General Division of the High Court · Decided 19 October 2026

McNaught, David Holterman v Confetti Fine Foods Pte Ltd

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[2026] SGHC 220Case no. Originating Claim No 902 of 2024

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Laws this judgment relies on

Misrepresentation Act 1967

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Official text from eLitigation

Low Siew Ling JC:
Introduction
[1] The Claimant, Mr David Holterman McNaught (“Mr McNaught”), invested US$1 million with the Defendant, Confetti Fine Foods Pte Ltd (“Confetti”) in 2022, pursuant to a Simple Agreement for Future Equity (“SAFE Note”). In HC/OC 902/2024 (“OC 902”), Mr McNaught seeks the rescission of this SAFE Note and claims the return of his US$1 million, as well as other losses to be assessed, as a result of what he alleges to be fraudulent or negligent misrepresentations made by Confetti’s main founder and Chief Executive Officer (“CEO”), Ms Betty Lu (“Ms Lu”).
[2] Having considered the evidence, I dismiss Mr McNaught’s claim as I find that he has failed to prove that he relied on the alleged misrepresentations made by Ms Lu, to the extent that they implied actionable statements of fact. I set out my reasons in detail below.
Facts
The parties
[3] Mr McNaught is a naval architect by training and is employed as a consultant in the energy sector.
[4] Confetti is a start-up company incorporated in Singapore on 10 July 2018, with its primary business being the manufacture, marketing and sale of snacks, specifically snacks produced by “upcycling” imperfect produce and crop surpluses which may otherwise be unsellable.
[5] Ms Lu is Confetti’s main founder and was its sole shareholder, director and CEO at all material times. Mr Alexander de Wit (“Mr de Wit”), a former management consultant with experience in other start-ups and venture capital, was also involved in the founding of Confetti, and currently sits on the Advisory Board for Confetti Snacks Inc (“Confetti US”), an affiliated company incorporated in the United States (“US”).
[6] Ms Lu came to know Mr McNaught on or around the start of 2020. Their friendship blossomed, and they began exchanging personal messages regularly. In February 2020, Ms Lu began updating Mr McNaught about her efforts in starting and growing Confetti’s business. She also shared with Mr McNaught her travels and meetings with various business leaders, as well as positive media coverage about Confetti’s business. Their friendship continued to develop after the COVID-19 pandemic struck in March 2020, and they grew to be close friends who would regularly update each other about their lives.
Confetti’s beginnings and growth
[7] As Confetti was a start-up, it sought to participate in accelerator programmes to gain exposure and generate investor interest. These were short-term programmes typically organised by large organisations or institutional investors to offer start-ups access to funding, mentorship, training and other opportunities. To participate, start-ups would typically go through a selection process. Confetti participated in a number of these accelerator programmes, including one hosted in Singapore by Big Idea Ventures, a large venture capital firm based in New York City.
[8] Confetti gradually gained media coverage and accolades and managed to secure distribution agreements with major grocery retailers in Singapore such as NTUC Fairprice and Cold Storage from 2019 to 2021. Confetti also received a grant from Innovate 360, Singapore’s first food accelerator with integrated facilities and venture capital support, and was appointed a Startup EntrePass Partner by Enterprise SG. After its local success, Confetti set its sights on the US market. In 2021, Confetti incorporated Confetti US, launched its products in the US and participated in various US trade shows.
[9] In 2022, Confetti was selected to participate in two major accelerator programmes in the US. These were significant as they were organised by large players in the snack industry with annual revenues in the billions, and Confetti received investment interest as a result of these programmes:
(a) At the start of 2022, Confetti was selected to participate in Food Foundry, an accelerator programme organised by Relish Works, the venture arm of Gordon Food Services, and 1871, a technology hub and private business incubator. Gordon Food Services was one of the largest food service players in the US. All participants in Food Foundry, including Confetti, received US$75,000 in venture capital funding.
(b) In early August 2022, Confetti was also invited to apply for Bimbo Open Door, an accelerator programme hosted by Grupo Bimbo, the largest bakery company in the world. After Confetti was selected to participate on 29 August 2022, Grupo Bimbo indicated its interest in investing in Confetti and reached out to Ms Lu for details as to Confetti’s fundraising efforts, including its intended valuation, sales and projection figures, and the identity of the lead investor.
[10] Confetti was also set to launch its products in the United Kingdom (“UK”) by the autumn of 2022 through a deal with a major bookstore chain.
Mr McNaught’s investments in Confetti
[11] Mr McNaught started to invest in Confetti in 2021. I begin by setting out the events surrounding Mr McNaught’s previous investments. While these did not form part of his claim in OC 902, they set the context leading up to his US$1 million investment which is the subject of the present dispute, and shed light on his state of mind at the time the alleged misrepresentations were made.
The 1st SAFE Note
[12] Sometime in November 2020, the erstwhile personal conversations between Mr McNaught and Ms Lu turned to the topic of investments and new career prospects. When Ms Lu raised the question of whether Mr McNaught would like to become “a stakeholder in Confetti”, he was open to the idea. Ms Lu followed up by sending Mr McNaught various publicity materials and information concerning Confetti, including a “teaser” directed at potential investors, on 28 November 2020. These materials indicated that Confetti was connected to, or had received investments from, various established institutional and industry investors.
[13] While Mr McNaught did not respond immediately, he informed Ms Lu on 7 December 2020 that he was looking to “restructure [his] existing investments” so as to channel his funds into Confetti. In turn, Ms Lu gave further details about Confetti’s fundraising efforts – that Confetti was looking at “1m at 6.7m post, 15% straight equity for Series A” (ie, Confetti was planning to raise US$1 million with a post-money equity valuation of US$6.7 million, in exchange for 15% of Confetti’s shares), and that they were aiming to “close by Q1” of 2021 (ie, that Confetti’s target was to raise US$1 million and close the funding round by the first quarter of 2021). Mr McNaught was receptive and spoke to Ms Lu to discuss further details.
[14] On 17 December 2020, Ms Lu informed Mr McNaught that investors were “considering how much shares to take now” and they would take some time to decide. Mr McNaught then indicated that he “[would] probably be good for 250-300kusd [sic], depending on what the others do and the final price, [due diligence] etc”. Ms Lu offered to introduce Mr McNaught to Mr Neil Fong (“Mr Fong”), an existing investor in Confetti with private equity experience.
[15] Mr McNaught spoke to Mr Fong on 20 December 2020 and was impressed by what Mr Fong shared. Thereafter, Ms Lu and Mr McNaught continued to go back and forth on the details of Mr McNaught’s proposed investment. Ms Lu indicated her plans for a “Series A” round (ie, an equity financing round) which “will be closed with a couple VCs [ie, venture capital investors], trusted advisory board members and [Mr McNaught]”.
[17] Ms Lu offered to link Mr McNaught up with Mr Christian Cadeo (“Mr Cadeo”) of Big Idea Ventures, the venture capital fund that had hosted one of the accelerator programmes that Confetti had participated in. Mr McNaught spoke with Mr Cadeo, together with two food scientists, on 13 February 2021. This conversation also inspired Mr McNaught’s confidence in Confetti’s business.
