WBL Corporation Ltd v Lew Chee Fai Kevin

• Judgment Date: 10 February 2012
• Date: 10 February 2012
• Docket Number: Civil Appeals Nos 149 and 150 of 2010
• Court: Court of Appeal (Singapore)

WBL Corp Ltd

Plaintiff

and

Lew Chee Fai Kevin and another appeal

Defendant

[2012] SGCA 13

Chan Sek Keong CJ

,

Andrew Phang Boon Leong JA

and

V K Rajah JA

Civil Appeals Nos 149 and 150 of 2010

Court of Appeal

Contract—Illegality and public policy—Whether performance of contract illegal—Section 47 Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (Cap 65 A, 2000 Rev Ed)

Criminal Law—Statutory offences—Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (Cap 65 A, 2000 Rev Ed)—Whether common investor could deduce, conclude or infer from generally available information same quality or character as alleged inside information—Sections 215 (c) and 218 Securities and Futures Act (Cap 289, 2006 Rev Ed)

This appeal and cross-appeal arose out of the judgment of the High Court in Suit No 129 of 2008 (‘Suit 129’). Lew Chee Fai Kevin (‘Lew’) was the Group General Manager of WBL Corporation Private Limited's (‘WBL’) Enterprise Risk Management group. He commenced Suit 129 against WBL seeking, inter alia, specific performance of WBL's contractual obligation to issue him a total of 167,500 shares in WBL pursuant to his exercise of share options under an Executive Share Options Scheme (‘ESOS’). WBL had refused to issue the shares to Lew because he had purportedly paid for them using the proceeds from share transactions that were alleged to constitute insider trading. WBL's defence was that it was not in breach of its obligation under the ESOS to issue the shares to the appellant because it would have been illegal under either the common law or s 44 or s 47 of the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (Cap 65 A, 2000 Rev Ed) (‘CDSA’) for it to issue the shares.

Suit 129 was heard before the trial judge together with Suit No 71 of 2009 (‘Suit 71’), which was a civil action brought by the Monetary Authority of Singapore (‘MAS’) against Lew for violating the insider trading provisions of the Securities and Futures Act (Cap 289, 2006 Rev Ed) (‘SFA’). After hearing parties, the judge in the High Court (‘the Judge’) found in Suit 71 that Lew had violated the said provisions of the SFA and was therefore liable to pay a civil penalty. The Judge then found in Suit 129 that WBL would have contravened s 44 of the CDSA had it issued the shares to Lew pursuant to his purported exercise of his share options under the ESOS (‘the first part of the Judge's decision’). However, the Judge held that WBL could have legally performed its contractual obligation, ie, by obtaining the consent of the Commercial Affairs Department (‘CAD’) under s 44 (3) of the CDSA for the shares to be issued, and therefore directed that WBL seek this consent (‘the second part of the Judge's decision’).

WBL appealed in Civil Appeal No 149 of 2010 against the second part of the Judge's decision; Lew appealed in Civil Appeal No 150 of 2010 against the first part of the Judge's decision. Both the appeal and the cross-appeal were heard by the Court of Appeal together with Civil Appeal No 123 of 2010, in which Lew appealed against the Judge's decision in Suit 71 and which the Court of Appeal dismissed in Lew Chee Fai Kevin v Monetary Authority of Singapore[2012] 2 SLR 913.

Held, dismissing the appeal:

(1) There was no dispute that WBL was under a contractual obligation to issue the shares to Lew pursuant to his exercise of the options under the ESOS, unless performing it was contrary to law: at [17].

(2) The first possible basis upon which WBL's performance of its obligations under the ESOS would have been illegal was if WBL would have contravened s 44 of the CDSA in issuing the shares to Lew. Section 44 of the CDSA did not apply at all to WBL in this case because s 40 of the CDSA exonerated the relevant party against the application of s 44 once the party discharged its obligations under s 39 of the CDSA to make a Suspicious Transaction Report, as WBL had done here: at [20] and [21].

(3) The second possible basis upon which WBL's performance of its obligations under the ESOS would have been illegal was if Lew would be guilty of an offence under s 47 (1) of the CDSA if WBL issued the shares to him, even if WBL would not be contravening any criminal provisions. Section 47 only applied to the ‘benefits of criminal conduct’. Lew's contravention of the insider trading provisions did not constitute ‘criminal conduct’ because the definition of ‘criminal conduct’ in s 2 (1) of the CDA read with the Second Schedule required that criminal proceedings for the contravention of the insider trading provisions be brought in order to establish ‘criminal conduct’ for the purposes of the CDSA. Here, no criminal proceedings were brought; instead, the Public Prosecutor had permitted MAS to pursue civil proceedings against Lew: at [37] to [40].

(4) WBL's defence of common law illegality failed because there was no illegality to begin with. WBL could not prove that Lew's claim for specific performance of its contractual obligation under the ESOS was premised upon an illegality: at [41].

