Mentormophosis v Phua Raymond: Fraudulent Misrepresentation in Franchise Agreements
Mentormophosis Pty Ltd, DNV Image Pte Ltd, PT Patria Nusantara Perkasa, and Ms Dian Patriani sued Mr Raymond Phua and Da Vinci Holdings Pte Ltd in the High Court of Singapore on 2 July 2010, alleging fraudulent misrepresentations that induced them to enter into franchise agreements with Tradewind Group Pte Ltd, which was later wound up. The plaintiffs claimed that RP, as managing director of DVH, misrepresented that Tradewind had the backing of the Da Vinci group. The court found RP liable for fraudulent misrepresentation and held DVH liable based on RP's apparent authority. Judgment was granted in favor of the plaintiffs, with damages to be assessed.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Judgment for Plaintiffs
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Plaintiffs claim RP made false representations inducing them to enter franchise agreements. Court finds RP liable for fraudulent misrepresentation; DVH also liable.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Mentormophosis Pty Ltd | Plaintiff | Corporation | Judgment for Plaintiff | Won | |
| DNV Image Pte Ltd | Plaintiff | Corporation | Judgment for Plaintiff | Won | |
| PT Patria Nusantara Perkasa | Plaintiff | Corporation | Judgment for Plaintiff | Won | |
| Dian Patriani | Plaintiff | Individual | Judgment for Plaintiff | Won | |
| Phua Raymond | Defendant | Individual | Judgment Against Defendant | Lost | |
| Da Vinci Holdings Pte Ltd | Defendant | Corporation | Judgment Against Defendant | Lost |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Woo Bih Li | Judge | Yes |
4. Counsels
4. Facts
- RP represented himself as managing director of DVH.
- RP represented that Walking Culture was backed by the Da Vinci group.
- Plaintiffs entered into franchise agreements with Tradewind based on RP's representations.
- Da Vinci group did not provide substantial support to Tradewind.
- RP knew that Da Vinci was not linked to Walking Culture.
- The plaintiffs suffered damages as a result of the misrepresentations.
- RP used Da Vinci name cards and email signatures to promote Walking Culture.
5. Formal Citations
- Mentormophosis Pty Ltd and others v Phua Raymond and another, Suit No 459 of 2008, [2010] SGHC 188
6. Timeline
| Date | Event |
|---|---|
| RP met Dian Patriani | |
| RP left Da Vinci group | |
| Tradewind Venture Pte Ltd registered | |
| Tradewind Group Pte Ltd name change | |
| RP met with FT Consulting | |
| PT PNP entered into franchise agreement with Tradewind | |
| Da Vinci had 19 mega stores | |
| Evelyn Chung visited the Global Franchise Exhibition | |
| Neo and Evelyn met with RP and Peck Lin | |
| RP, Evelyn, Neo and Shavon viewed outlet at People’s Park | |
| Evelyn received email from Richard Quek | |
| Evelyn went with RP and Richard Quek to view unit at Millenia Walk | |
| DNV incorporated | |
| Wendy first met RP at Harbourfront outlet opening | |
| Evelyn, Neo and Shavon met RP and Peck Lin to discuss franchise agreements | |
| Wendy met RP, Rodney Soh, and Tan Swee Lin | |
| DNV executed two franchise agreements with Tradewind | |
| Article in TODAY newspaper stating RP was managing director of DVH | |
| RP had training sessions for Neo and Evelyn | |
| Wendy and Rodney met RP and Peck Lin | |
| Peck Lin sent Wendy first draft of main commercial terms | |
| Peck Lin sent Wendy second draft of main commercial terms | |
| Peck Lin sent Wendy third draft of main commercial terms | |
| AGM outlet opened | |
| Peck Lin sent Wendy a draft letter of intent | |
| Wendy signed finalised letter of intent | |
| Rodney and Wendy went to Melbourne | |
| MPL incorporated | |
| Wendy signed master franchise agreement | |
| MPL entered into franchise agreement with Tradewind | |
| Dian signed master franchise agreement with Tradewind | |
| Wendy wrote email to RP expressing frustrations | |
| People’s Park outlet closed | |
| Millenia Walk outlet closed | |
| Wendy went back to Singapore to look for local franchisees | |
| Wendy found out about the fraud | |
| Tradewind wound up | |
| Melbourne outlet closed | |
| Dian and Evelyn found out about RP’s fraud | |
| Judgment reserved |
7. Legal Issues
- Fraudulent Misrepresentation
- Outcome: The court found that RP made fraudulent misrepresentations to the plaintiffs, inducing them to enter into franchise agreements with Tradewind.
