Asidokona Mining Resources Pte Ltd and another v Alternative Advisors Investments Pte Ltd

• Jurisdiction: Singapore
• Judge: Woo Bih Li JAD
• Judgment Date: 03 February 2023
• Neutral Citation: [2023] SGHC(A) 6
• Court: High Court Appellate Division (Singapore)
• Docket Number: Civil Appeal No 28 of 2022
• Hearing Date: 21 September 2022
• Citation: [2023] SGHC(A) 6
• Year: 2023
• Plaintiff Counsel: Gregory Vijayendran Ganesamoorthy SC, Chua Kee Tian Lester (Cai Qizhan Lester), Tomoyuki Lewis Ban and Kevin Wong Jin Wei (Rajah & Tann Singapore LLP) (instructed), Mulani Prakash P and Safiuddin bin Mohamed Naseem (M & A Law Corporation)
• Defendant Counsel: Mulani Prakash P and Safiuddin bin Mohamed Naseem (M & A Law Corporation),Narayanan Sreenivasan SC, Rajaram Muralli Raja and Chloe Wang Wenyi (K&L Gates Straits Law LLC)
• Subject Matter: Agency,Ratification,Acts,Choses in Action,Assignment,Contract,Illegality and public policy,Maintenance and champerty,Damages,Liquidated damages or penalty
• Published date: 08 February 2023

Kannan Ramesh JAD (delivering the judgment of the court): Introduction

Several difficult questions arise in this appeal. First, can a principal ratify a contract (in this case, a loan agreement) when the alleged agent did not even purport to act on behalf of the principal? Second, can the principal ratify when it cannot show that it has performed the contract (in this case, the disbursement of a loan)? Third, where legal action is commenced on a contract that has not been ratified, can ratification thereafter retrospectively remedy the cause of action and so provide legal basis for the action?

In our view, these questions ought to be answered in the negative. Consequently, the respondent’s successful action below cannot stand, and the appeal is therefore allowed.

Background

The factual background to the appeal has been covered in detail in the judgment below, Alternative Advisors Investments Pte Ltd and another v Asidokona Mining Resources Pte Ltd and another [2022] SGHC 41 (the “Judgment”). We summarise the pertinent aspects.

In June 2016, the second appellant, Mr Soh Sai Kiang (“Mr Soh”), sought the assistance of Mr Wong Joo Wan (“Mr Wong”) to arrange a loan of $2m (the “Loan”) to the first appellant, Asidokona Mining Resources Pte Ltd (“Asidokona”). Asidokona was incorporated in Singapore and Mr Soh was its sole shareholder and director. To raise the Loan, Mr Wong contacted Mr Ong Su Aun Jeffrey (“Mr Ong”), an advocate and solicitor and then managing partner of JLC Advisors LLP (“JLC Advisors”), a Singapore law practice. Mr Wong approached Mr Ong as he was aware that Mr Ong had clients who might wish to participate in the Loan.

Mr Ong informed Mr Wong that he had a client (the “Investor”), who was willing to contribute $1m towards the $2m required for the Loan. Mr Wong was not informed at that time that the Investor was to be Ms Lou Swee Lan (“Ms Lou”), the sole shareholder and director of Supreme Star Investments (“SSI”), and that the investment would be made through SSI. SSI was a company registered in the British Virgin Islands (the “BVI”).

As Mr Wong was short by $1m of the $2m required for the Loan, he decided to raise the remaining $1m himself. This comprised $500,000 from his own funds and another $500,000 which he borrowed from various persons including his colleagues at the respondent, Alternative Advisors Investments Pte Ltd (“AAI”). Mr Wong was AAI’s principal director and shareholder. As will be explained in greater detail below, in 2018, SSI purported to assign its interests in, inter alia, the Loan to AAI so that AAI could proceed to recover the debt by commencing the action below.

The Loan was to be for a term of three months, with interest at the rate of 5% per month, and default interest at the rate of 6% per month. Further, the Loan was to be personally guaranteed by Mr Soh and secured by a charge on Mr Soh’s shares in Asidokona, representing 100% of its issued and paid-up capital (the “Charged Shares”).

These terms were recorded in a loan agreement (the “Loan Agreement”), a deed of charge (the “Deed of Charge”) and a personal guarantee issued by Mr Soh (the “Personal Guarantee”) (collectively the “Loan Documents”), which were prepared by Ms Pok Mee Yau, a colleague of Mr Ong at JLC Advisors. Notably, per the Loan Documents, despite contributing only half of the Loan, SSI was the sole lender to Asidokona, and the sole chargee of the Charged Shares per the Loan Agreement and Deed of Charge respectively. Mr Wong was not stated or identified as a lender or chargee in the Loan Agreement or the Deed of Charge respectively. Therefore, the purported parties to the Loan Agreement and Deed of Charge were SSI and Asidokona, and Mr Soh and SSI respectively, and as regards the Personal Guarantee, SSI and Mr Soh.

