In Conversation with Justice Simon Thorley QC

A PDF version of this article is available here.

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In Conversation with Justice SIMON THORLEY QC

Interviewers: Bryan Ong Junyu* & Shaktivel Arumugam**

This is the second part of a series of interviews that the Intellectual Property Students Association ("IPSA") has conducted with key players of the intellectual property ("IP") field in Singapore. They represent a diversity of views in the field of IP dispute resolution. As the Singapore IP Strategy 2030 Report highlights, Singapore is currently seeking to strengthen its position as a dispute resolution hub for IP disputes. The main purpose of these interviews is therefore to explore and discuss the various strategies that Singapore is intending to employ towards advancing its objectives.

On 30 June 2021, IPSA was given the opportunity to interview the learned Justice Simon Thorley QC, who sits on the panel of the Singapore International Commercial Court (SICC). Justice Thorley provided invaluable insights on issues ranging from confidentiality to enforceability and dove deeper into the landmark case of B2C2 Ltd v Quoine Pte Ltd, which was upheld on the breach of contract claim but reversed on the breach of trust claim by the Singapore Court of Appeal (SGCA).

Q1: You’ve served as an International Judge of the SICC since 2015. Would you be able to share, from your experience, some reasons that parties have for preferring SICC dispute resolution over international arbitration (or even mediation)?

Justice Thorley prefaced his response with a disclaimer that his perspective is based on anecdotal evidence. He pointed towards four differences in procedure in the SICC and the Singapore International Arbitration Centre (SIAC): (i) the right of appeal; (ii) privity; (iii) confidentiality; and (iv) the difference between judges and arbitrators.

(i)      Right of Appeal

The SICC is part of the Supreme Court and thus, cases heard before the SICC have an automatic right of appeal. Conversely, the rights of appeal are limited in the SIAC. (An SIAC award can only be set aside in exceptional circumstances.)

     Justice Thorley pointed out that “[t]he SICC does acknowledge that there are human frailties in judges who do on occasion get things wrong and all national systems have systems of appeal to ensure that justice is done and errors can be corrected.”

     In addition, given that there is only one tier of appeal in Singapore, up to 5 judges can be on the bench where necessary. The ability to appoint an amicus curiae further buttresses this appeal mechanism.

(ii)      Ability to order third parties to be joined as parties to the action

Given that the SICC is part of the Supreme Court and governed by the Rules of Court in the Supreme Court of Judicature Act[1], the SICC is empowered to order third parties to be joined as parties to the action.[2] Here, Justice Thorley acknowledged one of the weaknesses of arbitration— third parties affected by a contractual dispute who are not signatories to the contract are unable to seek relief.

(iii)    Confidentiality

With regards to confidentiality, arbitration appears to be the preferred option, given that arbitration is almost always conducted under an obligation of confidence. In comparison, SICC operates on the basis of open justice, although there are procedures for elements of confidentiality.

     Here, Justice Thorley pointed out that the procedures implemented by the SICC do not suggest a “one-way street kind of confidentiality”. Instead, he notes that “[t]he oxygen of publicity does encourage people to be far less aggressive in their litigation stance. [W]hen [litigation is] public, [parties] have to be more reasonable [and] the court can compel them to be reasonable.”

(iv)    Judges vs Arbitrators

Justice Thorley observed that “[t]he benefit of the SICC is that they have appointed International Judges with significant expertise in particular areas of law and litigation. For example, construction disputes, shipping disputes, and in my case, IP disputes.”

     In essence, the benefit of the SICC is that the judge that is appointed will have a background in the field the dispute concerns. There is also greater certainty in terms of scheduling since the docket system utilised by the SICC ensures that the judge will see the case from start to finish. This system allows for case management to be confirmed within two weeks from when a judge is given a case. It also enables parties to agree on when the trial is going to be conducted and thus, work backwards from there.

     In contrast, delays can happen in arbitration since the appointment of arbitrators takes time. The selected arbitrators may also be less experienced in the field. However, Justice Thorley reiterated that the SICC is not trying to subsume the functions of the SIAC, but to complement it.

Q2: Do you think concerns of international enforceability might make arbitration more attractive compared to the SICC as a platform for IP dispute resolution, especially since the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards[3] has extensive global reach consisting of 150 countries? We note, in this connection, that in 2018, the Supreme Court of Judicature Act was amended to, among other things, clarify that the SICC’s supervisory jurisdiction extends to international arbitration disputes seated in Singapore.[4] How have developments such as these had an impact on Singapore’s position as an international dispute resolution forum in general, and IP/Information Technology (IT) disputes in particular?

