Liberty Sky Investments Ltd v Aesthetic Medical Partners Pte Ltd

• Jurisdiction: Singapore
• Judge: Judith Prakash JA,Belinda Ang Saw Ean J,Andrew Phang Boon Leong JA
• Judgment Date: 10 February 2020
• Neutral Citation: [2020] SGCA 7
• Year: 2020
• Date: 10 February 2020
• Published date: 12 February 2020
• Hearing Date: 22 January 2020
• Plaintiff Counsel: Nehal Harpreet Singh SC (Instructed Counsel), Jordan Tan Zhengxian, Han Guangyuan Keith and Tan Tian Yi (Cavenagh Law LLP)
• Citation: [2020] SGCA 7
• Defendant Counsel: Narayanan Sreenivasan SC and Rajaram Muralli Raja (K&L Gates Straits Law LLC),Lok Vi Ming SC, Lee Sien Liang Joseph, Muk Chen Yeen Jonathan and Kelly Tseng Ai Lin (LVM Law Chambers LLC)
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeals Nos 55, 56 and 57 of 2019 and Civil Appeal Summons No 100 of 2019

Andrew Phang Boon Leong JA (delivering the oral judgment of the court): Introduction

Having carefully considered the parties’ written as well as oral submissions, we dismiss Civil Appeals Nos 55, 56 and 57 of 2019 and Civil Appeal Summons No 100 of 2019 (“SUM 100”).

By way of a brief factual background, Dr Goh Seng Heng (“Goh”) is a medical doctor who founded Aesthetic Medical Partners Pte Ltd (“AMP”) in 2008. Liberty Sky Investments Limited (“LSI”) is an investment vehicle incorporated in the Seychelles. Gong Ruilin (“Gong”) is LSI’s sole director and shareholder. Mr Lin Lijun (“Lin”) is Gong’s husband and LSI’s representative.

On 25 November 2014, LSI executed a sale and purchase agreement with Goh (“the SPA”) to purchase 32,049 shares in AMP (“the AMP shares”) from Goh for $14,422,050 (“the Purchase Price”). As the deal between LSI and Goh had to be concluded quickly, Gong and Lin did not have time to perform due diligence on AMP. Hence, they requested to be given a guarantee on their investment capital, as well as an internal rate of return (“IRR”) of 15% per annum (“the Guarantee”) to protect their investment. Goh informed them that AMP would provide the Guarantee.

In this appeal, the relevant fraudulent misrepresentations that Goh allegedly made to Gong took place over dinner on 23 October 2014, as well as at a meeting on 24 October 2014 (“the 24 October 2014 Meeting”), and are as follows: First, there would be a trade sale of all AMP shares to an important person in Singapore (ie, one Peter Lim, a billionaire who owned a medical group or hospital chain). The trade sale had a 99% chance of being concluded, it was a likely deal, it was imminent, and it would take place within one month or very soon (“the Trade Sale Representations”); and Second, if the trade sale did not materialise, Goh intended to list AMP through an initial public offering (“IPO”) on the Singapore Exchange that was targeted for completion around March to June 2015 (“the IPO Representations”).

Shortly after the SPA was executed, LSI sold 30,549 AMP shares to two Chinese investors (“the Chinese Investors”) at the same price that LSI paid Goh. LSI held the beneficial interest of only 1,500 AMP shares. Neither the trade sale nor the IPO occurred. Gong and Lin then brought claims against Goh in Suit No 1311 of 2015 (“Suit 1311”) for fraudulent misrepresentations and against Goh and AMP in Suit No 457 of 2017 (“Suit 457”) for the Purchase Price plus 15% IRR under the Guarantee.

In Suit 1311, the trial judge (“the Judge”) held that Goh had fraudulently misrepresented to Lin and Gong that (a) the trade sale was imminent and (b) he had reasonable grounds to believe that the IPO preparations were in a sufficiently advanced stage to enable an IPO to be achieved by June 2015. The Trade Sale and IPO Representations induced Lin and Gong to procure LSI to enter into the SPA to make a quick and large profit. LSI was not granted rescission as it failed to show that substantial restitutio in integrum was possible, but was awarded damages for the 1,500 AMP shares that it beneficially owned. In Suit 457, the Judge held that the Guarantee was encapsulated and reflected in cll 4(ii), (iv), (v), (vii) and (viii) of the SPA. LSI could not rely on the Guarantee as AMP was not a party to the SPA. There was no separate agreement between LSI and AMP and, in any event, LSI had rescinded the SPA.

CA 57 of 2019 – Misrepresentation

Civil Appeal No 57 of 2019 (“CA 57”) is Goh’s appeal against the Judge’s finding on liability for misrepresentation. In our view, the Judge rightly concluded, based on a comprehensive evaluation of the objective evidence, that the Trade Sale and IPO Representations were false, and Goh had made them fraudulently. On appeal, Goh submits, inter alia, that LSI could not rely on the Trade Sale Representations as he only mentioned “Peter Lim” to Gong and Lin after the SPA was executed. Goh refers, inter alia, to (a) an email dated 10 November 2014 where Peter Lim was referred to generically as the “buyer”, and (b) a text from Goh to Gong on 13 January 2015, which Goh claimed was the first time he informed Gong that Peter Lim was the prospective buyer (“the Text”). Goh further submits that if he had already informed Gong at the 24 October 2014 Meeting that Peter Lim was the prospective buyer, there would be no need for such secrecy in the 10 November 2014 email. There would also be no need for him to disclose Peter Lim’s details in the Text.

