Choy Swee Seng v Heng Zheng Yi Benedict

• Jurisdiction: Singapore
• Judge: James Leong Kiu Yiu
• Judgment Date: 17 March 2021
• Neutral Citation: [2021] SGDC 50
• Court: District Court (Singapore)
• Hearing Date: 12 January 2021,25 August 2020,23 June 2020,26 August 2020
• Docket Number: District Court Suit No 1358 of 2019
• Plaintiff Counsel: Kenny Khoo and Chiang Wan Ting (Ascentsia Law Corporation)
• Defendant Counsel: Koh Kok Kwang and Lee Pin Wen Karin (CTLC Law Corporation)
• Subject Matter: TORT,Misrepresentation,Fraud and deceit,Negligent misrepresentation,RESTITUTION,Money had and received
• Published date: 01 April 2021

District Judge James Leong Kiu Yiu: Introduction

The plaintiff’s claim against the defendant is premised primarily on misrepresentation for introducing “sham” or non “financially viable” investment products pursuant to a multi- level marketing (“MLM”) scheme that has collapsed. The plaintiff’s claim is founded on fraudulent or negligent misrepresentation and in the alternative for an account of monies paid to the defendant. The plaintiff’s separate pleaded claim under section 2 of the Misrepresentation Act (Cap 390, 1994 Rev Ed) was forgone by the plaintiff at the commencement of the trial. The trial was heard over three days followed by the exchange of three sets of written submissions each on behalf of the plaintiff and the defendant i.e. closing submissions, reply submissions and submissions on costs. This is my judgment in relation to the claim.

Facts

The plaintiff was introduced to the defendant by the latter’s acquaintance Zenon Teh (“Zenon”) and they met in China in June 2013. Zenon was named as a witness for the defendant at the Summons for Directions stage but did not file any Affidavit of Evidence in Chief (“AEIC”) or feature at the trial¹. The defendant was then working with a company known as Cuffz Holdings Pte Ltd (“Cuffz”) that operated a MLM business. Cuffz marketed investment products including the International Royale Franchise (“Royale Investment”) and the Islandia Resort issued by a company known as Excelsior Capital Finance Limited (“Excelsior”/“ECF”).

The parties’ cases

The plaintiff was his own sole witness at the trial. It is the plaintiff’s case as distilled in his closing submissions that the defendant made the following representations: The first representations in June 2013 that Excelsior issued Royale Investments in US$10,000.00 tranches, each yielding a profit of US$17,000.00 over 24 months and these investments were subject to asset holding protection by a Swiss International Trust Company; The second representations in August 2013 that Excelsior developed or sold the Islandia Resort at US$30,000.00 with an additional payout of US$27,000.00 payable over 30 months; and The third representations in December 2013 that Excelsior issued Royale Investments in US$30,000.00 tranches, each yielding a profit of US$60,000.00 over 30 months.

In reliance of which the plaintiff: Paid the defendant $99,615.00 on 8 and 16 June 2013 pursuant to the first representations for seven tranches of US$10,000.00 Royale Investments; Paid the defendant $25,675.00 on 26 August 2013 pursuant to the second representations for the purchase of one Islandia Resort unit; and Paid RMB71,500.00 on or around 22 January 2014 pursuant to the third representations to a Chinese bank account nominated by the defendant for two tranches of US$30 000 Royale Investments.

In addition to himself², the defendant called Toh Ching Kang (“DW1”) and Leong Shao Ming Shaun (“DW2”) to testify for the defence. DW1 was his uncle who testified that he had invested with other family members in the investment products through the defendant and suffered losses. DW2 had requested the defendant to help Zenon to explain the investment products to the plaintiff as the defendant was more fluent in Mandarin and was travelling to China. DW2 testified that the defendant was not part of the MLM upline or downline for the investments made by the plaintiff and thus did not receive any commission or payment, unlike Zenon or himself.

The defendant does not dispute introducing and explaining the investment products to the plaintiff. The defendant’s position is that he did not derive financial benefit from the transactions. He had explained the investment products to the plaintiff at the request of DW2 who together with Zenon earned the rewards from the plaintiff’s investment. The defendant also does not dispute assisting the plaintiff to set up the online account operated by Excelsior and handling payment transactions for the plaintiff. The defendant however disputes the plaintiff’s claim for misrepresentation, both fraudulent and negligent, and contests the plaintiff’s claim that he failed to apply the monies received from the plaintiff for the mandated purposes.

