Beckkett Pte Ltd v Deutsche Bank AG and Another

• Jurisdiction: Singapore
• Judge: Woo Bih Li J
• Judgment Date: 22 April 2005
• Neutral Citation: [2005] SGHC 79
• Date: 22 April 2005
• Subject Matter: Implied undertaking not to use documents disclosed for any ulterior purpose,Whether prejudice caused to party giving discovery,Discovery of documents,Whether special circumstances warranting modification of undertaking,Application for modification of or release from undertaking to allow use of documents in separate proceedings in Indonesia,Civil Procedure
• Docket Number: Suit No 326 of 2004 (Registrar's
• Published date: 21 June 2005
• Defendant Counsel: K Shanmugam SC, Stanley Lai and William Ong (Allen and Gledhill)
• Court: High Court (Singapore)
• Plaintiff Counsel: Steven Chong SC, Ronald Choo and Sim Kwan Kiat (Rajah and Tann)

22 April 2005

Woo Bih Li J:

Introduction

1 On or about 24 October 1997, the first defendant, Deutsche Bank AG (“DB”), advanced a loan of US$100m to PT Asminco Bara Utama (“Asminco”). The loan was secured by the following:

(a) the plaintiff’s, ie Beckkett Pte Ltd’s (“Beckkett”) 74.2% shareholding in PT Swabara Mining & Energy (“SME”),

(b) SME’s 99.9% shareholding in Asminco,

(c) Asminco’s 40% shareholding in PT Adaro Indonesia (“Adaro”) and PT Indonesia Bulk Terminal (“IBT”).

The above shares have been referred to as “the pledged shares” and I shall use the same description. The loan was also secured by a corporate guarantee by Beckkett and SME. Beckkett, Asminco, SME, Adaro and IBT are part of a group of companies known as “the Swabara group”. Adaro is reported as owning Indonesia’s biggest coalmine.

2 On or about 21 November 2001, DB disposed of the pledged shares. It is not in dispute that at that time, an event of default had already arisen giving DB the right to dispose of the pledged shares.

3 Beckkett, however, said that the disposal of the pledged shares was without notice to it. It also said that the timing of the disposal coincided with the time when it was involved in a dispute with another group of shareholders in the Swabara group which it referred to as “the Management Group”.

4 Beckkett said that despite requests from it in March 2002, DB refused to provide information to it on the identity of the purchaser of the pledged shares and the price at which the shares were sold, and that it was only in late April 2002, after its solicitors requested information from DB’s solicitors that DB provided limited information on the price and the identity of the purchaser of the SME shares but no information on the other pledged shares. Consequently, Beckkett applied for disclosure of documents in Originating Summons No 772 of 2002 (“the OS”). This was an application for pre-action discovery. An order was made by an assistant registrar on 2 August 2002 for such discovery. DB’s appeal to a judge was dismissed on 15 November 2002. Subsequently, DB filed a list of documents and an affidavit verifying the list. Beckkett complained about the lack of full disclosure by DB under the order made in the OS but that is not relevant for present purposes.

5 Beckkett’s position was that the sale of the pledged shares appeared to be at a gross undervalue. It believed that DB had breached its duties as mortgagee. It also believed that members of the Management Group had assisted the second defendant, PT Dianlia Setyamukti (“Setyamukti”), to purchase the pledged shares at an undervalue. Beckkett was unable to verify if Setyamukti was a bona fide purchaser, although Beckkett suspected it was not.

6 On or about 27 April 2004, Beckkett commenced the current proceedings in Suit No 326 of 2004 (“Suit 326”). DB gave discovery of various documents over a period of time. Again, Beckkett complained about the manner in which discovery was given but again, such a complaint is not relevant for present purposes.

7 Beckkett said that the documents disclosed by DB on 21 December 2004 and on 14 February 2005 confirmed its suspicion that DB and Setyamukti were involved in a conspiracy to harm or injure Beckkett when the pledged shares were sold by DB. Apparently, certain members of the Management Group had participated in the negotiations and/or assisted Setyamukti to purchase the pledged shares and the sale agreement and the exchange of e-mail revealed unusual terms and comments not usually found in an arms-length transaction. It is not necessary for me to elaborate on these allegations as they are not relevant for present purposes.

8 Suffice it for me to say that Setyamukti was added as a second defendant in Suit 326. Beckkett has obtained an order to serve the writ in Suit 326 outside of jurisdiction on Setyamukti in Indonesia but such service has not yet been effected. In Suit 326, Beckkett seeks an order for the sale of the pledged shares by DB to Sekyamukti to be set aside and for the equity of redemption in the pledged shares to be restored to their respective owners, or alternatively, damages.

