Goh Seng Heng v Liberty Sky Investments Ltd and another

• Jurisdiction: Singapore
• Judge: Andrew Phang Boon Leong JA
• Judgment Date: 05 October 2017
• Neutral Citation: [2017] SGCA 59
• Plaintiff Counsel: Tan Gim Hai Adrian, Ong Pei Ching, Kenneth Chua, Yeoh Jean Wern, Lim Siok Khoon, Goh Chee Hsien Joel and Hari Veluri (Morgan Lewis Stamford LLC)
• Docket Number: Civil Appeal No 154 of 2016
• Date: 05 October 2017
• Hearing Date: 17 August 2017
• Subject Matter: Civil Procedure,Disclosure of documents
• Published date: 18 November 2017
• Defendant Counsel: Harpreet Singh Nehal SC, Han Guangyuan Keith and Tan Tian Yi (Cavenagh Law LLP)
• Court: Court of Appeal (Singapore)
• Citation: [2017] SGCA 59
• Year: 2017

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

In Suit No 1311 of 2015 (“the Suit”), the first respondent, Liberty Sky Investments Limited (“LSI”) claimed that the appellant Dr Goh Seng Heng (“Dr Goh”) had made fraudulent misrepresentations which induced LSI to enter into a share sale and purchase agreement (“the SPA”) with Dr Goh, pursuant to which LSI purchased shares in a company from Dr Goh for $14,422,050 (“the Sale Price”). In the Suit, LSI sought, inter alia, rescission of the SPA and the return of the Sale Price, which was paid into Dr Goh’s bank account (“the Account”) with the second respondent, Oversea-Chinese Banking Corporation Ltd (“OCBC”).

Separately, and (significantly, in our view) without informing Dr Goh, LSI commenced Originating Summons No 509 of 2016 (“OS 509/2016”) against OCBC, seeking disclosure of documents relating to the Account to discover if the Sale Price remained in the Account or had been transferred to any third parties. If the Sale Price had been transferred to third parties, LSI could then seek recovery by asserting a proprietary claim to the Sale Price.

When Dr Goh found out about OS 509/2016, he successfully applied to be added as a defendant to the proceedings. Dr Goh argued against the order sought by LSI, while OCBC took the position that it would abide by any orders made by the court. The High Court judge (“the Judge”) allowed LSI’s application in OS 509/2016 (see Liberty Sky Investments Ltd v Oversea-Chinese Banking Corp Ltd and another [2017] SGHC 20 (“the GD”)). The present appeal was Dr Goh’s appeal against this decision. We allowed the appeal and now give the detailed grounds for our decision.

Facts Parties to the dispute

Dr Goh was a medical doctor with an established practice in aesthetic medical services. He founded Aesthetic Medical Partners Pte Ltd (“AMP”), a Singapore-incorporated company in 2008. AMP, through its wholly-owned subsidiary, Aesthetic Medical Holdings Pte Ltd (“AMH”), operates a chain of clinics under the PPP laser brand (“the PPP brand”). Dr Goh was the former Managing Director of AMP and today remains a shareholder. His daughter, Dr Michelle Goh, is also a shareholder of AMP. We refer to Dr Goh and his daughter collectively as “the Gohs”.

LSI is an investment company incorporated in the Seychelles. Mdm Gong Ruilin (“Mdm Gong”) is its shareholder and director. Mr Lin Lijun (“Mr Lin”) is Mdm Gong’s husband (collectively, “the Lins”). The Lins are Chinese nationals based in Shanghai. They are also the franchisees for the PPP brand in Suzhou, China.

Background to the dispute

On 25 November 2014, Dr Goh and LSI entered into the SPA, under which Dr Goh would sell 32,049 shares in AMP (representing approximately 10.6% of the shareholding in AMP) to LSI for the Sale Price of $14,422,050.

LSI alleged that the SPA was entered into as a result of the following express representations, which were fraudulently made by Dr Goh between 23 October 2014 and 25 October 2014 (see the GD at [8]): A trade sale of the shares in AMP to one Mr Peter Lim (or a company controlled by him) was imminent and would take place within a month from 23 October 2014 (“the Trade Sale representation”). If the trade sale did not materialise, Dr Goh planned to list AMP through an initial public offering (“IPO”) on the Singapore Exchange Mainboard. The IPO was targeted for completion during the period from March 2015 to June 2015, and at any rate no later than 24 months after LSI acquired the AMP shares from Dr Goh (“the IPO representation”). There were minority shareholders who could stifle the trade sale or IPO and Dr Goh needed funding from the Lins to buy out the interests of these minority shareholders (“the Minority Shareholders representation”).

We refer to these representations collectively as “the Three Representations”. Dr Goh denied making the Three Representations, and claimed that, in any event, he had an honest belief in the Three Representations and, further, that LSI had not been induced to enter the SPA by the Three Representations.

On 31 December 2015, LSI commenced the Suit against the Gohs. In the Suit, LSI raised, inter alia, claims of fraudulent misrepresentation and sought the rescission of the SPA and return of the Sale Price.

