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  • Mitsui Engineering and Shipbuilding Co Ltd v Easton Graham Rush and Another [2004] 2 SLR 14; [2004] SGHC 26
    not in dispute that the arbitration between the parties is an international arbitration and is governed by the International Arbitration Act Cap 143A 2002 Rev Ed IAA which incorporates the UNCITRAL Model Law on International Commercial Arbitration the Model Law It was also not in dispute that the scheme and intention behind such arbitrations is minimal court involvement but that is not to say that court involvement is excluded entirely 15 Accordingly cases before the advent of the Model Law and the IAA and cases which do not involve international arbitrations provided me with limited assistance if any in deciding the primary issue 16 As I have said under Singapore law the Model Law applies to an international arbitration This is by virtue of s 3 IAA The English text of the Model Law is set out in the First Schedule of the IAA Both sides referred to Art 5 of the Model Law It states Article 5 Extent of court intervention In matters governed by this Law no court shall intervene except where so provided in this Law 17 Mitsui argued that it was not relying on a general supervisory power of the court but a residual power of the court when an arbitrator is being challenged and when an application is being made to set aside an award It referred to Arts 13 and 34 of the Model Law as well as s 24 IAA As Art 13 provides the challenge procedure and Art 12 2 provides the grounds for challenge I set out below the terms of Arts 12 2 and 13 Article 12 Grounds for challenge 1 2 An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his impartiality or independence or if he does not possess qualifications agreed to by the parties A party may challenge an arbitrator appointed by him or in whose appointment he has participated only for reasons of which he becomes aware after the appointment has been made Article 13 Challenge procedure 1 The parties are free to agree on a procedure for challenging an arbitrator subject to the provisions of paragraph 3 of this Article 2 Failing such agreement a party who intends to challenge an arbitrator shall within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstance referred to in Article 12 2 send a written statement of the reasons for the challenge to the arbitral tribunal Unless the challenged arbitrator withdraws from his office or the other party agrees to the challenge the arbitral tribunal shall decide on the challenge 3 If a challenge under any procedure agreed upon by the parties or under the procedure of paragraph 2 of this Article is not successful the challenging party may request within thirty days after having received notice of the decision rejecting the challenge the court or other authority specified in Article 6 to decide on the challenge which decision shall be subject to no appeal while such a request is pending the arbitral tribunal including the challenged arbitrator may continue the arbitral proceedings and make an award 18 I also set out below the terms of Arts 34 1 2 a and 4 Article 34 Application for setting aside as exclusive recourse against arbitral award 1 Recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with paragraphs 2 and 3 of this Article 2 An arbitral award may be set aside by the court specified in Article 6 only if a the party making the application furnishes proof that i a party to the arbitration agreement referred to in Article 7 was under some incapacity or the said agreement is not valid under the law to which the parties have subjected it or failing any indication thereon under the law of this State or ii the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case or iii the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration or contains decisions on matters beyond the scope of the submission to arbitration provided that if the decisions on matters submitted to arbitration can be separated from those not so submitted only that part of the award which contains decisions on matters not submitted to arbitration may be set aside or iv the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties unless such agreement was in conflict with a provision of this Law from which the parties cannot derogate or failing such agreement was not in accordance with this Law or b 3 4 The court when asked to set aside an award may where appropriate and so requested by a party suspend the setting aside proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal s opinion will eliminate the grounds for setting aside 19 Section 24 IAA states Court may set aside award 24 Notwithstanding Article 34 1 of the Model Law the High Court may in addition to the grounds set out in Article 34 2 of the Model Law set aside the award of the arbitral tribunal if a the making of the award was induced or affected by fraud or corruption or b a breach of the rules of natural justice occurred in connection with the making of the award by which the rights of any party have been prejudiced 20 Under s 4 1 IAA reference may be made to the documents of the following where these documents relate to the Model Law for the purpose of interpreting the Model Law a the United Nations Commission on International Trade Law ie UNCITRAL and b its working group for the preparation of the Model Law However both Mitsui and Keppel referred to A Guide to the UNCITRAL Model Law on International Commercial Arbitration Legislative History and Commentary by Howard M Holtzmann and Joseph E Neuhaus Kluwer 1989 the Guide for assistance The Guide includes not only commentaries of the authors but also the legislative history and reports of the Commission and its working groups in respect of the Model Law 21 As regards Art 5 of the Model Law the Guide states at 216 COMMENTARY Article 5 states a simple but very important principle Its purpose is to oblige the draftsmen of the Law to state any instances in which court control is envisioned in order to increase certainty for parties and arbitrators and further the cause of uniformity As noted by the Secretariat the effect of the provision is to exclude any general or residual powers given to the court of the enacting State in statutes other than the Model Law The Commission made clear that the term intervene in Article 5 included court action that might be categorized as assistance to the arbitration rather than intervention in it Article 5 should not be taken to express hostility to court intervention or assistance in appropriate circumstances but only to satisfy the need for certainty as to when court action is permissible The Model Law provides for or envisages court involvement in the following Articles 8 arbitration agreement and substantive claim before court 9 interim measures 11 appointment of arbitrators 13 challenge procedure 14 failure or impossibility to act 16 competence of arbitral tribunal to rule on its jurisdiction 27 court assistance in taking evidence 34 setting aside an award and 35 and 36 recognition and enforcement of awards 22 Mitsui s argument was that the Model Law does provide for the instances of challenging the arbitrator and the setting aside of an award Accordingly the court must surely have the residual power to grant the Interlocutory Injunction To reinforce this argument Mitsui submitted that if a decision was made to remove an arbitrator but he insisted on carrying on with the arbitration notwithstanding his removal then surely the court must have the power to grant an injunction to restrain him from doing so However I bore in mind that this illustration was in relation to a perpetual injunction after a decision had been made to remove the arbitrator and not an interlocutory injunction pending such a decision Besides one does not really need an injunction if an arbitrator who has been removed continues with the arbitration All the proceedings before him thereafter will be invalid Also I could not imagine any bona fide arbitrant wanting to continue with an arbitrator after he is removed 23 It seemed to me that Mitsui s argument went against the terms of Art 5 which states that in matters governed by the Model Law no court shall intervene except where so provided in the Model Law Since the Model Law does not provide for the Interlocutory Injunction in respect of an application under Arts 13 and 24 the court does not have the power to do so In any event I did not rely on this view alone 24 It will be recalled that the last clause of Art 13 3 allows an arbitrator to continue the arbitral proceedings and even make an award pending the outcome of the court s ruling on the challenge In my view this clause hints that it is for the arbitrator and not the court to decide whether the arbitral proceedings should be stayed in the meantime 25 Moreover the Guide has the following commentary at 406 408 Article 13 like Articles 5 8 and 16 and to a lesser extent Article 14 raises the critical question of the extent of court interference in or assistance to an arbitration that is to be permitted during the arbitral proceedings It was on this question that the Commission displayed the greatest difference of views Other features of this article were settled early The only provision that occasioned continued debate throughout both the Working Group s and the Commission s consideration of the Article was paragraph 3 which governs the scope of court intervention in deciding challenges A wide variety of alternatives were considered on this question At one extreme was a proposal to permit a party challenging an arbitrator to resort to the court immediately after denial of the challenge by the arbitral tribunal or other body with the arbitral proceedings held in abeyance pending the court s decision The proponents of this view argued that settling the question immediately in this way would help avoid delays and controversy occasioned by proceedings being conducted by a challenged arbitrator and would reduce the risk of an award being set aside At the other extreme were those who argued that resort to a court to settle a challenge should not be allowed during the arbitral proceedings but only by way of an application to set aside the award The argument in favor of this view was that allowing for immediate court intervention provided an opportunity for dilatory tactics that would effectively enable a party to obtain a postponement of the proceedings at any time The Working Group adopted a compromise solution that is essentially the provision contained in the final text It provides for immediate court review of unsuccessful challenges but with three features designed to reduce the risk of delay a short time period for seeking court review no appeal of the court s decision and most important discretion in the arbitral tribunal to continue the arbitration during the court proceedings The court is to review all unsuccessful challenges whether decided initially by the arbitral tribunal under paragraph 2 of Article 13 or by another body under an agreed on challenge procedure During the Commission s deliberations a number of modifications to this scheme were proposed On the one hand it was suggested that the court and not only the arbitral tribunal should have the power to order a stay of the arbitral proceedings 7 26 At this point there is a reference to footnote 7 which states Commission Report A 40 17 para 123 p 436 infra The Commission rejected this view A court thus is barred by Article 5 of the Model Law from issuing such a stay order In this respect the Model Law as lex specialis supersedes any domestic laws authorizing such stay orders emphasis added 27 The Guide then continues to state at 408 On the other hand a number of suggestions were made to limit court intervention including 1 allowing the arbitral tribunal to decide whether court review would occur immediately or only after an award 2 restricting the operation of paragraph 3 to those cases where the sole arbitrator or a majority of the arbitrators were challenged and 3 restricting the operation of paragraph 3 to those cases in which the parties had not agreed on another procedure for resolving challenges such as one that entrusted final decision of challenges to a third person or an institution In favor of this last proposal it was argued that parties preferred arbitration to court proceedings in part because it was quick and confidential Because arbitrators might well stay proceedings pending a court s decision it was said and because court proceedings are public allowing court review of challenges nullified these advantages It was noted in reply that it was impossible to predict what challenge procedures the parties might choose so that court review was necessary to ensure fair procedures Further it was said that an arbitral tribunal would probably not stay its proceedings and a court would be less likely to uphold a challenge in cases where that challenge had already been rejected by an arbitral institution In the end the Commission retained the balance struck by the Working Group between preventing obstruction or delay and avoiding unnecessary arbitral proceedings 28 Mitsui submitted that the statement in footnote 7 that a court is barred by Art 5 from issuing a stay order is merely the view of the authors of the Guide and that that view is not expressly stated in the Commission s report I set out paras 122 to 125 of the Commission s report of 21 August 1985 in respect of Art 13 3 General discussion on appropriateness of court control during arbitral proceedings 121 The Commission before considering the provisions of article 13 in detail embarked on a general discussion on the appropriateness of court control during arbitral proceedings Divergent views were expressed on that matter 122 Under one view the court control envisaged under article 13 3 was inappropriate and should at least be limited in order the reduce the risk of dilatory tactics One suggestion was to delete the provision thus excluding court control during the arbitral proceedings or to restrict its application considerably for example to those rare cases where the sole arbitrator or a majority of the arbitrators were challenged Another suggestion was to replace in paragraph 1 the words subject to the provisions of paragraph 3 of this article by the words and the decision reached pursuant to that procedure shall be final The thrust of the suggestion was to allow the court control envisaged in paragraph 3 only if the parties had not agreed on a procedure for challenges and in particular not entrusted an institution or third person with deciding on the challenge Yet another suggestion was to let the arbitral tribunal decide whether court control should be allowed immediately or only after the award was made The suggestion was advanced as a possible solution to the problem that under article 13 a challenged arbitrator appeared to have full freedom to withdraw and that as a result of such withdrawal the party who appointed the arbitrator might be adversely affected by additional costs and delay 123 Under another view the weight accorded to court intervention in article 13 3 was not sufficient in that the provision empowered the arbitral tribunal including the challenged arbitrator to continue the arbitral proceedings irrespective of the fact that the challenge was pending with the Court It was stated in support of the view that such continuation would cause unnecessary waste of time and costs if the court later sustained the challenge At least it should be expressed in article 13 that the arbitral tribunal was precluded from continuing the proceedings if the Court ordered a stay of the arbitral proceedings 124 The prevailing view however was to retain the system adopted in article 13 since it struck an appropriate balance between the need for preventing obstruction or dilatory tactics and the desire of avoiding unnecessary waste of time and money 125 The Commission after deliberation adopted the prevailing view emphasis added 29 In my view footnote 7 did accurately reflect the outcome as stated in the Commission s report The question of the court s intervention by way of a stay was specifically mentioned in one of the views which advocated a more active role for the court under Art 13 3 That view was not adopted and a balance was struck If the court is still to have the power to stay the arbitral proceedings pending the outcome of the challenge in the court then this would not have been considered a balance That view would have prevailed I would add that it was not disputed that the granting of the Interlocutory Injunction would have effected a stay of the arbitration 30 However as I have mentioned Mitsui did not rely on its intended application to challenge Mr Easton under Art 13 alone to support the Application It also relied on its intended application to set aside the FIA under Art 34 and s 24 IAA In particular Mitsui relied on Art 34 2 a ii to iv and s

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  • Alexander G Tsavliris & Sons Maritime Co v Keppel Corp Ltd[1995] 2 SLR 113; [1995] SGCA 36
    claimable in rem and the latter claim was rejected as the learned judge perceived it to be a claim for special damages In his grounds of decision he said I also did not give judgment for the 7 300 41 claimed as costs and expenses of the plaintiffs the salvors agents in connection with the present action which cannot be claimed as special damages and should be dealt with as the costs of the action 7 The salvors appeal is in respect of the two items of which they did not get judgment 8 In order to answer the questions raised by this appeal it is necessary to consider in wider perspective the question of enforcing arbitration awards generally by invoking the jurisdiction of the court This question was considered by the English Court of Appeal in Bremer Oeltransport GmbH v Drewry The question arose in this way A charterparty was made in London for the hire of the plaintiffs vessel to the defendant who was resident in Paris A clause in the charterparty provided that disputes arising between the parties would be arbitrated upon in Hamburg A dispute having arisen the matter was referred by the parties to arbitration in Hamburg where an award was made that the defendant should pay the plaintiffs about 21 000 payment to be made in English currency The plaintiffs then issued a writ in London claiming 21 000 odd under the award and obtained leave to serve the writ out of the jurisdiction on the defendant The defendant s application to set aside the writ was refused Slesser LJ in delivering the only judgment said I proceed therefore to consider the case made on behalf of the plaintiffs that the award on which they seek to sue arose in respect of a contract made within the jurisdiction This contention raises at the outset the following juridical problem What is the nature of an action based upon an award On the one hand it is said for the respondents that in so far as the submission is a contract whereby the parties to it impliedly undertake to abide by and carry out the award of the arbitrators the submission is contained in the charter party which is made in London and therefore the enforcement of the award would be the enforcement of a contract made within the jurisdiction On the other hand it is contended for the appellant that the action is brought on the award itself and that consequently as the award was made in Hamburg the action is not the enforcement of a contract made within the jurisdiction The respective contentions require for their proper consideration some study of the history of the legal principles which govern the enforcement of awards at common law and in equity The contention of the respondents that the submission is the contract on which an action based on the award is founded is well supported by authority 9 After considering and reviewing the law he concluded It would appear therefore that the greater weight of authority is in favour of the view that in an action on the award the action is really founded on the agreement to submit the differences of which the award is the result 10 Bremer Oeltransport v Drewry became the foundation of the statement in 2 Halsbury s Laws of England 4th Ed Reissue para 712 which reads There is an implied promise in every arbitration agreement that the parties will perform the award If a party to an arbitration agreement acts in breach of this implied promise by failing to comply with the award the successful party may bring an action to enforce the award in any court of competent jurisdiction Our emphasis 11 Three years later in The Beldis another division of the English Court of Appeal had to consider the same question and came to a different conclusion on the law It appears that Bremer Oeltransport v Drewry was neither cited in argument nor considered by the learned judges in their judgments We set out below the headnote in The Beldis in so far as it is relevant to the question of law under discussion in this appeal It reads An action in rem was brought in a county court having admiralty jurisdiction by the plaintiffs against the defendants the owners of the Norwegian SS Beldis for 27l 4s 6d payable by the defendants to the plaintiffs under an arbitrator s award in respect of overpayment of chartered freight The arbitration was held by virtue of a clause in a charterparty relating not to the Beldis but to the SS Belfri another ship belonging to the defendants The defendants failed to appear and judgment was entered against them by default Thereupon the present appellants who held a mortgage on the Beldis intervened and by agreement an issue was submitted to the county court judge as to whether the plaintiffs action in rem against the SS Beldis is maintainable in view of the fact that the plaintiffs claim in this action arose out of a charter party of the SSBelfri belonging to the same owners On appeal the court raised the question whether apart from the point for decision in the agreed issue the issue itself was not based on a misconception as it asserted that the plaintiffs action arose out of a charterparty whereas it appeared to be based upon an award By s 2 sub s 1 of the County Courts Admiralty Jurisdiction Amendment Act 1869 any county court appointed to have admiralty jurisdiction shall have jurisdiction to try any claim arising out of any agreement made in relation to the use or hire of any ship Held a that the cause of action alleged was an ordinary common law claim for payment of money under an award and was not within the jurisdiction conferred by the Act of 1869 12 It is undeniable that the county court in The Beldis was a court of competent jurisdiction

