Hady Hartanto v Yee Kit Hong and others

JurisdictionSingapore
JudgeWoo Bih Li J
Judgment Date04 March 2014
Neutral Citation[2014] SGHC 40
CourtHigh Court (Singapore)
Hearing Date16 May 2013,15 January 2013,09 January 2013,10 April 2013,08 January 2013,08 April 2013,14 January 2013,05 April 2013,09 April 2013,11 January 2013,03 April 2013,12 April 2013,02 April 2013,04 April 2013,11 April 2013,10 January 2013,16 January 2013
Docket NumberSuit No 679 of 2011
Plaintiff CounselSuresh Nair Sukumaran, Muralli Rajaram Raja (Straits Law Practice LLC)
Defendant CounselAng Cheng Hock SC, Loong Tse Chuan, Ramesh Kumar, Michelle Yap and Eunice Chew (Allen & Gledhill LLP)
Subject MatterTort,defamation,publication,defamatory statements,justification,qualified privilege,malice
Published date18 March 2014
Woo Bih Li J: Introduction

This is a claim in defamation by the plaintiff against the defendants for publishing various words (“the disputed words”) in two documents on an internet portal. The documents were in relation to four transactions which took place while the plaintiff was a director of a company with the defendants. The trial before me concerns only the liability of the defendants with regard to the disputed words.1 The issues are: The meanings of the disputed words; the defence of justification; the defence of qualified privilege; and the defence of consent or leave and licence.

For ease of reference, a glossary containing various definitions is attached as Annexure A of this judgment. [LawNet Admin Note: Annexure A is viewable only to LawNet subscribers via the PDF in the Case View Tools.]

The plaintiff, Hady, was from 15 March 2011 to 25 October 20112 a director of SEH. He is suing the defendants, Yee, Chia and Ko, who were also directors of SEH at the material time for publishing the disputed words in: The Announcement: a 6-page announcement, published on 7 September 2011 by SEH on SGXNET, and The Executive Summary: an executive summary annexed to the Announcement which was prepared by SEH’s special auditor, SFCA.

The background

SEH trades on the Catalist platform of SGX-ST.

SEH’s subsidiaries include Scorpio East Pictures, Scorpio East Entertainment, and Scorpio East Production. SEH and its subsidiaries will hereinafter be referred to as “the Scorpio Group”.

Hady was appointed as a director of SEH on 15 March 2011. He had acquired an indirect interest in 29.56% of SEH’s shares from John Ho and his family members.3

From 14 March to 21 March 2011, Shiong Jin acted as Hady’s advisor and participated in the management of SEH.4

From 15 March to 21 March 2011, the Scorpio Group engaged in various steps in respect of four transactions central to this case.

Thereafter, on 23 March 2011, the Audit Committee of SEH, which comprised the defendants, recommended the appointment of SFCA as a special auditor to investigate the steps and the four transactions. The Board of SEH accepted the recommendation on the same day. Apparently, after the defendants met Chee on the same day, SFCA was formally appointed on 25 March 2011.5

After its investigation, SFCA produced the SFCA Report, which included the Executive Summary, highlighting SFCA’s concerns on these steps and the four transactions with recommendations for SEH. This was the same executive summary which was later annexed to the Announcement published on SGXNET on 7 September 2011.

The steps and the four transactions highlighted by SFCA are stated below.

The Scorpio Contracts

Prior to Hady’s appointment as director of SEH on 15 March 2011, the Scorpio Group had entered into nine contracts for the production of Chinese language motion pictures and serials as well as some concerts, ie, the Scorpio Contracts.6 The Scorpio Group had paid S$4.1m to various producers in relation to the Scorpio Contracts.7

As Hady was interested in acquiring shares in SEH, he instructed Adept to conduct a financial due diligence on SEH sometime in December 2010.8 Adept prepared the Adept Report which stated that the Scorpio Contracts were potentially loss-making.9

Hady said he did not want the Scorpio Contracts to affect the Net Asset Value (the “NAV”) of the shares he was to acquire. If the Scorpio Contracts remained, he wanted John Ho to guarantee their profitability which John Ho was not prepared to do. He alleged that he had agreed to John Ho’s proposal to terminate the Scorpio Contracts.10 The termination would cost 15% of the deposit, with the balance to be paid back by the producers of the Scorpio Contracts. Hady considered that this loss to SEH would still be lower than if the Scorpio Group were to continue with the Scorpio Contracts.11

The Alpha Contracts

Hady executed contracts, on behalf of Scorpio East Pictures, with Alpha for the production of motion pictures and concerts, ie, the Alpha Contracts. These contracts were dated 17 March 2011. They were in fact signed earlier as I will elaborate later. The Alpha Contracts totalled S$6.2m.12

The “round-tripping” transactions between SEH and Alpha

Between 17 and 21 March 2011, a total sum of S$3.2m was paid by the Scorpio Group to Alpha in respect of the Alpha Contracts.13 However, in the same period, Alpha then deposited sums totalling S$2.86m (from the S$3.2m) in cash into the bank accounts of companies in the Scorpio Group.14 These two transactions were referred to as “round-tripping” transactions in the Announcement and Executive Summary and I have adopted the term for the judgment.

