General Division of the High Court · Decided 29 October 2021

Yong Khong Yoong Mark and others v Ting Choon Meng and another

[2021] SGHC 246Case no. Suit No 1140 of 2018

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Introduction
[1] The plaintiffs claim that they were induced by the defendants’ misrepresentations to make several loans to HealthSTATS International Pte Ltd (“Healthstats International”) from January to July 2016 amounting to S$2.5m and to enter into a subscription agreement in August 2016 (the “Subscription Agreement”) for the sum of S$5m. The sum of S$2.5m loaned to Healthstats International formed part of the consideration for the Subscription Agreement.
[2] The Subscription Agreement was entered into on 12 August 2016 between the second plaintiff and Healthstats International. Under the Subscription Agreement, Healthstats International issued approximately 3.2 million new shares to the third plaintiff (as the second plaintiff’s nominee) for a total consideration of S$5m.
[3] The plaintiffs allege that the defendants’ representations were all made to paint a misleading picture that Healthstats International was a viable company with many products that were worth investing in. They also contend that the defendants made these representations fraudulently or negligently. Consequently, the plaintiffs claim damages to be assessed for the defendants’ fraudulent or negligent misrepresentation. Alternatively, they claim damages for misrepresentation pursuant to s 2 of the Misrepresentation Act (Cap 390, 1994 Rev Ed).
[4] Further or in the alternative, the plaintiffs claim that the defendants conspired by unlawful means to defraud them by presenting a false picture of Healthstats International’s viability, thereby inducing them to make a large investment in Healthstats International. They seek a declaration that the defendants participated in a conspiracy to injure them by unlawful means, as well as damages for conspiracy.
The parties
[6] The first plaintiff in this Suit is Mr Yong Khong Yoong Mark (“Mr Yong”), a businessman and a private investor. The second plaintiff is his wife, Ms Emily Hwang Mei Chen (“Ms Hwang”). Ms Hwang is the sole shareholder and director of the third plaintiff, Medivice Investment Limited (“Medivice”), a company incorporated in the Cayman Islands on 17 February 2016. Medivice is Ms Hwang’s investment vehicle. I shall refer to Mr Yong, Ms Hwang and Medivice collectively as “the plaintiffs”.
[7] The first defendant is Dr Ting Choon Meng (“Dr Ting”) and the second defendant is Mr Chua Ngak Hwee (“Mr Chua”) (collectively, “the defendants”). Dr Ting is a general medical practitioner and he knew Mr Yong and Ms Hwang personally as he was their personal physician. Mr Chua is a software engineer by training. Dr Ting and Mr Chua founded Healthstats International, a Singapore-incorporated company, in 2000.
Background to the dispute
[8] I shall briefly introduce the main entities and individuals involved in the matters which form the background to the present dispute.
[9] As I have mentioned at [6] above, Ms Hwang is the sole shareholder and director of Medivice, which is her investment vehicle. Mr Yong is a director and shareholder of Uncharted Holdings Limited (“Uncharted Holdings”), a Mauritius-incorporated company, which is one of his investment vehicles. Mr Yong is also the founder of the Uncharted Group Limited (the “Uncharted Group”), a Mauritius-incorporated private investment management company. In addition, Mr Yong is a shareholder of Success Dragon International Holdings Limited (“Success Dragon”), a company listed on the Hong Kong Stock Exchange. The chairman and chief executive officer (“CEO”) of Success Dragon from June 2015 to March 2017 was Mr Carlos Salas (“Mr Salas”), who has also been the chief commercial officer of the Uncharted Group since July 2007. In addition, Mr Douglas Goh (“Mr Goh”) was the business development director of Success Dragon and was also part of the Uncharted Group at the material time. Both Mr Salas and Mr Goh are business associates of Mr Yong.
[10] Dr Ting was the CEO of Healthstats International from the time it was founded in 2000 until March 2016, and thereafter from April 2017 to October 2017. In the period from March 2016 to April 2017, the CEO of Healthstats International was Mr Joshua Soh (“Mr Soh”), who was Mr Yong’s and Ms Hwang’s family friend and who had experience in the medical equipment industry. Mr Soh was also the former Managing Director of Cisco Systems Singapore and Country Manager of IBM Singapore. Mr Yong appointed Mr Soh as the CEO of Healthstats International at the relevant period with the concurrence of the defendants so as to change Healthstats International’s business model. Both Dr Ting and Mr Chua were the founding directors of Healthstats International until May 2018. From 1 October 2010 to May 2018, Dr Ting was also its executive chairman, while Mr Chua was its chief technology officer. Dr Ting and Mr Chua are still shareholders of Healthstats International. Healthstats International’s chief financial officer was Mr Marcus Chua (“Mr Marcus Chua”).
[11] Several other present and former employees of Healthstats International testified in these proceedings. These were:
[12] Healthstats International also had various subsidiaries in China, the UK, Australia, Malaysia and Singapore. Only its subsidiary in China, HealthSTATS Technology (SIP) Co Ltd (“Healthstats China”), is relevant to the present proceedings. Healthstats China was incorporated in 2006. Ms Li Wen Wen (“Ms Li”) was a sales manager in Healthstats China from July 2015 to October 2018. She was primarily responsible for running its sales and procurement office.
[13] With this overview, I shall now set out the background to the present dispute in three parts: first, the clinical devices developed by Healthstats International; second, the two contracts entered into by Healthstats International with Healthstats China; and third, the plaintiffs’ involvement with Healthstats International.
Healthstats International’s clinical devices
[14] Healthstats International is in the business of manufacturing medical research and clinical diagnostic instruments. Its flagship products are two clinical devices relating to the measurement and monitoring of blood pressure:
(a) the BPro ambulatory blood pressure monitoring system devices (the “BPro” devices), which are wearable watch-like devices attached to an individual’s wrist that are able to measure the individual’s blood pressure non-invasively; and
(b) the central aortic systolic blood pressure measurement devices (the “CasPro” devices), which are able to measure an individual’s central aortic pressure non-invasively using radial artery pulse waves from the wrist.
[15] The first generation of the BPro devices (the “BPro G1”) was launched in 2002. The BPro G1 obtained the requisite regulatory approvals from the US’s Food and Drug Administration (the “FDA”) on 7 April 2006, the European Union (“EU”)’s Conformité Européenne (the “CE”) on 2 June 2006, Singapore’s Health Sciences Authority (the “HSA”) on 20 April 2006, and China’s Food and Drug Administration (the “CFDA”) in 2008.
[16] Healthstats International had also obtained approval for the CasPro from the relevant regulatory authorities prior to manufacturing the CasPro devices for distribution. Regulatory approvals for the CasPro had been granted by the FDA, the CE, the HSA and the CFDA by April 2012.
[17] In or around the first quarter of 2012, Healthstats International started work on the second generation of the BPro devices which featured an added Bluetooth wireless function (the “BPro G2”). Both the BPro G1 and the BPro G2 were targeted for use by medical professionals. However, as at the end of 2016, the BPro G2 had not received any regulatory approval from the US’s FDA. The BPro G2 received FDA approval on 21 June 2018.
[18] Subsequently, sometime in or around 2015, Healthstats International started work on the third generation of the BPro devices, which were intended to be consumer wearables targeted for mass market consumer distribution (the “BPro G3”).
The two contracts with Healthstats China
[19] Healthstats China was initially solely owned by Healthstats Instruments Pte Ltd, a Singapore-incorporated company, of which Healthstats International was a majority shareholder. In July 2015, Winsan (Shanghai) Medical Science and Technology Co Ltd (“Winsan”), a listed company in China, acquired 51% of the shares in Healthstats China. At the material time, Healthstats International held the remaining 49% of the shares. Healthstats China thus became a joint venture between Healthstats International and Winsan.
[20] At that time, Winsan had been awarded three tenders to supply an integrated system for the remote monitoring of blood pressure for the population of three cities in China. Winsan, therefore, wanted Healthstats International to supply the BPro G2, BPro G3 and CasPro devices. To this end, Healthstats China entered into two contracts with Healthstats International in 2015 (collectively, the “China Contracts”):
(a) a purchase agreement (Agreement No: P2015080001) dated 13 August 2015, under which Healthstats China was to purchase S$5m worth of the BPro G2 devices and accessories from Healthstats International (the “First China Contract”); and
