Ma Hongjin v SCP Holdings Pte Ltd

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 28 October 2020
• Neutral Citation: [2020] SGCA 106
• Defendant Counsel: Tan Kheng Ann Alvin (Wong Thomas & Leong)
• Docket Number: Civil Appeal No 45 of 2019
• Date: 28 October 2020
• Hearing Date: 09 July 2020
• Plaintiff Counsel: Derek Kang Yu Hsien and Lim Shi Zheng Lucas (Cairnhill Law LLC)
• Published date: 31 October 2020
• Court: Court of Appeal (Singapore)
• Citation: [2020] SGCA 106
• Year: 2020

Andrew Phang Boon Leong JA (delivering the grounds of decision of the court): Introduction

This was an appeal against the decision of the High Court judge (“the Judge”) in Ma Hongjin v SCP Holdings Pte Ltd and another [2019] SGHC 277 (“the GD”). The entire appeal centred on various aspects and/or applications of the doctrine of consideration. We dismissed the appeal and now give the detailed grounds for our decision.

Amongst all the doctrines of the common law of contract in the Commonwealth, perhaps the most academic ink has been spilt on the doctrine of consideration. Yet, modern cases at least that involve the invocation of the doctrine are few and far between. This is one of the rare decisions in the Singapore context; the last major decision, the decision of this court in Gay Choon Ing v Loh Sze Ti Terence Peter and another appeal [2009] 2 SLR(R) 332 (“Gay Choon Ing”), was handed down over a decade ago. Viewed from a practical perspective, this is not surprising. As we shall see, the existing case law renders it relatively easy to demonstrate the presence of valid or sufficient consideration in practice. On an academic level, though, it is understandable why there is a continued fascination with the doctrine. Its historical roots continue to remain obscure (for a very perceptive and recent essay from historical as well as comparative points of view, see Susan Kiefel, “The Doctrine of Consideration in Contract: Some Historical and Comparative Perspectives” in Contract in Commercial Law (Simone Degeling, James Edelman and James Goudkamp gen eds) (Lawbook Co, 2016) (“Contract in Commercial Law”) at Ch 4), and its very existence continues to be a topic of fascination amongst legal academics – particularly whether it ought to be superseded by other contractual doctrines. Significantly, though, the burgeoning literature on the doctrine has brought us no nearer to a solution on an academic level. For this reason alone, it is inadvisable for courts to enter the various debates (interesting though they may be on the academic plane), particularly when the practical yield is so paltry. Indeed, this is the approach that this court adopted in Gay Choon Ing.

In Gay Choon Ing, this court decided that the doctrine of consideration continued to be part of the Singapore contractual landscape. That case related, on its facts, to the operation of the doctrine in so far as the formation of contracts was concerned. The present appeal raises, inter alia, a different issue as to whether the doctrine of consideration ought nevertheless to continue to operate in so far as the variation or modification of contracts is concerned (indeed, this was an additional argument which was not canvassed in the court below but which the appellant raised in the present appeal (and which itself raised a procedural question which will be dealt with below)).

Although the observations in Gay Choon Ing were general in nature and the case itself endorsed the leading decision of the English Court of Appeal in Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 (“Williams”) (which confirmed the need for consideration in respect of the variation of an existing contract in a situation where it was sought by the promisee to enforce a promise to pay more, albeit in a more “dilute” form), given the fact that Gay Choon Ing related, strictly speaking, to the operation of the doctrine of consideration in relation to the formation (as opposed to a variation or modification) of the contract concerned, it could be argued that the issue as to whether consideration is required for the variation or modification of an existing contract has not been (at least wholly) foreclosed in the Singapore context. As we shall see, there is some case law and (not surprisingly) academic writing that suggests that the doctrine ought to be dispensed with in the latter situation, viz, the variation or modification of contracts. However, this would, inter alia, entail departing from not only Williams but also the longstanding House of Lords decision in Foakes v Beer (1884) 9 App Cas 605 (“Foakes”) (which held that consideration was required in a situation where it was sought by the promisee to enforce a promise to take less). We will touch briefly on this particular legal issue below.

In addition to the issue of the doctrine of consideration in the context of the variation or modification of contracts, there was also a procedural issue in the court below that centred on the relevant test to apply upon a submission of no case to answer. That procedure and substance have an integrated and symbiotic relationship with each other cannot be denied (see the decision of the Singapore High Court in United Overseas Bank Ltd v Ng Huat Foundations Pte Ltd [2005] 2 SLR(R) 425, especially at [8]). Although this particular issue was not raised in the present appeal, we will nevertheless make some observations on it as it has general significance beyond this case.

