Xia Zhengyan v Geng Changqing: Breach of Contract & Fraudulent Misrepresentation in Apple Plus School Share Transfer

In Xia Zhengyan v Geng Changqing, the Court of Appeal of Singapore heard an appeal from the High Court regarding claims by Xia Zhengyan against Geng Changqing for breach of contract and fraudulent misrepresentation, and a counterclaim by Geng Changqing. The dispute arose from Xia Zhengyan's purchase of Geng Changqing's interests in the Apple Plus School chain of education centers. The Court of Appeal allowed the appeal in part, finding Geng Changqing in breach of contract and ordering her to return $1.2 million to Xia Zhengyan, while Xia Zhengyan was ordered to return her shares in the Company to Geng Changqing. The fraudulent misrepresentation claim was dismissed.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeal allowed in part.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Appeal concerning breach of contract and fraudulent misrepresentation claims related to the purchase of shares in Apple Plus School. Appeal allowed in part.

1.7 Decision Date

9 April 2015

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Xia Zhengyan	Appellant, Plaintiff	Individual	Appeal allowed in part	Partial	Wong Kai Yun of Chia Wong LLP Chia Boon Teck of Chia Wong LLP Ang Hou Fu of Chia Wong LLP
Geng Changqing	Respondent, Defendant	Individual	Counterclaim Dismissed	Dismissed	Ng Kim Beng of Rajah & Tann Singapore LLP Cynthea Zhou Jingdi of Rajah & Tann Singapore LLP

3. Judges

Judge Name	Title	Delivered Judgment
Sundaresh Menon	Chief Justice	No
Andrew Phang Boon Leong	Justice of the Court of Appeal	Yes
Quentin Loh	Judge	No

4. Counsels

Counsel Name	Organization
Wong Kai Yun	Chia Wong LLP
Chia Boon Teck	Chia Wong LLP
Ang Hou Fu	Chia Wong LLP
Ng Kim Beng	Rajah & Tann Singapore LLP
Cynthea Zhou Jingdi	Rajah & Tann Singapore LLP

4. Facts

Appellant and Respondent entered into an agreement for the transfer of shares in Apple Plus School International Pte Ltd.
The agreement included a clause stating the Respondent would transfer 50% of her shares in Apple Plus School International Pte Ltd.
The agreement also mentioned the transfer of shares in other entities, including Apple Plus School (Tampines) Pte Ltd, Apple Plus School (Bukit Timah) Pte Ltd, Apple Plus School (Serangoon) Pte Ltd, Apple Plus School (Thomson) Pte Ltd and Apple Plus School (Malaysia).
The Appellant claimed the Respondent made 22 misrepresentations to induce her into purchasing the shares.
A sum of $300,000 was placed in a joint time deposit account and later transferred to the Appellant's personal account.
The Respondent transferred 50% of her shares in Apple Plus School International Pte Ltd to the Appellant but did not transfer shares in the other entities.
The Appellant claimed breach of contract and fraudulent misrepresentation, seeking remedies including the return of monies paid and damages.

5. Formal Citations

Xia Zhengyan v Geng Changqing, Civil Appeal No 86 of 2014, [2015] SGCA 22
Xia Zhengyan v Geng Changqing, , [2014] SGHC 152

