Prudential Assurance Co Singapore Pte Ltd v Tan Shou Yi Peter [2018] SGHCR 4 – Singapore High Court Assistant Registrar rules on interrogatories about authenticity of audio recordings

The High Court Assistant Registrar (“AR”) summarised helpful guidance on when interrogatories may be ordered under Order 26, rule 1 of the Rules of Court.

Interrogatories is a form of discovery of facts (and not documents) to be utilised early in the proceedings to focus the dispute and save costs.

Interrogatories are more readily allowed where (at [13]):

“(a) they direct the parties’ attention to the central issues in contention at an early stage, thus reducing the need for counsel to focus time and effort on peripheral and uncontested matters;

(b) they have direct bearing on the issues in dispute, and will ease the subsequent passage of cross-examination by delineating the precise matters in contention;

(c) there would be real, substantial and irremediable prejudice if the interrogatories are refused (although these are not prerequisites to finding that interrogatories are necessary);

(d) they can be answered without difficulty and can potentially dispose of entire lines of questioning, or even the need to call certain witnesses; or

(e) the information sought, if introduced only in cross-examination, may catch opposing counsel unaware and create the need for adjournments and a flurry of interlocutory applications to address the new developments.”

Interrogatories may more readily be refused where (at [14]):

“(a) they are oppressive in nature, in that they exceed the legitimate requirements of the circumstances at hand, or impose a burden on the interrogated party that is entirely disproportionate to the benefit to be gained by the interrogating party;

(b) they amount to an attempt to fish for information, in the hope of stumbling upon something that will support the interrogating party’s case;

(c) they are of a more ancillary nature that are more appropriately sought in cross-examination;

(d) they concern matters which a witness will testify to at trial;

(e) they are intended merely to obtain the identities of witnesses and documents which the other party intends to produce; or

(f) they seek mere evidence which does not form any part of the material facts in dispute.”

The Court accepted that interrogatories can be issued in relation to authenticity in the event that authenticity is disputed (Swain v Hest Australia Ltd v Anor [2003] TASSC 104): at [20].

The general proposition that interrogatories should not be allowed to seek admissions of fact from a witness who would be attending at trial ought not be interpreted as an absolute prohibition of interrogatories against all persons who would be witnesses at trial, regardless of the circumstances at hand. In particular, the proposition should not be taken to preclude the administering of interrogatories, where allowing the same would be entirely in line with O 26 r 1(1) of the Rules of Court, viz, necessary for the fair disposal of the matter or for saving costs: at [21].

In Foo Ko Hing v Foo Chee Heng [2002] 1 SLR(R) 664 (HC), the High Court allowed the administration of interrogatories on a non-party witness (pursuant to O 26A r 1 of the Rules of Court) notwithstanding that he would be giving oral testimony at trial. The court’s rationale for doing so was to avoid disruptions to the trial, in view that the witness in question was not willing to provide an affidavit of evidence-in-chief: at [22].

The Court allowed part of the interrogatories in this case for several reasons.

Allowing the “Primary Queries” now would potentially dispose of entire lines of questioning and expert inquiry. The answers to the Primary Queries will provide clarity, in advance of trial, on the precise dispute in relation to an important aspect of authenticity that may otherwise involve the furnishing of a large range of evidence, including expert evidence. This would thus avoid incurring costs. See [24].

There is little reason to believe that the Defendant would offer the relevant information in his affidavit of evidence-in-chief. Furthermore, provision of information only in the affidavit of evidence-in-chief would be too late. See [25].

While the information sought in the interrogatories may be potentially obtained from other witnesses, the Defendant’s responses may well be in the nature of admissions: at [26].

The Defendant would not face “insurmountable difficulties” in answering the interrogatories, and allowing such interrogatories would not cause prejudice to his challenge to authenticity of the recordings: at [27].

Legal issues involving Chinese (PRC) business parties

Some thoughts and insights I learned from my recent trip to Shanghai, China.

1:  When doing business in China, draft agreements / contracts in Chinese, use Chinese law as governing law, be very detailed about addressing all possible scenarios, be specific about enforcement provisions. Then the likelihood of successful enforcement of contract is higher.

2: How civil law suits are treated in Chinese courts vary depending on the province and city. Cultural variances matter. Local knowledge of legal culture and practice is key. It’s important then to have a bridge between you and the local Chinese lawyer who can speak both your language and Chinese, understand the legal nuances of what the Chinese lawyer is advising, and thus translate that legally (not linguistically) and advise you accordingly. Singapore lawyers can play that role.

3: When doing cross-border business or international trade with Chinese parties, do your due diligence, ensure contracts are drafted properly with the Chinese party properly identified and dispute resolution and enforcement terms properly defined. Creative ways to do due diligence are necessary. Consider performance bonds and personal guarantees where much is at stake.

4: China is party to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. So that is a good process to adopt. It’s not uncommon for Chinese parties in international contracts to choose SIAC for arbitration.

Likelihood of enforcement of foreign arbitration awards vary across provinces and cities. Again, culture matters. This is corroborated by research on this (http://www.kwm.com/en/knowledge/insights/enforcing-foreign-arbitral-awards-in-china-20160915).

5: Enforcement of foreign court judgments in Chinese courts depends on reciprocity. If Chinese court judgments are recognised and enforced in that foreign court, the Chinese court will also recognise and enforce that foreign court’s judgment. Good to know that there have been enforcements of Chinese court judgment in the Singapore High Court (Giant Light Metal Technology (Kunshan) Co Ltd v Aksa Far East Pte Ltd [2014] SGHC 16) and conversely, of a Singapore High Court judgment in the Nanjing People’s Intermediate Court (Kolmar case).

6: The Belt & Road Initiative (BRI) will present many legal issues for stakeholders. China will set up 3 international commercial courts to address disputes arising from the BRI. Details are not finalised. Perceived lack of neutrality may be a concern. But enforcement against Chinese parties may be more likely. Conversely, Chinese parties may find it difficult to enforce against their foreign counterparties. Neutral dispute resolution avenues such as SIAC or ICC may be helpful.

