Cases |
Bankruptcy | Civil Procedure | Conflict of Laws | Equity | Trusts and Trustees
Caltong (Australia) Pty Ltd (fka Tong Tien See Holding (Australia) Pty Ltd) & Anor v Tong Tien See Construction Pte Ltd (in liquidation) and another appeal [2002] 3 SLR 241
Court of Appeal — Civil Appeal Nos 600124 and 600130 of 2001
Yong Pung How CJ, Chao Hick Tin JA and Tan Lee Meng J
23 April, 29 May 2002
Appeal — Leave to appeal — Leave to commence proceedings already obtained — Whether leave to appeal against judgment in favour of bankrupt necessary — Whether appeal is ‘proceeding’ under s
76(1)(c)(ii) of Bankruptcy Act (Cap 20, 2000 Ed) — Bankruptcy Act (Cap 20, 2000 Ed) s 76(1)(c)(ii)
N Sreenivasan and Sharon Chia (Straits Law Practice LLC) for the appellants in CA 600124/2001 and respondents in CA 600130/2001.
Foo Maw Shien and Deborah Koh (Ang & Partners) for the respondent in CA 600124/2001 and appellant in CA 600130/2001.
Tong Tien See Construction Pte Ltd (‘TTSC’) was a major player in the building construction industry. In 2000, TTSC was wound up on the ground of insolvency, it being unable to pay its debts of some $53.3m. The liquidator,
after examining the affairs of the company, came to the conclusion that the directors had breached their fiduciary duties to the company and commenced actions against the founder of the company, Tong Tien See (‘Tong’), some of his
family members, as well as associated companies and parties who had wrongfully received assets from TTSC.
In the court below, the trial judge found that Tong, his wife (‘Koo’) and daughter (‘Angela’) had breached their fiduciary duties. Not only had they deceived TTSC’s creditors by manipulating the company’s accounts, the Tongs
also siphoned large sums of money for their personal benefit. Furthermore, the evidence showed that they caused TTSC to transfer a total of $984,899.60 to Caltong (Australia) Pty Ltd (‘Caltong’). With these funds, Caltong
purchased three properties in Australia, one of which was 70 Barker Road, Sydney. This property was sold in 1999 for A$800,000. Koo’s sister, Sally, was Caltong’s sole shareholder and director and despite her claim that one of her
properties, No 17 Woodward Avenue (‘the Woodward property’), had nothing to do with TTSC or its funds, the trial judge found that the property was bought using proceeds from the sale of 70 Barker Road.
At the end of the trial, the trial judge ordered Tong, Koo and Angela to pay TTSC $53.3m in damages. He also held that they were constructive trustees in respect of this sum of money and the properties bought by them using the
company’s funds. With regard to Caltong and Sally, the trial judge declared that they were constructive trustees of the $984,899.60 which Caltong received from TTSC as well as the Woodward property and the two Australian
properties owned by Caltong. Dissatisfied with the ruling against them, Caltong and Sally appealed against the trial judge’s decision, arguing, inter alia, that Sally should not be personally liable to account for the $984,899.60
and that the trial judge erred in declaring that Sally held the Woodward property on trust for TTSC. TTSC also appealed, contending that the trial judge erred in refusing to grant it the tracing orders that it sought against the
Tongs, Caltong and Sally.
Held, allowing both appeals in part:
Sally was not guilty of dishonest assistance or of knowing receipt vis-à-vis the sum remitted from TTSC to Caltong. As such, she should not be held to be personally liable for this sum. To be liable for knowing receipt, three elements must be proved. First, the plaintiff must show a disposal of his assets in breach of fiduciary duty. Second, there must have been the beneficial receipt by the defendant of assets traceable to the assets of the plaintiff. Finally, it must be shown that the defendant had knowledge that the assets are traceable to a breach of fiduciary duty. In the present case, Sally did not receive the money and there was no evidence to indicate that she knew that the money received by Caltong from Tong was improperly siphoned off from TTSC;
El Ajou v Dollar Land Holdings [1994] 2 All ER 685; [1994] 1 BCLC 464 followed.
