Xia Zhengyan v Geng Changqing

JurisdictionSingapore
JudgeSundaresh Menon CJ
Judgment Date10 April 2015
Neutral Citation[2015] SGCA 22
Citation[2015] SGCA 22
Date10 April 2015
Docket NumberCivil Appeal No 86 of 2014
Hearing Date16 January 2015
Plaintiff CounselChia Boon Teck, Wong Kai Yun and Ang Hou Fu (Chia Wong LLP)
Published date15 April 2015
Defendant CounselNg Kim Beng and Cynthea Zhou Jingdi (Rajah & Tann Singapore LLP)
CourtCourt of Appeal (Singapore)
Subject MatterContractual terms,Interpretation of term,Contract,Misrepresentation,Express terms
Andrew Phang Boon Leong JA (delivering the judgment of the court): Introduction

This is an appeal from the decision of the High Court Judge (“the Judge”) whose written grounds of decision are published as Xia Zhengyan v Geng Changqing [2014] SGHC 152 (“the GD”). As we shall see in a moment, the issues are straightforward and the applicable legal principles are also generally clear. However, the difficulty lies in the application of the legal principles to the facts of the case and, in relation to the issue of contractual interpretation, the (simultaneous) need to bear in mind the precise context from which the relevant agreement arose.

In brief, this appeal concerns the Appellant’s purchase of part of the Respondent’s interests in a chain of private children’s education centres operating under the “Apple Plus” name. The Appellant was the plaintiff below and she put forward two types of claims. One claim was for breach of contract, and the other was for fraudulent misrepresentation. Both of these claims failed wholly before the Judge. There was also a counterclaim put forward by the Respondent which the Judge allowed. Before us, the Appellant challenges the dismissal of her claims for breach of contract and misrepresentation as well as the Judge’s decision allowing the Respondent’s counterclaim.

In so far as the Appellant’s claim in contract is concerned, the issue is simply the scope of the Respondent’s shares and interests which parties agreed would be transferred to the Appellant. The Respondent contends that what was to be transferred was no more than her shares in what might roughly be called the head or master company of the Apple Plus School business. The Appellant’s case, on the other hand, is that this was not the only thing that the Respondent was contractually obliged to transfer to her. She says that the Respondent was also obliged to transfer half of her other shares and interests in the various companies and entities within the Apple Plus business.

In so far as the claim in misrepresentation is concerned, the Appellant alleged that the Respondent made no fewer than 22 misrepresentations to her over a period of approximately ten months, and that these misrepresentations were made fraudulently. According to the Appellant, the broad effect of all these false representations was to convince her that the Apple Plus business had enjoyed success in Singapore and Malaysia and had genuine plans to expand further, not only in these two countries but also in other parts of South-East Asia and beyond, eg, Australia and Dubai. She says that she was thus induced into agreeing to purchase the Respondent’s shares and interests in the business.

In so far as the Respondent’s counterclaim is concerned, this is in relation to an amount of $300,000 which was placed by the parties into a time deposit joint account and which was transferred to the Appellant’s personal account a year later on maturity of the time deposit. The Respondent’s case is simply that the Appellant may not keep the $300,000 for herself but is contractually obliged to transfer it back to the joint account.

Background facts Structure of the Apple Plus business

As the Judge noted in the GD (at [4]), the Appellant is a Singapore permanent resident from China. She is a homemaker with a background in business and teaching, and holds a master’s degree in education from the University of Cardiff.

The Respondent was a Singapore permanent resident from China until she became a Singapore citizen in late 2012. She is the founder of the Apple Plus business. The business operates on a franchising model under which the head or master company is Apple Plus School International Pte Ltd (“the Company”); that is to say, the Company enters into franchise agreements with other companies under which it grants them the right to use the name “Apple Plus School” and provides them with teaching and operational support and teaching materials. In return, the companies pay the Company franchise fees, royalties and materials fees. We will refer to these companies with which the Company has franchise agreements as “Franchisees”. The Company does not own any shares in the Franchisees.

As at 22 September 2011, the Company had franchise agreements with four Franchisees in Singapore and one in Malaysia. This date is important because it is when the Appellant and Respondent first discussed with any seriousness the possibility of the Appellant investing in the Apple Plus business, and it is when the Respondent is alleged to have begun her campaign of misrepresentations. Each of the four Franchisees in Singapore operated a school under the Apple Plus brand name and the Franchisees were named according to the locations of the respective schools, as follows: Apple Plus School (Bukit Timah) Pte Ltd, registered on 8 March 2010; Apple Plus School (Telok Kurau) Pte Ltd, registered on 20 May 2010; Apple Plus School (Tampines) Pte Ltd, registered on 26 May 2010; and Apple Plus School (Serangoon) Pte Ltd, registered on 12 January 2011.

