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

JurisdictionSingapore
Judgment Date29 November 2013
Date29 November 2013
Docket NumberCivil Appeal No 3 of 2013 and Summons No 3558 of 2013
CourtCourt of Appeal (Singapore)
EFT Holdings, Inc and another
Plaintiff
and
Marinteknik Shipbuilders (S) Pte Ltd and another
Defendant

Sundaresh Menon CJ

,

Andrew Phang Boon Leong JA

and

Judith Prakash J

Civil Appeal No 3 of 2013 and Summons No 3558 of 2013

Court of Appeal

Conflict of Laws—Choice of law—Tort—Double actionability rule—Tort arising in foreign jurisdiction—Parties not pleading or raising issue of foreign law—Whether claimant's action should be dismissed for failure to plead actionability under Taiwan law

Tort—Conspiracy—Unlawful means conspiracy—Shipbuilder participating in plan with potential buyer of vessel to deceive banks into financing purchase of vessel through creation and use of documents containing false statements—Potential buyer using documents to procure investment from equity investor—Shipbuilder not knowing of equity investor's existence or that equity investor would be approached—Whether there was an agreement or combination between parties to mislead equity investor into making investment

Tort—Conspiracy—Unlawful means conspiracy—Intention—Class of persons contemplated by alleged co-conspirator—Whether mental element satisfied if the shipbuilder knew or ought to have known that potential buyer would use documents containing false statements to deceive equity investor

The first respondent (‘Marinteknik’) was a company incorporated in Singapore. The second respondent (‘Ms Lim’) is a director of Marinteknik. In November 2005, Marinteknik began building two catamarans, Hull 189 and Hull 190 (‘the Hulls’). Excalibur International Marine Corporation (‘EIMC’), a company which had a licence to operate a ferry service across the Straits of Taiwan, wanted to purchase the Hulls. On 15 November 2005, Marinteknik and a Mr Lu Tso-Chun (‘Mr Lu’) entered into two contracts for the sale and purchase of the Hulls (‘the 2005 Shipbuilding Contracts’). Mr Lu was not yet a shareholder of EIMC although the impression conveyed was that he was somehow connected with it. In late April or early May 2006, Mr Lu told Ms Lim that the 2005 Shipbuilding Contracts would be novated to EIMC and that EIMC was in the process of securing bank financing for this purpose.

In the meantime, EIMC and Mr Lu signed an investment agreement (‘the Investment Agreement’) which provided that Mr Lu had paid US$15 m to Marinteknik for the Hulls and would novate the 2005 Shipbuilding Contracts to EIMC in exchange for shares in EIMC. He had not in fact paid US$15 m to Marinteknik. Marinteknik, Mr Lu and EIMC also signed a tripartite agreement (‘the Tripartite Agreement’) which stated that EIMC had paid US$100,000 to Marinteknik and that this was part of the ‘final balance money’ paid by Mr Lu to Marinteknik. EIMC would thereafter take on Mr Lu's liability under the 2005 Shipbuilding Contracts.

On 30 August 2006, Marinteknik issued a letter rescinding the 2005 Shipbuilding Contracts as EIMC had not met its payment obligations. However, Marinteknik continued to hope that a resolution could be found on the basis of the terms on which the contracts were entered into. When payment for the Hulls had still not been made by 9 April 2007, Marinteknik informed EIMC that the 2005 Shipbuilding Contracts had been ‘officially rescinded’.

Despite this, on 24 April 2007, Marinteknik, EIMC and Mr Lu signed two affidavits (‘the Transfer Affidavits’) stating that EIMC and Mr Lu had paid for the Hulls in full. Ms Lim was given to understand that EIMC needed to show the banks in Taiwan that it had title to the Hulls by producing affidavits that stated this before the banks would provide a letter of credit or a telegraphic transfer of moneys for the Hulls. EIMC promised to provide evidence that moneys would be remitted for the Hulls by 24 April 2007, but when this was not done, Marinteknik, EIMC and Mr Lu signed two addenda (‘the Transfer Affidavits Addenda’) which stated that Mr Lu had never paid for the Hulls and title to the Hulls had not been transferred to EIMC. Despite this, EIMC continued to provide Marinteknik with evidence of its attempts to obtain bank financing. On 15 January 2008, the Hulls were sold to another buyer as EIMC had not paid for the Hulls.

In April 2008, EIMC approached Marinteknik with a view to purchasing a Marinteknik-built vessel, the Ocean Lala, which was then trading in Spain. As Marinteknik was not in the business of purchasing secondhand vessels and as the registered owner of the Ocean Lala(‘Eurolineas’) was not interested in dealing with EIMC directly, it was agreed that Ezone Capital Limited (‘Ezone’), a company of which Ms Lim was director and shareholder, would purchase the Ocean Lala from Eurolineas and sell it to EIMC at a profit.

