Ma Binxiang v Hainan Hui Bang Construction Investment Group Ltd

• Judge: Woo Bih Li JAD
• Judgment Date: 27 October 2022
• Neutral Citation: [2022] SGHC(A) 37
• Citation: [2022] SGHC(A) 37
• Published date: 01 November 2022
• Docket Number: Civil Appeal No 20 of 2022
• Plaintiff Counsel: Foo Yuet Min, Koh Boon Hao Samuel, Koh Will Sheng Wilson and Tan Yi Fan (Drew & Napier LLC)
• Defendant Counsel: Boey Swee Siang, Lin Yuankai, Toh Yunyuan Selina and Suchitra Suresh Kumar (Premier Law LLC)
• Subject Matter: Contract,Formation,Evidence,Proof of Evidence,Standard of proof
• Hearing Date: 17 August 2022
• Court: High Court Appellate Division (Singapore)

Woo Bih Li JAD (delivering the judgment of the court):

This appeal arises from the decision of the Judge of the General Division of the High Court (the “Judge”) in Hainan Hui Bang Construction Investment Group Ltd v Ma Binxiang [2022] SGHC 13 (the “Judgment”) and it concerns a dispute between Hainan Hui Bang Construction Investment Group Ltd (“HHBC”), a company incorporated in the People’s Republic of China (“PRC”) and Ma Binxiang (“Mr Ma”), a PRC national. From October 2010 to March 2018, Mr Ma was an employee of Weiye Holdings Limited (“Weiye”), a company incorporated in Singapore which is principally based in the PRC. Since then, Mr Ma has been running his own investment company.

Background facts The transfer of the Sum to Mr Ma in 2015

The dispute revolves around S$1,784,350 (the “Sum”) that HHBC caused certain intermediaries (the “Intermediaries”) to transfer to Mr Ma. HHBC claims that sometime between early to mid-2015, one Mr Li Keyi (“Mr Li”) (on behalf of HHBC) and Mr Ma entered into an oral “Investment Agreement”, under which Mr Ma was to invest in stocks in Singapore and/or Hong Kong on behalf of HHBC. For context, Mr Ma and Mr Li had met in or around 2012 when both of them were working at Weiye. They became friends and remained so after Mr Li left Weiye to join HHBC as a director in 2013 or 2014.

It was and remains uncontroversial that the Sum was transferred in ten tranches by the Intermediaries over 36 days from 30 March 2015 to 4 May 2015 to Mr Ma’s UOB account in Singapore (the “UOB Account”). The four Intermediaries were Mr Li, Mr Liu Hongen, Max Fill International Limited (“Max Fill”) and Well Fai International Limited (“Well Fai”). HHBC claimed to have entered into loan agreements with the Intermediaries, at an interest rate of 12% per annum, to procure the transfer of the Sum to Mr Ma. In addition, HHBC alleged that Mr Ma had used two other accounts to manage the investments: one with China Construction Bank (Asia) Hong Kong (the “CCB Account”), and, another with KGI Securities (Singapore) Pte Ltd (the “KGI Account”). Where necessary, we will refer to the UOB Account and these two other accounts, collectively, as the “Accounts”.

On the other hand, Mr Ma alleged that the Sum was transferred to him pursuant to a different oral agreement formed earlier in December 2014 between Mr Ma and one Mr Zhang Wei (“Mr Zhang”). At the material time, Mr Zhang was the chairman of Weiye’s board of directors and HHBC’s “Supervisor” (a position in PRC law that entails exercising supervisory functions over a company’s directors and senior management).

Mr Ma gave evidence that he was thinking of leaving Weiye at the end of 2014 to set up his own investment firm to manage investments of about RMB100m. He informed Mr Zhang of this. According to Mr Ma, Mr Zhang asked him to stay on at Weiye and provide him with investment consultancy and management services. In exchange for the commissions and returns he would have had to give up by staying in Weiye, Mr Zhang would pay Mr Ma a single lump sum of RMB9m (ie, 3% per annum on RMB100m over three years). Mr Ma agreed. The Judge referred to this alleged oral agreement as “Zhang Wei’s Arrangement” (see the Judgment at [17]). Hence, under Mr Ma’s case, the Sum was transferred on the instruction of Mr Zhang (not HHBC) to Mr Ma’s UOB Account in Singapore. The Sum, denominated in Singapore dollars, was supposedly the equivalent of RMB9m.

Execution of the Declaration in 2018

According to HHBC, between January and March 2018, Mr Li heard that Mr Ma was being investigated by Weiye. Mr Li discussed this with HHBC’s president and legal representative, Mr Wang Xianzhou (“Mr Wang”). HHBC decided to terminate the Investment Agreement and retrieve the Sum and any investment returns (the “Investment Returns”) from Mr Ma. However, when Mr Li spoke to Mr Ma about returning these moneys, Mr Ma cited difficulties in the stock market. Accordingly, Mr Li was tasked to obtain a written document from Mr Ma to attest to the existence of the Investment Agreement and Mr Ma’s obligation to return the Sum and Investment Returns. Mr Ma signed a document in Shenzhen on 15 March 2018, which the Judge referred to as the “Declaration” (Judgment at [11]). In the Declaration, Mr Ma declared that all “cash deposits and stocks” in the Accounts were owned by HHBC. The Declaration states as follows:

I, [Mr Ma,] hereby declare that all the cash deposits and stocks in [the CCB Account], [the KGI Account], and [UOB Account] are owned by [HHBC]. I have no ownership rights and disposal rights to all the assets in the abovementioned accounts. Instead, [HHBC] has all ownership rights and disposal rights to all the assets in the abovementioned accounts. The undersigned shall voluntarily cooperate with [HHBC] in completing other operations such as the realization of the accounts, transfer etc.