The short answer is yes. In principle, the SIAC is more attractive in terms of enforceability (due to the presence of the New York Convention). Nonetheless, Justice Thorley highlighted that, in reality, there are not many drawbacks in getting a judgment from the SICC enforced as opposed to the SIAC. There are three basic ways to enforce a SICC judgment internationally.

     First, Singapore has treaties with 10 other jurisdictions, including India, Pakistan, and Brunei, amongst others. These treaties mean that a judgment can very easily be enforced in these jurisdictions, assuming that the usual requirements to enforce such a judgment are fulfilled (eg, a court of competent jurisdiction, no indication of fraud, process of natural justice and not against public policy).

     Second, such judgments are enforceable by virtue of the Convention of 30 June 2005 on Choice of Court Agreements.[5] This is the equivalent of the New York Convention for courts. All 27 European Union countries are covered by this convention, while the United States and China have signed but not ratified it.

     Third, judgments are enforced through the principle of reciprocity. This covers countries like Japan and China. In fact, there is now a memorandum of guidance (MoG) between Singapore and China setting out the documents that need to be filed to enable reciprocity. However, the MoG does not explicitly include IP. This is because there is still significant national influence when it comes to enforcing IP rights.

     Justice Thorley highlighted that the International Judges of the SICC are also experienced arbitrators. This means that “anybody arbitrating before the SIAC will know that there is going to be an appeal to the supervisory court (ie, the Supreme Court). Such appeals can be listed in the SICC. Hence, the parties know that any appeal will be dealt with efficiently by somebody who knows what they are doing and understands the arbitration system.”

Q3: Singapore employs various strategies to become a leading IP dispute resolution centre such as strengthening its legislative framework (eg, by introducing amendments to the Arbitration Act[6] and the International Arbitration Act[7] in 2019, which clarify that IP rights disputes are arbitrable in Singapore) and developing its capabilities through training and professional development (eg, by cultivating a pool of expert witnesses). What else can Singapore do to strengthen its position as a choice location for IP dispute resolution, in particular for IP litigation?

Preliminarily, Intellectual Property Rights (IPRs) do cause difficulty for international tribunals of any sort, given that they are the result of a registration process on a national basis—commonly referred to as the principle of territoriality. This is evident from the provision which is present in various international conventions regulating patent law which states that only the granting state can revoke a patent in question. Justice Thorley noted that “[t]his leads to, in the case of Europe, for example, the need for multiple litigation.” This is because getting an injunction in one European jurisdiction does not have extraterritorial effect.

     Justice Thorley pointed out the difficulties in setting up an international court which could declare that IPRs are invalid on an international basis. While this has been attempted in Europe in the form of a central court litigating patents granted by the European patent office, the German Constitutional Court has had difficulty with this because it was handing over jurisdiction to an international tribunal.

     Simply put, one has to accept that there are limits to extraterritorial effect. Despite this, the SICC is still an attractive forum for resolving IP licensing disputes. Justice Thorley identified patent infringement disputes that surface under the guise of a breach of contract, where the issue is “whether a modification to a previously infringing product on which a royalty is payable has the effect of making it non-infringing so that no royalty is payable”.

     In order to be an attractive forum for resolving such IP disputes, one must have experienced judges—both in IP Law and those “with a technical bent” who can understand the technology.

     For completeness, Justice Thorley acknowledged the assistance rendered by expert witnesses. He is “personally… in favour of parties appointing their own experts… The parties can ensure the experts understand the technology. The process of cross examination ensures that they are independent.” To ensure that the expert reports remain relevant in assisting the judge, Justice Thorley also shared that it is common practice for him and his colleagues to narrow down and agree on the legal issues that the expert report should address before the expert witness is cross examined.

Q4: Your decision in B2C2 Ltd v Quoine Pte Ltd[8], which was upheld on the breach of contract claim but reversed on the breach of trust claim by the SGCA[9], has been recognised as one of the first instances to apply contractual principles and trust law to a cryptocurrency trading case. Is there anything in particular that you would like to highlight about this case?

Justice Thorley said “[y]es! It was very hard work. As the trial judge, it was factually extremely complex. We had to work out how two computer algorithms worked and were interrelated to each other. This emphasises the need for expert evidence that is focused, comprehensible and objective. I was fortunate to have two experts, both of whom knew their subject matter and were very balanced. They were able to assist me in determining how exactly the two algorithms worked.”