[18] On 14 February 2021, Ms Lu granted Mr McNaught access to a virtual data room which contained more information about Confetti’s performance and projected growth. After looking at the data, Mr McNaught remarked to Ms Lu that it was “quite impressive”. He sought further clarifications from Ms Lu about the “forecast extrapolations”, Confetti’s current liabilities, as well as convertible notes. He also had questions about the due diligence to be done, and admitted that he was “a bit of a newby [sic] to start up finance and never understood convertible notes”. Ms Lu explained to Mr McNaught that “SAFE notes is [sic] what [Confetti] did last round. Everyone converts in the series A to real shares”. For context, SAFE Notes are agreements which function similarly to convertible note agreements, in that they provide for conversion of the invested funds into shares upon the occurrence of specific trigger events, such as a successful equity fundraising round or an initial public offer (“IPO”). By her statement, Ms Lu meant that Confetti had previously issued SAFE Notes (as opposed to shares) to investors in return for their investments, and all SAFE Notes previously issued would be converted into shares in the equity financing round (ie, “Series A”).
[19] Towards the end of March 2021, Mr McNaught informed Ms Lu that he would be limiting his investment in Confetti to US$200,000 as some of his existing investments had not done well. He proceeded to sell some of his existing shares to invest in Confetti. However, no investment took place after this discussion as Mr McNaught did not receive any concrete updates from Ms Lu about the closing of the funding round.
[20] Between March and May 2021, Ms Lu continued to update Mr McNaught on Confetti’s fundraising efforts, including that they had leads as to investors, and “650k committed by angels [ie, individual angel investors] already”. However, Ms Lu was of the view that Confetti had not secured sufficient funding. Against this background, on 30 May 2021, Ms Lu asked if Mr McNaught could “do 300k if [he] came in three months later”. This was rejected by Mr McNaught who thought it was “too high” and “150-200k would be [his] limit”. Ms Lu then brought up that they agreed to an investment of US$200,000 and requested that they “stick to that”.
[21] On 6 June 2021, Ms Lu sent Mr McNaught a “Confidential Non-Binding Term Sheet” which indicated that Confetti was raising US$1 million in this fundraising round, and that Confetti’s post-money equity valuation would be US$6.7 million. Ms Lu followed up on 7 June 2021 to encourage Mr McNaught to invest quickly as the “round was subscribing fast”, suggesting that if Mr McNaught waited longer for the venture capital firms to complete their due diligence, the round may become oversubscribed resulting in Mr McNaught being unable to invest.
[22] When Mr McNaught exhibited reluctance and asked for more time, Ms Lu became displeased. She complained that they had previously agreed for Mr McNaught’s investment to be reduced from US$300,000 to US$200,000, and that she hoped that he would “hold up [his] end of the deal.”
[23] Mr McNaught pushed back on Ms Lu’s messages and pointed out that he had been ready to invest in March 2021 but did not proceed as she “did not honour [her] words” that the funding round would “close on Q1 and left me sitting with 6 figure [sic] in cash”. Ms Lu apologised and explained that she took responsibility for “not closing on Q1 as expected, even though its [sic] beyond my control”. She stated that while she hoped Mr McNaught would invest in Confetti, “if you decide not to, [that’s] fine. I [won’t] be giving any pressure whatsoever”.
[24] Mr McNaught appreciated Ms Lu’s conciliatory message and acknowledged that “its [sic] difficult to predict the VCs and coordinate everything”. He characterised their earlier disagreement as a “miscommunication on timing” and made it clear that he still wanted to invest in Confetti but just needed time. Mr McNaught eventually signed the “Confidential Non-Binding Term Sheet” on 16 June 2021 and transferred a first tranche of US$50,000 to Confetti on 15 July 2021. Ms Lu then congratulated him on becoming a shareholder of Confetti. Nevertheless, on 16 August 2021, Ms Lu informed Mr McNaught that the round would not be an equity financing round, but a “safe 2” round with SAFE Notes issued instead of equity (“Series II Round”). She asked if Mr McNaught would be agreeable as the Series II Round could “launch faster” with SAFE Notes. Mr McNaught indicated that he did not know anything about SAFE Notes but that he trusted her “better judgement”.
[25] On 24 August 2021, Mr McNaught received a SAFE Note in respect of the US$50,000 transferred on 15 July 2021, which he executed and returned. This was cancelled and replaced with a fresh SAFE Note in respect of the earlier agreed sum of US$200,000 on or around 3 September 2021 (“1st SAFE Note”). Mr McNaught transferred the remaining US$150,000 to Confetti in December 2021. Both the initial SAFE Note in August 2021 and the 1st SAFE Note provided for a “post-money valuation cap” of US$6.7 million, which protected the shares that Mr McNaught would receive at the date of conversion from further dilution should Confetti’s valuation exceed the cap.
The 2nd SAFE Note
[26] In September 2021, Ms Lu added Mr McNaught to a WhatsApp group named “Confetti Yetis”, which included other Confetti investors, employees and advisors, as well as other WhatsApp groups with different stakeholders of Confetti. Through these chatgroups, Mr McNaught received various positive updates about Confetti’s progress. These included new investors, potential distribution expansion and attendance at trade shows, media exposure opportunities and Ms Lu’s plans for an IPO in December 2025.
[27] These positive developments further excited Mr McNaught, and he approached Ms Lu on 8 March 2022 to make a further investment in Confetti. On 15 March 2022, Ms Lu suggested that Mr McNaught invest US$250,000, as it would bring the total sum raised by Confetti to US$1.4 million. Pursuant to this, Mr McNaught executed another SAFE Note in the Series II Round for US$250,000 on 17 March 2022, and transferred this sum to Confetti on or around 23 March 2022 (“2nd SAFE Note”).
Meeting in London and the 3rd SAFE Note
[28] In April 2022, Ms Lu and Mr McNaught arranged to meet in London and spend a few days together. On 16 April 2022, they discussed Mr McNaught’s investments in Confetti, and Ms Lu showed him some materials about Confetti’s business. Over this period, Mr McNaught remained optimistic about Confetti’s prospects, and he executed another SAFE Note on 19 April 2022 for a further investment of US$250,000 in the Series II Round (“3rd SAFE Note”), transferring the sum to Confetti on or around 20 April 2022.
[29] The 1st, 2nd and 3rd SAFE Notes all contained an identical term that the conversion of the invested sums into shares would occur upon an “Equity Financing” event, which was in turn defined as “a bona fide transaction or series of transactions with the principal purpose of raising capital, pursuant to which [Confetti] issues and sells Preferred Stock at a fixed valuation, including but not limited to, a pre-money or post-money valuation”.
The 4th SAFE Note
[30] After the meeting in London, Ms Lu and Mr McNaught continued to speak regularly about Confetti’s prospects. As before, all the signs were upbeat – Ms Lu shared that there were more possible customers, and that she had plans to launch Confetti’s products in the UK in a few months.
[31] On 29 June 2022, Mr McNaught asked Ms Lu when Confetti’s next round of financing was scheduled as he had US$1 million in cash that he was interested in investing in Confetti given the existing market volatility. Ms Lu informed him that Confetti would be opening a new funding round for equity to be issued (“Series A Round”) later in the year, and welcomed his participation. Mr McNaught’s understanding was that the closing of a Series A Round would be a conversion event under the SAFE Notes, pursuant to which Mr McNaught would come to own shares in Confetti. Mr McNaught indicated that he “would definitely like to participate” as Confetti was “a great investment”.
[32] On 15 August 2022, Mr McNaught approached Ms Lu to ask about the status of the proposed Series A Round:
[33] In response, Ms Lu sent the following messages, which formed the subject of Mr McNaught’s misrepresentation claim:
(collectively, the “Representations”)
[34] On 31 August 2022, Mr McNaught indicated that he would be receiving US$1 million from his investment manager. As Mr McNaught wanted to send the funds to Confetti soon, he asked when Confetti could start accepting funds and when the shares could be issued. Ms Lu responded that Confetti was “already opening up Series A” and that shares would be issued “after the entire 7.5m round is done”.
