1 The Claimant, Mr David Holterman McNaught (“Mr McNaught”), invested US$1 million with the Defendant, Confetti Fine Foods Pte Ltd (“Confetti”) in 2022, pursuant to a Simple Agreement for Future Equity (“SAFE Note”). In HC/OC 902/2024 (“OC 902”), Mr McNaught seeks the rescission of this SAFE Note and claims the return of his US$1 million, as well as other losses to be assessed, as a result of what he alleges to be fraudulent or negligent misrepresentations made by Confetti’s main founder and Chief Executive Officer (“CEO”), Ms Betty Lu (“Ms Lu”).

2 Having considered the evidence, I dismiss Mr McNaught’s claim as I find that he has failed to prove that he relied on the alleged misrepresentations made by Ms Lu, to the extent that they implied actionable statements of fact. I set out my reasons in detail below.

3 Mr McNaught is a naval architect by training and is employed as a consultant in the energy sector.

4 Confetti is a start-up company incorporated in Singapore on 10 July 2018, ¹ with its primary business being the manufacture, marketing and sale of snacks, specifically snacks produced by “upcycling” imperfect produce and crop surpluses which may otherwise be unsellable. ²

5 Ms Lu is Confetti’s main founder and was its sole shareholder, director and CEO at all material times. ³ Mr Alexander de Wit (“Mr de Wit”), a former management consultant with experience in other start-ups and venture capital, ⁴ was also involved in the founding of Confetti, and currently sits on the Advisory Board for Confetti Snacks Inc (“Confetti US”), an affiliated company incorporated in the United States (“US”). ⁵

6 Ms Lu came to know Mr McNaught on or around the start of 2020. ⁶ Their friendship blossomed, and they began exchanging personal messages regularly. ⁷ In February 2020, Ms Lu began updating Mr McNaught about her efforts in starting and growing Confetti’s business. She also shared with Mr McNaught her travels and meetings with various business leaders, as well as positive media coverage about Confetti’s business. ⁸ Their friendship continued to develop after the COVID-19 pandemic struck in March 2020, ⁹ and they grew to be close friends who would regularly update each other about their lives.

7 As Confetti was a start-up, it sought to participate in accelerator programmes to gain exposure and generate investor interest. These were short-term programmes typically organised by large organisations or institutional investors to offer start-ups access to funding, mentorship, training and other opportunities. ¹⁰ To participate, start-ups would typically go through a selection process. ¹¹ Confetti participated in a number of these accelerator programmes, including one hosted in Singapore by Big Idea Ventures, a large venture capital firm based in New York City. ¹²

8 Confetti gradually gained media coverage and accolades and managed to secure distribution agreements with major grocery retailers in Singapore such as NTUC Fairprice and Cold Storage from 2019 to 2021. ¹³ Confetti also received a grant from Innovate 360, Singapore’s first food accelerator with integrated facilities and venture capital support, and was appointed a Startup EntrePass Partner by Enterprise SG. ¹⁴ After its local success, Confetti set its sights on the US market. In 2021, Confetti incorporated Confetti US, launched its products in the US and participated in various US trade shows. ¹⁵

9 In 2022, Confetti was selected to participate in two major accelerator programmes in the US. These were significant as they were organised by large players in the snack industry with annual revenues in the billions, and Confetti received investment interest as a result of these programmes: ¹⁶

(a) At the start of 2022, Confetti was selected to participate in Food Foundry, an accelerator programme organised by Relish Works, the venture arm of Gordon Food Services, and 1871, a technology hub and private business incubator. ¹⁷ Gordon Food Services was one of the largest food service players in the US. ¹⁸ All participants in Food Foundry, including Confetti, received US$75,000 in venture capital funding. ¹⁹

(b) In early August 2022, Confetti was also invited to apply for Bimbo Open Door, an accelerator programme hosted by Grupo Bimbo, the largest bakery company in the world. ²⁰ After Confetti was selected to participate on 29 August 2022, ²¹ Grupo Bimbo indicated its interest in investing in Confetti and reached out to Ms Lu for details as to Confetti’s fundraising efforts, including its intended valuation, sales and projection figures, and the identity of the lead investor. ²²

10 Confetti was also set to launch its products in the United Kingdom (“UK”) by the autumn of 2022 through a deal with a major bookstore chain. ²³

11 Mr McNaught started to invest in Confetti in 2021. I begin by setting out the events surrounding Mr McNaught’s previous investments. While these did not form part of his claim in OC 902, they set the context leading up to his US$1 million investment which is the subject of the present dispute, and shed light on his state of mind at the time the alleged misrepresentations were made.

12 Sometime in November 2020, the erstwhile personal conversations between Mr McNaught and Ms Lu turned to the topic of investments and new career prospects. When Ms Lu raised the question of whether Mr McNaught would like to become “a stakeholder in Confetti”, he was open to the idea. ²⁴ Ms Lu followed up by sending Mr McNaught various publicity materials and information concerning Confetti, including a “teaser” directed at potential investors, on 28 November 2020. ²⁵ These materials indicated that Confetti was connected to, or had received investments from, various established institutional and industry investors.

13 While Mr McNaught did not respond immediately, he informed Ms Lu on 7 December 2020 that he was looking to “restructure [his] existing investments” so as to channel his funds into Confetti. In turn, Ms Lu gave further details about Confetti’s fundraising efforts – that Confetti was looking at “1m at 6.7m post, 15% straight equity for Series A” (ie, Confetti was planning to raise US$1 million with a post-money equity valuation of US$6.7 million, in exchange for 15% of Confetti’s shares), and that they were aiming to “close by Q1” of 2021 (ie, that Confetti’s target was to raise US$1 million and close the funding round by the first quarter of 2021). ²⁶ Mr McNaught was receptive and spoke to Ms Lu to discuss further details. ²⁷

14 On 17 December 2020, Ms Lu informed Mr McNaught that investors were “considering how much shares to take now” and they would take some time to decide. Mr McNaught then indicated that he “[would] probably be good for 250-300kusd [sic], depending on what the others do and the final price, [due diligence] etc”. ²⁸ Ms Lu offered to introduce Mr McNaught to Mr Neil Fong (“Mr Fong”), an existing investor in Confetti with private equity experience. ²⁹

15 Mr McNaught spoke to Mr Fong on 20 December 2020 and was impressed by what Mr Fong shared. ³⁰ Thereafter, Ms Lu and Mr McNaught continued to go back and forth on the details of Mr McNaught’s proposed investment. Ms Lu indicated her plans for a “Series A” round (ie, an equity financing round) which “will be closed with a couple VCs [ie, venture capital investors], trusted advisory board members and [Mr McNaught]”. ³¹

16 In January 2021, Mr McNaught approached Ms Lu for information about the pricing, total cost and timing of Confetti’s upcoming funding round, as he “[would] likely sell some of [his existing biotechnology investments] in Feb [2021] and would like to make sure [he has] enough cash on hand.” ³²

17 Ms Lu offered to link Mr McNaught up with Mr Christian Cadeo (“Mr Cadeo”) of Big Idea Ventures, the venture capital fund that had hosted one of the accelerator programmes that Confetti had participated in. Mr McNaught spoke with Mr Cadeo, together with two food scientists, on 13 February 2021. This conversation also inspired Mr McNaught’s confidence in Confetti’s business. ³³

18 On 14 February 2021, Ms Lu granted Mr McNaught access to a virtual data room which contained more information about Confetti’s performance and projected growth. ³⁴ After looking at the data, Mr McNaught remarked to Ms Lu that it was “quite impressive”. He sought further clarifications from Ms Lu about the “forecast extrapolations”, Confetti’s current liabilities, as well as convertible notes. He also had questions about the due diligence to be done, and admitted that he was “a bit of a newby [sic] to start up finance and never understood convertible notes”. ³⁵ Ms Lu explained to Mr McNaught that “SAFE notes is [sic] what [Confetti] did last round. Everyone converts in the series A to real shares”. ³⁶ For context, SAFE Notes are agreements which function similarly to convertible note agreements, in that they provide for conversion of the invested funds into shares upon the occurrence of specific trigger events, such as a successful equity fundraising round or an initial public offer (“IPO”). ³⁷ By her statement, Ms Lu meant that Confetti had previously issued SAFE Notes (as opposed to shares) to investors in return for their investments, and all SAFE Notes previously issued would be converted into shares in the equity financing round (ie, “Series A”). ³⁸

19 Towards the end of March 2021, Mr McNaught informed Ms Lu that he would be limiting his investment in Confetti to US$200,000 as some of his existing investments had not done well. ³⁹ He proceeded to sell some of his existing shares to invest in Confetti. However, no investment took place after this discussion as Mr McNaught did not receive any concrete updates from Ms Lu about the closing of the funding round. ⁴⁰

20 Between March and May 2021, Ms Lu continued to update Mr McNaught on Confetti’s fundraising efforts, including that they had leads as to investors, ⁴¹ and “650k committed by angels [ie, individual angel investors] already”. ⁴² However, Ms Lu was of the view that Confetti had not secured sufficient funding. ⁴³ Against this background, on 30 May 2021, Ms Lu asked if Mr McNaught could “do 300k if [he] came in three months later”. ⁴⁴ This was rejected by Mr McNaught who thought it was “too high” and “150-200k would be [his] limit”. Ms Lu then brought up that they agreed to an investment of US$200,000 and requested that they “stick to that”. ⁴⁵

21 On 6 June 2021, Ms Lu sent Mr McNaught a “Confidential Non-Binding Term Sheet” which indicated that Confetti was raising US$1 million in this fundraising round, and that Confetti’s post-money equity valuation would be US$6.7 million. ⁴⁶ Ms Lu followed up on 7 June 2021 to encourage Mr McNaught to invest quickly as the “round was subscribing fast”, suggesting that if Mr McNaught waited longer for the venture capital firms to complete their due diligence, the round may become oversubscribed resulting in Mr McNaught being unable to invest. ⁴⁷

22 When Mr McNaught exhibited reluctance and asked for more time, Ms Lu became displeased. She complained that they had previously agreed for Mr McNaught’s investment to be reduced from US$300,000 to US$200,000, and that she hoped that he would “hold up [his] end of the deal.” ⁴⁸

23 Mr McNaught pushed back on Ms Lu’s messages and pointed out that he had been ready to invest in March 2021 but did not proceed as she “did not honour [her] words” that the funding round would “close on Q1 and left me sitting with 6 figure [sic] in cash”. Ms Lu apologised and explained that she took responsibility for “not closing on Q1 as expected, even though its [sic] beyond my control”. She stated that while she hoped Mr McNaught would invest in Confetti, “if you decide not to, [that’s] fine. I [won’t] be giving any pressure whatsoever”. ⁴⁹

24 Mr McNaught appreciated Ms Lu’s conciliatory message and acknowledged that “its [sic] difficult to predict the VCs and coordinate everything”. ⁵⁰ He characterised their earlier disagreement as a “miscommunication on timing” and made it clear that he still wanted to invest in Confetti but just needed time. ⁵¹ Mr McNaught eventually signed the “Confidential Non-Binding Term Sheet” on 16 June 2021 and transferred a first tranche of US$50,000 to Confetti on 15 July 2021. ⁵² Ms Lu then congratulated him on becoming a shareholder of Confetti. ⁵³ Nevertheless, on 16 August 2021, Ms Lu informed Mr McNaught that the round would not be an equity financing round, but a “safe 2” round with SAFE Notes issued instead of equity (“Series II Round”). ⁵⁴ She asked if Mr McNaught would be agreeable as the Series II Round could “launch faster” with SAFE Notes. Mr McNaught indicated that he did not know anything about SAFE Notes but that he trusted her “better judgement”. ⁵⁵