The elements which must be proved to establish dishonest assistance are (a) that there has been a disposal of assets in breach of trust or fiduciary duty; (b) in which the defendant has assisted or which she/he has procured;
(c) the defendant acted dishonestly; and (d) resulting loss to the claimant. There was no evidence that Sally had dishonestly assisted Tong, Koo or Angela in siphoning off the funds of TTSC to Caltong. That she was a nominee
director of Caltong did not per se mean that she would also know of the Tongs’ wrongdoings; Royal Brunei Airlines v Tan Kok Ming Philip [1995] 2 AC 378; [1995] 3 All ER 97 followed.
When a trustee mixes trust funds with his own funds, the whole is subject to the trust, except so far as he is able to distinguish what is his own; Frith v Cartland (1865) 71 ER 525 and Re Tilley’s Will Trusts
[1967] Ch 1179; [1967] 2 All ER 303 followed. In this case, Sally used proceeds from the Barker Road property to buy the Woodward property and knew that the proceeds were tainted. Having knowingly mixed trust moneys with her own
when purchasing the property, the burden was on her to show which portion of the purchase price came from her own resources. However, having regard to the nature of the pleadings, and the manner in which the trial had proceeded,
it was fairer to afford Sally the opportunity of showing the extent to which she and/or her husband had contributed towards that portion of the purchase price of the Woodward property in excess of the amount obtained from the sale
of the Barker Road property.
Once leave is obtained to commence an action against a bankrupt under s 76(1)(c)(ii) of the Bankruptcy Act (Cap 20, 2000 Ed), that leave should hold good until the final determination of the proceeding, including any appeal.
There is really no good reason why leave should be obtained at every stage; Overseas Union Bank v Lew Keh Lam [1999] 3 SLR 393 distinguished.
Tracing is a process rather than a remedy. It enables a plaintiff to trace what has happened to his property, identify the persons who have handled or received it and justify his claim that the assets/property which they
handled or received can properly be regarded as representing his property; Foskett v McKeown [2000] 3 All ER 97 followed. For a tracing order to operate, the assets from which a tracing exercise is to begin must be
identified. However, it is not necessary to identify the traceable proceeds, as one of the objects of a tracing exercise is to establish this.
The court is entitled to take all the circumstances of a case into account in determining whether a tracing order should be granted. While TTSC’s prayer for a tracing order was inadequately formulated, this did not preclude a
court from granting an appropriate tracing order if the case warranted it.
No tracing order based on the $53.3m, which Tong, Koo and Angela were held to be accountable, would be granted. This was because there would be great difficulties in identifying the specific sums from which tracing was to be
initiated, bearing in mind the numerous transactions which would have taken place.
The same could not be said of the $984,899.60 received by Caltong from Tong/TTSC as this was a starting point from which tracing could begin. While proceedings would be extended by such a tracing exercise, this was inevitable.
Furthermore, a tracing order was not redundant as it could compel third parties to assist in the exercise. This could be useful as Caltong was not very co-operative in disclosing its records.
CIVIL PROCEDURE
Info-Communications Development Authority of Singapore v Singapore Telecommunications Ltd [2002] 3 SLR 289
High Court — Suit No 934 of 2001 (Registrar’s Appeal Nos 84 and 86 of 2002)
Choo Han Teck JC
25, 26, 29 April, 2 May 2002
Discovery — Application for further discovery — Waiver of privilege — Disclosure of letter of advice from solicitors — Whether privilege also waived in respect of letter of instruction — Whether documents sought
admissible
Discovery — Application for further discovery — Disclosure of electronic mail printouts — Whether drafts and attachments referred to in electronic mail produced should be disclosed
Discovery — Relevancy of documents — Application for further discovery — Whether documents sought relevant and admissible
Cavinder Bull (Drew & Napier LLC) for the plaintiff.