[35] At this point, Mr McNaught was preparing to invest a total of US$2 million in Confetti for the Series A Round. He informed Ms Lu that he would transfer US$1 million first, as the remaining US$1 million was “tied up in shell shares which have gone south”. He planned to liquidate the shares once their prices had recovered and invest the proceeds in Confetti.
[36] On 6 September 2022, Mr McNaught asked further questions about the intended structure of his proposed US$1 million investment in Confetti:
[37] Mr McNaught gave instructions for the transfer of US$1 million to Confetti’s account on 9 September 2022, and asked Ms Lu to keep a lookout for the funds.
[38] On 12 September 2022, Ms Lu indicated that the funds had been received. Mr McNaught asked further questions about the closing of the Series A Round, and the impact of the Series A Round on his earlier investments. Ms Lu explained the mechanism for the Series A Round and clarified that there was no lead investor yet. I set out the exchange between Ms Lu and Mr McNaught in some detail here as their discussion is also relevant to Mr McNaught’s misrepresentation claim:
[39] Following the above exchange, on 13 September 2022, Mr McNaught sought “a SAFE Note or a receipt” for the US$1 million he had advanced to Confetti as his bank had raised concerns about the large transfer. Ms Lu conveyed that Confetti’s lawyer was preparing the document. Shortly after, Ms Lu sent a draft SAFE Note to Mr McNaught by WhatsApp, together with the following messages:
[40] However, unlike the 1st, 2nd and 3rd SAFE Notes, this draft SAFE Note did not contain any post-money valuation cap, with the consequence that Mr McNaught would be exposed to potential dilution.
[41] Mr McNaught executed and returned the SAFE Note without any complaint on 15 September 2022 (“4th SAFE Note”). It is this US$1 million investment, as recorded in the 4th SAFE Note, that forms the subject of Mr McNaught’s claim.
Investors’ Call on 15 November 2022
[42] On 15 November 2022, one day before Ms Lu was due to visit Mr McNaught at his home in Scotland, Ms Lu arranged for a virtual call with Confetti’s investors (“Investors’ Call”). The attendees included Mr McNaught and Mr Fong.
[43] During the call, which Ms Lu was late in attending, she shared a deck of slides titled “Confetti’s Board Meeting” which gave updates about Confetti’s business and fundraising efforts. The deck included details of Confetti’s successes as well as a slide titled “Fundraise Update & Current Series A” which reiterated Confetti’s plans to raise US$7.5 million in its first equity round to drive growth. The next slide, titled “Challenges & Key Asks”, requested investors’ assistance to introduce “strategic VCs or angels” for the Series A Round. The minutes circulated to all attendees after the call (including Mr McNaught) stated a revised timeline that “Series A [was] starting this month and aim[ed] to close by 28 February 2023”.
[44] Mr McNaught was unhappy with Ms Lu’s performance during the call and reached out to Mr Fong towards the end of the call to bemoan that the “numbers are all over the place” and that it was “a bit of a train wreck”. Notably, Mr McNaught did not raise any concerns about the delayed closing of the Series A Round, because he claimed he did not notice that it had been discussed at the time. Ultimately, Mr McNaught was much more concerned about Confetti’s valuation as “given the low revenues[, he] didn’t get any clarity on margin”. Mr Fong agreed and stressed that more pressure was needed, and offered to speak further on “how [they] can all work together to help the company succeed.” Mr McNaught agreed and stated that he had “invested 1.7musd and [was] definitely concerned following [the] meeting”. Mr McNaught and Mr Fong agreed to arrange for a call the following week to “align on where there are gaps and how [they] can influence closure”.
Ms Lu’s visit to Scotland
[45] Ms Lu arrived at Mr McNaught’s home in Scotland the next day, on 16 November 2022. She appeared emotionally distraught and apologised for her performance during the Investors’ Call, explaining that she was sick and under a lot of stress from the bullying and harassment she had been subjected to by Mr Fong and a former Confetti employee, who had allegedly hacked into her social media accounts.
[46] Ms Lu claimed that Mr Fong had disagreed with her on certain matters relating to Confetti, and that he had been micromanaging her and trying to sabotage her with false accusations. Mr McNaught was taken aback by these revelations, and eventually came to accept Ms Lu’s account of events. As such, when Mr Fong reached out in the early morning on 20 November 2022 pursuant to their earlier agreement for a call, Mr McNaught did not respond.
[47] A few hours later, Mr Fong sent an email to a group of Confetti’s investors, management and other advisors. In this email, Mr Fong stated that he was “no longer comfortable being a part of the board of advisors” as there were “a litany of governance, finance and HR issues” and “many promises made by a solo founder have simply not been fulfilled.”
[48] As Mr McNaught believed Ms Lu’s version of events, he suggested to Ms Lu that an email could be sent to set out Mr Fong’s misdeeds. Mr McNaught proceeded to send an email to Mr Fong, copied to the other Confetti investors, calling out what he perceived to be Mr Fong’s wrongdoing, including: (a) “disclosure […] of confidential information that may result in the loss of a major client”; (b) “micromanagement and bullying by [Mr Fong] of a female CEO”; (c) “providing continuous unsolicited advice and instruction regarding company affairs”; and (d) “insistence on special reports out-with the scope required for a small shareholder”. Mr McNaught then offered to buy over Mr Fong’s investment in Confetti. Mr McNaught emphasised that he fundamentally “believe[d] in the mission of Confetti”, that he had “taken a hands off approach with [his] investment”, and called on the other investors to “[support] Betty and [build] the reputation of Confetti”. Finally, as Mr McNaught was upset that Mr Fong had disclosed his email address to the other investors in his email to the group, Mr McNaught asked Mr Fong not to contact him henceforth, and proceeded to block Mr Fong on WhatsApp.
[49] Ms Lu replied in the same email chain on the same day. She stated that she was happy that Mr Fong was stepping away as his actions had compromised one of Confetti’s biggest retail accounts, and repeated Mr McNaught’s offer to buy him out. Mr Fong replied shortly after to accept Mr McNaught’s offer, and also to provide further details about Ms Lu’s abusive behaviour towards staff, her lack of accountability to investors, and his view that Confetti could not succeed.
[50] Ms Lu stayed with Mr McNaught in Scotland until 28 November 2022. After this visit, Mr McNaught agreed not only to buy over Mr Fong’s investment in Confetti, but also the investments of other disgruntled investors who wished to exit Confetti between November and early December 2022. The documentation to finalise Mr McNaught’s buyout of their investments for US$75,000 was finalised in a Novation Agreement signed on 3 February 2023. The Novation Agreement also contained post-money valuation caps for the investments.
[51] On 3 December 2022, when Ms Lu asked Mr McNaught to buy over another US$90,000 investment from an entity connected with Mr Fong, Mr McNaught expressed hesitation as he had other personal exigencies which required his time and money. Eventually, Ms Lu indicated that she would buy over this US$90,000 investment using Confetti’s “own funds”.
Failure to close Series A Round by December 2022
[52] Contrary to Ms Lu’s initial representation to Mr McNaught on 15 August 2022, the Series A Round did not close by December 2022. Without any further news about the closing, Mr McNaught reached out to Ms Lu on 18 January 2023 to ask for updates. He wished to know when the next round would take place or if Ms Lu could convert his US$1 million investment into shares at Confetti’s current valuation.
[53] To Mr McNaught’s surprise, Ms Lu informed him that the Series A Round had not opened yet, that it would only open in the first quarter of 2023, and that may take four to six months to close. Ms Lu also rebuffed Mr McNaught’s request for conversion on the basis that the US$1 million investment was for a SAFE Note. However, Mr McNaught pointed out to her that unlike his previous SAFE Notes, there was no valuation mentioned in the 4th SAFE Note.
