Date: 24th October 2016
London, UK, 24th October 2016 – Actatek Inc (Actatek) and its founder and CEO Thomas Wan represented by S.Magintharan, James Liew Boon Kwee and Vineetha G of Essex LLC have been vindicated by the Apex Court of Appeal in Singapore, after more than four years of “event of default” litigation instigated by Actatek’s own VCs. Tembusu Growth Fund (Tembusu) under the management of Tembusu Partners Limited in Singapore was found to be in breach of contract itself and, amongst other orders made by the Court of Appeal, instructed to pay damages to be determined by the High Court for terminating Actatek Inc's Listing in The New Zealand Stock Exchange just 2-3 weeks before trading started at the end of May 2012.
The final verdict, delivered in Actatek’s favour on August 17th 2016, comes after lengthy consideration of a long list of authorities and case precedents from the UK and Singapore, and represents a landmark judgment with significant implications for all VCs, lenders and bondholders, who have previously been able to call events of default with malicious intent with impunity, and as a legal instrument to “blackmail” and get what they want from unsuspecting entrepreneurs in common law countries.
The Apex Court of Appeal's final decision is noteworthy in four ways. Firstly, it is the first time a party has been held in anticipatory repudiatory breach of contract by wrongly calling events of default such that Actatek’s plan to list on the NZ stock exchange was derailed. Secondly, the Court considered the interesting point of law to be “what are the legal consequences that flow if an event of default is found to have been wrongly declared and damages are suffered as a result?”. By citing various case precedents from the UK and Singapore, then declaring a breach of contract by Tembusu (with damages to Actatek to be determined by the High Court), the Court is suggesting the possibility that a wrongful call on an event of default by a lender – for example, to accelerate repayment of loan or to assert an event of default wrongfully resulting in some non-performance or performance contrary to the express terms of the contract – could constitute a breach of contract. Thirdly, this judgement has significant implications for lenders, bondholders and the like in calling events of default with malicious intent for the purposes of manipulating and exploiting investee companies and start-ups. Finally, it shows how vulnerable high tech start-ups and entrepreneurs are, having to face the challenge not only of managing a risky venture full of uncertainty and tough global competition, but also managing involvement from opportunistic “vulture” VCs armed with significant financial and legal resources, and the ability to draft investment agreements with expert knowledge to exploit any probable and plausible loopholes in the law and subsequently use it against “legal-blind” entrepreneurs – to potentially financially and professionally devastating effect.
The case hinged on Tembusu serving a solicitors’ letter of demand in 2012 with false allegations that Actatek Inc deliberately did not disclose owed salaries and cash loans by directors of Actatek, and was therefore in breach of the terms of the Convertible Loan Agreement 2012 (CLA 2012) by paying directors’ salaries using the proceeds from CLA2012. These were ridiculous and trumped up charges, as all owed salaries and cash loans were disclosed in the audited accounts and quarterly accounts sent to Tembusu Partners since their first investment under the CLA2007 in 2007. Tembusu's Andy Lim as Chairman and a member of Investment Committee (IC), ex-Principle Investment Manager Mahim Chellappa, Director Daniel Lee and Rajpal Singh Compliance Manager – advised and represented by their team of lawyers from Morgan Lewis Stamford LLC lawyers (Daniel Chia, Bernard Lui and Kenneth Chua, Stephanie Aw and Ker Yangguang) – persisted in Tembusu’s false testimony and false stand in all their court actions, and numerous interlocutory applications taken out against Actatek, Thomas Wan and the other defendants and at trial.
During the trial, Andy Lim, Mahim Chellappa and Daniel Lee were reprimanded by the High Court judge for evasive and rude behaviour. Still, the High Court judge was “misled” by the misrepresentations of Tembusu and initially delivered a stinging verdict against Thomas Wan and Actatek Inc, whilst the case against the other three defendants was dismissed on November 27, 2014. That verdict has now been overturned by the highest court of appeal in Singapore.
As a footnote to the case, soon after the Final Court orders were received, Actatek lawyers were stunned and aghast to find that Tembusu Partners has quietly applied for a members’ voluntary liquidation of Tembusu Growth Fund Limited. The directors of Tembusu – including Andy Lim – had made false declarations on their statement of accounts under the Company Act on declaration of solvency regarding Tembusu’ ability to pay off all current and following 12 months' liabilities in June 2, 2016 – almost four months after the Final Court of Appeal hearing. It is impossible and remiss of them to omit to declare the said Appeal and neglected their potential liabilities of over NZ$30 million as counterclaimed by Actatek and Thomas. The Morgan Lewis Stamford lawyers representing Tembusu at the Apex Court of Appeal hearing were grilled by the panel of three judges, including the Chief Justice himself. It was most likely that because Actatek’s lawyer asked specifically that Thomas Wan and Actatek be exonerated with a written judgment that judgment was not immediately delivered. Judgment was accordingly reserved and released only on 17 August 2016.
About Actatek: (www.actatek.com)
A leading technology supplier of biometrics and RFID IoT ID management cloud solutions for workforce management and physical security applications. Among Actatek’s list of accolades and achievements are Frost Sullivan World Wide Biometric Vertical Market Penetration 2011 winner in London, and the award of product of the year by SC magazine in the USA.
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