(b) a purchase agreement (Agreement No: P2015090002) dated 26 October 2015, under which Healthstats China was to purchase a total of S$52.785m worth of the BPro G2, BPro G3 and CasPro devices and accessories from Healthstats International (the “Second China Contract”).
[21] On 20 August 2015, Healthstats International received payment of S$1.5m from Healthstats China pursuant to the First China Contract. Healthstats International then commenced the production process and subsequently delivered certain components to Healthstats China. Healthstats International later issued two invoices (dated 23 June 2016 and 13 March 2017) to Healthstats China amounting to a total of S$720,000. This left a balance of S$3.5m of sales, out of the S$5m of sales secured under the First China Contract, which was not fulfilled.
[22] Under the Second China Contract, Healthstats China was to purchase S$14,555,000 worth of the BPro G2 and BPro G3 devices (and related devices) from Healthstats International in 2016, and S$38,230,000 worth of such devices in 2017. Clause 9.2 of the Second China Contract is of key importance in the present case and I shall set it out in full:
[23] A contract approval form dated 23 October 2015 (the “Contract Approval Form”) was signed by four of Winsan’s representatives in Healthstats China. The Contract Approval Form related to the Second China Contract. It stated that “[t]he conditions for the validity of the contract [had not] been met” and that “there [was] no need to perform the contract immediately even if it [was] signed”.
[24] Ultimately, no orders were fulfilled under the Second China Contract.
[25] In October 2018, Healthstats International re-acquired Winsan’s shares in Healthstats China. At this point, Winsan arranged for all documents relating to Healthstats China which it had kept in its office to be handed over to Healthstats China. During this process, Winsan provided Healthstats China with a checklist of all the documents which were handed over (the “Winsan Handover Checklist”). Healthstats International is currently the sole shareholder of Healthstats China.
The plaintiffs’ involvement with Healthstats International
[26] Dr Ting had been Mr Yong’s and Ms Hwang’s personal physician for many years. They trusted Dr Ting and held him in high esteem. Dr Ting also knew them personally and was aware that they were investors in various businesses. In September 2015, Mr Yong and Ms Hwang met Dr Ting for dinner. This was the first time that they had met socially. Over dinner, Dr Ting told them that he was an inventor of medical devices, including the BPro and CasPro devices.
[27] From October 2015 to January 2016, the defendants and Mr Yong had several business meetings to discuss the possibility of Mr Yong or Ms Hwang investing in Healthstats International. During this period, there were also several social meetings between Dr Ting, Mr Yong, Ms Hwang and other individuals including Mr Soh, Mr Salas and Mr Goh.
The aborted purchase of Healthstats International’s shares by Uncharted Holdings
[28] On 2 December 2015, a letter of intent was executed by Mr Yong pursuant to which the Uncharted Group confirmed its intention to purchase shares in Healthstats International (the “Letter of Intent”). The purchase price of these shares was to be calculated based on the Uncharted Group’s valuation of Healthstats International at S$50m (the “S$50m Valuation”). The Uncharted Group’s investment in Healthstats International was expected to be around S$27m.
[29] On 19 January 2016, copies of both the First China Contract and the Second China Contract (in Mandarin) were provided by Mr Marcus Chua to Mr Goh via e-mail (the “19 January 2016 E-mail”). Mr Goh was assisting Mr Yong with carrying out due diligence on the Uncharted Group’s intended investment in Healthstats International.
[30] Subsequently, a sale and purchase agreement dated 1 February 2016 was entered into between Uncharted Holdings and the selling shareholders of Healthstats International (the “Sale and Purchase Agreement”). Pursuant to cl 4.1 (read with Schedule 3 para 1) of the Sale and Purchase Agreement, the completion of the sale and purchase of Healthstats International’s shares under this agreement was conditional on the completion of due diligence to the satisfaction of Uncharted Holdings.
[31] On 1 March 2016, Mr Soh was formally appointed as the CEO of Healthstats International by way of a Master Consultancy Agreement between him and Uncharted Holdings (“the Master Consultancy Agreement”). Mr Soh served as the CEO of Healthstats International from March 2016 to April 2017. As Mr Yong’s nominee, he represented Mr Yong in Healthstats International. Following his appointment, Mr Soh changed Healthstats International’s business model for the BPro devices from a sales-based model for the BPro G1 (under which the devices were sold) to a service-based model for the BPro G2 (under which the devices were given to clinical professionals for free with a fee being charged for each use of the device).
[32] The Sale and Purchase Agreement was amended on 11 March 2016 to allow Uncharted Holdings an extension of time to complete the due diligence process. Between March and April 2016, three draft reports were prepared by way of due diligence on Uncharted Holdings’ potential purchase of shares in Healthstats International:
[33] Uncharted Holdings did not officially appoint any advisors to conduct due diligence on Winsan, Healthstats China, or the two China Contracts. However, Mr Yong approached his friend, Mr John Sheng (“Mr Sheng”), to assist him with this. Mr Sheng was a partner in a law firm based in Shanghai. He specialised in private equity investments and mergers and acquisitions in China. Between March and April 2016, Mr Sheng looked into Winsan on behalf of Mr Yong.
[34] After conducting the abovementioned due diligence, Uncharted Holdings decided not to proceed with the purchase of Healthstats International’s shares. In a letter dated 25 April 2016 to the selling shareholders of Healthstats International (the “Notice of Termination”), Uncharted Holdings stated that it did not intend to proceed with the completion of the Sale and Purchase Agreement because the due diligence had not been completed satisfactorily. Paragraphs 2 and 3 of the Notice of Termination stated as follows:
[35] Shortly after the Notice of Termination was sent to the selling shareholders of Healthstats International, on 25 April 2016, Mr Salas e-mailed Dr Ting and Mr Yong (the “25 April 2016 E-mail”). In that e-mail, Mr Salas forwarded the Notice of Termination and stated that:
[36] Dr Ting replied as follows (the “25 April 2016 Reply”):
[37] A few hours later, Mr Yong e-mailed Dr Ting, copying Mr Salas and Mr Chua, (the “First 26 April 2016 E-mail”) stating:
[38] Dr Ting replied as follows:
[39] Subsequently, Mr Yong sent Dr Ting the following e-mail for Dr Ting to send to Healthstats International’s shareholders (the “Second 26 April 2016 E-mail”):
The loans to Healthstats International
[40] It is undisputed that the following loans amounting to S$2.5m were extended to Healthstats International by Mr Yong and/or Ms Hwang (the “Loans”):
[41] The aggregate sum of the Loans was recorded in the Subscription Agreement.
The Subscription Agreement
[42] On 12 August 2016, Ms Hwang entered into the Subscription Agreement with Healthstats International. Under the Subscription Agreement, Ms Hwang’s subscription for Healthstats International’s shares was to take place in two tranches:
(a) In the first tranche, Healthstats International was to issue 3,172,589 new shares (the “Subscription Shares”) to Ms Hwang for a consideration of S$5m (the “Subscription Consideration”). Of this sum, S$2.5m was to be offset against the Loans which had already been extended to Healthstats International, and the remaining S$2.5m (the “Net Subscription Consideration”) would be paid thereafter.
(b) In the second tranche, Healthstats International granted Ms Hwang a call option to subscribe for a further 3,095,781 new shares (the “Option Shares”) for a consideration of S$4,878,950 (the “Option Shares Consideration”) within six months from the completion of the Subscription Agreement. I shall refer to this as the “Call Option”. Under the corresponding put option granted to Healthstats International, Ms Hwang would be obligated to subscribe for these Option Shares if Healthstats China fulfilled its orders under the First China Contract by 31 December 2016 (the “Put Option”).
[43] Under the Subscription Agreement, Medivice had the right to nominate one person to be appointed as a director of Healthstats International upon the completion of the Subscription Agreement. The completion of the Subscription Agreement took place on or around 15 August 2016. On 26 August 2016, Medivice nominated Mr Soh as its representative on Healthstats International’s board of directors. Mr Soh was appointed to Healthstats International’s board of directors shortly afterwards. It is not disputed that Mr Soh was representing Mr Yong and Ms Hwang in this capacity.
[44] Pursuant to the first tranche of the share subscription under the Subscription Agreement, Ms Hwang directed Healthstats International to allot and issue the Subscription Shares to her nominee, Medivice. The Net Subscription Consideration of S$2.5m was paid by Ms Hwang through Medivice in September 2016, in the following sums:
The parties’ cases
The plaintiffs’ case