     Justice Thorley further emphasised that the need for confidentiality also compounded the complexity of the case. The defendant not only ran an exchange for bartering cryptocurrencies and fiat currencies, but also they traded on that exchange. This meant that they were in direct competition with B2C2. B2C2’s algorithm worked extremely well and hence, they obviously did not want Quoine to find out what it was. The experts thus had to work within many constraints such that the confidentiality of B2C2’s algorithm would not be breached. They had to work within a closed facility and could not take photographs. Any notes that they took were effectively sterilised. However, Justice Thorley admitted that at least one representative of the defendant would need to know, to some degree, how the algorithms interacted so that further commercial decisions can be made. This led to a need for further checks and balances tailored specifically for the case.

     Finally, the complexity of the case was also compounded by the fact that, prior to the case, the law of unilateral and mutual mistake had never dealt with computer programmes. Usually, two people trade under a misapprehension and a judge is able to set in stone what everybody knew at a particular date. However, in this case, the computer programmes were working twenty four-seven. They were programmed to do certain things in the event something unplanned happened. Justice Thorley observed that “[b]oth programmes worked as intended. The question was whether the plaintiff's programme was intended to take advantage of such a mistake or to protect the plaintiff from such a situation.” Justice Thorley shared that he “adopted an objective approach, writing wholly new law. Thus, it was not very surprising when the SGCA… sat as a bench of five [when the case went on appeal].” The SGCA had three local judges, two overseas judges and the benefit of an amicus curiae.

     The Court of Appeal upheld Justice Thorley’s decision on the breach of contract issue, but overruled the decision on the breach of trust issue by a majority of four to one. This illustrates the benefit of parties using the SICC as a forum of dispute resolution where difficult legal matters are concerned. Justice Thorley notes that “if this had been an SIAC case, I doubt the supervisory judges would have set the award aside on the basis of either limb and certainly not on the breach of contract. Moreover, the case would not have had the investigation of five judges and an amicus.” Judge Thorley quips that he will “never forget B2C2… It was hard work writing the judgment but it was a satisfying exercise.”

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* LLB (Candidate) (NUS), Class of 2022.

** LLB (NUS), Class of 2021.

[1] Cap 322, 2007 Rev Ed Sing, s 80.

[2] Ibid at O 4, r 1; O 15, r 4.

[3] 10 June 1958, 330 UNTS 3 (entered into force 7 June 1959) [New York Convention].

[4] Supreme Court of Judicature Act, supra note 1.

[5] 30 June 2005 (entered into force 1 October 2015), online: <https://www.hcch.net/en/instruments/conventions/specialised-sections/choice-of-court>.

[6] Cap 10, 2002 Rev Ed Sing.

[7] Cap 143A, 2002 Rev Ed Sing.

[8] [2019] 4 SLR 17 (HC(I)) [B2C2].

[9] [2020] 2 SLR 20 (CA).

In Conversation with Justice Dedar Singh Gill

A PDF version of this article is available here.

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In Conversation with Justice Dedar Singh Gill

Interviewers: Bryan Ong Junyu* & Shaktivel Arumugam**

This is the first part of a series of interviews that the Intellectual Property Students Association ("IPSA") has conducted with key players of the intellectual property ("IP") field in Singapore. They represent a diversity of views in the field of IP dispute resolution. As the Singapore IP Strategy 2030 Report highlights, Singapore is currently seeking to strengthen its position as a dispute resolution hub for IP disputes. The main purpose of these interviews is therefore to explore and discuss the various strategies that Singapore is intending to employ towards advancing its objectives.

IPSA had the honour of interviewing Justice Dedar Singh Gill, who was sworn in to the High Court (SGHC) as Judicial Commissioner in August 2018 and Judge in August 2020. He touches on significant judgements in the IP and Information Technology (IT) domain, the strengths of Singapore’s judiciary, and key reforms that are in the process of being implemented.

Q1: An interesting feature of Singapore’s legal system is the option for the court to appoint amicus curiae or court-appointed legal experts. Could you share, for our readers’ benefit, how these options have been employed by the courts in IP/IT cases? Could you please discuss unique features of Singapore’s system that benefit litigants in IP/IT legal proceedings in Singapore?