(5) WBL's contractual obligation to issue the shares to Lew pursuant to his exercise of the options under the ESOS was therefore not extinguished by illegality under either the common law, or under s 44 or s 47 of the CDSA. WBL was therefore in breach of the ESOS for failing to issue the shares to Lew in accordance with its terms: at [41].

(6) WBL's contractual breach arose on 19 July 2007, which was the date by which it was contractually obliged to issue the shares to Lew once he had exercised his options on 9 July 2007 pursuant to cl 8 (a) of the ESOS. The fact that it had a potential defence of illegality depending on whether the Public Prosecutor, in his discretion, decided to bring criminal proceedings against Lew for insider trading or to allow MAS to bring civil proceedings for the same, did not postpone the contractual deadline for performance. There was no defence of ‘wait and see’ in the performance of a contractual obligation unless expressly provided for in the contract. Lew was therefore entitled to damages which he was able to prove from 19 July 2007 onwards: at [42], [44] and [45].

[Observation: Even if s 40 of the CDSA had not precluded the application of s 44 of the CDSA, s 44 would still not apply to make it illegal for WBL to issue the shares to Lew pursuant to its contractual obligations under the ESOS. This was because s 44 required the proceeds from Lew's insider trading transaction, which he utilised to pay for the shares, to be the ‘benefits of criminal conduct’. The definition of ‘criminal conduct’ in s 2 (1) of the CDA read with the Second Schedule demonstrated that s 44 only applied when criminal proceedings had been brought in respect of contravention of the insider trading provisions of the SFA. Here, no criminal proceedings were brought; instead, the Public Prosecutor had permitted MAS to pursue civil proceedings against Lew: at [32].

The Judge's direction to WBL to seek CAD's consent to issue the shares was made on the basis that WBL had a contractual duty under cl 8 (b) of the ESOS to obtain consent ‘from any competent authorities’ and this extended to seeking the consent of the relevant authorities under s 44 (3) of the CDSA for the shares to be issued. However, parties could not have contemplated an illegal performance of WBL's contractual obligation to Lew. If the issuing of the shares had been contrary to law, the question of WBL having a continuing duty to issue the shares by seeking the consent of the relevant authorities would not arise: at [35] and [36].]

Ang Jeanette v PP [2011] 4 SLR 1 (refd)

Lars Wester v Euan Cecil Santhagens Borland [2007] EWHC 2484 (Ch) (refd)

Lew Chee Fai Kevin v Monetary Authority of Singapore [2012] 2 SLR 913 (refd)

Mahmoud and Ispahani, Re An Arbitration between [1921] 2 KB 716 (refd)

Monetary Authority of Singapore v Lew Chee Fai Kevin [2010] 4 SLR 209 (refd)

R v Lo Chak Man and Tsoi Sau Ngai [1996] HKCU 172 (refd)

Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (Cap 65 A, 2000 Rev Ed) ss 2, 40, 44 (1) , 44 (3) , 47 (1) , 47 (1) (b) (consd) ; ss 2 (1) , 8, 39, 43, 44, 44 (1) (b) (ii) , 44 (2) , 47, 47 (2) , Pt II, Second Schedule Pt III

Securities and Futures Act (Cap 289, 2006 Rev Ed) ss 218, 221, 232 (2)

Drug Trafficking (Recovery of Proceeds) Ordinance (Cap 405) (HK) s 25

Yeo Khirn Hin Andrew, Aaron Lee Teck Chye, Tay Yong Seng and Chang Ya Lan (Allen & Gledhill LLP) for the appellant in CA 149/2010 and the respondent in CA 150/2010

Thio Shen Yi SC, Leow Yuan An Clara Vivien and Charmaine Kong (TSMP Law Corporation) for the respondent in CA 149/2010 and the appellant in CA 150/2010.

Judgment reserved.

Andrew Phang Boon Leong JA

(delivering the judgment of the court):

Introduction

1 This appeal and cross-appeal (collectively, ‘the present appeals’) arose out of the judgment of the trial judge (‘the Judge’) in Suit No 129 of 2008 (‘Suit 129’) (see Lew Chee Fai Kevin v WBL Corp Ltd [2010] 4 SLR 774 (‘the Judgment’)). For ease of reference in the present appeals, we will refer to Kevin Lew Chee Fai as ‘Lew’ and WBL Corporation Limited as ‘WBL’ instead of as ‘the appellant’ and ‘the respondent’ in their respective appeals.

2 Lew was, at the material time, the Group General Manager of WBL's Enterprise Risk Management Group. He commenced proceedings against WBL, seeking, inter alia, specific performance of WBL's obligation to issue him a total of 167,500 shares in WBL (‘the Relevant Shares’) under an Executive Share Options Scheme (‘ESOS’). WBL had refused to issue the Relevant Shares to Lew because he had purportedly paid for them using the proceeds from share transactions that were alleged to constitute insider trading. WBL's defence was that it was not in breach of its obligation under the ESOS to issue the...