Case Summaries

Ma Hongjin v SCP Holdings Pte Ltd [2020] SGCA 106

SUPREME COURT OF SINGAPORE

28 October 2020

Case summary

Ma Hongjin v SCP Holdings Pte Ltd [2020] SGCA 106
Civil Appeal No 45 of 2019

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Decision of the Court of Appeal (delivered by Judge of Appeal Justice Andrew Phang Boon Leong):

Outcome: The Court of Appeal dismisses the appellant’s appeal against the decision of the High Court Judge that the respondent was not liable to her for a sum of S$250,000 under an amended loan agreement. While contracting parties may, by agreement, dispense with the requirement of consideration with regard to the variation of that particular contract, an objective reading of the plain language of the relevant clause in this case did not support the conclusion that the parties had dispensed with the need for consideration for the variation of that contract. Consideration is a requirement for a contractual variation to be legally binding, and the contractual variation in this case was unenforceable for lack of consideration.

Background to the appeal

1 The appellant, 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”).

2 In January 2015, the appellant entered into a Convertible Loan Agreement (“the CLA”) with the respondent for a convertible loan of S$5m for a period of two years. In return, the respondent would have to pay interest at 10% per annum. 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 second interest payment and the principal of S$5.5m.

3 Within two months of entering into the CLA, the parties re-negotiated some of the terms of the CLA. This resulted in a supplemental agreement (“the SA”) being signed in April 2015. The SA essentially imposed additional obligations on the respondent by stipulating several amendments to the CLA. Notably, the appellant did not assume any additional obligations to the respondent under the terms of the SA.

4 Relevant to the appeal were several other transactions in which the appellant was involved. 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, though the loan facility 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”).

5 In January 2016, the respondent made payment of S$500,000 but neglected to pay the S$250,000 facility fee which the SA provided for. The appellant thus brought proceedings to, amongst other things, obtain payment of the facility fee from the respondent.

6 The respondent’s only defence was that the SA was unsupported by consideration and therefore unenforceable. The respondent also advanced the argument that the appellant had failed to plead that the SA was supported by consideration. Following the close of the appellant’s case in the proceedings below, the respondent made a submission of no case to answer coupled with the usual election not to call evidence if the submission failed.

7 The Judge found that consideration was necessary for contractual variation, and that the SA was unenforceable as it was not supported by consideration. While the Judge found that the appellant had failed to adequately plead in her reply that the SA was supported by consideration, he considered that this did not cause any prejudice to the respondent. The Judge also found that the appropriate test to apply in civil cases following a defendant’s submission of no case to answer was that the plaintiff had to prove her case on a balance of probabilities.

8 The appellant appealed against the Judge’s decision, relying on many of the same arguments that were raised before the Judge. First, that cl 9.3 of the CLA dispensed with the need for fresh consideration for a variation of the CLA. Second, that consideration had been furnished for the SA by way of a factual and/or practical benefit. The appellant also sought leave to argue that consideration should not be required in the case of contractual variation.

The Court’s decision

The applicable test upon a submission of no case to answer

9 The Court held that in a situation where a defendant has submitted that it has no case to answer and elected to call no evidence should that submission fail, the plaintiff would succeed if it could establish a prima facie case on each of the essential elements of its claim, and in doing so would simultaneously have proved its overall case on a balance of probabilities: at [22]–[33].

Whether the appellant had adequately pleaded that the SA was supported by consideration

10 The Court held that the appellant should be permitted to raise her arguments in relation to the consideration issue. The Court noted that there appeared to be some reference in the appellant’s pleadings to the fact that the SA dispensed with the need for consideration, but the remaining arguments relied on by the appellant were not particularised in her pleadings. Nonetheless, the respondent had not been caught by surprise by these arguments and they did not cause any prejudice to the respondent: at [34]–[35].

Whether cl 9.3 of the CLA dispensed with the need for fresh consideration for a variation of the CLA

11 The Court held that cl 9.3 of the CLA did not dispense with the need for fresh consideration for a variation of the CLA. While contracting parties may, by agreement, dispense with the requirement of consideration with regard to the variation of that particular contract, an objective reading of the plain language of cl 9.3 did not support the conclusion that the parties had dispensed with the need for consideration if the CLA was varied: at [36]–[44].

Whether the appellant had furnished consideration for the SA

12 The Court found that the appellant had not furnished consideration for the SA, whether in the form of the alleged “goodwill” to provide future loans to the respondent or its related entities or otherwise. The element of request necessary in order to establish a link between the parties was absent, as there was no request for any “goodwill” by the respondent leading to the conclusion of the SA. In any event, the alleged consideration was itself insufficient in the eyes of the law to the extent it referred to an improved relationship between the parties or some increased likelihood that the appellant would extend future loans to the respondent or its related entities: at [45]–[53].

Whether the requirement for consideration should be dispensed with for contractual variations

13 The Court held that the doctrine of consideration should be retained in the context of variation or modification of contracts. The Court was unpersuaded by the arguments in favour of the abolition of the doctrine of consideration in the context of the variation or modification of contracts. One reason was that maintaining the status quo would afford the courts a range of legal options to achieve a just and fair result. Furthermore, the difficulties with the possible alternatives to the doctrine of consideration do not appear to have been resolved: at [58]–[95].

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.

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