Ser Kim Koi and Another v William Merrell Fulton and Others

• Jurisdiction: Singapore
• Judge: Teo Guan Siew AR
• Judgment Date: 07 January 2009
• Neutral Citation: [2009] SGHC 5
• Court: High Court (Singapore)
• Published date: 15 January 2009
• Citation: [2009] SGHC 5
• Plaintiff Counsel: Derek Kang and Thng
• Defendant Counsel: Khoo Boo Jin and Tan Suan Boon,Chua Sui Tong and Cheng
• Subject Matter: Civil Procedure
• Year: 2009

7 January 2009

AR Teo Guan Siew:

Introduction

1 The plaintiffs in this suit wanted to use certain documents, disclosed by the defendants in the course of proceedings, for the purpose of another related action in which the plaintiffs are the third parties. What stood in the way of the plaintiffs was the general rule (frequently referred to as the “Riddick principle”) that where a party to litigation is ordered to provide documents to the other party, the latter is under an implied obligation not to use those discovered documents other than for the purpose of those proceedings pursuant to which discovery is obtained. This application was about whether the court should order a release of that implied undertaking in respect of documents in one suit which were argued to be relevant to the issues in another.

Background

2 The present action (S 427/2006) was commenced by the plaintiffs (hereinafter “the Sers”) against a company Metalform Asia Pte Ltd (“MFA”) and its directors and officers. The Sers were directors and shareholders of another company called Holland Leedon Pte Ltd (“HL”), the business and assets of which were transferred to MFA in 2004. The corporate structure arising from this business acquisition was complex, but in essence, the Sers (through a Mauritius holding company) ended up with 49% control of the ultimate holding company of MFA. A Singapore incorporated company CCMP Capital Asia Pte Ltd had the majority 51% control through another Mauritius holding company JPMP MPL Holding Limited (“JPMP”). The Board of MFA included three directors appointed by JPMP (the second, third and fourth defendants) and the Sers. The first defendant was the Chief Executive Officer of MFA. After the acquisition, MFA, which was in the business of manufacture and sale of top covers for hard disk drives, purchased steel from HL from around July 2004.

3 From these background facts arose a series of disputes which have given rise to a number of related actions involving overlapping parties. For present purposes, it would suffice to focus on two of these suits. In S 427/2006, the Sers allege that MFA had been insolvent since December 2005 and should have stopped trading and incurring further debts. They seek a declaration that MFA is insolvent as well as injunctions to prevent the defendants from causing the company to continue to trade and disposing of the company’s assets. In addition, the Sers say that the defendant directors acted in breach of their fiduciary duties to MFA by inter alia diverting its assets to other related entities.

4 The related S 668/2006 consists of a claim brought by HL, in its capacity as a creditor of MFA, against certain directors and officers of MFA which include the first, second and third defendants in S 427/2006. The nature of HL’s claim is that the defendants in S 668/2006 had procured the purchase of steel from HL in circumstances where they knew or had reason to believe that MFA would not be able to pay HL, and are therefore liable for knowingly carrying on the business of MFA with intent to defraud HL. The Sers were brought in to S 668/2006 as third parties, on the basis of their alleged knowledge and approval of the procurement of steel by MFA such that they should bear responsibility if such procurement indeed amounted to a fraud on HL. The defendants in S 668/2006 further allege that the Sers had subsequently obstructed MFA’s various efforts to refinance so as to repay HL for the steel debt.

The present application

5 The Sers took the view that the issues in S 427/2006 overlapped with S 668/2006 as well as a third suit S 496/2006 involving similar parties (there, MFA is suing the Sers for breach of fiduciary duties owed to MFA in not informing MFA of certain breaches of warranty by HL in the sale and purchase of MFA’s business and assets mentioned above at [2]). The Sers therefore made an application in S 427/2006 for leave to rely on the documents disclosed in the suit for the purposes of the other two actions, insofar as such documents were relevant to the issues in those two suits, but without specifying what those documents were. This application was rejected at first instance by AR Chung Yoon Joo and on appeal by Judith Prakash J, largely because the Sers were effectively seeking a blanket release from their implied obligations under the Riddick principle. It would appear that both the AR and the Judge were concerned that if such blanket leave was granted and since the documents in question would already be in the Sers’ possession, the Sers could decide for themselves which of those documents they want to rely on in the other two suits without any need to take up further applications. The effect would be that the issue of relevance of the documents in those two suits becomes exclusively in the hands of the Sers. The argument of the defendants, which the AR (and seemingly the Judge) agreed with, was that it should be for the Sers to identify the specific documents for which they seek a release of the implied undertaking.