Muthu Arusu and Prakash Pillai (Allen & Gledhill) for the defendant.
The defendant held a licence granted by the plaintiff’s predecessor to provide telecommunication services. The monopoly conferred by the licence was later affected by an amendment to the licence, and compensation to the
defendant was fixed at $1.5bn. The sum of $1.5bn had been calculated to include a tax component of $388m, as it was apparently intended by the plaintiff that the defendant would not have to bear the tax burden on the compensation.
When the plaintiff subsequently discovered that there was in fact no tax payable on the compensation, they brought a suit demanding the return of the $388m. After the standard discovery process was completed, the plaintiff applied
to discover advice and correspondence relating to a letter of advice provided by the defendant’s solicitors to the defendant. The defendant for its part applied for specific discovery of drafts and attachments referred to in
electronic mail printouts produced by the plaintiff. Both applications were rejected by the assistant registrar and the parties appealed.
Held, dismissing the plaintiff’s appeal and allowing the defendant’s appeal:
By putting in the letter of advice, the defendant had waived privilege attaching to that letter. If privilege is waived in respect of a solicitor’s letter of advice, it is also waived in respect of the letter of instruction
that brought forth the advice.
However, the primary question was whether the document was admissible evidence. The letter of advice related to the defendant’s desire for assistance in the quantification of its loss, and the eventual quantification made by
the defendant did not appear to be of any relevance in the dispute with the plaintiff. The mere disclosure of the letter of advice did not make it a fact in issue and consequently, relevant. There was presently no direct evidence
to show that the defendant knew that the $1.5bn included a tax component, and the letter of advice had no indication relating to the tax component. Hence, there was at present nothing to indicate that there was any relevance in
the production of further documents connected with the letter of advice.
As to the defendant’s appeal, the issue before the trial judge was whether there had been any mistake when the $1.5bn was paid over. It would therefore be relevant to consider how the mistake arose. The drafts, discussion and
other evidence tracing the path to the final act constituting the error would, accordingly, also be material. In light of the manner in which the drafts in question were referred to in the disclosed electronic mail, the drafts
were relevant as they might or might not go towards proving the fact in issue, ie the plaintiff’s mistake.
CONFLICT OF LAWS
Mala Shukla v Jayant Amritanand Shukla (Danialle An, co-respondent) [2002] 3 SLR 295
High Court — Divorce Petition No 2792 of 2000 (Registrar’s Appeal No 720022 of 2002)
Woo Bih Li JC
28 March, 23 April, 2 May 2002
Forum non conveniens — Stay of proceedings — Divorce petition — Petitioner and respondent both Indian citizens — Concurrent divorce proceedings in India — Whether India more appropriate forum — Whether stay ought to
be granted
Imran Khwaja and Michelle Jeganathan (Tan Rajah & Cheah) for the petitioner.
John Thomas and Anita Thomas (Colin Ng & Partners) for the respondent.
The respondent, Jayant, sought to stay or dismiss the divorce petition brought by the petitioner, Mala, in Singapore, on the grounds that India was the appropriate forum to hear the matter. The divorce petition was, inter alia,
based on the alleged adultery of Jayant with the co-respondent, Danialle An. Jayant and Mala were married in India in 1976, and had two children. All four are Indian citizens. In June 1999, Mala learnt of the alleged adultery. She
returned to India with her two children in July 1999. Jayant and Mala subsequently reached a settlement on division of matrimonial assets, custody and maintenance in October 1999, and filed a joint petition for divorce by mutual
consent in the Court of the District Judge in Delhi. However, Mala later filed an application to withdraw her consent to the application on the basis that the settlement was obtained under duress, coercion and undue influence.