25 On 24 August 2021, Mr McNaught received a SAFE Note in respect of the US$50,000 transferred on 15 July 2021, which he executed and returned. ⁵⁶ This was cancelled and replaced with a fresh SAFE Note in respect of the earlier agreed sum of US$200,000 on or around 3 September 2021 (“1st SAFE Note”). ⁵⁷ Mr McNaught transferred the remaining US$150,000 to Confetti in December 2021. ⁵⁸ Both the initial SAFE Note in August 2021 and the 1st SAFE Note provided for a “post-money valuation cap” of US$6.7 million, ⁵⁹ which protected the shares that Mr McNaught would receive at the date of conversion from further dilution should Confetti’s valuation exceed the cap. ⁶⁰

26 In September 2021, Ms Lu added Mr McNaught to a WhatsApp group named “Confetti Yetis”, which included other Confetti investors, employees and advisors, as well as other WhatsApp groups with different stakeholders of Confetti. ⁶¹ Through these chatgroups, Mr McNaught received various positive updates about Confetti’s progress. These included new investors, potential distribution expansion and attendance at trade shows, media exposure opportunities and Ms Lu’s plans for an IPO in December 2025. ⁶²

27 These positive developments further excited Mr McNaught, and he approached Ms Lu on 8 March 2022 to make a further investment in Confetti. ⁶³ On 15 March 2022, Ms Lu suggested that Mr McNaught invest US$250,000, as it would bring the total sum raised by Confetti to US$1.4 million. ⁶⁴ Pursuant to this, Mr McNaught executed another SAFE Note in the Series II Round for US$250,000 on 17 March 2022, ⁶⁵ and transferred this sum to Confetti on or around 23 March 2022 (“2nd SAFE Note”). ⁶⁶

28 In April 2022, Ms Lu and Mr McNaught arranged to meet in London and spend a few days together. On 16 April 2022, they discussed Mr McNaught’s investments in Confetti, and Ms Lu showed him some materials about Confetti’s business. ⁶⁷ Over this period, Mr McNaught remained optimistic about Confetti’s prospects, and he executed another SAFE Note on 19 April 2022 for a further investment of US$250,000 in the Series II Round (“3rd SAFE Note”), ⁶⁸ transferring the sum to Confetti on or around 20 April 2022. ⁶⁹

29 The 1st, 2nd and 3rd SAFE Notes all contained an identical term that the conversion of the invested sums into shares would occur upon an “Equity Financing” event, which was in turn defined as “a bona fide transaction or series of transactions with the principal purpose of raising capital, pursuant to which [Confetti] issues and sells Preferred Stock at a fixed valuation, including but not limited to, a pre-money or post-money valuation”. ⁷⁰

30 After the meeting in London, Ms Lu and Mr McNaught continued to speak regularly about Confetti’s prospects. As before, all the signs were upbeat – Ms Lu shared that there were more possible customers, and that she had plans to launch Confetti’s products in the UK in a few months. ⁷¹

31 On 29 June 2022, Mr McNaught asked Ms Lu when Confetti’s next round of financing was scheduled as he had US$1 million in cash that he was interested in investing in Confetti given the existing market volatility. Ms Lu informed him that Confetti would be opening a new funding round for equity to be issued (“Series A Round”) later in the year, and welcomed his participation. ⁷² Mr McNaught’s understanding was that the closing of a Series A Round would be a conversion event under the SAFE Notes, pursuant to which Mr McNaught would come to own shares in Confetti. ⁷³ Mr McNaught indicated that he “would definitely like to participate” as Confetti was “a great investment”. ⁷⁴

32 On 15 August 2022, Mr McNaught approached Ms Lu to ask about the status of the proposed Series A Round: ⁷⁵

33 In response, Ms Lu sent the following messages, which formed the subject of Mr McNaught’s misrepresentation claim: ⁷⁶

(collectively, the “Representations”)

34 On 31 August 2022, Mr McNaught indicated that he would be receiving US$1 million from his investment manager. As Mr McNaught wanted to send the funds to Confetti soon, he asked when Confetti could start accepting funds and when the shares could be issued. Ms Lu responded that Confetti was “already opening up Series A” and that shares would be issued “after the entire 7.5m round is done”. ⁷⁷

35 At this point, Mr McNaught was preparing to invest a total of US$2 million in Confetti for the Series A Round. He informed Ms Lu that he would transfer US$1 million first, as the remaining US$1 million was “tied up in shell shares which have gone south”. He planned to liquidate the shares once their prices had recovered and invest the proceeds in Confetti. ⁷⁸

36 On 6 September 2022, Mr McNaught asked further questions about the intended structure of his proposed US$1 million investment in Confetti: ⁷⁹

37 Mr McNaught gave instructions for the transfer of US$1 million to Confetti’s account on 9 September 2022, and asked Ms Lu to keep a lookout for the funds. ⁸⁰

38 On 12 September 2022, Ms Lu indicated that the funds had been received. Mr McNaught asked further questions about the closing of the Series A Round, and the impact of the Series A Round on his earlier investments. Ms Lu explained the mechanism for the Series A Round and clarified that there was no lead investor yet. I set out the exchange between Ms Lu and Mr McNaught in some detail here as their discussion is also relevant to Mr McNaught’s misrepresentation claim: ⁸¹

39 Following the above exchange, on 13 September 2022, Mr McNaught sought “a SAFE Note or a receipt” for the US$1 million he had advanced to Confetti as his bank had raised concerns about the large transfer. Ms Lu conveyed that Confetti’s lawyer was preparing the document. ⁸² Shortly after, Ms Lu sent a draft SAFE Note to Mr McNaught by WhatsApp, ⁸³ together with the following messages: ⁸⁴

40 However, unlike the 1st, 2nd and 3rd SAFE Notes, this draft SAFE Note did not contain any post-money valuation cap, with the consequence that Mr McNaught would be exposed to potential dilution. ⁸⁵

41 Mr McNaught executed and returned the SAFE Note without any complaint on 15 September 2022 (“4th SAFE Note”). ⁸⁶ It is this US$1 million investment, as recorded in the 4th SAFE Note, that forms the subject of Mr McNaught’s claim.

42 On 15 November 2022, one day before Ms Lu was due to visit Mr McNaught at his home in Scotland, Ms Lu arranged for a virtual call with Confetti’s investors (“Investors’ Call”). ⁸⁷ The attendees included Mr McNaught and Mr Fong. ⁸⁸

43 During the call, which Ms Lu was late in attending, ⁸⁹ she shared a deck of slides titled “Confetti’s Board Meeting” which gave updates about Confetti’s business and fundraising efforts. ⁹⁰ The deck included details of Confetti’s successes as well as a slide titled “Fundraise Update & Current Series A” which reiterated Confetti’s plans to raise US$7.5 million in its first equity round to drive growth. ⁹¹ The next slide, titled “Challenges & Key Asks”, requested investors’ assistance to introduce “strategic VCs or angels” for the Series A Round. ⁹² The minutes circulated to all attendees after the call (including Mr McNaught) stated a revised timeline that “Series A [was] starting this month and aim[ed] to close by 28 February 2023”. ⁹³

44 Mr McNaught was unhappy with Ms Lu’s performance during the call and reached out to Mr Fong towards the end of the call to bemoan that the “numbers are all over the place” and that it was “a bit of a train wreck”. ⁹⁴ Notably, Mr McNaught did not raise any concerns about the delayed closing of the Series A Round, because he claimed he did not notice that it had been discussed at the time. ⁹⁵ Ultimately, Mr McNaught was much more concerned about Confetti’s valuation as “given the low revenues[, he] didn’t get any clarity on margin”. ⁹⁶ Mr Fong agreed and stressed that more pressure was needed, and offered to speak further on “how [they] can all work together to help the company succeed.” Mr McNaught agreed and stated that he had “invested 1.7musd and [was] definitely concerned following [the] meeting”. Mr McNaught and Mr Fong agreed to arrange for a call the following week to “align on where there are gaps and how [they] can influence closure”. ⁹⁷

45 Ms Lu arrived at Mr McNaught’s home in Scotland the next day, on 16 November 2022. She appeared emotionally distraught and apologised for her performance during the Investors’ Call, explaining that she was sick ⁹⁸ and under a lot of stress from the bullying and harassment she had been subjected to by Mr Fong and a former Confetti employee, who had allegedly hacked into her social media accounts. ⁹⁹

46 Ms Lu claimed that Mr Fong had disagreed with her on certain matters relating to Confetti, and that he had been micromanaging her and trying to sabotage her with false accusations. Mr McNaught was taken aback by these revelations, and eventually came to accept Ms Lu’s account of events. ¹⁰⁰ As such, when Mr Fong reached out in the early morning on 20 November 2022 pursuant to their earlier agreement for a call, ¹⁰¹ Mr McNaught did not respond.

47 A few hours later, Mr Fong sent an email to a group of Confetti’s investors, management and other advisors. In this email, Mr Fong stated that he was “no longer comfortable being a part of the board of advisors” as there were “a litany of governance, finance and HR issues” and “many promises made by a solo founder have simply not been fulfilled.” ¹⁰²

48 As Mr McNaught believed Ms Lu’s version of events, he suggested to Ms Lu that an email could be sent to set out Mr Fong’s misdeeds. ¹⁰³ Mr McNaught proceeded to send an email to Mr Fong, copied to the other Confetti investors, calling out what he perceived to be Mr Fong’s wrongdoing, including: (a) “disclosure […] of confidential information that may result in the loss of a major client”; (b) “micromanagement and bullying by [Mr Fong] of a female CEO”; (c) “providing continuous unsolicited advice and instruction regarding company affairs”; and (d) “insistence on special reports out-with the scope required for a small shareholder”. Mr McNaught then offered to buy over Mr Fong’s investment in Confetti. Mr McNaught emphasised that he fundamentally “believe[d] in the mission of Confetti”, that he had “taken a hands off approach with [his] investment”, and called on the other investors to “[support] Betty and [build] the reputation of Confetti”. Finally, as Mr McNaught was upset that Mr Fong had disclosed his email address to the other investors in his email to the group, Mr McNaught asked Mr Fong not to contact him henceforth, ¹⁰⁴ and proceeded to block Mr Fong on WhatsApp. ¹⁰⁵

49 Ms Lu replied in the same email chain on the same day. She stated that she was happy that Mr Fong was stepping away as his actions had compromised one of Confetti’s biggest retail accounts, and repeated Mr McNaught’s offer to buy him out. ¹⁰⁶ Mr Fong replied shortly after to accept Mr McNaught’s offer, and also to provide further details about Ms Lu’s abusive behaviour towards staff, her lack of accountability to investors, and his view that Confetti could not succeed. ¹⁰⁷

50 Ms Lu stayed with Mr McNaught in Scotland until 28 November 2022. ¹⁰⁸ After this visit, Mr McNaught agreed not only to buy over Mr Fong’s investment in Confetti, but also the investments of other disgruntled investors who wished to exit Confetti between November and early December 2022. ¹⁰⁹ The documentation to finalise Mr McNaught’s buyout of their investments for US$75,000 was finalised in a Novation Agreement signed on 3 February 2023. ¹¹⁰ The Novation Agreement also contained post-money valuation caps for the investments. ¹¹¹

51 On 3 December 2022, when Ms Lu asked Mr McNaught to buy over another US$90,000 investment from an entity connected with Mr Fong, Mr McNaught expressed hesitation as he had other personal exigencies which required his time and money. ¹¹² Eventually, Ms Lu indicated that she would buy over this US$90,000 investment using Confetti’s “own funds”. ¹¹³

52 Contrary to Ms Lu’s initial representation to Mr McNaught on 15 August 2022, the Series A Round did not close by December 2022. Without any further news about the closing, Mr McNaught reached out to Ms Lu on 18 January 2023 to ask for updates. He wished to know when the next round would take place or if Ms Lu could convert his US$1 million investment into shares at Confetti’s current valuation. ¹¹⁴

