Criminal Law
| Date | 01 December 2011 |
| Published date | 01 December 2011 |
| Author | CHAN Wing Cheong MA (Oxford), LLM (Cornell); Barrister (Gray's Inn), Attorney and Counsellor-at-Law (New York State), Advocate and Solicitor (Singapore); Associate Professor and Amaladass Fellow, Faculty of Law, National University of Singapore. |
| Citation | (2011) 12 SAL Ann Rev 227 |
Strict liability
12.1 Tan Chong Koay v Monetary Authority of Singapore[2011] 4 SLR 348 (Tan Chong Koay) involved various share transactions by the appellants, Dr Tan Chong Koay (Dr Tan) and Pheim Asset Management Sdn Bhd (Pheim Group), a fund management company of which Dr Tan was the founder, chief executive officer and chairman of the investment committee. Arising from these share transactions, the Monetary Authority of Singapore (MAS) claimed a civil penalty from the appellants under s 232(3) read with s 197(1)(b) of the Securities and Futures Act (Cap 289, 2006 Rev Ed) (SFA).
12.2 The High Court had held that the second limb of s 197(1)(b) of the SFA had been made out as the appellants had acted with intent to create a false or misleading appearance with respect to the shares and imposed a civil penalty amounting to S$250,000 on each of them. The appellants appealed against this decision on their liability as well as the quantum of the civil penalty. The MAS, in response, argued that the appellants were not only rightly held liable under the second limb of s 197(1)(b) of the SFA, but they could also be held liable under the first or third limbs of the provision in the alternative.
12.3 Section 197 of the SFA provides:
(1) No person shall create, or do anything that is intended or likely to create a false or misleading appearance
(a) of active trading in any securities on a securities market; or
(b) with respect to the market for, or the price of, such securities.
12.4 The Court of Appeal noted that (Tan Chong Koay at [12]):
Section 197(1) creates two offences one relating to active trading in any securities, and the other relating to the market for or the price of such securities. The two offences can be committed in three ways:
(a) by creating a false or misleading appearance of active trading in, the market for or the price of securities; (b) by doing anything that is intended to create such a false or misleading appearance; or (c) doing anything that is likely to create such a false or misleading appearance. The second prohibited act expressly requires the presence of an intention to create a false or misleading appearance before liability can be imposed. There is no clear authority as to whether the other two prohibited acts require proof of intention or some other kind of mens rea in order to establish liability under s 197(1).
12.5 The Court of Appeal agreed with the High Court's finding that the appellants' trades in the shares were intended to set an artificially high price for those shares in order to increase the year-end valuation of the investments held by the Pheim Group and therefore violated the second limb of s 197(1) of the SFA.
12.6 However, since the MAS had also relied on the other two limbs of s 197(1) in its response and had argued that proof of mens rea was not needed to establish liability under these two limbs, the Court of Appeal proceeded to state its views on these two limbs although these views were strictly obiter and not meant to be a concluded opinion on this issue of interpretation: Tan Chong Koay at [30]; see also at [53].
12.7 The Court of Appeal noted the various arguments in support of MAS's view. First, since the second limb of s 197(1) expressly requires proof of intention, it would follow that the other two limbs do not. Secondly, if proof of intention is required in the first and third limbs, the second limb of s 197(1) would be redundant. Thirdly, Australian decisions showed a general consensus that the Australian equivalent to the third limb of s 197(1) did not require proof of intention or knowledge (although there is no such consensus on the first limb of s 197(1)).
12.8 In deciding what should be the proper approach to interpreting s 197(1), the Court of Appeal started out with a general proposition on criminal law in Singapore (Tan Chong Koay at [47]):
In the realm of criminal law, it is prima facie objectionable to penalise a person for doing a criminal act which he did not intend to do or did not know would be a criminal act. The criminal law punishes or penalises persons with guilty minds.
12.9 However, this general statement is subject to a qualification in respect of regulatory laws which are meant to protect the public interest rather than to condemn individual behaviour: Tan Chong Koay at [47]. The court continued that [m]ost regulatory offences are strict liability offences and are expressed to be so: Tan Chong Koay at [47].
12.10 In the court's view, s 197(1) of the SFA was both a regulatory provision aimed at protecting the public interest as well as a prohibition designed to condemn manipulative market behaviour: Tan Chong Koay at [48]. It may be commented that this is only to be expected as most, if not all, criminal laws aim to protect the public and deter wrongful conduct by others through the punishment of individuals who fail to meet the law's expectations.
