ACTAtek v Tembusu: Misrepresentation, Implied Terms & Breach of Contract in Convertible Loan Agreements
ACTAtek, Inc and Wan Wah Tong Thomas appealed against the decision of the High Court in favor of Tembusu Growth Fund Ltd regarding two convertible loan agreements. The Court of Appeal of the Republic of Singapore, comprising Sundaresh Menon CJ, Tay Yong Kwang JA, and Steven Chong J, allowed the appeal, finding that ACTAtek did not commit fraudulent misrepresentation and did not breach an implied term of the 2012 CLA. The court remitted the matter back to the trial judge for an assessment of damages for the wrongful declaration of an event of default.
1. Case Overview
1.1 Court
Court of Appeal of the Republic of Singapore1.2 Outcome
Appeal Allowed
1.3 Case Type
Civil
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
Appeal regarding convertible loan agreements. Court found no misrepresentation or breach, allowing the appeal and remitting damages assessment.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| TEMBUSU GROWTH FUND LTD | Respondent | Corporation | Appeal Dismissed | Lost | |
| ACTATEK, INC. | Appellant | Corporation | Appeal Allowed | Won | |
| WAN WAH TONG THOMAS | Appellant | Individual | Appeal Allowed | Won |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Sundaresh Menon | Chief Justice | Yes |
| Tay Yong Kwang | Judge of Appeal | No |
| Steven Chong | Judge | No |
4. Counsels
4. Facts
- ACTAtek and Tembusu entered into two convertible loan agreements (CLAs) in 2007 and 2012.
- Under the CLAs, Tembusu was to lend money to ACTAtek, repaid by issuing shares upon ACTAtek's listing on the New Zealand stock exchange.
- The planned listing did not occur.
- In May 2012, Tembusu declared an event of default under the 2012 CLA, alleging misapplication of loan proceeds.
- ACTAtek disputed the misapplication and claimed Tembusu wrongly declared the event of default, causing the listing to be aborted.
- Tembusu sought repayment of loan proceeds under both the 2007 and 2012 CLAs with interest.
- ACTAtek counterclaimed losses suffered as a result of ACTAtek being unable to list on the NZ stock exchange.
5. Formal Citations
- ACTAtek, Inc and anothervTembusu Growth Fund Ltd, Civil Appeal No 191 of 2014, [2016] SGCA 50
6. Timeline
| Date | Event |
|---|---|
| 2007 CLA signed | |
| Tembusu's option to demand repayment of loan with interest expired | |
| Discussions between ACTAtek and Tembusu on further investment | |
| Discussions between ACTAtek and Tembusu on further investment | |
| ACTAtek informed Tembusu about negotiations with Ingram Micro | |
| ACTAtek informed Tembusu about negotiations with Ingram Micro | |
| Negotiations resumed and Thomas asked Mahim to consider a second investment | |
| Thomas emailed Mahim regarding the use of funds | |
| Tembusu sent a Summary of Indicative Key Terms & Conditions to ACTAtek | |
| Thomas invited Andy, Mahim and Renhui to attend a meeting with representatives of Investment Research Group Limited | |
| Thomas emailed Andy to arrange a meeting to discuss a further proposed investment | |
| Mahim asked Thomas for a breakdown as to how ACTAtek intended to apply the proceeds of the proposed investment | |
| Daniel sent a forecast to Mahim and Renhui | |
| Renhui emailed Thomas to clarify certain aspects of ACTAtek’s forecast | |
| Due diligence call conducted between the parties | |
| Daniel sent an email to Renhui clarifying the liability of USD$578,000 | |
| Mahim emailed Thomas about converting shareholder loans | |
| 2012 CLA dated | |
| Parties reached an agreement as to terms on which the outstanding shareholder loans and accrued salaries would be converted or repaid | |
| Tembusu received ACTAtek’s income statement for the first quarter | |
| Tembusu’s solicitors wrote to ACTAtek declaring an event of default under the 2012 CLA | |
| Lee commissioned a special audit | |
| Tembusu commenced suit | |
| Hearing date | |
| Judgment Reserved |
7. Legal Issues
- Tort of Deceit
- Outcome: The Court of Appeal found that the elements of the tort of deceit had not been fulfilled.
- Category: Substantive
- Implied Term Restricting Use of Proceeds
- Outcome: The Court of Appeal found that there was no implied term restricting the use of proceeds in the 2012 CLA.