Issues to be determined

The parties were in broad agreement³ that the following issues of fact and law fell to be determined at trial⁴: Whether the defendant made the first, second and third representations to the plaintiff. In this connection: Whether forwarding of information received from Excelsior (including “explaining”, “conveying”, “passing” per paras. 11-14, defendant’s AEIC) constitute the making of representations to the plaintiff; and Whether the information conveyed provided for the first, second and third representations; For the purpose of fraudulent misrepresentation, whether the defendant had made the representations intending the plaintiff acts on it; the plaintiff had acted on the representations; the defendant had made the representations in the absence of a genuine belief that they were true; For the purpose of negligent misrepresentation, whether the loss was foreseeable, and a duty of care should be found in light of the proximity and policy considerations; and Whether the defendant failed to apply the investment monies for the mandated purposes.

A secondary issue that arose at trial was the admissibility or otherwise of the High Court decision in Toh Fong Peng and others v Excelsior Finance Ltd and others [2020] SGHC 51 that was affirmed by the Court of Appeal subsequent to the conclusion of the trial in Fan Ren Ray and others v Toh Fong Peng and others [2020] SGCA 117.

Secondary issue

Addressing the secondary issue first, citing section 44 of the Evidence Act (Cap 47, 1997 Rev Ed) (“EA”), the plaintiff relies on the High Court decision that was affirmed by the Court of Appeal to assert that Swiss International was a sham company and the undisputed fact that ECF i.e. Excelsior was a dormant company⁵. The defendant who first highlighted the existence of the High Court decision at trial by including it in the bundle of documents⁶ challenged admissibility on the ground that there was no public element to the findings of the High Court as well as relevance.

The High Court decision was a claim in contract by seven named respondents and 546 other participants in a network marketing scheme owned and operated by a networking marketing business in Malaysia. The main issue that fell to be determined there was who were the owners and operators of the Malaysian business. Essentially, it was found by the High Court and affirmed by the Court of Appeal that the appellants including Fan Ren Ray and Fan Ruicheng (“Fan brothers”) were the owners and operators of the Malaysian MLM business. It was also conceded before the High Court by counsel for the defendants that they were the owners of the Singapore business but not the Malaysian one.

On balance, I agreed with the plaintiff that the findings of the High Court would be admissible given that they do relate to a matter of a public nature and was of relevance to our case. To this end, the defendant’s reading of s44 of the EA to equate public nature with the public right of way mentioned in the illustration is too restrictive, especially in view of section 7A(a) of the Interpretation Act (Cap 1, 2002 Rev Ed) which states that the example or illustration shall not be taken to be exhaustive. That said, the decision of the High Court that was affirmed by the Court of Appeal is not conclusive proof as provided by s44 of the EA. The decision is also not dispositive of the issues in our case given the difference in the cause of action, the difference in the parties involved as well as the difference in the investments that were sold in Malaysia as compared to the investments in our case that were sold in Singapore.

Considering that it is patently clear to both the plaintiff and the defendant by now that the MLM scheme has collapsed, nothing turns on admitting the findings of the High Court that were affirmed by the Court of Appeal that Swiss International was a sham company and ECF i.e. Excelsior was a dormant company. After all, if the investments had panned out as promised, and the returns were paid as promised, there would be no need for this action.

Whether the defendant made the first, second and third representations to the plaintiff

Having regard to the submissions and evidence in relation to the representations, I am satisfied that the defendant did indeed make them to the plaintiff as pleaded. It is pertinent to note that the defendant does not dispute that he participated in the business of Cuffz who marketed various products including the Royale Investment and Islandia Resort issued by Excelsior and had introduced or explained these products to the plaintiff⁷. I am also satisfied that the actions of the defendant in forwarding the documents from Excelsior and explaining, conveying and passing the documents to the plaintiff would constitute the making of representations.

In this regard, it is clear to me that the information conveyed generally conformed and provided for the first, second and third representations save for the fact that the documents provided for the Royale investment to be in International Royale Points (“IRP”) rather than US dollars. Nothing however turns on this given the common understanding that the IRP points were supposed to be exchangeable for US dollars. According to both DW2⁸ and the defendant⁹, this could be done at some point in time via the website with the monies being paid to one’s bank account. It is also evident from the testimony of the plaintiff¹⁰ that it would not have made sense for him to have invested if the IRP points were not exchangeable.

As for the specific representations that were made, I find myself in broad agreement with the submission of the defendant that not all of them were false and...