Info-communications Development Authority of Singapore v Singapore Telecommunications Ltd (No 2)

• Jurisdiction: Singapore
• Judge: Lai Kew Chai J
• Judgment Date: 30 May 2002
• Neutral Citation: [2002] SGHC 119
• Date: 30 May 2002
• Subject Matter: Estoppel,Recovery of moneys so paid,Principles governing recovery,Defences,Restitution,Assumption of risk,Recovery of moneys paid under mistake of law,Change of position,Whether there was any operative mistake existing in the circumstances of case,'Compromise',Compromise,Money paid under mistake of law,Words and Phrases,s 28 Telecommunication Authority of Singapore Act (Cap 323, 1993 Ed),Whether statutory nature of payment precludes recovery,Unjust enrichment,Whether mistake relates to formation of pre-existing contract or mistaken payment simpliciter
• Docket Number: Suit No 934 of 2001
• Published date: 19 September 2003
• Defendant Counsel: Jules Sher QC, K Shanmugam SC, Prakash Pillai and Marcus Yip (Allen & Gledhill)
• Court: High Court (Singapore)
• Plaintiff Counsel: Davinder Singh SC, Cavinder Bull and Shirin Tang (Drew & Napier LLC)

Judgment Cur Adv Vult

GROUNDS OF DECISION

Introduction

1 In March 1997 the statutory predecessor in title of the plaintiffs ("IDA"), then known as the Telecommunications Authority of Singapore ("TAS") paid the defendants ("SingTel") $1.5 billion as compensation for the modification of SingTel’s telecommunication licence, following the decision of the Government of Singapore to liberalise the telecommunications industry. The modification allowed the entry of competition against SingTel in the provision of basic telecommunication services as from March 2000, 7 years ahead of the expiry of SingTel’s monopoly over basic telecommunication services in March 2007. TAS had grossed up tax in the compensation and included in it was the sum of $388 million. Before accepting the offer of compensation, SingTel knew only in passing of the fact that the compensation was grossed up for tax. The offer was an undifferentiated lump sum of $1.5 billion. The compensation was offered, accepted and eventually paid in one lump sum, and the "full and final payment" ended a process of interchanges between the two parties, which had started in March 1996.

2 The nature of the bilateral exchanges which led to the acceptance of TAS’s statutory offer on 30 May 1996 and the precise circumstances in which this sum was grossed up for tax are highly controversial. In my view, much of this case will turn on them. Suffice it to note at this preliminary stage that there was a dearth of evidence as to how TAS decided to gross up for tax. In October 2000 IDA learnt that the Inland Revenue Authority of Singapore ("IRAS") had ruled that the compensation of $1.5 billion for the loss of SingTel’s monopoly would not attract any income tax liability. IDA formed the view, no doubt on advice, that a mistake of law on the part of TAS had caused the inclusion of the tax element in the compensation and that SingTel’s "unjust enrichment" ought to be reversed. As the IRAS ruling was said to be final and binding for all intents and purposes, IDA decided to and in this action seek restitution from SingTel.

3 IDA asserted in this action that TAS had made a mistake in law as a result of which SingTel was unjustly enriched in the sum of $388 million. As the successor in title of TAS, IDA asks that SingTel be ordered to return it.

4 It is not in controversy that the common law of Singapore has recently been declared as allowing a claim in restitution grounded on a mistake of law. In Management Corporation Strata Title No 473 v De Beers Jewellery Pte Ltd [2001] 4 SLR 90, Judith Prakash J followed the famous, though not unanimous, decision of the House of Lords in Kleinwort Benson v Lincoln City Council [1998] 4 All ER 513 and on 31 July 2001 allowed the reversal and recovery of payments made by a mistake of law. On 6 March 2002 the Court of Appeal affirmed the ruling of the High Court: see the report at [2002] 2 SLR 1. The case before the Court of Appeal shall be referred to as "the De Beers case" in this judgment. I shall return to these cases shortly for the precise width of the ruling, its basis and the defences which were considered so far as they are relevant for present purposes.

