Axis Megalink Sdn Bhd and another v Far East Mining Pte Ltd

• Jurisdiction: Singapore
• Court: High Court Appellate Division (Singapore)
• Judge: Belinda Ang Saw Ean JCA
• Judgment Date: 10 May 2024
• Neutral Citation: [2024] SGHC(A) 15
• Citation: [2024] SGHC(A) 15
• Published date: 10 May 2024
• Year: 2024
• Docket Number: Civil Appeal No 107 of 2023
• Hearing Date: 02 April 2024
• Plaintiff Counsel: Koh Choon Guan Daniel (Eldan Law LLP) (instructed), Koong Len Sheng and Joshua Ang Zhao Neng (Hong Zhaoneng) (David Lim & Partners LLP)
• Defendant Counsel: Koh Swee Yen SC, Chng Zi Zhao Joel (Zhuang Zizhao), Felicia Soong Wanyi, G Kiran and Toh Yong Xiang (WongPartnership LLP)
• Subject Matter: Contract,Mistake,Unilateral mistake as to identity of contracting counterparty,Whether doctrine of mistaken identity extends to attributes of contracting counterparty,Misrepresentation,Rescission,Whether rescission is available in respect of contract for services where services have been rendered thereunder,Inducement,Whether representee was induced to enter into contract

Philip Jeyaretnam J (delivering the judgment of the court): Introduction

This appeal concerns a contract entered into between an arranger and an acquirer. The arranger was engaged to assist with a hoped-for reverse takeover of an identified publicly listed target in return for shares in that entity once the acquirer had injected its assets into it. The relevant contracts between the acquirer and the target were entered into, and almost two years passed without complaint by the acquirer. However, when the arranger attempted to enforce its contract and have the shares issued to it, the acquirer, who by now owned the target, resisted enforcement. It pleaded among other things that the contract was void for unilateral mistake of identity or voidable for fraudulent misrepresentation. The two defences both rested on the factual claim that, unknown to the acquirer, the arranger was owned by a man who was said to be a representative of the target or its controlling shareholder.

The Judge found in favour of the acquirer in Axis Megalink Sdn Bhd v Far East Mining Pte Ltd [2023] SGHC 243 (“the Judgment”). He held that the contract was void by reason of the acquirer’s unilateral mistake and the acquirer was also entitled to damages on the ground of fraudulent misrepresentation (see Judgment at [2]–[3], [113], [131] and [148]). These are the holdings challenged in AD/CA 107/2023 (“AD 107”).

Having considered parties’ submissions, we allow AD 107 in part, for the reasons which follow.

Relevant background The parties

The first appellant, Axis Megalink Sdn Bhd (whom we have thus far referred to as the ‘arranger’ and will hereafter refer to as “Axis”), is a Malaysian company, while the respondent, Far East Mining Pte Ltd (whom we have thus far referred to as the ‘acquirer’ and will hereafter refer to as “FEM”), is a private Singapore company.¹ At all material times, Mr Syed Abdel Nasser bin Syed Hassan Aljunied (“Mr Aljunied”) and Mr Hong Kah Ing (“Mr Hong”) were directors and shareholders of FEM.²

FEM and Axis entered into a contract (or a putative contract) dated 16 August 2016 (“the Engagement Letter”) for the former to engage the latter as an introducer and arranger for a reverse takeover of a then-listed Singaporean company, China Bearing (Singapore) Ltd (later renamed to Silkroad Nickel Ltd) (whom we have thus far referred to as the ‘target’ and will hereafter refer to as “CBL”). In exchange, Axis was to receive a fee of US$2 million to be paid in the form of new ordinary shares in CBL (“the Consideration Sum”) to be issued only after the injection by FEM of its nickel mine, located in Sulawesi, Indonesia, into CBL.³

Axis brought its claim for the Consideration Sum against FEM in HC/S 342/2023 (“Suit 342”).⁴ FEM then counterclaimed against Axis, the second appellant, Mr Lee Kien Han (“Mr Lee”), along with two other defendants in counterclaim (against whom the claims were either dismissed or discontinued and in respect of which there has been no appeal, see Judgment at [128] and [132]), for among other things fraudulent misrepresentation.⁵

Mr Lee has been the beneficial owner of Axis since 22 July 2016.⁶ He had a close working relationship as a lawyer and advisor to Datuk Lim Kean Tin (“Datuk Lim”),⁷ former non-executive Chairman of the Board and controlling shareholder of CBL (prior to the completion of the reverse takeover),⁸ although it was a matter of dispute whether Mr Lee acted as Datuk Lim’s lawyer in the transaction at issue.⁹

Factual background to dispute The identification of CBL as a potential counterparty for the RTO Transaction by FEM on 28 June 2016

Sometime in 2015–2016, Mr Aljunied and Mr Hong were interested in FEM acquiring a controlling stake in a listed company through a reverse takeover transaction (“the RTO Transaction”).¹⁰

FEM’s Chief Financial Officer, Mr Lim Eng Hoe (“Mr Lim”),¹¹ was tasked with structuring the RTO Transaction for FEM.¹² So he sought to identify a suitable listed company.¹³

On 28 June 2016, Mr Lim sent an email to Mr Aljunied and Mr Hong, proposing CBL as a counterparty for the RTO Transaction with FEM.¹⁴ Mr Aljunied and Mr Hong gave Mr Lim the go-ahead to negotiate with CBL for the RTO Transaction.¹⁵

The introduction of Mr Aljunied and Mr Hong to Datuk Lim of CBL on 20 July 2016

On 12 July 2016, Mr Lim asked Mr Aljunied and Mr Hong (over WhatsApp) if they were able to meet the representatives of CBL to discuss the terms of the draft term sheet for the proposed RTO Transaction. Both replied that they could.¹⁶

