Haywood Management Ltd v Eagle Aero Technology Pte Ltd

• Jurisdiction: Singapore
• Judge: Tay Yong Kwang J
• Judgment Date: 19 August 2014
• Neutral Citation: [2014] SGHC 164
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 1055 of 2013, (Registrar’s Appeal No 34 of 2014)
• Year: 2014
• Published date: 25 August 2014
• Hearing Date: 27 May 2014,10 March 2014
• Plaintiff Counsel: Andy Lem, Toh Wei Yi and Zack Quek (Harry Elias Partnership LLP)
• Defendant Counsel: Kristy Tan and Toh Jia Yi (Allen & Gledhill LLP)
• Subject Matter: Civil Procedure,Discovery of Documents,Pre-action Discovery
• Citation: [2014] SGHC 164

Tay Yong Kwang J: Introduction

This appeal arises from an application by the respondent, Haywood Management Limited (“Haywood”), for pre-action interrogatories and discovery against the appellant, Eagle Aero Technology Pte Ltd (“EAT”), in contemplation of an action in conspiracy and/or fraud to be commenced by Haywood against EAT and other parties. The application by Haywood was granted in part by the learned Assistant Registrar (“the AR”) on 23 January 2014 and EAT subsequently filed an appeal against the AR’s decision. I dismissed EAT’s appeal with respect to the AR’s order as to pre-action discovery. With regard to the pre-action interrogatories, I declined to make any order for the time being and instead gave Haywood liberty to restore the application should EAT fail to comply adequately with its discovery obligations. EAT has since filed an appeal against my decision and I now set out the grounds for my decision.

The facts Background facts

The present dispute arises from the sale of three multi-role light frigates (“the MRLFs”) which were initially owned by the Royal Brunei Technical Services Sendirian Berhad (“RBTS”).¹ At the outset, it is useful to note that Haywood and EAT do not have any direct contractual relationship or prior business dealings with each other.² To understand how the present application by Haywood against EAT came about, it would be necessary to delve into the contractual relationship that each party had with the Lurssen group of companies (“the Lurssen Group”).

In or around January 2007, Peter Lurssen (“Peter”), a central figure in the Lurssen Group, approached Mohamad Ajami (“Ajami”), the beneficial owner of Haywood, with a business proposal concerning the MRLFs.³ Peter told Ajami that he intended to get one of the wholly-owned subsidiaries of the Lurssen Group, Global Naval Systems Pte Ltd (“GNS”), a Singapore-incorporated company, to conclude an agreement with RBTS to market and procure the sale of the MRLFs. He proposed that Ajami could join him in the transaction by way of a joint venture in GNS.⁴ Ajami agreed in principle to Peter’s proposal and proceeded to incorporate Haywood as a special purpose vehicle to act in the intended transaction.

On 4 April 2007, GNS concluded a sales agency agreement with RBTS, under which RBTS appointed GNS as its agent to market and procure the sale of the MRLFs.⁵ Under this agreement, GNS owed certain payment obligations to RBTS. Haywood extended money to GNS for this purpose. Separately, GNS engaged the services of Lurssen Logistics UK (“LLUK”) and/or its related company in Bremen (“LL Bremen”), both of which belong to the Lurssen Group, for the care and maintenance of the MRLFs.⁶

However, the proposed joint venture did not materialise. Instead, Haywood and GNS entered into a loan agreement on 3 March 2008 for the outstanding sum of €11m which Haywood had extended to GNS to enable it to fulfil its payment obligations to RBTS.⁷ On 11 January 2010, Haywood and GNS executed an Amended and Restated Loan Agreement (“the ARLA”), in which the amount GNS had to repay Haywood was determined by, among other things, the price at which the MRLFs were sold.⁸ For present purposes, it suffices to note that Haywood would stand to benefit from a larger repayment sum if the MRLFs were sold at a higher price.

In or around April 2011, a director of GNS, Robertus Van der Wurff (“Rob”), informed Haywood that a company belonging to the Lurssen Group, Fr. Lurssen Werft GmbH & Co. KG (“FLW”), had obtained title in the MRLFs from RBTS.⁹ Thereafter, both GNS and FLW entered into negotiations with the Ministry of Defence of the Republic of Indonesia (“MOD”) over the potential sale of the MRLFs.

Subsequently, it was agreed by the parties that the transaction would be structured as follows:¹⁰ a sale of the MRLFs from FLW to EAT; a back-to-back sale of the MRLFs from EAT to MOD. Under this arrangement, the title of the MRLFs would be transferred directly from FLW to MOD. At that point in time, the reason which FLW gave for the interposition of EAT in the sale transaction was to facilitate the procurement of loan facilities for MOD. It was mentioned that, unlike EAT, FLW was not in a position to arrange for financing.

