OVERVIEW

In the recent case of Simran Bedi v Montgomery, Mark A [2022] SGHC 67, the plaintiff succeeded in her claim for breach of contract or, in the alternative, by way of restitution for total failure of consideration and/or unjust enrichment. PDLegal LLC’s Partner, Gerard Quek, and Counsel Daniel Ling acted for the successful plaintiff in the trial before the Singapore High Court.

A novel issue was considered, namely: If a defendant had spent a sum of money with full knowledge that he received the sum subject to an obligation on his part to perform, could he still rely on the Change of Position Defence? The Court stated its preliminary view that, in such circumstances, the Change of Position Defence should not be allowed. In summary, the Change of Position Defence holds that the Court will not order an unjustly enriched person to make restitution, if it can be shown that (i) he had changed his position by spending the money in question, (ii) that the spending was bona fide, and (iii) that it would be inequitable for the Court to order such restitution.

THE BACKGROUND

The plaintiff is a businesswoman, and the defendant is an Australian movie producer. In 2017, the plaintiff entered into a US$270,000 contract (the “Contract”) to purchase from the defendant a minority stake in his production company, Xeitgeist Entertainment Group Pte Ltd (“Xeitgeist”). At the time, Xeitgeist was involved in the production of the movie “Hotel Mumbai”, a movie starring Dev Patel (of “Slumdog Millionaire” fame) about the terrorist attacks that occurred in Mumbai in 2008.

While the plaintiff transferred the purchase price to the defendant, the Xeitgeist shares were never transferred to the plaintiff. The plaintiff brought a claim for breach of contract, with an alternative claim in restitution (for total failure of consideration) and a further alternative claim in misrepresentation (amongst other things, over the alleged valuation of the Xeitgeist shares).

The main claim turned on the key issue of whether the plaintiff was required to execute a Deed of Ratification and Accession (the “DRA”) as a pre-condition to the transfer of the shares (the “DRA Precondition Term”).

THE HIGH COURT’S DECISION

The Court held that the plaintiff was entitled to damages in the full sum paid for the shares, with interest. This was on the ground of breach of contract, and in the alternative, restitution for total failure of consideration. Most interestingly, the Court considered the defendant’s submission on the Change of Position Defence, but rejected this with some novel observations.

Breach of contract

The plaintiff successfully convinced the Court that the terms of the Contract were contained in a series of emails dated between 30 January and 14 February 2017. As these emails did not mention the need to sign the DRA, the defendant’s failure to transfer the shares after payment was a repudiatory breach of the Contract.

Counsel for the Plaintiff were able to obtain key concessions from the defendant’s witnesses at trial, most importantly that the plaintiff was only informed of the need to sign the DRA on 24 April 2017, some two months after the terms of the Contract had been agreed upon. The Court eventually found that the DRA Precondition Term was “a further formality raised belatedly by the defendant” well after the conclusion of the Contract.

The Court also found that the DRA Precondition Term was an “onerous and unusual” one, as the DRA would have bound the plaintiff certain unfavourable terms. Therefore, It would have required an express incorporating clause in order to be successfully incorporated into the Contract. In this regard, the Court was not persuaded by the defendant’s argument that the reference to “several conditions” in the Share Transfer Deed was equivalent to an express incorporating clause.

Total failure of consideration

The plaintiff also claimed for restitution on the basis that consideration had totally failed.

The defendant argued that consideration had only partially failed as the plaintiff had enjoyed various additional benefits pursuant to the Contract, such as her attendance at the Cannes Film Festival. In this regard, counsel for the plaintiff were able to obtain an acknowledgment from the defendant that the plaintiff had attended the Cannes Film Festival as a member of Xeitgeist’s advisory panel, rather than pursuant to the Contract.

In the end, the Court agreed that these “additional benefits” were not benefits that the plaintiff had “bargained for under the contract”. Therefore, as the Xeitgiest shares were not transferred to the plaintiff, there was a total failure of consideration.

Change of Position

Most notably, the defendant argued that should a claim for restitution succeed, he ought to be able to avail himself of the Change of Position Defence. This defence has three elements, namely that (a) the payee has changed his position, and did so because of the payment received; (b) the change was bona fide; and (c) it would be inequitable to require the person enriched to make restitution or to make restitution in full.

The defendant listed various expenditures totalling S$207,565.71, which he claimed he had paid for using the proceeds from the purchase price of the Xeitgeist shares. He sought to argue that he had changed his position by this amount.

However, the Court found that due to various evidential issues (such as the questionable authenticity of certain bank statements), the evidence adduced by the defendant was insufficient to prove these expenditures. Furthermore, the Court held that the defendant had failed to lead any evidence whatsoever that any of the expenses he had incurred would not have been incurred by him in the ordinary course. Hence, the defendant failed to prove even the first element of the Change of Position Defence.

Obiter on the Change of Position Defence

On a novel issue of law, the Court also considered, in obiter, whether the Change of Position Defence should be available to a defendant who spends a sum of money, in full knowledge that he received such sums conditional upon his performance of a contractual obligation. No doubt, this was due to the fact that in the present case, the defendant received the purchase price of US$270,000, then allegedly spent a portion of it (i.e. S$207,565.71) in full knowledge that he was subsequently supposed to transfer the shares to the plaintiff, which he had failed to do.

Importantly, the Court explored the potential basis for this tentative rule. In this regard, the Court considered the reasoning of the academic authority Goff & Jones, The Law of Unjust Enrichment (Sweet & Maxwell, 9th Ed, 2016), the English Court of Appeal decision in Haugesund Kommune and another v Depfa ACS Bank (Wikborg Rein & Co, Part 20 defendant) [2012] 2 WLR 199 (“Haugesund Kommune”), and the Singapore High Court decision in Supercars Lorinser Pte Ltd and another v Benzline Auto Pte Ltd [2016] SGHC 281 (“Supercars”). The Court noted that the learned editors Goff & Jones found that the defendant’s bona fides (i.e. the second element) was the one potentially affected in such a case. Conversely, the courts in Haugesund Kommune and Supercars appeared to base their analysis on the third element, i.e. that it may be inequitable in the circumstances to allow restitution.

The Court ultimately expressed no preference between the different reasonings by the various authorities. However, it expressed preliminary agreement with the general proposition that a defendant should not be allowed to rely on the Change of Position Defence in circumstances where he pays money that he knows he received subject to an obligation on his part to perform.

Estoppel by Representation

The defendant also argued that, in reliance on the plaintiff’s representation that she would sign the DRA, he suffered detriment, such as the lost opportunity to sell his shares at a non-discounted rate. As such, he argued that the plaintiff was estopped from bringing a claim in restitution. However, the defence of estoppel by representation requires a clear and unambiguous representation of fact, rather than simply a statement of future intention.

In line with the plaintiffs’ submissions, the Court found that the plaintiff’s email promising to sign the DRA by a certain date did not constitute a representation of fact. The Court also found that that it was neither clear nor unambiguous from the plaintiff’s representations that she would execute the DRA as a condition precedent to receiving the shares. As such, this defence failed.

KEY TAKEAWAYS

Since the High Court’s decision in Supercars, it appears that there has been no further development on the Change of Position Defence. This case provides a good review of the leading authorities on this area of the law, and summarises the doctrinal bases of these authorities. It also provides a tentative endorsement of the proposition that a defendant should not be allowed to rely on the Change of Position Defence in circumstances when he pays away money that he knows he received subject to an obligation on his part to perform. It would be interesting to observe how this area of law develops when the issue next comes before the Courts.

The full judgment can be found here.