12.11 The court noted that ss 197(4) and 197(6) of the SFA, by providing for defences to liability in certain situations, showed that the first limb of s 197(1) is directed at the purpose of the defendant's sale or purchase of securities: Tan Chong Koay at [49]. Since a person cannot effectuate a purpose without doing an intentional act to achieve it, proof of the absence of a specific purpose must therefore be equivalent to proving the absence of a specific intention: Tan Chong Koay at [49]. In the court's view, this indicated that the requirement of acting intentionally is relevant to liability under the first limb to s 197(1), although it is up to the accused to show that he did not have the required intent.
12.12 Furthermore, the court noted that if s 197(1) proscribes the effects of an investor's activities in the securities market without considering his intention or knowledge regarding those effects, there would be nothing he could do in advance to prevent himself from incurring liability, short of not trading at all. In other words, he would be trading at his peril: Tan Chong Koay at [51]. This judicial concern echoes the common law view that legislation should not be interpreted in a way which would penalise a luckless victim (Lim Chin Aik v The QueenELR[1963] AC 160 at 174).
12.13 With respect to the third limb of s 197(1) of the SFA, the court did not wish to express a view, without hearing full arguments, on whether it created a strict liability offence such that liability for the specified act can never be avoided even if the false or misleading appearance were created accidentally: Tan Chong Koay at [53].
12.14 The advice by the court is that MAS might wish to amend s 197(1) to make it clear whether and what kind of mens rea is required for liability under the first and third limbs of s 197(1): Tan Chong Koay at [53]. This is particularly important as s 197(1) creates both a criminal offence as well as a prohibition subject to a civil penalty, and the kind of mens rea required may need to be calibrated according to the consequence involved. The advice is a timely one considering the dissatisfaction that has been repeatedly expressed with regard to criminal laws which do not expressly stipulate the requirement of mens rea: see Chan Sek Keong CJ, Rethinking the Criminal Justice System of Singapore for the 21st Century in The Singapore Conference: Leading the Law and Lawyers into the New Millennium@2020(Butterworths, 2000).
Wilful blindness
12.15 Several cases decided in 2011 discussed the concept of wilful blindness in the context of drug offences under the Misuse of Drugs Act (Cap 185, 2008 Rev Ed) (MDA), as expounded in the Court of Appeal case of Tan Kiam Peng v Public Prosecutor[2008] 1 SLR(R) 1 (Tan Kiam Peng). For comment on Tan Kiam Peng, see Hor, Criminal Justice in the Chan CourtSAL Conference 2011: Developments in Singapore Law Between 2006 and 2010 (Academy Publishing, 2011).
12.16 For purposes of the drug offences under the MDA (ie, drug trafficking and drug importation under ss 5 and 7 of the MDA), the Prosecution must prove that the accused knew the specific type of controlled drug involved: Tan Kiam Peng at [95]. However, the concept of wilful blindness may be used by the Prosecution to assist its case in two ways. The first way involves the Prosecution using the concept of wilful blindness to show that the accused had actual knowledge of the drug in question. The second way in which the Prosecution may use the concept of wilful blindness is when it cannot show that the accused had actual knowledge of the drug involved.
12.17 Concerning the first way, in Public Prosecutor v Mas Swan bin Adnan[2011] SGHC 107 (Mas Swan), the High Court noted that the doctrine of wilful blindness is an evidential tool towards establishing actual knowledge: Mas Swan at [55]. What if the accused only suspects that he is handling illicit drugs but refuses to confirm if this is true is this sufficient to justify a finding of wilful blindness and therefore actual knowledge of the drug? Tan Kiam Peng had cautioned that whether a finding of wilful blindness will be made depends on the relevant factual matrix and the accused deliberately decides to turn a blind eye: Tan Kiam Peng at [125] [emphasis added]. In Khor Soon Lee v Public Prosecutor[2011] 3 SLR 201 (Khor Soon Lee), the Court of Appeal warned that (Khor Soon Lee at [20]):
[N]egligence or recklessness does not amount to wilful blindness It is a high threshold to be met and a finding of wilful blindness ought not to be made unless there is a strong factual basis for doing so. [emphasis in original]
12.18 The Court of Appeal in Nagaenthran a/l K Dharmalingam v Public Prosecutor[2011] 4 SLR 1156 (Nagaenthran) also offered the following guidance (Nagaenthran at [30]):
Wilful blindness (or Nelsonian blindness) is merely lawyer-speak for actual knowledge that is inferred from the circumstances of the case. It is an indirect way to prove actual...
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