Toh Fong Peng and others v Excelsior Capital Finance Ltd and others

• Jurisdiction: Singapore
• Judge: Kannan Ramesh J
• Judgment Date: 11 March 2020
• Neutral Citation: [2020] SGHC 51
• Court: High Court (Singapore)
• Docket Number: Suit No 1348 of 2014
• Published date: 14 March 2020
• Year: 2020
• Hearing Date: 24 April 2019,12 April 2019,15 April 2019,18 April 2019,16 April 2019,23 April 2019,17 April 2019,25 April 2019,03 October 2019,26 April 2019,11 April 2019
• Plaintiff Counsel: Muthu Kumaran s/o Muthu Santhana Krishnan (M/s Kumaran Law)
• Defendant Counsel: Robert Raj Joseph (Gravitas Law LLC)
• Subject Matter: Contracts,Formation
• Citation: [2020] SGHC 51

Kannan Ramesh J:

The present suit was commenced on behalf of a total of 553 individuals (“the plaintiffs”), and centres around allegations that the defendants have breached contracts which were entered into between each of the plaintiffs and the owners and operators of a network marketing business in Malaysia (“the Malaysian business”) which owned and operated a network marketing scheme (“the scheme”) there. The Malaysian business is not a registered entity with separate legal personality, and the central issue in the present suit is therefore who the owners and operators of the Malaysian business are. That this is the main issue to be decided is common ground between the parties. The plaintiffs’ case is that the defendants are the owners and operators, while the defendants’ case is that the 1st plaintiff is the owner and operator, and not them.

While the claim was brought against seven defendants in total, the plaintiffs discontinued their claim against the 6th defendant, Mr Fock Mun Hong, midway through the trial by consent with no order as to costs. The Writ of Summons and Statement of Claim were not served on the 1st and 7th defendants. Accordingly, the claim before me relates only to the 2nd to 5th defendants, whom I refer to collectively in this judgment as “the defendants”.

The defendants accept that all 553 plaintiffs were participants in the scheme and that the scheme was owned and operated by the Malaysian business. The defendants also accept that the 553 plaintiffs have locus standi to bring the claim, and that not all of them need to testify at trial for the purpose of establishing the terms of the contracts between each of them and the Malaysian business. As such, notwithstanding the doubts that might otherwise have been raised as to the propriety of the manner in which the claim has been brought, I do not consider this issue further in this judgment.

As the trial has been bifurcated, this judgment pertains to the question of liability only. The focus of both parties’ submissions was on the central issue identified at [1] above. Having considered the evidence before me, I find that the defendants are the owners of the Malaysian business and therefore the owners and operators of the scheme. Accordingly, I order interlocutory judgment in favour of the plaintiffs against the defendants, with damages to be assessed, on the basis that the defendants are in breach of the term of the contracts that each of the plaintiffs would be granted access to the Web Shop (as defined at [8] below). I also order interlocutory judgment in favour of the 3rd plaintiff for the breach of the insurance obligation (as defined at [12] below), and enter judgment in favour of the 4th plaintiff against the defendants for the sum of US$5,000, with interest to run at the rate of 5.33% from 30 December 2013 until payment.

The parties’ pleaded cases

In this suit, the plaintiffs seek (1) a declaration that the defendants, or a combination of them, are the owners and operators of the Malaysian business; (2) an “Account” of all the plaintiffs’ transactions on the Malaysian business’s “Web Shop(s)” and payment to them of the amount due on the “Account”; and (3) in the alternative, damages to be assessed.

The 2nd defendant is Mr Fan Ren Ray and the 4th defendant is Mr Chua Teng Da (also known as Jayern Chua). It is undisputed that they prepared the marketing material for the Malaysian business and the scheme, and also procured the services of third party service providers to design, set up and administer the Web Shop. However, they argue that they did so at the request and on the instructions of the 1st plaintiff. The 3rd defendant, Mr Fan Ruicheng (also known as Bryannz Fan), is the brother of the 2nd defendant. At the close of the plaintiffs’ case, the 3rd defendant made a submission of no case to answer. He therefore did not give evidence at trial. The 5th defendant, Mr Chia Chee Tian Joe (also known as Joe Chia), was the sole director and shareholder of the 1st defendant, Excelsior Capital Finance Limited (“ECF”) until he allegedly resigned on 21 August 2013.