[emphasis added in bold italics]

Mr Ma’s version of events was that the Declaration had been signed pursuant to another oral agreement formed between him and HHBC in or around March 2018. Mr Ma referred to this alleged oral agreement as the “Asset Exchange Agreement”, and, on his account, its genesis was as follows. Mr Li conveyed to him that Mr Zhang had requested Mr Ma to lend the funds in the Accounts to Weiye for either Mr Zhang’s own or Weiye’s use outside of the PRC. In exchange, an equivalent sum in RMB would be transferred to Mr Ma’s personal bank account in the PRC. Mr Ma would also be reimbursed for the entirety of his income tax incurred in the PRC as a result of the assets exchanged. As the Judge noted, this “in essence leads to a remittance of [Mr Ma’s] monies in Singapore currency in Singapore back to China in RMB in exchange for a remittance of [HHBC’s] monies in RMB out of China to Singapore in Singapore currency” (Judgment at [20]). Mr Ma alleged that he signed the Declaration to show his commitment to the Asset Exchange Agreement.

Mr Ma denied that he drafted the Declaration (as alleged by Mr Li). He claimed instead that he signed a document presented to him by Mr Li. Mr Li’s evidence was that, at the same meeting in Shenzhen on 15 March 2018, Mr Ma informed him of “the relevant banking information such as the passwords” of the Accounts for the purposes of ceding control (see [40] below) over the Accounts to him. In August 2018, Mr Xu Jingbo (“Mr Xu”), Mr Zhang’s secretary at the material time, transferred HK$2,785,000 from Mr Ma’s CCB Account to Mr Li. Mr Ma claimed that this transfer was made pursuant to the Asset Exchange Agreement. However, the Judge viewed this transfer as Mr Ma “return[ing] some of the assets owed to [HHBC]” under the Declaration (Judgment at [117]).

In or around September 2018, HHBC caused RMB680,000 to be transferred to Mr Ma’s designated recipient company as reimbursement for part of his personal income tax. Mr Ma had commissioned the preparation of a tax report, which indicated that he was liable to pay personal income tax of RMB1,189,071.74 on the Sum and Investment Returns residing in the Accounts. According to Mr Ma, this reimbursement was pursuant to the Asset Exchange Agreement (Judgment at [20]–[21] and [124]). HHBC accepts that Mr Li did agree, on its behalf, to reimburse Mr Ma for personal income tax incurred in respect of the Sum and Investment Returns residing in the Accounts (Judgment at [12]). However, HHBC did not agree that this reimbursement was made pursuant to the Asset Exchange Agreement. Rather, it was made in exchange for the Sum and the Investment Returns.

As it turned out, Mr Ma refused to return the Sum and Investment Returns to HHBC. To recover these moneys, HHBC commenced Suit 242 of 2019 (“Suit 242”) on 4 March 2019. Mr Ma counterclaimed for breach of the Asset Exchange Agreement and for damages to be assessed. The trial was bifurcated, and the judgment being appealed concerned only issues of liability.

The decision below

The Judge found in favour of HHBC. He found that the objective evidence, at the time of the Investment Agreement and thereafter, supported the existence of the Investment Agreement (Judgment at [85]). He accepted that the agreement contained these terms (Judgment at [69], [115] and [116]): HHBC would transfer the Sum to Mr Ma, and this would be held by the latter for and on behalf of HHBC. Mr Ma would invest the Sum in listed stocks in Singapore and/or Hong Kong for HHBC. On HHBC’s demand, at any time, Mr Ma was to fully account for and return the Sum together with any profits, dividends and benefits derived therefrom (ie, the Investment Returns). It was a common understanding that HHBC would remunerate Mr Ma according to the investment profits. The quantum of Mr Ma’s remuneration was to be determined after the investment profits had been accounted for. If a loss were made, Mr Ma would not be remunerated. We refer to this as the “Alleged Remuneration Understanding”. We elaborate on the Judge’s evidential bases for recognising the Investment Agreement below.

The Judge found that to give effect to the Investment Agreement, HHBC took loans from the Intermediaries at an interest rate of 12% per annum and had the moneys disbursed to Mr Ma (Judgment at [71]).

The Judge held that the Investment Agreement was governed by PRC law and that it constituted a contractual entrustment thereunder. He ordered as follows (Judgment at [121]–[126]): Mr Ma is to return the Sum to HHBC. An inquiry is to be held to assess the quantum of Investment Returns derived by Mr Ma from the underlying Sum, and Mr Ma is to return the assessed returns to HHBC at the conclusion of the inquiry. Mr Ma is to return the RMB680,000 paid to him in purported reimbursement of part of his personal income tax arising from the assets in the Accounts. However, as Mr Ma had already returned HK$2,785,000 to HHBC (see [8] above), this is to be set off against his obligation to return the Sum, assessed...