Hady’s position was that the deposits of cash from Alpha were to be treated as refunds to the Scorpio Group from the producers of the Scorpio Contracts (after deducting 15% of the deposits for termination costs) and thereafter, Alpha would be entitled to and be responsible for claiming the same amount from such producers.

Proposed Investment

On 21 March 2011, Shiong Jin sent an email to, inter alia, Hady and KN Lim proposing that: S$3m be transferred from the Scorpio Group to a client account at JLC for unspecified purposes, and S$300,000 be transferred to Liu Woon San and Jung Jin in equal proportions, in respect of a proposed investment in Alpha.15 (collectively, the “Proposed Investment”)

Hady replied to Shiong Jin’s e-mail with approval and instructed KN Lim to “proceed” with the proposed transfer of S$3.3m.16

However, after being alerted to the proposed transfer, Yee issued instructions to stop the payments on 21 March 2011.17

The defendants’ concerns

The appointment of SFCA arose out of the defendants’ concerns about the steps taken in respect of these four transactions. The SFCA Report and the Executive Summary reinforced their concerns. Consequently, SGX required SEH to disclose the Executive Summary, which SEH did by making the Announcement and appending the Executive Summary to it.

I will first set out the situation which the defendants said they found themselves in. Most of the information stated below is from Yee’s affidavit of evidence-in-chief.18

SEH was incorporated in Singapore on 24 November 2004. Its original shareholders were John Ho and his family members: Ms Lian Lee Lee, Ms Lian Poh Heng and Ms Lian Poh Chey. SEH was listed on SGX Sesdaq, the predecessor of the Catalist platform, on 23 March 2006. After the Initial Public Offering was completed, John Ho and his family members held a 29.56% shareholding in the company.

John Ho was the chief executive officer (“CEO”) and executive director of the company from 24 November 2004 to 15 or 16 March 2011. Lian Lee Lee was an executive director of the company from 24 November 2004 to 15 or 16 March 2011.

Yee was appointed to SEH’s Board on 9 December 2005. Chia was appointed to the Board on 17 January 2006 and Ko was appointed to the Board on 15 August 2007. At all material times, the defendants were non-executive directors.

On 14 March 2011, John Ho, Lian Lee Lee, Lian Poh Heng and Lian Poh Chey entered into an agreement to sell their 29.56% shareholding in SEH to Telemedia. Hady was the chairman and CEO of Telemedia.

The sale was completed on 15 March 2011. Upon completion of the sale, Telemedia became the single largest shareholder of SEH.

On 15 March 2011, a meeting was held by the Nominating Committee of the Board of SEH. The Nominating Committee comprised the defendants. This meeting was followed by a Board meeting which the defendants and Lian Lee Lee attended. The Board accepted the recommendation of the Nominating Committee to appoint Hady and Wong Teck Yenn as executive directors. At the same time, John Ho stepped down as CEO and executive director and Lian Lee Lee stepped down as executive director.

On 17 March 2011, a Board meeting was held. Hady attended and introduced himself as a new executive director of SEH. He was accompanied by Shiong Jin whom he introduced as his consultant. Shiong Jin made a number of proposals in respect of SEH. No decision was made on his proposals.

On 21 March 2011, Yee received a telephone call from SEH’s finance manager, Aoki. She informed him that: Hady had executed five contracts between Scorpio East Pictures and Alpha, ie, the Alpha Contracts; $3.2m had been paid by companies in the Scorpio Group pursuant to the Alpha Contracts; Hady had approved the transfer of a separate sum of S$3.3m from the Scorpio Group on 21 March 2011 for the Proposed Investment; and the consolidated cash balances of the Scorpio Group at that time was only S$2.2m.

Yee was alarmed. Hady had not informed the defendants about the Alpha Contracts or the transfer or proposed transfer of funds. Yee told Aoki not to make any further payment without the defendants’ approval. He telephoned Chia and Ko to update them. They agreed to convene an urgent Board meeting the next day, ie, 22 March 2011 and that Hady should be asked to attend and explain these transactions.

Yee had also learned on 21 March 2011 that Shiong Jin was an undischarged bankrupt and had in fact been blacklisted by SGX. In a public statement dated 13 April 2010, SGX stated that Shiong Jin had failed to demonstrate the qualities expected of directors and management of SGX-listed companies and SGX-listed companies should consult SGX before appointing Shiong Jin as a director or member of their management. Both Chia and Yee were extremely concerned that Hady had allowed Shiong Jin to participate in the Board meeting on 17 March 2011 despite the notice from SGX.

Yee also briefed Ong Hwee Li and Bernard Lim from SEH’s Sponsor and invited them to attend the proposed Board meeting on 22 March 2011.

At the Board meeting on 22 March 2011, Hady informed the defendants of the Alpha Contracts, totalling S$6.2m, which he had already signed on...

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1 cases
  • Hady Hartanto v Yee Kit Hong
    • Singapore
    • High Court (Singapore)
    • 4 March 2014
    ...Hartanto Plaintiff and Yee Kit Hong and others Defendant [2014] SGHC 40 Woo Bih Li J Suit No 679 of 2011 High Court Tort—Defamation—Justification—The principle of justification—Approach to pleading justification and qualified privilege—Whether publications were justified Tort—Defamation—Pub......

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