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  • Jeyaretnam Joshua Benjamin v Lee Kuan Yew[1992] 2 SLR 310; [1992] SGCA 27
    Mr Teh Cheang Wan to get away from answering his question and so we must know how is it that he came by his death 31 To the listener the last two questions and the statement immediately following would suggest that the respondent must have advised Teh because the appellant linked the advice to Teh s suicide that followed and would further suggest that Teh was allowed to have access to the poison with which he killed himself and thus was allowed to escape an investigation which would result in findings adverse to the respondent and his government 32 In our judgment to a reasonable listener present at the rally and watching and listening to the appellant delivering his speech the words complained of bore the following meaning that there was a cover up of the circumstances of Teh s death and particularly his ways and means of obtaining the poison with which he killed himself that the government was not such an open and honest government as the respondent and his party claimed to be that on the day before Teh died he had sought advice from the respondent that the respondent must have advised him and that advice had something to do with his death because following that Teh committed suicide by taking poison that Teh was allowed to have access to the poison that the respondent was involved in Teh obtaining the poison and that Teh was thereby allowed to escape a full investigation which would have resulted in findings discreditable or embarrassing to the respondent as Prime Minister and leader of his party and of the government of Singapore This meaning we have found is not exactly the same as that found by the learned judge 33 We now turn to the question whether the words complained of are defamatory of the respondent In the natural and ordinary meaning we have found the words are undoubtedly defamatory of the respondent they impute dishonourable and discreditable conduct and disparage him in his office as Prime Minister and tend to bring him into public odium and contempt and lower him as such in the estimation of right thinking people in Singapore Fair comment 34 We now come to the next issue the defence of fair comment Mr Gray conceded that if the words bore the meaning found by the learned judge the defence of fair comment would not avail the appellant as it was not part of his case that the words were fair comment in that meaning In view of what we have found as the natural and ordinary meaning of the words equally the defence of fair comment is not available to the appellant The words were not comment but imputation of facts 35 At any rate assuming that the words complained of in the meaning as found by us were comments the defence of fair comment would still fail An essential requirement for the success of the defence of fair comment is that the comment must be based on facts and those facts are true In Joshua Benjamin Jeyaretnam v Goh Chok Tong 1989 3 MLJ 1 at p 3 Lord Ackner delivering the judgment of the Board said It is of course well established that a writer may not suggest or invent facts and then comment upon them on the assumption that they are true If the facts upon which the comment purports to be made do not exist the defence of fair comment must fail The commentator must get his basic facts right emphasis added 36 In London Artists Ltd v Littler 1969 2 QB 375 which was referred to by Lord Ackner one of the defences raised by the defendant to a claim for damages for libel was fair comment In dealing with this defence Lord Denning MR said at p 391 In order to be fair the commentator must get his basic facts right The basic facts are those which go to the pith and substance of the matter see Cunningham Howie v Dimbleby 1951 1 KB 360 364 They are the facts on which the comments are based or from which the inferences are drawn as distinct from the comments or inferences themselves The commentator need not set out in his original article all the basic facts see Kemsley v Foot 1952 AC 345 but he must get them right and be ready to prove them to be true 37 Later having held that the words there complained of were not comment but statement of facts he said at p 392 In case however I am wrong about this and it could be regarded as comment then I turn to the third point which is this were there any facts on which a fair minded man might honestly make such a comment I take it to be settled law that in order for the defence of fair comment to be left to the jury there must at least be a sufficient basis of fact to warrant the comment in this sense that a fair minded man might on those facts honestly hold that opinion emphasis added 38 In this case for the purpose of the comments the only facts established are a Teh was a member of the Cabinet of which the respondent was the head and Teh committed suicide on 14 December 1986 b The respondent received a letter from Teh on the day before his death in which the latter concluded I am willing to accept full responsibility for this I would accept any decision which you may want to make c The respondent did not make any public announcement to the effect that he had not replied to the letter of 13 December 1986 from Teh d The availability of the poison amytal barbiturate to individuals is controlled and regulated in Singapore and in ordinary circumstances Teh could not have access to it e The respondent did not set up or seek to set up an inquiry into the question of how Teh obtained the poison 39 These facts by themselves are not sufficient to form the basis on which a fair minded person could honestly make a comment in the form of the words complained of The defence of fair comment therefore fails Qualified privilege 40 We now turn to the third issue the defence of qualified privilege founded on art 14 of the Constitution of Singapore Article 14 in so far as relevant provides 1 Subject to clauses 2 and 3 a every citizen of Singapore has the right to freedom of speech and expression b c 2 Parliament may by law impose a on the rights conferred by clause 1 a such restrictions as it considers necessary or expedient in the interest of the security of Singapore or any part thereof friendly relations with other countries public order or morality and restrictions designed to protect the privileges of Parliament or to provide against contempt of court defamation or incitement to any offence 41 It is relevant to set out also art 162 of the Constitution which is as follows Subject to this Article all existing laws shall continue in force on and after the commencement of this Constitution and all laws which have not been brought into force by the date of the commencement of this Constitution may subject as aforesaid be brought into force on or after its commencement but all such laws shall subject to this Article be construed as from the commencement of this Constitution with such modifications adaptations qualifications and exceptions as may be necessary to bring them into conformity with this Constitution 42 Mr Gray mounted a very elaborate and careful argument for a qualified privilege and developed it in this way First he set out the factual matrix The respondent sued in his capacity as secretary general of a political party and as Prime Minister and the complaint relates to words spoken by a political opponent who was the secretary general of a rival party The subject matter of the speech was political namely criticism of the conduct of the respondent then a candidate in the forthcoming election in his capacity as Prime Minister in relation to a Cabinet colleague and bore on an issue of major public interest The audience to whom the appellant addressed his speech were voters in the forthcoming election Next Mr Gray referred us to art 14 1 which confers the right of freedom of speech and expression on every citizen and this right is only subject to art 14 2 a which empowers Parliament to pass legislation restricting such right Such constitutional provision he submitted should be given a generous and purposive construction Attorney General of Gambia v Momodou Jobe 1984 AC 689 at p 700 and Ong Ah Chuan v PP 1981 1 MLJ 64 Further under art 162 all existing laws both common law and statutes must be construed with such modifications adaptations qualifications and exceptions as may be necessary to bring them into conformity with this Constitution It therefore follows so Mr Gray submitted that pre existing laws including the Defamation Act Cap 75 may require reformulation to take account of the recognition in the Constitution of the right of freedom of speech and expression 43 By way of comparison Mr Gray drew our attention to constitutional provisions guaranteeing freedom of speech in other jurisdictions such as Canada India and the United States of America and also art 10 of the European Convention on Human Rights and sought to show how these jurisdictions reconcile the right of free speech with constraints imposed by the law of defamation He further submitted that as the Constitution confers a right of free speech a speech made by a politician in the context of a political debate deserves the greatest degree of protection and unconstrained political debate is the life blood of the democratic process and such protection is not limited to statements made in Parliament for which there is absolute privilege but extends to all comments on government ministers and officers of state because it is in the public benefit that such comment should be freely made In support he cited extensively authorities from various jurisdictions In particular two leading cases were heavily relied upon namely the decision of the United States Supreme Court in New York Times Co v Sullivan 1964 376 US 254 and the decision of the European Court of Human Rights in Lingens v Austria 1986 8 EHRR 407 On the basis of these authorities Mr Gray submitted that in order to give effect to art 14 the right to sue for defamation has to be curtailed and such curtailment has been accepted in other jurisdictions In particular these authorities suggest that qualified or conditional privilege attaches to publications critical and defamatory of the official acts of politicians and those in public positions because it is the common interest of all citizens to have unconstrained political debate and effective democracy 44 Relying on the authorities cited Mr Gray formulated his plea of qualified or conditional privilege as follows qualified privilege attaches to defamatory publications concerning public officials or candidates for a public office relating to their official conduct or the performance of their public duties by those who have an honest and legitimate interest in the matter to those who have a corresponding and legitimate interest whether as electors or as citizens potentially affected by the conduct of public officials Reverting to the facts of the case Mr Gray submitted that the speech made by the appellant was a publication concerning the official conduct of the respondent as Prime Minister or the performance of his duties as such that the appellant had a legitimate interest in the subject matter of his speech and that the publication was made to those having a corresponding and legitimate interest and hence the occasion in which the publication was made was privileged 45 In response Mr Eady pointed out that the respondent did not sue in his capacity as secretary general of a political party and as Prime Minister but in his personal capacity the respondent complained that the words disparaged him in his office as Prime Minister Counsel argued that no qualified or conditional privilege existed on such occasion The privilege contended on behalf of the appellant gave rise to a defence analogous to that applied by the Supreme Court of the United States in New York Times Co v Sullivan But counsel submitted the terms of our art 14 1 differ fundamentally from those of the First Amendment of the Constitution of the United States The structure and policy underlying art 14 provides expressly that freedom of speech and expression is not absolute but subject inter alia to the law of defamation He relied on Jeyaretnam Joshua Benjamin v Lee Kuan Yew 1990 2 MLJ 65 and Lee Kuan Yew v Chin Vui Khen 1991 3 MLJ 494 In Singapore so he submitted public policy has determined that a balance between free speech on the one hand and the right of the individual to protect his reputation on the other is to be struck differently from that in the United States He further submitted that there is no authority either in England or Singapore to suggest that citizens should be categorized differently and accorded different rights in law depending on whether they are public figures or persons holding public offices all persons whether they be public figures or not are entitled to have their reputation protected by the law of defamation 46 We have considered the authorities cited by Mr Gray All of them except for two cases which we shall discuss in a moment are essentially dicta from judgments on freedom of speech in different jurisdictions and have no relevance to the issue before us The two cases which can be said to lend some support to Mr Gray s formulation of qualified privilege are New York Times Co v Sullivan and Lingens v Austria to which we now turn 47 In New York Times Co v Sullivan an elected official in Montgomery Alabama brought a suit in a state court against the defendant alleging that he had been libelled by an advertisement appearing in the latter s newspaper The advertisement contained certain statements which were false At the trial before the state court a jury after direction by the trial judge found for the official and awarded him damages in the sum of US 500 000 On appeal the finding was affirmed by the State Supreme Court On further appeal the Supreme Court of the United States held that under the First and Fourteenth Amendments of the Constitution of the United States damages could not be awarded to a public official for defamatory falsehood relating to his official conduct unless actual malice was proved ie the statement was made with knowledge of its falsity or with reckless disregard of whether it was true or false and that the First and Fourteenth Amendments protected libellous publications of official conducts of officials in the absence of actual malice The First Amendment provides as follows Congress shall make no law respecting an establishment of religion or prohibiting the free exercise thereof or abridging the freedom of speech or of the press or the right of the people peaceably to assemble and to petition the Government for a redress of grievances and the Fourteenth Amendment in so far as relevant provides Section 1 All persons born or naturalized in the United States and subject to the jurisdiction thereof are citizens of the United States and of the State wherein they reside No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States nor shall any State deprive any person of life liberty or property without due process of law nor deny to any person within its jurisdiction the equal protection of the laws 48 Brennan J in delivering the opinion of the court said at p 264 We hold that the rule of law applied by the Alabama courts is constitutionally deficient for failure to provide the safeguards for freedom of speech and of the press that are required by the First and Fourteenth Amendments in a libel action brought by a public official against critics of his official conduct 49 Later he said at p 268 The question before us is whether this rule of liability as applied to an action brought by a public official against critics of his official conduct abridges the freedom of speech and of the press that is guaranteed by the First and Fourteenth Amendments Respondent relies heavily as did the Alabama courts on statements of this court to the effect that the Constitution does not protect libellous publications Those statements do not foreclose our inquiry here None of the cases sustained the use of libel laws to impose sanctions upon expression critical of the official conduct of public officials In Beauharnais v Illinois 343 US 250 the court sustained an Illinois criminal libel statute as applied to a publication held to be both defamatory of a racial group and liable to cause violence and disorder But the court was careful to note that it retains and exercises authority to nullify action which encroaches on freedom of utterance under the guise of punishing libel for public men are as it were public property and discussion cannot be denied and the right as well as the duty of criticism must not be stifled Id at pp 263 264 and n 18 In the only previous case that did present the question of constitutional limitations upon the power to award damages for libel of a public official the court was equally divided and the question was not decided Schenectady Union Pub Co v 4 Sweeney 316 US 642 50 The learned judge then referred to and considered other cases cited and at p 270 said Thus we consider this case against the background of a profound national commitment to the principle that debate on public issues should be uninhibited robust and wide open and that it may well include vehement caustic and sometimes unpleasantly sharp attacks on government and public officials See