EIMC apparently remained keen to purchase two vessels from Marinteknik, and told Ms Lim that it could lose its ferry licence unless it could show that it had a contract to buy vessels which bore the same hull numbers and specifications as the Hulls. Marinteknik and EIMC agreed to execute two documents dated 30 April 2008 (‘April MOUs’) which stated that the sum of US$15 m paid for the Hulls would be transferred to pay for Hull 189 A and Hull 190 A. In fact, no such sum of US$15 m had been paid at any time. Marinteknik was promised that funds for the vessels would come in on 15 May 2008, but when that did not happen, Marinteknik, EIMC and Mr Lu executed two addenda (‘April MOUs Addenda’) to state that the US$15 m had never been paid to Marinteknik and the April MOUs would be treated as null and void if the first instalment for Hull 189 A and Hull 190 A was not paid by 9 June 2008. On 9 June 2008, Ms Lim wrote to EIMC stating that the contracts for building Hull 190 A and Hull 190 A would be rescinded.

On 20 June 2008, Mr Jack Jie Qin (‘Mr Qin’), the first appellant's chairman and chief executive officer, visited Taiwan and was introduced to Mr Jen-Ho Chiao (‘Mr Chiao’), a director of EIMC, for the first time on 23 June 2008. During a business presentation on 24 June 2008, Mr Qin was shown a number of documents (‘the Documents’) including the 2005 Shipbuilding Contracts, the Investment Agreement, the Tripartite Agreement, the Transfer Affidavits and EIMC's audited financial statements for the financial years ended 31 December 2006 and 31 December 2007 (‘2006/2007 Financial Statements’). Mr Qin claimed that he was persuaded that EIMC was a financially robust company. The first appellant decided to invest in EIMC, with its subsidiary, the second appellant, holding the shares acquired in EIMC. With the investment, EIMC purchased the Ocean Lala.The first appellant took over the management of EIMC in November 2008 and the ferry services started in June 2009. However, after one year of operation, the Ocean Lala sustained severe weather damage and was declared a constructive total loss.

On 2 August 2010, the appellants sued the respondents, Mr Hsiao Zhong-Xing (‘Mr Hsiao’), a director of EIMC, and Mr Lu for engaging in an unlawful means conspiracy to artificially inflate EIMC's paid-up capital by creating false documents which resulted in EIMC's equity and assets being overstated in the 2006/2007 Financial Statements. The appellants claimed that they were led to believe that EIMC was financially robust when it was not. Mr Hsiao and Mr Lu did not enter an appearance to the suit and default judgment was entered against them.

The High Court judge (‘the Judge’) dismissed the suit on the basis that the appellants had failed to plead and prove Taiwan law in respect of the conspiracy claim, although the parties had not pleaded or raised the issue of actionability under Taiwan law. The Judge also considered that a claim of unlawful means conspiracy under Singapore law was not made out because it could not be shown that the respondents were party to a combination or had the intention to mislead the appellants into investing in EIMC.

On appeal, the appellants submitted that it was for the respondents to plead and prove that the claim for unlawful means conspiracy was not actionable under Taiwan law; the appellants also argued that the mental element of reckless indifference should apply to the conspiracy claim and that this was satisfied on the facts. The appellants also filed a summons (‘the Summons’) in the appeal for leave to adduce further evidence on Taiwan law.

Held, dismissing the appeal and making no order on the Summons:

(1) The respondents agreed to participate in a plan with Mr Hsiao and Mr Lu where they would practice a deceit on the banks in Taiwan in order to enable EIMC to obtain bank financing with which to complete the sale and purchase of the Hulls. The evidence revealed that the respondents had consistently been under the impression that financing for the purchase of the Hulls would come from banks rather than by way of an equity injection. What Mr Chiao and Mr Hsiao did with the Documents was different from what had been contemplated by Marinteknik when it executed the Tripartite Agreement and the Transfer Affidavits: at [41] and [44] .

(2) A plaintiff was not required to plead actionability under a foreign law, and in the absence of such pleading, a tort claim involving foreign elements may be treated as if it were a domestic case governed by Singapore law. The parties did not plead or raise any issue of foreign law in relation to the claim of unlawful means conspiracy. In a tortious claim involving foreign elements, the claimant was not obliged to plead the applicability of foreign law, and there was no reason or basis for imposing any such burden on the claimant. The rule existed primarily for the benefit of the defendant, whose burden it should be to raise the issue and prove the difference. Where, as here, he did not raise any difference in the law of the place of the tort, there was accordingly no conflict of laws issue raised by the parties, and the court would apply the forum's law. The Judge ought simply to have applied Singapore law and...

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11 books & journal articles
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  • FOREIGN LAW IN DOMESTIC COURTS
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    ...not factual analysis, when it undertakes this exercise”. 7 Cooper Tyre & Rubber Co v Shell Chemicals [2009] EWHC 833 (Comm) at [14]. 8 [2014] 1 SLR 860 at [57]. 9 Judith Gill QC, “The Development of Legal Argument in Arbitration” in Practising Virtue: Inside International Arbitration (David......
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