Case Update

Companies and Corporations | Evidence | Immigration | Tort

Low Hua Kin v Kumagai-Zenecon Construction Pte Ltd (in liquidation) & Anor
[2000] 3 SLR 529
Court of Appeal — Civil Appeal No 124 of 1999
Yong Pung How CJ, LP Thean And Chao Hick Tin JJA
23 May, 28 July 2000

Winding up — Provisional liquidators procured sale of shares belonging to company resulting in loss — Whether act of provisional liquidators ultra vires or negligent — Whether chain of causation between breach of fiduciary duty of director in purchasing shares and loss incurred in selling them broken

Alvin Yeo SC and Nandakumar Ponniya (Wong Partnership) for the appellant.
Anthony Lee and Rodney Keong (Bih Li & Lee) for the respondents.

The appellant was a director of both the first respondent (‘K-Z’), and the second respondent (‘KPM’). K-Z held 90% of the shares of KPM, but the latter was at all material times under the management of the appellant and his nominees. Between May and August 1991, the appellant, in breach of his fiduciary duty as a director of KPM, caused KPM to purchase a total of 7,321,000 shares in a public listed company called Pacific Can Investment Holdings Ltd (‘Pac Can’). The purchase of the shares were financed by Arab Bank plc under a loan facility and upon purchase, the shares were charged to the bank as security. On 11 February 1992, provisional liquidators of K-Z were appointed. Between April and June 1992, several margin calls were made by Arab Bank against KPM, which the latter was unable to meet. On 24 June 1992, Arab Bank declared KPM’s failure to be an event of default and demanded repayment of the entire outstanding sum of some $3.074m. As KPM had no income or potential source of income, the provisional liquidators of K-Z made arrangements to sell the Pac Can shares en bloc in order to repay the amount owing to Arab Bank. KPM wrote several letters to the appellant asking him to offer a price for the purchase of the shares but the appellant failed to do so. The shares were eventually sold en bloc in a ‘married deal’ on the stock exchange with KPM incurring a loss amounting to $2.983m. On 1 July 1994, the High Court ordered the winding-up of both K-Z and KPM and further ordered the appellant to reimburse the sum of $2.983m to KPM. On appeal, the winding-up orders were upheld but the order to reimburse was quashed. Thereafter, the liquidators of K-Z and KPM took out a misfeasance summons against the appellant under s 341 of the Companies Act (Cap 50) claiming the reimbursement of $2.983m being the loss arising from the sale of the Pac Can shares. The order was granted and the appellant appealed.

Held, dismissing the appeal:

There was sufficient evidence before the trial judge to reach the finding that the loss suffered by KPM was caused by the appellant. KPM was the party who sold the shares, and the sale was authorised by its shareholders at a general meeting. Whatever the provisional liquidators did was done in their capacity as agents for and on behalf of KPM, and KPM was undoubtedly the party who entered into the sale transaction. The provisional liquidators in procuring the sale of the Pac Can shares by KPM acted within the scope of their powers conferred on them by s 267 read with s 272(2) of the Companies Act (Cap 50), and these powers were not in any way restricted by the order of the court appointing them.

While generally the primary duty of a provisional liquidator was to preserve the status quo with the least possible harm to all concerned, this was not an inflexible rule and much depended on the circumstances prevailing at the material time. The provisional liquidators had to make a critical decision on the disposal of the shares following the demand by Arab Bank for repayment of the loan, and they decided in the end that it was in the best interests of the company to sell the shares en bloc. They should not be faulted for causing the disposal of the entire block of shares. There was no evidence to show that the provisional liquidators were negligent in procuring the sale of the Pac Can shares. They had acted bona fide in what they perceived to be in the best interests of the company and their actions were not unreasonable or such that no other reasonable provisional liquidator would have undertaken in the circumstances.

The sale of the Pac Can shares procured by the provisional liquidators did not break the chain of causation between the appellant’s breach of fiduciary duty in purchasing the shares and the loss arising from the sale. What the provisional liquidators did was based purely on their commercial judgment at that time, and there was no valid ground for questioning it. The provisional liquidators made a commercial decision. In considering a challenge to such a decision, the court must approach the matter on the basis that the provisional liquidators, being appointed by the court, were recognised as having both the qualifications and the access to the multiplicity of information for making such a decision, and in the absence of bad faith, would treat the provisional liquidators’ decision as a proper one, unless the court was satisfied that they acted in a way in which no reasonable provisional liquidator should have acted.

Public Prosecutor v Ong Phee Hoon James
[2000] 3 SLR 293
High Court — Magistrate’s Appeal No 179 of 1999
Yong Pung How CJ
16 May, 26 June 2000

Adverse inference — Whether drawing of adverse inference appropriate where failure to call witness not due to improper motive

Identification evidence — Whether irregularity in identification parade affected admissibility of identification evidence

Witness — Impeachment — Whether finding of impeachment justified — Whether explanation of inconsistencies satisfactory

Ang Sin Teck (Raja Loo & Chandra) for the appellant.
Jennifer Marie and Christopher Tang (Deputy Public Prosecutor) for the respondent.

On 1 October 1998, the appellant leased out his premises to a Bangladeshi national called Ansar. Between July and October 1998, five Bangladeshi nationals were brought to the premises to stay. They were told that the appellant owned the premises and that they had to obtain his permission to stay there. They were also told to pay a monthly rent of $150. On 13 October 1998, the police raided the premises and arrested 21 Bangladeshi nationals, including the five persons who were brought to the premises to stay. All five persons turned out to be illegal immigrants. They were charged and convicted for their illegal presence in Singapore. Subsequently, the appellant was charged with five counts of having harboured illegal immigrants under s 57(1)(d) of the Immigration Act (Cap 133). He was tried and convicted on all five charges and appealed against the conviction.

