Acute Result Holdings Ltd v CGS-CIMB Securities (Singapore) Pte Ltd

• Jurisdiction: Singapore
• Judge: Woo Bih Li JAD,Kannan Ramesh JAD,Aedit Abdullah J
• Judgment Date: 28 July 2023
• Docket Number: Civil Appeal No 33 of 2022
• Court: High Court Appellate Division (Singapore)

Acute Result Holdings Ltd

and

CGS-CIMB Securities (Singapore) Pte Ltd (formerly known as CIMB Securities (Singapore) Pte Ltd)

[2023] SGHC(A) 27

Woo Bih Li JAD, Kannan Ramesh JAD and Aedit Abdullah J

Civil Appeal No 33 of 2022

Appellate Division of the High Court

Contract — Breach — Respondent dealing with appellant's shares on third-party's instructions — Whether appellant authorised third-party to operate appellant's account with respondent — Whether appellant precluded by conclusive evidence clause from alleging that transaction was unauthorised

Trusts — Express trusts — Appellant and third-party lender entering into loan agreement with shares as security — Loan agreement providing that third-party lender intended to borrow shares — Respondent dealing with shares on third-party lender's instructions — Whether shares held by third-party lender on express trust for appellant — Whether express trust compatible with security interest — Whether respondent liable in knowing receipt and dishonest assistance

Trusts — Resulting trusts — Appellant and third-party lender entering into loan agreement with shares as security — Loan agreement providing that third-party lender intended to borrow shares — Respondent dealing with shares on third-party lender's instructions — Whether shares held by third-party lender on resulting trust for appellant — Whether resulting trust compatible with security interest — Whether respondent liable in knowing receipt and dishonest assistance

Held, dismissing the appeal:

First Tranche Shares

(1) The appellant intended to create a security interest over the First Tranche Shares in favour of Lioncap. Under the November 2016 Agreements, the First Tranche Shares were intended as security for various loan facilities granted by Lioncap Asia, to which Lioncap would have had recourse in the event of a default in repayment by the appellant. This was not altered by the terms of the April 2017 Addendum or the Instruction Letters: at [19].

(2) The April 2017 Addendum was internally contradictory. Section 3.05 of the April 2017 Addendum suggested that the draft instruction letter exhibited therein (the “Draft Instruction Letter”) was meant to be executed to complete the transaction in the November 2016 Agreements, which involved “perfect[ing] the right, title, and interest” of Lioncap Global to and in the First Tranche Shares. Yet, the Draft Instruction Later stated that the appellant would remain the beneficial owner of the shares. Moreover, although the Draft Instruction Letter and the Instruction Letters mentioned that the appellant would remain the beneficial owner of the shares, a later part mentioned that both the legal and beneficial ownership of the shares were to remain with the appellant: at [22] and [24].

(3) The Instruction Letters referred to Lioncap Global having an intention to borrow the First Tranche Shares. If Lioncap Global had in fact borrowed the shares, it would not have been holding the shares on trust for the appellant, as that would ordinarily mean that Lioncap Global was entitled to deal with and/or dispose of the shares for its own purposes, subject to an obligation on Lioncap Global's part to return an equivalent amount of shares to the appellant. That would have been incompatible with Lioncap Global being a trustee of the First Tranche Shares for the appellant as beneficiary: at [27] and [29].

(4) The suggestion from the April 2017 Addendum and the Instruction Letters was that they were meant to complete the transaction in the November 2016 Agreements. However, the November 2016 Agreements never contemplated that Lioncap would hold the Cabbeen shares on trust for the appellant. In this scenario, Lioncap only had a security interest over the shares, which would not be ordinarily compatible with a trust: at [28] and [29].

(5) There was no clear suggestion or discernible intent on the appellant's part that Lioncap was to hold the First Tranche Shares on a resulting trust or an express trust for the appellant, nor that the shares were to be held by Lioncap subject to trust obligations. Therefore, no resulting trust or express trust arose over the First Tranche Shares in favour of the appellant: at [21], [30] and [33].

(6) As there was neither a resulting nor an express trust over the First Tranche Shares, and no other basis was pleaded for a fiduciary relationship to arise, the appellant's claim in knowing assistance and dishonest receipt against the respondent could not be made out: at [34].

Second Tranche Shares

(7) There was sufficient evidence that Lioncap was duly authorised to operate Acute's CGS-CIMB Account containing the Second Tranche Shares. In addition, the appellant did not query the respondent or raise objections at the material time as to why the respondent had acted on instructions from Lioncap Global even though the Second Tranche Shares were kept in an account in the appellant's name. The appellant's letter and e-mails instructing the respondent to withdraw the Second Tranche Shares from Acute's CGS-CIMB Account were not objections that the respondent had acted without authorisation: at [36] to [38].