Terminiello v Chicago 337 US 1 4 De Jonge v Oregon 299 US 353 365 51 The learned judge went on to hold inter alia as follows The constitutional protection of free speech did not turn on the truth of the publication and erroneous statement was inevitable He said at p 272 Injury to official reputation affords no more warrant for repressing speech that would otherwise be free than does of factual error Fear of an award of damages in civil suits would inhibit the freedom under the First Amendment The defence of justification under Alabama state law was not sufficient protection of those freedoms Such a rule dampened the vigor and limited the variety of public debate and was inconsistent with the First and Fourteenth Amendments Brennan J referred to inter alia the Kansas case of Coleman v MacLennan 78 Kan 711 where the State Attorney General sued a newspaper publisher for alleged libel in an article purporting to state certain facts relating to his official conduct and the defendant pleaded the defence of privilege The trial judge directed the jury that the publication was privileged unless the Attorney General succeeded in proving actual malice This direction was upheld by the Supreme Court of Kansas Brennan J at p 281 quoted with approval the following passage from the opinion of the court delivered by Burch J It is of the utmost consequence that the people should discuss the character and qualifications of candidates for their suffrages The importance to the state and to society of such discussions is so vast and the advantages derived are so great that they more than counterbalance the inconvenience of private persons whose conduct may be involved and occasional injury to the reputations of individuals must yield to the public welfare although at times such injury may be great The public benefit from publicity is so great and the chance of injury to private character so small that such discussion must be privileged and held that such privilege attached to criticism of official conduct and was required by the First and Fourteenth Amendments The effect of this decision is that the freedom of speech under the First and Fourteenth Amendments in so far as the law of defamation is concerned extends to publication of anything including false and defamatory matters of or concerning a public official or a politician in respect of his official conduct or performance of his duties unless actual malice on the part of the publisher is proved 52 The next case is Lingens v Austria There the publisher of a magazine in Vienna printed two articles critical of the Austrian Chancellor and accusing him of protecting former members of the Nazi SS for political reasons The Chancellor brought private prosecutions and the publisher was convicted The publisher then applied to the European Court of Human Rights complaining of a violation of art 10 of the European Convention on Human Rights Article 10 provides 1 Everyone has the right to freedom of expression This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers 2 The exercise of these freedoms since it carries with it duties and responsibilities may be subject to such formalities conditions restrictions or penalties as are prescribed by law and are necessary in a democratic society in the interests of national security territorial integrity or public safety for the prevention of disorder or crime for the protection of health or morals for the protection of the reputation or rights of others for preventing the disclosure of information received in confidence or for maintaining the authority and impartiality of the judiciary 53 The court held that the conviction of the publisher infringed the freedom of opinion which was part of art 10 of the Convention The court said at pp 418 419 41 In this connection the court has to recall that freedom of expression as secured in para 1 of art 10 constitutes one of the essential foundations of a democratic society and one of the basic conditions for its progress and for each individual s self fulfilment Subject to para 2 it is applicable not only to information or ideas that are favourably received or regarded as inoffensive or as a matter of indifference but also to those that offend shock or disturb Such are the demands of that pluralism tolerance and broadmindedness without which there is no democratic society These principles are of particular importance as far as the press is concerned Whilst the press must not overstep the bounds set inter alia for the protection of the reputation of others it is nevertheless incumbent on it to impart information and ideas on political issues just as on those in other areas of public interest Not only does the press have the task of imparting such information and ideas the public also has a right to receive them In this connection the court cannot accept the opinion expressed in the judgment of the Vienna Court of Appeal to the effect that the task of the press was to impart information the interpretation of which had to be left primarily to the reader 42 Freedom of the press furthermore affords the public one of the best means of discovering and forming an opinion of the ideas and attitudes of political leaders More generally freedom of political debate is at the very core of the concept of a democratic society which prevails throughout the Convention The limits of acceptable criticism are accordingly wider as regards a politician as such than as regards a private individual Unlike the latter the former inevitably and knowingly lays himself open to close scrutiny of his every word and deed by both journalists and the public at large and he must consequently display a greater degree of tolerance No doubt art 10 2 enables the reputation of others that is to say of all individuals to be protected and this protection extends to politicians too even when they are not acting in their private capacity but in such cases the requirements of such protection have to be weighed in relation to the interests of open discussion of political issues 54 Having propounded these principles the court went on and found that the case concerned the Chancellor in his capacity as a politician and held that the publication must be considered against the background of a post election political controversy The court then found that the observations complained of were value judgments ie opinions or comments made by the publisher The court said at pp 420 421 The defendant had submitted that the observations in question were value judgments made by him in the exercise of his freedom of expression The court like the Commission shares this view The applicant s criticisms were in fact directed against the attitude adopted by Mr Kreisky who was Federal Chancellor at the time What was at issue was not his right to disseminate information but his freedom of opinion and his right to impart ideas the restrictions authorized in para 2 of art 10 nevertheless remained applicable In the court s view careful distinction needs to be made between facts and value judgments The existence of facts can be demonstrated whereas the truth of value judgments is not susceptible of proof The court notes in this connection that the facts on which Mr Lingens founded his value judgments were undisputed as was also his good faith Under para 3 of art 111 of the Criminal Code read in conjunction with para 2 journalists in a case such as this cannot escape conviction for the matters specified in para 1 unless they can prove the truth of their statements As regards value judgments this requirement is impossible of fulfilment and it infringes freedom of opinion itself which is a fundamental part of the right secured by art 10 of the Convention 55 The court thus held that the offensive passage in the article was an expression of value judgments concerning the conduct of a politician that the press had the task of imparting such information and ideas on political issues and the public has the right to receive them and that the publication was therefore protected by art 10 of the Convention 56 We are unable to follow either of these decisions The terms of art 14 of our Constitution differ materially from the First and Fourteenth Amendments of the Constitution of the United States and also from art 10 of the European Convention on Human Rights The First Amendment by its express terms prohibits Congress from making any laws abridging the freedom of speech or of the press The Fourteenth Amendment extends the prohibition to state legislatures No such express prohibition is found in art 14 of our Constitution On the contrary the right of free speech and expression under cl 1 a of art 14 is expressly subject to cl 2 a of the same article and the latter provides that Parliament may by law impose on the rights of free speech and expression conferred by cl 1 a two categories of restrictions first such restrictions as it considers necessary and expedient in the interest of the security of Singapore or any part thereof friendly relations with other countries public order or morality and second restrictions designed to protect the privileges of Parliament or to provide against contempt of court defamation or incitement to any offence While the first category of restrictions must satisfy the test of necessity and expediency in the interest of the various matters specified therein the second category of restrictions is not required to satisfy any such test Thus Parliament is empowered to make laws to impose on the right of free speech restriction designed to provide against defamation As for art 10 of the European Convention on Human Rights it is true that the wording in para 1 thereof is similar to cl 1 a of art 14 However para 2 of art 10 is in no way similar to cl 2 of art 14 para 2 provides that the exercise of the freedom under para 1 is subject to restrictions or penalties as are prescribed by law and are necessary in a democratic society for the protection of the reputation or rights of others Clearly the terms allowing restrictions to be imposed under art 10 2 are not as wide as those under art 14 2 57 In addition we have art 162 of the Constitution under which all existing laws continue in force on and after the commencement of the Constitution and the term law under art 2 includes the common law in so far as it is in operation in Singapore The common law of defamation as modified by the Defamation Act then the Defamation Ordinance was in operation at the time of commencement of the Constitution and by virtue of art 162 it continues in force The question then is whether as required by art 162 any modification adaptation qualification and exception is necessary to be made to the law of defamation so as to bring it into conformity with the Constitution We think not The law of defamation is not inconsistent with the right of free speech under art 14 1 a and accordingly no such modification adaptation qualification and exception is necessary to be made thereto 58 We are reinforced in our view by the circumstances in which the Defamation Act became part of the law of Singapore It originated from Malaysia On 1 July 1957 the Federation of Malaya enacted the Defamation Ordinance The preamble states that it is a consolidating and amending ordinance and it is clear from the terms of the ordinance that it is premised on the existence and continuation of the common law of defamation The Federation of Malaysia incorporating Singapore as a constituent state came into legal existence by virtue of the Malaysia Act Act 26 of 1963 which came into force on 16 September 1963 and the existing Federal Constitution as modified by the Act became the Constitution of Malaysia Sections 73 and 74 of the Act governed the position of pre Malaysia laws s 73 provided for the continuation of those laws as though the Malaysia Act had never been passed and s 74 gave to the Yang di Pertuan Agong the power to order such modification to the pre Malaysian laws as appeared necessary or expedient The power to modify included the power to extend existing laws to inter alia Singapore At that time the Constitution governing and applicable to Singapore which was a constituent state of Malaysia was the Constitution of Malaysia and art 10 thereof provided for freedom of speech and expression in terms which in all material respects were identical with art 14 of our Constitution By the Modification of Laws Defamation Modification and Extension to Borneo States and Singapore Order 1965 made pursuant to s 74 of the Malaysia Act the Defamation Ordinance 1957 was extended to Singapore on 22 February 1965 The extension also repealed the then Defamation Ordinance 1960 of Singapore It was therefore intended by the Malaysian Parliament acting by the Yang di Pertuan Agong that the common law of defamation as modified by the Defamation Ordinance 1957 should continue to apply in Singapore where the right of free speech was guaranteed by art 10 of the Constitution On separation the Republic of Singapore Independence Act 1965 provided for the continuation of most of the articles of the Malaysian Constitution including arts 10 and 162 and also the continuation of the laws existing at the time of independence as the Constitution and laws of Singapore The present art 14 with necessary modification is art 10 of the Malaysian Constitution Thus against this background of the development of our Constitution it is implicit that the right of free speech under art 14 is subject to the common law of defamation as modified by the Defamation Ordinance now the Defamation Act Cap 75 the Act 59 It has been decided by this court in Jeyaretnam Joshua Benjamin v Lee Kuan Yew that the right of free speech under art 14 is subject inter alia to the common law of defamation as modified by the Defamation Act Cap 75 1965 Ed That was an appeal against the decision of the High Court on an interlocutory application made in this same action The appellant applied for leave to amend the defence by pleading that this action sought to restrict the appellant s right under art 14 1 and was therefore an unlawful interference of his fundamental rights and for that reason the action was not maintainable The High Court dismissed the application and on appeal that decision was affirmed by this court Wee Chong Jin CJ delivering the judgment said at p 65 The constitutional right of freedom of speech and expression is unarguably restricted by the laws of defamation Article 14 1 a is subject to cl 2 which provides that Parliament may by law impose a on the rights conferred by cl 1 a restriction to provide against defamation The relevant enactment is the Defamation Act Cap 75 In addition by enacting the Defamation Act which was enacted by the Malaysian Federal Parliament as Act 20 of 1957 and was extended to Singapore by way of modification pursuant to s 74 of the Malaysia Act 1963 in May 1963 the legislature has clearly intended that the common law relating to defamation as modified by the Act should continue to apply in Singapore The Act is premised on that underlying assumption and has to be read against matrix of the common law Moreover the definition of law in art 2 1 of the Constitution includes the common law in so far it is in operation in Singapore In our view it is manifestly beyond argument that art 14 1 a is subject to the common law of defamation as modified by the Act and accordingly does not in itself afford a defence 60 Across the causeway the High Court in Malaysia has expressed a similar opinion see Lee Kuan Yew v Chin Vui Khen at pp 502 503 61 It therefore cannot be disputed that the freedom of speech and expression provided in art 14 is not absolute or totally unrestricted Certainly Mr Gray is not disputing this and is not contending that the appellant under art 14 has the right to say anything An absolute or unrestricted right of free speech would result in persons recklessly maligning others with impunity and the exercise of such a right would do the public more harm than good Every person has a right to reputation and that right ought to be protected by law Accordingly a balance has to be maintained between the right of free speech on the one hand and the right to protection of reputation on the other The law of defamation protects such right to reputation and as we have shown it was undoubtedly intended by the framers of our Constitution that the right of free speech should be subject to such law 62 Both the decisions in New York Times and in Lingens were premised on the proposition that the limits of acceptable criticism of persons holding public office or politicians in respect of their official duties or conduct are wider than those of ordinary persons In our judgment our law is not premised on such a proposition Persons holding public office or politicians we call them public men are equally entitled to have their reputations protected as those of any other persons Such persons in the discharge of their

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  • Turner (East Asia) Pte Ltd v Builders Federal (Hong Kong) Ltd & Another (No 2)[1988] SLR 532; [1988] SGHC 47