[54] Ms Lu explained that despite the lack of a valuation cap, the 4th SAFE Note was still a SAFE Note that could only convert to equity upon the occurrence of an equity financing event, and depending on the valuation to be set by a lead investor. Mr McNaught appeared to accept Ms Lu’s explanation, observing that he was “probably 6 months too early with investing the 1m” and that he “thought the round would be done by now, so that’s why [he] did it early. But it’s ok.”
[55] It bears mentioning that Mr McNaught was under a great deal of personal stress during this period beginning in August 2022 due to the illness of both his parents, and the eventual passing of his mother on 17 February 2023.
[56] On 17 March 2023, Mr McNaught sent an email to Ms Lu to follow up on the status of his investments. In the email, Mr McNaught expressed unhappiness that the 4th SAFE Note was “not linked to a valuation” and pointed out that his investment had been “provided based on [Ms Lu’s] written guidance that the series A would close in December”. As the US$1 million was not appreciating and would remain subject to dilution, he repeated his demand for the US$1 million investment to be converted to Confetti shares at the current valuation.
[57] Ms Lu sent a long voice message in reply, explaining that Mr McNaught was “neither gaining nor losing valuation” as his US$1 million investment would be pegged to the valuation of the Series A Round which would be determined by the lead investor. She clarified that it was not possible for his investment to be converted first without the Series A Round closing as it would be unfair to the other investors. She also stated that fundraising can take a long time, and that Confetti was “gaining really good traction” and could not afford litigation risk (which might be occasioned if Confetti converted only Mr McNaught’s SAFE Note and not those of other investors). As such, she sought Mr McNaught’s support and promised that he would soon reap the benefit of his investments.
[58] Mr McNaught clarified on 18 March 2023 that he was referring to the fact that the 4th SAFE Note had no valuation cap and “wanted to know if it could be converted at the 6.7musd cap” stated in the earlier SAFE Notes. Nevertheless, he accepted that this might not have been possible and it appeared that his concerns were abated by Ms Lu’s explanation, as can be seen in the following message he sent to her:
[59] Ms Lu reached out to Mr McNaught on 1 April 2023 to arrange a phone call. During the conversation on 3 April 2023, Mr McNaught took issue with the fact that the Series A Round had not yet closed. He also objected to Confetti’s use of its “own funds” to buy over the US$90,000 investment linked to Mr Fong (see [51] above) as this was essentially using the funds put in by investors with no upside to them. Ms Lu eventually agreed to let Mr McNaught buy over a total of US$145,000 from Confetti’s existing investors, which included the US$90,000 investment.
[60] On 26 April 2023, Ms Lu sent two SAFE Notes to Mr McNaught to reflect the transfer of the investments: one for US$120,000 in the earlier Series I Round (including the US$90,000 investment) (“5th SAFE Note”) and another for US$25,000 in the Series II Round (“6th SAFE Note”). On 5 May 2023, Ms Lu pressured Mr McNaught to execute these SAFE Notes as any delay “might jeopardise [the] series A round and concern the new investors and VCs”. Mr McNaught agreed that he did not wish to “cause a crisis in Confetti or jeopardize series A” and explained that he would “try to exit next week so [he could] execute and send cash”. Mr McNaught proceeded to transfer the funds and execute the 5th and 6th SAFE Notes on 9 May 2023. Again, these SAFE Notes all contained post-money valuation caps.
[61] Mr McNaught’s patience finally ran out on 29 August 2023, when he confronted Ms Lu about his exposure, taking particular issue with the lack of a valuation cap in the 4th SAFE Note:
[62] Ms Lu sent a lengthy reply. In essence, she reemphasised that a SAFE Note was not a loan and had no expiry date. Rather, investments in a start-up were naturally risky, and would take time to mature. The terms of the SAFE Notes were legally binding, and they did not stipulate that an equity round had to happen. As such, “[i]f any investors back out and the round takes longer to complete, it is what it is”. Ms Lu stated that she would not be “doing anything above and beyond whatever was written and signed for in the contract”.
[63] In his messages to Ms Lu on 30 August 2023 and 1 September 2023, Mr McNaught reiterated his complaint that Confetti had essentially obtained “an interest free loan” of US$1 million from him under false pretences:
[64] Subsequent to this confrontation, Ms Lu blocked Mr McNaught on WhatsApp and also removed him from the “Confetti Yetis” chat group and other WhatsApp groups related to Confetti.
[65] Mr McNaught reached out to Mr de Wit with his concerns via email on 18 November 2023 but was met with a reply that Mr de Wit could do nothing to “address the perception gap” between Ms Lu and Mr McNaught.
[66] Mr McNaught commenced OC 902 on 15 November 2024. The trial was bifurcated with issues relating to damages to be heard in a subsequent tranche if Mr McNaught succeeded in establishing liability.
The parties’ cases
[67] Relying on Ms Lu’s Representations on 15 August 2022 to the effect that Confetti would raise a total of US$7.5 million and close its Series A Round by December 2022, Mr McNaught’s case is that Confetti is liable for fraudulent or negligent misrepresentation as: (a) the Representations were expressed in unequivocal, factual terms; (b) the Representations were material representations designed to get Mr McNaught to invest promptly, and Mr McNaught relied on the Representations and was induced to invest US$1 million in Confetti as a result; (c) the Representations were false; (d) Ms Lu made the Representations fraudulently or negligently, without honest belief in their truth; and (e) Mr McNaught suffered loss as a result.
[68] Confetti rests its defence on the following grounds: (a) the Representations were not actionable as they were statements of future intention or statements of opinion; (b) Mr McNaught could not have genuinely taken the view that Confetti was close to raising US$7.5 million on 15 August 2022 or at the time of execution of the 4th SAFE Note on 15 September 2022; (c) Mr McNaught was not induced by the Representations to make the investment, as he had already decided to invest the US$1 million in Confetti before the Representations were made; (d) any misrepresentation made on 15 August 2022 was corrected by Ms Lu’s subsequent communications to Mr McNaught on 12 September 2022 that no lead investor had been secured; (e) Ms Lu did not make the Representations fraudulently but had an honest belief in the truth of the Representations and reasonable grounds for such belief; (f) in respect of the claim for negligent misrepresentation, Confetti did not owe a duty of care to Mr McNaught and, even if it did, did not breach it; and (g) Mr McNaught did not suffer any loss or damage as he obtained precisely what he bargained for in the 4th SAFE Note, ie, the contractual right to receive Confetti shares upon an equity financing event.
Applicable law and issues
[69] The requirements for fraudulent misrepresentation and negligent misrepresentation are well-established. I set them out below to identify the issues which arise for my consideration.
[70] For fraudulent misrepresentation, the following requirements must be satisfied (Chan Pik Sun v Wan Hoe Keet (alias Wen Haojie) [2024] 1 SLR 893 (“Chan Pik Sun”) at [66]–[67]):
(a) There must be a false representation of fact made by words or conduct;
(b) The representation must have been made with the intention that it should be acted upon by the representee, or by a class of persons which includes the representee;
(c) The representee must have acted upon the false statement;
(d) The representee must have suffered damage by so doing; and
(e) The representation must be made with knowledge that it is false; it must be wilfully false, or at least made in the absence of any genuine belief that it is true. This includes a case where the statement is made “recklessly, careless whether it be true or false”.
[71] For negligent misrepresentation under the common law, the requirements are (Lim Bee Lan v Lee Juan Loong [2021] SGHC 234 at [70]):