53 To Mr McNaught’s surprise, Ms Lu informed him that the Series A Round had not opened yet, that it would only open in the first quarter of 2023, and that may take four to six months to close. Ms Lu also rebuffed Mr McNaught’s request for conversion on the basis that the US$1 million investment was for a SAFE Note. ¹¹⁵ However, Mr McNaught pointed out to her that unlike his previous SAFE Notes, there was no valuation mentioned in the 4th SAFE Note. ¹¹⁶

54 Ms Lu explained that despite the lack of a valuation cap, the 4th SAFE Note was still a SAFE Note that could only convert to equity upon the occurrence of an equity financing event, and depending on the valuation to be set by a lead investor. Mr McNaught appeared to accept Ms Lu’s explanation, observing that he was “probably 6 months too early with investing the 1m” and that he “thought the round would be done by now, so that’s why [he] did it early. But it’s ok.” ¹¹⁷

55 It bears mentioning that Mr McNaught was under a great deal of personal stress during this period beginning in August 2022 due to the illness of both his parents, and the eventual passing of his mother on 17 February 2023. ¹¹⁸

56 On 17 March 2023, Mr McNaught sent an email to Ms Lu to follow up on the status of his investments. In the email, Mr McNaught expressed unhappiness that the 4th SAFE Note was “not linked to a valuation” and pointed out that his investment had been “provided based on [Ms Lu’s] written guidance that the series A would close in December”. As the US$1 million was not appreciating and would remain subject to dilution, he repeated his demand for the US$1 million investment to be converted to Confetti shares at the current valuation. ¹¹⁹

57 Ms Lu sent a long voice message in reply, explaining that Mr McNaught was “neither gaining nor losing valuation” as his US$1 million investment would be pegged to the valuation of the Series A Round which would be determined by the lead investor. She clarified that it was not possible for his investment to be converted first without the Series A Round closing as it would be unfair to the other investors. She also stated that fundraising can take a long time, and that Confetti was “gaining really good traction” and could not afford litigation risk (which might be occasioned if Confetti converted only Mr McNaught’s SAFE Note and not those of other investors). As such, she sought Mr McNaught’s support and promised that he would soon reap the benefit of his investments. ¹²⁰

58 Mr McNaught clarified on 18 March 2023 that he was referring to the fact that the 4th SAFE Note had no valuation cap and “wanted to know if it could be converted at the 6.7musd cap” stated in the earlier SAFE Notes. ¹²¹ Nevertheless, he accepted that this might not have been possible and it appeared that his concerns were abated by Ms Lu’s explanation, as can be seen in the following message he sent to her: ¹²²

59 Ms Lu reached out to Mr McNaught on 1 April 2023 to arrange a phone call. ¹²³ During the conversation on 3 April 2023, Mr McNaught took issue with the fact that the Series A Round had not yet closed. He also objected to Confetti’s use of its “own funds” to buy over the US$90,000 investment linked to Mr Fong (see [51] above) as this was essentially using the funds put in by investors with no upside to them. ¹²⁴ Ms Lu eventually agreed to let Mr McNaught buy over a total of US$145,000 from Confetti’s existing investors, which included the US$90,000 investment. ¹²⁵

60 On 26 April 2023, Ms Lu sent two SAFE Notes to Mr McNaught to reflect the transfer of the investments: one for US$120,000 in the earlier Series I Round (including the US$90,000 investment) (“5th SAFE Note”) and another for US$25,000 in the Series II Round (“6th SAFE Note”). ¹²⁶ On 5 May 2023, Ms Lu pressured Mr McNaught to execute these SAFE Notes as any delay “might jeopardise [the] series A round and concern the new investors and VCs”. Mr McNaught agreed that he did not wish to “cause a crisis in Confetti or jeopardize series A” and explained that he would “try to exit next week so [he could] execute and send cash”. ¹²⁷ Mr McNaught proceeded to transfer the funds and execute the 5th and 6th SAFE Notes on 9 May 2023. ¹²⁸ Again, these SAFE Notes all contained post-money valuation caps.

61 Mr McNaught’s patience finally ran out on 29 August 2023, when he confronted Ms Lu about his exposure, taking particular issue with the lack of a valuation cap in the 4th SAFE Note: ¹²⁹

62 Ms Lu sent a lengthy reply. ¹³⁰ In essence, she reemphasised that a SAFE Note was not a loan and had no expiry date. Rather, investments in a start-up were naturally risky, and would take time to mature. The terms of the SAFE Notes were legally binding, and they did not stipulate that an equity round had to happen. As such, “[i]f any investors back out and the round takes longer to complete, it is what it is”. Ms Lu stated that she would not be “doing anything above and beyond whatever was written and signed for in the contract”. ¹³¹

63 In his messages to Ms Lu on 30 August 2023 and 1 September 2023, Mr McNaught reiterated his complaint that Confetti had essentially obtained “an interest free loan” of US$1 million from him under false pretences: ¹³²

64 Subsequent to this confrontation, Ms Lu blocked Mr McNaught on WhatsApp and also removed him from the “Confetti Yetis” chat group and other WhatsApp groups related to Confetti. ¹³³

65 Mr McNaught reached out to Mr de Wit with his concerns via email on 18 November 2023 but was met with a reply that Mr de Wit could do nothing to “address the perception gap” between Ms Lu and Mr McNaught. ¹³⁴

66 Mr McNaught commenced OC 902 on 15 November 2024. The trial was bifurcated with issues relating to damages to be heard in a subsequent tranche if Mr McNaught succeeded in establishing liability.

67 Relying on Ms Lu’s Representations on 15 August 2022 to the effect that Confetti would raise a total of US$7.5 million and close its Series A Round by December 2022, Mr McNaught’s case is that Confetti is liable for fraudulent or negligent misrepresentation as: (a) the Representations were expressed in unequivocal, factual terms; ¹³⁵ (b) the Representations were material representations designed to get Mr McNaught to invest promptly, and Mr McNaught relied on the Representations and was induced to invest US$1 million in Confetti as a result; ¹³⁶ (c) the Representations were false; ¹³⁷ (d) Ms Lu made the Representations fraudulently or negligently, without honest belief in their truth; ¹³⁸ and (e) Mr McNaught suffered loss as a result. ¹³⁹

68 Confetti rests its defence on the following grounds: (a) the Representations were not actionable as they were statements of future intention or statements of opinion; ¹⁴⁰ (b) Mr McNaught could not have genuinely taken the view that Confetti was close to raising US$7.5 million on 15 August 2022 or at the time of execution of the 4th SAFE Note on 15 September 2022; ¹⁴¹ (c) Mr McNaught was not induced by the Representations to make the investment, as he had already decided to invest the US$1 million in Confetti before the Representations were made; ¹⁴² (d) any misrepresentation made on 15 August 2022 was corrected by Ms Lu’s subsequent communications to Mr McNaught on 12 September 2022 that no lead investor had been secured; ¹⁴³ (e) Ms Lu did not make the Representations fraudulently but had an honest belief in the truth of the Representations and reasonable grounds for such belief; ¹⁴⁴ (f) in respect of the claim for negligent misrepresentation, Confetti did not owe a duty of care to Mr McNaught and, even if it did, did not breach it; ¹⁴⁵ and (g) Mr McNaught did not suffer any loss or damage as he obtained precisely what he bargained for in the 4th SAFE Note, ie, the contractual right to receive Confetti shares upon an equity financing event. ¹⁴⁶

69 The requirements for fraudulent misrepresentation and negligent misrepresentation are well-established. I set them out below to identify the issues which arise for my consideration.

70 For fraudulent misrepresentation, the following requirements must be satisfied (Chan Pik Sun v Wan Hoe Keet (alias Wen Haojie) [2024] 1 SLR 893 (“Chan Pik Sun”) at [66]–[67]):

(a) There must be a false representation of fact made by words or conduct;

(b) The representation must have been made with the intention that it should be acted upon by the representee, or by a class of persons which includes the representee;

(c) The representee must have acted upon the false statement;

(d) The representee must have suffered damage by so doing; and

(e) The representation must be made with knowledge that it is false; it must be wilfully false, or at least made in the absence of any genuine belief that it is true. This includes a case where the statement is made “recklessly, careless whether it be true or false”.

71 For negligent misrepresentation under the common law, the requirements are (Lim Bee Lan v Lee Juan Loong [2021] SGHC 234 at [70]):

72 For misrepresentation under s 2(1) of the Misrepresentation Act 1967 (2020 Rev Ed) (“MA”), the representee (a) must have entered into a contract after (b) an actionable misrepresentation was made to him. The representee need not establish that the representor owed him a duty of care, and the burden of proof is on the representor to show that “he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true.” Although a requirement of reliance by or inducement of the representee is not found in the express statutory language, the law is clear that it remains a necessary element for a successful claim under s 2(1) of the MA. The MA does not alter the common law as to what constitutes an actionable misrepresentation, but simply reverses the burden of proof so that the party who made the misrepresentation has to show that he had reasonable grounds to believe that the fact represented was true: Tiong Swee Eng v Yeo Khee Siang [2015] 3 SLR 1141 at [19], citing Lim Koon Park v Yap Jin Meng Bryan [2013] 4 SLR 150 (“Lim Koon Park”) at [39]. Thus, an actionable misrepresentation under s 2(1) of the MA still requires that the representation induced the other party to enter into the contract: Lim Koon Park at [38]; Liberty Sky Investments Ltd v Goh Seng Heng [2020] 3 SLR 335 (“Liberty Sky”) at [33].

73 It follows from the foregoing analysis that reliance is a common element required for all three causes of action which Mr McNaught mounts: Anita Hatta v Lee Siow Kiang Georgia [2020] 5 SLR 304 (“Anita Hatta”) at [55].

74 Flowing from the above, the issues to be determined are:

(a) Issue 1: were the Representations false statements of fact, or mere statements of future intention or opinion;

(b) Issue 2: did Mr McNaught rely upon the Representations to invest US$1 million in Confetti;

(c) Issue 3: Ms Lu’s state of mind when making the Representations, ie, did she make the Representations with the intention that Mr McNaught would act upon them, and did she know or ought to know that the Representations were false, or make them without honest belief in their truth, or recklessly, not caring whether they were true or false;

(d) Issue 4: did Ms Lu owe a duty of care to Mr McNaught to ensure the accuracy and truth of the Representations, and if she did, did she breach that duty in providing information which fell short of the standard of care reasonably expected of a reasonably competent and prudent person in her position; and

(e) Issue 5: did Mr McNaught suffer damage as a result of the Representations. ¹⁴⁷

75 In summary, I agree with Mr McNaught that the Representations implied an actionable statement of fact, namely, that Ms Lu had reasonable grounds to believe that Confetti was in a position to open and close the Series A Round and raise US$7.5 million within a compressed timeframe (“Implied Representation of Fact”). Even if this was false, however, I find that the requisite reliance was not made out as the Implied Representation of Fact did not play a real or substantial role in Mr McNaught’s decision to invest. This alone is sufficient to dismiss OC 902 in its entirety as reliance is a necessary element for all of Mr McNaught’s claims. I set out the reasons for my conclusion on these issues below.

76 On Issue 1, the main dispute centred on whether the Representations amounted to actionable statements of fact, or whether they were statements as to future intention or opinion.

77 It is axiomatic that an actionable misrepresentation must be a false statement of an existing or past fact: Tan Chin Seng v Raffles Town Club Pte Ltd [2003] 3 SLR(R) 307 (“Tan Chin Seng”) at [20], citing Anson’s Law of Contract (Oxford University Press, 28th Ed, 2002) at 237. A distinction must be drawn between a representation of existing fact and a promise to do something in the future: Tan Chin Seng at [21], citing Andrew Phang, Law of Contract (Second Singapore and Malaysian Edition, 1998) at 444–445. A statement as to the future is not in itself an actionable representation because its truth depends on what later happens, and on matters that may lie outside the maker’s control: Chong Jorina v Ritz Property Investimentos Imobiliarios Ltda [2026] SGHC 120 (“Chong Jorina”) at [87]–[88].