The Loan Documents were signed by Mr Soh on 22 July 2016 and dated the same date. On the same day, $1.69m was disbursed by JLC Advisors from their client account to Asidokona. The sum of $1.69m was based on the loan amount of $2m less the sums of $300,000 and $10,000 that were deducted at disbursement for interest for the first three months of the Loan and transaction expenses respectively. This was in accordance with the terms of the Loan Agreement. It is pertinent that the Loan Documents were not executed by SSI, or by Mr Wong for and on SSI’s behalf, on that day. Instead, the Loan Documents were signed by Mr Wong purportedly for and on behalf of SSI much later in 2018 (see [12] below).

By May 2017, Asidokona had defaulted on the Loan. It had by then repaid some $900,000 towards interest, including the $300,000 that was deducted when the Loan was disbursed: see the Judgment at [142]. Asidokona continued to be in default in the first quarter of 2018, and by this time, the tenure of the Loan had been extended several times. As stated above at [6], in 2018, SSI purported to assign its interest in the Loan and the related instruments to AAI with a view to enabling AAI to recover the debt through the action below. The Loan Agreement and Personal Guarantee were assigned pursuant to a deed of assignment dated 30 March 2018 (the “First Deed of Assignment”), while the Deed of Charge was assigned pursuant to a deed of assignment dated 15 November 2018 (the “Second Deed of Assignment”) (collectively, the “Deeds of Assignment”). The Deeds of Assignment were signed by Mr Wong, purportedly for and on behalf of SSI, and Mr Yong Chor Ken (another director and shareholder of AAI) on behalf of AAI. Mr Wong initially gave evidence that the First Deed of Assignment was signed on 30 March 2018 but later clarified that it was only signed in June 2018. As for the Second Deed of Assignment, while there was no direct evidence of when it was signed, it was likely signed on or about 15 November 2018 as the notice of the assignment was given to Asidokona that day. SSI also purportedly agreed with AAI that the proceeds recovered from the action would be split equally between them, after payment of costs. The action below was commenced by AAI on 20 July 2018 against the appellants based on the First Deed of Assignment. It would be readily apparent that the Second Deed of Assignment was executed after the action below was commenced. On 8 February 2019, AAI amended its statement of claim to introduce the Second Deed of Assignment.

As will be explained below at [29]–[72], Mr Wong appears to have acted without SSI’s knowledge and authorisation in relation to the Loan Documents and the Deeds of Assignment. SSI only ratified his actions much later. Indeed, SSI claims that it was not aware of the action below until much later in March 2020. Further, for the same reasons, it is not at all clear that, prior to the Loan, there was an agreement between SSI and Mr Wong on their respective contributions towards the principal sum of the Loan and the manner in which they would share in the repayment. We will elaborate on the lack of documentary evidence as regards such agreement below at [42].

It was also in the first quarter of 2018, at about the time of the events set out in [10] above, that Mr Wong discovered that the Loan Documents had not been executed by SSI. He queried Mr Ong about this and was informed, for the very first time, of the identity of the Investor (ie, Ms Lou) and that he (ie, Mr Wong) had been authorised to act as SSI’s “principal and agent”. Mr Wong was also told by Mr Ong to confirm with Mr Wong Kup Loon (“Mr William Wong”), Ms Lou’s husband, that he was authorised to act for SSI, which he did in June or July 2018. Mr William Wong, who was not called as a witness, appears to have told Mr Wong that Mr Wong was authorised to sign the Loan Documents, and commence legal proceedings. On this basis, Mr Wong signed the Loan Documents and AAI commenced the action below in July 2018. It appears that he signed the Loan Documents after he signed the First Deed of Assignment but before the action below was commenced.

The action below was brought by AAI, as assignee of rights under the Loan Documents pursuant to the Deeds of Assignment, for recovery of the Loan and accrued interest, costs on an indemnity basis, and to enforce rights against the Charged Shares. SSI was added as a co-plaintiff in February 2019, but was struck off the BVI register of companies in November 2019. Subsequently, its claim was struck out in April 2020 following its failure to comply with an unless order for specific discovery (see [54] below).

On 23 July 2021, SSI was restored to the BVI register of companies. However, it did not apply to restore itself as a party to the action below. Notably, Ms Lou asserted that she only came to know about the Loan Documents, the Deeds of Assignment and the action below, and indeed Mr Wong’s actions, on or about March 2020. On 26 July 2021, Ms Lou procured SSI to pass a director’s resolution to ratify: (a) Mr Wong’s execution of the Loan Documents and the Deeds of Assignment; (b) commencement by AAI of the action below; and (c) joinder of SSI to the action below in February 2019. We shall refer to this director’s resolution as the “Ratification”.

The action below

In the action below, the appellants did not seriously dispute that: (a) the sum of $1.69m, being the principal sum of the Loan less the deductions stated above, was disbursed to Asidokona from JLC Advisors’ client account sometime in July 2016; (b) Mr Soh personally guaranteed Asidokona’s obligation to repay the Loan; and (c) the appellants had not repaid the Loan and interest in full (see [57] of the Judgment). Instead, the appellants raised an assortment of defences, which were all not accepted by the Judge: First, the “Locus Standi Defence” – that AAI, as equitable assignee of the Loan under the Deeds of Assignment, could not sue without joining SSI, the equitable assignor, as a party to the action. The Judge noted that this was a mere procedural requirement, and exercised her...