Lim Eng Hock Peter v Lin Jian Wei and Another and Another Appeal

• Jurisdiction: Singapore
• Judge: Chan Sek Keong CJ
• Judgment Date: 08 October 2009
• Neutral Citation: [2009] SGCA 48
• Date: 08 October 2009
• Subject Matter: Defamation,Civil Procedure,Appeals,Tort
• Docket Number: Civil Appeals Nos 25 and 38 of 2009
• Published date: 14 October 2009
• Defendant Counsel: Ang Cheng Hock SC, William Ong, Kristy Tan and Ramesh Selvaraj (Allen & Gledhill LLP)
• Court: Court of Appeal (Singapore)
• Plaintiff Counsel: Alvin Yeo SC, Chan Hock Keng, Koh Swee Yen, Suegene Ang and Reina Chua (Wong Partnership LLP)

8 October 2009 Judgment reserved.

Chan Sek Keong CJ (delivering the judgment of the court):

Introduction

1 These two appeals arise out of a defamation action commenced by Lim Eng Hock, Peter (“the Appellant”) against Lin Jian Wei and Tung Yu-Lien, Margaret (“the Respondents”) which was dismissed by the High Court (see Lim Eng Hock Peter v Lin Jian Wei [2009] 2 SLR 1004 (“the GD”)).

2 The Appellant claimed that he had been defamed in three passages (“the Extracts”) contained in an Explanatory Statement dated 2 November 2005 (“the ES”) explaining a Scheme of Arrangement and Compromise (“the Scheme”) proposed by Raffles Town Club Pte Ltd (“the Company”) to members of Raffles Town Club (the “Club”). The Company owned and operated the Club as a proprietary club. The Respondents were the controlling shareholders and directors of the Company since April 2001.

Background

3 As the facts of this case have been fully set out in the GD, we will only refer to the salient facts in this judgment. In or around March 1996, the Company purchased a 30-year lease on a piece of land from the Government for the purpose of developing and operating on it a high class recreational club. The Appellant was a consultant to the Club. In November 1996, the Company invited selected members of the public to join the Club at a discounted price of $28,000 payable in instalments over four years. The selected invitees were promised membership in an exclusive club which would be one of the most prestigious and lavish clubs in Singapore. More than 24,000 applications were received, out of which 5,000 were rejected.

4 After the Club was opened in March 2000, the members realised that the recreational facilities were inadequate to meet their needs. Unknown to the members, the Club had 19,000 members. This meant that the entrance fees collected and to be collected by the Company amounted to more than $500 million. Disputes subsequently arose between the Appellant and the then shareholders of the Company, Lawrence Ang Yee Lim (“Ang”), William Tan Leong Ko (“Tan”) and Dennis Foo Jong Long (“Foo”). Their subsequent court actions against one another led to the disclosure to the members that the Club had 19,000 members. This number made a mockery of the Company’s promise of the Club’s exclusivity to the original members. The court actions were settled in April 2001, with the existing shareholders selling their shares in the Company to the Respondents and the first Respondent’s wife under certain agreements dated 23 April 2001 and 6 June 2001. The second Respondent was appointed an executive director of the Company before the change of ownership. As at April 2001, the Company had current assets of $206 million and receivables of $65 million in directors’/shareholders’ loans. This strong financial position was due principally to a deferred tax and accounting policy adopted by the Appellant (“the DA Policy”).

5 The original members were unhappy that they had been deceived by the Company concerning the Club’s exclusivity. They wrote to the Company on 25 April 2001 and demanded compensation. On 12 June 2001, they made a claim for $120,484,000. On 15 November 2001, 4,895 members of the Club (“the Raffles 5000”) filed Suit No 1441 of 2001 against the Company claiming damages for misrepresentation and/or breach of contract. The action was dismissed by the High Court on 22 November 2002. On appeal, however, the decision was reversed by this court on 11 August 2003. Damages were assessed by the High Court at $1,000 per member on 23 February 2005. The members appealed and on 23 August 2005, this court increased the damages to $3,000 per member. This meant that the Company was liable to pay the members damages ranging from $14,685,000 (for 4,895 members in the suit) or about $48,000,000 (for all eligible members as at March 2001) or $52,122,000 (for 17,374 members who were the Scheme creditors) (see GD at [48]).