Justice Gill observed that:

“An amicus curiae is usually appointed by the Court of Appeal (SGCA) where a case raises a novel or complex question of law, or where the appeal will benefit from specialised legal knowledge. Leading IP academics, such as Professor Ng-Loy Wee Loon and Professor David Llewelyn, were appointed as amicus curiae in recent SGCA decisions concerning IP law (eg, Burberry Ltd v Megastar Shipping Pte Ltd[1], Société des Produits Nestlé SA v Petra Foods Ltd[2], and Staywell Hospitality Group Pty Ltd v Starwood Hotels & Resorts Worldwide, Inc[3]).

At the General Division of the SGHC, junior advocates can also be appointed as young amicus curiae (YAC) to assist the court in a similar manner. In the recent case of Bellingham, Alex v Reed, Michael[4], a YAC was appointed to assist the court in interpreting the scope of section 32(1) of the Personal Data Protection Act 2012[5]. The appointed amicus curiae and YAC will address issues specified by the court, thereby assisting the judiciary in developing the law and enriching local jurisprudence for the benefit of future litigants.

Apart from the amicus curiae and YAC schemes, Singapore’s judiciary also taps on the expertise of renowned IP practitioners through the Singapore International Commercial Court (SICC). B2C2 Ltd v Quoine Pte Ltd[6], an SICC case involving a contractual dispute arising from a glitch on a currency exchange platform that used deterministic algorithms, was heard by Simon Thorley IJ, a leading Queen’s Counsel in the field of IP Law.”

Q2: Singapore enjoys a reputation for a strong rule of law, supported by a highly skilled judiciary that is well regarded internationally. We understand that the General Division of the SGHC has had an IP/IT list since 2002. The list presently features 11 judges (including 3 Judicial Commissioners). In addition, in recent years, the SGCA has handed down a number of important decisions in this field. What do you think are the key strengths of Singapore’s judiciary and legal system in the field of IP/IT? Furthermore, in recent years, there have been substantial developments in Singapore’s IP/IT law and the SGCA has handed down a number of significant judgments in this field.[7] Some of these cases were heard by a five-judge panel in the SGCA (instead of the usual three) and amicus curiae were appointed. In many of these cases, the SGCA undertook a comparative analysis of the approaches taken in various foreign jurisdictions (eg, United Kingdom (UK), European Union (EU), United States (US), to name a few). Would you be able to share your observations and comments in this regard?

Justice Gill noted the three key strengths of the SGCA when it comes to decision-making: (i) sensitivity to the policy considerations underpinning IP regimes; (ii) willingness to adapt the law, where appropriate, to better cater to an increasingly digitised world; and (iii) readiness to review settled positions and change the law where it is desirable as a matter of logic and principle.

(i) Sensitivity to the Policy Considerations Underpinning IP Regimes;

Justice Gill highlighted the SGCA’s independent and careful evaluation of the policy considerations that have led to the departure from established positions in the EU, the UK and the US. He demonstrated his point with reference to the landmark case of Staywell[8]. He shared that:

“In Staywell, after considering the doctrine of initial interest confusion in the US, UK and EU, the SGCA decisively concluded that this doctrine ought not to be introduced into Singapore trade mark law.[9] The effect of introducing this doctrine into Singapore trade mark law, is that confusion which arises initially, but which would have been dispelled by the time of the purchase, can constitute confusion for the purpose of sections 8(2) and 27(2) of the Trade Marks Act[10]. The court found that this doctrine is inconsistent with the purpose of sections 8(2) and 27(2) of the TMA: while the doctrine of initial interest confusion seeks to protect the reputation of a well-known mark, sections 8(2) and 27(2) of the TMA are concerned with the origin of goods. Further, if the initial confusion has been dispelled by the time of purchase, the function of the trade mark as a ‘badge of origin’ is not undermined. As a result, the court declined to import the doctrine of initial interest confusion into Singapore trade mark law.”

(ii) Willingness to Adapt the Law, Where Appropriate, to Better Cater to an Increasingly Digitised World; and

On this point, Justice Gill mentioned that:

"In I-Admin (Singapore) Pte Ltd v Hong Ying Ting, the court recognised that advances in modern technology make it significantly easier to access, copy, and disseminate confidential information almost instantaneously, often without the plaintiffs’ knowledge.[11] To better protect owners from loss, the court modified its approach towards breach of confidence claims: now, claimants only need to prove that the information possesses the quality of confidentiality and was imparted in circumstances which imported an obligation of confidence. Thereafter, the burden is shifted to the defendant to prove that his conscience is unaffected.[12]”

(iii) Readiness to Review Settled Positions and Change the Law Where it is Desirable as a Matter Of Logic And Principle.

