Ernest Ferdinand Perez De La Sala v Compañia De Navegación Palomar, SA

• Jurisdiction: Singapore
• Judge: Andrew Phang Boon Leong JA,Judith Prakash JA,Steven Chong JA
• Judgment Date: 22 March 2018
• Neutral Citation: [2018] SGCA 16
• Published date: 27 March 2018
• Date: 22 March 2018
• Year: 2018
• Hearing Date: 25 September 2017
• Plaintiff Counsel: Harpreet Singh Nehal SC, Nish Shetty, Joan Lim-Casanova, Jordan Tan, Keith Han and Sarah Hew (Cavenagh Law LLP)
• Defendant Counsel: Cavinder Bull SC, Lim Gerui, Adam Maniam, Tan Yuan Kheng, Kelly Lua, and Sam Yi Ting (Drew & Napier LLC),Thio Shen Yi SC, Kelvin Koh, Niklas Wong and Benjamin Bala (TSMP Law Corporation)
• Court: Court of Appeal (Singapore)
• Citation: [2018] SGCA 16
• Docket Number: Civil Appeals Nos 34, 35, 59 and 60 of 2017

Andrew Phang Boon Leong JA (delivering the judgment of the court): Introduction

These appeals are very unfortunate. Substantively, they are unfortunate because they are the result of a dramatic breakdown in familial ties – which, as we shall see, has been exacerbated by the fact that the breakdown stretches across more than one generation. On the surface, the breakdown was caused by a dispute over money – in particular, the monies withdrawn by the defendant in Suit No 178 of 2012 (“S 178”), allegedly wrongfully, from the accounts of the six plaintiff companies (“the Companies”). But at a deeper level, the breakdown concerns control over the family’s (material) fate and direction. It is regrettable that differences over what the family owns have come to so deeply compromise the wholeness of what a family is; a greater value has been sacrificed in service of a lesser one.

There is much to regret procedurally as well. In a dispute as large as this one, spanning many decades (and, for that matter, many years of litigation), engaging many issues, and involving large sums of money, it is particularly important that matters of procedure be carefully observed. In particular, the parties’ pleadings play a crucial role in defining the scope of the dispute and the parties’ positions. When parties enlarge the boundaries of a dispute by adducing evidence and making submissions on matters not originally within the scope of the dispute, without amending the pleadings to reflect this, the court is hobbled in its task of seeking the just and correct resolution of the dispute, and confusion can result. Sadly, that is precisely what has happened here.

Regardless of which party is ultimately held to prevail, one thing is clear – the wishes and hopes of the patriarch of the family will never be fulfilled, at least in their original form. The best that this Court can do is to decide which party or parties are legally entitled to the assets concerned and in what manner that legal entitlement can be enforced. As will become apparent in the course of this judgment, not every issue which was argued and/or decided below is, in our view, an appropriate one to be decided here given the parties involved and the way the cases have been pleaded. Given the long-drawn and acrimonious nature of this litigation (as well as the accompanying emotional and other fallout and stress that it has engendered), it is our hope that the parties will be able to find some other means of attaining closure on the issues which must for now remain unresolved. This is desirable, if nothing else, to honour the memory of the patriarch of the family.

The judgment of the High Court judge (“the Judge”) is to be found in Compania De Navegacion Palomar, SA and others v Ernest Ferdinand Perez De La Sala and another matter [2017] SGHC 14 (“the Judgment”). It is a meticulous and detailed judgment which sifts through a veritable mountain of both documentary as well as oral evidence and distils much of what is essential. Though we respectfully disagree with the Judge’s conclusions in some crucial respects, we were much aided in our analysis by the clarity with which the Judge laid the foundation by setting out the basic structure and issues, as well as his own analysis, of what was by any account an extremely complex case. Indeed, we agree with many of the Judge’s findings, particularly on the factual level. We mainly differ from the Judge in respect of two broad areas: first, the legal implications that follow from some of the facts, particularly those concerning beneficial ownership, and secondly, the impact of procedural issues such as the state of the pleadings.

The ultimate effect of the decision we have arrived at is, in substance, not dissimilar to that arrived at by the Judge. In brief, we find on the main claim that the Companies are the legal owners of the monies, that the defendant’s defence (that he was the full beneficial owner of all the monies) was not made out, and that the monies should therefore be returned to the Companies. We do not agree, however, that the Companies own their assets absolutely; rather, they hold the assets on trust for two other companies, from which the assets were originally transferred for no consideration and not as gifts, and it appears that the defendant, his siblings and his mother’s estate have beneficial interests in these two companies. With that said, the way the parties have pleaded their cases makes it unnecessary for us to make findings as to the precise proportions of the beneficial interests in the two other companies that are the source of the Companies’ assets, nor does this need to be dealt with during the taking of accounts before the Judge subsequent to our judgment.