The alleged representations
[45] The plaintiffs pleaded that three representations were made to them by the defendants (collectively, the “Representations”):
(a) that all of Healthstats International’s products, in particular the BPro G2 and the CasPro devices, had obtained the necessary regulatory approvals from the HSA, the FDA and the CE (the “Regulatory Representation”);
(b) that S$18m of sales had been booked for 2016 and another S$38.2m of sales had been booked for 2017 (the “Revenue Representation”); and
(c) that Healthstats International was to launch the BPro G3 in the second quarter of 2016 (the “Product Representation”).
[46] According to the plaintiffs, the Representations were made to them by Dr Ting and/or Mr Chua on the following occasions:
(a) In or around October 2015, Dr Ting and his girlfriend, Ms Lena Sim (“Ms Sim”) invited Mr Yong and Ms Hwang to Dr Ting’s house for tea (the “October 2015 Meeting”). Also present were Mr Chua, who was introduced as Dr Ting’s partner in Healthstats International, and Mr Alan Ho (“Mr Ho”), who was introduced as the person in charge of Healthstats International’s London office. According to the plaintiffs, Dr Ting made the following representations to Mr Yong and Ms Hwang during this meeting:
At this meeting, Dr Ting also told Mr Yong and Ms Hwang that he was just a doctor and did not know how to run a business. He suggested that Healthstats International would benefit from investors like them who were business-savvy and asked if they were interested to invest.
(b) In or around November 2015, Mr Yong contacted Dr Ting to follow up on the proposed investment. On 21 November 2015, Mr Yong attended at Healthstats International’s office to listen to the defendants’ investment pitch (the “21 November 2015 Meeting”). According to the plaintiffs, Dr Ting made the following representations to Mr Yong at this meeting:
(i) that in or around 2006, Dr Ting had invented the BPro G1;
(ii) that the BPro G1 had earned Dr Ting various accolades and had been approved by regulatory authorities such as the US’s FDA, Singapore’s HSA, the EU’s CE, and China’s CFDA;
(iii) that the BPro G2 was developed in 2012 or 2013;
(iv) that Healthstats International “was launching” the BPro G3 and had secured orders of over 200,000 units of the BPro G3, with its target release date being the second quarter of 2016;
(v) that all of Healthstats International’s products, including the BPro G2, had obtained all the relevant regulatory approvals, including approvals from the HSA, the CE, the FDA and the CFDA;
(vi) that Healthstats International was in need of working capital and that the defendants were unable to raise funds from its shareholders as they had failed these shareholders too many times given their lack of business acumen;
(vii) that the defendants were looking to secure a business-savvy investor to buy out the other shareholders’ shares;
(viii) that an investment by Mr Yong and Ms Hwang would enable Healthstats International’s products, especially the BPro devices, to be distributed more widely, which would in turn benefit more patients globally; and
(ix) that Healthstats International had a valuation of S$50m, as evidenced by the joint venture contract entered into between Healthstats International and Winsan.
(c) Following the 21 November 2015 Meeting, on 22 November 2015, Dr Ting sent Mr Yong an executive summary of Healthstats International’s business, titled “[a]n opportunity to invest in or acquire a wearable device company focussed on health and medical technology” (the “Executive Summary”). It is undisputed that this Executive Summary was sent to Mr Yong and that it included the following information:
(d) On 5 January 2016, Mr Yong attended another meeting at Healthstats International’s office with the defendants and Mr Soh (the “5 January 2016 Meeting”). At this meeting, the defendants presented a set of PowerPoint slides containing business updates regarding Healthstats International (the “Business Update Slides”). It is not disputed that the Business Update was presented and that it suggested, among other things, that S$18m was expected from China in 2016 and S$38.2m was expected from China in 2017. The plaintiffs assert that, at this meeting, Dr Ting also repeated that the BPro devices had received all necessary regulatory approvals, and referred to Healthstats International’s contracts for the supply of the BPro devices to certain parties in China.
(e) On 9 January 2016, Mr Yong and Ms Hwang attended a further meeting at Ms Sim’s house (the “9 January 2016 Meeting”). Also present were Mr Chua, Mr Marcus Chua, and Mr Ho (via Skype). At this meeting, the defendants presented two sets of PowerPoint slides titled “HS Financial Forecast” (the “Financial Forecast Slides”) and the other titled “Product Portfolio” (the “Product Portfolio Slides”). It is not disputed that these slides were presented and that they included the following information:
(i) The Financial Forecast Slides stated that the revenue forecast from China was S$18m in 2016 and S$38.2m in 2017.
(ii) The Product Portfolio Slides included a picture of the BPro G3 and listed it as one of Healthstats International’s 24-hour ambulatory blood pressure monitoring products and a “consumer wearable”.
The plaintiffs contend that the Product Portfolio Slides fortified the Product Representation at [45(c)] above.
(f) On 19 January 2016, as I have noted at [29] above, copies of both the First China Contract and the Second China Contract were provided by Mr Marcus Chua to Mr Goh. The plaintiffs contend that this was done to fortify the Revenue Representation at [45(b)] above.
(g) Between 14 January 2016 and 24 February 2016, a number of further meetings took place (the “January–February 2016 Meetings”). These meetings were attended by (among others) Dr Ting, Mr Chua, Mr Soh, Mr Yong and Ms Hwang, or some of them. According to the plaintiffs, at each of these meetings, Dr Ting represented that the BPro devices (which included the BPro G3) had been developed; that they had received all relevant regulatory approvals; that there were lucrative contracts relating to them; and that “the time was now” to invest.
The falsity of the representations
[47] The plaintiffs argue that all of the Representations were false.
[48] According to the plaintiffs, the Regulatory Representation was false because Healthstats International did not have the requisite regulatory approvals for the BPro G2. The plaintiffs rely on the following:
(a) At the material time, Healthstats International had only obtained the HSA, FDA and CE approval for the BPro G1, and not the BPro G2, although the BPro G2 was being sold in (among other countries) the US, the UK or Europe, and Singapore.
(b) The changes from the BPro G1 to the BPro G2 were such that fresh regulatory approvals from the FDA, the HSA, the CE and the CFDA were required for the BPro G2. However, Healthstats International never applied for or obtained such approvals for the BPro G2. Even if fresh regulatory approvals were not required, Healthstats International did not submit the required “change notifications” to the relevant authorities in respect of the changes from the BPro G1 to the BPro G2.
[49] In respect of the CasPro, the plaintiffs allege that Healthstats China had obtained approval from the CFDA in 2012 on the basis of a fabricated report containing amended clinical trial data. In any event, even before obtaining the CFDA’s approval on 7 June 2012, Healthstats International had already been supplying the CasPro to China.
[50] Further, the plaintiffs argue that the Revenue Representation and the Product Representation were false because the Second China Contract (which included sales for the BPro G3) was not a genuine contract and it was instead a sham contract. Specifically, the plaintiffs argue that the Second China Contract was not entered into with the intention of being performed, but was instead entered into for the defendants to make use of the forecasted revenue thereunder to fraudulently solicit investments from potential investors. In this regard, the plaintiffs rely on the following:
[51] With regard to the Second China Contract, the plaintiffs deny that the defendants informed them of the possibility that Healthstats China would not be able to fulfil its obligations under this contract. The plaintiffs assert that, on the contrary, the defendants had specifically represented to the plaintiffs (in, among other things, the Executive Summary) that the revenue under the two China Contracts was “booked” and that advance orders thereunder had been “secured”.
The fraudulence or negligence of the representations
[52] The plaintiffs aver that the defendants knew, or must have known, that the Representations were false as the defendants did not have any reasonable grounds to believe that they were true. In particular, the plaintiffs rely on the following:
(a) At the time the Representations were made, Dr Ting was the executive chairman and Mr Chua was the chief technology officer of Healthstats International. Both defendants, therefore, had intimate knowledge of Healthstats International’s day-to-day affairs and knew, or must have known, that the Representations were false.
