Alwie Handoyo v Tjong Very Sumito

• Jurisdiction: Singapore
• Judgment Date: 06 August 2013
• Date: 06 August 2013
• Docket Number: Civil Appeals Nos 82 and 83 of 2012
• Court: Court of Appeal (Singapore)

Alwie Handoyo

Plaintiff

and

Tjong Very Sumito and another and another appeal

Defendant

[2013] SGCA 44

Sundaresh Menon CJ

,

Chao Hick Tin JA

and

VK Rajah JA

Civil Appeals Nos 82 and 83 of 2012

Court of Appeal

Agency—Evidence of agency—Whether third party recipient of shares paid pursuant to agreement was agent of seller in agreement

Bailment—Bailees—Whether third party recipient of shares paid pursuant to agreement was bailee of shares

Companies—Incorporation of companies—Lifting of corporate veil—Whether corporate veil should be lifted on ground of alter ego

Evidence—Proof of evidence—Onus of proof—Standard of proof—Whether there was separate and discrete burden of proof for allegations of fraud

Evidence—Witnesses—Whether unreliable witness's evidence should be rejected entirely

Tort—Conversion—Whether scripless shares in Singapore could be converted

Tort—Misrepresentation—Fraud and deceit—Whether representee could rely on fact of entering into contract to demonstrate inducement

Restitution—Unjust enrichment—Whether want of authority was recognised unjust factor for purposes of establishing claim in unjust enrichment

The parties to the appeals from Suit No 89 of 2010 (‘Suit 89’) were involved in three transactions for the acquisition of shares in two Indonesian companies, PT Deefu Chemical Indonesia (‘PT Deefu’) and PT Batubaraselaras Sapta (‘PT Batubara’). PT Batubara held a coal mining concession in Indonesia. The first and main transaction involved the sale of 72% of PT Deefu (which owned 95% of PT Batubara) from the plaintiffs collectively to the 11 thdefendant, Antig Investments Pte Ltd (‘Antig’). The other two transactions involved the sale of 5% of PT Batubara and the remaining 28% of PT Deefu (‘the Remaining Shares’) from Tjong Very Sumito (‘Tjong’), the first respondent and one of the three plaintiffs, to the seventh and eighth defendants respectively.

As part of the agreement for the first transaction, a sizeable portion of the purchase price of US$18 m was paid to Aventi Holdings Limited (‘Aventi’) and Overseas Alliance Financial Limited (‘OAFL’) in the form of cash and shares in the Antig's parent company which was listed on the Singapore Stock Exchange. Aventi and OAFL were authorised under the agreement to receive the payments for and on behalf of the plaintiffs. However, the plaintiffs subsequently claimed that Tjong, and not Aventi and OAFL, should receive the full US$18 m. The sale of the Remaining Shares took place shortly thereafter.

In Suit 89, the plaintiffs alleged, inter alia, that Chan Sing En (‘Chan’), the first defendant and appellant in Civil Appeal 83 of 2012 (‘CA 83’), had guaranteed that the plaintiffs, through Tjong, would receive the full US$18 m. Tjong also alleged, inter alia, that Chan had misrepresented to Tjong that he would receive the full US$18 m if he sold his Remaining Shares. As against Alwie Handoyo (‘Alwie’), the fifth defendant and appellant in Civil Appeal No 82 of 2012 (‘CA 82’), the plaintiffs claimed that he was liable to refund the cash and share payments received by OAFL as he was the alter ego of OAFL which was unjustly enriched by the cash payments and had converted the shares which it received from Antig. The High Court judge (‘the Judge’) dismissed most of the plaintiffs' claims. The Judge however found that Chan had guaranteed that the plaintiffs would receive the full US$18 m purchase price, and had induced Tjong into selling his Remaining Shares by misrepresenting to Tjong that he would receive the full US$18 m if he did so. The Judge also found that OAFL was unjustly enriched and had converted the shares. He held that the corporate veil of OAFL should be lifted and consequently, Alwie was personally liable to return the payments received by OAFL from Antig.

