CIFG Special Assets Capital I Ltd (formerly known as Diamond Kendall Ltd) v Polimet Pte Ltd and others

• Judge: George Wei J
• Judgment Date: 23 December 2015
• Neutral Citation: [2015] SGHC 325
• Citation: [2015] SGHC 325
• Docket Number: Suit No 758 of 2013 (Registrar’s Appeal No 232 of 2015)
• Published date: 30 December 2015
• Hearing Date: 17 September 2015
• Plaintiff Counsel: Shivani d/o Sivasagthy Retnam and Ben Mathias Tan (Drew & Napier LLC)
• Date: 23 December 2015
• Defendant Counsel: Tan Chee Meng SC, Alvin Lim Xian Yong and Sngeeta Rai (WongPartnership LLP)
• Court: High Court (Singapore)
• Subject Matter: Civil Procedure,Professional privileges,Legal Profession,Discovery of documents

George Wei J: Introduction

This is an appeal against the entire decision of the Assistant Registrar (“the AR”) made on 30 July 2015 in Summons No 1632 of 2015, ordering that the plaintiff disclose documents and written communications between itself and its solicitors, Messrs Richard Wee & Yip (“RWY”), in relation to an unsigned agreement in 2011 (“the Documents”). The AR awarded costs of $5000 (excluding reasonable disbursements) to be paid by the plaintiff to the defendants.

RWY is a law firm in Kuala Lumpur, Malaysia. Mr Yip Huen Weng (“Mr Yip”) is an advocate and solicitor of the High Court of Malaya and a partner of RWY.¹ There is no suggestion that Mr Yip has been called to the bar in Singapore or that he holds a Singapore practising certificate. The relevance of this point will become clearer below.

Central to this appeal are the issues of (a) whether the Documents are relevant for disposing fairly of the matter and/or for saving costs; and (b) whether the Documents are cloaked with legal professional privilege.

Background The parties

The plaintiff, CIFG Special Assets Capital I Ltd (“CIFG”), is a private company incorporated in Mauritius.² It was set up as a special purpose vehicle by Kendall Court Mezzanine (Asia) Fund 1 LP (“Kendall Court”) for the purpose of entering into Convertible Bond Subscription Agreements (“CBSAs”) with the defendants.³ It is worth noting that CIFG was formerly known as Diamond Kendall Limited and most of the material events took place prior to the change of name. To be clear, references to “the plaintiff” will include both CIFG and its previous incarnation, Diamond Kendall Limited.

The first defendant, Polimet Pte Ltd (“Polimet”), is a private limited company incorporated in Singapore.⁴ It is in the business of, inter alia, manufacturing lead-in wires and cold formed components for the glass diodes and semiconductor industry.⁵ The second to fifth defendants were the initial shareholders of Polimet. At present, the second defendant, Lee Sin Peng (“Ms Lee”), is a director of Polimet. I note that the second to fifth defendants are Malaysians.

The third parties, Chris Chia Woon Liat (“Mr Chia”) and Yeo Kar Peng (“Ms Yeo”), were the plaintiff’s former nominee directors in Polimet.⁶ They were directors of Polimet from 5 October 2007 to 21 September 2012, and 5 October 2007 to 26 March 2012 respectively.⁷ The third parties were the representatives of Kendall Court in the negotiations leading up to the CBSAs entered into between the plaintiff and the defendants.⁸ After the plaintiff was formed, the third parties were also the plaintiff’s representatives in all matters related to and arising out of the CBSAs.⁹

The agreements

In October 2007, the parties entered into a Convertible Bond Subscription Agreement dated 5 October 2007 (“2007 CBSA”) by which Polimet issued a convertible bond with a redemption value of US$8,333,333 (subsequently increased to US$9,166,667) and the plaintiff subscribed for the full amount the bond. In exchange, the plaintiff granted Polimet a facility in the sum of US$5,500,000 to be drawn down in three tranches.

On 16 October 2008, the parties entered into another CBSA (“2008 CBSA”). The parties also entered into a Supplemental Bond Subscription Agreement on the same date (“Supplemental 2008 CBSA”). Under these agreements, Polimet issued a convertible bond with a redemption value of US$4,666,667 and the plaintiff subscribed for the full amount of the bond. In exchange, the plaintiff granted Polimet a facility in the sum of US$2,800,000.