(c) Healthstats International did not have CFDA approval for the BPro G2. It also did not submit any “change notification” to the CFDA in respect of the changes from the BPro G1 to the BPro G2. Therefore, Healthstats International did not have the necessary regulatory approval to sell or distribute the BPro G2 in China.
(d) The Second China Contract included revenue for 210,000 units of the BPro G3 devices which amounted to S$21m. This was not feasible given that Healthstats International did not even have a working prototype of the BPro G3 at the time the Second China Contract was entered into.
The plaintiffs’ reliance on the representations and damage suffered
(1) Investment in Healthstats International
[53] The plaintiffs assert that they were specifically induced by the Representations to invest in Healthstats International.
[54] The plaintiffs allege that Mr Yong acted in reliance on the Representations in executing the Letter of Intent pursuant to which the Uncharted Group confirmed its intention to purchase shares in Healthstats International, for a purchase price to be calculated based on the S$50m Valuation of Healthstats International.
[55] Further, the plaintiffs claim that, induced by the Representations, Ms Hwang (through Medivice) had subscribed for the Subscription Shares under the Subscription Agreement on 12 August 2016 at a value which was higher than what a buyer would have paid. On this basis, the plaintiffs allege that they had suffered loss and damage by investing in Healthstats International under the terms of the Subscription Agreement.
[56] According to the plaintiffs, their investment in Healthstats International was based on the S$50m Valuation, which was put forward by the defendants when they were soliciting the Uncharted Group’s investment in Healthstats International. The S$50m Valuation was based on, among other things, the “booked” revenue under the two China Contracts. In addition, the defendants had specifically relied on the two China Contracts and the purported revenue derived therefrom (in, among other things, the Executive Summary) to demonstrate to the plaintiffs that Healthstats International’s business would improve from the purported profits from the two China Contracts. Healthstats International’s ability to perform the two China Contracts was contingent on it having the necessary regulatory approvals in respect of all its devices, and on it having a working prototype of the BPro G3.
(2) Loans to Healthstats International
[57] The plaintiffs also claim that, induced by the Representations, Mr Yong and Ms Hwang agreed to make the Loans amounting to S$2.5m (as set out at [40] above) to Healthstats International. The plaintiffs allege that the circumstances surrounding each loan were as follows:
(a) At a meeting in January 2016, Dr Ting indicated to Mr Yong and Ms Hwang that Healthstats International needed working capital urgently and would not last beyond the Lunar New Year without fresh funds. Dr Ting pleaded with them to loan S$1m to Healthstats International urgently, pending the outcome of Uncharted Holdings’ due diligence exercise, and proposed that this sum be structured as a convertible note or bond subject to Healthstats International’s shareholders’ approval. Acting in reliance on the Representations, Mr Yong and Ms Hwang agreed to loan S$1m to Healthstats International on this basis. Ms Hwang transferred this sum to Healthstats International on or around 20 January 2016.
(b) Pending the final outcome of Uncharted Holdings’ due diligence exercise, in early April 2016, Dr Ting (through Mr Soh) requested Mr Yong and Ms Hwang to extend a further loan to Healthstats International to cover its expenses for April 2016. Acting in reliance on the Representations, they agreed to extend a further loan of S$500,000 with arrangements for this sum to be treated as a convertible note.
(c) Sometime in June and July 2016, acting in reliance on the Representations, Mr Yong and/or Ms Hwang agreed to loan a further S$1m to Healthstats International pursuant to Dr Ting’s requests. S$500,000 of this sum was transferred on 10 June 2016 and the remaining S$500,000 was transferred on 26 July 2016 (see [40] above).
Unlawful means conspiracy
[59] The plaintiffs allege that Dr Ting and Mr Chua were in a conspiracy to do unlawful acts to them. Pursuant to and in furtherance of this conspiracy, the defendants made the Representations (as outlined at [45]–[46] above).
[60] The plaintiffs contend that, by reason of the conspiracy, they have suffered loss and damage, and that the defendants are jointly and severally liable to them in damages for the conspiracy.
The remedy sought
[61] The plaintiffs seek damages at common law for the defendants’ fraudulent or negligent misrepresentation. Alternatively, they claim damages for misrepresentation pursuant to s 2 of the Misrepresentation Act. With regard to the alleged unlawful means conspiracy, the plaintiffs seek a declaration that the defendants participated in a conspiracy to injure them by unlawful means, as well as damages for conspiracy.
[62] The plaintiffs engaged an expert witness, Ms Grace Lui Kit Ying (“Ms Lui”), to perform an indicative share valuation on Healthstats International as at 31 August 2016. Ms Lui considered two possible valuation methods: the Discounted Cash Flow method and the Guideline Public Company method. Applying the former method, Ms Lui assessed the estimated market value of the equity in Healthstats International, without the two China Contracts, to be S$0. On this basis, the plaintiffs argue that they paid S$5m under the Subscription Agreement to subscribe for shares in Healthstats International that were effectively worthless. Therefore, they claim damages of S$5m.
The defendants’ case
[63] The defendants’ position is that both Mr Yong and Ms Hwang were sophisticated, savvy and well-advised investors who were experienced in investing in global companies which operated businesses in various industries. According to the defendants, Mr Yong had initiated the discussions and the proposal to invest in Healthstats International.
[64] The defendants deny that the alleged Representations were made. They argue that the representations that they did make to the plaintiffs were true in substance and in fact. They deny that the Representations, or any other representations made by them, were made with the intention of inducing the plaintiffs to invest in Healthstats International. Further, they deny that the plaintiffs were induced by the Representations to invest in Healthstats International.
The representations made by the defendants
[65] With regard to the Regulatory Representation, the defendants deny that they made this alleged representation and contend that nothing in the evidence supports this allegation. With regard to the Revenue Representation, the defendants do not deny that they represented to the plaintiffs that S$18m of sales had been booked for 2016 and S$38.2m of sales had been booked for 2017, but they emphasise that these were no more than revenue forecasts and there was no warranty or confirmation of any numbers. With regard to the Product Representation, the defendants accept that they told Mr Yong in November 2015 that Healthstats International was to launch the BPro G3 in the second quarter of 2016. However, they contend that this was no more than a target date to be worked towards.
[66] The defendants do not dispute that meetings were held between Dr Ting, Mr Chua and Mr Yong between October 2015 and January 2016. However, the defendants’ account of what transpired during these meetings diverges from the plaintiff’s account of the October 2015 Meeting, the 21 November 2015 Meeting and the January–February 2016 Meetings described at [46] above:
(a) In October or November 2015, during one of Mr Yong’s visits to Dr Ting’s medical clinic, he asked Dr Ting how the blood pressure monitoring business was doing. Dr Ting informed Mr Yong that the business was in need of funds to scale up development and production. Mr Yong then informed Dr Ting that he had a Hong Kong-listed vehicle (ie, Success Dragon) which could play a pivotal role in unlocking funds for Healthstats International. As Mr Yong was interested in finding out more about Healthstats International’s business and inventions, Dr Ting invited him to Healthstats International’s office where its business could be further explained to him.
(b) In or around October or November 2015, Mr Yong attended at Healthstats International’s office together with Mr Soh, Mr Salas (whom Mr Yong introduced as the chairman and CEO of Success Dragon), Mr Goh and Mr Ron Tan (whom Mr Yong introduced as a shareholder of Success Dragon and his nominee). The defendants were present at this meeting. It was after this meeting that subsequent meetings and conversations relating to Healthstats International took place between Mr Yong and Dr Ting, with Mr Chua participating at times.
(c) In the course of these meetings and conversations, the defendants shared factual representations relating to Healthstats International’s business with Mr Yong and his team. For example, these representations related to Healthstats International and its subsidiaries (including Healthstats China), the BPro and CasPro devices, the development of a prototype of the BPro G3, and the two China Contracts with Healthstats China. The defendants contend that these representations were true.
The defendants had reasonable grounds to believe that their representations were true