[72] For misrepresentation under s 2(1) of the Misrepresentation Act 1967 (2020 Rev Ed) (“MA”), the representee (a) must have entered into a contract after (b) an actionable misrepresentation was made to him. The representee need not establish that the representor owed him a duty of care, and the burden of proof is on the representor to show that “he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true.” Although a requirement of reliance by or inducement of the representee is not found in the express statutory language, the law is clear that it remains a necessary element for a successful claim under s 2(1) of the MA. The MA does not alter the common law as to what constitutes an actionable misrepresentation, but simply reverses the burden of proof so that the party who made the misrepresentation has to show that he had reasonable grounds to believe that the fact represented was true: Tiong Swee Eng v Yeo Khee Siang [2015] 3 SLR 1141 at [19], citing Lim Koon Park v Yap Jin Meng Bryan [2013] 4 SLR 150 (“Lim Koon Park”) at [39]. Thus, an actionable misrepresentation under s 2(1) of the MA still requires that the representation induced the other party to enter into the contract: Lim Koon Park at [38]; Liberty Sky Investments Ltd v Goh Seng Heng [2020] 3 SLR 335 (“Liberty Sky”) at [33].
[73] It follows from the foregoing analysis that reliance is a common element required for all three causes of action which Mr McNaught mounts: Anita Hatta v Lee Siow Kiang Georgia [2020] 5 SLR 304 (“Anita Hatta”) at [55].
[74] Flowing from the above, the issues to be determined are:
(a) Issue 1: were the Representations false statements of fact, or mere statements of future intention or opinion;
(b) Issue 2: did Mr McNaught rely upon the Representations to invest US$1 million in Confetti;
(c) Issue 3: Ms Lu’s state of mind when making the Representations, ie, did she make the Representations with the intention that Mr McNaught would act upon them, and did she know or ought to know that the Representations were false, or make them without honest belief in their truth, or recklessly, not caring whether they were true or false;
(d) Issue 4: did Ms Lu owe a duty of care to Mr McNaught to ensure the accuracy and truth of the Representations, and if she did, did she breach that duty in providing information which fell short of the standard of care reasonably expected of a reasonably competent and prudent person in her position; and
(e) Issue 5: did Mr McNaught suffer damage as a result of the Representations.
[75] In summary, I agree with Mr McNaught that the Representations implied an actionable statement of fact, namely, that Ms Lu had reasonable grounds to believe that Confetti was in a position to open and close the Series A Round and raise US$7.5 million within a compressed timeframe (“Implied Representation of Fact”). Even if this was false, however, I find that the requisite reliance was not made out as the Implied Representation of Fact did not play a real or substantial role in Mr McNaught’s decision to invest. This alone is sufficient to dismiss OC 902 in its entirety as reliance is a necessary element for all of Mr McNaught’s claims. I set out the reasons for my conclusion on these issues below.
Whether there was a false representation of fact
[76] On Issue 1, the main dispute centred on whether the Representations amounted to actionable statements of fact, or whether they were statements as to future intention or opinion.
Representations were on their face statements as to the future
[77] It is axiomatic that an actionable misrepresentation must be a false statement of an existing or past fact: Tan Chin Seng v Raffles Town Club Pte Ltd [2003] 3 SLR(R) 307 (“Tan Chin Seng”) at [20], citing Anson’s Law of Contract (Oxford University Press, 28th Ed, 2002) at 237. A distinction must be drawn between a representation of existing fact and a promise to do something in the future: Tan Chin Seng at [21], citing Andrew Phang, Law of Contract (Second Singapore and Malaysian Edition, 1998) at 444–445. A statement as to the future is not in itself an actionable representation because its truth depends on what later happens, and on matters that may lie outside the maker’s control: Chong Jorina v Ritz Property Investimentos Imobiliarios Ltda [2026] SGHC 120 (“Chong Jorina”) at [87]–[88].
[78] Mr McNaught’s primary pleaded case was that the Representations constituted actionable statements of fact that Confetti was opening its Series A funding round in August 2022 to raise US$7.5 million, that the round would close in December 2022 and that shares would be issued thereafter. However, this cannot ground a viable claim in misrepresentation as the Representations were, on their face, statements as to the future. Ms Lu’s messages on 15 August 2022 that “we open series A for 7.5m this month and will close by December” and that “shares will be issued in Series A” plainly referred to events that would take place after 15 August 2022, ie, that the Series A Round would open in August, that it would close by December 2022, and that shares would be issued. A statement by one party that he “would” do something for the other party in the future was in essence a promise, which would only become actionable only if such promise was subsequently incorporated into the contract as a term: Deutsche Bank AG v Chang Tse Wen [2013] 1 SLR 1310 (“Deutsche Bank”) at [94], citing The Law of Contract in Singapore (Andrew Phang Boon Leong gen ed) (Academy Publishing, 1st Ed, 2012) at paras 11.029–11.030.
[79] For present purposes, it is immaterial whether the Representations are characterised as statements as to future intention or statements of opinion as neither constitutes an actionable misrepresentation at law. If it were necessary to come to a definitive conclusion, I would consider them to be more accurately framed as statements of opinion as to an outcome in the future. Since Ms Lu did not have control over when (or whether) Confetti could raise US$7.5 million and therefore close the Series A Round, it is inapposite to consider the Representations to be statements of future intention, which would presuppose a large measure of control by Ms Lu or Confetti over the future event.
[80] Mr McNaught’s case therefore hinges on him establishing that, notwithstanding the element of futurity on the face of the Representations, they also implied statements as to existing fact.
Representations implied statement of existing fact
[81] Mr McNaught’s secondary case at trial was that he understood the Representations as an implied statement of fact that Ms Lu had reasonable grounds to believe that Confetti was in a position to raise US$7.5 million and achieve a December 2022 closing.
[82] It is well-established that a person who makes a statement of opinion or statement as to the future may, in doing so, make an implied representation as to an existing fact. For instance:
(a) A statement of future intention might contain an implicit representation that the representor had an honest belief in the statement, that the representor had reasonable grounds to make the statement, or that the representor had the present intention to carry out the matters expressed in the statement at the time of making it: Deutsche Bank AG v Chang Tse Wen [2013] 4 SLR 886 at [83]; Ernest Ferdinand Perez De La Sala v Compañia De Navegación Palomar, SA [2018] 1 SLR 894 at [172]. A representation as to future intention may imply a misrepresentation of existing fact if the representor had no such intention at the time he made the statement, as “a statement as to a man’s intention, or as to his own statement of mind, is no less a statement of fact” such that “a misstatement of the state of a man’s mind is a misrepresentation of fact”: Edgington v Fitzmaurice (1885) 29 Ch D 459 at 483.
(b) A person who makes a statement as to a future event may at the same time impliedly make a statement of present fact, namely, that the representor has “an honest belief or expectation, based on reasonable grounds, that events will turn out to be as stated or forecast”: Deutsche Bank at [95], citing Bank Leumi Le Israel BM v British National Insurance Co Ltd [1988] 1 Lloyd’s Rep 71 at 75.
(c) Where there is an asymmetry of information, in particular, “a statement of opinion by one who knows the facts best involves very often a statement of a material fact, for he impliedly states that he knows facts which justify his opinion”: Smith v Land and House Property Corporation (1884) 28 Ch D 7 at 15.