Justice Gill returned to the case of Staywell, a case “emblematic of the judiciary’s willingness to refine the law where necessary”.

Prior to Staywell, the court in The Polo/Lauren Co, LP v Shop In Department Store Pte Ltd held that the confusion inquiry requires the court to consider all the circumstances, including extraneous factors which go beyond matters relating to similarity of marks and goods.[13] Guided by the underlying aim of the trade marks regime—to prevent confusion, Polo found that the law ought not to extend protection in cases where extraneous matters indicates that the confusion is merely imaginary.

However, Justice Gill pointed out the following:

“In Staywell, the court observed that even though the risk of origin-based confusion is the primary interest sought to be protected by trade mark law, the proprietary rights of a trade mark owner must also be vindicated.[14] A liberal approach towards the admissibility of extraneous factors would enable a subsequent trader to enter the market using a trade mark that is very similar to the senior mark and applied to similar if not identical goods, and yet avoid liability by means of an express disclaimer or by selling his goods at a much lower price, on the basis that confusion has been dispelled due to these differentiating steps. Allowing extraneous factors to readily displace a finding of likely confusion would not meaningfully uphold property rights represented by the trade mark.

Accordingly, the court in Staywell held that there must be a limit to the range of external factors.[15] Departing from its previous decisions starting with Polo, the court held that extraneous factors in the confusion inquiry are only permissible to the extent that they are: (a) intrinsic to the very nature of the goods and/or (b) affect the impact that similarity of marks and goods has on consumers; extraneous factors consisting of differences created by a trader’s differentiating steps (eg, pricing differentials and packaging) are impermissible in the confusion inquiry.[16] The change was brought about after a detailed consideration of the case law from the UK and EU.”

Justice Gill also noted Singapore’s IP legislation is updated regularly to keep abreast with international developments. For instance, as a result of the United States-Singapore Free Trade Agreement[17], Singapore amended the TMA in 2004 to accord a higher standard of protection to well-known trade marks in response to the Joint Recommendation adopted at the 34th World Intellectual Property Organisation Meeting.[18] At the same time, Singapore directly imported the definition of “dilution” set out in the US Trademark Act of 1946 into its local trade mark legislation. Another example would be the enactment of the Geographical Indications Act[19] in 2014 as a result of the European Union-Singapore Free Trade Agreement[20], which established a system of registration of geographical indications (GI). More recently, the GI Act was further amended in 2020 to improve the running of the GI Registry and provide greater clarity to traders and producers.

Q3: A key aspect of ensuring Singapore becomes a hub for IP Dispute Resolution is ensuring that such dispute resolution is cost effective. One such mechanism is encapsulated in the proposed reforms to allow for a new “track” that places restrictions on the length of trial, the quantum of damages recoverable, and the amount of costs awarded. While we understand that these reforms are still in the process of being implemented, what would be the key benefits that litigants can look forward to?

Justice Gill commented that:

“This new “track” provides a simplified process for IP claims. Modelled after the UK Intellectual Property Enterprise Court (IPEC), this track enables litigants to resolve their disputes in an expeditious and cost-efficient manner. This is significant, given that IP litigation tends, in general, to be more expensive than other types of litigation by virtue of the highly technical nature of the dispute which often calls for expert evidence. It is hoped that the simplified process track will play an important role in ensuring that litigants with more limited budgets can still access justice through the courts, notwithstanding the consolidation of civil IP disputes at the SGHC.

The introduction of this track, alongside existing procedures and timelines that apply to disputes presently on the SGHC IP list, gives litigants control over the costs of proceedings. The Minister of Law has indicated that litigants will generally be able to choose between the simplified process track and the normal track. Litigants with greater financial resources can opt for the normal track while cost-sensitive litigants can choose the simplified process track, which limits the length of proceedings and caps the costs and damages recoverable. Although it is ultimately for the court to decide which court the case is heard, the UK courts generally endeavour to accommodate parties’ agreement to use the IPEC. It remains to be seen if similar weight would be given to parties’ agreements in Singapore.”

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* LLB (Candidate) (NUS), Class of 2022.

** LLB (NUS), Class of 2021.

[1] [2019] 1 SLR 536 (CA).

[2] [2017] 1 SLR 35 (CA).

[3] [2014] 1 SLR 911 (CA) [Staywell].

[4] [2021] SGHC 125.

[5] No 26 of 2012, Sing.