7: The number of BRI projects and opportunities will continue to increase. There will also be spillover benefits from the BRI to smaller businesses and SMEs across South-East Asia. Consider joint venture structures with the Chinese parties. Conduct legal and financial due diligence. Negotiate with Chinese in Chinese. Singapore lawyers can be the cultural, linguistic and consultancy bridge between the Chinese and our other ASEAN friends.

8: Chinese businesses and individuals are keen to take their funds out of China and invest in Singapore and ASEAN businesses or acquire them to scale their own business and get a foothold in the wider regional market. Take advice on the best way to take and win, or lose to a competitor who does.

9: The Chinese market remains a huge one for Singapore and other SEA businesses to venture into. There are still Chinese blue oceans. Many cities are still expanding and growing rapidly. Again, having professional advisors and consultants to bridge the cultural, linguistic, relational gap is extremely helpful. Singapore businesses must be daring. We met a few Singapore business people who came out here years ago and took the risk, and have done well.

10: The Chinese are increasingly placing more weight on trade mark protection, as their own Chinese brands grow. A more level playing field may therefore be assuring for foreign businesses going in. As for other types of intellectual property (IP), e.g. patents and designs, well you should apply for them anyway.

#CovenantChambersLLC #ChineseLaw #SingaporeLaw #SingaporeLawyer

Case Update: Thio Syn Kym Wendy v Thio Syn Pyn [2018] SGHC 54 – Singapore High Court set out legal principles on minority discount in share buyout

Significance: Singapore High Court set out legal principles on whether a minority discount (for lack of control by the minority shareholding, and not non-marketability of minority shares) should be applied in a share buyout following a finding of minority oppression.

Where the company in question is a quasi-partnership, there is a strong presumption that no discount should be applied: In re Bird at 430; Strahan v Wilcock [2006] 2 BCLC 555 (“Strahan”) at [1]; Robin Hollington, Hollington on Shareholders’ Rights (Sweet & Maxwell, 7th Ed, 2013) (“Hollington”) at para 8-152. This presumption may be displaced in special circumstances (O’Neill and Another v Phillips and Others [1999] 1 WLR 1092 at 1107), such as when the minority shareholder has acted in such a manner as to deserve his exclusion from the company or has contributed to the oppressive conduct of the majority: see In re Bird at 430–431; Hollington at para 8-152: at [25].

There is no general rule in cases involving companies that are not quasi-partnerships: In re Bird at 431 (affirmed on appeal in In re Bird Precision Bellows Ltd [1986] 1 Ch 658). This view adequately takes into account the balance of competing considerations: (a) generally, an oppressed minority shareholder should not be treated as having elected freely to sell his shares; (b) the court should ensure that the oppressor does not profit from his wrongful behaviour (at [29]). There is no presumption or “baseline”. See [30].

The court must look at all the facts and circumstances when determining whether a discount should be applied in any case. E.g. the court will be more inclined to order no discount where the majority’s oppressive conduct was directed at worsening the position of the minority as shareholders so as to compel them to sell out (see Re Sunrise Radio Ltd [2009] EWHC 2893 (Ch) at [305]), or entirely responsible for precipitating the breakdown in the parties’ relationship: Over & Over Ltd v Bonvests Holdings Ltd and another [2010] 2 SLR 776. As with cases involving quasi-partnerships the court is likely to order a discount where the conduct of the minority contributed to their exclusion from the company or the oppressive conduct complained of: Sharikat Logistics Pte Ltd v Ong Boon Chuan and others [2014] SGHC 224 at [246]. The court will also consider relevant background facts such as whether the minority had originally purchased their shares at a discounted price to reflect their minority status, or for full value: Hollington at para 8-153; Re Blue Index Ltd at [51]. Ultimately, the broad task for the courts is to ensure that the forced buyout is fair, just and equitable for the parties in all the circumstances. See [31].

As regards minority discount for non-marketability of minority shares, the concern of preventing unfairness to a minority shareholder
who otherwise would not have sold out applies with equal force, but the countervailing considerations are different. Such a discount arises from the difficulty of selling shares due to share transfer restrictions and the narrowness of the market, regardless of whether the shares are majority or minority shares. The factors to be weighed are also distinct. For instance, the company may not be a listed company and there may be share transfer restrictions which stipulate that the shares may only be sold to Singaporeans. These are considerations that would be more appropriately evaluated by the expert valuer when assessing the value of the company and its shares as a whole, rather than by the court. The question of whether to apply a discount for non-marketability should ordinarily be left to be determined by the independent valuer in his expertise. However, it is possible that in an exceptional case, the circumstances may warrant an order by the court that no discount be applied in order to remedy the unfairness to the minority that would otherwise result. See [32].

Case Update: PropertyGuru Pte Ltd v 99 Pte Ltd [2018] SGHC 52 – Singapore High Court dismisses claim for copyright infringement by cross-posting listing app (inter alia)

Significance

Singapore High Court (coram Justice Hoo Sheau Peng) held, inter alia, that PropertyGuru did not have copyright over photographs which property agent users uploaded onto their website for real estate listings and which they edited and imposed their watermark on. This was not a material alteration or embellishment to become original new work. Their website’s Terms of Use also merely asserted that they had copyright, but this did not take them far since at law, there was no copyright in the first place.

Facts of the Case

In this case, a well-established Singapore property / real estate listings website PropertyGuru sued a relatively younger startup competitor 99.co for breach of a settlement agreement, tort of inducement of breach of contract (by PropertyGuru’s users), and copyright infringement. Much of the case centred on Xpressor app, an app which allowed cross-posting or cross-listing on multiple property listings platforms. It was found that 99.co had co-developed the app: at [18]. The Xpressor app allows users to log in to their PropertyGuru account and choose the listings therein to cross-post onto 99.co’s website: at [19].

