Straits Advisors v Michael Deeb: Breach of Contract, Misrepresentation, Conspiracy, Negligence Claims in Aborted IPO

Straits Advisors Pte Ltd sued Michael Deeb, Music Group Services SG (Pte) Ltd, and Music Group Ltd in the High Court of Singapore, alleging fraudulent misrepresentation, conspiracy, negligence, and breach of contract related to a failed initial public offering (IPO). Straits Advisors claimed that the defendants' actions caused them to lose potential profits and the value of shares they were promised. The court, presided over by Chan Seng Onn J, dismissed all of Straits Advisors' claims, finding that they failed to establish any of the alleged causes of action.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Plaintiff's claims dismissed.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Straits Advisors sues Michael Deeb for fraudulent misrepresentation, conspiracy, negligence, and breach of contract related to a failed IPO. Claims dismissed.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Straits Advisors Pte LtdPlaintiffCorporationClaims DismissedLost
Michael Deeb (alias Magdi Salah El-Deeb)DefendantIndividualJudgment in favor of DefendantWon
Music Group Services SG (Pte) Ltd (formerly Behringer Holdings Pte Ltd)DefendantCorporationJudgment in favor of DefendantWon
Music Group Ltd (formerly Behringer Corporation Ltd)DefendantCorporationJudgment in favor of DefendantWon

3. Judges

Judge NameTitleDelivered Judgment
Chan Seng OnnJudgeYes

4. Counsels

Counsel NameOrganization
Chenthil KumarasingamQuahe Woo & Palmer LLC
Chiang Wan TingQuahe Woo & Palmer LLC
Jeremy NonisQuahe Woo & Palmer LLC
Alan KohOracle Law Corporation
Stanley BayOracle Law Corporation
Joel LimAllen & Gledhill LLP
Andrew YeoAllen & Gledhill LLP
Colin ChowAllen & Gledhill LLP
Margaret LingAllen & Gledhill LLP

4. Facts

  1. Straits Advisors was engaged to provide corporate finance advisory services to the second and third defendants to steer the third defendant towards an IPO.
  2. The planned IPO was aborted after a short pursuit.
  3. The parties entered into a new agreement in late 2006 to suit the changed circumstances.
  4. The third defendant refused to issue any shares to the plaintiff after the engagement ended.
  5. The plaintiff commenced Suit No. 487 of 2008 against the second and third defendants to claim the shares, but the claim failed.
  6. The plaintiff brought the present action after it became privy to certain information that raised its suspicions over the propriety of the defendants’ conduct.
  7. The plaintiff alleged fraudulent misrepresentation, conspiracy, negligence, and breach of contract.

5. Formal Citations

  1. Straits Advisors Pte Ltd v Michael Deeb (alias Magdi Salah El-Deeb) and others, Suit No 349 of 2011, [2014] SGHC 94
  2. Straits Advisors Pte Ltd v Behringer Holdings (Pte) Ltd and another, , [2009] SGHC 86
  3. Straits Advisors Pte Ltd v Behringer Holdings (Pte) Ltd and another and another application, , [2010] 1 SLR 760

6. Timeline

DateEvent
Third defendant decided to pursue a listing of its shares on the Singapore Exchange.
Deeb approached Dominic on behalf of the Companies to request assistance in preparing for a NASDAQ IPO.
Meeting at the Companies’ Singapore office where Deeb allegedly made oral representations.
Original Agreements signed.
JP Morgan received a poison pen email.
Decision made to suspend the NASDAQ IPO.
Renegotiations of the Original Agreements began.
Board resolution showed the third defendant’s focus had turned away from a possible listing.
Roch Low appointed as new CFO of the Companies.
Jones Day received a poison pen email.
Email from Deeb to Dominic regarding intention to IPO around the third quarter of 2007.
Email from Dominic to Deeb regarding the disclosure of information.
Low/Deeb Email Exchange.
Consultancy Agreement signed.
Plaintiff and the Companies agreed to terminate the Secondment Agreement for Villanueva’s services.
Email from Ulrich to Deeb regarding trade sale.
Email from Deeb to Ulrich updating on the status of discussions with investors.
Email from Low to Dominic proposing to bring an immediate end to the parties’ contractual engagement.
KPMG engaged by Deeb and Ulrich in their personal capacities.
Plaintiff commenced Suit 487 against the Companies to recover the Shares.
Third defendant filed an originating summons to seek an order for Deeb to cease acting as its director.
Decision Date