6 That the Sers tried to do which gave rise to the present application before me. This time round, the Sers stipulated the specific categories of documents disclosed in S 427/2006 which they wish to rely upon in S 668/2006. These documents had been either disclosed by the first defendant, or by the second to fourth defendants, in the proceedings of S 427/2006. One critical point to note is that those documents that had been disclosed by the first defendant had also been concurrently produced for discovery by the fifth defendant MFA. But unlike their previous application for a general release from the implied undertaking, the Sers’ present application was not taken up against MFA.

7 The categories of documents were arranged according to certain issues which the Sers submitted were common to both suits, such as (a) the financial position of MFA; (b) the management and control of MFA; and (c) various refinancing initiatives which MFA allegedly undertook for the purpose of inter alia repaying HL for the steel debt. This more narrowly-scoped application however still met with strenuous objections from the first to fourth defendants. Although the first defendant was represented by different solicitors from the second to fourth defendants, their points of objection were largely the same. Both sets of solicitors relied strongly on the Riddick principle, arguing that there were no exceptional circumstances for the implied undertaking to be released in respect of those stipulated documents. It was also submitted that the documents in question were in any event not relevant or necessary for the purposes of S 668/2006. Counsel for the first defendant had an additional argument, which was that in respect of those documents pertaining to their client, the application was improper as MFA had not been made a party despite the fact that those same documents had also been disclosed by MFA in the proceedings of S 427/2006. It was contended that MFA (which had separate legal representation from the first defendant) ought to be given an equal chance to object to the release of the Sers’ implied undertaking in respect of those documents in question.

The rationale and application of the Riddick principle

8 Discovery is today undoubtedly regarded as an essential component of all established civil procedure systems, for it serves the important function of ensuring that all documents pertaining to the issues in dispute are surfaced in the proceedings so that the truth can be discovered and justice done. Yet, many litigants may feel aggrieved at being compelled to produce such documents, particularly those that are confidential in nature, or which are adverse to their interests. It is this tussle between the objective of discovering the truth in litigation on the one hand, and the interest of safeguarding privacy and confidentiality on the other, that underlies the Riddick principle. The rationale is nowhere better explained than by Lord Denning in the case from which the principle acquired its name (Riddick v Thames Board Mills [1977] 1 QB 882 at 895-896):

The reason for compelling discovery of documents in this way lies in the public interest in discovering the truth so that justice may be done between the parties. That public interest is to be put into the scales against the public interest in preserving privacy and protecting confidential information. The balance comes down in the ordinary way in favour of the public interest of discovering the truth, i.e., in making full disclosure.

…

Compulsion is an invasion of a private right to keep one’s documents to oneself. The public interest in privacy and confidence demands that this compulsion should not be pressed further than the course of justice requires. The courts should, therefore, not allow the other party – or anyone else – to use the documents for any ulterior or alien purpose. Otherwise the court themselves would be doing injustice.

[emphasis added]

9 In addition, it has also been pointed out that another reason for the principle is to promote full and frank disclosure in discovery. Without such an implied undertaking, the possibility that the disclosed documents could be put to some collateral use may operate as a disincentive to proper discovery (see Matthews & Malek, Disclosure (London: Sweet & Maxwell, 3rd ed., 2007) at 454).

10 The law therefore requires suitable controls to be imposed on the use of documents obtained from other parties who disclosed them under compulsion. This comes in the form of a general rule that the documents should not be used for any collateral or ulterior purpose, but only for the purpose of the action in which they were disclosed. Since the early decision of Alterskye v Scott [1948] 1 All ER 469, this has been regarded by the English courts as operating by means of an implied undertaking by the party seeking discovery. This general principle has been accepted by the Singapore...