The Franchisee in Malaysia went by the name Apple Plus Sdn Bhd. The agreement between the Company and this Malaysia Franchisee was made on what the Respondent calls an “area franchise” basis. In contrast to the Singapore Franchisees which proceeded on a “single unit franchise” footing, meaning that each Franchisee could operate only one school, the Malaysia Franchisee was at liberty to run multiple schools within a specified area and it was also free to enter into sub-franchise agreements with third parties.

As at 22 September 2011, the Respondent was the sole shareholder of the Company. Although, as we have mentioned, the Company did not own shares in the Franchisees, the Respondent herself held shares in all but one of the Franchisees described above and her shareholdings were as follows: 26% in Apple Plus School (Bukit Timah) Pte Ltd; 25% in Apple Plus School (Tampines) Pte Ltd; 25% in Apple Plus School (Serangoon) Pte Ltd (subsequently sold by the Respondent to a third party on 22 October 2012); and 50% in Apple Plus Sdn Bhd.

It should also be noted that the Respondent is the sole proprietor of an unincorporated entity known as Apple Plus School. We shall refer to this as “the Sole Proprietorship”. As the Judge noted in the GD (at [7]), the Sole Proprietorship was the registered proprietor of the “Apple Plus School” and “Monkey Abacus” trade marks in Malaysia while the Company was the registered proprietor of these trade marks in Singapore.

Initial contact

The initial contact between the Appellant and the Respondent’s Apple Plus business occurred on 8 September 2011. According to the Appellant, she attended the “Franchising & Licensing Asia” exhibition held on this particular day at Marina Bay Sands with the intention of looking for a suitable business to invest in, and she came across the Respondent’s booth. She left her contact details and about a week and a half later, a franchise consultant sent her an e-mail inviting her to an “Apple Plus Discovery Day” to be held at the Serangoon school on 22 September 2011.

Thus, on 22 September 2011, the Appellant attended this “Apple Plus Discovery Day” and spoke to the Respondent. The Appellant indicated that she was not interested in participating as a shareholder in just another Franchisee; instead, she wanted to invest in the Company itself. The Appellant alleges that, in the course of this discussion, the Respondent made seven oral misrepresentations relating to the Company in order to entice her into investing in it. We will describe these seven alleged misrepresentations later in this judgment together with the other 15 misrepresentations that were alleged to have been made.

Early enquiries

Thereafter, the Appellant returned to China and consulted her family about investing in the Apple Plus business. She returned to Singapore sometime in the middle of October 2011. She met the Respondent on 17 October 2011 to discuss the form as well as the terms of the proposed investment in the business. The following day, the Appellant sent the Respondent an e-mail requesting (i) the Company’s general operation profile, (ii) the patents and qualifications held by the Company, (iii) the Company’s current financial report, and (iv) the Company’s business plan for the coming years.

The Respondent replied two days later, on 20 October 2011. She told the Appellant that it was difficult for her to produce the materials sought because the Company was “still in a loss-making state”. However, she was able to attach “a report of the development and current status” of the Company. Much of this report was taken up by descriptions of the Respondent’s plans to increase the extent of the Apple Plus Schools’ collaboration with government-linked entities in Singapore and to expand into various overseas markets. The Appellant alleges that this report gave rise to three misrepresentations, as we shall elaborate on later. Having received this report from the Respondent, the Appellant wrote back the following day. She told the Respondent that she had “read through [the] report carefully”, and continued by saying, “There is no relevant data and the situation is somewhat special. You [sic] sincerity is appreciated and your enthusiasm has been infectious.”

Negotiations between the parties

As the Judge noted in the GD (at [12]), there were conflicting accounts as to what happened next. The Respondent says that on 1 November 2011, she agreed to sell half her shares in the Company to the Appellant for $1.5 million. The Appellant says that, in mid-November 2011, the Respondent represented to her that, with the Company’s global expansion plans, half of the shareholding in the entire group of Apple Plus entities – that is, shareholding not only in the Company but also in the Franchisees – would be worth $1.5 million. This, the Appellant says, was a...

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