When 99.co first started, it employed a software to “scrape” listings on PropertyGuru’s website and post them on 99.co’s website. Sometime around 2015, the two competitors entered into a Settlement Agreement. This prohibited 99.co from, inter alia, reproducing content from PropertyGuru’s website onto their own. Sometime around August 2016, 99.co offered its users a Premium Account service where it employed independent contractors to manually copy information in property agent’s listings on PropertyGuru and list it on 99.co: at [22].

Breach of Settlement Agreement

On PropertyGuru’s breach of settlement agreement claim, the Court found that there was insufficient evidence for this claim regarding some January and February 2016 reproductions on 99.co’s website (which had photographs bearing PropertyGuru’s watermark) because it was plausible that the property agents who made these listings had used other means to reproduce them. Based on the evidence, it was likely that these reproductions were not done through the Xpressor app because by then, the app made sure to remove the watermark before cross-posting: at [54]-[55]. The Court also rejected the argument that 99.co had reproduced the listings simply by developing, marketing, and hosting on its server, the Xpressor app; it remained the individual property agent’s decision whether or not to cross-post listings, not 99.co’s: at [57].

However, the Court did find that the reproduction of 9 photographs through the Premium Account service amounted to a breach of the settlement agreement and thus awarded damages to be assessed and an injunction restraining 99.co from continuing breaches: at [62]. It should be noted also that the Judge had to address an argument that the Premium Account service point was not expressly pleaded by PropertyGuru.

The Court also rejected arguments that 99.co had breached the Settlement Agreement by connecting to PropertyGuru’s website to cross-post listings. The Court found that it was the end users of the Xpressor app who connected to PrpoertyGuru’s website, not 99.co: at [70]-[72]. The Judge also made some comments on the odd drafting of the relevant clauses in the Settlement Agreement: at [72].

Tort of Inducement of Breach of Contract

The Court rejected PropertyGuru’s claim on this head. The discussion however is interesting. Users of PropertyGuru’s website are deemed to have entered into a contract with PropertyGuru. The contract’s terms include the Terms of Use and Acceptable Use Policy. These terms prohibited users from reproducing material from PropertyGuru’s website and using any software to access PropertyGuru’s services or collect information through PropertyGuru. The Court observed that it could be possible that property agents who had used the Xpressor app to make cross-postings were in breach of the Terms of Use and Acceptable Use Policy: at [84].

However, because there was no evidence that the property agents did actually use the Xpressor app to make cross-postings, the claim on this head failed: at [85]-[87]. As regards the Premium Account service, the Court rejected the claim on this evidence because it was not expressly pleaded that this was a mode by which 99.co induced property agents to breach their contract with PropertyGuru: at [88]-[89]. Unlike the earlier head where the matter of Premium Account services could be seen as evidence, in this instance, PropertyGuru did not amend its Statement of Claim to expressly nail its case down.

Copyright Infringement

The Court also rejected this claim. The issue was whether PropertyGuru owned copyright in the photographs which it obtained from property agents and which it then edited by resizing them, altering their light balance, softening the edges, and adding a watermark: [96].

The Court reviewed three decisions—Interlego AG v Tyco Industries Inc [1989] AC 217 (“Interlego”); The Reject Shop Plc v Robert Manners [1995] FSR 870; Virtual Map (Singapore) Pte Ltd v Suncool International Pte Ltd [2005] 2 SLR(R) 157 (“Virtual Map”)—and held that “the copying, enlargement or resizing of an artistic work, such as a drawing, painting or photograph, does not make the resulting image a copyrighted work. There must be a material alteration or embellishment to the original work to confer originality (and hence copyright protection) on the resulting work. What counts as “material” for this purpose is a question of fact and degree. There was some alteration in Interlego, namely the addition of new written information to the drawing, but this was insufficient to confer originality on what was otherwise a visually similar copy of an image. On the other hand, Virtual Map provided a clear example of a material alteration. While the alteration in that case was extremely substantial, it does not mean that alterations to an original work must necessarily be to a similar degree before the derivative work becomes original and copyrightable”: at [102].

The Court found that PropertyGuru’s editing of the photographs did not amount to an original work which gave rise to copyright: at [103]-[104]. There was no “skill and labour as conferred originality of an artistic character” (at [100], [103]).

As regards PropertyGuru’s Terms of Use, and in particular this sentence—“We shall have the right to watermark the photographs within the Content and the copyright in the final watermarked photographs shall belong solely to us”—the Court found that this was merely an assertion that PropertyGuru had copyright. But if at law, they did not have copyright, then the clause does nothing further: at [107].

Groundless Threats of Infringement Proceedings

Finally, the Court considered 99.co’s counterclaim for PropertyGuru’s groundless threats of infringement proceedings under section 200 of the Copyright Act. The Court rejected the counterclaim. First, it thought that PropertyGuru was justified in thinking that it had basis to sue 99.co: at [116]. Second, 99.co did not adduce evidence of loss. It merely asserted that the threat of the lawsuit affected its ability to obtain funding and strained its relationship with its investors, but there was no evidence for this: at [117].

Comments on Wider Repercussions and Other Issues to Consider

Platforms’ Terms of Use

This case raises issues about platforms, websites, apps’ Terms of Use or Terms of Service. Many of us use these platforms and entered into legally binding contracts with them without realizing what we agreed to. When it comes down to it, a lot of it is an issue of construction of the terms.

In this case, the terms were deemed as merely an assertion of copyright. But the Court found there’s no copyright in the edited watermarked photographs.

Generally, however, terms of use may be drafted in a way to amount to an assignment or license of copyright or intellectual property (“IP”) when posting or listing on websites, apps and other platforms. If it’s an assignment, you effectively give ownership of your IP away. If it’s a non-exclusive licence, you retain ownership and the licensee does not have right to enforce the IP. If it’s an exclusive licence, you retain ownership but the licensee can enforce IP rights, and you technically cannot license your IP to other persons.

