Case Summaries

Dennis Kam Thai Leong v Asian Infrastructure Ltd [2020] SGCA 87


31 August 2020

Case summary

Dennis Kam Thai Leong v Asian Infrastructure Ltd [2020] SGCA 87
Civil Appeal No 10 of 2020



Decision of the Court of Appeal (delivered by Steven Chong JA):

Outcome: Court of Appeal allows the appeal of Mr Dennis Kam Thai Leong (“Mr Kam”) against the decision of the High Court judge (“the Judge”) that he was liable to the respondent, Asian Infrastructure Ltd (“AIL”), on two personal guarantees given in respect of two loans extended by AIL to a company controlled by Mr Kam.


Background to the appeal

1 Mr Kam was a shareholder and director of Accelera Precious Timber & Strategic Agriculture Ltd (“APTSA”), which in turn owned a majority stake in PT Aceh Rubber Industries (“PT ARI”), an Indonesia incorporated company which owned and operated a rubber factory in Aceh, Indonesia. Mr Kam was also the director and sole shareholder of Perfect Earth Management Pte Ltd (“PEM”), a Singapore incorporated company.

2 The respondent AIL was a company owned and controlled by Mr Malcolm Chang (“Mr Chang”). Mr Chang also owned and controlled a number of other corporate entities including ARI Investments Ltd (“ARI”) and Infraavest Private Ltd (“Infraavest”).

3 AIL extended two loans to PEM for the purposes of PT ARI, which were both guaranteed by Mr Kam pursuant to two personal guarantees. The first loan of US$500,000 was extended on 23 September 2013 and was due to be repaid on 23 December 2013 with a monthly interest rate of 1%. By mid-January 2014, only US$150,000 had been repaid. AIL subsequently agreed to extend the repayment date to 31 December 2014. The second loan of US$650,000 was extended on 11 March 2014 and was due to be repaid on 31 December 2014 with the same monthly interest rate of 1%. No further repayments were made to AIL.

4 AIL commenced proceedings against Mr Kam to enforce the personal guarantees for PEM’s obligations under the two loans. Mr Kam did not deny that the personal guarantees were valid when they were executed. Rather, he contended that the personal guarantees had been discharged and/or were unenforceable for three reasons: (a) first, that they had been discharged pursuant to a “joint venture” agreement entered into between PEM, PT ARI, APTSA, ARI and AIL in September 2015 (“the Agreement”); (b) second, a collateral oral agreement (“the alleged oral agreement”) was reached in a meeting on 24 July 2015 at Infraavest’s office in Singapore (“the 24 July 2015 Meeting”) discharging his liability under the personal guarantees; and (c) third, that AIL was estopped from denying that the personal guarantees had been discharged.

Decision below


5 The Judge rejected all three arguments raised by Mr Kam and found that he had failed to prove that he was not liable under the personal guarantees. The Judge found that the Agreement had been entered into as part of a turnaround plan to rescue PT ARI by which ARI would inject capital by way of a convertible loan in exchange for a fixed shareholding in APTSA. As part of this, Mr Kam’s personal guarantees would be discharged after the following events had taken place: (a) first, the pay-out of dividends by APTSA to ARI (upon a successful turnaround of PT ARI); (b) second, the novation of the loans and interest from PEM to ARI; and (c) third, the shutdown of PEM after all its liabilities had been discharged. Since ARI had not been paid dividends from APTSA, the novation of PEM’s obligations had not taken place and Mr Kam was therefore still liable under the personal guarantees.

6 The Judge held that Mr Kam had not proved that the alleged oral agreement was formed at the 24 July 2015 Meeting whereby Mr Chang, on AIL’s behalf, agreed to release Mr Kam from the personal guarantees on condition that he procure APTSA’s entering into a “joint venture agreement” with PEM, PT ARI, AIL and ARI. The Judge also rejected Mr Kam’s claim that AIL was estopped from enforcing the personal guarantees as the terms of the Agreement and AIL’s failure to demand repayment did not constitute clear and unequivocal representations that AIL would not enforce the personal guarantees.

The appeal


7 Mr Kam appealed against the Judge’s decision, raising substantially the same arguments as he did before the Judge. Mr Kam argued that a plain reading of the Agreement led to the conclusion that the novation of the loans and interest and the dissolution of his personal guarantees were to take place upon the signing of the Agreement, and that this was supported by the context of the Agreement. Mr Kam also challenged the Judge’s findings in relation to the existence of the alleged oral agreement and whether AIL was estopped from enforcing the personal guarantees.