[67] The defendants contend that at all material times, they had reasonable grounds to believe and did believe that all the representations they made to the plaintiffs were true.
[68] In particular, with regard to each of the Representations alleged by the plaintiffs, the defendants argue as follows:
(a) Regulatory Representation:
(i) With regard to the BPro devices: Given that the changes from the BPro G1 to the BPro G2 did not affect the core function of the latter, Healthstats International’s regulatory and technical team determined that fresh submissions for regulatory approval were not yet required for the then BPro G2 prototype. In any event, prior to obtaining FDA approval, the BPro G2 was never sold and was only used in clinical trials.
(ii) With regard to the CasPro devices: No fabrication of clinical trial data took place and these clinical trials were in compliance with China’s regulatory standards.
(iii) In any event, any supply of the BPro and CasPro devices prior to obtaining the CFDA’s approval was to the People’s Liberation Army Air Force, which did not require CFDA approval.
(b) Revenue Representation: Under the Second China Contract, Healthstats International was to make sales of S$18m in 2016 and S$38.2m in 2017 to Healthstats China. Shortly after the two China Contracts were signed (ie, 13 August 2015 and 26 October 2015), Winsan was suspended from trading on the Shanghai Stock Exchange. According to the defendants, Healthstats International’s shareholders were informed of the suspension at an annual general meeting on 4 December 2015, and were told that there was a possibility that Healthstats China would not be able to fulfil its obligations under the two China Contracts. However, Winsan’s suspension was lifted on or around 8 December 2015 and Winsan announced on 9 December 2015 that it had been awarded a further tender to provide remote blood pressure monitoring. The defendants deny that the Second China Contract was a sham contract.
(c) Product Representation: The defendants contend that Mr Soh’s change of Healthstats International’s business model from a sales-based model to a service-based model meant that the funding and focus previously afforded to the BPro G3 would be stopped and shifted to the BPro G2. This left the development of the BPro G3 without the necessary funding and focus.
Whether the plaintiffs relied on the alleged representations
[69] Further or in the alternative, the defendants deny that the plaintiffs were induced by any representations to invest in Healthstats International. The defendants emphasise that Mr Yong and Ms Hwang were at all times well-advised by a team of professional advisors, including Baker & McKenzie, DLA Piper and KPMG. They had appointed these professional advisors to carry out due diligence and advise them on various aspects of their investment in Healthstats International. The due diligence exercise was wide-ranging, including intellectual property, licensing and approvals, contracts and taxation. Mr Yong testified that he had spent about S$300,000 in engaging these professional advisors. According to the defendants, Dr Ting met Mr Yong on various occasions between March and April 2016 and was informed by Mr Yong that the due diligence carried out by these professional advisors on Healthstats International was satisfactory. Further, the Subscription Agreement was prepared by Baker & McKenzie, and Mr Yong and/or Ms Hwang were well-advised on its terms. In addition, in February 2016, while the Sale and Purchase Agreement between Uncharted Holdings and the selling shareholders of Healthstats International was still pending completion, Dr Ting agreed (at Mr Yong’s request) to formally appoint Mr Soh as the CEO of Healthstats International in March 2016, to replace Dr Ting (see [30]–[31] above).
[71] The defendants further contend that it was Mr Yong who proposed the disbursements of the Loans to Healthstats International. According to the defendants, Mr Yong proposed the acquisition of a majority interest in Healthstats International in the following manner:
(a) Mr Yong would acquire shares in Healthstats International through companies under his or Ms Hwang’s management and control. These companies included the Uncharted Group, Uncharted Holdings and Medivice.
(b) Concurrently, Mr Yong would disburse the Loans to Healthstats International, which would thereafter (at the option of Mr Yong or Ms Hwang) be set off against the consideration to be paid for the Subscription Shares.
[72] The defendants’ understanding is that Uncharted Holdings did not complete the Sale and Purchase Agreement, and Ms Hwang did not exercise the Call Option under the Subscription Agreement for the Option Shares, because of financial difficulties faced by Mr Yong. These financial difficulties arose out of unforeseen major regulatory changes in Vietnam which led to a sharp decline in Success Dragon’s share price. This adversely affected Mr Yong’s ability to raise funds to complete the Sale and Purchase Agreement and the subscription for the Option Shares. As a result of Uncharted Holdings’ failure to complete the Sale and Purchase Agreement and Ms Hwang’s failure to exercise the Call Option, Mr Yong failed to acquire a majority shareholding in Healthstats International and the Proposed Share Swap was not completed.
[73] Consequently, the defendants argue that even if the alleged Representations were made, the plaintiffs did not rely on them:
(a) With regard to the Regulatory Representation, the plaintiffs could not have relied on this alleged representation in entering into the Subscription Agreement in view of the due diligence report produced by DLA Piper. Further, Mr Marcus Chua had expressly disclosed the exact number of regulatory approvals which Healthstats International had obtained at the material time.
(b) With regard to the Revenue Representation, Mr Yong never placed any reliance on the Second China Contract being performed. The S$50m Valuation was Mr Yong’s valuation, and Mr Yong candidly admitted that he was not concerned about the Second China Contract but instead focused on the First China Contract.
(c) With regard to the Product Representation, the Subscription Agreement was signed in August 2016, well after the second quarter of 2016 when the BPro G3 was targeted to be launched. Hence, by the time the Subscription Agreement was signed, the plaintiffs would have known that the BPro G3 had not yet been launched. Therefore, the plaintiffs never relied upon the alleged Product Representation when they invested in Healthstats International.
Unlawful means conspiracy
[74] The defendants deny that there was an unlawful means conspiracy to injure the plaintiffs. They reiterate that they did not make any false representations to the plaintiffs. Further, they deny that they had any intention to cause injury to the plaintiffs.
The interlocutory applications
[75] Apart from the main Suit, four summonses were heard: an application for specific discovery (Summons No 1975 of 2021 (“SUM 1975”)); an application for third party discovery (Summons No 1976 of 2021 (“SUM 1976”)); an application for declaratory relief (Summons No 1688 of 2021 (“SUM 1688”)); and an application for adjournment (Summons No 2330 of 2021 (“SUM 2330”)).
Applications for discovery (SUM 1975 and SUM 1976)
[76] SUM 1975 was an application for specific discovery in which the defendants sought the following categories of documents from the plaintiffs:
(a) the audited financial statements and/or management accounts of Uncharted Holdings from 2015 to April 2016, evidencing that Uncharted Holdings had the means to purchase 17,113,532 of Healthstats International’s shares for the sum of $26,970,926.43;
(b) the bank statements of Uncharted Holdings from January to May 2016, evidencing that it had funds to purchase 17,113,532 of Healthstats International’s shares for the sum of $26,970,926.43; that Uncharted Holdings had the ability to acquire shares in Healthstats International; and proof of payment to DLA Piper and Baker & McKenzie for their due diligence reports;
(c) in the event that Uncharted Holdings did not pay for DLA Piper’s and Baker & McKenzie’s due diligence reports, documents evidencing who paid for these reports and evidence of such payments for the period from January to May 2016; and
(d) the legal documents and contracts handed over by Winsan to Healthstats China, which were referred to in the Winsan Handover Checklist exhibited in Ms Li’s affidavit of evidence-in-chief.
[77] On the first day of trial, I granted leave for SUM 1975 to be kept in abeyance pending Mr Yong’s testimony at the trial, as sought by the defendants’ counsel.
Application for declaratory relief under O 33 r 2 (SUM 1688)
[79] SUM 1688 was Dr Ting’s application under O 33 r 2 of the Rules of Court (2014 Rev Ed) for declarations that Mr Yong and Medivice were not entitled to rely on s 2(1) of the Misrepresentation Act; that Mr Yong and Medivice could not maintain a claim for misrepresentation against the defendants because no detriment and no inducement had been shown; and that the plaintiffs’ conspiracy claim be dismissed.
[80] With regard to s 2(1) of the Misrepresentation Act, the defendants argued that only Ms Hwang can rely on this provision because it requires that “a person has entered into a contract after a misrepresentation has been made to him by another party thereto” [emphasis added]. As the Subscription Agreement was entered into between Ms Hwang and Healthstats International, the defendants contended that neither Mr Yong nor Medivice can rely on s 2(1).