78 Mr McNaught’s primary pleaded case was that the Representations constituted actionable statements of fact that Confetti was opening its Series A funding round in August 2022 to raise US$7.5 million, that the round would close in December 2022 and that shares would be issued thereafter. ¹⁴⁸ However, this cannot ground a viable claim in misrepresentation as the Representations were, on their face, statements as to the future. Ms Lu’s messages on 15 August 2022 that “we open series A for 7.5m this month and will close by December” and that “shares will be issued in Series A” plainly referred to events that would take place after 15 August 2022, ie, that the Series A Round would open in August, that it would close by December 2022, and that shares would be issued. A statement by one party that he “would” do something for the other party in the future was in essence a promise, which would only become actionable only if such promise was subsequently incorporated into the contract as a term: Deutsche Bank AG v Chang Tse Wen [2013] 1 SLR 1310 (“Deutsche Bank”) at [94], citing The Law of Contract in Singapore (Andrew Phang Boon Leong gen ed) (Academy Publishing, 1st Ed, 2012) at paras 11.029–11.030.

79 For present purposes, it is immaterial whether the Representations are characterised as statements as to future intention or statements of opinion as neither constitutes an actionable misrepresentation at law. If it were necessary to come to a definitive conclusion, I would consider them to be more accurately framed as statements of opinion as to an outcome in the future. Since Ms Lu did not have control over when (or whether) Confetti could raise US$7.5 million and therefore close the Series A Round, it is inapposite to consider the Representations to be statements of future intention, which would presuppose a large measure of control by Ms Lu or Confetti over the future event.

80 Mr McNaught’s case therefore hinges on him establishing that, notwithstanding the element of futurity on the face of the Representations, they also implied statements as to existing fact.

81 Mr McNaught’s secondary case at trial was that he understood the Representations as an implied statement of fact that Ms Lu had reasonable grounds to believe that Confetti was in a position to raise US$7.5 million and achieve a December 2022 closing. ¹⁴⁹

82 It is well-established that a person who makes a statement of opinion or statement as to the future may, in doing so, make an implied representation as to an existing fact. For instance:

(a) A statement of future intention might contain an implicit representation that the representor had an honest belief in the statement, that the representor had reasonable grounds to make the statement, or that the representor had the present intention to carry out the matters expressed in the statement at the time of making it: Deutsche Bank AG v Chang Tse Wen [2013] 4 SLR 886 at [83]; Ernest Ferdinand Perez De La Sala v Compañia De Navegación Palomar, SA [2018] 1 SLR 894 at [172]. A representation as to future intention may imply a misrepresentation of existing fact if the representor had no such intention at the time he made the statement, as “a statement as to a man’s intention, or as to his own statement of mind, is no less a statement of fact” such that “a misstatement of the state of a man’s mind is a misrepresentation of fact”: Edgington v Fitzmaurice (1885) 29 Ch D 459 at 483.

(b) A person who makes a statement as to a future event may at the same time impliedly make a statement of present fact, namely, that the representor has “an honest belief or expectation, based on reasonable grounds, that events will turn out to be as stated or forecast”: Deutsche Bank at [95], citing Bank Leumi Le Israel BM v British National Insurance Co Ltd [1988] 1 Lloyd’s Rep 71 at 75.

(c) Where there is an asymmetry of information, in particular, “a statement of opinion by one who knows the facts best involves very often a statement of a material fact, for he impliedly states that he knows facts which justify his opinion”: Smith v Land and House Property Corporation (1884) 28 Ch D 7 at 15.

83 In considering whether a statement as to the future may imply a statement as to existing fact, the key question for the court to consider is the meaning of the particular representation and its likely effect upon the representee. Just as in the case of an explicit representation, this is to be assessed from the perspective of what a reasonable person in the representee’s position would have understood the statement to mean, based on an objective construction of the impugned statement and the surrounding circumstances: Lam Wing Yee Jane v Realstar Premier Group Pte Ltd [2024] 5 SLR 51 at [42]. In the context of implied representations, the question is therefore what a reasonable person would have inferred as being implicitly represented by the representor’s words and conduct in their context: Loreley Financing (Jersey) No 30 Ltd v Credit Suisse Securities (Europe) Ltd [2023] EWHC 2759 (Comm) (“Loreley Financing”) at [293]–[295].

84 The meaning and effect of words do not fall to be viewed in a vacuum – they are shaped by the context of their communication, including the parties’ respective positions, knowledge and experience: Bankers Trust International plc v PT Dharmala Sakti Sejahtera [1996] CLC 518 (“Bankers Trust”) at 531. However, caution should be exercised to ensure that implied representations are not “too easily found”: Loreley Financing at [303(i)], citing Royscot Trust Ltd v Rogerson [1991] 2 QB 297. Any such reinterpretation should be constrained by the facts, and “should not be used as a general solvent to transform the one type of assurance with another”: British Airways Board v Taylor [1976] 1 WLR 13 at 17.

85 In determining whether an actionable statement of fact is implied by an otherwise unactionable representation (such as a statement as to the future or a statement of opinion), the following considerations are relevant and should be considered holistically.

86 First, the language used in the representation. Where the words of the impugned statement are vague or uncertain, or where the representation is accompanied by qualifications or explanations, this will militate against a statement of fact being implied as these are suggestive that the representor was not assuming responsibility for the accuracy of the representation, or any implied fact therein: Loreley Financing at [297], [303(ii)] and [345], citing Raiffeisen Zentralbank Osterreich AG v Royal Bank of Scotland plc [2010] EWHC 1392 (Comm) (“Raiffeisen”) at [111]. It is also important to assess the question of implication against the context of any express representations that were made: Loreley Financing at [296(iv)], citing Standard Chartered Bank v Ceylon Petroleum Corporation [2011] EWHC 1785 (Comm) at [562]; Brown v InnovatorOne plc [2012] EWHC 1321 (Comm) at [902]. It is difficult to see how the court can find an implied representation of fact if it is in direct conflict or otherwise inconsistent with what was made explicit.

87 Second, and on a related note, the meaning of the statement of fact that is sought to be implied must also be considered. An implied representation should be clear and capable of being spelled out from the surrounding circumstances. The more vague, uncertain, imprecise or “elastic” the meaning of the implied representation, the less likely it is that it will be implied and the more that would be required in terms of words or conduct: Loreley Financing at [303(ii)].

88 The nature and number of the purported implied statements of fact are also relevant in this connection. In Loreley Financing, for example, the claimant alleged that the defendant bank had made myriad representations (both express and implied) to induce it to purchase certain notes that were linked via a credit default swap to a portfolio of residential mortgage-backed securities (“RMBS”). The Court found the wide range of implied representations relied on difficult to comprehend, and expressed doubt as to how such numbers of different implied representations could all conceivably be made, effectively at the same time: Loreley Financing at [318]–[319]. The Court also found issues with the way in which the implied representations depended on “numerous highly complex or elastic concepts” (relating to how the defendant had structured, arranged, underwritten, issued, marketed or sold the RMBS), noting that such difficult and complex concepts could only be addressed expressly: Loreley Financing at [371].

89 Third, the knowledge of the parties and their characteristics and relative positions. This includes consideration of the nature of the parties’ relationship, any asymmetry of information, the representor’s known (or appearance of) expertise and/or degree of control over the outcome, and any vulnerability or dependency upon the representor on the part of the representee. These factors are relevant as they shed light on the effect that the representation would have had on the representee and the representor’s knowledge of the same. A description or commendation which may obviously be irrelevant because of its generality, superficiality, or laudatory nature, or because of the recipient’s own knowledge and experience, may constitute a material representation if made to another less informed or sophisticated receiver: Bankers Trust at 531.

90 Local jurisprudence has also considered this factor. In Forum Development Pte Ltd v Global Accent Trading Pte Ltd [1994] 3 SLR(R) 1097 (“Forum Development”), the Court of Appeal was concerned with a statement made by the landlord’s representative to a prospective tenant in January 1990 that a brick wall which blocked the view of the demised premises from the pedestrian walkway would be replaced by glass panels by December 1990. In finding that this constituted an actionable misrepresentation, the Court must have found that this representation as to future intention also implied a statement of existing fact, namely, that there were plans in place to carry out the replacement by December 1990: see Tan Chin Seng at [18] discussing Forum Development. In arriving at this observation, the Court of Appeal in Tan Chin Seng was clearly influenced by the asymmetry of information between the parties, as the landlord’s representative could have ascertained the facts if she had taken the trouble to inquire from those who were directly concerned with the planning and programming of the works.

91 This can be contrasted with Bisset v Wilkinson [1927] AC 177 (“Bisset v Wilkinson”), where the Court dismissed a claim in misrepresentation by the purchasers of two blocks of land against the vendor. The purchasers had bought the land for the purpose of sheep-farming and they claimed the vendor had represented that the land had a “carrying capacity of two thousand sheep”: at 179–180. As the purchasers were aware that neither the vendors nor any other person had at any time carried on sheep-farming on the land in question, they “were not justified in regarding anything said by the [vendor] as to the carrying capacity as being anything more than an expression of his opinion on the subject”: Bisset v Wilkinson at 180–181. In other words, the representation did not imply a statement of fact, as the representor did not have superior knowledge and was not in a better position than the representee to assess if the statement was an accurate one.

92 Fourth, the court must consider the context and surrounding circumstances of the representation, including the parties’ conduct and the contractual and other documentation passing between the parties. In Springwell Navigation Corporation v JP Morgan Chase Bank [2010] EWCA Civ 1221 (“Springwell Navigation”), the Court concluded that, notwithstanding that there was a relationship between the representor and the representee where the former had offered the latter financial advice over “regular and often long” telephone conversations (Springwell Navigation at [14]–[16]), that was not, by itself, sufficient to create an implied representation that there was a reasonable basis for the opinions. This was because the representee was a sophisticated investor who was well aware of the relevant risks of the investments, which were also set out very clearly in a risk disclosure document which accompanied the terms and conditions of each investment: Springwell Navigation at [121]. Similar disclaimers were found to be fatal to the finding of any implied representations in Raiffeisen at [134] and IFE Fund SA v Goldman Sachs International [2007] 1 Lloyd’s Rep 64 at [67].

93 Applying the above principles to the Representations, I take the view that while the Representations were explicitly statements of opinion as to the future, they also carried an implied representation of existing fact that Ms Lu had reasonable grounds to believe that Confetti was in a position to open and close the Series A Round and raise US$7.5 million within a compressed timeframe (ie, the Implied Representation of Fact). I explain.

94 First, the Representations were clear on their face and not qualified in any way. Unlike Ms Lu’s earlier representations in December 2020 as to the Series II Round closing date which were expressly conveyed as targets rather than definitive outcomes (see [13] above), the Representations were framed in certain and unequivocal terms.

95 Second, the meaning of the Implied Representation of Fact – that Ms Lu had reasonable grounds to believe that Confetti was in a position to open and close the Series A Round within a short period of time – was also relatively straightforward.

96 Third, and perhaps most importantly, in Mr McNaught’s own words, the “facts were not equally known”. ¹⁵⁰ From the perspective of a reasonable person in Mr McNaught’s position, Ms Lu was Confetti’s main founder and CEO and the key person driving Confetti’s fundraising efforts. In contrast, Mr McNaught was only privy to the information that Ms Lu provided to him. Ms Lu was not just in a position to decide when Confetti should open a fundraising round, whether the round would be a SAFE round or an equity financing round, and what the target investment for the round should be. She was also best placed to assess the degree of investor interest and thus the estimated time that Confetti would take to close the round after raising the target investment sum of US$7.5 million.