[83] In considering whether a statement as to the future may imply a statement as to existing fact, the key question for the court to consider is the meaning of the particular representation and its likely effect upon the representee. Just as in the case of an explicit representation, this is to be assessed from the perspective of what a reasonable person in the representee’s position would have understood the statement to mean, based on an objective construction of the impugned statement and the surrounding circumstances: Lam Wing Yee Jane v Realstar Premier Group Pte Ltd [2024] 5 SLR 51 at [42]. In the context of implied representations, the question is therefore what a reasonable person would have inferred as being implicitly represented by the representor’s words and conduct in their context: Loreley Financing (Jersey) No 30 Ltd v Credit Suisse Securities (Europe) Ltd [2023] EWHC 2759 (Comm) (“Loreley Financing”) at [293]–[295].
[84] The meaning and effect of words do not fall to be viewed in a vacuum – they are shaped by the context of their communication, including the parties’ respective positions, knowledge and experience: Bankers Trust International plc v PT Dharmala Sakti Sejahtera [1996] CLC 518 (“Bankers Trust”) at 531. However, caution should be exercised to ensure that implied representations are not “too easily found”: Loreley Financing at [303(i)], citing Royscot Trust Ltd v Rogerson [1991] 2 QB 297. Any such reinterpretation should be constrained by the facts, and “should not be used as a general solvent to transform the one type of assurance with another”: British Airways Board v Taylor [1976] 1 WLR 13 at 17.
[85] In determining whether an actionable statement of fact is implied by an otherwise unactionable representation (such as a statement as to the future or a statement of opinion), the following considerations are relevant and should be considered holistically.
[86] First, the language used in the representation. Where the words of the impugned statement are vague or uncertain, or where the representation is accompanied by qualifications or explanations, this will militate against a statement of fact being implied as these are suggestive that the representor was not assuming responsibility for the accuracy of the representation, or any implied fact therein: Loreley Financing at [297], [303(ii)] and [345], citing Raiffeisen Zentralbank Osterreich AG v Royal Bank of Scotland plc [2010] EWHC 1392 (Comm) (“Raiffeisen”) at [111]. It is also important to assess the question of implication against the context of any express representations that were made: Loreley Financing at [296(iv)], citing Standard Chartered Bank v Ceylon Petroleum Corporation [2011] EWHC 1785 (Comm) at [562]; Brown v InnovatorOne plc [2012] EWHC 1321 (Comm) at [902]. It is difficult to see how the court can find an implied representation of fact if it is in direct conflict or otherwise inconsistent with what was made explicit.
[87] Second, and on a related note, the meaning of the statement of fact that is sought to be implied must also be considered. An implied representation should be clear and capable of being spelled out from the surrounding circumstances. The more vague, uncertain, imprecise or “elastic” the meaning of the implied representation, the less likely it is that it will be implied and the more that would be required in terms of words or conduct: Loreley Financing at [303(ii)].
[88] The nature and number of the purported implied statements of fact are also relevant in this connection. In Loreley Financing, for example, the claimant alleged that the defendant bank had made myriad representations (both express and implied) to induce it to purchase certain notes that were linked via a credit default swap to a portfolio of residential mortgage-backed securities (“RMBS”). The Court found the wide range of implied representations relied on difficult to comprehend, and expressed doubt as to how such numbers of different implied representations could all conceivably be made, effectively at the same time: Loreley Financing at [318]–[319]. The Court also found issues with the way in which the implied representations depended on “numerous highly complex or elastic concepts” (relating to how the defendant had structured, arranged, underwritten, issued, marketed or sold the RMBS), noting that such difficult and complex concepts could only be addressed expressly: Loreley Financing at [371].
[89] Third, the knowledge of the parties and their characteristics and relative positions. This includes consideration of the nature of the parties’ relationship, any asymmetry of information, the representor’s known (or appearance of) expertise and/or degree of control over the outcome, and any vulnerability or dependency upon the representor on the part of the representee. These factors are relevant as they shed light on the effect that the representation would have had on the representee and the representor’s knowledge of the same. A description or commendation which may obviously be irrelevant because of its generality, superficiality, or laudatory nature, or because of the recipient’s own knowledge and experience, may constitute a material representation if made to another less informed or sophisticated receiver: Bankers Trust at 531.
[90] Local jurisprudence has also considered this factor. In Forum Development Pte Ltd v Global Accent Trading Pte Ltd [1994] 3 SLR(R) 1097 (“Forum Development”), the Court of Appeal was concerned with a statement made by the landlord’s representative to a prospective tenant in January 1990 that a brick wall which blocked the view of the demised premises from the pedestrian walkway would be replaced by glass panels by December 1990. In finding that this constituted an actionable misrepresentation, the Court must have found that this representation as to future intention also implied a statement of existing fact, namely, that there were plans in place to carry out the replacement by December 1990: see Tan Chin Seng at [18] discussing Forum Development. In arriving at this observation, the Court of Appeal in Tan Chin Seng was clearly influenced by the asymmetry of information between the parties, as the landlord’s representative could have ascertained the facts if she had taken the trouble to inquire from those who were directly concerned with the planning and programming of the works.
[91] This can be contrasted with Bisset v Wilkinson [1927] AC 177 (“Bisset v Wilkinson”), where the Court dismissed a claim in misrepresentation by the purchasers of two blocks of land against the vendor. The purchasers had bought the land for the purpose of sheep-farming and they claimed the vendor had represented that the land had a “carrying capacity of two thousand sheep”: at 179–180. As the purchasers were aware that neither the vendors nor any other person had at any time carried on sheep-farming on the land in question, they “were not justified in regarding anything said by the [vendor] as to the carrying capacity as being anything more than an expression of his opinion on the subject”: Bisset v Wilkinson at 180–181. In other words, the representation did not imply a statement of fact, as the representor did not have superior knowledge and was not in a better position than the representee to assess if the statement was an accurate one.
[92] Fourth, the court must consider the context and surrounding circumstances of the representation, including the parties’ conduct and the contractual and other documentation passing between the parties. In Springwell Navigation Corporation v JP Morgan Chase Bank [2010] EWCA Civ 1221 (“Springwell Navigation”), the Court concluded that, notwithstanding that there was a relationship between the representor and the representee where the former had offered the latter financial advice over “regular and often long” telephone conversations (Springwell Navigation at [14]–[16]), that was not, by itself, sufficient to create an implied representation that there was a reasonable basis for the opinions. This was because the representee was a sophisticated investor who was well aware of the relevant risks of the investments, which were also set out very clearly in a risk disclosure document which accompanied the terms and conditions of each investment: Springwell Navigation at [121]. Similar disclaimers were found to be fatal to the finding of any implied representations in Raiffeisen at [134] and IFE Fund SA v Goldman Sachs International [2007] 1 Lloyd’s Rep 64 at [67].
