EFT Holdings, Inc and another v Marinteknik Shipbuilders (S) Pte Ltd and another

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 29 November 2013
• Neutral Citation: [2013] SGCA 64
• Citation: [2013] SGCA 64
• Court: Court of Appeal (Singapore)
• Published date: 26 December 2013
• Docket Number: Civil Appeal No 3 of 2013 and Summons No 3558 of 2013
• Plaintiff Counsel: Alvin Yeo, SC, Chen Xinping and Debra Lam (WongPartnership LLP)
• Defendant Counsel: Haridass Ajaib and Mohammad Haireez (Haridass Ho & Partners)
• Subject Matter: Conflict of Laws,Choice of Law,Tort,Conspiracy
• Hearing Date: 23 July 2013

Sundaresh Menon CJ (delivering the judgment of the court):

This is an appeal against the decision of the High Court Judge (“the Judge”) in Suit No 571 of 2010 (“the Suit”) dismissing the appellants’ claim against the respondents in respect of an alleged conspiracy by unlawful means. The Judge’s decision is reported as EFT Holdings, Inc and another v Marinteknik Shipbuilders (S) Pte Ltd and others [2013] 1 SLR 1254 (“the Judgment”). The present appeal raises some important issues as to the requisite mental element that must be established to sustain a claim for conspiracy by unlawful means; and on the principles and practice of pleading and proof of foreign law, in particular, in the context of a tort with foreign elements. At the end of the hearing, we reserved our decision and invited the parties to make further submissions on the issue of the mental element that must be proved for the tort of unlawful means conspiracy. We address all these issues, as well as the appeal against the Judge’s factual findings, in this judgment.

Background to the appeal Parties to the dispute

The first respondent, Marinteknik Shipbuilders (S) Pte Ltd (“Marinteknik”) is a company incorporated in Singapore. Marinteknik is in the business of building and repairing ships, tankers and other ocean-going vessels. One David Liang and his family own Marinteknik.¹ The second respondent, Priscilla Lim (“Ms Lim”), has been a director of Marinteknik since 8 January 1993.²

The first appellant (“1st Appellant”) is a company incorporated in the United States of America. On 30 June 2008, the 1st Appellant agreed to invest US$19.193m to acquire shares in Excalibur International Marine Corporation (“EIMC”), a company that had been incorporated in Taiwan on 29 June 2006.³ The second appellant (“2nd Appellant”) is a subsidiary of the 1st Appellant and was incorporated in Taiwan on 6 November 2008 to hold the acquired shares in EIMC.⁴ EIMC is a ferry operator that had been granted a licence to operate a ferry service across the Straits of Taiwan.⁵

There were two other parties to the Suit. Mr Hsiao Zhong-Xing (“Mr Hsiao”), who was the third defendant in the Suit, was a director of EIMC.⁶ The fourth defendant in the Suit, Mr Lu Tso-Chun (“Mr Lu”), was thought to be a shareholder of EIMC pursuant to an agreement he entered into with EIMC on 11 July 2006 (“the Investment Agreement”).

In the Suit, which was filed on 2 August 2010, the appellants claimed that the respondents, Mr Hsiao and Mr Lu had together engaged in a conspiracy by unlawful means to artificially inflate EIMC’s paid-up capital by creating false documents which resulted in EIMC’s equity and assets being overstated in its financial statements for the financial year ended 31 December 2007. The appellants claimed that Mr Lu never actually paid for the shares allotted to him in EIMC, contrary to what was stated in a number of documents. The overstated paid-up capital led the appellants to believe that EIMC was financially robust and induced them to invest in EIMC.⁷ The appellants sued for damages or a refund of the invested sum of US$19.193m. Mr Hsiao and Mr Lu did not enter an appearance to the Suit, and default judgment was entered against them.⁸

The transaction between the respondents and EIMC for two catamarans

The facts giving rise to the dispute date back to November 2005 soon after Marinteknik commenced building two catamarans, Hull 189 and Hull 190 (“the Hulls”), with a view to selling them. It was apparently a seller’s market in the shipbuilding industry at that time and Marinteknik received many enquiries concerning the possible purchase of the Hulls.⁹ EIMC was among those that expressed interest in the Hulls. Mr Bill Duan (“Mr Duan”) of MaxMart Shipping & Trading Co, Ltd, who Ms Lim knew as EIMC’s shipbroker in Taiwan, introduced Mr Hsiao to Ms Lim.¹⁰ Mr Lu also visited Marinteknik’s shipyard in Singapore with Mr Duan and Mr Hsiao in November 2005 to discuss the purchase of the Hulls. Ms Lim was keen to sell the Hulls to EIMC to “give Marinteknik-built catamarans an opening into the cross-strait trade between Mainland China and Taiwan”.¹¹ At that time, Mr Lu was not yet (even ostensibly) a shareholder of EIMC though the impression conveyed was that he was somehow connected with it.

On 15 November 2005, Marinteknik and Mr Lu entered into two contracts for the sale and purchase of the Hulls (“the 2005 Shipbuilding Contracts”). The purchase price for each hull was originally US$25m, but this was subsequently increased to US$27.5m on 15 June 2006 due to some modification work.¹²

According to Ms Lim, Mr Lu told her in late April or early May 2006 that he wanted the 2005 Shipbuilding Contracts to be novated to EIMC. Mr Duan subsequently contacted her in early May 2006 to confirm that EIMC would “take over” the 2005 Shipbuilding Contracts from Mr Lu and that Mr Hsiao was in the process of securing bank financing for EIMC for this purpose.¹³ Between May 2006 and early July 2006, EIMC kept Ms Lim informed of its efforts to secure bank financing for the Hulls.