97 The context in which the Representations were made is also important. The Representations were made in unequivocal terms after Mr McNaught had asked Ms Lu when Confetti would be accepting funds for the next financing round and when shares would be issued. In the circumstances, a reasonable investor in Mr McNaught’s position would have understood Ms Lu’s Representations as implying that she had reasonable grounds to believe that Confetti was ready to open the Series A Round very soon and that it would close within an accelerated timeframe.

98 This was reinforced by Ms Lu’s statements that Confetti had already engaged a law firm and that its corporate secretary would issue the share certificates. ¹⁵¹ The overall impression conveyed by the Representations was clear: Confetti was ready to open the funding round imminently, and the mechanics for a quick closing were in place.

99 I do not think the fact that the closing of the Series A Round was beyond Ms Lu’s control necessarily excluded the possibility of an implied statement of fact as to Ms Lu’s honest belief, whether as a matter of law or fact. The representor’s control over the outcome of the future event is just one of the factors to be considered in the overall analysis.

100  In Liberty Sky, the first defendant represented that he needed financial support to urgently buy out certain minority investors in his company who could stifle a trade sale. The Court found that this representation impliedly represented that the trade sale was imminent and highly likely (at [49]). However, it was clear that even if the representation was that the trade deal had a 99% chance of being concluded (Liberty Sky at [45]), the defendant did not have absolute control over whether the sale would actually take place, since it was subject to the consent of the counterparty. Nevertheless, this did not prevent the Court from finding an implied statement of fact. The key question was not whether the trade sale would in fact take place, but whether the defendant had a genuine belief or reasonable grounds to believe, when he made the representations, that a trade sale was imminent.

101 Similarly, in the present case, the issue was not whether Ms Lu was in a position to guarantee that the Series A Round would be able to open and close soon, but whether she had reasonable grounds to believe that it would.

102 Moreover, as I have explained at [96] above, Ms Lu was well-placed to make that assessment based on her knowledge of Confetti’s business and the degree of investor interest in the company. The general tenor of her messages to Mr McNaught preceding the Representations had consistently been that Confetti was doing very well and in great demand:

(a) On 7 December 2020, Ms Lu claimed that Confetti “might be signing with Dole soon” and that she needed to “reserve a small portion for some angels who wanna reserve some shares of Confetti”. ¹⁵²

(b) On 17 December 2020, Ms Lu claimed that “[i]nvestors are considering how much shares to take now”. ¹⁵³

(c) From March to June 2021, Ms Lu reinforced the impression that investor demand was high. She stated that Confetti “had a bunch of [angel investors] pledge so we are likely to be oversubscribed” for the Series II Round, that Confetti had “6 parties interested for the lead [investor]” role and that by May 2021, “[t]here are many [angel investors] here who are keen to come in”. ¹⁵⁴

(d) On 29 June 2022, Ms Lu also represented that there was a New York state fund that was “keen to invest” and “likely to participate” in the upcoming Series A Round, and that Confetti’s “cash flow is now great”. ¹⁵⁵

103 In light of Ms Lu’s preceding statements regarding Confetti’s fundraising success, it was entirely reasonable for Mr McNaught to have understood the Representations as implying that Ms Lu had reasonable grounds to believe that closing within a relatively short timeframe was possible. After all, her messages suggested that she was in a position to give a reasonably accurate indication as to when Confetti would be able to raise the requisite investment sum. Under cross-examination, Ms Lu also acknowledged that a reasonable understanding of the unqualified representation that closing would be in December 2022 must have been that “most of the milestones needed to close that funding round were more or less in place”. ¹⁵⁶

104 There is, however, a caveat to Mr McNaught’s case. His primary contention was that he understood Ms Lu’s reference to a December 2022 closing as a strict deadline. I find that difficult to accept, for the following reasons.

105 By the time the Representations were made, Mr McNaught already had an idea about the general process of start-up finance. Confetti submitted that Mr McNaught was a “sophisticated investor who had commercial nous and financial acumen”, ¹⁵⁷ but I do not find this to be an accurate description. While Mr McNaught was not a “babe in the woods”, ¹⁵⁸ he clarified that his prior investment experience was limited to investments in public equity markets. ¹⁵⁹ He had repeatedly informed Ms Lu that he was inexperienced when it came to investments in start-ups or SAFE Notes. ¹⁶⁰ Yet, even as Mr McNaught was new to start-up financing, he had by August 2022 already executed the 1st, 2nd and 3rd SAFE Notes. By his own admission, Mr McNaught had, by this time, developed “an understanding of start-up finance in the abstract”, ¹⁶¹ as well as in practice. ¹⁶² He must therefore have been aware that whether and when Confetti would be able to attract US$7.5 million in investments was ultimately dependent on how much third-party investors were willing to put into Confetti and when they would decide to do so. A reasonable person in his position would not have understood the Representations as implying a rigid and immovable deadline.

106 Mr McNaught’s involvement in the earlier Series II Round would also have informed his experience that Ms Lu’s indications did not amount to hard deadlines, as she had failed to meet her earlier projected timelines (see [13]–[23] above). ¹⁶³ In fact, when Ms Lu shared her difficulties with the venture capital investors’ investment decisions and timelines in June 2022, Mr McNaught had accepted the uncertainties and agreed that “its [sic] difficult to predict the VCs”. ¹⁶⁴ In other words, he was well aware that investor decisions were ultimately beyond Ms Lu’s control. His own message to Ms Lu on 30 August 2023 (eight months after the promised closing of the Series A Round) was that “[i]n no way did I expect you would take a year to close”. ¹⁶⁵ Implicit in this was his own understanding that December 2022 was never intended to be a strict deadline – his real grievance was not that closing did not take place in December 2022, but that it should not have taken so long.

107 Nevertheless, having stated in unequivocal terms that the Series A Round would close in December 2022 after raising US$7.5 million, the objective meaning implied in the Representations, determined in light of the surrounding circumstances and viewed from the perspective of a reasonable person in Mr McNaught’s position, must have been that Ms Lu had a reasonable basis for believing that Confetti was in a position to open and close the Series A Round within a short period of time, ie, the Implied Representation of Fact.

108 Confetti raised the case of Zuraimi bin Mohamed Dahlan v Zulkarnine B Hafiz [2020] SGHC 219 (“Zuraimi”) to argue that Confetti should not be held liable as the Representations were simply statements of Ms Lu’s opinion. ¹⁶⁶ Zuraimi was also a case involving a failed investment. The plaintiffs had invested a total of S$1 million in companies owned or run by the defendants, who had allegedly misrepresented that the companies in question had an aggregate valuation in excess of S$10 million, which the plaintiffs claimed to be false. In dismissing the claim for misrepresentation in respect of this particular statement, the Court noted (at [30]) that “[b]usiness persons looking for investors […] will surely have in mind as part of their investment pitch their honest belief of what the value of their company is […] The defendants, based on an assessment of [the company’s] business [...] formed their subjective opinion on [the company’s] valuation”.

109 However, I do not think the case advances Confetti’s case to any significant degree, because the Court in Zuraimi at [31] expressly noted that a statement of opinion could well amount to an actionable misrepresentation of fact under certain circumstances, for instance, where the person expressing the opinion did not hold such an opinion, or could not, as a reasonable man having his knowledge of the facts, honestly have held it. The claim in misrepresentation was ultimately dismissed because the plaintiffs failed to prove on a balance of probabilities that “the defendants were dishonest or unreasonable in their subjective valuation”: Zuraimi at [32]. The defendants’ valuation was supported by their expert’s valuation which the court was inclined to accept, and which demonstrated that the defendants were “not far off or unreasonable in their subjective valuation”: Zuraimi at [35]. The case therefore does not suggest that a claim in misrepresentation can never lie against a statement of opinion. In fact, Confetti itself conceded that statements of opinion may amount to actionable misrepresentations when the representor did not hold such an opinion or could not, as a reasonable person having knowledge of the facts, have honestly held it (see [82] above). ¹⁶⁷

110 Confetti’s final repartee was that the only implied representation referred to in Mr McNaught’s pleadings was that “Confetti had already raised substantial funds and would as a matter of fact close the Series A funding round in December 2022”. ¹⁶⁸ Mr McNaught should therefore not be allowed to rewrite his pleaded case by arguing that the Representations also implied that Ms Lu had reasonable grounds to believe that Confetti was in a position to raise US$7.5 million and achieve a December 2022 closing, as this implied representation was never pleaded.

111 I start by addressing Mr McNaught’s pleaded case that the Representations also contained an implied statement that Confetti had already raised substantial funds for the Series A Round. ¹⁶⁹ This is a non-starter, since Mr McNaught confirmed under cross-examination that Ms Lu never suggested that substantial funds had already been raised during their conversation on 15 August 2022. ¹⁷⁰ In fact, any suggestion that the Representations implied that substantial funds had already been raised would not make sense as Ms Lu’s message indicated that the Series A Round had not even opened yet. ¹⁷¹

112 Turning to Mr McNaught’s revised contention that the Representations implied that Ms Lu had reasonable grounds to believe that Confetti was in a position to raise US$7.5 million and close the round in a few months, ¹⁷² I see the force of Confetti’s objections on the point of pleading. Pleadings serve an important function of giving the other party notice of the case they have to meet, and define the issues the court will have to decide: V Nithia v Buthmanaban s/o Vaithilingam [2015] 5 SLR 1422 (“V Nithia”) at [34]–[38]. Allegations of fraud or misrepresentation must be pleaded with “utmost particularity”: JTrust Asia Pte Ltd v Group Lease Holdings Pte Ltd [2020] 2 SLR 1256 (“JTrust Asia”) at [116]. Full particulars of the misrepresentations must be pleaded, including the nature and extent of the misrepresentation, whether the representation was made orally or in writing, and the specific sense which the representee understood the representation, if it was ambiguous: Fuji Xerox Singapore Pte Ltd v Mazzy Creations Pte Ltd [2021] SGHC 193 at [53]–[54]. Failure to adequately plead particulars of misrepresentation may lead to an unsuccessful claim: JTrust Asia at [116], citing Bullen & Leake & Jacob’s Singapore Precedents of Pleadings vol 2 (Jeffrey Pinsler gen ed) (Sweet & Maxwell, 18th Ed, 2016) at para 20.20.

113 I take Confetti’s point that Mr McNaught’s Statement of Claim did not adequately plead the implied representation which he is now seeking to rely on. The implied statement of fact that was pleaded was materially different from that which he asserted at trial. While the Representations were reproduced in his pleadings, the implied statement of fact which formed the basis of his case at trial was not. This was a material fact that should have been pleaded to enable Confetti to know the case it had to meet, especially as the specific sense in which Mr McNaught understood the Representations was implied as opposed to express.

114 Nevertheless, it is open to the Court to consider an unpleaded point where there is no irreparable prejudice caused to the other party in the trial that cannot be compensated by costs, or where it would be clearly unjust for the court not to do so: How Weng Fan v Sengkang Town Council [2023] 2 SLR 235 (“How Weng Fan”) at [20], citing V Nithia at [40]. For example, in H8 Holdings Pte Ltd v RIC Dormitory (SG) Pte Ltd [2024] SGHC 177 (“H8 Holdings”), the defendants argued that the claimant had failed to plead the particularisation of its losses and only set it out for the first time in its opening statement. Although the Court disagreed with the submission and found that the claimant had sufficiently pleaded that it suffered damage, and the valuation method by which it intended the damage to be assessed, the Court went on to find that even if the pleadings were deficient in this respect, there was no prejudice occasioned to the defendants as they had adequate notice of and opportunity to engage with the issue: H8 Holdings at [126]–[127].