Copyright In Edited Images

As the Court held, there must be material alteration or embellishment to become original new work giving rise to copyright. Resizing, altering light balance, softening edges and adding watermarks to a photograph does not amount to material alteration or embellishment to make the work an original new work with copyright conferred on the editor.

This is important for web users (which is almost all of us), platforms, apps, websites, which edit images and content uploaded online. This may not be original new work. It may even amount to copyright infringement of the first work.

Cross-Posting Apps

Some of us use cross-posting applications, software, platforms. This case highlights that the mechanism of how content is cross-posted or cross-listed on multiple platforms can have legal repercussions.

If the app takes content from a first platform and post on other platforms, then there may be issues of whether the first platform has copyright over the content, and whether that copyright has been infringed.

If the app takes content direct from the app user and post on multiple platforms, then likely there is no copyright infringement issue since the app is dealing with the app user’s copyright.

Hyperlinking, Crawling, Framing, Inline Linking

There was no discussion on whether hyperlinking, crawling, framing, deep linking, inline linking, etc. would amount to IP infringement. In this case, the issue only arose as a matter of a breach of contract, and even so, there was no evidence for the claim.

Generally hyperlinking to the home page of a website is unlikely to raise issues. Deep linking – linking to a particular page within another website rather than the homepage – is uncertain but per se is unlikely to constitute IP infringement (based on decisions and authoritative opinions from other jurisdictions). Also, framing (creating frames on the web page which load another person’s website) and inline/embedding/img-src linking (i.e. in simple HTML code, <img src=”some third party image”>) is also uncertain.

In this case, PropertyGuru’s Terms of Use prohibits a user from hyperlinking to content on their website and from using software to crawl and obtain information from their website. Hence, this should give us pause as to whether some of our online actions may constitute breaches of contract.

Authorization Liability

Although this was not an issue in the case at all, platforms, websites, apps, should also be careful that their functionalities, including hyperlinking, crawling and re-posting, does not amount to IP infringement by way of authorizing another person to breach IP. For copyright, granting or purporting to grant a right to a third party to do a copyright infringing act would incur authorization liability. The law in Singapore on this, reflected in the Court of Appeal’s landmark decision in the RecordTV case, is calibrated narrowly. Various factors would be taken into account, including the relationship between the alleged authorizer and the direct infringer, whether the alleged authorizer had actual or constructive knowledge of the infringement, whether the alleged authorizer had the ability to prevent infringement.

Conclusion

All in all, while this decision does not lay down any new law, it is nonetheless interesting because of the application of law to relatively new and evolving technology and scenarios. It also raises important questions for all of us as to the rights and obligations we have when we use various platforms, websites or apps, or the rights and intellectual property we are assigning and thus giving away. It should be noted that either party may appeal this decision to the Court of Appeal, so we shall wait and see if there are any further developments on this.

Case Update: High Court lays down sentencing framework for negligence in road traffic accidents

Summary by Tedric Chai & Ronald JJ Wong

In Tang Ling Lee v Public Prosecutor [2018] SGHC 18, the High Court judge laid down the sentencing framework for road traffic cases under Section 338(b) of the Penal Code. The judge emphasized that it applied only to road traffic cases (at [24]). A flowchart summarizing the sentencing framework is set out here.

The sentencing framework consists of 3 broad sentencing bands on the basis of: (1) the degree of harm caused by the offence; and (2) the culpability of the offender (at [25]).

Degree of harm caused by offence

  1. The degree of harm caused would generally refer to the nature and degree of grievous bodily injury caused to the victim (at [25]).
  2. The period of hospitalisation leave or medical leave would be a relevant consideration insofar as it represents a medical professional’s opinion as to the length of time required for treatment of the injuries and for the victim to resume his daily activities (at [26]).
  3. Nevertheless, the period of hospitalisation or medical leave is a rough-and-ready proxy for the severity of the victim’s injuries at best, as the assessment of time required for treatment and subsequent recovery may vary from case to case and may also depend on an interplay of various other circumstances, including the opinion of the medical professional as well as the personal characteristics of the victim (at [26]).

Degree of culpability of offender

  1. The degree of culpability would generally refer to the degree of relative blameworthiness disclosed by an offender’s actions, and is measured chiefly in relation to the extent and manner of the offender’s involvement in the criminal act (i.e. the offender’s manner of driving) (at [25]).
  2. Factors that the Court will take into account include: (i) the manner of driving, i.e. how dangerous the driving was and the extent of danger to road users posed by the offender’s conduct; and (ii) the circumstances of driving which might have increased the danger to road users during the incident (at [27]).
  3. For (i) the manner of driving, some examples of situations where culpability would be increased include speeding, drink-driving, sleepy driving, driving while under the influence of drugs, driving while using a mobile phone, flouting traffic rules, driving against the flow of traffic or off the road, involvement in a car chase or a racing competition, or exhibiting poor control of the vehicle. These circumstances in relation to the offender’s manner of driving are aggravating due to the increased danger to road users posed by such conduct. (At [28])
  4. For (ii) the circumstances of driving, this would include instances where the offender drives without a licence or while under disqualification. Also, there may be increased risk where the offender drives: (a) during rush hours when the volume of traffic is heavy; (b) within a residential or school zone; (c) a heavy vehicle that is more difficult to control and requires a quicker reaction time; or (d) where he intends to travel a substantial distance to reach his destination. These circumstances may heighten the danger posed to road users. (At [29])
  5. Where some of the culpability-increasing factors arise, it is possible and indeed likely that additional charges may be preferred and proceeded with. In such circumstances, the respective sentences upon conviction ought to be calibrated as appropriate, avoiding loading or double-counting of the culpability-increasing factors. (At [30])

The sentencing framework comprising 3 presumptive sentencing ranges, which applies where the accused person claims trial, is as follows (at [31]):