Having decided the main claim in that way, the issue of the non-party’s intervention (which is the partial subject matter of one of the appeals and the entire focus of yet another appeal) becomes moot. For general guidance for the future, however, we express our views on the Judge’s order ordering the said intervention. With respect, we are of the view that, on the facts of this particular case, the Judge ought not to have ordered the intervention. We elaborate below.

We also differ from the Judge’s holdings with regard to fraudulent misrepresentation and whether certain correspondence between the parties was covered by without prejudice privilege. In this last-mentioned regard, we should add that the admission of such correspondence did not, in fact, impact the substantive decision of this Court and, to that extent, is a damp squib.

We will begin by setting out the salient facts of the case, as well as the Judge’s decision, so as to set the context for the present appeals, Civil Appeals Nos 34, 35, 59 and 60 of 2017 (“CA 34”, “CA 35”, “CA 59” and “CA 60”, respectively).

Facts Parties

S 178 is a dispute between two main factions of the De La Sala family over assets held by the Companies, which are: The first plaintiff, Compañia De Navegación Palomar SA (“PAL”), a Panamanian company incorporated in 1958 as a subsidiary of JMC; The second plaintiff, Cosmopolitan Finance Corporation (“CFC”), a British Virgin Islands (“BVI”) company incorporated in 1995; The third plaintiff, Dominion Corporation SA (“DOM”), a Panamanian company incorporated in 1973, owned by Summit Finance Corporation SA (“Summit Corp”), which is in turn owned by PAL; The fourth plaintiff, John Manners & Co (Malaya) Ltd (“JMM”), a Singapore company incorporated in 1948 owned by Cambay Prince Steamship Co Ltd (BVI) (“Cambay BVI”), which is in turn owned by the fifth plaintiff, PEN Peninsula Navigation Company Private Limited (“PEN”), a BVI company incorporated in 1995; and The sixth plaintiff, Straits Marine Company Private Limited (“SMC”), a BVI company which is also owned by PEN. It was incorporated in 2008.

The Companies collectively held assets (including but not limited to cash, shares of other companies and bonds) worth over US$584m in 2012. According to the Companies’ Statement of Claim, while the Companies used to be in the business of, among others, “shipping, marine engineering and supplies”, the Companies’ present activities are confined to “the holding and management of various investment assets (comprising principally cash, gold and shareholdings)”. Ernest Ferdinand Perez De La Sala (“Ernest”), the defendant in S 178, also described the Companies as “holding vehicles with no day-to-day trading or operations except for any minor business that [JMM] may have had” in his affidavit of evidence-in-chief (“AEIC”). It should be noted that CFC owns all the shares in PEN, PEN owns all the shares in PAL, and PAL owns all the shares in CFC. CFC, PEN, and PAL are organised in an “orphan” or circular structure, which is legal under Panamanian and BVI law but not under Singapore law. We will refer to CFC, PEN and PAL collectively as “the Orphan Companies”. The structure that they exist in will be referred to as “the Orphan Structure”.

The Judgment sets out the relationships in the De La Sala family in great detail (at [7]–[14]). Since many of these background facts are not disputed and not material for the purposes of the present appeals, we will not repeat them except to introduce the key members of the family who are involved in the present state of affairs: Robert Perez De La Sala Sr (“Robert Sr”) and Camila Vasquez De La Sala (“Camila”) were the patriarch and matriarch of the De La Sala family before their deaths in 1967 and 2005, respectively. Camila was the sole beneficiary of Robert Sr’s will. Robert Sr was the reason for the family’s tremendous wealth as he was a successful self-made businessman. He rose to become the chairman and majority shareholder of the shipping company John Manners and Company Limited (Hong Kong) (“JMC”), which was to be one of the key assets of the De La Sala family. Robert Sr also incorporated Lasala Investments Limited (“LIL”) in 1939, which was an investment company under his control. LIL was renamed North Enterprises Limited (“NEL”) some time after June 1959. In his later years, Robert Sr was preoccupied with reducing his exposure to estate duty as evidenced by his correspondence with his sons prior to his death. By the time of Robert Sr’s death, he had long divested himself of his shareholdings in JMC and NEL, which held much of his wealth. Robert Sr and Camila had four children in the following order: Jerome Anthony Perez De La Sala (“Tony”), Ernest, Robert Perez De La Sala (“Bobby”) and Isabel Brenda Koutsos (“Isabel”). Camila and the four children were known collectively as “JERIC”. We will refer to Camila, Bobby, Isabel and Tony as “JRIC”. Ernest, apparently the most commercially astute of the four children, took over the management of the family’s business interests and assets after the death of Robert Sr, and was the de facto head of the De La Sala family after Camila’s passing....