In CA 82, Alwie submitted, inter alia, that the unjust enrichment claim should not have been allowed as there was no unjust factor. The conversion claim should also not have been allowed as the shares were not capable of being converted and in any event, the plaintiffs did not have an immediate right of possession to the shares which was required to found an action in conversion. In CA 83, Chan submitted, inter alia, that the guarantee relied by the plaintiffs was fabricated and therefore should not be enforced. Chan also argued that the misrepresentation claim was not established as he had not made the alleged representation and that in any event, Tjong was not induced by it.

Held, allowing CA 82 and CA 83 in part:

(1) The evidence of a witness need not be rejected in toto simply because it was unreliable or untrue in some parts. The court should appraise the witness's entire evidence in the context of all the other evidence and circumstances of the case and separate the grain from the chaff: at [59] to [61] .

(2) The plaintiffs were, on paper, selling their stake in PT Deefu for US$18 m. In reality, the understanding was that Tjong would only receive US$6 m. The remainder would be paid to Aventi and OAFL who were to receive the payments as third party beneficiaries. On this basis, the claims for unjust enrichment and conversion against OAFL, and by extension, Alwie, failed: at [73] to [84] and [88] .

(3) The ground of alter ego was distinct from that based on façade or sham, and the key question that had to be asked whenever an argument of alter ego was raised was whether the company was carrying on the business of its controller. The corporate veil was rightly lifted as Alwie controlled OAFL and made no distinction between himself and OAFL: at [96] to [100] .

(4) A plaintiff had no remedy against a defendant under the law of unjust enrichment where the plaintiff and a third party entered into a contract under which the plaintiff was required to confer a benefit directly on the defendant. To do otherwise would undermine the contract and the contractual allocation of risk between the plaintiff and the third party. Antig performed its obligations entirely in accordance with the agreement and the plaintiffs obtained the performance they contracted for in relation to the cash payments to OAFL. In any event, the authorities did not support the proposition that want of authority was a recognised unjust factor for the purposes of establishing a claim in unjust enrichment: at [104] , [109] and [111] to [114] .

(5) Under the scripless trading system in Singapore, although shares were scripless for the purposes of trading, they were still backed by certificates. The account holder to whom the shares were issued would have a book-entry under his account reflecting his title to the shares, and would enjoy the same rights and privileges as a shareholder of the issuer. When the account holder transferred shares electronically, his account and that of the transferee's would be updated to reflect the change in title to the shares. The share certificates which were tied to and sustained the book-entries in the Central Depository's register, were capable of being the subject-matter of a substantive claim for conversion: at [134] to [137] .

(6) The plaintiffs did not have a right to immediate possession of the shares. They never had any interests - legal, equitable or possessory - in the shares which were, at all times, allotted to OAFL's nominee for OAFL's account. OAFL was also never an agent of the plaintiffs as it never consented to receiving the shares as an agent for the plaintiffs: at [142] to [156] .

(7) The standard of proof that applied in all civil proceedings was the balance of probabilities. There was no third legal burden of proof where fraud was alleged that straddled the civil and criminal burdens. Nevertheless, because of the serious implications of fraud, cogent evidence was required before a court would be satisfied that the allegation of fraud was established: at [159] to [161] .

(8) In the light of the expert evidence tendered by Chan coupled with the surrounding circumstances, it was more likely than not that the guarantee relied upon by Tjong was fabricated by him: at [165] to [181] .

(9) Under the test for determining whether there had been actionable misrepresentation, it was immaterial whether the representee was induced by other factors. The correct focus should not be on what would have happened without the misrepresentation but on whether the misrepresentation influenced the representee's decision to enter into the contract. The representation had to have a real and substantial effect on the representee's mind such that it could be said to be an inducing cause which led him to act as he did. Applying this test, the facts were too bare to support the conclusion that the representation by Chan, even if it was made, induced Tjong to sell the Remaining Shares. The mere fact that Tjong sold his Remaining Shares did not necessarily mean, without more, that he was induced: at [186] , [188] and [192] .

[Observation: Lipkin Gorman (a firm) v Karpnale Ltd[1991] 2 AC 548 should not be understood as a clear instance of a case involving a proprietary restitutionary claim: at [119] to [121] .

Money had and received was not a cause of action. Identifying the precise underlying cause of action for a restitutionary claim had practical consequences in terms of affecting what the plaintiff needed to show in order to establish the claim. The underlying basis for the action for money had and received was now embraced under the rubric of unjust enrichment: at [125] .]

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