Category Circumstances Presumptive sentencing range

(excluding an appropriate period of disqualification from driving)

1 Lesser harm and lower culpability Fines
2 Greater harm and lower culpability OR lesser harm and higher culpability One to two weeks’ imprisonment
3 Greater harm and higher culpability More than two weeks’ imprisonment

Presumptive sentencing ranges are merely starting points which seek to guide the exercise of sentencing discretion, and are not rigid or immutable anchors. In the final analysis, the appropriate sentence to be imposed will be the product of a fact-sensitive exercise of discretion, taking into account all the circumstances of the case. (At [33])

With regard to the sentencing framework, the Court will adopt a 2-step inquiry as follows (at [32]):

  • First, the Court should identify the sentencing band within which the offence in question falls, and also where the particular case falls within the applicable presumptive sentencing range, having regard to the twin considerations of harm and culpability, in order to derive the starting point sentence.
  • Second, further adjustments should then be made to take into account the relevant mitigating and aggravating factors, which may take the eventual sentence out of the applicable presumptive sentencing range.

Examples of relevant mitigating factors may include an offender’s timely plea of guilt, stopping to render assistance to the victim(s), a good driving record, and evidence of remorse.

Relevant aggravating factors may include efforts to avoid detection or apprehension, and the existence of similar antecedents which are indicative of persistent or prolonged bad driving.

For Category 1 cases, culpability-increasing factors would either be absent altogether or present only to a very limited extent, thus suggesting negligence to be at the lowest end of the spectrum. The harm occasioned to the victim(s) would generally be characterised by the lack of very serious or permanent injuries. This is often reflected in the victim having undergone a relatively brief duration of hospitalisation and medical leave (or none at all) and minimal surgical procedures (if any). (At [34])

For Category 2 cases, they comprise offences of a higher level of seriousness. These are usually cases where: (a) the harm is at the lower end of the spectrum but the culpability of the offender is moderate to high; or (b) the harm is serious but the culpability of the offender remains low. Where there are two or more culpability-increasing factors or injuries of a more serious or permanent nature and/or which necessitate significant surgical procedures, the offence would generally fall into Category 2. (At [35])

For Category 3 cases, there are both serious injuries and a moderate to high degree of culpability. A case falling within the Category 3 sentencing band would usually feature at least two culpability-increasing factors and injuries of a very serious or permanent nature and/or which necessitate significant surgical procedures. In this connection, serious long-term injuries occasioned to the victim, such as loss of limb, sight or hearing or paralysis in particular, would generally attract the sentencing band in Category 3. (At [36])

Case Update: BOK v BOL [2017] SGHC 316 – Singapore High Court sets aside trust on grounds of misrepresentation, mistake, undue influence and unconscionability, construes scope of living trust

Case summary by Tedric Chai

Significance: Singapore High Court sets aside a trust on grounds of misrepresentation, mistake, undue influence and unconscionability, construes scope of living trust to include the plaintiff’s interest under a will.

Facts

On the evening of 26 March 2014 (which was 3 days after the funeral of his mother who was killed tragically), the Plaintiff, who was then 29 years old, signed a declaration of trust (“DOT”), which purported to constitute him and his wife (the 2nd Defendant) as joint trustees of all his assets for the sole benefit of their infant son (the 1st Defendant). Pf then sought to set aside the DOT, which had been drafted and presented to him by the 2nd Defendant. Before the 2nd Defendant stopped working in 2012, she had been a practising lawyer for four years before spending two years in the banking industry.

One of the issues was whether the subject of the trust created by the DOT extended to the Plaintiff’s interest under his mother’s will. Under her will, the Plaintiff’s mother had created a testamentary trust over her assets. She had appointed the Plaintiff and his sister as the executors and trustees of her will, and they were to sell the properties only after the twenty-fifth anniversary of her death. Until that date, they were each permitted to withdraw a sum not exceeding $10,000 per month from the estate. On 9 July 2014, the Plaintiff and his sister then entered into a deed of family arrangement, under which they agreed to exercise their right under Saunders v Vautier and to apportion and distribute their respective entitlements under their mother’s will. In November 2014, the High Court allowed their application to terminate their mother’s testamentary trust and distribute the assets according to the deed.

 

Issues

Plaintiff’s primary case

  1. Should the DOT be set aside because of the circumstances in which it was signed (i.e. because it was procured as a result of misrepresentation, mistake, undue influence or it was an unconscionable transaction)?

Plaintiff’s alternative case

  1. Is the DOT void for not defining the trust property with reasonable certainty?
  2. If the DOT is valid, does the trust property extend to the Plaintiff’s interest under his mother’s will, and if so, what is the scope of that interest which is trust property?

 

Holding by the Court (Coram: Valerie Thean J)

Issue 1: on the 4 vitiating factors – ratio decidendi

Misrepresentation

  • The DOT ought to be rescinded on the ground of misrepresentation.
  • The Plaintiff must establish five elements to succeed in a claim on misrepresentation: (i) a representation of fact made by words or conduct; (ii) the representation was made with the intention that it should be acted upon by the Plaintiff or by a class of persons which includes the Plaintiff; (iii) the Plaintiff acted upon the false statement; (iv) the Plaintiff suffered damage by so doing; (v) the representation was made with the knowledge that it is false or made in the absence of any genuine belief that it is true. (at [80] of the judgment)
  • In this case, the 1st and 5th elements were established. The 2nd Defendant made a false representation of fact by words in telling the Plaintiff that the DOT would leave him free until his death to deal with the assets which were caught under the DOT, and the court found that the 2nd Defendant knew that it was false at the time she made the representation. (at [81])
  • The 2nd and 3rd elements were also made out. The 2nd Defendant made the false representation with the intention of persuading the Plaintiff to sign the DOT. The Plaintiff had initially refused to sign the DOT because he did not want to give away all his assets, so she allayed this concern by lying to him that the DOT would take effect only upon his death. The Plaintiff therefore relied on this misrepresentation, as he changed his mind and decided to sign the DOT, and also as he acted as if the DOT had no effect on his assets in the months after he signed it. (at [82])
  • The 4th element was made out, as the Plaintiff had suffered damage in the form of losing his beneficial interest in all the assets he owned as at 26 March 2014 as a result of signing the DOT. (at [83])

