Rio Christofle v Tan Chun Chuen Malcolm

• Jurisdiction: Singapore
• Judge: Lee Seiu Kin J
• Judgment Date: 22 March 2023
• Docket Number: Suit No 1247 of 2020
• Court: High Court (Singapore)

Rio Christofle

and

Tan Chun Chuen Malcolm

[2023] SGHC 66

Lee Seiu Kin J

Suit No 1247 of 2020

General Division of the High Court

Contract — Formation — Capacity of parties — Plaintiff and defendant acting on behalf of companies — Whether plaintiff and defendant were proper parties to agreement

Contract — Illegality and public policy — Parties entering into agreement for sale and purchase of cryptocurrency — Whether agreement between parties for sale and purchase of cryptocurrencies was expressly or impliedly prohibited by s 5 Payment Services Act 2019 (2020 Rev Ed) — Section 5 Payment Services Act 2019 (2020 Rev Ed)

Contract — Illegality and public policy — Whether object of agreement between parties for sale and purchase of cryptocurrencies contravened s 5 Payment Services Act 2019 (2020 Rev Ed) — Section 5 Payment Services Act 2019 (2020 Rev Ed)

Held, dismissing the plaintiff's claim:

(1) While the defendant had not pleaded that the Agreement was an illegal one, it was clear that the court could invoke illegality of its own motion, provided that one or more of the propositions set out in Edler v Auerbach[1950] 1 KB 359 (“Edler”) were satisfied. The court was, after all, duty-bound to uphold Singapore's laws and public policy – the mere fact that illegality had not been pleaded did not, and could not mean that the court had to remain blind to the illegality: at [49] and [50].

(2) In the present case, the first and fourth Edler propositions were relevant. To invoke illegality, it had to be shown that the Agreement was either ex facie illegal under Singapore law, or whether, all the relevant facts showed that the Agreement had an illegal object: at [51].

(3) Whether the Agreement was ex facie illegal turned on s 5 of the PSA. The wording of that provision did not expressly declare that contracts for the sale and purchase of Bitcoin or cryptocurrency were illegal: at [53].

(4) It was also clear from the Parliamentary debates that s 5 of the PSA did not impliedly prohibit the sale and purchase of cryptocurrencies. After all, the PSA was meant to provide a forward and flexible framework for regulating payment systems and payment service providers in Singapore, and also, to provide “regulatory certainty and consumer safeguards, while encouraging innovation and growth of payment services and Fintech”. The purpose of this regulatory framework was to tackle the significant money laundering and terrorism financing risks arising from the anonymous and borderless nature of the transactions which were enabled by cryptocurrency dealing or exchange services. The object of s 5 of the PSA was thus limited in scope and did not include an implied prohibition on contracts formed in cases where the parties to the contract had run afoul of s 5 of the PSA. Its object was to enforce the regulatory framework established by the PSA by penalising those caught operating a payment service without the requisite licenses or exemptions. There was no clear implication, nor was it a necessary inference, that s 5 of the PSA was also intended to prohibit such a class of contracts: at [54] to [59].

(5) The Agreement was therefore not ex facie illegal as s 5 of the PSA did not expressly, or impliedly, prohibit contracts for the sale and purchase of cryptocurrencies: at [60].

(6) The relevant facts did not show that the object of the Agreement was to contravene s 5 of the PSA. A key element in establishing liability under s 5 of the PSA was that it had to be shown that the person was carrying on a business of providing any type of payment service in Singapore. The mere buying and selling of cryptocurrency did not expose one to liability under s 5 of the PSA. It was clear that the plaintiff was merely selling Bitcoin in his possession to the defendant, and not providing any type of payment service, or carrying on a business of providing a payment service: at [61] to [66].

(7) One important indicium in determining whether a person was liable under s 5 of the PSA was the role in which they played in the transaction. If that person played the role of a middleman in facilitating the sale and purchase of cryptocurrencies between two parties, that person would likely be found liable under s 5 of the PSA. In the present case, the facts showed that the defendant was not acting as a middleman: at [64], [65] and [67].

(8) An objective approach was taken to identify the proper parties to a contract. In cases where the contract was contained in a document, the inquiry centred on whether the document sufficiently and unequivocally identified the parties to the contract. In these cases, the rule which stipulated that where a person signed a contract with no qualification as to the capacity in which he signed, he would be a party to the contract unless the document made it clear that he contracted as an agent, would be relevant. The inquiry, however, was slightly different in cases where the contract was contained in, or evidenced in writing but the documents containing or evidencing the agreement did not enable the parties to be ascertained. In such cases, recourse was permitted of what the parties said to each other and what they did down to the point at which a contract was concluded for the purpose of determining who the parties to the agreement were intended to be. The objective approach still applied, and the pertinent question was what a reasonable person furnished with the relevant information would conclude: at [71] and [72].

