When Will The Breach Of Duty Exception Apply?

• Published date: 09 January 2024
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Criminal Law, Corporate and Company Law, Directors and Officers, Contracts and Commercial Law, Trials & Appeals & Compensation, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: WongPartnership LLP
• Author: Ms Swee Yen Koh and Joel Chng

In Axis Megalink Sdn Bhd v Far East Mining Pte Ltd [2023] SGHC 243 (Axis Megalink), the General Division of the High Court of Singapore (High Court) expounded on the breach of duty exception and elaborated on how this principle interacts with the attribution of an agent's knowledge and acts to his principal. The High Court also explained how a mistake as to a counterparty's identity (in particular, the characteristics of the counterparty) could lead to the contract being declared void through the operation of the doctrine of unilateral mistake at common law. The High Court further reaffirmed the principle that silence can amount to an operative misrepresentation if there is a duty on the alleged representor to speak or disclose certain facts to the representee.

Our Partners Koh Swee Yen SC and Joel Chng, Senior Associate Felicia Soong and Associate G Kiran acted for the successful defendant before the High Court.

Our Comments

The breach of duty exception vis-à-vis the attribution of an agent's state of mind and acts to his principal is not new to Singapore law (see the Court of Appeal decision in Singapore Swimming Club v Koh Sin Chong Freddie [2016] 3 SLR 845 (Singapore Swimming Club)). The High Court's decision in Axis Megalink elaborates on this exception and provides guidance on how it should be applied. In doing so, the High Court drew from principles espoused in the leading UK Supreme Court decision of Bilta (UK) Ltd (in liquidation) and others v Nazir and others (No 2) [2015] 2 WLR 1168 (Bilta), before summarising the principle as follows: an agent in breach of his duties to his principal, or a person who knows of the agent's breach, cannot rely on the agent's knowledge of his breach to argue that he (the agent or a person who knows of the agent's breach) should not be liable to the principal.

Apart from the breach of duty exception, there may be other situations where the court may find that an agent's knowledge is not attributable to the principal. One such circumstance is where there is no connection between the scope of the knowledge-holder's power to act for the principal, and the content of the knowledge that is sought to be attributed to the principal.

The High Court also revisited two familiar doctrines in its decision:

1. Unilateral mistake at common law, with the High Court explaining how a mistake as to the characteristics of the contracting entity could give rise to a unilateral mistake at common law so as to render the contract in question void; and
2. Fraudulent misrepresentation, with the High Court confirming that: (i) silence can amount to a misrepresentation in certain situations; and (ii) it does not matter that the representee was negligent in not verifying the representation, so long as reliance on the false representation is proven.

This update takes a look at the High Court's decision.

Background

The plaintiff, Axis Megalink Sdn Bhd (Axis), is a company incorporated in Malaysia. The defendant, Far...