 

Mistake

  • The DOT ought also to be set aside on the independent ground of mistake.
  • In this case, the court held that, because of the 2nd Defendant’s conduct and misrepresentation, the Plaintiff made the mistake that the effect of the DOT was that he remained free to deal with his assets until the time of his death, and that this was a mistake of sufficient gravity as it struck at the heart of the DOT. (at [86])
  • The Plaintiff believed the misrepresentation because of his altered mental state owing to his grief from his mother’s death as well as the 2nd Defendant’s threat to kick him out of the house if he did not sign the DOT. (at [86])
  • It was also a causative mistake, as the Plaintiff would not have signed the DOT had he not held his belief in the misrepresentation. (at [86])
  • The seriousness of this mistake makes it unconscionable for the disposition not to be corrected because it is a disposition of serious consequence, the Plaintiff having been deprived of a significant portion of his assets. (at [86])

 

Undue influence

  • The Plaintiff sought to establish undue influence under Class 1 and Class 2A undue influence, and the court held that the DOT should be set aside on both Class 1 and Class 2A undue influence.
  • Under Class 1 actual undue influence, the Plaintiff must show that: (i) the other party had the capacity to influence the Plaintiff; (ii) the influence was exercised; (iii) its exercise was undue; and (iv) its exercise brought about the transaction which the Plaintiff now seeks to set aside. (at [91])
  • In this case, the 2nd Defendant had the capacity to influence the Plaintiff because: (i) she was his wife; (ii) she had previously advised him on matters of law; (iii) the Plaintiff was in a state of grief and isolation (the court found that the Plaintiff was an isolated individual whose world revolved around only a small number of individuals with whom he shares a strong relationship, and that this is thus likely to render him vulnerable to their influence); (iv) the 2nd Defendant’s attempt to persuade the Plaintiff was legitimised by her father, who is a senior lawyer whom the Plaintiff respected and who was in their presence on the evening of 26 March 2014 before the Plaintiff signed the DOT. (at [92])
  • The 2nd Defendant exercised the influence she had by persistently asking him to sign the DOT and by misrepresenting to him its true legal effect. The exercise was undue because the Plaintiff was persuaded to sign the DOT based on a lie that he would remain free to deal with his assets, and the Plaintiff did not have the benefit of independent legal advice before signing the DOT. Finally, the 2nd Defendant’s influence caused the Plaintiff to decide to sign the DOT. (at [93])
  • Under Class 2A presumed undue influence, the Plaintiff may raise a presumption that undue influence was exercised by proving two requirements: (i) that there is a particular relationship which enabled one party to influence the decisions of the other; and (ii) the resulting transaction was manifestly disadvantageous to the other i.e. one that calls for an explanation. Once these elements are proved, the burden of proof shifts to the Defendant to show that he or she did not exercise undue influence on the Pf. (at [89])
  • In this case, the court found the existence of an implied retainer between the Plaintiff and the 2nd Defendant at the time the Plaintiff signed the DOT, thus giving rise to a solicitor and client relationship and also raising an irrebuttable presumption of a relationship of trust and confidence. The court held that a retainer might be implied where an intention to enter into such a contractual relationship ought fairly and properly to be imputed to all the parties. The court noted that the 2nd Df was a trained lawyer, was the one who drafted the DOT, had a demonstrable familiarity with the law on trusts, had on many occasions prior to 26 March 2014 advised the Pf on legal matters and the Pf relied upon her. Further, the 2nd Df prepared the DOT for the Pf to sign essentially on her own accord, as the court found that he had never instructed her to draw up such a document. (at [90], [94], [95], [98])
  • The 2nd Defendant also failed to qualify her work or advice, preferring instead to assert to the Plaintiff misleadingly that the DOT had been written in “plain, simple” English and required no explanation. The court also found that the DOT was manifestly disadvantageous to the Plaintiff because it divested him of all his assets at the time he signed it for nothing in return. Further, the 2nd Defendant failed to discharge the burden of showing that she did not exercise undue influence on the Plaintiff. (at [98], [99])

 

Unconscionable transaction

  • The DOT ought to be set aside on the ground of unconscionability.
  • The court applied the criteria in the English case of Cresswell v Potter [1978] 1 WLR 255 for establishing “a circumstance of oppression or abuse of confidence which will invoke the aid of equity”. The three primary requirements are: (i) the Plaintiff must be poor and ignorant, in the sense that he is of a lower income group and is less well educated; (ii) the transaction must be at an undervalue; and (iii) the Plaintiff must not have received independent legal advice. Alternatively, unconscionability may be established by a separate limb of oppression or abuse of confidence which will invoke the aid of equity. The court noted that the three primary requirements are, taken together, only a non-exhaustive example of a circumstance of oppression or abuse of confidence. The court formulated two requirements for what amounted to oppression or abuse of confidence: (i) there must be weakness on one side, which could arise from poverty, ignorance or other circumstances, like acute grief in the present case, and lack of independent advice would almost always deepen the weakness; and (ii) there must be exploitation, extortion or advantage taken of that weakness, and a transaction at an undervalue would be a necessary component of this requirement. Finally, once these two elements are established, it will be for the Defendant to show that the transaction was fair, just and reasonable. (at [107], [117], [120], [122])
  • In this case, the first element for establishing oppression or abuse of confidence was made out. The Plaintiff was in a state of weakness at the time he signed the DOT due to his grief and isolation, his relationship with the 2nd Defendant, his lack of independent advice and his trust in her ability as a lawyer (circumstances which created a window of opportunity for oppression). The second element was also made out by the 2nd Defendant deepening that window of opportunity by asking the Plaintiff to leave the house. The 2nd Defendant took advantage of the Plaintiff’s emotionally vulnerable state in order to persuade him to part with the entirety of his assets by misrepresenting to him that the DOT would take effect only upon his death. Lastly, the DOT, being made voluntarily, was a transaction at an undervalue. The court also held that the 2nd Defendant failed to show that the DOT was fair, just and reasonable, or a fair and reasonable means by which the Plaintiff was to provide for his family. (at [123], [124])