- Category: Substantive
- Wrongful Declaration of Event of Default
- Outcome: The Court of Appeal found that the wrongful declaration of the event of default did amount to a breach of the 2012 CLA.
- Category: Substantive
8. Remedies Sought
- Repayment of loan proceeds with interest
- Damages for wrongful repudiation of contract
9. Cause of Actions
- Breach of Contract
- Tort of Deceit
10. Practice Areas
- Commercial Litigation
- Appeals
11. Industries
- Venture Capital
- Technology
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Lim Eng Hock Peter v Lin Jian Wei and another and another appeal | Court of Appeal | Yes | [2010] 4 SLR 331 | Singapore | Cited regarding the ambit of Order 59 rule 9A(5) of the Rules of Court. |
| Chiam Heng Hsien (on his own behalf and as partner of Mitre Hotel Proprietors) v Chiam Heng Chow (executor of the estate of Chiam Toh Say, deceased) and others | Court of Appeal | Yes | [2015] 4 SLR 180 | Singapore | Cited regarding the ambit of Order 59 rule 9A(5) of the Rules of Court. |
| Panatron Pte Ltd and another v Lee Cheow Lee and another | High Court | Yes | [2001] 2 SLR(R) 435 | Singapore | Cited for the elements of the tort of deceit. |
| Tan Chin Seng and others v Raffles Town Club Pte Ltd | High Court | Yes | [2003] 3 SLR(R) 307 | Singapore | Cited for the principle that a misstatement of the existence of a state of mind or intention would amount to a misrepresentation of fact. |
| Edgington v Fitzmaurice | Court of Appeal | Yes | (1885) 29 Ch D 459 | England and Wales | Cited for the principle that a statement as to one’s intention may amount to a statement of fact. |
| Wee Chiaw Sek Anna v Ng Li-Ann Genevieve (sole executrix of the estate of Ng Hock Seng, deceased) and another | High Court | Yes | [2013] 3 SLR 801 | Singapore | Cited for the principle that in an action founded on the tort of deceit, it is the representor’s own (subjective) belief that is crucial. |
| Xia Zhengyan v Geng Changqing | High Court | Yes | [2015] 3 SLR 732 | Singapore | Cited regarding caution in looking to subsequent conduct when construing the terms of an earlier agreement. |
| Hewlett-Packard Singapore (Sales) Pte Ltd v Chin Shu Hwa Corinna | High Court | Yes | [2016] 2 SLR 1083 | Singapore | Cited regarding caution in looking to subsequent conduct when construing the terms of an earlier agreement. |
| Sheng Siong Supermarkets Pte Ltd v Carilla Pte Ltd | High Court | Yes | [2011] 4 SLR 1094 | Singapore | Distinguished on the facts; cited regarding express terms in a contract. |
| Sembcorp Marine Ltd v PPL Holdings Pte Ltd and another and another appeal | Court of Appeal | Yes | [2013] 4 SLR 193 | Singapore | Cited for the three-step process for implying a term into a contract. |
| Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd and another | UK Supreme Court | Yes | [2015] 3 WLR 1843 | United Kingdom | Cited for the principle that a term should not be implied into a detailed commercial contract merely because it appears fair. |
| Concord Trust v The Law Debenture Trust Corporation | House of Lords | Yes | [2005] 1 WLR 1591 | United Kingdom | Distinguished on the facts; cited regarding wrongful calling of an event of default. |
| Jafari-Fini v Skillglass Ltd and others | English Court of Appeal | Yes | [2007] EWCA Civ 261 | England and Wales | Distinguished on the facts; cited regarding wrongful calling of an event of default. |
13. Applicable Rules
| Rule Name |
|---|
| Order 59 r 9A(5) of the Rules of Court |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| No applicable statutes | |
15. Key Terms and Keywords
15.1 Key Terms
- Convertible Loan Agreement
- Event of Default
- Misrepresentation
- Implied Term
- Initial Public Offering
- Working Capital
- Use of Proceeds
15.2 Keywords
- convertible loan agreement
- misrepresentation
- implied terms
- breach of contract
- Singapore
- ACTAtek
- Tembusu
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Breach of Contract | 80 |
| Contract Law | 80 |
| Misrepresentation | 75 |
| Fraud and Deceit | 75 |
| Implied Terms | 70 |
16. Subjects
- Contract Law
- Financial Law
- Corporate Law