As Haywood was not privy to the ongoing negotiations between GNS, FLW, EAT and MOD, it only came to know about these developments in 2012 when Rob sent copies of the correspondence between the negotiating parties to Haywood.¹¹ GNS also made several representations to the effect that the MRLFs had been properly maintained and were in excellent condition.¹² On 22 September 2011, FLW sent a letter to EAT stating that it had agreed to the sale price of €270m for the MRLFs in the intended contract between FLW and EAT.¹³

Subsequently, Rob forwarded draft copies of both the sale and purchase agreements between FLW and EAT (“the FLW-EAT contract”) and that between EAT and MOD (“the EAT-MOD contract”) to the business associate of Ajami, Rashid Ibrahim (“Ibrahim”), on several occasions in 2012.¹⁴ The material aspects in the draft EAT-MOD contract are as follows: the total contract price did not contemplate the inclusion of any costs for repairs or upgrading of the MRLFs to be undertaken by EAT; and the MRLFs were to be sold on an “as is where is” basis with all faults and entirely without recourse whatsoever against the seller.

On 17 January 2013, Haywood got to know from an Indonesian media report that the MRLFs would be sold to MOD for a price of US$385m (approximately €300m).¹⁵ This figure was fairly similar to the amount of €270m as stated in FLW’s letter to EAT dated 22 September 2011 (see [8] above).

As a result, Haywood was shocked when it was subsequently informed by GNS via a letter dated 26 March 2013 that the sale price of the MRLFs in the FLW-EAT contract was US$170m, a decrease of US$215m from the US$385m figure stated in the Indonesian media report.¹⁶ Haywood suspected that EAT and the entities in the Lurssen Group, such as FLW and GNS, had conspired with one another to artificially depress the sale price of the MRLFs in order to reduce GNS’ repayment obligations under the ARLA. Ibrahim subsequently met Rob in Amsterdam, where the following explanations were provided to justify the disparity in sale prices:¹⁷ GNS and/or FLW had transferred the MRLFs to EAT on an “as is where is” basis and EAT had reduced the sale price on the basis that a lot of repair and modification work was required; and EAT had sold the MRLFs to MOD at a higher price as it had effected repairs and upgrades to the MRLFs after receiving it from GNS and/or FLW.

Haywood was dissatisfied with the explanation provided. On 12 September 2013, Haywood’s solicitors sent a letter to EAT requesting documents and information relating to the sale transactions.¹⁸ EAT rejected Haywood’s request by way of a letter dated 3 October 2013.¹⁹ Thereafter, Haywood proceeded to take out the current application for pre-action interrogatories and discovery against EAT.

The AR’s decision

The AR granted Haywood’s application for pre-action discovery in part. It was held by the AR that there was a reasonable basis for contending that a wrong may have been committed against Haywood and the application was therefore not speculative or frivolous. On the issue of necessity, the AR agreed with Haywood that it would not be possible for Haywood to mount a proper claim without having access to the requested documents. The AR also rejected EAT’s claim that the information sought to be disclosed was confidential. It was observed at [14] that:

... there is nothing to suggest that the information or documents sought would be injurious to public interest or that such information or documents are protected under the Official Secrets Act, thereby prohibiting their disclosure.

As a result, the AR granted the order for interrogatories in relation to items 3–6, 7–9 and 12 set out in Schedule A of Haywood’s application. With regard to pre-action discovery, the AR granted disclosure of the documents in item 1 of Schedule B, in so far as they did not relate to LLUK and LL Bremen. Item 2 of Schedule B was disallowed. Dissatisfied with the outcome, EAT filed an appeal against the AR’s decision. The parties’ arguments

In the present appeal, I note that both parties were largely in agreement with respect to the general legal principles applicable to pre-action interrogatories and discovery. The parties’ dispute was primarily over the application of these legal principles to the factual matrix in the present case.

EAT’s arguments

In the present appeal, EAT’s arguments can be grouped into three broad categories, summarised as follows: Pre-action discovery is unnecessary as Haywood already has sufficient facts to plead its intended cause of action and is in a position to commence legal proceedings. The information sought by Haywood involves confidential military information which is subject to EAT’s strict confidentiality obligations owed to the other contracting parties such as MOD. The application for pre-action discovery is an attempt by Haywood to circumvent the arbitration clause found in the ARLA entered into by Haywood and GNS.

With regard to the first issue, EAT referred to the lengthy affidavit filed by Ibrahim on behalf of Haywood to support its assertion that Haywood already had sufficient facts to plead a viable claim in the tort of conspiracy.²⁰ In particular, EAT submitted that the alleged lack of knowledge in relation to the sale prices of the MRLFs in the FLW-EAT contract and the EAT-MOD contract was a red herring as Haywood already had access to the following documents and information:²¹ the letter of undertaking sent by FLW to EAT which indicated the sale price of the MRLFs in the FLW-EAT contract as €270m;²² the Indonesian media report which revealed that EAT had sold the MRLFs to MOD for US$385m;²³ the letter from GNS...