[81] With regard to misrepresentation generally, the defendants similarly argued that only Ms Hwang could be a plaintiff in this Suit:
(a) First, the defendants contended that Medivice cannot be a plaintiff because the Subscription Agreement was entered into between Healthstats International and Ms Hwang, in her own name. Medivice was allocated the Subscription Shares as Ms Hwang’s nominee. Medivice did not make any investment in Healthstats International. Further, given that Medivice was incorporated on 17 February 2016, after the alleged Representations were made by the defendants, Medivice could not have relied upon or been induced by the Representations.
(b) Next, the defendants argued that it is logically inconsistent for both Mr Yong and Ms Hwang to be plaintiffs. Clause 16 of the Subscription Agreement provides that, save for any nominee nominated by Ms Hwang to hold the Subscription Shares, no third party would have any rights thereunder. However, the plaintiffs pleaded that Ms Hwang entered into the Subscription Agreement “on her own behalf and/or on behalf of Mark [ie, Mr Yong]”. If Ms Hwang entered into the Subscription Agreement on her own behalf, Mr Yong would have no rights under the Subscription Agreement and cannot be a plaintiff. If, instead, Ms Hwang entered into the Subscription Agreement on Mr Yong’s behalf, then Ms Hwang would merely have been acting as an agent for Mr Yong and cannot be a plaintiff.
Application for adjournment (SUM 2330)
[83] SUM 2330 was the plaintiffs’ application for the adjournment of the trial after the plaintiffs’ witnesses, save for Mr Yong and Ms Hwang, had given their evidence. Mr Yong and Ms Hwang had intended to travel from Zimbabwe to Singapore via a transit in Dubai in late April 2021, to attend the trial for this Suit. However, upon their arrival in the Dubai International Airport, Mr Yong was detained by the Dubai authorities as there was a notice issued by INTERPOL against him in respect of certain debts that he was alleged to have had in South Korea. He was taken to a holding facility situated within the Dubai International Airport and was still in custody when SUM 2330 was heard on 20 May 2021.
[85] The defendants did not contest the adjournment in respect of Mr Yong but submitted that no adjournment should be granted in respect of Ms Hwang.
[86] After considering the parties’ submissions, I allowed the plaintiffs’ application for the adjournment of the trial and for both Mr Yong and Ms Hwang to give their evidence in the second tranche of the trial. Adopting a practical approach, even if no adjournment was granted for Ms Hwang, an adjournment would need to be granted for Mr Yong. Bearing in mind Mr Yong’s and Ms Hwang’s predicament in Dubai and her understandable anxiety and distress at the situation in which she and her husband had found themselves, I was prepared to accommodate their application for adjournment as a matter of fairness.
Issues to be determined
[87] The main issues that arise for my determination are as follows:
[88] I shall consider each of these issues in turn.
My decision
Misrepresentation
The applicable law
[89] It is trite that to ascertain whether an operative misrepresentation has been made, there must be a false statement of existing or past fact made by one party (ie, the representor) before or at the time of making the contract, to the other party (ie, the representee), and the representee must have been induced to enter into the contract (see Lim Koon Park and another v Yap Jin Meng Bryan and another [2013] 4 SLR 150 at [38]).
[90] Where fraudulent misrepresentation is alleged, the plaintiff must prove five elements (see Panatron Pte Ltd and another v Lee Cheow Lee and another [2001] 2 SLR(R) 435 (“Panatron”) at [14], recently applied in Ma Hongjin v Sim Eng Tong [2021] SGHC 84 (“Ma Hongjin”) at [19]):
[91] Where negligent misrepresentation is alleged, the plaintiff must prove the following five elements (see IM Skaugen SE and another v MAN Diesel & Turbo SE and another [2018] SGHC 123 (“IM Skaugen”) at [121]; Ma Hongjin at [20]):
[92] The elements common to both fraudulent and negligent misrepresentation are: (a) that the representor made a false representation of fact (the “Representation Requirement”); and (b) that there was inducement and reliance by the representee (the “Reliance Requirement”) (IM Skaugen at [122]–[123]). I shall consider the Representation Requirement and the Reliance Requirement in turn before going on to address the other elements of fraudulent and negligent misrepresentation.
Whether the Representation Requirement is satisfied
(1) To whom were the Representations made?
[93] My analysis of whether the Representations were made to the plaintiffs shall proceed from two perspectives.
[94] The first perspective is: did the defendants make the Representations directly to Ms Hwang? This perspective is a technical one. Ms Hwang entered into the Subscription Agreement with Healthstats International on 12 August 2016. Since Ms Hwang is the only plaintiff that was a party to this agreement, the inquiry in this regard should strictly focus on whether the misrepresentations were made to her. This is especially the case for the plaintiffs’ claim under s 2(1) of the Misrepresentation Act: as I have stated earlier (see [80] above), the defendants argue that only Ms Hwang can rely on this provision because it requires that “a person has entered into a contract after a misrepresentation has been made to him by another party thereto” [emphasis added]. On this view, the proper inquiry concerns whether the Representations were made by the defendants to Ms Hwang, and not to the other plaintiffs in this action who are not party to the Subscription Agreement, viz, Mr Yong and Medivice.
[95] On this perspective, it follows that the parties’ extensive submissions on whether the Representations were made to Mr Yong would seem to be irrelevant.
[96] However, Ms Hwang’s own case is that the Representations were not made to her by the defendants directly. Indeed, Ms Hwang insisted that it was Mr Yong who told her that the Representations were made by the defendants before she signed the Subscription Agreement. She claimed that her involvement in the investment in Healthstats International through the Subscription Agreement was minimal. She also claimed that this was because Mr Yong is a savvy businessman, so she left the details of the Healthstats International investment and the running of its business to Mr Yong. Succinctly put, she relied almost solely on Mr Yong for this investment. Ms Hwang came to the conclusion that Dr Ting had deceived her and Mr Yong when Mr Yong told her about the deceit sometime in 2018 or 2019. She could not remember if she had even asked whether Healthstats International was making profits from 2015 to 2016, ie, around the period in which she entered into the Subscription Agreement. She also did not ask Dr Ting whether Healthstats International was profitable. Ms Hwang said she did not attend any of the business meetings in the offices of Healthstats International in 2015 and 2016.
[97] Having considered Ms Hwang’s evidence, I find, on a balance of probabilities, that she was merely Mr Yong’s nominee in the Healthstats International investment. They, as husband and wife, did not differentiate between their respective assets, and Mr Yong was the brains behind the Subscription Agreement.
[98] I now consider the second perspective: were the Representations made by the defendants to Ms Hwang through Mr Yong? Hence, my analysis below will focus on whether the Representations were made to Mr Yong on the basis that he would then communicate the Representations to Ms Hwang.
(2) Whether the Regulatory Representation was made
[99] As I have noted at [65] above, the defendants denied making the Regulatory Representation, ie, that all of Healthstats International’s products had obtained the necessary regulatory approvals from the HSA, the FDA and the CE.
[100] On the other hand, the plaintiffs allege that the Regulatory Representation was made and they relied on the following evidence:
(a) Mr Yong testified that at the October 2015 Meeting, Dr Ting stated that the BPro and the CasPro had already obtained FDA approval and would easily obtain worldwide approval.
(b) Mr Yong further testified that at the 21 November 2015 Meeting, Dr Ting represented to him that the BPro G1 had been approved by regulatory authorities such as the FDA, the HSA, the CE and the CFDA. Dr Ting further represented that all of Healthstats International’s products (including the BPro G2) had obtained all the relevant regulatory approvals, including approvals from the HSA, the CE, the FDA and the CFDA.
(c) It was undisputed that Dr Ting sent Mr Yong the Executive Summary after the 21 November 2015 Meeting. It was stated therein that the BPro technology was “now well accepted by medical communities around the world”, that Healthstats International had achieved “USA FDA and European CE MDD mark approvals”.
(d) Mr Yong testified that at the 5 January 2016 Meeting, Dr Ting repeated that the BPro devices had received all necessary regulatory approvals, including FDA, CE and HSA approvals.