7. Legal Issues

  1. Fraudulent Misrepresentation
    • Outcome: The court found that the plaintiff failed to prove that the defendants made the alleged representations with the knowledge that they were false or without an honest belief that they were true.
    • Category: Substantive
  2. Breach of Contract
    • Outcome: The court found that the plaintiff lacked standing to sue under the Employment Agreement and that the plaintiff's Standard Terms and Conditions were not incorporated into the Employment Agreement. The court also found that the Companies were not in breach of the implied obligation to act in good faith in triggering IPO Activation nor were the Companies in breach of any of the express clauses in the Consultancy Agreement.
    • Category: Substantive
  3. Negligence
    • Outcome: The court found that the Companies did not voluntarily assume responsibility towards the plaintiff and so it was unnecessary to consider the second aspect of the twin criteria, viz, reliance. The court also found that the alleged breach, viz, failing to verify the PPEs, did not materially affect the plaintiff’s decision to enter into the Consultancy Agreement from which the alleged losses were said to flow.
    • Category: Substantive
  4. Conspiracy
    • Outcome: The court found that the plaintiff could not establish that there was a conspiracy by unlawful means to injure it.
    • Category: Substantive
  5. Duty of Care
    • Outcome: The court found that the Companies did not owe the plaintiff a duty of care.
    • Category: Substantive
  6. Interpretation of Contractual Terms
    • Outcome: The court interpreted the terms of the Original Agreements and the Consultancy Agreement to determine the parties' rights and obligations.
    • Category: Substantive

8. Remedies Sought

  1. Shares in the third defendant
  2. Opportunity loss suffered in accepting the engagement
  3. Value of the shares in the third defendant measurable at different points of the engagement
  4. Costs incurred in the previous suit

9. Cause of Actions

  • Fraudulent Misrepresentation
  • Conspiracy
  • Negligence
  • Breach of Contract

10. Practice Areas

  • Commercial Litigation
  • Corporate Finance
  • Initial Public Offerings (IPO)