6. Timeline

Date	Event
2011-09-08	Initial contact between Appellant and Respondent's Apple Plus business.
2011-09-22	Appellant attended Apple Plus Discovery Day.
2011-10-17	Appellant and Respondent met to discuss investment terms.
2011-10-18	Appellant requested Company's operation profile and financial report.
2011-10-20	Respondent replied with a report of the Company's development.
2011-11-01	Respondent agreed to sell half her shares in the Company to the Appellant.
2011-11-29	Respondent sent Appellant a memorandum of understanding and a draft sale and purchase agreement.
2011-12-15	Respondent sent Appellant an email with an unsigned Indonesia MOU.
2012-01-02	Respondent sent Appellant an SMS about letters of intent for sole agency in Vietnam and Indonesia.
2012-01-06	Respondent sent Appellant a message regarding Indonesia.
2012-01-06	Respondent sent Appellant another draft sale and purchase agreement.
2012-01-07	Appellant responded with a draft agreement of her own.
2012-01-10	Respondent sent an SMS to the Appellant about discussing school lecture matters in Malaysia.
2012-01-13	Respondent sent an SMS to the Appellant about discussing the agent in Dubai and Philippines in Malaysia.
2012-01-17	Appellant and Respondent signed a Chinese version of a sale and purchase agreement.
2012-01-19	Respondent brought Appellant to see a geomancer.
2012-01-20	Appellant and Respondent signed an English translation of the Agreement.
2012-06-01	Respondent transferred 50% of her shares in the Company to the Appellant.
2012-07-04	Parties opened a joint time deposit bank account.
2012-10-22	Respondent sold her shares in Apple Plus School (Serangoon) Pte Ltd to a third party.
2012-10-01	Parties began to speak about the possibility of one of them buying over the other’s shares.
2012-11-01	Parties began to speak about the possibility of one of them buying over the other’s shares.
2013-07-04	$300,000 was credited into the Appellant’s account on maturity of the time deposit.
2014-01-01	Appellant commenced action against the Respondent.
2014-01-01	High Court Judge's written grounds of decision published as Xia Zhengyan v Geng Changqing [2014] SGHC 152.
2015-04-10	Judgment reserved.

7. Legal Issues

Breach of Contract
- Outcome: The Court of Appeal found the Respondent in breach of contract for failing to transfer all the agreed-upon shares.
- Category: Substantive
- Sub-Issues:
  - Interpretation of contract clause
  - Failure to transfer shares
Fraudulent Misrepresentation
- Outcome: The Court of Appeal dismissed the claim for fraudulent misrepresentation, finding insufficient evidence to prove the Respondent made actionable misrepresentations.
- Category: Substantive
- Sub-Issues:
  - False statements
  - Inducement
  - Reliance
Penalty Clause
- Outcome: The Court of Appeal found that the second limb of clause 7.2 was a penalty clause and therefore unenforceable.
- Category: Substantive

