commenced proceedings against the appellant in the General Division of the High Court for fraudulent misrepresentation, asserting that the appellant had induced her to purchase the Unit by making the following misrepresentations in the brochures sent on 31 January 2019 and 1 February 2019:

a. In early 2019, Infinity Capital, as the developer of the Development, owned the land on which the project was to be constructed, on a freehold tenure (“Ownership Representation”).

b. In early 2019, Infinity Capital, as the developer, intended to commence construction of the project soon (“Construction Representation”).

The respondent also brought claims against the appellant in negligent misstatement and unlawful means conspiracy.

8 The Judge allowed all three claims and awarded the respondent damages of US$1,786,000 with interest at 5.33% per annum from the commencement of proceedings, together with the full costs of the proceedings. The appellant appealed against the Judge's decisions on all three claims.

9 The Judge did not err in finding that the appellant made the Ownership Representation and the Construction Representation. The brochures would have conveyed to a reasonable reader that the developer already owned the Land. A reasonable reader would interpret statements about freehold tenure in a property marketing brochure as meaning that the developer already owned the land on which the property was to be built, since it was reasonable to expect that, at the point when units in a development were actively being sold, the developer had at least obtained the right to build the development. This interpretation was bolstered by the appellant’s message to Serene stating that the contract for groundbreaking works had been signed: at [35]–[36].

10 The Construction Representation was a representation as to a future event (ie, that construction would begin soon). It was false because the appellant had no honest belief that the developer owned the Land or had the financial wherewithal to acquire it: at [41].

11 A representor's duty to correct a continuing misrepresentation persisted only until the time the representation was relied on. The respondent's act of reliance occurred on 29 May 2019, when she executed the Contract for Sale. Accordingly, the appellant's duty to correct the misrepresentations ended on 29 May 2019, and the Judge had erred in finding that the duty persisted until January 2020 when the Settlement Deed was executed: at [42].

12 The Judge did not err in finding that the appellant knew the representations were false or was reckless as to their truth: at [59].

a. The Judge did not err in finding that the appellant was part of the Infinity Group’s key management team. The Infinity Group held him out as a part of its key management team in its marketing materials, and he told Serene that he was involved at the “company level, [as] investor and advisor”. His representation that he was involved at the “company level” acknowledged that he worked in some capacity in the company: at [44]–[45].

b. The Judge was entitled to draw an adverse inference against the appellant that he knew, at the material time, that the Infinity Group did not own the Land. There were glaring omissions in the appellant's affidavits of evidence-in-chief. He failed to explain the nature and degree of his involvement with the Infinity Group. He also failed to explain when and how he came to know that the Infinity Group never owned the Land, which severely undermined his defence that he had believed the Infinity Group owned the Land at the time he sent the brochures. His documentary disclosures were woefully inadequate and his testimony in cross-examination was evasive and inconsistent. His failure to candidly and consistently explain when and how he knew of the Land S&P and Settlement Deed raised questions as to his knowledge of the ownership of the Land, and how involved he was with the Development and the Infinity Group: at [50]–[56].

c. The Judge was also justified in finding, in the alternative, that the appellant was reckless as to the truth of the Ownership Representation. The Infinity Group had defaulted on the First Loan and the first coupon payment under the Bond Certificate, which must have alerted the appellant to the Infinity Group's financial difficulty. The appellant had advised the Infinity Group on fundraising for the Development and would have known that the fundraising target had not been met, such that the Infinity Group could not meet its payment for the purchase price of the Land. The defaults jeopardised a sizeable personal investment the appellant had made, as well as the investment of other bondholders, some of whom were clients and friends whom the appellant had convinced to subscribe to the bonds. The appellant thus had a strong incentive and ample opportunity to verify the Infinity Group’s claim of land ownership, but he chose not to ask Jonathan or YC any questions about this: at [58].

13 The Court affirmed the Judge’s finding that the respondent had relied on the representations. A material representation gave rise to a rebuttable presumption of fact that the representee was induced to enter into the contract by it. The representations were highly material as they went to the very heart of the Development's viability, affecting the fundamental question of whether the Development would even go ahead and be completed as promised. The element of reliance was accordingly made out as a matter of course, and the appellant could not point to evidence disproving such reliance: at [60]–[63].

14 The Court disagreed with the Judge on two discrete findings of fact. The evidence did not clearly support the Judge’s finding that the appellant had dissuaded the respondent not to use a Japanese lawyer or his finding that the appellant had conjured an artificial sense of urgency to pressure the respondent into quickly signing the Contract for Sale. Despite this, the rest of the available evidence, when viewed holistically, supported the Judge’s finding of reliance: at [64].

15 The Court set aside the Judge’s decision on negligent misstatement on the ground that the pleadings were defective. The Judge had rightly held that the respondent’s pleadings on negligent misstatement were defective, but he erred in holding that the claim could be pursued despite the defective pleadings. The respondent did not plead the material facts supporting the elements of duty of care and breach. She did not plead how the appellant’s conduct showed a voluntary assumption of responsibility to the respondent, what the standard of care expected of the appellant was, or how the duty of care was breached. The appellant was prejudiced by not knowing the case he had to meet at the trial below. There were no particulars about what standard of care was expected of him, and so he could not prove how his conduct had met this standard of care: at [73]–[76].

16 The respondent’s pleadings on unlawful means conspiracy were defective. The respondent was required to plead the role of each conspirator and his or her participation in the conspiracy. In her Statement of Claim and Opening Statement, she pleaded that the conspiracy only involved the appellant and YC, but in Closing Submissions, she changed her case to one in which the combination comprised the appellant, YC, and Jonathan. The pleadings were thus inconsistent with the final position taken by the respondent. The appellant was prejudiced because he did not have the opportunity to challenge Jonathan’s alleged involvement in the conspiracy. Accordingly, the Judge should not have found that the claim for unlawful means conspiracy was made out given that the respondent’s position at the trial departed materially from her pleaded case, and there was no attempt by the respondent to amend her pleadings: at [81]–[82].

17 There was insufficient evidence of any combination or agreement between the appellant, YC, and Jonathan to injure the respondent. A finding that such a combination existed would be contrary to the respondent's own case, which was that the appellant had made the false representations to induce the respondent to enter into the Contract for Sale as part of a scheme to raise funds to buy the Land and build the Development. Under this pleaded case, the appellant and his alleged co-conspirators had not intended for the respondent to lose any money, whether as an end or a means to an end. The evidence also did not prove such a shared intention: at [83]–[84].