[6] [2019] 4 SLR 17 (HC(I)).

[7] Andrew Phang, Goh Yihan & Jerrold Soh, “The Development of Singapore Law: A Bicentennial Retrospective” (2020) 32:2 Sing Ac LJ 804 at paras 94-100.

[8] Staywell, supra note 3.

[9] Ibid at paras 105-116.

[10] Cap 332, 2005 Rev Ed Sing [TMA].

[11] [2020] 1 SLR 1130 at para 55 (CA).

[12] Ibid at paras 61-62.

[13] [2006] 2 SLR (R) 690 at paras 8, 28-32 (CA) [Polo].

[14] Staywell, supra note 3 at paras 78, 95.

[15] Ibid at para 90.

[16] Ibid at para 95.

[17] United States and Singapore, 4 September 2003 (entered into force 1 January 2004).

[18] Trade Marks (Amendment) Act 2004 (No 20 of 2004, Sing).

[19] No. 19 of 2014, Sing [GI Act].

[20] European Union and Singapore, 19 October 2018 (entered into force 21 November 2019).

Director's Duties: Re-Examining the Bona Fide Test

A PDF version of the article can be found here.

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Director’s duties: Re-examining the bona fide test

Desmond Chye & Russell Vaz*

I.                    Introduction

It is well-established that directors are fiduciaries of the company they serve. As fiduciaries, they owe a host of duties, including the duty to act bona fide in the company’s best interests. Unfortunately, recent developments have created uncertainty over how the test is to be applied. In particular, whether the test has a substantive objective component in addition to a subjective one. The dominant interpretation is that both components are part of the test. However, closer inspection exposes some flaws in this interpretation. This article will explore the arguments for the contrary position: that the test for the duty to act bona fide in the company’s interests is purely subjective.

II.                 The Original Test

Originally, the Singapore courts’ test for assessing bona fides was purely subjective. Directors need only act in “what they consider – not what a court may consider – is in the interests of the company” to satisfy the duty.[1] Courts were motivated by “strong policy considerations” to avoid “coerc[ing directors] into exercising defensive commercial judgment” that “will dampen, if not stifle, the appetite for commercial risk and entrepreneurship”.[2] As such, the duty would not be breached if the directors acted in the “honest and reasonable belief that they were for the best interest of the company, even if those decisions turned out subsequently to be money-losing ones”.[3]

It is apposite to note that the test may occasionally dip into the realm of objectivity. This is also known as the evidential standard version of the objective test. In the Singapore High Court case of Cheam Tat Pang v PP[4] the Learned Judge made the following remark:[5]

“It is settled law that if directors take risks which no director could honestly believe to be taken in the interests of the company, such actions could well support allegations that the directors in question had acted in breach of their fiduciary duties to the company”.

The Learned Judge’s remarks appear limited to establishing the evidential proof of the subjective mind of the director in question to see if he did in fact act reasonably. As such, the evidential objectivity did not detract from the overall subjectivity of the test.

III.              The Dominant Interpretation of the Current Test

The locus classicus for the new test is Ho Kang Peng v Scintronix.[6] The facts of the case are simple: the defendant director effectively paid bribes to advance the company’s overseas interests.[7] In applying the bona fide test, the courts stated:[8]

“However, this does not mean that the court should refrain from exercising any supervision over directors as long as they claim to be genuinely acting to promote the company’s interests. First, “where the transaction is not objectively in the company’s interests, a judge may very well draw an inference that the directors were not acting honestly”... The test in Charterbridge Corporation Ltd v Lloyds Bank Ltd [1970] Ch 62 (at 74) of “whether an intelligent and honest man in the position of a director of the company concerned, could, in the whole of the existing circumstances, have reasonably believed that the transactions were for the benefit of the company”, has been accepted and applied by this court in Intraco (CA) (at [28]). On the other hand, it will be difficult to find that a director has acted bona fide in the interests of the company if he “take[s] risks which no director could honestly believe to be taken in the interests of the company”… Secondly, it seems that the requirement of bona fide or honesty will not be satisfied if the director acted dishonestly even if for the purported aim of maximising profits for the company.” (emphasis added)

By advocating for the standard of an “intelligent and honest man”, and stating that acting for the company’s best interests would be insufficient, the courts seemed to be introducing a substantive objective component.