We find this to be an unpersuasive as well as literalist argument that, in any event, is contrary to the documentary evidence. First, even if Peter Lim’s name was not repeated in correspondence subsequent to the 24 October 2014 Meeting, this does not imply that it was not uttered then. Second, shortly after the 24 October 2014 Meeting, Gong informed Lin on WeChat that Peter Lim was the prospective buyer in the trade sale. Gong could not have done so had she not heard Peter Lim’s name from Goh. Third, Goh admitted in his Further and Better Particulars dated 29 April 2016 (“F&BP”) that when he met Gong at the 24 October 2014 Meeting, he had informed her that one Nelson Loh, a director of AMP, “was in the process of negotiating a trade sale of AMP to Thomson Medical and/or Peter Lim”. The Judge rightly held that Goh was represented by counsel throughout and was unlikely to have made any mistakes as to the contents of his F&BP. Finally, even if Goh had not represented that the prospective buyer was Peter Lim, he nonetheless represented that a trade sale was imminent and this was sufficient to establish liability for fraudulent misrepresentation.

Goh further submits on appeal that Lin and Gong were not induced by the Trade Sale and IPO Representations as the Guarantee was the real reason they entered into the SPA. We cannot accept this submission. A representation will be actionable so long as it played a real and substantial part in inducing the representee to enter into the contract: see the decision of this court in Panatron Pte Ltd v Lee Cheow Lee [2001] 2 SLR(R) 435 at [23]. The Judge rightly concluded that the Trade Sale and IPO Representations played a real and substantial part in inducing Gong and Lin to enter into the SPA, as they clearly wanted to make a quick and handsome profit from the occurrence of a liquidity event.

For these reasons, we dismiss CA 57 and affirm the Judge’s findings on liability for misrepresentation.

CA 56 of 2019 – Remedies; SUM 100 – Leave to adduce further evidence

Civil Appeal No 56 of 2019 (“CA 56”) is LSI’s appeal against the Judge’s finding that LSI is entitled only to damages for 1,500 AMP shares. LSI submits, in its Appellant’s Case, that the burden falls on Goh to plead and prove the equitable bars to rescission, and it is entitled qua trustee, vis-à-vis the Chinese Investors, to rescind the SPA and recover damages in respect of all the 32,049 AMP shares (“the Trustee Argument”). However, during oral submissions, LSI (elaborating on what was in effect a volte face in so far as its Appellant’s Case was concerned, the seed of which it had (surprisingly) planted in its skeletal submissions) argued that it is entitled to rescission in its personal capacity as there had never been any sale of the AMP shares under the investment agreements between it and the Chinese Investors (“the Investment Agreements”). In essence, LSI argued that as it was still in possession of all the 32,049 AMP shares, it could furnish restitutio in integrum, and was therefore entitled to rescind the SPA and recover damages in respect of these shares (“the New Argument”). During oral submissions, LSI asserted that the Trustee Argument would remain relevant only if this court finds that there was indeed a sale of the AMP shares to the Chinese Investors.

LSI has also filed SUM 100, which is its application for leave to adduce the affidavits of the Chinese Investors (“the Investors’ Affidavits”). The Investors’ Affidavits state that the Chinese Investors (a) have authorised LSI to commence Suit 1311 on their behalf; (b) were willing to transfer the AMP shares back to Goh; and (c) had not dealt with their beneficial interests in the shares. Given LSI’s radical change in the direction of its arguments before this court during oral submissions (as set out in the preceding paragraph), it is not surprising that it did not now desire to focus on SUM 100, which is relevant only in relation to the Trustee Argument.

The Trustee Argument would have failed in any event

Returning to the substantive arguments proffered in CA 56, we pause to note, notwithstanding LSI’s concession (as noted above) that the Trustee Argument was only a fall back, such an argument would have failed in any event. This particular argument is a completely new one that cannot succeed. First, LSI did not plead in its statement of claim that it was suing in a representative capacity: see O 6 r 2(1)(c) of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) (“ROC”). Second, LSI did not apply for leave to introduce this completely new argument on appeal: see O 57 r 9A(4)(b) of the ROC. Third, there is no reason for this court to entertain LSI’s new argument that it is entitled to the full measure of damages flowing from all the AMP shares as a trustee when this should have been made clear from the outset in Suit 1311. In any event, LSI’s argument is wholly without merit. LSI did not enter into the SPA for the benefit of the Chinese Investors, the fraudulent misrepresentations were directed only at Gong and Lin, and the creation of a trust between LSI and the Chinese Investors (if any) would have arisen only after the tort had been committed, since LSI and the Chinese Investors entered into the Investment Agreements after the SPA was concluded (see the discussion below at [27]).

The pleading issue

LSI had vigorously contended that since Goh did not plead any bars to rescission, the...