In Asidokona Mining Resources Pte Ltd & Anor v Alternative Advisors Investments Pte Ltd [2023] SGHC(A) 6, the Appellate Division of the High Court allowed an appeal in a case that raised “several difficult questions” (in the words of the Court). The Appellate Division considered the law regarding when a principal may ratify a contract purportedly entered into on its behalf. There were important issues considered by the Court such as: (i) can a principal ratify a contract (in this case, a loan agreement) when the alleged agent did not even purport to act on behalf of the principal; and (ii) can the principal ratify when it cannot show that it has performed the contract (in this case, a loan disbursement)? The especially difficult question of law analysed by the Court was “where legal action has been commenced on a contract that has not yet been ratified, can ratification hereafter retrospectively remedy the cause of action and so provide legal basis for the action” (“Post-Action Ratification Issue“)? The Appellate Division, accepting the appellant’s case on the Post-Action Ratification Issue, answered all these questions in the negative.
The purported contract sued on was a set of Loan Documents between two companies, Asidokona Mining Resources Pte Ltd (“Asidokona“) and Supreme Star Investments (“SSI“). Mr Soh, the sole shareholder and director of Asidokona, had sought the assistance of one Mr Wong, the principal director and shareholder of Alternative Advisors Investments Pte Ltd (“AAI“), to arrange a loan of S$2 million to Asidokona. Mr Wong managed to arrange for a lender to loan part of this sum and raised the remaining S$1 million himself. Mr Soh signed the Loan Documents in July 2016, but the Loan Documents were not executed by SSI at the time. Asidokona defaulted on repaying the loan in 2017. In 2018, when Mr Wong discovered that the Loan Documents had not been executed by SSI, he proceeded to sign the Loan Documents (for and on behalf of SSI) and purported to assign SSI’s rights under the Loan Documents to AAI, both pursuant to Deeds of Assignment. AAI then commenced proceedings against Asidokona and Mr Soh to recover the loan amount.
Sometime after the commencement of proceedings, one Ms Lou, SSI’s sole shareholder and director, procured SSI to pass a director’s resolution to ratify Mr Wong’s execution of the Loan Documents and Deeds of Assignment, AAI’s commencement of the action below and the joinder of SSI to the action (“Ratification“). However, the Appellate Division held that AAI failed to show that the Ratification was valid and dismissed AAI’s claim. In particular, AAI failed to discharge its burden of proof in showing that SSI could ratify the Loan and the Loan Documents as: (i) AAI failed to show that Mr Wong had acted or purported to act on SSI’s behalf in relation to the Loan; and (ii) AAI failed to show that the monies purportedly disbursed pursuant to the Loan came from SSI. When a principal ratifies a contract with a third party, the principal is obliged to perform the contract. Here, prior to Ratification, performance of the contract had already taken place and was spent. AAI had not shown evidentially that the performance was by SSI.
On the Post-Action Ratification Issue, the Court found that the Ratification, even if valid, could not retrospectively furnish a basis for AAI’s action because it occurred after the commencement of the action. There was no valid cause of action at the time of the suit’s start because neither the Loan Documents nor the Deeds of Assignment had been ratified yet. AAI should have either: (i) sued afresh after the Ratification; or (ii) sued after the Ratification.
Gregory Vijayendran, SC, assisted by Lester Chua, Tomoyuki Ban, and Kevin Wong from the Commercial Litigation Practice, was instructed Counsel for the successful co-appellant in the appeal.