    respect without reservation a party s entitlement so to act Conversely however an arbitrator s task is not to permit unreasonable delays in bringing the matter to a hearing if one party is likely to be particularly disadvantaged by such delays possibly where substantial sums of money are alleged to have been wrongly withheld and or that entitlement to payment is alleged to have arisen a long time ago then delays if permitted would exacerbate or even imperil its position Ultimately of course an arbitrator s authority encompasses the award as to costs which may act as a deterrent to unreasonable perpetuation of delaying tactics 39 Mr Wong Meng Meng submitted that though Mr Smith mentioned that the situation he referred to was a hypothetical situation Mr Smith was really referring to the present case bearing in mind these further remarks of Mr Smith in the addendum Mr Lee by taking only a subjective view erroneously mistakes an arbitrator s obligation not to permit unilaterally inspired delays unfairly to disadvantage a party or parties involved in arbitration for hostility towards the other party or for lack of impartiality In view of the long history of this dispute since notice of arbitration was first given and respondent s repeated efforts to inhibit or displace the arbitrator eventually appointed by order of Justice Lai Kew Chai understood to have been made on 9 April 1987 and Mr Wong Meng Meng s undisguised attempts at the preliminary meeting held on 21 August 1987 then to delay the hearing in his own words until the fall of 1988 it is not easy to take seriously the words in view of the parties desire to proceed expeditiously with the arbitration 40 The next significant event occurred on 13 October 1987 when SLB wrote to Mr Smith to say that in the course of preparing Turner s points of defence they had the occasion to examine the arbitration clause cl 22 the relevant part of which reads the arbitration shall not without the written consent of the architect or the contractor and in any case of the sub contractor be opened or entered into until after completion or abandonment of the main contract works except 41 SLB said that as Turner had not given their consent the arbitration should not proceed any further SLB requested Mr Smith for his views and stated that if Mr Smith wanted to make a formal ruling that the parties be allowed to make submissions on it 42 CLLMK in their letter of 19 October 1987 to Mr Smith stated that the past conduct of Turner was inconsistent with the position now taken by SLB However CLLMK agreed with SLB s suggestion that Mr Smith rule on it after submissions from parties Mr Smith was asked to set a timetable for submission In any event CLLMK suggested this matter be placed on the agenda for the second preliminary meeting scheduled for 12 January 1988 43 On 21 October 1987 Mr Smith responded to the parties and put forth two alternative procedures to deal with the cl 22 point a parties will submit and Mr Smith will rule based on submission or b as in a but no ruling until second preliminary meeting on 12 January 1988 after if necessary hearing oral submission 44 Later both CLLMK and SLB accepted the first alternative 45 Then on 23 October 1987 CLLMK reminded SLB that Turner s defence was overdue On 26 October 1987 SLB replied to say that in view of the stand taken by us on cl 22 we do not think it appropriate for us to file the defence at all This letter of SLB crossed with that of the same date written by Mr Smith in these terms It may be that the respondent is under some misapprehension regarding his obligations in respect of the terms of the Order for Directions No 1 to all of which his lawyers agreed notwithstanding his already having made application to the Singapore court to remove me as arbitrator I have to say that not to have met the first deadline date is in itself perhaps indicative of future performance but complete failure to have addressed any communication to me in the matter I take as a gross discourtesy to me and to the claimants and their advisers In the event of the application to remove me succeeding then all will change but until then everything should proceed on the assumption that the application will fail No other course is available unless both parties were to agree on alternative Furthermore the new objection to my proceeding with the arbitration first identified in Shook Lin Bok s letter dated 13 October 1987 just seven days before their response was due to be served similarly does not alter anything unless and until submissions are made and either the claimants accept the respondents view or I rule in the respondents favour Finally after having drafted this letter I received by fax from Shook Lin Bok a copy of their 26 October letter to Cooma Lau Loh M Karthigesu No one is likely to be at all surprised by the content and it does not alter anything I have already stated Consideration ought now possibly to be given to invoking cl 28D of the Singapore Arbitration Act 46 Mr Wong Meng Meng apart from complaining about the tone of the remarks of Mr Smith above also thought it improper for Mr Smith evidencing of bias to suggest to CLLMK to take out an application under s 28D now s 32 Mr Wong recognized that s 32 permits such an application to enforce compliance with an order of arbitration to be made by Mr Smith as arbitrator 47 On 27 October 1987 CLLMK wrote to SLB to ask SLB to file a defence on a without prejudice basis And in response to Mr Smith s suggestion of proceeding under s 32 CLLMK in their letter of 2 November 1987 stated We are instructed that if necessary our clients would be prepared to make the necessary application to court under s 32 of the Arbitration Act In the present circumstances our clients think it apposite to await your ruling on the point taken by the respondents on cl 22 and the conduct of the respondents thereafter before making a decision whether to apply to court under section 32 48 On 4 November 1987 SLB explained to Mr Smith why Turner did not file the defence by 20 October 1987 in these terms We did not address you on the question of the first deadline for filing the defence because we had already raised our objection on cl 22 to which you responded on 21 October 1987 To have filed our defence at that juncture may well have prejudiced our position Nevertheless we apologize for any adverse effect our conduct had on you 49 Also on the same day SLB wrote to CLLMK that they would furnish CLLMK on a without prejudice basis a draft defence within a fortnight This letter was not copied to Mr Smith 50 On 5 November 1987 Mr Smith issued Order for Directions No 2 wherein he prescribed deadlines for submission by Turner and BF JG on the cl 22 point However he also went one step further and gave the parties the option to apply to the High Court on the point Both SLB reserving their rights to take it up to court later and CLLMK did not think this additional option was needed at this time Accordingly this additional part of the direction was deleted However there is one startling remark in this letter of 5 November 1987 where Mr Smith said in response to an earlier comment by SLB in relation to the function of an arbitrator that he neither understand nor accept the reference to quasi judicial capacity 51 So it would appear that by 10 November 1987 there was an understanding between SLB CLLMK and Mr Smith as to how the cl 22 point should be dealt with This was confirmed by a letter from Mr Smith on that day However on that same day a second letter was written by Mr Smith not to the solicitors but directly to the parties themselves Builders Federal Hong Kong Ltd and Turner East Asia Pte Ltd and copied to the solicitors In view of the importance of this letter I shall set it out in full I have now given considerable further thought to recent developments in this case There seems to be at risk a possible denial of justice and for this reason I am addressing this letter directly to the parties Respondent s lawyer s actions are without doubt intended to delay postpone thwart or prevent an arbitration taking place This would defeat the provision in cl 22 of the sub contract for the procedure to be followed in the event of a dispute arising between the parties to that subcontract I have on an earlier occasion made clear my own views on a party s entitlement so to react when faced with arbitration proceedings I do not propose here to repeat them However having accepted a tender on the basis of a form of contract incorporating a straightforward arbitration clause and subsequently having signed a sub contract on that basis a dispute having arisen a long time ago there appears to be some disinclination to abide by this particular condition I have therefore to make clear my position as arbitrator in this case which is that I intend to proceed with the arbitration within a sensible time frame unless otherwise requested by both parties or so ordered by the Singapore court or removed as arbitrator by order of that court Times provided in my Order for Directions No 1 were not at all ungenerous Were service of documents to be late without good cause or justification or were there to be no service of vital documents at all then I should have to consider how best to overcome such difficulty It may be and I have not yet applied my mind to the matter let alone come to a decision that a short initial hearing should be held in spring 1988 which might be followed by an interim award Should one party be insufficiently prepared or possibly unwilling to attend a short initial healing that would be entirely up to them Whilst I am cognizant of the respondents current stance in relation to commencement of the arbitration and acknowledging that this matter is as yet undecided one way or another I would again emphasize that its late introduction does not affect any dates or deadlines unless or until the point be decided in the respondents favour In order to preclude possible misunderstanding or risk of anyone being taken by surprise my likely responses to possible scenarios would be as follows 1 Should respondents fail to provide any response to statement of claim I would proceed with the arbitration without in any way treating such failure in itself as an admission of claimants allegations 2 Should respondents fail to appear at a pre trial review or hearing or fail to produce documentary evidence I would continue the proceedings ex parte and make my award on such evidence as is provided for me I sincerely hope there will not be a need to have recourse to any of the above processes and that the matter can proceed normally and sensibly Emphasis added 52 The portions which Turner find particularly objectionable are in italics SLB in their letter of 18 November 1987 to Mr Smith stated that by so writing this letter Mr Smith has further misconducted himself SLB also observed Although we are not entirely clear as to the meaning of the first paragraph of your letter it would appear that you have written directly to the parties because you believe that counsel for both sides have not fully protected their clients interests If that was the inference you meant for our clients to draw from your actions we must we are afraid disagree strongly Further we must again state that our actions are in no way intended to delay postpone thwart or prevent an arbitration from taking place Rather our actions are intended to carry forward an arbitration properly and within the provisions of the applicable contract documents By your statements you appear to have prejudiced the merits of the case at least with respect to our position on cl 22 and you certainly appear to have expressed a bias for one side of a question on which you have not yet received the submission of either party 53 Turner also replied to Mr Smith asking him inter alia to explain what he meant by possible denial of justice 54 CLLMK in their letter of 24 November 1987 to SLB and copied to Smith said that it was not inappropriate for Mr Smith to address the parties directly They argued that both your standing and our standing with respect to this arbitration are solely as representatives of the parties and in our view such standing does not in any way prevent or make it inappropriate for the arbitrator to address correspondence directly to the parties They then went on to explain Smith s action as follows It seems to us that Mr Smith intended to do nothing more than fulfil what he viewed as his obligation to the parties whose action had resulted in his appointment as arbitrator of informing them directly of certain facts with respect to the conduct of the arbitration Furthermore we see no basis for taking the view that Mr Smith s letter of 10 November 1987 amounts in any way to a prejudgment of the cl 22 issue a matter with respect to which he had already established a schedule for submission of the parties positions to him Indeed it seems to us that as of 10 November 1987 Mr Smith not being cognizant of any other arrangement was greatly troubled as any conscientious arbitrator would be by your clients complete and total disregard of your agreement and his Order for Directions No 1 In this light any reasonable view of the position taken by Mr Smith in his letter of 10 November would be that it was quite acceptable and consistent with his duties as arbitrator You go on to state in your letter of 18 November that your actions are in no way to delay postpone thwart or prevent an arbitration from taking place In our view any objective appraisal of your actions taken no doubt on instructions will impel a different conclusion 55 Though requested to explain his letter of 10 November 1987 Mr Smith in his letter of 25 November 1987 merely stated in so far as concerns this point that having read the letter of CLLMK of 24 November 1987 there seems no need for me to add further comment 56 Following this there was an exchange of correspondence between SLB and CLLMK on a misunderstanding whether there was an agreement understanding between SLB and CLLMK on the question whether there was to be a suspension of the time prescribed for Turner to file their defence The correspondence on it was not copied to Mr Smith When eventually all the correspondence were disclosed to Mr Smith Mr Smith without consulting or seeking the views of the parties issued Order for Directions No 3 which provided that BF JG should file their reply within 18 days from 11 December 1987 and Turner to file a rejoinder if necessary within 14 days after they had been served with the reply 57 By 15 December 1987 both parties had made their submissions on cl 22 to Mr Smith On 21 December 1987 Mr Smith rendered his decision the relevant parts of which are Taking account of the comprehensive documentation which has been rapidly and conscientiously assembled for my consideration by the solicitors for the parties which goes to considerable lengths and incorporates impressive and extensive but in some respects confusing and contradictory case law and legal testimony to support on the one hand respondents argument for indefinitely postponing the reference and on the other claimants challenge to such proposal I have decided not to make any ruling on cl 22 provisos as in doing so I could not avoid ruling on my own jurisdiction Which is to say that whilst accepting in principle the respondents third submission at 18 of respondents reply without necessarily accepting the whole of it I have come to a conclusion that with due respect to but using and slightly amending SLB s wording it is inconceivable to imagine that the arbitrator in these proceedings has jurisdiction to determine whether or not the main contract works have been abandoned However whilst having decided not to make a ruling on cl 22 provisos I have most carefully considered the merits of the challenge to my jurisdiction made by SLB on behalf of the respondents in this arbitration It is my view that respondents arguments whilst persuasive are not overwhelmingly so to provide sufficient grounds for me as a non lawyer arbitrator to postpone indefinitely the continuation of this arbitration reference I propose then to leave to a judge of the Singapore High Court to decide in the light of the arguments put forward and previous activities of disputants if cl 22 of the sub contract does preclude or should have precluded my continuing with this reference to arbitration Meanwhile I shall continue with this arbitration on the assumption that I do have jurisdiction unless and until I am ordered by the Singapore court not to do so Emphasis added 58 As stated above the second preliminary meeting was fixed for 12 January 1988 In view of the new developments relating to cl 22 SLB on 5 December 1987 wrote to Mr Smith that it might be appropriate to defer that meeting until the jurisdictional point on cl 22 had been clarified or decided upon CLLMK wrote opposing the application to vacate the date for the second preliminary meeting After some correspondence on the matter Mr Smith ruled that the second preliminary meeting should proceed as scheduled Then on 28 December 1987 Mr Wong Meng Meng of SLB wrote to Mr Smith proposing to bring forward the meeting by one day because his office appears to have overlooked my having a court hearing on 12 January 1988 To this Mr Smith who was scheduled to arrive in Singapore on 10 January 1988 replied on 30 December 1987 as follows In view of the date having been agreed last August and reference to it having been made so frequently of late I am reluctant now to change it as requested by SLB However were SLB themselves to undertake to meet all costs of now changing the date and providing such change were not to be unacceptable to CLLMK then I should be prepared for such change to be made Unless I hear that both parties solicitors have agreed to such a change and have arranged with Westin Stamford Hotel within the next 48 hours then arrangements as ordered and made shall stand 59 Also on 30 December 1987 CLLMK wrote to Mr Smith to say that 11 January 1988 would not be convenient to their clients representative Further for both Messrs Karthigesu and Alan Thambiayah who were and still are handling this matter for BF JG almost all of the period 11 January to 23 January 1988 will be spent in conference with other clients Accordingly CLLMK said they were unable to agree to SLB s proposal Thereafter following a direct conversation between Mr Wong Meng Meng and Mr Thambiayah they agreed on 13 January 1988 60 This is of course a small matter What SLB complained about was the attitude of Mr Smith On such a minor matter a shift of just one day Mr Smith could not even act fairly and had to ask SLB to undertake all additional costs of changing the date when nobody else mentioned about costs It would appear that Mr Smith responded even before hearing the views of CLLMK on it Further SLB alleged that the 48 hour deadline given was hardly adequate or reasonable bearing in mind the intervening New Year holidays 61 The next development concerns the decision of Mr Smith on cl 22 By Originating Summons No 16 of 1988 filed on 9 January 1988 Turner applied for the revocation of Mr Smith s authority as arbitrator on the ground that he is conducting this arbitration in excess of his jurisdiction At the second preliminary meeting it would appear that SLB on behalf of Turner made an application to Mr Smith for his consent to refer the cl 22 jurisdictional point to the court for a determination and if that consent was forthcoming Turner would be prepared to withdraw Originating Summons No 16 to avoid another round of adversarial proceedings Mr Smith refused to give his consent Neither did BF JG give theirs 62 The second preliminary meeting was held on 13 January 1988 A number of complaints were made by SLB on the way Mr Smith conducted the proceedings These were disputed by CLLMK I do not propose to go into that However when discussing the dates for the hearing of the arbitration it would appear that Mr Wong did inform Mr Smith that the main arbitration with the owners of the project would take place from 11 April to 11 May 1988 Notwithstanding this Mr Smith suggested the following three periods for the hearing of this arbitration 21 March 16 April 1988 25 April 14 May 1988 7 June 21 July 1988 There were some disputes as to the circumstances under which these suggestions were made by Mr Smith But it was not denied that those three periods were suggested by Mr Smith The first two periods clearly conflict with the dates for the hearing of the main arbitration Turner complains that this is hardly the way in which a fair minded arbitrator should act 63 The last point raised by Turner to which I will refer now relates to the contracts which Mr Smith had with Freshfields BF JG D P prior to and subsequent to 25 June 1987 This was set out in SLB s letter of 20 January 1988 and Mr Smith was asked to confirm certain facts and to furnish some specific information SLB ended their letter by saying we ask for these particulars as it is our intention to draw inferences from these matters and we thought it only proper that we have your comments on them In answering on 21 January 1988 Mr Smith made these remarks The undisguised intention to convey an impression to third parties of lack of trust in my impartiality as arbitrator looks to be more of an ingenuous ploy than a firmly held conviction SLB in their letter of 25 January 1988 requested Mr Smith to confine himself to answering questions put to him and refrain from making further unpleasant remarks However in his further response also of 25 January 1988 Mr Smith regretted that he was not able to accede to that request Law 64 I will now consider the law applicable to the removal of an arbitrator Section 17 1 of the Arbitration Act Cap 10 provides that the court may remove an arbitrator if he has misconducted himself or the proceedings The Act does not define what amounts to misconduct 65 Parties are entitled to expect from an arbitrator complete impartiality and indifference both as between themselves and with regard to the matters left to the arbitrator to decide They are also entitled to expect from him a faithful honest and disinterested decision Lack of impartiality or bias will be a ground on which objection may be taken against an arbitrator see Russell on Law of Arbitration 20th Ed at pp 143 and 144 and Szilard v Szazz 1955 SCR 3 66 Mustill Boyd on Commercial Arbitration at p 215 states that It is not however necessary to go as far as establishing actual bias for the court will in appropriate cases intervene if facts are proved which would lead a reasonable person not knowing the arbitrator s state of mind to think it likely that there was bias 67 There appears to be a conflict in the authorities as to the test to be applied in determining bias is it real likelihood or reasonable suspicion of bias For example R v Camborne Justices ex p Pearce 1955 1 QB 41 adopted the former test Allison v General Council of Medical