 

Issue 2: whether DOT defines the trust property with reasonable certainty – ratio decidendi

  • The court held that the DOT defines the trust property with reasonable certainty and includes, at the very least, the assets the Plaintiff owned and the annuity his mother’s will provided him with. Thus, the DOT was a legally valid instrument that could be set aside. (at [35])
  • In this case, the clause in the DOT that the Plaintiff impugns for uncertainty reads: “…all assets, both personal and immovable, owned by me, whether legally or beneficially…”. The Plaintiff argued that the phrase “owned by me” is ambiguous because it is capable of being combined with a number of auxiliary verbs to read, for example “which are owned”, “which are and shall be owned” or “which may be owned”. As the latter two interpretations cover future property, which cannot be the subject of a trust, and as the DOT does not contain a severability clause which preserves the validity of the DOT as to trust property defined with reasonable certainty, the entire DOT should be invalidated. (at [135])
  • The court dismissed the Plaintiff’s argument and held that, on a plain reading, the clause in the DOT provides that all the assets the Plaintiff “owned” (in the past simple tense) at the time he signed the DOT would become the subject of the trust created by the DOT. (at [136])

 

Issue 3: whether trust property extends to Plaintiff’s interest under his mother’s will, and what is the scope of that interest – obiter dicta

  • The court held that at the time of the signing of the DOT, the Plaintiff, being a beneficiary of his mother’s will, had an equitable right or chose in action to have the deceased’s estate properly administered. Through the DOT, the Plaintiff created a trust over the chose in action. In addition, the disponee (person who receives the disposition under the trust) will be regarded as entitled to the property which the exercise of the chose in action would have granted the disponor (person who gives the disposition). Hence, the trust created by the DOT extends to the Plaintiff’s interest under his mother’s will, and includes, at the very least, the annuity his mother’s will provided him with. (at [138], [139])
  • However, the court held that it was not necessary to decide whether the trust property under the DOT extended beyond the annuity to the assets the Plaintiff obtained later by the deed of family arrangement he concluded with his sister. (at [35])

Case Update: Major Shipping & Trading Inc v Standard Chartered Bank (Singapore) Ltd [2018] SGHC 04 – Claim against bank for making unauthorised transactions by fraudster fails

Significance: Singapore High Court construes “good faith” in banking standard terms in the context of unauthorised fund transfers, finds that circumstances were not sufficient to put a reasonable banker on suspicion regarding unauthorised transfers, and finds on reasonableness of exclusion clauses under the unfair contract terms act.

Summary: The plaintiff sued Standard Chartered Bank for remitting monies in four transactions totalling US$1.8 million it claims were not authorised, but were instructed by some third party fraudster who had presumably hacked into the plaintiff’s personnel’s email (possibly through a phishing attack) and sent instructions to the bank. The plaintiff sued the bank for breach of contract–making remittances without authorisation when the bank could not have believed in good faith that the payment instructions were sent by authorised persons, given the suspicious circumstances surrounding their receipt. The plaintiff also claimed the bank breached its duty to use reasonable care and skill under the contract, and also some duty to take steps or systems to prevent unauthorised fund transfers.

The Court (Kannan Ramesh J) first considered the issue of the definition of “good faith” and held, relying on HSBC Institutional Trust Services (Singapore) Ltd (trustee of Starhill Global Real Estate Investment Trust) v Toshin Development Singapore Pte Ltd [2012] 4 SLR 738 (CA), and construing the bank account opening documents, that the concept of good faith incorporated a subjective requirement of acting honestly, and the objective element of a lack of gross negligence or recklessness by the bank: at [53].

The Court examined the evidence and found on the facts that on balance of probabilities, the plaintiff’s authorised personnel did not issue the payment instructions to the bank: at [64].

The Court then considered whether the bank was grossly negligent in believing that the plaintiff’s authorised personnel had issued the payment instructions. The plaintiff relied on expert evidence to argue that there were various red flags in the circumstances of the bank’s receipt of the payment instructions which would have given rise to enough suspicion to warrant further investigations of the payment instructions before they were executed. The red flags were (at [68]):

(a) Irregularities concerning the content of the Four Instructions:
(i) The frequency and quantum of the payment instructions were “extremely high” and unprecedented.
(ii) The instructions were to remit monies to beneficiaries and countries to which the plaintiff had not remitted monies before.
(iii) The plaintiff’s name was misspelt as “Major Shipping & Tagging”.
(iv) The purposes of the Four Instructions were not stated on the Four Instructions.
(v) The date of the 3rd and 4th Instructions was erroneously stated.

(b) Irregularities concerning the manner in which the payment instructions were sent to the Bank:
(i) The payment instructions were sent to the Bank by email before being faxed thereto, contrary to the plaintiff’s usual practice.
(ii) The payment instructions were faxed via eFax, which the plaintiff had not used before.
(iii) The payment instructions were sent by email and fax to the Bank notwithstanding that plaintiff’s authorised personnel had learnt to use the S2B Platform as a more efficient way of transferring funds.

(c) Miscellaneous irregularities:
(i) one of the bank’s relationship managers (“RM”) was asked by email for the balance of the Account
(ii) on another occasion, the plaintiff’s authorised personnel purportedly sent the Health Problems email to another RM.