115 In this case, Mr McNaught’s revised case on the implied statement of fact arising from the Representations was raised early in his opening statement filed prior to trial. ¹⁷³ No objections as to pleadings were raised, and evidence was given and witnesses cross-examined on that basis. I also accept Mr McNaught’s point that even if the implied statement of fact he relied on at trial had been specifically pleaded, Confetti’s defence would have been exactly the same. ¹⁷⁴ Ms Lu had directly addressed the contention as to whether she had reasonable grounds to believe that Confetti could open and close the Series A Round within an accelerated timeline both in her affidavit of evidence-in-chief (“AEIC”), ¹⁷⁵ and during cross-examination. ¹⁷⁶ The parties’ closing submissions also canvassed this very same point in detail. ¹⁷⁷ As Confetti had advance notice of the case that Mr McNaught intended to run and was able to marshal its evidence and arguments to meet it, I do not see any prejudice to Confetti that cannot be compensated by costs: How Weng Fan at [20].

116 To sum up, I find that the Representations also implied the Implied Representation of Fact, ie, that Ms Lu had reasonable grounds to believe that Confetti was in a position to open and close the Series A Round and raise US$7.5 million within a compressed timeframe.

117 The question that naturally follows from this is whether this implied statement of fact was false. Given the nature of the Implied Representation of Fact, however, the determination of the falsity of the statement would engage issues relating to Ms Lu’s state of mind when she made the Representations, ie, whether she had an honest belief based on reasonable grounds that Confetti could open and close the Series A Round in a few months. As this is more directly addressed in Issue 3, I deal with this later in my judgment.

118 I turn to consider Issue 2. For a claim in misrepresentation to succeed, it is necessary to establish that the representee was induced by or had relied upon the alleged representations. Thus, even assuming that the representation was false, if the representee would have taken the same course of action regardless of the representation, there would be no action in misrepresentation: Gary Chan Kok Yew, The Law of Torts in Singapore (Academy Publishing, 2nd Ed, 2017) at para 14.017.

119 Reliance looks at the actions of the representee arising from a state of mind or will engendered by the representation concerned. The representation must “act upon the will of the representee”, such that the representee is influenced to change his behaviour in reliance on the representation: Wee Chiaw Sek Anna v Ng Li-Ann Genevieve [2013] 3 SLR 801 at [43]–[44]. The element of reliance requires that the “misrepresentation play a ‘real and substantial’ role in inducing the plaintiff to act, though it need not be the sole or decisive factor”: Ma Hongjin v Sim Eng Tong [2021] SGHC 84 (“Ma Hongjin”) at [64], citing Panatron Pte Ltd v Lee Cheow Lee [2001] 2 SLR(R) 435 (“Panatron”) at [23].

120 Whether there was reliance is a question of fact, and the burden lies on the representee to establish this: Raiffeisen Zentralbank Osterreich AG v Archer Daniels Midland Co [2007] 1 SLR(R) 196 at [56]. However, where the representation is material in that it would “affect a normal and reasonable person”, a rebuttable presumption of inducement arises: Lo Yew Seng v Astrawati Aluwi [2026] SGHC(A) 18 (“Lo Yew Seng”) at [61], citing The Law of Contract in Singapore (Andrew Phang Boon Leng gen ed) (Academy Publishing, 2nd Ed, 2022) (“The Law of Contract”) at para 11.093.

121 As a start, I accept that the Implied Representation of Fact that Ms Lu had reasonable grounds to believe that Confetti was in a position to open and close the Series A Round within a compressed timeframe was a material one. A reasonable investor considering whether to make a substantial investment in a start-up would naturally take into account the timelines pursuant to which his investment would bear fruit, as part of his decision-making calculus.

122 Although this gives rise to a presumption of reliance, however, I find that the presumption has been rebutted on the facts. In my assessment, the Implied Representation of Fact did not play a real and substantial role in Mr McNaught’s decision to invest the US$1 million in Confetti, primarily because: (a) he had already made up his mind to invest this money in Confetti even before the Representations were made; and (b) Ms Lu had corrected any misimpression that an expedited closing was likely by the time Mr McNaught finalised his investment by executing the 4th SAFE Note. A misrepresentation that is sufficiently corrected before the representee acts on it is no longer actionable: The Law of Contract at para 11.063.

123 Mr McNaught pleaded that the Representations induced him to invest US$1 million in Confetti. ¹⁷⁸ However, more precision is necessary, as the date when Mr McNaught’s investment was crystallised was not entirely clear from his case. While Mr McNaught gave instructions for the funds to be transferred on 9 September 2022, the 4th SAFE Note recording the terms of that investment was only executed on 15 September 2022. The timing of the investment is critical as there were a number of representations made by Ms Lu in the intervening period which may have dispelled any impression that Representations had initially engendered in Mr McNaught.

124 Mr McNaught claimed in submissions that the investment was made on 9 September 2022 once he gave instructions to his bank for the wire transfer to be made, with the 4th SAFE Note executed on 15 September 2022 merely being a “stopgap measure to record that investment”. ¹⁷⁹ This contention was presumably made so that I would not have regard to any representations made by Ms Lu after 9 September 2022. According to counsel’s oral closing submissions, Mr McNaught’s case was that there was a binding contract between parties on 9 September 2022 once he gave instructions for the wire transfer, on terms that he would invest US$1 million in Confetti and obtain shares in return. ¹⁸⁰

125 I am unable to accept this characterisation of events for a number of reasons. First, Mr McNaught’s belated contention of an earlier contract was inconsistent with his Statement of Claim, which proceeded on the basis that his US$1 million investment was made “by way of the 15 September SAFE Agreement” ¹⁸¹ or “under the 15 September SAFE Agreement” ¹⁸² . The only contract between the parties that was pleaded and sought to be rescinded was the 4th SAFE Note executed on 15 September 2022.

126 The suggestion that Mr McNaught’s investment was made pursuant to an earlier contract on 9 September 2022 was also inconsistent with his own AEIC, various parts of which reinforced the point that the 4th SAFE Note was the only contract in existence between parties. ¹⁸³ Even on the stand, Mr McNaught repeatedly referred to his decision “to invest in a capless SAFE”, ¹⁸⁴ and emphasised that the Representations remained operative on his mind until 15 September 2022. ¹⁸⁵ Clearly, Mr McNaught viewed the 4th SAFE Note as the contract that represented his investment.

127 It is also difficult to follow the logic of this new gloss to Mr McNaught’s case, which was alluded to for the first time in oral opening submissions. ¹⁸⁶ In my view, this contention materially changed the complexion of his case. If parties already had a binding contract in place by 9 September 2022, the Representations would presumably have formed part of the terms of this alleged contract as these were the only specific terms that had been discussed by that point and were clearly intended to induce Mr McNaught to make the investment. Yet Mr McNaught did not suggest that the Representations formed part of this earlier contract, and his claim was not for breach (or even rescission) of this alleged contract, but for rescission of the 4th SAFE Note based on the Representations. This can only be explained if the 4th SAFE Note was the only contract between the parties relating to Mr McNaught’s investment.

128 Putting aside the difficulties reconciling this new contention with Mr McNaught’s pleadings and evidence, there was, in any case, insufficient certainty of terms for a binding contract to arise as at 9 September 2022. Even as Mr McNaught confirmed that he would be investing US$1 million and transferred the funds, ¹⁸⁷ there was no certainty as to the structure and material terms of his investment, eg, it was still not confirmed at this point whether it would be for equity, and if so, at what valuation, and when the shares would be issued. Parties were well aware that the “mechanics” of the investment would be finalised and “finetune[d]” later, as Ms Lu’s message on 29 June 2022 made clear. ¹⁸⁸ It was only when the 4th SAFE Note was executed that the material terms of this US$1 million investment were spelt out and agreed.

129 This is reinforced by the fact that all of Mr McNaught’s previous investments were recorded in formal contracts with Confetti. Ms Lu had also clarified on 6 September 2022 (just before Mr McNaught had given instructions for the wire transfer) that the funding round was an equity round where shares would be issued, and a contract would be provided based on this “structure”. ¹⁸⁹ In other words, both Mr McNaught and Ms Lu understood that the former’s investment would be made pursuant to a formal contract, as per their usual practice, and not simply based on WhatsApp messages and a bank transfer.

130 I accept that Mr McNaught had, on 13 September 2022, asked for a “SAFE note or a receipt for the 1M” to satisfy his bank, ¹⁹⁰ and Ms Lu conceded that the 4th SAFE Note was to acknowledge his investment. ¹⁹¹ However, this is not conclusive as to the nature of the 4th SAFE Note. While Mr McNaught may have decided to invest US$1 million with Confetti when he arranged for the wire transfer, he also accepted that he did not have a clear idea of how this investment would be executed at the time. ¹⁹² Construed in this context, the 4th SAFE Note was not a mere “stopgap” to record an investment already made, but formed the very terms of the investment itself.

131 Moreover, it is undisputed that the terms of the proposed investment materially changed between 9 and 15 September 2022. Ms Lu had indicated up until 6 September 2022 that the investment would be for shares as it was “an equity round”. ¹⁹³ However, what was eventually signed on 15 September 2022 was a SAFE Note, which was a fundamentally different investment structure. This was a substantial departure from what was previously discussed, and one which Mr McNaught accepted by signing and returning the 4th SAFE Note without any protest. Having done so, it must have been apparent to him that it was the 4th SAFE Note that set out the terms of his investment of US$1 million, and not any earlier (inconsistent) communications. In fact, even if I accept his contention that there was a binding contract as at 9 September 2026 that he would invest US$1 million and get shares in return, the 4th SAFE Note represented a material variation that superseded any prior agreement.

132 Significantly, Mr McNaught did not seek to disclaim the terms of the 4th SAFE Note. On the contrary, he actively relied on its terms to support his case that he was induced by the Representations to make his investment. His evidence was that he noticed the absence of a valuation cap in the 4th SAFE Note “[i]mmediately”, ¹⁹⁴ but that he was prepared to sign the 4th SAFE Note without a valuation cap precisely because he relied on Ms Lu’s Representations that the Series A Round would close soon. In my view, Mr McNaught was impermissibly seeking to have it both ways: he downplayed the significance of the 4th SAFE Note to discount the effect of Ms Lu’s subsequent representations, yet he also sought to rely on the terms of the 4th SAFE Note to demonstrate his reliance on the Representations.

133 Another aspect of Ms Lu’s evidence is material on this point. Ms Lu’s testimony in cross-examination (albeit after some equivocation) was that although she had unilaterally changed the investment from one for equity to one for a SAFE Note, she would have returned the US$1 million to Mr McNaught “[i]f he wanted his money back because it was not an equity [sic] but a SAFE”. ¹⁹⁵ Ms Lu testified that she would have been prepared to refund any sums invested not just by Mr McNaught, but by any other investors who had made investments on the understanding that the funding round was an equity round, only to have the basis for their investment unilaterally changed (ie, into a SAFE Note round). ¹⁹⁶

134 I accept Ms Lu’s evidence on this point as it was consistent with the documentary evidence. Investments raised in Confetti’s funding rounds were consistently recorded in formal contracts (ie, SAFE Notes). Ms Lu had also sought Mr McNaught’s consent to convert his earlier investment in the Series II Round (which was initially represented to him as an equity round) into a SAFE Note round instead (see [24] above). This is significant because it means that the transfer of the US$1 million was not the proximate cause of loss Mr McNaught claimed to have suffered. Mr McNaught could have refused to execute the draft SAFE Note and demanded his US$1 million back if he was dissatisfied with its terms, since parties had not executed any binding contract at that point. Thus, the mere transfer of funds was inchoate. Mr McNaught’s investment only crystallised on 15 September 2022 when he signed and returned the 4th SAFE Note which recorded the terms of his investment with Confetti.