Education 1894 1 QB 750 adopted the latter test Mustill Boyd take the view that the latter is the correct test 68 In Metropolitan Properties v Lannon 1969 1 QB 577 which concerned the question whether the chairman of a rent assessment committee was biased in view of his links with the parties who were before him Lord Denning MR stated at p 599 In considering whether there was a real likelihood of bias the court does not look at the mind of the justice himself or at the mind of the chairman of the tribunal or whoever it may be who sits in a judicial capacity It does not look to see if there was a real likelihood that he would or did in fact favour one side at the expense of the other The court looks at the impression which would be given to other people Even if he was as impartial as could be nevertheless if right minded persons would think in the circumstances there was a real likelihood of bias on his part then he should not sit And if he does sit his decision cannot stand see R v Huggins 1895 1 QB 563 and R v Sunderland Justices 1901 2 KB 357 per Vaughan Williams LJ Nevertheless there must appear to be a real likelihood of bias Surmise or conjecture is not enough see R v Camborne Justices ex p Pearce 1954 2 All ER 850 and R v Nailsworth Licensing Justices ex p Bird 1953 2 All ER 652 There must be circumstances from which a reasonable man would think it likely or probable that the justice or chairman as the case may be would or did favour one side unfairly at the expense of the other The court will not inquire whether he did in fact favour one side unfairly Suffice it that reasonable people might think he did The reason is plain enough Justice must be rooted in confidence and confidence is destroyed when right minded people go away thinking The judge was biased 69 It should be noted that while Lord Denning referred to a real likelihood of bias it is nevertheless the appearance that counts Danckwerts LJ in that case seemed to think that a court should interfere if a person knowing the circumstances might reasonably feel doubts as to the tribunal s impartiality Edmund Davies LJ after reviewing the real likelihood test propounded in R v Camborne Justices 1955 1 QB 41 and R v Bamsley Licensing Justices 1960 2 QB 167 said at p 606 With profound respect to those who have propounded the real likelihood test I take the view that the requirement that justice must manifestly be done operates with undiminished force in cases where bias is alleged and that any development of the law which appears to emasculate that requirement should be strongly resisted That the different tests even when applied to the same facts may lead to different results is illustrated by R v Barnsley Licensing Justices itself as Devlin LJ made clear in the passage I have quoted But I cannot bring myself to hold that a decision may properly be allowed to stand even although there is reasonable suspicion of bias on the part of one or more members of the adjudicating body 70 In the later case Hannam v Bradford Corp 1970 1 WLR 937 1970 2 All ER 690 the test which the county court judge applied was whether a reasonable man would say that a real danger of bias existed When the matter came before the Court of Appeal Sachs LJ doubted whether in practice materially different results would be produced by the real likelihood of bias test or the test adopted by the county court judge He also approved the decision in Lannon 1969 1 QB 577 and the reasons there given by Lord Denning Cross LJ thought there really was little if any difference between the two tests and added at p 949 If a reasonable person who has no knowledge of the matter beyond knowledge of the relationship which subsists between some members of the tribunal and one of the parties would think that there might even be bias then there is in his opinion a real likelihood of bias Of course someone else with inside knowledge of the characters of the members in question might say Although things don t look very well in fact there is no real likelihood of bias That however would be besides the point because the question is not whether the tribunal will in fact be biased but whether a reasonable man with no inside knowledge might well think that it might be biased 71 These views of Cross LJ were expressly accepted and approved by Ackner LJ in R v Liverpool City Justices ex p Topping 1983 1 WLR 119 1983 1 All ER 490 who went on to propound this test would a reasonable and fair minded person sitting in court and knowing all the relevant facts have a reasonable suspicion that a fair trial for the applicant was not possible 72 While both Cross LJ in Hannam and Ackner LJ in Liverpool City Justices thought that there was little if any difference between the two tests Staughton J in Tracomin v Gibbs 1985 1 Lloyd s Rep 586 thought otherwise Be that as it may in my view the correct test should be the reasonable suspicion test and I would adopt the formulation of Ackner LJ as set out above It must be borne in mind that the decision of an arbitrator under the Arbitration Act is final at least in so far as findings of fact are concerned If there is a reasonable suspicion as to the impartiality of an arbitrator I do not think he should be allowed to continue to act in the matter 73 Mr Karthigesu in his submission to me made the observation that in all the above cases the alleged bias was of the situation type and they are not of the sort of cases this court is now asked to decide ie allegations of bias because of the way in which the arbitrator conducted the proceedings I doubt this difference necessarily meant that a different test should be applied In any event I will now refer to several cases of the kind as the present case The first is Re Enoch Zaretzky Bock Co 1910 1 KB 327 In that case the allegation was that the umpire did not conduct the arbitration proceedings fairly and impartially Among the complaints in that case were that from an early date the umpire had made up his mind that without the consent of the parties and without informing them of the nature of the evidence the umpire himself on his own initiative called as a witness a person to whose evidence the umpire attached great weight that he would not grant an adjournment for a party to obtain further evidence from Rangoon that the umpire while agreeing that he would state certain questions of law for the opinion of the court would not do so unless that party first handed in a cheque for 150 on account of legal expenses Cozen Hardy MR after reviewing the facts said I do say his conduct as umpire as manifested by the particulars which I have given is such that it would not be satisfactory it would not be fair it would not be just to leave the rights of the parties as they necessarily would be in his sole hands 74 This test was adopted by Peter Pain J in Pratt v Swanmore Builders 1980 15 BLR 37 1980 2 Lloyd s Rep 504 who also took the view that it could be misconduct to fail in important respects to show the elementary skill of an arbitrator 75 I turn next to the Australian case R v Watson 1976 9 ALR 551 a decision of the Australian High Court There it was a judge of the Family Court of Australia who the applicant alleged was biased not through interest or by reason of any relationship but by reason of some pre determination he had arrived at in the course of the case Barwick CJ Gibbs Stephen and Mason JJ in a joint judgment after reviewing the authorities on the test to be applied in determining bias said at p 565 It remains then to apply these principles in the circumstances of the present case The question is not whether there was a real likelihood that Watson J was biased The question is whether it has been established that it might reasonably be suspected by fairminded persons that the learned judge might not resolve the question before him with a fair and unprejudiced mind 76 In Modern Engineering v Miskin 1981 1 Lloyd s Rep 135 the arbitrator made a ruling on a point and gave an interim award against a party without having heard the submissions on it It was agreed between the parties that the arbitrator misconducted the proceedings There was no allegation of bias in that case In determining the test to be applied whether to remove an arbitrator in those circumstances Lord Denning said at p 138 This does seem to me a most serious matter The judge put this test to himself in his judgment Are the circumstances such as to demonstrate that the arbitrator is not a fit and proper person to continue to conduct the arbitration proceedings I do not think that was the right test I would ask whether his conduct was such as to destroy the confidence of the parties or either of them in his ability to come to a fair and just conclusion The question is whether the way he conducted himself in the case was such that the parties can no longer have confidence in him It seems to me that if this arbitrator is allowed to continue with this arbitration one at least of the parties will have no confidence in him He will feel that the issue has been prejudged against him It is most undesirable that either party should go away from the judge or an arbitrator saying I have not had a fair hearing 77 Last I would refer to Catalina SS Owners v Norma Owners 1938 61 Lloyd LR 360 where a very senior and eminent King s Counsel while acting as an arbitrator was heard to have uttered remarks to the effect that Italians were liars and so were the Portuguese and one of the parties before him was Portuguese In that case the Divisional Court of the King s Bench Division consisting of two judges held that the arbitrator approached the matter with a bias against witnesses of Portuguese nationality The decision of the arbitrator was set aside Assessment of the facts 78 There can be no doubt that an arbitrator must always act judicially with a detached mind and with patience He must not at any time descend into the arena or take an adversarial role His response and words used must always be measured and circumspect 79 I will now examine the grounds of complaint made by Turner against Mr

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  • Vita Health Laboratories Pte Ltd and Others v Pang Seng Meng[2004] 4 SLR 162; [2004] SGHC 158
    Nomura that arrangements would be made for the owners of Vitaton and VHLP to address the unsatisfactory state of their receivables The defendant s explanation that he had unilaterally taken this step because of his personal indemnity obligation to these investors is utterly implausible He never informed them that he was discharging such an obligation No demand had been made Indeed Linus Koh Koh DMG s nominee director on VHLS at the material time expressed undisguised surprise in court when informed of the defendant s inexplicable conduct It bears mention that Koh was a witness for the defence This baffling payment provides compelling evidence of the defendant s scheme to maintain the appearance of VHLS running a profitable business with Vitaton and VHLP 39 I also draw an adverse inference against the defendant for not making serious attempts to arrange for Tang to give evidence via a video link Several of the plaintiffs witnesses gave evidence through this medium I do not understand why the defendant did not take strenuous steps to enable Tang to give evidence if it could help his case Tang is in Canada and it would not have been difficult to make arrangements for him to give evidence see Cheong Ghim Fah v Murugian s o Rangasamy 2004 1 SLR 628 at 37 to 45 It is incontrovertible that Tang was purporting to liaise with the owners of Vitaton and VHLP It appears to me that the defendant and Tang worked hand in glove in the gestation of the Vitaton VHLP charade Both of them knew that there were no owners behind Vitaton or VHLP 40 The farcical nature of the trading relationship is further exposed when two credit notes that the defendant caused VHLS to issue are scrutinised These credit notes amounting to 800 000 and 500 000 were ascribed to Vitaton and VHLP respectively The purported consideration for these credit notes which first surfaced in 1999 included the purchase of a the existing product licences b the sales and distribution networks and c all unsold stock which these two entities owned The 500 000 credit note in favour of VHLP subsequently ballooned into 783 000 in December 2001 There is clear evidence that this amount was arbitrarily tied to the latest current outstandings of VHLP In an e mail dated 13 December 2001 Paul Teo the then finance manager who had replaced Tang directed George Chong to rework the valuations to about 700 000 which allow us to also capitalize all VHLP s owing as at to date Both credit notes were plainly a sham There was no need to purchase any assets VHLS already owned and managed these entities The true purpose of these credit notes was to reduce the outstandings due from Vitaton and VHLP without exposing the charade It should be noted that there is congruence between part of the 600 000 paid by the defendant on behalf of the owners and the 500 000 he initially sought to write off in respect of VHLP s accounts The defendant cannot now rely on the ostensible approval for these arrangements he had procured from the boards of VHLS and or VLS Any such approval was procured entirely through deceit and is to that extent wholly ineffective in shielding the defendant from the consequences of his conduct 41 There is yet another matter that merits mention The Indonesian and Philippines entities have two essential and telltale attributes They use the Vita trade name and deal only with VHGC supplied products It is impossible to permit the defendant momentary lapses in allowing the utilisation of the Vita trade name in circumstances that would subsequently entail a ransom be paid This was not an instance of Homer nodding The defendant struck me as nothing less than an astute businessman 42 In the circumstances I unreservedly accept the plaintiffs contention that VHLP like Vitaton was a de facto subsidiary of VHLS I do not accept the alternative contention that the defendant owned VHLP and surreptitiously conducted its business entirely for his direct benefit The benefit was indirect He had installed in the Philippines an arrangement similar to the Indonesian arrangement The intention was again to create the illusion to outside investors that a viable business arrangement had taken root in the Philippines Inter company debts were reflected in VHLS s accounts at all material times as sales and booked as third party receivables This was nothing short of a deception While I am prepared to accept that the defendant may have believed at some stage that the activities in Philippines were a prudent long term investment decision they were never disclosed as such DMG Nomura and VLS were in turn actively and fraudulently misled into thinking that VHLS had an important and successful business relationship with a Philippine entity 43 VHLS has a further claim based on outstandings due from Zuellig Pharma Corporation Philippines Zuellig Philippines As pleaded the claim is principally anchored to an alleged breach of duty by the defendant in failing to ensure collection of payments for products sold to them There is a further subsidiary allegation that he caused Zuellig Philippines to advance funds to VHLP Ho s testimony on this issue is unsatisfactory as he failed to adequately understand the relationship between the various entities The claim is further undermined by reason of settlement arrangements VHLS entered into with the Zuellig group which allowed them to have a fresh clean start for 2003 Gerald Adams the current managing director of VLS confirmed that the plaintiffs were averse to taking steps to collect debts from inter alia Zuellig Philippines because of the greater relationship the parties had Given this stance it would not be appropriate for the plaintiffs to maintain this claim against the defendant It also appears that the plaintiffs have strayed beyond their pleadings in pressing this claim which has some degree of overlap with the claim apropos VHLP Taiwan 44 The plaintiffs have four different claims arising from business transactions in Taiwan There are four separate entities involved Weider Pharma Taiwan Co Ltd Weider Baillian Enterprises Baillian Dragon Pharmaceutical Company Ltd Dragon and Zuellig Pharma Inc Taiwan Zuellig Taiwan For convenience I will deal only with the Weider issues under this head The main plank in respect of the plaintiffs claims for the other entities is the defendant s failure to act diligently or reasonably in collecting longstanding receivables The other claims are also subsumed under VLS s claim based on the defendant s alleged breach es of his contractual warranties and undertakings 45 The plaintiffs claims in respect of Weider largely mirror the charges levelled in respect of the business arrangements VHGC had with Vitaton and VHLP It is alleged that Weider too was a de facto subsidiary and that this was concealed from the plaintiffs and in particular VLS However it bears mention that the defendant s stance on this issue is quite the opposite of his position on Vitaton and VHLP In his defence he admits that Weider was indeed a de facto subsidiary of VHLS established to assist in the facilitation of its sales to Zuellig Taiwan In support of his position several witnesses were called by the defence to give evidence on the arrangements in Taiwan and the genesis of some rather controversial business practices This too was an entirely different stance from the defendant s approach in addressing the claims apropos Vitaton and VHLP where he was effectively the sole factual witness called in rebuttal 46 Weider was created because Zuellig Taiwan had concerns about dealing directly with VHLS There are no real issues pertaining to the legitimacy of VHLS s transactions with Zuellig Taiwan The Zuellig group continues to maintain a sound business relationship with the plaintiffs VHLS had in the course of time under declared the price of goods it shipped to Zuellig Taiwan Zuellig Taiwan discovered that Sophia Cheng Sophia VHLS s Taiwan representative had forged its company stamp to facilitate this Not wanting to be implicated by dealing directly with VHLS Zuellig Taiwan thereafter required that it interpose an intermediary Sophia then established Weider using family members as directors Indeed one of the directors was Sophia s four year old son Clearly Weider was another charade That much is undisputed at least for this aspect of VHLS s operations The question remains however whether this was another charade that the defendant both created and concealed from the plaintiffs The plaintiffs plead that the true nature of Weider was concealed from and or misrepresented to VLS their directors the plaintiffs officers employees It is axiomatic that the burden to establish these facts lies on the plaintiffs 47 It must be observed at the outset that apart from the defendant s pleaded position there are other significant differences between Weider on the one hand and Vitaton and VHLP on the other First Weider was only incorporated after VLS bought into VHGC It was established in March 2001 Secondly the defendant quite clearly made no attempt to mask this arrangement from VHGC s employees and officers Perhaps because all the investors were already in unlike the establishment of Vitaton and VHLP where clandestine arrangements were initiated concluded and concealed by the defendant Weider enjoyed an altogether different gestation The problems pertaining to the business operations and sales in Taiwan were well documented and freely discussed among the management of VHGC Thirdly and most importantly I find that no attempt was made to conceal the peculiar structure and arrangements from VLS David Allison the plaintiffs then group financial manager and VLS s company secretary was privy to the Weider arrangements Indeed he was present at a crucial meeting on 3 July 2001 where it was minuted that to resolve Zuellig s issues management agrees to set up a company