So much by way of preliminary observations. Let us now turn to the background and the decision of the court below.

Background

The appellant in this appeal, Mdm Ma Hongjin, is an investor. The respondent, SCP Holdings Pte Ltd, is an investment holding company, and the ultimate holding company of a group of companies known as the Biomax Group. The respondent owns and controls Biomax Holdings Pte Ltd (“Biomax Holdings”), which in turn owns and controls Biomax Technologies Pte Ltd (“Biomax Technologies”). Biomax Technologies was the second defendant in the trial below, but was not named as a party to the appeal.

The dispute between the parties arose out of a convertible loan of S$5m extended by the appellant to the respondent pursuant to a Convertible Loan Agreement (“the CLA”) dated 6 January 2015. While the appellant was the investor on record, the CLA was negotiated by Mr Han Jianpeng (“Mr Han”), the appellant’s husband, and Mr Sim Eng Tong (“Mr Sim”), the controlling shareholder of the respondent.

Under cl 3 of the CLA, the S$5m loan was extended for a period of two years. In return, the respondent would have to pay interest at the rate of 10% per annum. The interest was to be paid in two instalments: the first interest payment of S$500,000 was due on 5 January 2016 and the second interest payment of the same amount was due on 5 January 2017 together with repayment of the principal, making a total of S$5.5m payable on that date. Additionally, the appellant was granted an option to require the respondent to procure a transfer of 15% of the shares in Biomax Holdings to her in lieu of paying the sum of S$5.5m due on 5 January 2017.

Although the CLA provided that the whole of the loan amount (ie, S$5m) was to be disbursed on the date of the CLA (see cl 2.2), the sum of S$5m was in fact disbursed to the respondent in three tranches on the following dates: S$2.5m on 6 January 2015; S$1m on 14 January 2015; and S$1.5m on 30 March 2015.

Within two months of entering into the CLA, the appellant and Mr Han became unhappy with the respondent’s financial results. This caused Mr Han to re-negotiate some of the terms of the CLA with Mr Sim sometime in March 2015. This resulted in the appellant and the respondent entering into the “Supplemental Agreement relating to a S$5,000,000 Convertible Loan Agreement Dated 6 January 2015” (“the SA”) on 16 April 2015. The two recitals to the SA provided that it was “supplemental to” the CLA, and that the appellant had agreed to amend the CLA to the extent set out in the SA at the respondent’s request.

The SA essentially imposed additional obligations on the respondent by stipulating several amendments to the CLA. First, the proportion of Biomax Holdings shares in respect of which the appellant could exercise a call option on 5 January 2017 increased from 15% to 20%. Second, the SA imposed an additional “lump sum facility fee” of S$250,000 to be paid on the same day as the first interest payment (ie, 5 January 2016). These amendments were to take effect on 16 April 2015. Notably, the appellant did not assume any additional obligations to the respondent under the terms of the SA.

There were a number of other transactions which the appellant was involved in which were of relevance to the appeal. Shortly after entering into the SA on 16 April 2015, the appellant entered into a Share Investment Agreement with Biomax Technologies (“the SIA”) under which she agreed to extend a loan of not more than S$5m to Biomax Technologies for the purpose of setting up a recycling plant, though the loan facility under the SIA was eventually not disbursed. The appellant also separately extended a number of loans totalling S$6m to Biomax Technologies between June and October 2015 (“the June to October 2015 loan agreements”). Of these, only S$1m was eventually repaid by Biomax Technologies to the appellant.

In January 2016, the respondent made payment of S$500,000 but neglected to pay the S$250,000 facility fee which was provided for under the SA. The appellant thus commenced proceedings in Suit No 765 of 2016 (from which the present appeal arose) to obtain payment of the facility fee from the respondent and repayment of the outstanding loans and interest from Biomax Technologies.

Two further points bear mentioning before we turn to the Judge’s decision. First, there was no appeal against the Judge’s decision in respect of the appellant’s claims against Biomax Technologies. Second, the appellant had commenced a separate suit against the respondent following its failure to repay the sum of S$5.5m due on 5 January 2017. These points were irrelevant to the present appeal and thus do not feature any further in these grounds.

The decision below

Although the respondent had initially pleaded a number of defences against the appellant’s claim for the unpaid facility fee, it chose to abandon all defences prior to the trial save one – that the SA was unsupported...