[93] Applying the above principles to the Representations, I take the view that while the Representations were explicitly statements of opinion as to the future, they also carried an implied representation of existing fact that Ms Lu had reasonable grounds to believe that Confetti was in a position to open and close the Series A Round and raise US$7.5 million within a compressed timeframe (ie, the Implied Representation of Fact). I explain.
[94] First, the Representations were clear on their face and not qualified in any way. Unlike Ms Lu’s earlier representations in December 2020 as to the Series II Round closing date which were expressly conveyed as targets rather than definitive outcomes (see [13] above), the Representations were framed in certain and unequivocal terms.
[95] Second, the meaning of the Implied Representation of Fact – that Ms Lu had reasonable grounds to believe that Confetti was in a position to open and close the Series A Round within a short period of time – was also relatively straightforward.
[96] Third, and perhaps most importantly, in Mr McNaught’s own words, the “facts were not equally known”. From the perspective of a reasonable person in Mr McNaught’s position, Ms Lu was Confetti’s main founder and CEO and the key person driving Confetti’s fundraising efforts. In contrast, Mr McNaught was only privy to the information that Ms Lu provided to him. Ms Lu was not just in a position to decide when Confetti should open a fundraising round, whether the round would be a SAFE round or an equity financing round, and what the target investment for the round should be. She was also best placed to assess the degree of investor interest and thus the estimated time that Confetti would take to close the round after raising the target investment sum of US$7.5 million.
[97] The context in which the Representations were made is also important. The Representations were made in unequivocal terms after Mr McNaught had asked Ms Lu when Confetti would be accepting funds for the next financing round and when shares would be issued. In the circumstances, a reasonable investor in Mr McNaught’s position would have understood Ms Lu’s Representations as implying that she had reasonable grounds to believe that Confetti was ready to open the Series A Round very soon and that it would close within an accelerated timeframe.
[98] This was reinforced by Ms Lu’s statements that Confetti had already engaged a law firm and that its corporate secretary would issue the share certificates. The overall impression conveyed by the Representations was clear: Confetti was ready to open the funding round imminently, and the mechanics for a quick closing were in place.
[99] I do not think the fact that the closing of the Series A Round was beyond Ms Lu’s control necessarily excluded the possibility of an implied statement of fact as to Ms Lu’s honest belief, whether as a matter of law or fact. The representor’s control over the outcome of the future event is just one of the factors to be considered in the overall analysis.
[100] In Liberty Sky, the first defendant represented that he needed financial support to urgently buy out certain minority investors in his company who could stifle a trade sale. The Court found that this representation impliedly represented that the trade sale was imminent and highly likely (at [49]). However, it was clear that even if the representation was that the trade deal had a 99% chance of being concluded (Liberty Sky at [45]), the defendant did not have absolute control over whether the sale would actually take place, since it was subject to the consent of the counterparty. Nevertheless, this did not prevent the Court from finding an implied statement of fact. The key question was not whether the trade sale would in fact take place, but whether the defendant had a genuine belief or reasonable grounds to believe, when he made the representations, that a trade sale was imminent.
[101] Similarly, in the present case, the issue was not whether Ms Lu was in a position to guarantee that the Series A Round would be able to open and close soon, but whether she had reasonable grounds to believe that it would.
[102] Moreover, as I have explained at [96] above, Ms Lu was well-placed to make that assessment based on her knowledge of Confetti’s business and the degree of investor interest in the company. The general tenor of her messages to Mr McNaught preceding the Representations had consistently been that Confetti was doing very well and in great demand:
(a) On 7 December 2020, Ms Lu claimed that Confetti “might be signing with Dole soon” and that she needed to “reserve a small portion for some angels who wanna reserve some shares of Confetti”.
(b) On 17 December 2020, Ms Lu claimed that “[i]nvestors are considering how much shares to take now”.
(c) From March to June 2021, Ms Lu reinforced the impression that investor demand was high. She stated that Confetti “had a bunch of [angel investors] pledge so we are likely to be oversubscribed” for the Series II Round, that Confetti had “6 parties interested for the lead [investor]” role and that by May 2021, “[t]here are many [angel investors] here who are keen to come in”.
(d) On 29 June 2022, Ms Lu also represented that there was a New York state fund that was “keen to invest” and “likely to participate” in the upcoming Series A Round, and that Confetti’s “cash flow is now great”.
[103] In light of Ms Lu’s preceding statements regarding Confetti’s fundraising success, it was entirely reasonable for Mr McNaught to have understood the Representations as implying that Ms Lu had reasonable grounds to believe that closing within a relatively short timeframe was possible. After all, her messages suggested that she was in a position to give a reasonably accurate indication as to when Confetti would be able to raise the requisite investment sum. Under cross-examination, Ms Lu also acknowledged that a reasonable understanding of the unqualified representation that closing would be in December 2022 must have been that “most of the milestones needed to close that funding round were more or less in place”.
[104] There is, however, a caveat to Mr McNaught’s case. His primary contention was that he understood Ms Lu’s reference to a December 2022 closing as a strict deadline. I find that difficult to accept, for the following reasons.
[105] By the time the Representations were made, Mr McNaught already had an idea about the general process of start-up finance. Confetti submitted that Mr McNaught was a “sophisticated investor who had commercial nous and financial acumen”, but I do not find this to be an accurate description. While Mr McNaught was not a “babe in the woods”, he clarified that his prior investment experience was limited to investments in public equity markets. He had repeatedly informed Ms Lu that he was inexperienced when it came to investments in start-ups or SAFE Notes. Yet, even as Mr McNaught was new to start-up financing, he had by August 2022 already executed the 1st, 2nd and 3rd SAFE Notes. By his own admission, Mr McNaught had, by this time, developed “an understanding of start-up finance in the abstract”, as well as in practice. He must therefore have been aware that whether and when Confetti would be able to attract US$7.5 million in investments was ultimately dependent on how much third-party investors were willing to put into Confetti and when they would decide to do so. A reasonable person in his position would not have understood the Representations as implying a rigid and immovable deadline.
[106] Mr McNaught’s involvement in the earlier Series II Round would also have informed his experience that Ms Lu’s indications did not amount to hard deadlines, as she had failed to meet her earlier projected timelines (see [13]–[23] above). In fact, when Ms Lu shared her difficulties with the venture capital investors’ investment decisions and timelines in June 2022, Mr McNaught had accepted the uncertainties and agreed that “its [sic] difficult to predict the VCs”. In other words, he was well aware that investor decisions were ultimately beyond Ms Lu’s control. His own message to Ms Lu on 30 August 2023 (eight months after the promised closing of the Series A Round) was that “[i]n no way did I expect you would take a year to close”. Implicit in this was his own understanding that December 2022 was never intended to be a strict deadline – his real grievance was not that closing did not take place in December 2022, but that it should not have taken so long.