Held, dismissing the appeal:

The word ‘harbour’ in the context of the Immigration Act was not confined to the giving of clandestine refuge to an immigration offender. The provision of shelter by leasing premises constituted ‘harbouring’ under the Immigration Act. The presumption of mens rea under s 57(7) of the Immigration Act was not rebutted in this case. The evidence showed that the appellant deliberately closed his eyes to circumstances which suggested that the five persons named in the charges were illegal immigrants.

The casual ‘face-to-face’ manner in which the identification of the appellant was carried out was procedurally improper. However, this merely affected the weight and not the admissibility of the identification. As the case against the appellant did not rest entirely on the identification evidence, the poor quality of the identification evidence did not render the conviction unsafe.

The judge was correct in finding that the appellant’s credit had been impeached. The inconsistencies between the appellant’s testimony in court and his statement to the police were such that they cast considerable doubt on his reliability as a witness.

It was not appropriate to draw an adverse inference against the prosecution for not calling Ansar. The evidence did not reveal an improper motive on the part of the prosecution to withhold Ansar’s evidence.

Per curiam

Where a tenant who is an illegal immigrant leases out the premises to other illegal immigrants without the knowledge of the landlord or owner, the latter cannot be held criminally liable for harbouring the illegal sub-tenants. To do so would unfairly circumvent the mens rea requirement in relation to the landlord or owner. Consequently, the dictum in Lim Dee Chew v PP [1997] 3 SLR 956 which suggests that such vicarious criminal liability is acceptable should not be followed.

Public Prosecutor v Ong Phee Hoon James
[2000] 3 SLR 293
High Court — Magistrate’s Appeal No 179 of 1999
Yong Pung How CJ
16 May, 26 June 2000

Immigration offenders — Harbouring — Whether leasing of premises constituted harbouring — Whether presumption of mens rea in Immigration Act (Cap 133) s 57(7) rebutted

See EVIDENCE.

Integrated Information Pte Ltd v CD-Biz Directories Pte Ltd & Ors
[2000] 3 SLR 457
High Court — Suit No 1131 of 1997 (Registrar’s Appeal No 30 of 1999)
Tay Yong Kwang JC
24 February, 5 May 1999

Malicious falsehood — Assessment of damages — Quantification of loss of profits

Chan Hock Keng (Wong Partnership) for the plaintiffs.
Rey Foo (KS Chia Gurdeep & Param) for the defendants.

The plaintiffs are the publishers of the Singapore Yellow Pages Commercial and Industrial Guide (‘Yellow Pages’). The first defendant is a company whose business is to compile, publish and market directories of telephone numbers and business addresses in a CD Rom format. The second defendant was a director and the third defendant the managing director of the first defendant.

On 27 May 1996, the plaintiffs received a copy of a fax dated 23 May 1996 sent by an employee of the first defendant to a public relations company. The fax contained a statement guaranteeing that the circulation of the CD Rom would be ‘at a minimum of 200,000 copies for local distribution alone (as many as the Commercial Yellow Pages if not more)’.

The plaintiffs received letters of complaint from two of their advertisers in December 1996 and January 1997. The complaints related to a leaflet released by the first defendant claiming that the CD ROM would have a local ‘circulation of 200,000 copies — more than the commercial Yellow Pages’. The plaintiffs further received from another of their advertisers the first defendant’s promotional materials containing the leaflet and a comparison chart which stated, inter alia, that the CD Rom’s circulation was 200,000, while that for the Yellow Pages was 180,000. The plaintiffs commenced proceedings against the defendants for injunctive relief as well as damages, claiming that the statements made by the first defendants in the fax and the leaflet were false and/or published maliciously.

The trial judge allowed the plaintiffs’ claim. She found that the circulation of the Yellow Pages for 1996, being the actual number of copies of the Yellow Pages collected or distributed, was above 300,000. She held that the defendants made the statement that the circulation of the Yellow Pages was 180,000 or 200,000 knowing that it was not true or recklessly. She also held that although the plaintiffs did not need to prove special damage under s 6(1) of the Defamation Act, it appeared from the evidence adduced that they had suffered some loss of reputation if not revenue as a result of the malicious falsehood.

Assessment of damages was held before the assistant registrar who awarded damages of (1) $654,320 for shift of gross sales of common advertisers from the plaintiffs to the first defendant; and (2) $30,000 for loss of goodwill of potential advertisers not captured in shift of gross sales from common advertisers to the first defendants. For the shift of gross sales of common advertisers from the plaintiffs to the first defendant, the assistant registrar adopted the plaintiffs’ computation of the decline in their revenue of $1,308,640 and discounted 50% thereof. The assistant registrar also awarded interest at 6% per annum on the above amounts from the date of assessment. The defendants appealed against the assessment of damages.

Held, allowing the appeal under the first head but dismissing the appeal under the second head of damages:

Any award of loss of profits should not be on the basis of gross but of net profits.

On the evidence, loss of profits on the part of the plaintiffs was probable but was not capable of being quantified. It was not possible to compute how much business was lost as a result of the falsehood because it was not possible to gauge the reaction of all common advertisers to the leaflet. As such, damages under the first head were reduced to $50,000.

Loss of goodwill pertained to the loss of profits resulting from a pool of potential advertisers who could have been dissuaded from signing up with the Yellow Pages after reading the false statements disseminated to them in the defendants’ promotional materials. On a balance of probabilities, some potential advertisers could have been affected thus. Where loss could be shown but could not be quantified, it was justifiable to award nominal damages. Thus, the damages of $30,000 under the second head awarded by the assistant registrar were confirmed.