(9) The plaintiff was not the proper party to the Agreement and thus had no standing to maintain the action in contract. This was clear from the messages which had been sent on the Whatsapp chat group which was operated by GCX to facilitate the transactions for cryptocurrencies: at [77] to [85].

(10) The defendant was also not the proper party to the Agreement. It was Qrypt, and not the defendant, which held the exemption from holding a licence under the PSA for the provision of a digital payment token service. The defendant could not have intended to enter into the Agreement in his personal capacity. Further, the defendant had provided Qrypt's bank details for the transaction: at [87].

Case(s) referred to

Americas Bulk Transport Ltd (Liberia) v Cosco Bulk Carrier Ltd (China) m.v. Grand Fortune [2020] EWHC 147 (refd)

ANC Holdings Pte Ltd v Bina Puri Holdings Bhd [2013] 3 SLR 666 (refd)

B High House International Pte Ltd v MCDP Phoenix Services Pte Ltd [2023] SGHC 12 (refd)

Bhoomatidevi d/o Kishinchand Chugani Mrs Kavita Gope Mirwani v Nantakumar s/o v Ramachandra [2023] SGHC 37 (refd)

Diane Lumley v Foster & Co Group Ltd [2022] EWHC 54 (TCC) (refd)

Dolphina, The [2012] 1 SLR 992 (refd)

Edler v Auerbach [1950] 1 KB 359 (refd)

Estor Ltd v Multifit (UK) Ltd [2009] EWHC 2565 (refd)

Fan Ren Ray v Toh Fong Peng [2020] SGCA 117 (refd)

Gregor Fisken Ltd v Bernard Carl [2021] EWCA Civ 792 (refd)

Hamid v Francis Bradshaw Partnership [2013] EWCA Civ 470 (refd)

Hector v Lyons (1988) 58 P & CR 156 (refd)

iVenture Card Ltd v Big Bus Singapore City Sightseeing Pte Ltd [2022] 1 SLR 302 (refd)

Koon Seng Construction Pte Ltd v Chenab Contractor Pte Ltd [2008] 1 SLR(R) 375; [2008] 1 SLR 375 (refd)

Must Rich Construction Ltd v Chan Ka Lok [2022] HKEC 35 (refd)

North Star (S) Capital Pte Ltd v Yip Fook Meng [2022] 1 SLR 677 (folld)

Ochroid Trading Ltd v Chua Siok Lui [2018] 1 SLR 363 (refd)

PP v Lange Vivian [2021] SGMC 11 (refd)

Shogun Finance Ltd v Hudson [2004] 1 AC 919 (refd)

Siraj Ansari bin Mohamed Shariff v Juliana bte Bahadin [2022] SGHC 186 (refd)

Ting Siew May v Boon Lay Choo [2014] 3 SLR 609 (refd)

Facts

The plaintiff had set up GCXpress Commerce Pte Ltd (“GCX”) for the business of “over-the-counter” (“OTC”) trading of cryptocurrencies. He was the sole director and shareholder of GCX, and had obtained loans from his brother (“RC”) and other individuals. GCX had, up till 28 July 2020, an exemption from holding a licence under the Payment Services Act 2019 (2020 Rev Ed) (“PSA”) for the provision of a digital payment token service.

The defendant was, at all material times, the managing director of Qrypt Technologies Pte Ltd (“Qrypt”), a company engaged in the business of digital assets, blockchain, cryptocurrency and/or management consultancy services.

The defendant had been introduced to the plaintiff and GCX by RC. Between July 2019 and May 2020, the defendant had apparently concluded a number of transactions with GCX for the sale of cryptocurrencies. According to the plaintiff, after 28 July 2020, GCX had ceased business and the plaintiff had begun to liquidate the leftover cryptocurrencies in his personal capacity and returned the outstanding loans.

The present dispute arose out of a transaction for the sale of Bitcoins which took place on 1 December 2020. On that day, the defendant had contacted the plaintiff to ask if the plaintiff had some S$320,000.00 worth of Bitcoins for sale. The plaintiff answered in the affirmative. Arrangements were made to conduct the transaction at the defendant's office that afternoon. The price of the Bitcoins were fixed at 12.14 Bitcoins for S$320,000.00. The plaintiff arrived at the defendant's office, accompanied by one Mr Phoon Chee Kong (“Nik”). The plaintiff duly transferred the 12.14 Bitcoins to the cryptocurrency wallet specified by the defendant.

Problems arose after the transfer. The plaintiff was prevented from leaving with the S$320,000.00 in cash by three other male individuals present in the defendant's office. One of the three men told the plaintiff and Nik that the cash belonged to him and that they could not leave the premises until he had received his United States Dollars Tether (“USDT”). The plaintiff agreed to wait.

After almost an hour, the defendant said that the person to whom he had transferred the Bitcoin to had deleted his Telegram chat. Chaos erupted. A quarrel broke out as to who was entitled to the...