On 14 July 2016, Mr Lim sent an email to Mr Aljunied and Mr Hong with a draft term sheet to be executed between FEM, its Indonesian subsidiary, and CBL.¹⁷

The draft term sheet (at cl 3) included a provision for the payment of an ‘arranger fee’ to CBL’s arranger by CBL.¹⁸ Mr Lim’s email also stated: “The revised draft Term Sheet with arranger fee payable by CBL for your review. Please take note that there will also be arranger fee of 2% payable by the Vendor [defined therein as FEM] to another party. These 2 arrangers are separate and independent of each other”.¹⁹

On 15 July 2016, Mr Lim informed Mr Aljunied and Mr Hong (over WhatsApp) that they would be meeting “CB [ie, CBL] owner” and “his lawyer and his lieutenant” – Datuk Lim and Mr Lee respectively – for dinner next Wednesday.²⁰

That dinner took place on 20 July 2016 (“the Introductory Dinner”). Present were Mr Aljunied, Mr Hong, Mr Lim, Mr Lee, and Datuk Lim.²¹ The attendees discussed the proposed RTO Transaction and agreed to take steps to move forward with the proposal, including by arranging a due diligence visit to FEM’s nickel mine in Sulawesi, Indonesia.²²

The presentation of the proposed RTO Transaction to CBL’s board of directors on 8 August 2016

From 2–5 August 2016, Mr Lim corresponded with Mr Lee on the draft term sheet and the presentation of the proposal for the RTO Transaction to be placed before CBL’s board of directors.²³

On 5 August 2016, Mr Lim sent an email to Mr Aljunied and Mr Hong enclosing the board presentation and updating them that that proposal would be placed before CBL’s board the next Monday.²⁴

That board meeting took place on 8 August 2016 (“the CBL Board Meeting”). Present among others were Datuk Lim, Mr Lee, Mr Lim, and Mr Aljunied.²⁵ CBL’s board considered the proposal but did not approve it at the meeting itself. The issue price for consideration shares and the draft term sheet had yet to be decided or reviewed.²⁶

The execution of the Engagement Letter between FEM and Axis on 16 August 2016

On 10 August 2016, Mr Lim sent an email to Mr Aljunied and Mr Hong with a revised draft term sheet for the RTO Transaction.²⁷

On 11 August 2016, Mr Lim sent a copy of the paper presented to CBL’s board to Mr Lee’s law firm (copying Mr Lee), with a note on the upper limit for the issue price (for CBL’s shares) which was approved by CBL’s board.²⁸

On 12 August 2016, Mr Lim sent an email to Mr Aljunied and Mr Hong with another revised version of the draft term sheet for the RTO Transaction. The email stated: “If there are no further comments, we shall proceed to print out the clean copy for execution”.²⁹

On 15 August 2016, Mr Lee’s law firm sent an email to Mr Lim (copying Mr Lee),³⁰ attaching three documents: a draft of the Engagement Letter;³¹ a draft memorandum of understanding (to be signed by Mr Aljunied, Mr Hong, and Datuk Lim), stating that the arranger for the RTO Transaction would be Axis;³² and a draft letter of undertaking (to be signed by Mr Aljunied, Mr Hong, and Mr Lee’s law firm), undertaking to transfer shares in CBL to Mr Lee’s law firm upon the completion of the RTO Transaction, “in consideration of you [ie, Mr Lee’s law firm] introducing Datuk Lim Kean Tin and the Listed Company to us [ie, Mr Hong, Mr Aljunied, and FEM]” as “introducer fees”.³³

On 16 August 2016, Mr Lee’s law firm sent an email to Mr Lim (copying Mr Lee) with a copy of the Engagement Letter, signed by one of the nominee directors of Axis.³⁴ That same day, Mr Lim presented the Engagement Letter to Mr Aljunied, who signed it on behalf of FEM (with Mr Lim as the witness).³⁵ The signed Engagement Letter was sent by Mr Lim to Mr Lee’s law firm that same day.³⁶

Also on the same day, FEM’s group financial controller (“Ms Chong”) sent an email to Mr Lim, with the subject line: “Final term sheet with signature and initial”. Appended was a copy of the draft term sheet for the RTO Transaction, signed only by Mr Aljunied (with Mr Lim as the witness thereof).³⁷

On 22 August 2016, at the request of Ms Chong, a second copy of the Engagement Letter was signed by both Mr Aljunied and Mr Hong.³⁸ The two copies were otherwise the same.³⁹ After that second copy of the Engagement Letter was signed, Ms Chong then sent it by email to Mr Lim.⁴⁰

The execution of the Term Sheet for the RTO Transaction between CBL and FEM on 24 August 2016

On 22 August 2016, a draft term sheet for the RTO Transaction (bearing the signatures of Datuk Lim and Mr Lee) was sent from Mr Lee to Mr Lim, who sent it to Mr Aljunied and Mr Hong on the same day. The email described it as “signed copy from China Bearing [ie, CBL] as attached for your reference”.⁴¹

On 24 August 2016, CBL and FEM (as well as its Indonesian subsidiary) executed a term sheet for the RTO Transaction (“the Term Sheet”).⁴² The Term Sheet set out the terms for the RTO Transaction.⁴³ It was signed for CBL by Datuk Lim, witnessed by Mr Lee, for FEM by Mr Aljunied, witnessed by Mr Lim, and for its Indonesian subsidiary by Mr Hong.⁴⁴

The execution of the SPA for the RTO Transaction between CBL and FEM on 27 October 2016

On 27 October 2016, FEM and CBL executed a share and purchase agreement for the RTO Transaction (“the SPA”).⁴⁵ FEM had incorporated a special purpose vehicle to hold the shareholding of its Indonesian subsidiary that held the nickel mine following a contemplated group...