(8) The appellant was contractually precluded by Clause 2C from alleging that the transfer of the Second Tranche Shares from Acute's CGS-CIMB Account to Lioncap's account was unauthorised, as the appellant did not raise any objections within the time stipulated under Clause 2C after being informed that 21 million Cabbeen shares had been transferred out of Acute's CGS-CIMB Account. Clause 2C applied even in respect of unauthorised transactions or negligent breaches and was not unreasonable under the Unfair Contract Terms Act 1977 (2020 Rev Ed): at [39] to [42].

Case(s) referred to

Qilin World Capital Ltd v CPIT Investments Ltd [2018] 2 SLR 1 (folld)

State-Owned Company Yugoimport SDPR, The v Westacre Investments Inc [2016] 5 SLR 372 (folld)

Tjoa Elis v United Overseas Bank Ltd [2003] 1 SLR(R) 747; [2003] 1 SLR 747 (folld)

Yuanta Asset Management International Ltd v Telemedia Pacific Group Ltd [2018] 2 SLR 21 (distd)

Facts

The appellant owned shares in Cabbeen Fashion Ltd (“Cabbeen”), which was listed on the main board of the Hong Kong Stock Exchange. The appellant engaged in various transactions with Lioncap Global Management (“Lioncap Global”) and Lioncap Asia Ltd (“Lioncap Asia”) (collectively, “Lioncap”) surrounding the appellant's Cabbeen shares. In November 2016, the appellant and Lioncap entered into various agreements under which the appellant essentially created a security interest over 130 million Cabbeen shares in favour of Lioncap Global (the “November 2016 Agreements”). These shares were originally held in the appellant's brokerage account with PT CIMB Securities Indonesia (“CIMB Indonesia”), and were meant to secure: (a) a 2m Hong Kong dollars (“HK$”) loan previously extended by Lioncap Asia to an associate of the appellant's sole director and shareholder; and (b) a further loan of HK$120m which Lioncap Asia was to extend to the appellant. The appellant subsequently deposited 144 million Cabbeen shares in its account with CIMB Indonesia. Lioncap Asia thereafter failed to advance any part of the HK$120m to the appellant. In March 2017, with Lioncap Global's consent, the appellant withdrew 30 million shares from its account with CIMB Indonesia.

The appellant and Lioncap eventually executed an addendum on 20 April 2017 (the “April 2017 Addendum”) to amend the November 2016 Agreements, under which the appellant and Lioncap specifically agreed that the terms of the April 2017 Addendum were to be treated as part of the November 2016 Agreements, and that the terms in those earlier agreements which were not amended were to remain in effect. By the April 2017 Addendum and the November 2016 Agreements, the appellant and Lioncap agreed that: (a) the appellant would transfer 47.08 million Cabbeen shares from its CIMB Indonesia account to Lioncap Global's account with the respondent; (b) Lioncap Asia would extend a loan of HK$50m to the appellant (reduced from HK$120m); and (c) 56.92 million Cabbeen shares would be released from the security interest created in Lioncap Global's favour. The 57.08 million shares left in the appellant's account with CIMB Indonesia were eventually transferred to an account in Lioncap Global's name with the respondent.

The appellant also issued two instruction letters on 24 May 2017 and 18 May 2017 (respectively, the “First Instruction Letter” and “Second Instruction Letter” and collectively, the “Instruction Letters”) to CIMB Indonesia, instructing the latter to transfer a total of 57.08 million Cabbeen Shares (the “First Tranche Shares”) from the appellant's account with CIMB Indonesia to Lioncap Global's account with the respondent. The Instruction Letters stated that: (a) Lioncap Global had an intention to borrow shares in the custody of CIMB Indonesia which were owned by the appellant, who would remain the beneficial owner of the shares; and (b) the “legal and beneficial ownership” of the shares was to remain with the appellant. In accordance with the Instruction Letters, CIMB Indonesia transferred the 57.08 million Cabbeen shares from the appellant's account with CIMB Indonesia to Lioncap Global's account with the respondent. The shares were later dealt with by the respondent on Lioncap Global's instructions without the appellant's knowledge.

In May 2017, the appellant and Lioncap entered into negotiations regarding a further loan facility to be secured by the appellant's Cabbeen shares. As a condition for continuing the negotiations, Lioncap Global asked that the appellant open a brokerage account with the respondent (“Acute's CGS-CIMB Account”) and deposit 21 million Cabbeen shares into that account (the “Second Tranche Shares”), which the appellant did in July 2017. Lioncap Global then instructed the respondent to transfer the Second Tranche Shares to its...