(e) Mr Soh testified that when he was appointed as the CEO of Healthstats International in March 2016, he understood from the defendants that the BPro G2 had already obtained the required regulatory approval. After Mr Soh found out from DLA Piper’s report (in March 2016) that only the BPro G1 had FDA approval, the defendants had explained to him that this regulatory approval also covered the BPro G2 as it was a predicate device and there were minimal changes from the BPro G1 to the BPro G2. Mr Soh said that he had no formal knowledge of the regulatory approval process and was not in any position to question or verify the accuracy of what the defendants represented to him. Therefore, he trusted what the defendants represented and accepted this at face value. However, Mr Soh admitted that he had not looked at the documents to satisfy himself that the BPro G2 had obtained the required regulatory approvals. Mr Soh said he only found out that a separate application for regulatory approval had to be made for the BPro G2 “towards the later part of the year of 2016”. Thereafter, he informed Mr Yong of this around August 2016.
[101] On the other hand, the defendants maintain that they never made the alleged Regulatory Representation. The defendants testified that, in January 2016, the BPro G2 was still in its prototype and testing stages. The development of the BPro G2 had to be conducted in planned stages, and it was only after all the stages (including clinical trials and a battery of tests, such as lab tests and safety tests) were completed that Healthstats International could have applied for regulatory approval for the BPro G2. Therefore, there was no way that the defendants would have represented to Mr Yong that the BPro G2 had already received FDA approval.
[102] The burden of proving that the defendants made the Regulatory Representation rests on the plaintiffs (see Trans-World (Aluminium) Ltd v Cornelder China (Singapore) [2003] 3 SLR(R) 501 at [29]; Ma Hongjin at [25]).
(A) The BPro G2
[103] The documentary evidence suggests that the defendants represented to Mr Yong that FDA approval was obtained for the BPro G2. The Executive Summary sent by Dr Ting to Mr Yong on 22 November 2015 is contemporaneous evidence that the defendants made the Regulatory Representation. The Executive Summary was prepared by Mr Marcus Chua in consultation with Mr Chua.
[104] There are two issues with regard to the Executive Summary. First, did the defendants refer to the BPro G2 in this document? Second, did the defendants refer to the final version of the BPro G2 in this document?
[105] With regard to the first issue, the Executive Summary did give the impression that FDA approval had been obtained in respect of the BPro G2.
[106] The first page of the Executive Summary states as follows:
[107] In cross-examination, Dr Ting stated that “Wireless Wearable Technology” referred to the BPro G2 and that the rest of the bullet point referred to the software that the BPro G2 used (“the BPro Soft”). Dr Ting claimed that the words “FDA approved” in that bullet point thus meant that FDA approval was obtained in respect of the BPro Soft, not the BPro G2. Dr Ting’s explanation does not comport with the plain meaning of that bullet point. The last part of that bullet point states that FDA approval was obtained for the “blood pressure monitoring device” [emphasis added]. Hence, the reference must be to the BPro G2 (ie, the device) and not to the BPro Soft (ie, the software).
[108] Moreover, Dr Ting also testified that the third bullet point under the same heading referred to the BPro Soft, and the plaintiffs’ counsel rightly pointed out that there was no reference to FDA approval in that bullet point. Reading this section in totality, I find that a person reading this bullet point would have the impression that the BPro G2 was approved by the FDA. Dr Ting also conceded that this was the case.
[109] Furthermore, on the same page of the Executive Summary, there is a graphic just below the bullet points under the heading of “Strong Technology Platform”. This graphic shows a watch-like device with a caption, “BPro® G2”, which I reproduce below:
Dr Ting similarly conceded that this graphic suggested that FDA approval had been obtained for the BPro G2.
[110] With regard to the second issue, the Executive Summary did give the impression that FDA approval had been obtained in respect of the final version of the BPro G2.
[111] In re-examination, Mr Chua explained that the graphic in the Executive Summary was simply to show what the final design of the BPro G2 would look like. The reference to a device having obtained FDA approval was to an earlier version of the BPro G2. Indeed, Mr Chua explained that there was an earlier prototype of the BPro G2 developed in 2013. In this prototype there was a detachable “cap” or “cradle” over the face of the BPro G1 (“the prototype BPro G2”). This cap had Bluetooth connectivity and a power source to transmit wireless data from the BPro Soft in the BPro G1 to the computer. Mr Chua’s testimony at trial in this regard is consistent with that in his affidavit of evidence-in-chief, wherein he described a prototype BPro G2 with an attached cap as a “cover” or “dongle” to house Bluetooth technology so as to transmit the data wirelessly. I reproduce the designs of this prototype here:
This prototype was made as a proof of concept for the BPro G2. Although this prototype BPro G2 was functional using the wireless Bluetooth technology, it was bulky and the design had to be greatly enhanced to make it aesthetically acceptable for the market.
[112] Importantly, this prototype version of the BPro G2 did not require FDA approval because it was not a major modification of the BPro G1, which already had FDA approval. Mr Chua considered this prototype BPro G2 as a milestone development. Nevertheless, there was a plan to integrate Bluetooth technology and a power source in the cap into the watch device of BPro G1 itself, rather than using a detachable cap, so that the final version of the BPro G2 would be a refined and elegant product. However, this final version of the BPro G2 would require FDA approval. I reproduce the design of the final version of the BPro G2 here:
[113] According to the defendants, notwithstanding the apparent content of the Executive Summary, they told the plaintiffs that: (a) the prototype version of the BPro G2, ie, with the attached cap, did not require FDA approval; and (b) the final version of the BPro G2 had not obtained FDA approval and would require a fresh submission. Indeed, Dr Ting insisted that he told Mr Yong orally that the final version of the BPro G2 did not have FDA approval in “many discussions”. More specifically, according to Dr Ting and Mr Chua, there was a meeting on 27 November 2015 which they attended with Mr Yong, Mr Soh, Mr Salas, Mr Goh and Mr Ron Tan. Mr Chua claimed that Dr Ting referred to the same graphic of the final version of BPro G2 in the Executive Summary as the physical device of the final version of the BPro G2 was not available. In relation to this graphic, Dr Ting informed Mr Yong and his team that FDA approval was required in respect of the final version of the BPro G2 but had yet to be obtained. Mr Chua explained that, in this meeting, he also showed Mr Yong and his team a physical prototype BPro G2, ie, the BPro G1 with the detachable cap over it. This version of the BPro G2 did not require FDA approval as the BPro Soft and BPro G1 already had FDA approval. Hence, according to the defendants, the content of the Regulatory Representation cannot be accurately described by solely looking at what is shown in the Executive Summary.
[114] Dr Ting’s and Mr Chua’s narratives are plausible. They accord with the “BPro BT Change Requests Decision” document dated 31 December 2015 (“the Internal Justification Document”), which was signed by Mr Chua. This document shows that the Research and Development (“R&D”) department of Healthstats International decided, in consultation with its FDA application expert, Mr Stephen Gorski (“Mr Gorski”), that the prototype BPro G2 (ie, the BPro G1 with the attached cap) did not require a fresh submission for FDA approval. Dr Ting and Mr Chua explained that all that was needed was to prepare this Internal Justification Document in preparation for a possible unannounced audit by the FDA. Their narratives also accord with their affidavits filed in Originating Summons No 666 of 2018 (“OS 666”), where they maintained their position in 2018 that there was no need for a fresh submission for FDA approval for the prototype BPro G2. However, Mr Chua opined that FDA approval was required for the final version of the BPro G2 that integrated Bluetooth into the device itself. Dr Ting also explained that FDA approval was needed because it would be difficult to market the final version of the BPro G2 in the UK and Australia, as these countries had stringent data protection regimes. Hence, it is plausible that the defendants had informed Mr Yong and his team that the prototype BPro G2 did not need FDA approval, but the final product did require FDA approval. This would have caused some confusion as to whether the BPro G2 requires FDA approval, since the issue of whether FDA approval is required depends on whether the reference is to the prototype BPro G2 (ie, the BPro G1 with the attached cap) or the final version of BPro G2.