Jayant’s response was to file another petition for divorce, and to apply for directions to compel Mala to sign and verify this petition. This application was dismissed by the district judge and the High Court in Delhi on 29 July
2000 and 6 September 2001 respectively. When Mala presented a divorce petition in Singapore on 4 September 2000, Jayant applied to stay the divorce proceedings in Singapore but his application was dismissed by the district judge
on 14 February 2002. Jayant then filed the present appeal against the decision of the district judge. Meanwhile, he appealed against the decision of the High Court in Delhi and on 22 March 2002 obtained special leave to petition
to the Supreme Court of India.
Held, allowing the appeal and granting a stay of proceedings:
Existing proceedings in another jurisdiction can be a decisive, although not an automatic, factor depending on the circumstances of the case. The appropriate approach was to await the outcome of the appeal to the Supreme Court
of India rather than to allow Mala to race towards getting a decision from a Singapore court that might thwart the outcome of that appeal. Even though the success of the appeal would not necessarily mean that a divorce would be
granted by the Supreme Court of India, it was sufficient if the decision was likely to have an effect on a divorce petition filed in India.
Mala had sufficient evidence to establish the adultery of Jayant in an Indian court. Jayant had admitted adultery with Danialle in his e-mail correspondence and in his own appeal to the Delhi High Court. The fact that Mala did
not adduce a private investigator’s report about the adultery in her petition in Singapore suggested that she was confident that she had sufficient evidence to prove adultery. In any case, Mala could apply for divorce on the
alternate grounds of consent in India.
The issues relating to division of property, custody and maintenance were covered by the settlement. Whether the settlement was unfair or entered into involuntarily was a matter which should be determined by Indian courts. Even
if there was no settlement, these issues would still be appropriate for resolution by Indian courts. The moneys from Jayant’s bank accounts were not located solely in Singapore. There were two pieces of immovable property
remaining, both in India. The children are both Indian citizens and residing in India. With respect to maintenance, the court would also want to consider the cost of living in India. In all the circumstances, India would clearly
be the most appropriate forum to decide on any divorce petition or ancillary matters arising out of the dissolution of the marriage.
There was insufficient reason to refuse a stay based on any legitimate personal or juridical advantages Mala might enjoy in proceedings in Singapore. Even if Mala could get a quicker hearing and a better deal in Singapore, that was not sufficient reason to avoid a stay. Moreover, an Indian court order could be enforced directly in Singapore, either by registration of the order if it related to payment of a sum of money and emanated from a superior court, or by commencement of fresh proceedings in Singapore. Such a step would not result in multiplicity of proceedings and was not a sufficient reason to refuse a stay.
Caltong (Australia) Pty Ltd (fka Tong Tien See Holding (Australia) Pty Ltd) & Anor v Tong Tien See Construction Pte Ltd (in liquidation) and another appeal [2002] 3 SLR 241
Court of Appeal — Civil Appeal Nos 600124 and 600130 of 2001
Yong Pung How CJ, Chao Hick Tin JA and Tan Lee Meng J
23 April, 29 May 2002
Fiduciary duties — Breach — Accessory to breach — Liability of third party to account for dishonestly assisting fiduciary to breach fiduciary duties — Elements to be proved to establish liability — Whether appellant
rendered any assistance in breach
Fiduciary duties — Breach — Liability of third party who knowingly received sums traceable to breach of fiduciary duties — Elements to be proved to establish liability — Whether elements proved
Tracing — Nature of tracing exercise — When tracing order will be granted — Circumstances to be taken into account when determining whether to grant tracing order — Whether necessary to identify traceable proceeds in
order to obtain tracing order
See BANKRUPTCY.
TRUSTS AND TRUSTEES
Caltong (Australia) Pty Ltd (fka Tong Tien See Holding (Australia) Pty Ltd) & Anor v Tong Tien See Construction Pte Ltd (in liquidation) and another appeal [2002] 3 SLR 241
Court of Appeal — Civil Appeal Nos 600124 and 600130 of 2001
Yong Pung How CJ, Chao Hick Tin JA and Tan Lee Meng J
23 April, 29 May 2002
Breach of trust — Identification of trust property — Effect of trustee mixing his/her personal funds with trust funds
See BANKRUPTCY.