8. Remedies Sought

Return of monies paid
Damages
Penalty payment of SGD 100,000

9. Cause of Actions

Breach of Contract
Fraudulent Misrepresentation

10. Practice Areas

Commercial Litigation
Contract Disputes

11. Industries

Education
Franchising

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Xia Zhengyan v Geng Changqing	High Court	Yes	[2014] SGHC 152	Singapore	The judgment under appeal; the Court of Appeal is reviewing the High Court's decision.
Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd	Court of Appeal	Yes	[2008] 3 SLR(R) 1029	Singapore	Cited for the principle that a contract should be interpreted in a holistic manner having regard to the document as a whole and for the admissibility of extrinsic evidence in contractual interpretation.
Sembcorp Marine Ltd v PPL Holdings Pte Ltd	Court of Appeal	Yes	[2013] 4 SLR 193	Singapore	Cited regarding the admissibility of prior negotiations in contractual interpretation and the open question of whether evidence of prior negotiations should be included under Singapore law.
Investors Compensation Scheme Ltd v West Bromwich Building Society	House of Lords	Yes	[1998] 1 WLR 896	England and Wales	Cited as a leading case on contractual interpretation, representing the English position on excluding evidence of pre-contractual negotiations.
Chartbrook Ltd and another v Persimmon Homes Ltd and another	House of Lords	Yes	[2009] 1 AC 1101	England and Wales	Cited as a leading case on contractual interpretation, representing the English position on excluding evidence of pre-contractual negotiations.
Bank of Credit and Commerce International SA v Ali and others	House of Lords	Yes	[2002] 1 AC 251	England and Wales	Cited for clarifying Lord Hoffmann's view on the admissibility of extrinsic evidence in contractual interpretation.
Prenn v Simmonds	House of Lords	Yes	[1971] 1 WLR 1381	England and Wales	Cited for cautionary remarks on why evidence of past negotiations ought not to be received in contractual interpretation.
A & J Inglis v John Buttery & Co	House of Lords	Yes	(1878) 3 App Cas 552	England and Wales	Cited as an example of when the requirements for admitting evidence of pre-contractual negotiations might be met.
Oresundsvarvet Aktiebolag v Marcos Diamantis Lemos (The “Angelic Star”)	English Court of Appeal	Yes	[1988] 1 Lloyd’s Rep 122	England and Wales	Cited for the approach of dividing a clause into separate obligations, where one obligation is a penalty but not the other.
Dalkia Utilities Services plc v Celtech International Ltd	English High Court	Yes	[2006] 1 Lloyd’s Rep 599	England and Wales	Cited for the approach of dividing a clause into separate obligations, where one obligation is a penalty but not the other.
Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd	House of Lords	Yes	[1915] AC 79	England and Wales	Cited for the principles laid down by Lord Dunedin regarding penalty clauses and liquidated damages.
Edgington v Fitzmaurice	English Court of Appeal	Yes	(1885) 29 Ch D 459	England and Wales	Cited for the principle that a misrepresentation as to the state of a man's mind is a misstatement of fact.
Deutsche Bank AG v Chang Tse Wen and another appeal	Court of Appeal	Yes	[2013] 4 SLR 886	Singapore	Cited for the principle that for a statement as to future intention to be actionable as a misrepresentation, the appellant must show that the defendant had no honest belief in the statement.
Wee Chiaw Sek Anna v Ng Li-Ann Genevieve (sole executrix of the estate of Ng Hock Seng, deceased) and another	Court of Appeal	Yes	[2013] 3 SLR 801	Singapore	Cited for the principle that proof of fraud entails a relatively high standard of proof.
Smith New Court Securities Ltd v Citibank NA	House of Lords	Yes	[1997] AC 254	England and Wales	Cited for the principle that in cases of fraudulent misrepresentation, the appellant is entitled to claim all loss that flowed directly from the entry into the Agreement, regardless of whether or not such loss was foreseeable.
Wishing Star Ltd v Jurong Town Corp	Court of Appeal	Yes	[2008] 2 SLR(R) 909	Singapore	Cited for endorsing the principles in Smith New Court Securities Ltd v Citibank NA regarding damages for fraudulent misrepresentation.
RBC Properties Pte Ltd v Defu Furniture Pte Ltd	Court of Appeal	Yes	[2014] SGCA 62	Singapore	Cited for endorsing the principles in Smith New Court Securities Ltd v Citibank NA regarding damages for fraudulent misrepresentation.
Clydebank Engineering and Shipbuilding Co. v. Don Jose Ramos Yzquierdo y Castaneda	House of Lords	Yes	[1905] AC 6	United Kingdom	Cited for the essence of liquidated damages is a genuine covenanted pre-estimate of damage.
Public Works Commissioner v. Hills	Privy Council	Yes	[1906] AC 368	United Kingdom	Cited for the question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach.
Webster v. Bosanquet	Privy Council	Yes	[1912] AC 394	United Kingdom	Cited for the question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach.
Kemble v. Farren	Court of Common Pleas	Yes	(1829) 6 Bing 141	England and Wales	Cited for it will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid.
Wallis v. Smith	Court of Appeal	Yes	(1879) 21 Ch D 243	England and Wales	Cited for whether it had its historical origin in the doctrine of the common law that when A. promised to pay B. a sum of money on a certain day and did not do so, B. could only recover the sum with, in certain cases, interest, but could never recover further damages for non-timeous payment, or whether it was a survival of the time when equity reformed unconscionable bargains merely because they were unconscionable.
Lord Elphinstone v. Monkland Iron and Coal Co.	House of Lords	Yes	(1886) 11 App Cas 332	United Kingdom	Cited for there is a presumption (but no more) that it is penalty when “a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage”.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Misrepresentation Act (Cap 390, 1994 Rev Ed)	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Apple Plus School
Share transfer
Breach of contract
Fraudulent misrepresentation
Penalty clause
Sale and purchase agreement
Franchisee
Memorandum of understanding
Beneficial interest
Legal interest
Remaining Shares

15.2 Keywords

contract
misrepresentation
shares
education
franchise
singapore
appeal

17. Areas of Law

Area Name	Relevance Score
Contract Law	80
Breach of Contract	75
Contractual Interpretation	70
Misrepresentation	60
Corporate Law	30

16. Subjects

Contract Law
Misrepresentation
Shareholder Rights
Commercial Disputes