The Court’s decision

Interpretation of the Agreement


8 The Court began by considering the relevant context. While it largely agreed with the Judge’s analysis of the parties’ purposes in entering the Agreement, the Court found that the Judge omitted three key components of the relevant context in his reasoning. First, Mr Chang (through ARI) would be investing into the companies on extremely favourable terms and stood to reap significant returns in the event that the turnaround plan was successful. Second, Mr Chang was to contribute his expertise to achieve the turnaround of PT ARI’s business, with him and his associates becoming closely involved in its management following the conclusion of the Agreement. Third, Mr Kam was in possession of a back-to-back guarantee from PT ARI and it would not make commercial sense for Mr Kam to remain liable under the personal guarantees to AIL when ultimate liability would rest with the shareholders of PT ARI, including ARI: at [32]–[33].

9 There were considerable difficulties with AIL’s case theory that the novation would take place only after the occurrence of number of events, including the paying out of dividends from APTSA to ARI and the shutdown of PEM. Since the purpose of a novation was to transfer PEM’s obligations to ARI, it would be antithetical to the concept of a novation for it to take place only when sufficient dividends had been paid out to fully satisfy PEM’s obligations to AIL as by this time, there would in reality be no liabilities left to novate: at [36] and [38].

10 The only plausible case theory before the Court was Mr Kam’s that PEM’s obligations to AIL were novated to ARI and his personal guarantees discharged upon the signing of the Agreement, and this was supported by the text of the Agreement. The first sentence of cl 5(d) unequivocally stated that AIL “shall novate its existing … loan with interest to ARI”, which suggested that novation was not contingent on any dividends being distributed by APTSA to ARI. There was nothing in cl 5(d) which suggested that the novation was not meant to take place upon the conclusion of the Agreement. Clause 5(e) also did not affect the construction of cl 5(d) and in fact, served to confirm the Court’s interpretation of cl 5(d). Finally, the fact that cl 4(c) provided ARI the right to terminate the turnaround plan did not have any bearing on the timing of the novation of PEM’s obligation from AIL to ARI: at [40]–[43].

11 PEM’s signature on the Agreement was sufficient to constitute the requisite consent to effect the novation. Although the text of the Agreement described the parties as APTSA, ARI and AIL, PEM had appended its signature in acknowledgement of the Agreement. That PEM signed the Agreement in acknowledgement did not alter the fact that it was a party to the Agreement for the purposes of the novation: at [44].

12 The pre- and post-contractual conduct of the parties served to confirm the interpretation to be accorded to the Agreement. The Shareholders’ Update sent to APTSA’s shareholders prior to the signing of the Agreement specifically mentioned that Mr Chang would become responsible for the loans and interest previously extended and he did not object to this statement when given the opportunity, choosing instead to comment on other matters. As for post-contractual conduct, it was significant that AIL did not respond to an email sent by Ms Eileen Tan, a director of both APTSA and PEM, attaching a draft novation agreement together with a copy of the first personal guarantee given by Mr Kam with the words “cancelled” stamped on it. The inordinate delay by Mr Chang in taking steps to enforce the guarantees in the circumstances also served to reflect the common understanding of the parties that the loans and consequently the guarantees had been discharged by the Agreement. Accordingly, the personal guarantees given by Mr Kam were discharged at the time the Agreement was concluded in September 2015: at [45]–[49] and [51].

The alleged oral agreement and promissory estoppel

13 While it was unnecessary for the Court to deal with Mr Kam’s remaining arguments on the existence of the alleged oral agreement and promissory estoppel, it observed that in situations where the terms of a contract had been reduced to writing, s 94(b) of the Evidence Act (Cap 97, 1997 Rev Ed) precluded a party from adducing evidence of an oral agreement which was inconsistent with its terms. Since the terms of the alleged oral agreement stipulated quite different conditions for the discharge of Mr Kam’s personal guarantees than those contained in the Agreement, Mr Kam’s arguments based on the alleged oral agreement could not get off the ground: at [52] and [53].

14 The Court also expressed its doubts as to whether a creditor ordinarily had a duty to inform a debtor that he or she still considered a debt to be valid and opined that in most situations, silence on the part of a creditor or delay in prosecuting a claim would not amount to an unequivocal representation that the creditor no longer intended to insist on its strict legal rights: at [55].

This summary is provided to assist in the understanding of the Court’s grounds of decision. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s grounds of decision.