Both the 2007 CBSA and the 2008 CBSA contained a general indemnity clause (cl 12.1) stating that each of the defendants jointly and severally agreed and undertook to fully indemnify the plaintiff from and against all losses, costs, liabilities and expenses arising directly or indirectly from any breach of the corresponding CBSA (“the General Indemnity Clause”).¹⁰ Over and above the General Indemnity Clause, Ms Lee (the second defendant) and the third defendant, Andy Ho (“Mr Ho”), executed personal guarantees for up to 50% of Polimet’s obligations and liabilities under the 2007 CBSA and the 2008 CBSA (“the Personal Guarantees”).¹¹

It is undisputed that Polimet drew down the entire facility extended by the plaintiff pursuant to the aforesaid agreements. In 2009, at Polimet’s request and in the light of the defendants’ inability to meet its upcoming payment obligations and maintain the financial ratios required of it under the 2007 CBSA and the 2008 CBSA, the parties entered into a Supplemental CBSA on 28 October 2009 (“Supplemental 2009 CBSA”).¹² The purpose of the Supplemental 2009 CBSA was to grant Polimet a two-year grace period in respect of its payment obligations and eased the financial ratios to be maintained by Polimet under the 2007 CBSA and the 2008 CBSA.¹³

In or around October 2011, the parties were in discussions about implementing a moratorium of Polimet’s obligations under the CBSAs (“the Proposed Agreement”). Mr Yip was appointed to draft the Proposed Agreement. On one hand, the plaintiff takes the position that Mr Yip was appointed as the plaintiff’s solicitor. On the other hand, the defendants argue that Mr Yip was the solicitor of both the plaintiff and the defendants.

The Proposed Agreement was never concluded. Pertinently, the Documents that are the subject of this appeal relate to the communications between the plaintiff and Mr Yip in relation to the Proposed Agreement.

It appears that the 2007 and 2008 CBSAs and the Supplemental 2009 CBSA were prepared by law firms in Malaysia. The Proposed Agreement in October 2011 was prepared by My Yip.

The suit

To properly understand the issues arising in this appeal, it is necessary to have a broad understanding of the claims and defences in the main suit, ie, Suit No 758 of 2013 (“the Suit”). The plaintiff commenced this suit, claiming the outstanding sums due and owing to them under the CBSAs. Against Polimet, the plaintiff claims to be entitled to terminate the CBSAs and be paid all monies due under the same as a result of Polimet’s breaches of the CBSAs.¹⁴ These breaches include the failure to make payments due under the CBSAs and the failure to maintain the requisite financial ratios. Against Ms Lee and Mr Ho, the plaintiff claims (on the Personal Guarantees) for 50% of all the sums owing by Polimet under the CBSAs. Against Ms Lee, Mr Ho, Mr Ong Puay Koon (ie, the fourth defendant) (“Mr Ong”) and Mr Yap Tien Sung (ie, the fifth defendant) (“Mr Yap”), the plaintiff claims sums due and owing under the General Indemnity Clause.

In their defence and counterclaim, the defendants dispute the plaintiff’s understanding of the General Indemnity Clause and further allege that there was an oral agreement between the plaintiff’s representatives, Mr Chia and Ms Yeo, and Ms Lee, that the second to fifth defendants’ liability was limited to the loss of their initial shareholding in Polimet.

In the alternative, the defendants take the position that the General Indemnity Clause was included in the 2007 CBSA under a common, or alternatively, a unilateral mistake on the defendants’ part as to its nature and effect on the liability of the second to fifth defendants. They further plead that Mr Chia and Ms Yeo, as the plaintiff’s representatives, had misrepresented the effect of the General Indemnity Clause to the second to fifth defendants.

The defendants further allege that the circumstances surrounding the negotiations for the Proposed Agreement in October 2011 cast light on the parties’ understanding of the effect of the General Indemnity Clause that is set out in the 2007 and 2008 CBSA. According to them: In the course of the negotiations, Mr Ong wanted written confirmation from RWY that his liability under the Proposed Agreement shall be limited to the loss of his initial shareholding in Polimet, as it allegedly was “supposed to be” under the 2007 CBSA. Mr Ong could not obtain a satisfactory answer from RWY. Consequently, Mr Ong was not agreeable to proceed with the Proposed Agreement which was ultimately never concluded.

The plaintiff, in contrast, has pleaded that RWY (which the plaintiff alleges was its solicitor exclusively) did not provide Mr Ong with written confirmation that his liability under the Proposed Agreement was limited to the loss of his initial shareholding in Polimet because his liability was not limited in that manner.

There are two issues before me in this appeal: First, are the Documents relevant and necessary for the fair disposal of the matter or the saving of costs? Second, even if the Documents are relevant and necessary, are the documents cloaked with privilege such that they should not be disclosed?

Relevance of Documents

The AR took the view that the Documents were relevant. She reasoned that the negotiations and/or communication between RWY and the plaintiff’s representatives in the lead up to the Proposed Agreement are likely to reveal the state of the defendants’ knowledge and understanding of the extent of their liability, as well as the state of the plaintiff’s and/or RWY’s knowledge of the defendants’ understanding of the same.

The arguments

The defendants’ stated purpose for seeking disclosure is to shed light on the parties’ understanding of the extent of their liability under the 2007 CBSA. More specifically, they contend that the Documents will show that the parties were under a mistake or that the plaintiff was aware of the unilateral mistake in respect of the inclusion of the General Indemnity Clause.

The plaintiff first submits that the Proposed Agreement and its terms are wholly irrelevant because it was never concluded and the plaintiff is not suing on it. Second, the plaintiff submits that the documents are unnecessary because documents that have been disclosed already show the plaintiff’s views on the extent of the defendants’...