6 The Company was unable to pay the damages at any of these levels as it had insufficient funds. As at 31 December 2003, it had only $7.5 million in assets and cash reserves of $1.8 million. In July 2005, its assets (apart from the Club premises) were made up of cash reserves of $1 million, $7 million in receivables and $5.8 million paid into court. Thus, it was not surprising that even before the damages awarded by the High Court were increased on appeal on 23 August 2005, the Company had made preparations to introduce the Scheme pursuant to s 211 of the Companies Act (Cap 50, 1994 Rev Ed) (“the Companies Act”). Essentially, the Scheme creditors were asked to accept payment of damages (i.e. $3,000 each) in kind, in the form of food and beverage vouchers for use in the Club, or cash instalments or reductions of transfer fees of membership of the Club, or alternatively, a combination of these options. On 31 August 2005, the Company obtained the approval of the court in OS No 1164 of 2005 to convene the Scheme creditors’ meeting for the purpose of approving the Scheme.

7 The Raffles 5000 were dissatisfied with the Scheme and questioned the motives of the Company as they were aware that the Company had collected more than $500 million in entrance fees and also had an annual income stream of $20.4 million in subscription fees. They were surprised that the Company had no money to pay the damages and sought to appoint a special receiver and manager to examine the accounts of the Company. One of the matters that the Raffles 5000 wanted to look into was an item in the Company’s unaudited accounts showing that $124,213,169.46 had been paid out as dividends. They wanted to know when and to whom the dividends were paid. They also wanted to know what had happened to the $53 million collected in subscriptions from March 2000 to September 2002 and the yearly subscriptions of $19 million thereafter. The application to appoint a special receiver and manager was dismissed by the High Court on 22 September 2005 (see Re Raffles Town Club Pte Ltd [2005] SGHC 178 (“Re Raffles Town Club”)). An appeal to this court was likewise dismissed. However, during the hearings in both courts, the Company gave assurances to the members that all their queries in relation to the Company’s financial position would be addressed in an explanatory letter to be published later (i.e., the ES).

8 On 7 November 2005, the Company sent to each of the 17,374 Scheme creditors a copy of the 391-page ES. It is not disputed that the Respondents, being the sole shareholders and directors of the Company, caused the ES to be published and circulated to all the Scheme creditors. On 30 November 2005, 90% of the members, apparently satisfied with the Company’s explanation of its financial position and explanations as set out in the ES, voted to approve the Scheme. On 6 January 2006, the Scheme was approved by the court. Unfortunately for the Respondents, the Appellant read the ES and found that the Extracts in the ES were defamatory of him as they called into question his competence and/or integrity in managing the Company prior to April 2001. He then commenced the present action against the Respondents for damages for defamation.

Alleged defamatory statements

9 The alleged defamatory words are contained in the Extracts which are found in various parts of the ES. It is not disputed that the Extracts referred to the Appellant as one of the persons involved in the management of the Company prior to April 2001. The first passage in the ES complained of (“Extract 1”) was published under the section entitled “Background to Company’s Current Financial Difficulties” (starting at page 15 of the ES). For convenience, the full text of the section is reproduced below. The words that the Appellant claimed were defamatory are highlighted (in italics):

1.4.4 Background to Company’s Current Financial Difficulties

All the original promoters, directors, and shareholders of the Company have left. At the time the new shareholders assumed control, a substantial portion of the monies collected in entrance fees had already been spent. An explanation of some of the more sizable expenses follows.

High start up costs

The 30-year leasehold site at the junction of Dunearn Road and Whitley Road on which the Club is erected was leased from the URA at a high price of $108,140,542.00, which reflected the robustness of the economy pre-Asian Financial Crisis. The sum of $108,140,542.00 includes stamp duty, property tax as well as interest levied for late completion. The costs of constructing the Club added another $107,574,209.00 to the bill. The unit cost of constructing the Club was $6,204.70 per square meter. Seah Choo Meng, a chartered quantity surveyor and Executive Chairman of Davis Langdon & Seah gave evidence of this number during the hearing before the Honourable Justice Belinda Ang in September 2004. He noted that this figure was the highest in his 37 years of experience.

Additionally, a sizeable portion of the entrance fees collected went towards pre-operating costs for the Club, which came up to $115,558,751.00. This included $79,535,510.00, the bulk of which were sales and marketing commissions paid to Europa Holdings Pte Ltd a company managed by former directors of the Company, Lawrence Ang Yee Lim, Dennis Foo Jong Long and William Tan Leong Ko. Sales and marketing commissions were paid to banks involved in the membership launches. Also included is the cost of processing the application forms received by members, which totalled $1,126,211.00. The Company believes that a bulk of the $1,126,211.00 was paid to Ms Chan Lay Hoon of JS Corporate Services and an Indonesian company, both engaged by Lim Eng Hock, Peter to assist in the processing of approximately 24,000 application forms. Ms Chan Lay Hoon was a director of the Company from July 1998 to April 2001.

Other expenditure include directors’ remuneration of $9,682,512.00 paid out between 1997 and March 2000, and staff and other payroll costs of...