- Category: Substantive
- Sub-Issues:
- Reliance on representations
- Knowledge of falsity
- Inducement to contract
- Apparent Authority
- Outcome: The court found that RP had the apparent authority to represent that DVH was backing the Walking Culture business, and that it was reasonable for the plaintiffs to rely on his apparent authority.
- Category: Substantive
- Sub-Issues:
- Representation of authority
- Reasonable reliance
- Collateral Contract
- Outcome: The court rejected the plaintiffs' argument that a collateral contract was formed between them and DVH.
- Category: Substantive
8. Remedies Sought
- Monetary Damages
9. Cause of Actions
- Deceit
- Fraudulent Misrepresentation
- Breach of Contract
10. Practice Areas
- Commercial Litigation
- Franchise Disputes
11. Industries
- Retail
- Fashion
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Panatron Pte Ltd v Lee Cheow Lee | Court of Appeal | Yes | [2001] 2 SLR(R) 435 | Singapore | Cited for the elements of the tort of deceit and the requirement of reliance on the false statement. |
| Bradford Building Society v Borders | N/A | Yes | [1941] 2 All ER 205 | N/A | Cited for the elements of the tort of deceit. |
| Reynell v Sprye | N/A | Yes | (1852) 42 ER 710 | N/A | Cited for the principle that it is impossible to analyze the operations of the human mind to determine how far a particular representation led to a resolution. |
| The Directors, etc, of the Central Railway Company of Venezuela v Joseph Kisch | N/A | Yes | (1867) LR 2 HL 99 | N/A | Cited for the principle that it is no defense to fraud that the victim acted incautiously. |
| Gould v Vaggelas | N/A | Yes | (1985) 157 CLR 215 | N/A | Cited for the principle that a knave does not escape liability because he is dealing with a fool. |
| Tang Yoke Kheng (trading as Niklex Supply Co v Lek Benedict | Court of Appeal | Yes | [2005] 3 SLR(R) 263 | Singapore | Cited for the standard of proof required when fraud is alleged in a civil action. |
| Lee Chee Wei v Tan Hor Peow Victor | Court of Appeal | No | [2007] 3 SLR(R) 537 | Singapore | Cited for the observation that whether an entire agreement clause can exclude a claim in misrepresentation remains a matter of controversy. |
| S Pearson & Son Ltd v Dublin Corporation | N/A | Yes | [1907] AC 351 | N/A | Cited for the principle that a person cannot contractually exclude liability for his own fraud. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Misrepresentation Act (Cap 390, 1994 Rev Ed) | Singapore |
| Evidence Act (Cap 97, 1997 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Franchise Agreement
- Misrepresentation
- Da Vinci Group
- Walking Culture
- Tradewind
- Managing Director
- Apparent Authority
- Collateral Contract
15.2 Keywords
- franchise
- misrepresentation
- fraud
- Da Vinci
- Walking Culture
- Singapore
- contract
- tort
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Misrepresentation | 95 |
| Fraud and Deceit | 95 |
| Contract Law | 70 |
| Franchise Agreements | 60 |
| Company Law | 50 |
| Agency Law | 40 |
| Winding Up | 30 |
| Director's Liability | 30 |
16. Subjects
- Franchise Law
- Misrepresentation
- Tort Law
- Contract Law