135 For completeness, Mr McNaught’s claim based on s 2(1) of the MA also relied on the 4th SAFE Note, since a claim founded on s 2(1) of the MA is an action in contract (Trans-World (Aluminium) Ltd v Cornelder China (Singapore) [2003] 3 SLR(R) 501 at [124]), and Mr McNaught did not plead the existence of any other contract. Therefore, the relevant time for assessing whether there was reliance on the Representations for all of Mr McNaught’s causes of action is on 15 September 2022, when Mr McNaught executed the 4th SAFE Note and finalised the terms of his investment.

136 The key question then is what was operating on Mr McNaught’s mind at the time this investment was made, ie, on 15 September 2022. In this regard, I note the following developments occurred from 15 August 2022 to 15 September 2022 which are material to Mr McNaught’s state of mind at the relevant time: ¹⁹⁷

(a) On 31 August 2022, when Mr McNaught asked when Confetti could accept funds for Series A and whether shares could be issued “soon”, Ms Lu replied that they were “already opening up Series A” and that shares would be issued “after the entire 7.5m round is done”.

(b) On 6 September 2022, when Mr McNaught asked about the modality of the investment, ie, whether through a SAFE Note or share issue, Ms Lu replied to say “[s]hares, its an equity round [sic]”.

(c) On 12 September 2022, Mr McNaught asked about the valuation on which the funding round was proceeding, and how it was actually calculated. Ms Lu informed him that “the lead investor will price the round […] so everyone will convert based on that valuation”.

(d) Critically, Mr McNaught then asked if there was a lead investor yet and if so whether they had given any indication of valuation. Ms Lu answered “no lead yet as we are preparing data room right now, almost done. we can open next week and start the process.” [emphasis added]. She also mentioned that for the valuation, which she estimated at US$20–25 million post-money, “we will see after we get the lead”.

(e) On 13 September 2022, after Mr McNaught sought a “SAFE note or a receipt for the 1M”, Ms Lu sent the draft 4th SAFE Note with the message that “it will convert to whatever [valuation] the lead VC sets”.

137 It is evident from the repeated references to a lead investor in this series of messages that both parties understood that securing a lead investor was a prerequisite to closing the Series A Round successfully. Mr McNaught, in asking on 12 September 2022 whether there was a lead investor yet, was cognisant of the importance of having one. He also accepted in cross-examination that the lead investor would set the valuation of the round. ¹⁹⁸ Realistically, without such a valuation, fundraising for an equity round (as opposed to a SAFE Note round) could not make any substantial progress as the other investors would not know the basis upon which they would be making their investments. ¹⁹⁹ The failure to secure a lead investor was therefore an existential challenge to the closing of the Series A Round.

138 Further, the effect of Ms Lu’s messages was that, not only was a lead investor not found, but the Series A Round had not even opened by 12 September 2022. This was already a breach of a part of the explicit terms of the Representations, ie, that the Series A Round would open by August 2022. Moreover, I note that Mr McNaught had asked Ms Lu again on 31 August 2022 (even before he transferred the US$1 million) when Confetti could begin accepting funds and whether shares could be issued “soon”. Ms Lu’s response was not to restate the initial December 2022 timeline but to explain that shares would only be issued “after the entire 7.5m round is done”. ²⁰⁰ In other words, not only did Mr McNaught himself not seem to accept the earlier Representations at face value, Ms Lu had also clarified any misimpression he may have had that closing could be achieved by a definitive timeline.

139 In fact, Mr McNaught accepted on the stand that with hindsight, the timelines indicated in Ms Lu’s Representations would have become “technically impossible” by this point, but he argued that the warning signs were not flagged to him. ²⁰¹ However, I do not think hindsight or explicit warnings were necessary for him to come to such a conclusion.

140 Although I accepted above at [105] that Mr McNaught was not an experienced investor when it came to start-ups, he was not a complete novice by this time. He had been made aware on 13 September 2022 that the lead investor would likely be a venture capital investor, ie, that the valuation will be set by “the lead VC”. ²⁰² Further, Ms Lu had earlier explained on 30 May 2021 that venture capital investors typically needed three to six months to obtain the necessary internal approvals to invest. ²⁰³ Based on Ms Lu’s message on 12 September 2022, the data room would only open in a week. ²⁰⁴ Thus, even based on the limited information that Mr McNaught was provided by 13 September 2022, he would have known that the earlier indicative closing deadline of December 2022 would have been highly improbable, if not impossible. The only way that Mr McNaught could still have believed, and therefore relied on, Ms Lu’s implied representation that the Series A Round would be imminently closing at the time he executed the 4th SAFE Note was by ignoring the further information Ms Lu provided to him and deliberately turning a blind eye to the series of warning signs being revealed.

141 For Mr McNaught’s misrepresentation claims to succeed, he must establish that the Representations played a real and substantial role in his decision to make the investment on 15 September 2022 (at [119] above). A crucial plank of his case was that, unlike all the other SAFE Notes, the 4th SAFE Note did not contain a post-money valuation cap. His argument was that he did not take issue with this because he relied on Ms Lu’s representation that the funding round would close in a few short months, thereby limiting his risks as to dilution. ²⁰⁵

142 However, by the time he signed the 4th SAFE Note on 15 September 2022, Ms Lu had also made it clear to him the Series A Round had not even opened yet, and that no lead investor had been secured. ²⁰⁶ In other words, any mistaken impression as to the imminent closing of the Series A Round implied in the Representations would already have been dispelled. While I accept that Mr McNaught consistently affirmed that he had no reason to doubt an assurance given in writing by the CEO of Confetti, ²⁰⁷ there was also no reason for him to ignore the other information that the CEO provided to him thereafter.

143 In my assessment, the Representations did not play any real or substantial role in Mr McNaught’s decision to make the US$1 million investment via the 4th SAFE Note as he had already decided to make the investment in Confetti even before any of the Representations were made.

144 I agree with Confetti’s broad submission that as a matter of principle, if the representee had already made up their mind prior to the representation, it would be difficult to suggest that there was reliance on the statement since the representee would not have acted any differently even if the representation had not been made. ²⁰⁸ In this regard, the context in which Mr McNaught made this particular investment is important. Unlike some of his earlier investments, Mr McNaught had been the one to approach Ms Lu on 29 June 2022 to invest, explaining that he had US$1 million in cash and would “definitely like to participate” in the Series A Round. ²⁰⁹ He reiterated to Ms Lu on 15 August 2022 that he would be closing his investment account and “will invest [US$1 million] in confetti instead”. ²¹⁰ The only logical inference that can be drawn from these messages is that Mr McNaught had already decided to invest the US$1 million in Confetti even before the Representations were made.

145 I accept that there was no firm agreement or contract in place between parties until 15 September 2022. However, the point remains that Mr McNaught had already made up his mind to invest in Confetti, and this was likely because of his ardent belief in Confetti’s business and its potential for success.

146 Mr McNaught’s evidence, which I accept, was that he was very taken by Confetti’s business after his initial meetings with the authoritative third parties referred to him by Ms Lu, including his meeting with Mr Cadeo and the food scientists. ²¹¹ The documents contained in the data room in February 2021 boosted his confidence in Confetti’s growth, ²¹² and Ms Lu’s updates only served to reinforce his conviction that the company was bound for success.

147 Mr McNaught’s belief in Confetti remained unwavering up until 15 September 2022, when he made his investment. The contemporaneous correspondence in the preceding months is replete with instances where Mr McNaught affirmed his confidence in Confetti’s business. On 29 June 2022, he indicated that the good news shared by Ms Lu made him “very happy about [his] confetti investment and glad [he] didn’t try to outsmart the market”. ²¹³ On 4 July 2022, Mr McNaught seriously contemplated the possibility of Confetti being “bought out”. ²¹⁴ Short of an IPO, being “bought out” by a larger or institutional entity would be the ultimate success story for a start-up like Confetti, as its investors would stand to gain a windfall. On 22 July 2022, Mr McNaught again expressed his optimism about Confetti’s prospects, commenting to Ms Lu that “Confetti is blossoming beautifully”. ²¹⁵

148 As Mr McNaught candidly admitted, ²¹⁶ his main motivation was that Confetti could be the “next big thing” and he would miss out if he did not invest. In fact, sandwiched between his discussions with Ms Lu about his investment was a separate discussion on the branding and merchandising options for Confetti. In this regard, Mr McNaught only had good things to say. ²¹⁷ All this makes clear that at least up until 15 September 2022, Mr McNaught had fully bought into the company and Ms Lu’s vision, and was motivated to invest so that he would not miss out on a potentially lucrative investment opportunity.

149 The conduct of the representee after entering into the agreement can also be relevant in establishing his state of mind at the relevant time: Ma Hongjin at [86]. Mr McNaught’s subsequent actions after 15 September 2022 cast further doubt on his purported reliance on the Representations.

150 First, even after 15 September 2022, Mr McNaught’s confidence in Confetti’s business remained unabated. This point was made most clearly in his email to investors on 20 November 2022 in response to the crisis with Mr Fong (see [45]–[51] above), where he expressed his view that in a start-up, “flexibility, understanding and faith is required” and stated that “[f]undamentally, [he] believe[d] in the mission of Confetti”. ²¹⁸

151 Second, there are other indications that Mr McNaught was not concerned with whether the Series A Round would in fact close within a compressed timeframe. I find it incongruous that Mr McNaught never asked about the progress of the Series A Round between September and December 2022, if, as he claimed, the accelerated closing was important to him. Even as he continued to exchange messages with Ms Lu throughout this period, he did not raise the topic of the December 2022 deadline once, only reaching out to ask about this for the first time on 18 January 2023. ²¹⁹ I accept that Mr McNaught may have been consumed by personal stressors during this period due to his parents’ illness. ²²⁰ However, this did not distract him from discussing numerous other substantive matters relating to Confetti with Ms Lu. Mr McNaught’s conduct in not seeking any updates from Ms Lu anytime between September and December 2022 was not consistent with the actions of someone for whom an accelerated closing was material.

152 Third, Mr McNaught’s reaction to the Investors’ Call raised further questions about whether the implied representation as to an imminent closing had any real bearing on his decision to invest. On this note, I accept Ms Lu’s evidence that she had informed the investors during the Investors’ Call that the Series A Round would likely close by end February or March 2023. ²²¹ This was consistent with the slides for the Investors’ Call which explicitly mentioned the Series A Round fundraising efforts, described them as a “challenge”, and requested assistance to introduce “strategic VCs or angels that are impact driven, and ideally with a background in F&B”. ²²² Ms Lu’s evidence was also corroborated by the minutes of the Investors’ Call sent afterwards, which clearly stated a revised timeline with “Series A starting this month and aim[ing] to close by 28 February 2023”. ²²³ This already represented a breach of the December 2022 timeline that Ms Lu had conveyed in the Representations.

153 Mr McNaught asserted in cross-examination that he had “no recollection of [Ms Lu] providing any information whatsoever about the timeline changing” and he did not look at the presentation slides until after he had commenced the present suit. ²²⁴ His explanation was that, at the time, he was focused on supporting Ms Lu as she was under attack and he was sympathetic to her predicament. ²²⁵

154 I find this assertion to be a rather incredible one, particularly if, as he claimed, the imminent closing of the Series A Round played a substantial role in his decision to invest. The Series A Round was plainly discussed during the Investors’ Call. In fact, Mr McNaught’s claimed ignorance of the discussion is contradicted by his own AEIC, where he stated that Ms Lu was “extremely vague on key issues such as [...] fundraising and the closing of the Series A fundraising round” during the call. ²²⁶ For Mr McNaught to be able to say this in his AEIC, he must have been aware that Ms Lu had broached this topic during the Investors’ Call. It then begs the question as to why, having been informed of the delayed closing by mid-November 2022, he did not raise this issue with Ms Lu at all.