for import purposes Sophia set up Weider in 2001 for the purposes of importing goods to be sold to Zuellig This company is owned by Sophia and family It should also be noted that in May 2001 the defendant had personally asked Allison to look into the Taiwan situation and asked him to follow up with all concerned on this matter as well There was no suggestion from plaintiffs counsel that the defendant had asked any of VHGC s staff involved in its Taiwan business to conceal the true nature of the Weider operations from Allison or VLS This was not a clandestinely evolved arrangement like Vitaton and VHLP 48 There are obviously a number of improprieties pertaining to VHGC s Taiwan operations Notwithstanding the responsibility for this cannot be brought to bear upon the defendant The plaintiffs are limited by their narrowly pleaded case on this issue Unlike the instances of Vitaton and VHLP Weider s origins and structure were an open secret within the plaintiffs I also take into account that in 2001 the defendant was no longer engaged in the day to day operations of VHLS particularly after Lam s arrival as a result of his heavy engagements outside Singapore Granting that he clearly had the final say with regard to all decisions he nevertheless assumed a more broad brush approach upon Lam s appointment allowing the minutiae to be addressed by others in VHLS s management He quite reasonably left it to them to resolve this issue in the interests of VHLS As for the plaintiffs claim that Weider was another improper operation that was wilfully concealed from them such a claim is untenable and fails Indeed Allison and Lam knew about this arrangement and were attempting to resolve the unsatisfactory position Unlike the earlier episodes it cannot be fairly said that the defendant initiated and concealed this arrangement Malaysia 49 The defendant admits that he inflated the receivables due from Zuellig Pharma Malaysia Zuellig Malaysia He signed a letter dated 31 March 2001 unilaterally increasing the price of certain products already sold to Zuellig Malaysia The letter was backdated 50 The defendant conceded that the price increase of 20 was effected to ensure that the planned half year results of VLS could be achieved He also asserted that Henry Townsing Townsing another director of VLS had acquiesced in this exercise Leaving aside the truth of this assertion it must be observed that this position was neither pleaded nor put to Townsing when he gave evidence I therefore leave this issue open In the final analysis the fact remains that the defendant initiated and effected this exercise in creative accounting to dress up VHGC s accounts This is wholly unacceptable conduct for which the defendant as managing director is personally answerable Even if Townsing played a role in this abject pantomime of creative accounting the defendant cannot shirk his responsibility 51 Ho gave evidence that the plaintiffs loss arising from this exercise was the precise amount of the improper increase Despite being queried by me he adamantly insisted that this loss was both theoretically and practically recoverable Ho s evidence on this point does not stand up to scrutiny If the increase was not justified in the first instance how could he claim the plaintiffs had been damaged to the extent of the purported increase He did not strike me as an objective witness on this and indeed some other issues see 87 to 90 Counsel for the plaintiffs to his credit neither pursued this line of quantification nor attempted to shore up his expert s untenable stance He submitted that the damage recoverable by the plaintiffs as a consequence of this exercise was limited to excessive taxes paid and the costs of restating the accounts However as no evidence was led by the plaintiffs to quantify these claims no award is called for Ordering excessive stock 52 On 26 November 1998 the defendant signed a trademark licence agreement with Sunkist Growers pursuant to which VHLS was allowed to manufacture market and sell certain Sunkist products In June 2000 the defendant arranged for VCL to enter into a distribution agreement with Nestlé Australia for the distribution of Nestlé products The plaintiffs have pleaded that in breach of his fiduciary duties the defendant caused VHLS to purchase excessive amounts of Sunkist and Nestlé products which it had no reasonable prospect of selling The defendant s case is that in so far as the Sunkist agreement is concerned there was a prior commitment to purchase minimum quantities on an annual basis This estimation had been reasonably arrived at As for the Nestlé arrangement the products were ordered on the basis of sales forecasts made by the various country managers in VHGC 53 In their submissions the plaintiffs contend that the Sunkist and Nestlé disaster should be seen in the context of the defendant s attempts to inflate the financial performance of VHLS As a consequence the plaintiffs suffered losses by being forced to write off 1 734 434 worth of Sunkist and Nestlé products It is also asserted that the defendant signed the Sunkist agreement without due diligence and committed VHLS to overly aggressive sales targets For good measure it is further maintained that he failed to supervise the various country managers in relation to these matters None of these assertions was pleaded Despite a request for further and better particulars of the statement of claim on this issue the plaintiffs case remained unsatisfactorily threadbare The defendant has rightly taken serious objection to this There appears to be a chasm between the plaintiffs pleaded case on an alleged breach of fiduciary duties in effecting the orders and the re crafted case in submissions hinging on the absence of due diligence in entering into the relevant agreements The particularity of a pleaded claim should invariably be commensurate with the seriousness and complexity of the claims being made By omitting to detail the basis on which they allege there were no reasonable sales prospects the plaintiffs failed to adequately plead these claims There is merit in the defence counsel s contention that the plaintiffs changed horses in mid stream on this issue 54 There is another reason why the plaintiffs claim under this head must fail Alex Chen Alex VHLS s former business manager in charge of Sunkist and Nestlé products gave evidence that he liaised with the various country managers on the orders before they were placed I found him to be a credible and forthright witness His evidence though not a model of perfection was largely corroborated by contemporaneous documents and correspondence No evidence was led to show that either he or the other country managers had been asked to manipulate the sales and conjure up orders Leaving aside the issue of pleadings which does not appear capable of being satisfactorily resolved the concatenation of circumstances precludes any finding of fraudulent conduct on the part of the defendant on this issue 55 With the benefit of hindsight there are facets of the defendant s oversight or lack of foresight which can be criticised Arguably he could have paid closer attention to the sales figures and the concurrent issues This does not by itself merit a finding of liability based on lack of due diligence against the defendant I do not think it was unreasonable for him to rely on Alex and the country managers The temptation to judge the defendant with the benefit of hindsight for a commercial decision gone awry should be resisted 56 In any event the plaintiffs have not clearly spelt out a case for visiting these losses on the defendant The damages claimed by the plaintiffs for these losses rely primarily on Ho s rather unsatisfactory evidence See 87 to 90 He concluded that the write offs which amounted to 59 4 of the total sales inevitably meant that the orders were excessive I do not find this contention particularly helpful I am not prepared to conclude that the defendant entered into these agreements because he was motivated by improper considerations There appears to be adequate business consideration grounded on management input experience and market cum development potential leading to these forays and the agreements Clearly all of this now appears to have been over optimistic and somewhat excessive However minimum portions had already been committed to and VHLS had no choice but to make the best out of an unhappy situation Excessive salaries paid to defendant s brother and wife 57 The plaintiffs claim that the defendant s brother Seng Hock had been improperly and excessively remunerated for the period from August 2001 to February 2002 It is undisputed that Seng Hock ceased attending VHLS s offices from August 2001 He was also not included or named by the defendant as an employee in an organisation chart sent by him to Lam on 6 May 2001 If indeed he continued to be an employee of VHLS or VHGC I find it wholly inexplicable that the defendant did not deal with this issue in a direct manner I accept the plaintiffs further contention that no proper disclosure of his alleged role qua employee of VHLS was made to them The private arrangement the defendant had directly arrived at with his brother appears to be shrouded in mystery and clouded by uncertainty The defendant did not take steps to adequately bring this matter to the attention of the other directors before sanctioning the payment of his brother s remuneration VLS had reporting obligations to the ASX in so far as there was any remuneration paid to the family members I accept Vanda s and Lam s evidence that the employment of relatives was an issue of niggling concern for them which the defendant held out as having been resolved by his brother s departure from VHLS qua employee The amount to be reimbursed by the defendant under this claim is 60 389 58 There is a further claim by the plaintiffs in respect of the defendant s wife Michelle Nicholas Michelle It is alleged that Michelle s salary which had been adjusted downwards to address certain listing requirements on disclosure had subsequently been restored without proper authorisation I do not think it is legitimate for the plaintiffs to maintain this petty claim Soon after a remuneration committee meeting on 20 March 2001 Tang sent an e mail to David Allison asserting his belief that the committee had approved the restoration of Michelle s pay Neither Allison nor Townsing responded to this Townsing now purports that there were some further discussions which led to a contrary position These alleged discussions were not documented Allison has not given any satisfactory response why he did not expressly contradict Tang s belief and assertion as recorded in this e mail It must also be noted that the relationship between the plaintiffs and the defendant at that juncture was cordial I therefore find the plaintiffs complaint here unsubstantiated The sum involved is 42 790 There was no attempt by either Tang or the defendant to conceal the restoration of this rather minor pay adjustment The plaintiffs temptation to tar them for all manner of irregularities should not be exercised extravagantly The car purchase 59 On 5 March 2000 the directors of VLS resolved that any capital expenditure within VHGC in excess of 200 000 required board approval It is accepted that the defendant was aware of this given that he was present when the resolution was passed 60 In April 2001 the defendant caused VHLS to purchase a Mercedes S320 which cost 357 000 The plaintiffs assert that it was only noticed around 25 February 2002 that the capital expenditure threshold had been exceeded through this purchase 61 The defendant asserts that Vanda and Townsing had seen the car in Singapore on more than a few occasions when they visited Singapore He says they knew of the purchase and had by their conduct assented to the purchase Vanda and Townsing deny knowledge both of the purchase using company s funds and of the car s value It is axiomatic that even if the other directors knew of the purchase the real issue is whether the defendant openly disclosed to them the purchase price It is clear that he did not seek the board s prior consent before the purchase Was VLS s board subsequently informed of the purchase and did it ratify the purchase by its conduct 62 The defendant finally asserts that in any event he had disclosed the purchase of the car in the management reporting package dated 31 May 2001 which Tang had sent to VLS s board The schedule dealing with Property plant equipment as at 31 May 2001 included a section captioned Major addition 5 200 Description Category Amount SM BGT Car Mercedes 5320L Motor Vehicle 357 000 The plaintiffs complain that this information is hidden among a mass of corporate information I disagree Any reasonable director looking at the information would have immediately realised that disclosure had been made of a recent purchase of the car for the defendant It does not appear to me that Tang and the defendant were trying to camouflage this information The plaintiffs complaint here is again redolent of overkill 63 In the extant circumstances a resolution to approve this purchase was not needed The records of the company coupled with the testimonies adduced ineluctably lead to the conclusion that the board of VLS had been run rather informally Not every decision of substance warranted a resolution Business was often transacted over the phone or through e mails Board resolutions and papers were not required for all transactions and or purchases The relationship between board members was such that the board operated on the basis of disclosure rather than a rigid adherence to documentation Considering the evidence I also accept the defendant s assertion that he disclosed this fact orally to Vanda and Townsing It must be borne in mind that their relationship at that juncture was good There was no need for the purchase to be concealed I find that the VLS board not only knew of the purchase of the car but approved it informally by their conduct Breach of share sale agreement 64 VLS has pleaded a further independent cause of action against the defendant based on the share sale agreement SSA made inter alia between them on 29 October 1999 This springs from several alleged breaches by the defendant of warranties and obligations he undertook in the SSA 65 The SSA contains specific warranties made by the defendant that the VCL s financial statements at the material dates presented a true and fair view of the profit or loss of the company and the trade debts are good debts and will produce the full amount of the debts without deduction It is not in dispute that a finding of a breach will entail personal liability on the part of the defendant to repair the consequences 66 The trade debts and receivables owing to VHLS as at the completion date ie on 3 February 2000 was 12 762 722 From that sum the plaintiffs assert the amount of 2 206 189 87 still remains unpaid Given that Ho s findings on this issue were neither contradicted by Tim Reid Reid the defence expert nor tested in cross examination I accept them see 90 The outstanding sums as identified by Ho are S N Name Amount S 1 Baillian Enterprise Ltd 197 564 45 2 Zuellig Pharma Inc Taiwan 298 959 12 3 PT Doves Soper Indonesia 36 551 40 4 PT Dayasembada Swadarma 8 928 54 5 PT Rajawali Int l Retail 10 460 87 6 PT Muara Sehat Permai 12 717 92 7 PT Caturabadi Jayasakti 746 98 8 Barclay Marketing Pte Ltd 7 615 00 9 CV Prima International Melawai 2 481 50 10 Dragon Pharmaceutical Co Ltd 148 403 77 11 Kenda S Pte Ltd 258 75 12 Takehaya Co Ltd 360 00 13 PT Vitaton 1 025 546 06 14 VHLP 618 227 63 2 368 821 99 67 It is axiomatic that the defendant is liable in full for all amounts warranted as good debts from Vitaton and from VHLP Given that these debts do not exist it is immaterial whether they can be properly characterised as good debts in short they are neither real nor genuine let alone good The warranty was patently false 68 In relation to the Zuellig Taiwan debts it cannot really be argued that there had been an actual vivid portrayal by the defendant qua vendor in the SSA that this was a genuine debt which would be paid without deduction It is not open to him now to rely on the complex set off arrangements between Weider and Zuellig to wipe out this obligation It is also clear that the Barclay Baillian and other debts referred to in the list of receivables remain outstanding and cannot now be satisfied by any means reasonable or otherwise More than four years have passed since these warranties were given and the defendant has been unable to adduce a scintilla of credible evidence as to what other steps the plaintiffs could plausibly have taken or can now take to recover these amounts VLS is entitled to recover the losses pleaded under this head The disclosure letter 69 The defendant claims that pursuant to a disclosure letter dated 26 October 1999 his obligation to make good some 1 3m of debts purportedly due from Vitaton and VHLP has been effectively avoided The disclosure letter it is said discloses the intention to set off 1 3m worth of debts from Vitaton and VHLP Pursuant to the terms of the SSA and or subsequent ratification by the plaintiffs it is asserted that these obligations have now been extinguished 70 Generally speaking the rationale of disclosure letters is well captured by the expression confess and avoid The essence of any disclosure letter subject to the terms of its contractual setting is candour Indeed the SSA itself refers only to the avoidance of exceptions fairly disclosed in a disclosure letter The facts disclosed in the purported disclosure letter sent on behalf of the defendant wilfully misstated the relationship between VHLS on the one hand and Vitaton and VHLP on the other What did the defendant disclose That there would be an arrangement where valuable consideration would be given for the setting of these debts The so called consideration it should be reiterated was inter alia the purchase of the relevant product licences and networks which VHLS already had control of 71 Quite apart from this fundamental issue that undermines the thrust of the defendant s contention I accept the plaintiffs submissions that the facts pertaining to the sending and receipt of the disclosure letter have neither been properly pleaded nor proved by the defendant For these reasons the disclosure letter does not assist the defendant in diminishing his liability to VLS 72 The defendant also contends that the plaintiffs are estopped from denying the applicability and or validity of the disclosure letter by reason of their subsequent acceptance of the write offs for Vitaton and VHLP For good measure it is also pleaded that the plaintiffs failed to object to the write off Considerable ingenuity was exercised by defendant s counsel in extrapolating the various facets of this contention and in dissecting the available evidence In my view the defendant s contentions are wholly misplaced Having concluded that the set off arrangements were a sham I do not see how the defendant can sustain an argument that the plaintiffs had consented to this sham It is a remarkable argument and ought to be dismissed in limine In any event it seems clear to me that there was no such agreement prior to the signing of the SSA Indeed if there was such an understanding why was the disclosure letter necessary Furthermore the defendant s reliance on a cryptic defence of capitalisation is bereft of credible particulars and should be dismissed altogether For good measure I should also add that I accept Townsing s and one Alexander Beard s evidence on this issue Any inconsistencies in their evidence should also be interpreted and viewed in light of their mistaken state of knowledge at the material time s Finally even if VLS were not contractually entitled to maintain this claim the defendant would be unable to fend off claims for the identical amounts apropos the vehicle of VHLS It is also noteworthy that in an e mail dated 14 March 2002 the defendant confirmed to Vanda