The Court considered the evidence concerning these purported red flags and found that individually and collectively were not sufficient to put the bank on suspicion to question the payment instructions: at [90]-[91]. Accordingly, the Court found that the bank was not negligent in not obtaining call-back information on the payment instructions: at [92]. Thus, the Court found that the bank had believed in good faith that the instructions were sent by the plaintiff: at [94].

In addressing the plaintiff’s arguments on whether the bank could rely on exclusion of liability clauses, the Court also found that it was not unreasonable for the bank to exclude liability for negligence simpliciter under the Unfair Contract Terms Act given that the plaintiff was a commercial entity who entered into a contractual relationship with the bank in the course of its business, the banking experts’ view that such clauses were commonly found in account opening documents and standard terms of Singapore banks, and the volume of transactions banks handle for various customers.

Finally, the Court held that the plaintiff was to pay costs to the bank on an indemnity basis under the bank’s standard terms. Costs amounted to S$384,375.

 

Article: So you want to conduct an initial coin offering (ICO) or digital token sale?

Introduction

So you are a tech startup who want to raise funds. You figure that instead of incurring debt, issuing equity, entering into convertible loan agreements (CLA), you will conduct an initial coin offering (ICO) or digital token sale. Not least because the amounts of money which have been raised by recent ICOs are huge. (I am using ICO because it is a shorter well-recognised abbreviation than “digital token sale”, even though the term ICO may be a bit of a misnomer.)

For every ICO that makes headlines, there are probably many ICOs which fall far below the issuers’ expectations. A lot of this of course is based on investors/purchasers’ sentiment and speculation. But some of that is also dependent on a few things like good marketing, viable underlying business model or technology, a credible team, and fair and reasonable terms of sale. If you do wish to build credibility for your ICO, there are some things which you would want to consider from a legal, regulatory perspective.

Continue reading “Article: So you want to conduct an initial coin offering (ICO) or digital token sale?”

Case Update: Long Kim Wing v LTX-Credence Singapore Pte Ltd [2017] SGHC 151 – employer liable for failing to conduct due inquiry before termination for cause / dismissal

Significance: The Singapore High Court held an employer liable for failing to conduct due inquiry before terminating or dismissing an employee for misconduct.

Although the employee was found to have indeed committed misconduct which justified his dismissal, the Court also found that the employer had breached its employment contract in failing to conduct due inquiry. Under the relevant clause in the contract, it was provided that:-

“The Company may after due inquiry dismiss without notice an employee on the grounds of misconduct inconsistent with the fulfilment of the express or implied conditions of his/her service.”

The Court then had to consider what constituted “due inquiry”. Although the clause was similar to s 14(1) of the Employment Act (Cap 91, 2009 Rev Ed), the employee did not rely on this section as the Act was not applicable to him. The Court then considered case law as well as the website of Singapore’s Ministry of Manpower (“MOM”) (http://www.mom.gov.sg/employment-practices/termination-of-employment (accessed 17 April 2017)). The Court noted that under the subject of “Termination due to employee misconduct” and “Holding an inquiry”, the website states that the employee being investigated for misconduct should have the opportunity to present his case even though there is no prescribed procedure for conducting an inquiry.

At [161]-[162], the Court then opined that the phrase “due inquiry” means something more than just the making of inquiries and the conduct of an investigation. Otherwise the word “inquiry” alone would suffice. The phrase suggests some sort of process in which the employee concerned is informed about the allegation(s) and the evidence against him so that he has an opportunity to defend himself by presenting his position, with or without other evidence. While the website of the MOM does not have the force of law, its guide that the employee concerned should have the opportunity to present his case is a useful one. That accords with notions of justice and fairness especially since serious consequences may follow.  In order for an employee to be given an opportunity to present his case effectively, he must first be informed clearly what the case against him is. This includes the allegation(s) and the evidence against him. While “due inquiry” does not mandate any formal procedure to be undertaken, the more the informality the greater the danger that “due inquiry” was not undertaken. Accordingly, where no formal process was undertaken, the court should be more careful to ensure that the employee’s right is protected.

The Court thus found the employer liable for breaching its obligation to conduct due inquiry. The Court then applied Gunton v Richmond-Upon-Thames London Borough Council  [1980] 3 WLR 714, which entitled the employee his salary for the reasonable time it would have taken the employer to conduct “due inquiry”.

Unfortunately, the evidence adduced by the parties before the Court was scant on this point of how long the reasonable time would have been to conduct due inquiry.

Further,  the Court had some reservation as to whether the Defendant would also be obliged to give the Plaintiff an opportunity to address it on the consequences of his misconduct if it concluded that the misconduct was established. There was no evidence as to what human resource departments do or on the advantages and disadvantages of embarking on such a course of conduct. There was also no evidence or submission as to whether both liability and consequences could be addressed together in the same opportunity given to the Plaintiff or should be done separately: at [182].

The Court then found that the employer would not have required more than seven days, based on the chronology of events which transpired in this case.

Case Update: Long Kim Wing v LTX-Credence Singapore Pte Ltd [2017] SGHC 312 – offer to settle and costs

Significance: Singapore High Court considered that an Offer to Settle (“OTS”) was not validly accepted when it was purportedly accepted by the other party after judgment was given.

The Court also considered whether indemnity costs ought to be ordered in the light of the OTS. The Court thought that the OTS was not a genuine offer to settle all the claims and counterclaims, despite the OTS offer being higher than the actual judgment sum (after taking into account claims and counterclaims). Because this analysis was to be with reference to the claim amount not the actual judgment sum.

The Court then found that on a standard basis, 100% of the costs of the action (for a 7-day trial) was $113,000. The Court then ordered 80% costs to the Defendant. It should be noted that this amount was based on the Appendix G Fee Guidelines on Party and Party Costs. Party and Party Costs are what the court orders. It is different from Solicitor and Client Costs, which are what the client actually pays their solicitors, which is usually much more than the Party and Party Costs.