5 What had been hotly contested in this action are questions of fact and questions of mixed fact and law upon the answers of which the outcome of this action will turn. In terms of issues of fact, the central areas of dispute are firstly whether in fact TAS had made the kind of operative mistake of law which would generate a restitutionary relief. The second issue of fact is whether there had been negotiations between TAS and SingTel in March and April 1996 which led to the conclusion of a contract on 30 May 1996 under which SingTel accepted the lump sum compensation of $1.5 billion for the earlier termination of its exclusive rights. Further or alternatively, and closely linked, is the question whether a compromise was concluded on 30 May 1996 of all issues and differences between the parties resulting in SingTel’s acceptance of $1.5 billion as compensation, as SingTel alleged, or whether there were only ‘pre-Notification consultations’ which merely led to an agreement on 30 May 1996 to the limited effect that the amount of $1.5 billion when paid would be "full and final payment", as IDA alleged. Fourthly, what was the precise nature of the decision to gross up for tax and the true intention of both TAS and SingTel in relation to the provision for the tax? A central issue of fact is whether a deal had been concluded on 30 May 1996 to the intent that the lump sum compensation was offered and accepted on the basis that there was a full and final settlement of all issues between the parties. The findings of fact of this court on these and related subsidiary issues of fact will bear on (1) the grounds of restitution and the identification of the unjust factor(s) necessary to designate the tax element as "unjust enrichment" in the hands of SingTel which is justifiably described in the law of restitution as "at the expense of" TAS; and (2) the defences which are relied on by SingTel and which are referred to in the issues arising for determination in this case. In addition to the proper evaluation of the evidence led in these proceedings, the other challenge to the court is to discover and identify the principles governing the rather new cause of restitutionary claim grounded on mistake of law and the application of the facts, as found, to those principles.

6 There arose during the trial incidental disputes of fact, for example, as to whether TAS acting through its then Director-General, Mr Lim Chuan Poh, had "threatened" and "applied extreme pressure" on SingTel’s CEO BG Lee Hsien Yang and Ms Chua Sock Koong, then a Senior Vice President, SingTel’s Corporate Affairs & Finance, to accept TAS’s offer of compensation without making any representations or appeal to the Minister of Communication in accordance with the procedure as laid down in the Telecommunication Authority Act of Singapore Act, Chapter 323 ("the TAS Act"). As will be shortly apparent from my evaluation of the evidence led before me and in the light of my findings of fact based on those evidence, nothing turned on these peripheral issues which would have any impact on the outcome of these proceedings. In relation to these side disputes, these were at the end of the day usefully clarified. SingTel’s top management honestly felt the ‘threat’ and pressure. However, when the then Minister of Communications ("Minister Mah") and the then Permanent Secretary ("Mr Teo Ming Kian") of the Ministry of Communications ("MINCOM") went into the witness box and took the stand that they had not done anything wrong or questionable, it was clarified that nothing unlawful such as duress or any wrongdoing on the part of the regulators was suggested by SingTel. It emerged, however, that the regulators, particularly the then Director-General of TAS, was ‘very aggressive’ in implementing and generally directing Government’s policy to liberalise the industry. In that context, TAS was very keen to bring about closure on the issue of compensation so that competition could be introduced as planned. The raising of those peripheral issues necessarily raised the ‘heat’ of these proceedings. In the end, matters were clarified. One has to be careful, however, that the dust of conflict generated by these forensic skirmishes is not allowed so to distract us as to miss the wood for the trees.

The material issues

7 I now turn to the material disputes between the parties. Those controversies involve questions of mixed fact and law or the applications of the facts as I find them to the law. They are as follows.

(1) Whether a mistake of law was made which entitles IDA to restitution, as IDA contended?

(2) Whether the mistake, if operative, was a mistake in the formation of the pre-existing transaction, not in the payment itself, as SingTel contended to bar restitution?

(3) Whether payment under section 28 of the TAS Act precludes recovery for mistake of law?

(4) Whether there was a compromise and settlement of all issues and differences between the two parties which precludes recovery as SingTel alleged?

(5) Whether there was, in any case, a relevant mistake of law when it was, as SingTel contended, a misprediction on the part of TAS?

(6) Whether it was not an ‘operative’ mistake of law, as SingTel contended, because the non-taxability of the compensation for the loss of the monopoly rights has not been established by a court of law?

(7) Whether the defence of change of position is available to SingTel?

(8) Whether the defence of estoppel is available to SingTel?

(9) Whether there had been no injustice in the enrichment because of the loss of tax credit, as SingTel contended?

(10) Whether any mistake as to tax was immaterial and irrelevant, seeing that SingTel’s claim greatly exceeded the $1.5 billion compensation?

These issues will be discussed under the different legal aspects of the case and therefore they are not discussed sequentially but thematically.

The parties

8 IDA is a body corporate established pursuant to the Info-Communications Development Authority of Singapore Act (Cap 137A) as the successor authority to TAS. Prior to 1992, domestic and international telecommunications and postal services in Singapore were provided by TAS. In the late 1980s, the Singapore government announced its intention to privatise these services.

9 SingTel was accordingly incorporated in March 1992 under the name of "Singapore Telecommunications Private Limited" to take over the provision of domestic and international telecommunications services from TAS. After the incorporation of SingTel in March, 1992 TAS remained as a statutory board and assumed the role of the regulator of the telecommunication industry. Under the TAS Act, TAS had powers to regulate and monitor licensees as well as modify the terms of any licence, in accordance with the...