11. Industries

  • Finance
  • Legal Services

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Straits Advisors Pte Ltd v Behringer Holdings (Pte) Ltd and anotherHigh CourtYes[2009] SGHC 86SingaporeDetails the High Court's decision in the previous suit between the parties, which turned solely upon an issue of contractual interpretation.
Straits Advisors Pte Ltd v Behringer Holdings (Pte) Ltd and another and another applicationCourt of AppealYes[2010] 1 SLR 760SingaporeDetails the Court of Appeal's decision in the previous suit between the parties, which turned solely upon an issue of contractual interpretation. The current judgment relies heavily on the Court of Appeal's interpretation of the Consultancy Agreement.
Panatron Pte Ltd and another v Lee Cheow Lee and anotherCourt of AppealYes[2001] 2 SLR(R) 435SingaporeCited for the essential elements of the tort of fraudulent misrepresentation.
Derry v PeekHouse of LordsYes(1889) 14 App Cas 337United KingdomCited as the leading House of Lords decision on the requirement of dishonesty in fraudulent misrepresentation.
Pasley and another v FreemanCourt of King's BenchYes(1789) 3 Term Rep 51United KingdomCited for the principle that deceit is more than a lie.
Tang Yoke Kheng (trading as Niklex Supply Co) v Lek Benedict and othersCourt of AppealYes[2005] 3 SLR(R) 263SingaporeCited for the standard of proof required for allegations of dishonesty in civil claims.
Chua Kwee Chen and others (as Westlake Eating House) and another v Koh Choon ChinCourt of AppealYes[2006] 3 SLR(R) 469SingaporeCited for the standard of proof required for allegations of dishonesty in civil claims.
Wee Chiaw Sek Anna v Ng Li-Ann Genevieve (sole executrix of the estate of Ng Hock Seng, deceased) and anotherCourt of AppealYes[2013] 3 SLR 801SingaporeCited for the high standard of proof required to establish fraudulent misrepresentation.
Vita Health Laboratories Pte Ltd v Pang Seng MengHigh CourtYes[2004] 4 SLR(R) 162SingaporeCited for the principle that the graver the allegation, the higher the standard of proof.
Angus v CliffordCourt of AppealYes[1891] 2 Ch 449United KingdomCited for the inherent difficulty of having to look into a man’s mind.
Barings Plc (In Liquidation) v Coopers & Lybrand (No. 5)High CourtYes[2002] EWHC 461 (Ch)United KingdomCited for the principle that a man is more likely to knowingly make a false statement if he has some reason for doing so.
Spandeck Engineering (S) Pte Ltd v Defence Science & Technology AgencyCourt of AppealYes[2007] 4 SLR(R) 100SingaporeCited for the two-stage test of proximity and policy considerations for determining whether a duty of care existed.
Sunny Metal & Engineering Pte Ltd v Ng Khim Ming Eric (practising under the name and style of W P Architects)High CourtYes[2007] 1 SLR(R) 853SingaporeCited for the principle that the threshold inquiry of factual foreseeability will almost always be satisfied.
Council of the Shire of Sutherland v HeymanHigh Court of AustraliaYes(1985) 157 CLR 424AustraliaCited for the relational indicia of proximity between parties.
Resource Piling Pte Ltd v Geospecs Pte LtdHigh CourtYes[2014] 1 SLR 485SingaporeCited for the principle that, where pure economic loss is concerned, it may be more practicable to adjudge whether the requisite proximity existed based on the twin criteria of voluntary assumption of responsibility and reliance.
Hedley Byrne & Co Ltd v Heller & Partners LtdHouse of LordsYes[1964] AC 465United KingdomCited for the traditional test of assumption of responsibility and reliance in the context of economic loss.
McLoughlin v O'BrianHouse of LordsYes[1983] 1 AC 410United KingdomCited in Geospecs for comparison to Ngiam Kong Seng, which applied the three factors in McLoughlin v O'Brian within the context of the first proximity stage in the Spandeck Test for a claim involving a duty of care not to cause psychiatric harm.
Customs and Excise Commissioners v Barclays Bank plcHouse of LordsYes[2007] 1 AC 181United KingdomCited for the principle that the defendant's subjective intentions are irrelevant in determining whether he is deemed to have assumed responsibility for the consequences in law of the task being performed negligently.
Phelps v Hillingdon London Borough CouncilHouse of LordsYes[2001] 2 AC 619United KingdomCited for the principle that the defendant's subjective intentions are irrelevant in determining whether he is deemed to have assumed responsibility for the consequences in law of the task being performed negligently.
Williams and anor v Natural Life Health Foods LtdHouse of LordsYes[1998] 1 WLR 830United KingdomCited for the principle that the primary focus for the court must be on exchanges which may take the form of statements and conduct that cross the line between the claimant and the defendant.
Tan Chin Seng and others v Raffles Town Club Pte LtdCourt of AppealYes[2003] 3 SLR(R) 307SingaporeCited for the need to differentiate between actionable representation and future promise.
Edgington v FitzmauriceCourt of AppealYes(1884) 29 Ch D 459United KingdomCited for the principle that the state of a man's mind is as much a fact as the state of his digestion.
Alexander and others v Standard Telephones & Cables Ltd (No 2)Employment Appeal TribunalYes[1991] IRLR 286United KingdomCited for the legal position regarding the incorporation of contractual terms in a contract of employment.
ABB Holdings Pte Ltd and others v Sher Hock Guan CharlesHigh CourtYes[2009] 4 SLR(R) 111SingaporeCited for the legal position regarding the incorporation of contractual terms in a contract of employment.
Lee Chee Wei v Tan Hor Peow Victor and others and another appealCourt of AppealYes[2007] 3 SLR(R) 537SingaporeCited for the purpose and effect of an entire agreement clause.
EFT Holdings, Inc and another v Marinteknik Shipbuilders (S) Pte Ltd and anotherCourt of AppealYes[2014] 1 SLR 860SingaporeCited for the elements of the tort of conspiracy by unlawful means.
Wu Yang Construction Group Ltd v Zhejiang Jinyi Group Co, Ltd and othersCourt of AppealYes[2006] 4 SLR(R) 451SingaporeCited for the principle that the amount of proof required to establish a conspiracy by unlawful means will be higher than that in respect of a normal civil action.
Swiss Butchery Pte Ltd v Huber Ernst and others and another suitHigh CourtYes[2010] 3 SLR 813SingaporeCited for the principle that the amount of proof required to establish a conspiracy by unlawful means will be higher than that in respect of a normal civil action.
Asian Corporate Services (SEA) Pte Ltd v Eastwest Management Ltd (Singapore Branch)High CourtYes[2006] 1 SLR(R) 901SingaporeCited for the principle that a conspiratorial agreement or combination need not be in the form of an express agreement but may, and often is, proven inferentially from the surrounding circumstances and acts of the alleged conspirators.
Raiffeisen Zentralbank Osterreich AG v Archer Daniels Midland Co and othersCourt of AppealYes[2007] 1 SLR(R) 196SingaporeCited for the principle that a conspiratorial agreement or combination need not be in the form of an express agreement but may, and often is, proven inferentially from the surrounding circumstances and acts of the alleged conspirators.
The “Dolphina”Court of AppealYes[2012] 1 SLR 992SingaporeCited for the principle that a conspiratorial agreement or combination need not be in the form of an express agreement but may, and often is, proven inferentially from the surrounding circumstances and acts of the alleged conspirators.
Young & Woods Ltd v WestEmployment Appeal TribunalYes[1980] IRLR 201United KingdomCited for the principle that the label which parties use to describe their relationship is not a conclusive determination of their true legal relationship, but it is nevertheless relevant as an expression of their intention.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Contracts (Rights of Third Parties) Act (Cap 53B, 2002 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Initial Public Offering (IPO)
  • NASDAQ
  • SGX
  • Preliminary Prospectus
  • Eligibility-to-List (ETL)
  • Original Agreements
  • Consultancy Agreement
  • Pre-Listing Terms
  • IPO Advisory Terms
  • IPO Activation
  • Poison Pen Emails (PPEs)
  • Trade Sale

15.2 Keywords

  • fraudulent misrepresentation
  • conspiracy
  • negligence
  • breach of contract
  • IPO
  • Straits Advisors
  • Michael Deeb
  • Music Group
  • corporate finance
  • Singapore High Court

17. Areas of Law

Area NameRelevance Score
Contract Law75
Commercial Disputes65
Fraud and Deceit60
Conspiracy by Unlawful Means55
Negligence40
Company Law30
Arbitration20

16. Subjects

  • Contract Law
  • Tort Law
  • Corporate Law
  • Civil Litigation
  • Financial Advisory Services
  • Initial Public Offerings