The plaintiffs’ case is that all four defendants, or a combination of them, are the owners and operators of the Malaysian business. The Malaysian business operated the scheme in which the participants purchased financial products under overarching oral agreements formed with the Malaysian business. Purchasers of the financial products sold under the scheme would generally be given member accounts on a “web shop”. These member accounts received fixed returns based on the financial products they purchased, and would also earn commission by selling financial products to other customers, who would become the seller’s “downstream” members in the scheme. If certain conditions were met, members also earned commissions based on the fixed returns on financial products purchased by their “downstream” members. The returns and commissions would be credited into an online “E-Wallet” in the “web shop”, and, according to the plaintiffs, could be either cashed out, used to make payments for financial products or transferred to other member accounts.

As far as this suit is concerned, the scheme operated on two platforms or “web shops” (see [7] above), which the plaintiffs referred to as the “ECF” and “IOC” platforms. These were two separate websites with two distinct domain names. The parties also referred to these websites as “the online database” or the “web shop(s)” (confusingly, using the term interchangeably in the singular and the plural). Hereinafter, I shall collectively refer to both databases or “web shops” as “the Web Shop”. “ECF” and “IOC” were references to the 1st and 7th defendants, ECF and IOC Group Limited (“IOC”). The plaintiffs’ position is that the Malaysian business was carried out using the names of various entities, such as the ECF and IOC, which were “nominally” the parties that made various agreements with the plaintiffs. The plaintiffs’ case is that ECF and IOC were sham companies with no real business. It is not disputed, however, that ECF itself did not in fact participate in any transactions between the plaintiffs and the Malaysian business. It should also be noted that the plaintiffs have confirmed that they are not making the argument that the corporate veil ought to be pierced in relation to either ECF or IOC (see [14] below), even though that point had initially been asserted in the Statement of Claim. The defendants’ position is that ECF was not a sham company, and that there had been an oral agreement between the 5th defendant (Joe Chia) and the 1st plaintiff pursuant to which the latter was allowed to use ECF for the Malaysian business on the understanding that she would take over the company. The 1st plaintiff failed to do so, and ECF was struck off in 2014. In substance, the defendants’ position is that the Malaysian business and the scheme are owned and operated by the 1st plaintiff.

According to the plaintiffs, each of them orally agreed with a representative of the Malaysian business to participate in the scheme. The representative would then be reflected as the “sponsor” of that plaintiff in the Web Shop. Where the 1st plaintiff was concerned, the representative who made the oral contract on behalf of the Malaysian business was allegedly the 2nd defendant (Ray Fan). It is agreed that the terms of the plaintiffs’ participation in the scheme were the same for each of them. However, the plaintiffs’ position is that the 1st and 6th plaintiffs’ initial member accounts were “empty lot” member accounts with no financial products attached to them, and therefore did not receive fixed returns. As pleaded, the 1st plaintiff’s commission for the IOC platform was 20%. While her commission for the ECF platform was initially 20% as well, this was later unilaterally reduced by the Malaysian business to 15% with effect from 1 November 2013, and then to 10% with effect from 1 February 2014.

According to the plaintiffs, under the terms of the oral agreement between them and the Malaysian business, the Malaysian business was to: credit their returns from financial products they purchased and the commission from the financial products they sold into their “E-Wallets” on the Web Shop; allow the plaintiffs to utilise their credit balances in the “E-Wallet” to make payments for financial products, transfer balances to other member accounts, or to convert into cash; and maintain accounts and records of the transactions and financial products under the scheme, and to make those records accessible from the Web Shop.

The terms of the financial products purchased were ostensibly set out in documents including one titled “International Royal Franchise Agreement”, purporting to be an agreement between the plaintiffs and ECF. The defendants plead that the 1st plaintiff had requested the 2nd and 4th defendants’ assistance in drafting a franchise agreement for the Malaysian business. The 4th defendant explained in his affidavit of evidence-in-chief (“AEIC”) that they (the 2nd and 4th defendants) had been told that the participants in the scheme would each receive a certain number of IRP (which I understand to be a reference to “International Royale Points”, as set out in the “International Royale Franchise Agreement”) each month. The 2nd and 4th defendants then assisted the 1st plaintiff in drafting a franchise agreement. I note, however, that when shown the “International Royale Franchise Agreement” in cross-examination, the 2nd defendant denied having drafted the document.

The plaintiffs further claim that certain financial products known as “silver packages” were sold under the scheme. A term of these financial products was that the Malaysian business would procure and provide insurance for 60% of the principal sum paid for the financial products (“the insurance obligation”). This is consistent with the Defence in so far...