[107] Nevertheless, having stated in unequivocal terms that the Series A Round would close in December 2022 after raising US$7.5 million, the objective meaning implied in the Representations, determined in light of the surrounding circumstances and viewed from the perspective of a reasonable person in Mr McNaught’s position, must have been that Ms Lu had a reasonable basis for believing that Confetti was in a position to open and close the Series A Round within a short period of time, ie, the Implied Representation of Fact.
[108] Confetti raised the case of Zuraimi bin Mohamed Dahlan v Zulkarnine B Hafiz [2020] SGHC 219 (“Zuraimi”) to argue that Confetti should not be held liable as the Representations were simply statements of Ms Lu’s opinion. Zuraimi was also a case involving a failed investment. The plaintiffs had invested a total of S$1 million in companies owned or run by the defendants, who had allegedly misrepresented that the companies in question had an aggregate valuation in excess of S$10 million, which the plaintiffs claimed to be false. In dismissing the claim for misrepresentation in respect of this particular statement, the Court noted (at [30]) that “[b]usiness persons looking for investors […] will surely have in mind as part of their investment pitch their honest belief of what the value of their company is […] The defendants, based on an assessment of [the company’s] business [...] formed their subjective opinion on [the company’s] valuation”.
[109] However, I do not think the case advances Confetti’s case to any significant degree, because the Court in Zuraimi at [31] expressly noted that a statement of opinion could well amount to an actionable misrepresentation of fact under certain circumstances, for instance, where the person expressing the opinion did not hold such an opinion, or could not, as a reasonable man having his knowledge of the facts, honestly have held it. The claim in misrepresentation was ultimately dismissed because the plaintiffs failed to prove on a balance of probabilities that “the defendants were dishonest or unreasonable in their subjective valuation”: Zuraimi at [32]. The defendants’ valuation was supported by their expert’s valuation which the court was inclined to accept, and which demonstrated that the defendants were “not far off or unreasonable in their subjective valuation”: Zuraimi at [35]. The case therefore does not suggest that a claim in misrepresentation can never lie against a statement of opinion. In fact, Confetti itself conceded that statements of opinion may amount to actionable misrepresentations when the representor did not hold such an opinion or could not, as a reasonable person having knowledge of the facts, have honestly held it (see [82] above).
[110] Confetti’s final repartee was that the only implied representation referred to in Mr McNaught’s pleadings was that “Confetti had already raised substantial funds and would as a matter of fact close the Series A funding round in December 2022”. Mr McNaught should therefore not be allowed to rewrite his pleaded case by arguing that the Representations also implied that Ms Lu had reasonable grounds to believe that Confetti was in a position to raise US$7.5 million and achieve a December 2022 closing, as this implied representation was never pleaded.
[111] I start by addressing Mr McNaught’s pleaded case that the Representations also contained an implied statement that Confetti had already raised substantial funds for the Series A Round. This is a non-starter, since Mr McNaught confirmed under cross-examination that Ms Lu never suggested that substantial funds had already been raised during their conversation on 15 August 2022. In fact, any suggestion that the Representations implied that substantial funds had already been raised would not make sense as Ms Lu’s message indicated that the Series A Round had not even opened yet.
[112] Turning to Mr McNaught’s revised contention that the Representations implied that Ms Lu had reasonable grounds to believe that Confetti was in a position to raise US$7.5 million and close the round in a few months, I see the force of Confetti’s objections on the point of pleading. Pleadings serve an important function of giving the other party notice of the case they have to meet, and define the issues the court will have to decide: V Nithia v Buthmanaban s/o Vaithilingam [2015] 5 SLR 1422 (“V Nithia”) at [34]–[38]. Allegations of fraud or misrepresentation must be pleaded with “utmost particularity”: JTrust Asia Pte Ltd v Group Lease Holdings Pte Ltd [2020] 2 SLR 1256 (“JTrust Asia”) at [116]. Full particulars of the misrepresentations must be pleaded, including the nature and extent of the misrepresentation, whether the representation was made orally or in writing, and the specific sense which the representee understood the representation, if it was ambiguous: Fuji Xerox Singapore Pte Ltd v Mazzy Creations Pte Ltd [2021] SGHC 193 at [53]–[54]. Failure to adequately plead particulars of misrepresentation may lead to an unsuccessful claim: JTrust Asia at [116], citing Bullen & Leake & Jacob’s Singapore Precedents of Pleadings vol 2 (Jeffrey Pinsler gen ed) (Sweet & Maxwell, 18th Ed, 2016) at para 20.20.
[113] I take Confetti’s point that Mr McNaught’s Statement of Claim did not adequately plead the implied representation which he is now seeking to rely on. The implied statement of fact that was pleaded was materially different from that which he asserted at trial. While the Representations were reproduced in his pleadings, the implied statement of fact which formed the basis of his case at trial was not. This was a material fact that should have been pleaded to enable Confetti to know the case it had to meet, especially as the specific sense in which Mr McNaught understood the Representations was implied as opposed to express.
[116] To sum up, I find that the Representations also implied the Implied Representation of Fact, ie, that Ms Lu had reasonable grounds to believe that Confetti was in a position to open and close the Series A Round and raise US$7.5 million within a compressed timeframe.
[117] The question that naturally follows from this is whether this implied statement of fact was false. Given the nature of the Implied Representation of Fact, however, the determination of the falsity of the statement would engage issues relating to Ms Lu’s state of mind when she made the Representations, ie, whether she had an honest belief based on reasonable grounds that Confetti could open and close the Series A Round in a few months. As this is more directly addressed in Issue 3, I deal with this later in my judgment.
Whether Mr McNaught relied on the Representations
[118] I turn to consider Issue 2. For a claim in misrepresentation to succeed, it is necessary to establish that the representee was induced by or had relied upon the alleged representations. Thus, even assuming that the representation was false, if the representee would have taken the same course of action regardless of the representation, there would be no action in misrepresentation: Gary Chan Kok Yew, The Law of Torts in Singapore (Academy Publishing, 2nd Ed, 2017) at para 14.017.
[119] Reliance looks at the actions of the representee arising from a state of mind or will engendered by the representation concerned. The representation must “act upon the will of the representee”, such that the representee is influenced to change his behaviour in reliance on the representation: Wee Chiaw Sek Anna v Ng Li-Ann Genevieve [2013] 3 SLR 801 at [43]–[44]. The element of reliance requires that the “misrepresentation play a ‘real and substantial’ role in inducing the plaintiff to act, though it need not be the sole or decisive factor”: Ma Hongjin v Sim Eng Tong [2021] SGHC 84 (“Ma Hongjin”) at [64], citing Panatron Pte Ltd v Lee Cheow Lee [2001] 2 SLR(R) 435 (“Panatron”) at [23].

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McNaught, David Holterman v Confetti Fine Foods Pte Ltd

Laws this judgment relies on

Grounds of decision

Introduction

Facts

The parties

Confetti’s beginnings and growth

Mr McNaught’s investments in Confetti

The 1st SAFE Note

The 2nd SAFE Note

Meeting in London and the 3rd SAFE Note

The 4th SAFE Note

(collectively, the “Representations”)

Investors’ Call on 15 November 2022

Ms Lu’s visit to Scotland

Failure to close Series A Round by December 2022

The parties’ cases

Applicable law and issues

Whether there was a false representation of fact

Representations were on their face statements as to the future

Representations implied statement of existing fact

Whether Mr McNaught relied on the Representations