Indonesian and Philippines debt Henry has reminded me of the conditions for the sale of Vita Health to VLS I will stand by all legal obligations pertaining to these debts emphasis added This is an acknowledgment made by the defendant after the claim was made known to him His spirited attempts to now resile from his earlier solemn undertakings are simply put a misconceived afterthought Miscellaneous claims 73 The plaintiffs have also included a catalogue of claims pertaining to breach es of warranties These claims relate to the lack of disclosure of de facto control of Vitaton and VHLP related party transactions with Vitaton and VHLP and the defendant s alleged failure to staunch infringing activities by the Malaysian country manager Khoo Seng Kang They invite the court to direct that damages be assessed for these losses In so far as the additional claims pertaining to Vitaton and VHLP are concerned these appear to overlap with the preceding claim for receivables It is clear that the plaintiffs did not wholly rely on the purported collectability of these good debts hence the personal indemnities required from the defendant The warranty in the SSA however does not purport to embrace Khoo s infringing activities In this connection I also note that separate claims have already been made in Malaysia in respect of these alleged breaches There does not appear in these proceedings to be any cogent evidence directly and personally implicating the defendant in this connection While his management may be open to criticism this alone does not appear to be capable of crystallising into a basis for a contractual tortious or fiduciary claim 74 There is also a claim by VCL for an outstanding loan of 2 564 66 purportedly extended to the defendant This is not satisfactorily evidenced in Ho s testimony or documented and is disallowed Misrepresentation 75 Under this head VSL assert that they were fraudulently induced to enter into the SSA by the falsely portrayed status of Vitaton and VHLP They plead that there was an overstatement of receivables and concealment of bad or doubtful debts Having relied on these misrepresentations VSL says it has suffered loss es and is entitled to damages It is asserted that the value of VCL has been diminished given that the independent network in Indonesia and Philippines does not exist 76 VSL does not ask for the SSA to be rescinded It asks that damages be awarded in lieu of rescission pursuant to s 2 2 of the Misrepresentation Act Cap 390 1994 Rev Ed Their expert has not specifically quantified the loss under this head despite an invitation by the court to produce evidence that might assist In the course of the proceedings I had asked the plaintiffs whether their expert could present a financial statement reflecting the true financial position of VHGC if the purported sales figures of Vitaton and VHLP had not been included in VHGC s financial statements at the material time Counsel for the plaintiffs informed the court that it could not be done at that juncture as the plaintiffs no longer had access to the accounts of Vitaton and VHLP Granting that this could not have been done at the hearing stage I am not satisfied why it could not be prepared earlier The plaintiffs appear to have had Dr Pat s and Dr Gabiola s co operation in prosecuting their present claim against the defendant With diligence Ho could have utilised this method or some other approach to give evidence as to how this head of damages ought to be assessed A line has to be drawn Given that the plaintiffs have had the opportunity both before these proceedings and in the course of these lengthy proceedings to adduce additional evidence it is not appropriate that they be accorded a further opportunity to repair their claim by having damages assessed separately Interestingly the plaintiffs concede in their submissions that general damages for such misrepresentation are difficult to quantify in full 77 In any event I am not satisfied that having recovered their losses under the indemnity VLS can really mount a further claim for misrepresentation independent of VHLS s claims for losses caused by operations in Indonesia and the Philippines To the extent that there is an overlap it is preferable to deal with such a claim as a VHLS claim see 99 to 104 It must also be emphasised that Singapore and Malaysia have proved to be viable and valuable markets for the plaintiffs and no valid complaints have been made out in respect of business operations in these markets Return of bonus shares 78 Clause 8 of the SSA obliged VLS to issue additional shares to inter alia the defendant if certain net profit targets were reached by VCL in 2000 and 2001 These profit targets were reached assisted in no small measure by misstatements of the actual sales to Zuellig Malaysia for financial year 2000 and other irregularities The defendant contends that there was no reason to inflate profits for the financial year 2000 because he could and would have earned the additional shares in 2001 This is a strange argument It cannot really be denied that the issue of the bonus shares was premised on the achievement of a particular profit target for that financial year Quite apart from the misstatement of the Zuellig Malaysia share profits in 2000 I am constrained to take notice of the various misstatements and chicanery that the defendant was party to in the preparation of the accounts of

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  • ECRC Land Pte Ltd v Ho Wing On Christopher and Others[2004] 1 SLR 105; [2003] SGHC 298
    tenant Regent Bowl extended its lease in May 1995 agreeing to the automatic incorporation of the 5 6 times increase in rent 14 The plaintiff then made alternative plans to house the ATP in block B This would involve raising the floor slab of the second storey to increase the height of the ground floor and raising the roof of the second storey correspondingly However the seafood restaurant Jumbo Garden occupying the second storey also agreed to stay on at the premises at the increased rent and signed part of the agreement on 22 July 1995 The plans had to be changed again 15 From September 1995 onwards the plans were to build a new block D which would be linked to the second storey of block A In April 1996 the authorities disapproved of such plans An appeal was lodged and other options were explored In July 1996 the authorities informed the plaintiff the 22m height clearance was not approved for the new block which had to be of the same height as the existing ones The plaintiff then sought to make modifications to the attractions to fit the decreased height but that proved impossible The attractions could not be housed in block B because the authorities in all probability would not approve the increased height needed for that purpose 16 The plaintiff considered housing the ATP on the first and second floors of block A excluding that portion of the ground floor occupied by McDonald s restaurant and building a giant staircase as the main entrance from the ground floor However McDonald s objected to the staircase as it would affect the frontage of its restaurant 17 The plans then switched to having the ATP on the ground floor of block B through to the squash courts at block C This alternative would involve a scaled down version of the ATP with only two major rides An application was made in July 1996 to convert the squash courts to house one of the attractions In October 1996 the authorities did not approve the conversion of the squash courts 18 From late 1996 to early 1997 the plaintiff tried its best to work with Sega s engineers to modify the large attractions so that they could be housed at the ground floor of block B Eventually that plan was abandoned as it was not feasible due to the ceiling height of the ground floor 19 After exhausting all available options the plaintiff had no choice but to run the centre as a family entertainment centre that included an amusement arcade and Q Zar laser games at the ground floor of block B 20 The plaintiff relied heavily on funds from the joint venture parties George Wuu made it clear from the outset he was not going to provide funds for the plaintiff By late 1995 SAFE stated it had no wish to fund the plaintiff s operations It was therefore up to Grande to provide the funds and Grande made substantial contributions periodically By the middle of 1998 the plaintiff owed some 4m to the Grande group When the plaintiff was ordered to be wound up in March 1999 the level of indebtedness did not change much 21 In the second half of 1997 the plaintiff marketed the centre extensively in an effort to turn the centre s financial situation around Potential tenants began to show interest in the centre However these efforts could not save the plaintiff as it was unable to keep up with its payment obligations to OCBC Bank which then terminated the facilities granted to the plaintiff In January 1999 the Court of Appeal ruled against the plaintiff in its attempts in another action to recover 1 5m from ECRC In February 1999 the plaintiff was ordered to pay more than 2m and costs to ECRC Soon thereafter the plaintiff went into liquidation 22 It was alleged that the first to fourth defendants completely lost sight of the fact that the plaintiff was a separate legal entity and that the Grande group treated the plaintiff as if it were one of its subsidiaries The plaintiff alleged that the first to fourth defendants evicted existing tenants who had been paying rent faithfully and entered into questionable tenancy arrangements with the seventh to tenth defendants It was also alleged that the plaintiff was made to pay for renovations and upgrading works for these tenants benefit The plaintiff also complained that various payments were charged to its account The gist of the plaintiff s complaints was that the transactions entered into with the seventh to tenth defendants had no valid commercial justification whatsoever 23 The other joint venture partners were made aware of the transactions complained of SAFE and George Wuu attended all board and shareholders meetings They also received the reports and the accounts George Wuu maintained an office at the centre and was updated by the second defendant who met him frequently on site of the developments He knew that the first to fourth defendants were directors in the other defendants and that the companies were related to the Grande group 24 The centre was already 15 years old in 1995 and large portions of it were in disrepair There was leaking caused by severely corroded roof gutters The second storey of block A had an uneven floor level because a ballet studio used to occupy part of it There was spalling concrete The public toilets had to be upgraded too To achieve the status intended for the centre as a show case ATP redevelopment and renovation works obviously had to be undertaken The evidence showed that there were plans to do upgrading works from the early stages of the joint venture There was a directors resolution in October 1995 approving a 11m construction loan facility from OCBC Bank The loan was stated to be for retrofitting the existing buildings and the construction of a new building The infrastructure works undertaken involved the roofing and the ceiling works the provision of adequate electrical supply for the attractions air conditioning and plumbing 25 When the seventh defendant agreed to commence operations of its amusement arcade on the second floor of block A in December 1995 there were only three main tenants left at the centre It agreed to do so at the plaintiff s request as the centre was undergoing major re development and renovation works and there was a need to inject life into the centre so that it would not be forgotten by the public Once the public s interest in the centre waned it would be much more difficult to revive it The plaintiff had to keep the centre breathing and not let it lapse into a coma of oblivion 26 As the seventh defendant depended heavily on walk in customers and human traffic at the centre was adversely affected it was to be expected that the seventh defendant would need some incentive to start its operations It was never its intention to run a stand alone amusement arcade without the ATP Moreover access to the second floor of block A was far from adequate Therefore although tenants were usually expected to pay for their own fitting out works the plaintiff as landlord made a contribution of about 1m towards the seventh defendant s fitting out works and gave it a preferential rental rate It also accorded the seventh defendant a longer period of three months for fitting out works and a longer period of rent rebate 27 In late 1996 the seventh defendant had to think seriously of moving its operations out of the centre altogether as it became apparent that the original ATP conceptualised might not come to pass The link between the second floor of block A and the new block D was not going to materialise despite the architects advice to the plaintiff that the chances of rejection of the plans for block D were remote By June 1996 the major attractions from Sega had arrived and it was concerned about product obsolescence Sega was not willing to continue waiting and had issued an ultimatum for the purchase order for the large attractions to be issued The plaintiff had to assist the seventh defendant in storing the Sega attraction on site as its plans for the ATP had been delayed The plaintiff and the seventh defendant therefore agreed that the latter shift its operations to the ground floor of block B which was then unoccupied while the plaintiff explored other options to implement the ATP after July 1996 In this way the plaintiff would benefit from having an anchor tenant to attract the crowds and in turn attract better tenants to the site For this reason the plaintiff agreed to undertake the upgrading and renovation works for the ground floor of block B as well Block B was in serious need of repair in any event Similarly the plaintiff allowed the seventh defendant to terminate its tenancy agreement for block A without penalty 28 It was the same situation that led to the eighth defendant operating a seafood restaurant on the second level of block B After Jumbo Garden left because it was not able to meet the vastly increased rental payments there was no serious offer for those premises and practically the entire block B was unoccupied Potential tenants were interested to take up space at the centre only after the ATP was in operation The first defendant had to resort to persuading the famous floating restaurant in Hong Kong to open a restaurant in the vacated premises but was unsuccessful The Hong Kong restaurant was prepared nonetheless to send its chefs and managers to assist if a restaurant was set up at the centre The eighth defendant was also accorded a period of rental rebate Although the rent charged was only a fraction of that payable by Jumbo Garden after the 5 6 times increase it was a realistic one as a similar rent for the premises was offered by an established seafood restaurant operator Palm Beach which lost interest in the centre subsequently 29 It was argued by the plaintiff that the terms of the tenancy agreements between the plaintiff and the seventh and the eighth defendants suggested that renovation costs would be borne by the tenants However the bulk of the works undertaken by the plaintiff was infrastructural in nature The tenancy agreements were also signed well after the respective works had been completed and paid for It was the evidence of the legal department of the Grande group that it overlooked the arrangements in those cases by mistakenly using standard form tenancy agreements The tenancy agreement with the seventh defendant was signed only in October 1996 although it had been occupying the premises since January 1996 because Grande s legal department was chasing both parties to formalise the agreement 30 It was also contended that some invoices for the works on the second floor of block A were addressed to the seventh defendant and should not therefore have been paid by the plaintiff The evidence showed that many of the invoices or quotations for the works were in fact made out to wrong parties This was caused in part by the different calling cards handed out to the contractors by various persons from the Grande group involved in the works Some of the payments were made by the seventh defendant on the plaintiff s behalf as the latter was experiencing cash flow problems These problems were caused by the dispute between ECRC and the plaintiff which resulted in the plaintiff not being able to execute a legal mortgage for OCBC Bank in order to drawdown on the construction loan Once the funds became available the plaintiff reimbursed the seventh defendant and paid for the remaining works The situation was the same in the case of the eighth defendant paying for some of the works first 31 Such arrangements were not unique to companies related to the Grande group In May 1997 the plaintiff also contemplated undertaking 1m worth of works to try to attract Europa Holdings to take up a tenancy in block A Unfortunately the application for a change of use to discotheque karaoke lounge and a wine bar food shop was not approved by the authorities 32 Similar indulgences regarding rent rent free period and rent rebate was granted to the ninth and ten defendants for operating at the centre for the reason that the plaintiff wanted to keep the centre alive The ninth defendant was occupying the unwalled premises vacated by a previous tenant which could not keep up with its rent payments and went into liquidation subsequently The understanding with the ninth defendant was that it would be required to vacate the premises should a better paying tenant be found In the latter half of 1998 the plaintiff s marketing efforts paid off and a better paying tenant Four Amigos was found Pursuant to the said understanding the ninth defendant was given short notice to vacate the premises and it did so 33 The tenth defendant occupied a small take out counter at the ground level of block B The plaintiff hoped that by having a food counter there to draw in beach goers the amusement arcade would benefit An outdoor seating area was constructed next to the take out counter but it was used by members of the public and customers of McDonald s as well It was not for the exclusive use of the tenth defendant Like the case of the ninth defendant the arrangement was that the tenth defendant would vacate at short notice should an alternative tenant offering a higher rent be found When a better paying tenant was found the tenth defendant did vacate the counter at short notice The plaintiff purchased its inventory without depreciation because the new tenant wanted the use of it Subsequent to this tenant the plaintiff was able to rent out the furnished counter at an even higher rent 34 Some tenants were asked to leave the centre because their activities such as operating a massage parlour were incongruent with the original intention to have a family oriented ATP Others like the Pondok Gurame restaurant and Jumbo Garden had to leave because of arrears in rent Some tenants chose to leave because they were not willing to accept the corresponding 5 6 times increase in rent The existing tenants were not made to leave for ulterior motives such as the seventh defendant needing space to store the Sega attractions 35 The plaintiff s other claims concerned alleged wrongful charges which it was made to bear These charges included the fifth defendant s consultancy fee the sixth defendant s operational staff charges and legal administrative and secretarial charges the interest charges the foreign exchange entries in the plaintiff s accounts and payments to third parties 36 Like the consultancy fee due to ECRC the consultancy fee due to the fifth defendant was provided for in the shareholders agreement 37 As stated earlier the understanding among the joint venture parties was that Grande and SAFE would provide the necessary finance accounting and operational services and support for the plaintiff which had nothing more than a centre manager and some workers in charge of the general upkeep of the centre Grande and SAFE agreed between themselves that the plaintiff would be charged for all the services and support rendered by them The two partners also agreed between themselves that interest would be charged on loans extended to the plaintiff 38 From as early as March 1995 one of Grande s employees was seconded to the plaintiff for clerical and secretarial support George Wuu signed a letter in April 1995 informing ECRC s former company secretary that the sixth defendant would take over all corporate secretarial matters from the company secretary George Wuu was informed by June 1995 that where there were areas of duplication some staff costs would be apportioned to the plaintiff so as to minimise the costs to both entities The plaintiff agreed that the existing staff employed by ECRC was not capable of transforming the centre into an ATP The plaintiff was not disputing that it should bear the charges for such services and support Instead it took the stand that such charges must be reasonable in amount 39 The plaintiff s audited accounts for the financial years ending on 31 December 1995 and 31 December 1996 referred expressly to the fifth defendant s consultancy fee as a provision the allocation of office operating expenses and salaries the interest charges on loans from related parties and the fact that the loans from the sixth defendant were unsecured denominated in US Dollar and that interest was payable at US Dollar prime rate plus 1 These accounts were approved by a majority of the shareholders 40 The seconded staff looked after the redevelopment of the centre and attended to the day to day matters as well The sixth defendant paid the salaries of the seconded staff until September 1995 after which the plaintiff paid the salaries of the said staff directly The sixth defendant claimed reimbursement for these salaries for the period between January and September 1995 The method of computation used was to charge the plaintiff 50 of the actual total salaries of these seconded staff although they were practically working for the plaintiff full time during the period in question 41 In addition to the above the sixth defendant also provided legal administrative and corporate secretarial support and services to the plaintiff There were various legal matters to take care of such as loan documentation lease documentation recovery of rent arrears and liaising with the authorities In addition the plaintiff was involved in many legal actions There was work done for directors and shareholders meetings The sixth defendant also had to provide administrative support for the payroll and staff matters The proportion of all such costs attributed to the plaintiff was