This interpretation of Scintronix has been largely accepted as the orthodoxy. Subsequent cases, such as the Singapore Court of Appeal case of Goh Chan Peng v Beyonics Technology Ltd[9] appear to support this view, stating that the bona fide test has “both subjective and objective elements”.[10] Eminent local academics such as Professors Dan Puchniak and Tan Cheng Han SC have also adopted the position that the test has a substantive objective component.[11]

IV.              The Alternative Interpretation of the Current Test

A.      Case Authority supporting a Purely Subjective Standard

A closer inspection of Scintronix reveals that it may not have laid down a discrete objective component at all. Phrases like “intelligent and honest man” which hinted at an objective standard were tempered with statements that they would only be used to “draw an inference” or when directors only “purport” to act in the company’s best interest.[12] This suggests that the courts were only advocating the use of an objective evidentiary tool to determine the director’s subjective state of mind, keeping in line with the traditional test. Furthermore, the court never explicitly stated that there would be an objective component. This is an odd oversight considering the uninterrupted pedigree of the purely subjective test.

The apparent support of Beyonics is also to be doubted. The court commented that “where the transaction is not objectively in the company’s interests, a judge may very well draw an inference that the directors were not acting honestly” (emphasis added).[13] This statement suggests that the courts were using an objective evidentiary tool as explicated by Professor Walter Woon. This possibility was noted by the Singapore High Court in Ong Bee Chew v Ong Shu Lin,[14] acknowledging that Beyonics could have merely used an objective evidentiary tool. We note that while Ong Bee Chew did ultimately support the two-part test, this was for procedural fairness rather than doctrinal accuracy as Beyonics was not available to the parties at the time of their submission.[15]

Furthermore, as suggested by Professor Hans Tjio, Scintronix may have simply applied the original Charterbridge test instead.[16] The court in Charterbridge Corporation Ltd v Lloyds Bank Ltd[17] held that the objective standard of an “an intelligent and honest man” would only be applied where the director exercised no discretion at all.[18] The rationale behind it is simple – failing to engage in any subjective consideration whatsoever, an objective assessment remained the only way to determine if he had acted in the company’s interests.[19] In Scintronix, the court found that “[t]he wrong committed by the Appellant in the present case cannot be regarded as an error of judgment – it arose because he failed to exercise any judgment at all.” (emphasis added).[20] As determined by Professor Tjio, this indicates Scintronix was merely a use of the original Charterbridge test in Singapore, applying the objective standard only when no discretion was exercised.[21] This would leave the traditional subjective test largely intact.

B.      Policy Arguments supporting a Purely Subjective Standard

The main public policy rationale for a substantive objective component is to prevent directors from carrying out immoral acts they believe were in the company’s best interests. Under a purely subjective test, he would be exonerated, lowering the standards of commercial morality.  However, the need to maintain a minimum standard of commercial morality must be balanced against the need to avoid stifling entrepreneurship with excessive judicial interference. 

Unfortunately, the two-part test risks stifling entrepreneurship. Its vagueness instils undue fear in directors who would be unsure of what standard to act on. Courts have elucidated that the objective component depends on whether, “objectively, the transactions were not in the company’s interests”.[22] However, in an attempt to mitigate judicial interference, they have softened the standard, stating that is only serves to “[hold] directors to minimum standards of commercial morality” and that the court will thus apply “a very low baseline in order to avoid unnecessary interference”.[23] Unfortunately, ‘commercial morality’ is a nebulously defined criterion that does little to resolve the uncertainty.

Furthermore, the test is phrased very widely as it takes the perspective of an ‘honest and intelligent director’ such that even negligence can potentially fall under the objective limb. This problem was evident in Scintronix where the court made the following remark:[24]

“He simply continued a highly irregular and improper practice which he understood to have been initiated by the previous management under a different form without so much as inquiring why it was made, whether it would implicate the Company, and whether proper sanction had been obtained. He had failed to exercise reasonable care.” (emphasis added)

While the subsequent cases of Beyonics and Ong Bee Chew all stressed a ‘minimum standard’, they never repudiated Scintronix’s requirement for ‘reasonable care’ such that it is possible for the broad standard to persist since that would comport with what is expected of an ‘honest and intelligent’ director. 