9 I come now to the crux of the appeal before me. Beckkett said that in the light of the relief it sought to set aside the sale of the pledged shares and because there was news of an impending sale of the shares held by Setyamukti in Adaro, it wished to use the documents, disclosed by DB in the OS and in Suit 325, to seek an interim injunction in Indonesia to restrain the onward sale of the shares as that “would effectively render nugatory any relief that may be granted by the Singapore court” in Suit 326. On 10 March 2005, Beckkett applied for leave to use the documents enumerated in the schedule to the application. The documents listed in the schedule were in respect of all documents relating to the sale by DB of the pledged shares.

10 On 30 March 2005, an assistant registrar granted the leave sought with certain qualifications. The qualifications were:

(a) The documents to be used by Beckkett were limited to those exhibited in the seventh affidavit of Beckkett’s director Ling Ping Sheun, Arthur, dated 10 March 2005 (“the documents in issue”).

(b) Beckkett was not to proceed with its substantive action in Indonesia once the injunction was obtained, except with leave of the Singapore court.

(c) Beckkett was to apply for the Indonesian court record to be sealed when applying for the injunction.

As regards the second qualification, it will presumably apply once the application for the injunction is made and decided upon, even if the application were not successful.

11 The assistant registrar, however, granted a stay of execution pending DB’s appeal on DB’s undertaking to file its notice of appeal by 4.00pm on 31 March 2005 and to seek a hearing thereof on an urgent basis. The appeal was heard by me on 6 April 2005. On 8 April 2005, I gave an oral judgment allowing DB’s appeal and setting aside the order made below. I also ordered Beckkett to pay the costs of the appeal and of the hearing below to DB. Beckkett is appealing against my decision on an expedited basis. I now elaborate on the reasons for my decision.

The court’s reasons

12 The background to Beckkett’s application is the principle from Riddick v Thames Board Mills Ltd [1977] QB 881 which imposes an implied undertaking on a party to litigation not to use information disclosed to it in the course of the litigation for any ulterior purpose (“the Riddick principle”). There, Lord Denning MR said at 895 to 896:

The reason for compelling discovery of documents in this way lies in the public interest in discovering the truth so that justice may be done between the parties. That public interest is to be put into the scales against the public interest in preserving privacy and protecting confidential information. …

… Compulsion is an invasion of a private right to keep one’s documents to oneself. The public interest in privacy and confidence demands that this compulsion should not be pressed further than the course of justice requires. The courts should, therefore, not allow the other party – or anyone else – to use the documents for any ulterior or alien purpose. Otherwise the courts themselves would be doing injustice. … In order to encourage openness and fairness, the public interest requires that documents disclosed on discovery are not to be made use of except for the purpose of the action in which they are disclosed. They are not to be made a ground for comments in the newspapers, nor for bringing a libel action, or for any other alien purpose. The principle was stated in a work of the highest authority 93 years ago by Bray J., Bray on Discovery, 1st ed. (1885), p. 238:

A party who has obtained access to his adversary’s documents under an order for production has no right to make their contents public or communicate them to any stranger to the suit: … nor to use them or copies of them for any collateral object … If necessary an undertaking to that effect will be made a condition of granting an order: …

Since that time such an undertaking has always been implied, as Jenkins J. said in Alterskye v Scott [1948] 1 All E.R. 469, 471. A party who seeks discovery of documents gets it on condition that he will make use of them only for the purpose of that action, and no other purpose.

13 The above principle was not disputed. However, it was also not disputed that a party could be released from the implied undertaking (“the Riddick undertaking”) if it demonstrated cogent and persuasive reasons for the release. The court would release or modify the implied undertaking in special circumstances and where the release or modification would not occasion injustice to the person giving discovery: per Lord Oliver of Aylmerton at 860 of Crest Homes Plc v Marks [1987] AC 829. The principle about releasing or modifying an undertaking in special circumstances and in the absence of injustice to the person giving discovery was cited with approval by Chan Sek Keong J in Reebok International Ltd v Royal Corp [1992] 2 SLR 136.

14 Beckkett submitted that the intended use of the documents was not for a collateral or ulterior purpose, as the intended application for an injunction in Indonesia was to maintain the status quo pending the outcome of Suit 326. That application, it submitted, was ancillary to the proceedings in Suit 326.

15 Secondly, Beckkett submitted that there were cogent and persuasive reasons for its application. However, its reasons were the same as the basis for its application, that is, that if Setyamukti sold the pledged shares, any relief or judgment in Suit 326 would be nugatory.

16 Thirdly, Beckkett submitted that there would be no injustice to DB as Beckkett was prepared to seek a stay of the Indonesian proceedings after its application for injunctive relief was heard. It stressed that it was not seeking to pursue its main claims in Indonesia. Beckkett also stressed that it was...