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  • Wah Yuen Electrical Engineering Pte Ltd v Singapore Cables Manufacturers Pte Ltd[2003] 3 SLR 629; [2003] SGCA 23
    majority may push through the scheme at the expense of the minority whose rights may be dissimilar In the present case the creditors were not divided into any classes and all of the creditors voted together at the same meeting 12 Singapore Cables took objection to the claims of three related parties namely Mr Stanley Lee Kiang Leng Mr Lee Mr Wong Beng Huat Mr Wong and R N Electrical Engineering Pte Ltd R N The related party debts accounted for 61 72 of Wah Yuen s total unsecured debt The extent of the three parties relationship with Wah Yuen as well as the quantum of each of their three claims was as follows Related party Quantum of claim a Mr Stanley Lee Kiang Leng the managing director and 70 10 shareholder of Wah Yuen 4 296 254 10 b Mr Wong Beng Huat a director and 14 95 shareholder of Wah Yuen 20 000 00 c R N Electrical Engineering Pte Ltd a company in which Mr Lee held 90 of the shares and of which he was managing director 964 833 61 Total 5 281 087 71 13 Counsel for Wah Yuen correctly submitted that related party creditors did not constitute a separate class of creditors for voting purposes simply because they were related parties This is because the test is based on similarity or dissimilarity of legal rights against the company not on similarity or dissimilarity of interests not derived from such legal rights The fact that individuals may hold divergent views based on their private interests not derived from their legal rights against the company is not a ground for calling separate meetings UDL Argos Engineering Heavy Industries Co Ltd v Li Oi Lin 14 The position of Singapore Cables however was not that the two directors and R N should have voted separately by virtue of the fact that they were related parties rather counsel for Singapore Cables argued that the three parties should not have been allowed to vote at all because there were legitimate concerns over the existence and extent of the related party debts In so far as Mr Lee and Mr Wong were concerned the debts owing to the two directors witnessed a dramatic increase a In 1999 the amount Wah Yuen allegedly owed to their directors was only 161 188 00 b In Wah Yuen s audited balance sheet as at 31 December 2000 this amount had increased to 2 109 390 00 an increase of 1 948 202 00 c In Wah Yuen s unaudited balance sheet as of 30 November 2001 this amount had further increased to 3 936 847 00 an increase of 1 827 457 00 Out of this total amount the sum 3 916 847 00 was allegedly owing to Mr Lee alone d At the second creditors meeting the debt allegedly owing as admitted for the purposes of voting by Wah Yuen to both their directors as stated in the summary of results was 4 316 254 10 out of which the amount allegedly owing to Mr Lee alone was 4 296 254 10 This was more than the total amount allegedly owing to all the directors as at 30 November 2001 In so far as R N was concerned the debt owing to the company witnessed a dramatic decrease a The amount owing by Wah Yuen to R N in 1999 was only 356 028 00 b In Wah Yuen s audited balance sheet as at 31 December 2000 this had increased to 2 497 632 00 an increase of 2 141 604 00 c In Wah Yuen s unaudited balance sheet as at 30 November 2001 this amount decreased to 1 006 391 00 a decrease of 1 491 241 00 d At the second creditors meeting the debt allegedly owing as admitted for the purposes of voting as stated in the summary of results was 964 833 61 reflecting a further decrease of 41 557 39 15 Singapore Cables argued that it was not possible to verify the extent of the related parties claims or indeed if they were creditors at all on the information that was currently available In the premises the three related parties should not have been allowed to vote on the revised scheme If one were to discount the values attributable to these related parties the creditors in value supporting the scheme 8 556 893 43 less 5 281 087 71 would be 3 275 805 72 which worked out to 63 96 a figure that fell short of the 75 requirement of s 210 3 If one were to exclude the claims of the related parties from the equation Singapore Cables would have the single largest unsecured claim against Wah Yuen with a claim in excess of 1 1m and would have sufficient votes to effectively veto the scheme In the result Singapore Cables submitted Wah Yuen s application failed at the outset because the percentage requirements in s 210 3 had not been met 16 At the appeal hearing counsel for Wah Yuen sought to overcome this objection by arguing that the 75 threshold would have been crossed even if the related parties had voted on less favourable terms He tendered one set of calculations to show that the proposed scheme would have received the support of 81 03 in value of the creditors even if the quantum of related party debts had remained unchanged since the accounts were last audited for the financial year 2000 He tendered yet another set of calculations to show that the proposed scheme would have received the support of 77 48 in value of the creditors even if the amount owing to R N had dropped to 964 833 61 but the amount owing to the two directors had not increased since the financial year 2000 17 We were left unimpressed by this submission In our opinion it was always possible to cobble together some hypothetical scenario to show that the percentage requirements in s 210 could have been met Those scenarios however were just that hypotheticals and they did nothing to allay the real concerns that the changes in the related party debts had provoked 18 Nevertheless as much as we shared Singapore Cables concern over Wah Yuen s lack of transparency over its related party debts we were of the opinion that it was better dealt with when the bona fides of the related parties votes or the merits of the proposed scheme were assessed If it were a condition precedent that a company had to satisfy each creditor of the genesis and extent of all of its debts before the scheme could be put to the vote the entire process would be cumbersome and administratively inconvenient especially when the scheme might itself already provide for a procedure for the adjudication of claims for voting purposes as it did in this case Any remaining concerns therefore were better dealt with on a discretionary basis Whether the 36 creditors who stood to recover more than 15 of their claims should have been sub divided into separate classes for voting purposes 19 In the alternative Singapore Cables submitted that the votes of the remaining creditors were not representative of the views of the majority of the creditors as a whole because of the 75 creditors who voted for the scheme of arrangement 36 of them almost half of the creditors voting for the scheme of arrangement may be said to have rights which were so dissimilar from the other creditors that they would not be in a position to consult together with a view to their common interest Fourteen of the creditors stood to recover 100 of their claims Of the remaining 22 creditors Singapore Cables submitted that they too were not in position to consult together with a view to their common interest because they stood to recover various percentages of their claims ranging from 15 33 to 89 07 20 Although counsel for Wah Yuen took no objection we noted that Singapore Cables had not advanced this argument before the judge below According to the Court of Appeal in Management Corporation Strata Title No 473 v De Beers Jewellery Pte Ltd 2002 2 SLR 1 at 15 a party cannot raise a new argument on appeal unless the court is satisfied beyond doubt that a it has before it all the facts bearing upon the new contention as completely as would have been the case if the controversy had arisen at the trial and b that no satisfactory explanation could have been offered by those whose conduct is impugned if an opportunity for explanation had been afforded them when in the witness box The underlying principle behind the test is that the Court of Appeal should not allow any party to advance a new argument on appeal unless it is convinced that it is in as good a position as the judge below would have been to determine the merits of the new contention In the present case the court was indeed in such a position because it could resolve the question as to whether the creditors should have been divided into separate classes based on the material before it without having to call for further evidence 21 What Singapore Cables was essentially advocating was that the creditors should have been put into separate classes based on minor differences in the percentages that they stood to recover We found this to be both unrealistic and impractical If Singapore Cables was correct at least 12 classes of creditors would have to be given separate meetings each of which would be attended by anything from one to 14 creditors Just as the court must be careful not to empower the majority to oppress the minority by allowing the company to put everyone in the same class it must be careful not to enable a small minority to thwart the wishes of the majority by fragmenting the creditors into small classes see UDL Argos Engineering Heavy Industries Co Ltd v Li Oi Lin at 646 647 22 On the facts of the present case one could only adopt a fairly robust approach Re Crusader Limited 1995 QSC 95 and classify the creditors in a broad and objective manner Re Jax Marine Pty Ltd and Companies Act 1961 1967 1 NSWR 145 at 149 Complete identity of interest among the creditors was impossible Any attempt to subdivide the creditors into classes based on the precise percentage they stood to recover would lend itself to the charge of arbitrariness 23 What did cause us more concern however was whether Wah Yuen should at least have put the 14 who stood to recover 100 of their claims as well as the three whose claims were subordinated to the rest of the creditors into separate classes for voting purposes Prima facie it seemed to us that the rights of these two groups of creditors were so dissimilar from the remaining creditors that they could not sensibly consult together with a view to their common interest We did not find it necessary however to come to a definitive view on this because Wah Yuen s lack of transparency over its related party debts was sufficient reason not to sanction the proposed scheme of arrangement The adequacy of information The duty to give full information 24 Where a meeting is summoned under s 210 of the Act s 211 1 requires the company to provide its creditors with a statement explaining the effect of the compromise or arrangement and in particular stating any material interests of the directors whether as directors or as members or as creditors of the company or otherwise and the effect thereon of the compromise or arrangement in so far as it is different from the effect on the like interests of other persons Quite apart from statutory authority it is an independent principle of law that the creditors should be put in possession of such information as is necessary to make a meaningful choice As Selvam J held in Re Halley s Departmental Store Since s 210 does not lay down any matters on which the application must be based it is of extreme importance that the company furnishes full information to the creditors and the court before they can give their approval This point was stated by Maugham J in Re Dorman Long Co Ltd 1934 Ch 635 at 657 as follows it is essential to see that the explanatory circulars sent out by the board of the company are perfectly fair and as far as possible give all the information reasonably necessary to enable the recipients to determine how to vote I am assuming of course that following the usual procedure explanatory circulars are sent out because I may observe there is nothing in the Act to render them essential Plowman J in Re National Bank Ltd 1966 1 WLR 819 at 829 reiterated the point Section 206 say s nothing about disclosure either of valuations or of profits or of assets or of liabilities By s 206 the court is given the widest possible discretion to approve any sort of arrangement between a company and its shareholders The contentions of the parties 25 Counsel for Singapore Cables contended that this court should not sanction the proposed scheme because Wah Yuen did not provide the creditors with such information as was necessary for the creditors to assess the bona fides of the related parties votes or the fairness and reasonableness of the proposed scheme In essence Singapore Cables feared that the related parties under the guise of subordination were attempting to use this scheme to continue operating the business for their own benefit and prevent an investigation into possible misfeasance 26 In the present case besides the statutorily required explanatory statement Wah Yuen also furnished all voting creditors with its audited accounts for the year ending 31 December 2000 and its unaudited balance sheet as at 30 November 2001 27 Singapore Cables was dissatisfied with the extent of disclosure and attempted to seek further information on Wah Yuen s financial status at the two creditors meetings Counsel for Singapore Cables alleged that Wah Yuen did not tackle Singapore Cables queries at the first creditors meeting of 20 March 2002 and evaded the issue by saying that any creditor aggrieved by any lack of transparency by the company could make further enquiries from the company or vote against the proposed scheme of arrangement Singapore Cables subsequently wrote to Wah Yuen on 26 March 2002 with a list of questions regarding the proposed scheme Wah Yuen s audited accounts for the year ending 31 December 2000 and the unaudited balance sheet as at 30 November 2001 Singapore Cables was of the opinion that Wah Yuen s response of 3 April did not answer its queries adequately or at all At the second creditors meeting held on 3 April 2002 Singapore Cables again queried Wah Yuen on its alleged lack of transparency However it was merely told that it was at liberty to make representations to the court if the company eventually applied to the court for its approval of the revised scheme 28 For the purposes of the hearing below Singapore Cables obtained the services of an outside expert who in a report prepared after a perusal of all the accounting documents relating to Wah Yuen that had been made available to Singapore Cables pointed out various discrepancies and raised various queries on the amounts owed to the directors and R N Singapore Cables position was that Wah Yuen had yet to address any of its concerns to its satisfaction 29 Wah Yuen s position was that it had cooperated with Singapore Cables to the extent possible under the circumstances and that Singapore Cables was simply being fastidious in continuing to oppose what was a fair and reasonable scheme 30 Counsel for Wah Yuen submitted that it was not practical or realistic for the company to furnish an audited set of accounts for the year ending 31 December 2001 when the application to convene the first creditors meeting was scheduled for 16 January 2002 just two weeks after the close of the financial year An urgent special audit counsel argued was not feasible and could well have delayed the implementation of the scheme Quite apart from the fact that Wah Yuen allegedly could not even afford a special audit the company faced significant difficulties in updating its financial records and managing its projects because of the high turnover in its accounting and project management staff Far from being evasive Wah Yuen responded to each and every one of Singapore Cables queries of 26 March 2002 within a week While its response may not have appeared adequate to Singapore Cables it was the best that it could achieve within the short time frame and its financial constraints While Wah Yuen did not respond to the expert s report tendered on behalf of Singapore Cables counsel submitted that this should not be taken as a sign of bad faith because the fact of the matter was that the company could not afford to hire an accountant to respond to the queries 31 In so far as the related party debts were concerned Wah Yuen accused Singapore Cables of being unduly suspicious Wah Yuen contended that it was only natural for the directors to sustain the company in a time of grave financial difficulty by lending it substantial sums of money In so far as R N was concerned Wah Yuen submitted that it was not unusual for its running accounts with R N to fluctuate over time since it undertook projects of substantial size and R N was its primary subcontractor 32 If the related parties really did have oblique motives they would not have allowed their claims to be subordinated to the rest of the creditors nor permitted an outsider in the

    Original URL path: http://www.singaporelaw.sg/sglaw/laws-of-singapore/case-law/cases-in-articles/company/1456-wah-yuen-electrical-engineering-pte-ltd-v-singapore-cables-manufacturers-pte-ltd-2003-3-slr-629-2003-sgca-23 (2016-01-30)
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