The judgment continues past this page. Read the rest at eLitigation.

Yong Khong Yoong Mark and others v Ting Choon Meng and another

Laws this judgment relies on

Grounds of decision

Introduction

The parties

Background to the dispute

Healthstats International’s clinical devices

The two contracts with Healthstats China

The plaintiffs’ involvement with Healthstats International

The aborted purchase of Healthstats International’s shares by Uncharted Holdings

The loans to Healthstats International

The Subscription Agreement

The parties’ cases

The plaintiffs’ case

The alleged representations

The falsity of the representations

The fraudulence or negligence of the representations

The plaintiffs’ reliance on the representations and damage suffered

(1) Investment in Healthstats International

(2) Loans to Healthstats International

Unlawful means conspiracy

The remedy sought

The defendants’ case

The representations made by the defendants

The defendants had reasonable grounds to believe that their representations were true

Whether the plaintiffs relied on the alleged representations

Unlawful means conspiracy

The interlocutory applications

Applications for discovery (SUM 1975 and SUM 1976)

Application for declaratory relief under O 33 r 2 (SUM 1688)

Application for adjournment (SUM 2330)

Issues to be determined

My decision

Misrepresentation

The applicable law

Whether the Representation Requirement is satisfied

(1) To whom were the Representations made?

(2) Whether the Regulatory Representation was made

(A) The BPro G2