In early July 2006, Ms Lim, evidently assured that EIMC had obtained bank financing for the Hulls, travelled to Taiwan in order to finalise matters in relation to EIMC’s purchase of the Hulls.¹⁴ During her visit to Taiwan from 11 to 15 July 2006, Mr Duan and Mr Hsiao introduced Ms Lim to Mr Leo Wang from Union Insurance Company (Taiwan) (“Union Insurance”) and representatives from several other banks. These banks included Industrial Bank of Taiwan, Fuhwa Bank (Taiwan) (“Fuhwa Bank”), and Taishin International Bank (Taiwan) (“Taishin Bank”).¹⁵ The banks appeared keen to extend loans to EIMC in the light of the opening of direct links in transport and trade between Taiwan and China, and this further assured Ms Lim that EIMC would be able to meet its payment obligations under the 2005 Shipbuilding Contracts.¹⁶

In the meantime, EIMC and Mr Lu signed the Investment Agreement dated 11 July 2006 in Taiwan.¹⁷ This provided, among other things, that Mr Lu would be allotted 48,750,000 ordinary shares in EIMC, and in return, Mr Lu would novate the 2005 Shipbuilding Contracts to EIMC. It was implicit in cl 2 of the Investment Agreement that Mr Lu had paid US$15m to Marinteknik for the Hulls and that the parties had agreed to enter into a tripartite agreement with Marinteknik (“the Tripartite Agreement”) under which EIMC would assume Mr Lu’s remaining debt of US$40m to Marinteknik. It is undisputed that Mr Lu had not in fact paid US$15m to Marinteknik when the Tripartite Agreement was signed.¹⁸ Marinteknik had in fact issued a letter dated 30 August 2006 rescinding the 2005 Shipbuilding Contracts as EIMC had yet to meet its payment obligations despite repeated promises that it would do so.¹⁹

The Hulls were completed before 8 December 2006.²⁰

Between 30 August 2006 (when Marinteknik issued its letter rescinding the 2005 Shipbuilding Contracts) and 9 April 2007, Mr Hsiao repeatedly urged Ms Lim to give EIMC more time to pay for the Hulls.²¹ Ms Lim testified that although the 2005 Shipbuilding Contracts had been rescinded by the letter of 30 August 2006, Marintekink “kept the [2005 Shipbuilding Contracts] alive” at Mr Hsiao’s request.²² As a matter of law, this was a contradiction in terms but we understand it to mean that Marinteknik continued to hope that a resolution could be found on the basis of the terms on which the 2005 Shipbuilding Contracts had been entered into. Ms Lim explained that she was keen for the Hulls to be deployed in the cross-strait route between China and Taiwan, and she had been told that EIMC had the exclusive licence to operate the ferry service there.²³ Ms Lim also referred Mr Hsiao to one of her business contacts, Mr William Kim of Wooribank, Singapore (“Wooribank”), for his assistance in obtaining bank financing.²⁴ EIMC kept Ms Lim informed of its attempts to secure bank financing from Wooribank, Union Insurance and other banks in Taiwan.²⁵ However, when payment for the Hulls had still not been made by 9 April 2007, Marinteknik sent a letter of that date to EIMC stating that the 2005 Shipbuilding Contracts had been “officially rescinded”.²⁶

According to Ms Lim, Ms Hsiao at this time asked for yet another chance for EIMC to comply with its payment obligations under the 2005 Shipbuilding Contracts. Ms Lim was given to understand that EIMC needed to show that Mr Lu had paid US$15m for the Hulls and that EIMC had acquired title to the Hulls. This, she was told, would “enable Taiwanese banks to refinance the purchase price of [the Hulls]” [emphasis added].²⁷ Between 9 and 24 April 2007, Ms Lim claimed that she was told by Mr Hsiao and by various banks (including The Chinese Bank (Taiwan), Wooribank, Chiao Tung Bank (Taiwan), Industrial Bank of Taiwan and Fuhwa Bank)²⁸ that the banks would provide a letter of credit or a telegraphic transfer of monies for the Hulls on EIMC producing documentary evidence that the Hulls had been paid for and that it had title to the Hulls.²⁹ Once such evidence was produced, the banks would register a mortgage over the Hulls and release payment of the money to Marinteknik.³⁰ According to Ms Lim, once the payment from the banks was made to the tune of US$40m, the Hulls would be delivered against EIMC paying the remaining sum of US$15m.

Mr Hsiao apparently told Ms Lim that EIMC had to show evidence of title to the Hulls in the form of “affidavits”.³¹ On 24 April 2007 at Marinteknik’s shipyard in Singapore, Marinteknik, EIMC and Mr Lu signed two “affidavits” in relation to the 2005 Shipbuilding Contracts (“the Transfer Affidavits”). The Transfer Affidavits stated that Mr Lu and EIMC had paid for the Hulls in full and in consideration of the payment, “100 percent of shares” in the Hulls were transferred to Mr Lu. The Transfer Affidavits also stated that Mr Lu had paid US$7.5m for each hull, and EIMC had paid US$20m for each hull.³² Ms Lim...