155 It is even more inconceivable that, based on Mr McNaught’s own evidence, he and Ms Lu did not speak about the progress of the Series A Round at all during her almost two-week stay with him in Scotland immediately after the Investors’ Call. ²²⁷ In his email dated 20 November 2022, Mr Fong explicitly stated his belief that “Confetti will struggle to raise money” for the Series A Round. ²²⁸ The progress of the Series A Round was thus placed squarely in focus at this critical point in time when they were staying together. Mr McNaught also conceded that part of the concerns relating to Mr Fong’s unhappiness, and Mr McNaught’s own motivation for the buyout of the “dissenting” investors, was the risk that Mr Fong could jeopardise the closing of the Series A Round. ²²⁹ In light of this, Mr McNaught must have been aware, by this point, of the serious difficulties Confetti had in meeting the December 2022 deadline. His failure to react or even query Ms Lu on this point signals that he did not seriously believe, or was not concerned with, the Series A Round closing by December 2022 or anytime “soon”.

156 Rather, Mr McNaught’s email response to Mr Fong and the other Confetti investors on 20 November 2022 makes plain that he was unperturbed by the setback as he was completely convinced by Confetti’s business and vision. Mr McNaught’s focus and concern for the “governance” issues raised during the Investors’ Call demonstrated that his main interest was to “really understand what is going on” and how Ms Lu could improve. ²³⁰ If these operational concerns were the issues at the forefront of his mind at the material time, then the corollary is that the December 2022 closing date, which was by this time just a month away, must not have been all that important to him.

157 Given that Mr McNaught’s subsequent conduct evinced no real concern about Confetti’s inability to close the Series A Round within the expedited timeframe that was communicated to him, I find it difficult to accept that his decision to execute the 4th SAFE Note was in any way influenced by the Implied Representation of Fact. In my assessment, the more likely explanation for his inaction was because he was, in his own words, content to be “hands off” and trust Ms Lu to run the business which he firmly believed in. ²³¹

158 What is perhaps most damning is that, even after he had received updates that made it clear that the Series A Round could not close anytime soon, Mr McNaught continued to “double down” on his investments in Confetti. After the disastrous Investors’ Call when Ms Lu had indicated that closing by December 2022 was impossible, Mr McNaught offered to take over Mr Fong’s investment and the SAFE Notes of other “dissenting” Confetti investors. ²³² The novation of the SAFE Notes was only completed, and the Novation Agreement executed, on 3 February 2023, well after the December 2022 deadline. ²³³ Mr McNaught’s conduct underscores the point that he had invested in Confetti because of his continued faith in the company’s business and eventual success, and not in reliance on the Implied Representation of Fact that Ms Lu had reasonable grounds to believe that a compressed timeline for closing was achievable.

159 The sequence of events surrounding the novation of the SAFE Notes from other “dissenting” Confetti investors also reveals that Mr McNaught was perfectly capable of seeking clear and enforceable positions when he wanted to do so. ²³⁴ In his email to Confetti’s lawyer, Mr Chris Wilson, on 23 November 2022 discussing the novation documentation, Mr McNaught asked for the “wording [of a non-disparagement clause] to be robust and enforceable” and suggested that it “explicitly stat[e] that further discussion of any nature with current or prospective future investors or buyers in relation to Confetti is prohibited.” ²³⁵ This stands in stark contrast with Mr McNaught’s evidence that he did not seek a confirmation of the December 2022 deadline as he “received that in writing from someone [he] trusted”. ²³⁶ If Mr McNaught was capable of insisting on specific contractual language where it was important to him, then his failure to raise the issue of the delayed closing of the Series A Round is even more illuminating as to his state of mind.

160 My conclusion from the above is that any implied representation that Confetti was in a position to close the Series A Round within a compressed timeframe did not play a real or substantial role in Mr McNaught’s decision to invest. By 15 September 2022, he was made aware of facts which rendered the December 2022 timeline all but impossible to meet. Instead, he held steadfast in his optimism about Confetti’s business prospects ²³⁷ and executed the 4th SAFE Note without any complaint as to its terms. Mr McNaught’s conviction in Confetti’s business and vision was the real driver behind his decision to invest. Given his steadfast belief in Confetti’s business and potential for success, there is nothing to suggest that he would have acted differently even if the Implied Representation of Fact had not been made.

161 I therefore find that the presumption of inducement has been rebutted as the evidence shows that the Representations did not play a real and substantial role in Mr McNaught’s decision to invest US$1 million in Confetti. As reliance was a common requirement to all the pleaded causes of action, his claims must accordingly be dismissed.

162 In light of my finding above, it is strictly unnecessary for me to deal with the remaining issues pertaining to fraud, negligence or damage. Nevertheless, as the issue was extensively canvassed in cross-examination and submissions, I also set out my views on Issue 3, which relates to Ms Lu’s state of mind when she made the Representations (and which also goes to the falsity of the Implied Representation of Fact under Issue 1, viz, whether Ms Lu had reasonable grounds to believe that Confetti was in a position to open and close the Series A Round and raise US$7.5 million within a compressed timeframe).

163 Confetti did not seriously dispute that Ms Lu made the Representations with the intention that Mr McNaught would act upon them. If it was necessary to do so, I would have been prepared to find that Ms Lu had made the Implied Representation of Fact recklessly, not caring whether it was true or false.

164 The issue is not whether Confetti ultimately achieved the forecasted timelines, but whether Ms Lu had reasonable grounds to believe that Confetti was in a position to do so.

165 Ms Lu emphasised repeatedly that she honestly believed that these tight timelines were possible, and that she had reasonable grounds for her belief, which she claimed was informed by the contemporaneous fundraising landscape, comparable data, objective validation of Confetti by sophisticated market participants and Confetti’s own commercial traction. ²³⁸ While I am mindful not to judge Ms Lu’s assessments with the benefit of hindsight, having considered the contemporaneous evidence, I am unable to agree that Ms Lu had any reasonable basis for the Representations that she made.

166 I accept that Confetti had achieved some moderate success by 15 August 2022. It had secured distribution channels with major retailers in Singapore, and had also just entered the US market with plans to expand into the UK. It also had a good track record of being selected for accelerator programmes in Singapore and the US. ²³⁹ Nevertheless, contrary to Ms Lu’s representation to Mr McNaught in June 2022 that cash flow was “great”, Confetti’s revenues remained poor. Based on Confetti’s Income Statement and Balance Sheet as at 15 August 2022, its gross profit from sales was only S$117,989.02 while its operating expenses for the same period were S$171,745.26. ²⁴⁰ Further, its Sales Report stated that from 2020 to 2022, its local revenue only totalled S$475,320, ²⁴¹ and its sales revenue for 2022 was just S$259,532. ²⁴² In fact, Confetti’s lacklustre revenues in 2022 were the subject of serious concern during the Investors’ Call. ²⁴³

167 I accept that Confetti’s earlier rounds of fundraising had been successful in that Ms Lu had met (and even exceeded) the fundraising targets she had initially set, but by 15 August 2022, Confetti had only raised a total of approximately US$1.98 million since its incorporation. ²⁴⁴ There was little by way of evidence to suggest that Confetti was suddenly in a position to raise almost four times that amount in a short period of time, especially when its revenue numbers were nowhere close to what had been projected. ²⁴⁵

168 Ms Lu’s projections as to Confetti’s revenue and her assessment of potential investor demand appeared to be based not on the available data or any credible market insight but sheer unfounded optimism. For instance, in an interview with a magazine in November 2020, Ms Lu indicated that Confetti’s projected revenue in 2021 was US$6.7 million. ²⁴⁶ This represented revenue growth in the order of 10,000% from Confetti’s total revenue in 2020 which was, needless to say, highly implausible. In fact, Confetti’s total revenue in Financial Year 2021 was only S$182,817. ²⁴⁷

169 As part of Confetti’s marketing materials, Ms Lu had also forecast further revenue growth of up to US$25 million in 2022 and up to US$493 million in 2025. ²⁴⁸ In cross-examination, Ms Lu could not explain how she arrived at these numbers, nor could she explain (even with the benefit of hindsight) how Confetti’s actual business and revenue figures could substantiate her projected timelines for the Series A Round. ²⁴⁹

170 Ms Lu’s key defence was that Confetti did not need to have strong revenue to secure the necessary investment of US$7.5 million to close the Series A Round because other brands in the same food technology and snack industry had achieved similar fundraising success without having stronger revenue figures (or even a viable product). ²⁵⁰ On the stand, Ms Lu repeatedly pointed to other companies which had managed to raise similar, if not far larger, sums in investment. However, apart from the fact that these other brands were in the same industry as Confetti, Ms Lu could point to no concrete evidence to explain why it was reasonable for her to benchmark her company against these other, highly successful businesses. ²⁵¹ As Mr McNaught rightly pointed out, just because another brand in the same market segment has achieved a certain valuation or fundraising target does not mean that Ms Lu had a reasonable basis to believe that Confetti would be able to achieve similar success. ²⁵² By this logic, any start-up could reasonably represent that it would be able to raise millions in a few short months by simply relying on the fact that the most successful brands in the same space had managed to do so. Ms Lu’s self-professed methodology of comparing Confetti to other, far more successful companies simply because they were in the same industry was inherently unreliable and entirely unrealistic. ²⁵³

171 In my assessment, Ms Lu did not have any reasonable grounds for her belief that Confetti would be able to raise US$7.5 million and close the Series A Round within an accelerated timeframe. On the evidence of Mr de Wit, who was Confetti’s witness and a member of Confetti’s Advisory Board, ²⁵⁴ there were various factors which had caused the contemplated investment from Grupo Bimbo (see [9(b)] above) not to materialise. ²⁵⁵ These included macroeconomic factors which negatively impacted investor confidence, such as: (a) inflation in 2022, when interest rates were at a 15-year high; ²⁵⁶ and (b) the Russia-Ukraine conflict, which started in February 2022, exacerbated inflationary pressures and substantially weakened investor confidence. ²⁵⁷

172 Accepting Mr de Wit’s evidence to be true, Ms Lu’s persistent belief in the potential for Confetti’s unprecedented fundraising success in August 2022 would have been even more misplaced. By her own account, Ms Lu was aware of these factors, ²⁵⁸ and Mr Fong had also cited these very same developments to her when they discussed what a reasonable post-money valuation of Confetti would be. ²⁵⁹ While I acknowledge that generally, the requirement to prove a dishonest state of mind is exacting and being careless or overly optimistic about a company’s prospects is insufficient, the present facts suggested to me that Ms Lu’s baseless optimism in Confetti’s prospects was “so unreasonable that it warrants the inference” that she could not have honestly held it: Chong Jorina at [112]. While I would not go so far as to find that she made the Implied Representation of Fact dishonestly, by continuing to represent that Confetti would be able to hit its lofty funding goals in the face of these strong investor headwinds and in the absence of any credible data, Ms Lu was, at the very least, wilfully blind to the objective realities and reckless as to the truth or falsity of the Implied Representation of Fact.

173 In light of the evidence, it strains credulity for me to accept that Ms Lu had any reasonable grounds to believe that Confetti was in a position to raise US$7.5 million within an accelerated timeframe. Consequently, Mr McNaught would have succeeded in establishing that she had made an implied representation of fact which was false.

174 While I have found that the Representations implied an actionable statement of fact that Ms Lu had reasonable grounds to believe that Confetti would be able to open and close the Series A Round within a compressed timeframe (ie, the Implied Representation of Fact), and that this statement was false as Ms Lu did not have any reasonable grounds for such belief, Mr McNaught’s claim ultimately fails as the Implied Representation of Fact did not play a real or substantial role in his decision to invest.

175 For the foregoing reasons, I dismiss OC 902. I will hear the parties separately on costs.