On 23 May 2016, LSI filed two applications. The first was Summons No 2483 of 2016 (“SUM 2483/2016”), where LSI sought Mareva injunctions against the Gohs. The second was OS 509/2016 (which, as already mentioned, is the subject of the present appeal). As noted above (at [2]), OS 509/2016 was an application against OCBC to seek discovery of documents relating to the Account. LSI neither named Dr Goh as defendant in OS 509/2016, nor informed him of it. Subsequently, Dr Goh found out about OS 509/2016 and succeeded in being joined as second defendant so that he could oppose it. It bears reiterating that whilst LSI filed two applications on the same day, Dr Goh only had notice of the first (which is not surprising since he was one of the parties in the first application). As we shall see, this was an important factor that we considered in relation to the issue as to whether or not LSI had come to court with clean hands in so far as the second application (viz, OS 509/2016) was concerned (see below at [32] and [56]−[60]).

On 10 November 2016, the Judge allowed SUM 2483/2016 in part, granting a Mareva injunction against Dr Goh (“the LSI Mareva”), but not against Dr Michelle Goh. The Judge also allowed OS 509/2016 and ordered OCBC to disclose the documents relating to the Account. The execution of this order was stayed pending the present appeal.

Dr Goh also appealed against the Judge’s decision to grant the LSI Mareva. That is the subject of Civil Appeal No 97 of 2016, which will be heard by this court at a later date.

The decision below

The Judge held that the applicable test for the grant of the order sought by LSI was the test laid down by this court in Dorsey James Michael v World Sport Group Pte Ltd [2014] 2 SLR 208 (“Dorsey James” and “the Dorsey James test”), which the Judge summarised as follows (see the GD at [20]):

First, the person from whom discovery is sought must have had been involved in the wrongdoing, though the involvement may have been completely innocent. Second, the applicant must be able to show a reasonable prima facie case of wrongdoing against the person whose information or identity is sought of. Third, the applicant must show that the disclosure sought is necessary to enable him to take action, or at least that it is just and convenient in the interests of justice to make the order sought. Two significant considerations in the last factor are whether there exists an alternative and more appropriate method to obtain the information and whether the order is proportionate in the circumstances. [references omitted]

In the court below, it was not disputed by parties that the first element was satisfied (see the GD at [25]). It was also clear that, with respect to the second element, the relevant wrongdoing must be a cause of action that would give LSI a proprietary claim over the Sale Price. Otherwise, LSI would have no basis to pursue claims against third parties who have received the Sale Price, which was LSI’s stated purpose in commencing OS 509/2016 (see above at [2]). The Judge therefore considered the second element only in relation to LSI’s claims of fraudulent misrepresentation, which, if proven, may provide LSI with a proprietary claim over the Sale Price (see the GD at [26]).

The Judge found that the second element was satisfied as LSI had demonstrated a prima facie case of fraudulent misrepresentation against Dr Goh, in respect of all the Three Representations (see the GD at [45]). In relation to the third element, the Judge held that it was necessary, just and convenient to order disclosure of the relevant documents from OCBC in order for LSI to trace and follow the Sale Price (see the GD at [46]).

The Judge further held that OS 509/2016 was not an abuse of process, notwithstanding the fact that it could be argued that LSI should have commenced the application for third-party discovery as a summons in the Suit instead, as no prejudice was caused to Dr Goh (see the GD at [51]). Accordingly, the Judge allowed OS 509/2016. Dissatisfied, Dr Goh appealed against the Judge’s decision.

Parties’ cases on appeal

On appeal, counsel for Dr Goh, Mr Adrian Tan (“Mr Tan”), contended that the Judge had applied the wrong test. Mr Tan drew a distinction between a Norwich Pharmacal order (“NPO”) (which can be traced to the eponymous decision of the House of Lords in Norwich Pharmacal Co and others v Customs and Excise Commissioners [1974] AC 133 (“Norwich Pharmacal”)) and a Bankers Trust Order (“BTO”) (which was named after the later decision of the English Court of Appeal in Bankers Trust Co v Shapira and others [1980] 1 WLR 1274 (“Bankers Trust”)).

According to Mr Tan, an NPO was a form of pre-action discovery that was sought for the purpose of identifying persons who were potentially liable to the applicant. Mr Tan submitted that the Dorsey James test was the appropriate test for the grant of an NPO (and, in this regard, we do acknowledge that Dorsey James related to the grant of an NPO). In contrast, a BTO was not typically a form of pre-action discovery. Instead, it was typically obtained in conjunction with or in aid of a Mareva injunction in order to preserve or trace an asset. Therefore, Mr Tan argued that before a BTO was granted, an applicant would have to show: That there are good grounds for thinking that he has proprietary interests over the asset, for example, by showing compelling evidence of fraud regarding the asset; and That there is a risk of dissipation of the asset, and a real prospect that the BTO will lead to the location or preservation of the asset.

Mr Tan further...