If the objective standard is truly, as a plain reading of the judgement indicates, that of an ‘honest and intelligent director’, the substantive objective test would impose too harsh a burden on directors. This is as 99% of all domestic companies are Small Medium Enterprises.[25] It is unrealistic to expect small businesses to have the funds to hire professionals to function as directors. Nor is it realistic to expect all business owners, many of whom are uneducated, to perform the role of an “honest and intelligent director”. Imposing such an exacting standard would “dampen, if not stifle, the appetite for commercial risk and entrepreneurship”.[26]

C.     Applying the Purely Subjective Test to existing Case Law 

The existing case law has dealt solely with the issue of bribery. Bribery satisfies the targeted fact matrix of being both immoral and prima facie in the company’s interest. However, such situations could have been easily prevented by a purely subjective test. As noted in Scintronix, bribery does not help the company’s long-term interests, only its short-term interests.[27] Ergo, a director could subjectively believe giving a bribe to be in the company’s short-term interest but still fail to subjectively believe it is in the company’s interests as a whole, after taking its long-term interests into account. The situation of receiving a bribe, as in Beyonics, is much more straightforward – the director accepted a bribe to do something he otherwise would not have done. It is unlikely any director could subjectively believe that accepting a bribe would further the company’s interests.

V.                 Conclusion

The bona fide test plays a critical role in regulating director’s duties. Uncertainty over its components could prompt unwarranted defensive decision making, curtailing the economic potential of Singapore’s businesses. A clearer test is therefore needed. While we hope that the courts will take the flaws of the two-part test into account, we recognise that the current orthodox interpretation of the bona fide test will likely remain the law for the foreseeable future. Our article merely aims to explore the possibility of an alternative rather than to overturn the status quo.

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* LLB (Candidate) (NUS), Class of 2023. All errors and views expressed in this article remain our own.

[1] Cheong Kim Hock v Lin Securities [1992] 2 SLR 349 [Cheong Kim Hock] at para 26.

[2] Vita Health Laboratories Pte Ltd v Pang Seng Meng [2004] 4 SLR 162 [Vita] at para 17.

[3] ECRC Land Pte Ltd v Ho Wing On Christopher [2004] 1 SLR(R) 105 at para 49.

[4] [1996] 1 SLR 541.

[5] Ibid at para 80.

[6] [2014] 3 SLR 0329 [Scintronix].

[7] Ibid at paras 32-34.

[8] Ibid at paras 38-39.

[9] [2017] 2 SLR 592 [Beyonics].

[10] Ibid at para 35.

[11] D Puchniak, CH Tan & SS Tang, “Company Law” (2017) 18 SAL Ann Rev 247 at paras 9.7-9.8.

[12] Scintronix, supra note 6 at paras 32-34.

[13] Beyonics, supra note 9 at para 36.

[14] [2017] SGHC 285 [Ong Bee Chew] at para 78.

[15] Ibid at para 78.

[16] Hans Tjio, P Koh & PW Lee, Corporate Law (Academy Publishing, 2015) [Tjio, Koh & Lee (2015)] at para 09.043.

[17] [1970] Ch 62 [Charterbridge].

[18] Ibid at 74.

[19] Tjio, Koh & Lee (2015) supra note 16 at para 09.043.

[20] Scintronix, supra note 6 at para 40.

[21] Tjio, Koh & Lee (2015) supra note 16 at para 09.043.

[22] Beyonics, supra note 9 at para 35.

[23] Ong Bee Chew, supra note 14 at para 84.

[24] Scintronix, supra note 6 at para 40.

[25] Singapore Department of Statistics, “Topline Estimates For All Enterprises And SMEs, Annual” (accessed 2 January 2021)

<https://www.tablebuilder.singstat.gov.sg/publicfacing/createDataTable.action?refId=15808>

[26] Vita, supra note 2 at para 17.

[27] Scintronix, supra note 6 at para 37.

Scraping the Sarcophagus of a Company in Liquidation: A Guide for Corporate Tomb Raiders Under the IRDA in Singapore

A PDF version of the article can be found here.

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SCRAPing the SARCOPHAGUS OF A COMPANY IN LIQUIDATION: A GUIDE FOR CORPORATE TOMB RAIDERS UNDER THE IRDA IN SINGAPORE

Clement Karim Lim Zhi Ren *

I. Introduction

Warren Buffett famously remarked that “only when the tide goes out do you discover who has been swimming naked”. As tidal fortunes ebb under the unrelenting headwinds of the COVID-19 pandemic, countless businesses have failed, and numerous managerial indiscretions have been brought to light. In 2020, we have seen the collapse of many former industry giants in Singapore, among many others: Hin Leong Trading, KS Energy, and Robinsons. Almost certainly, more will follow. [1] Unsecured creditors are usually left with only the bare-bones remains of a company’s assets. Hapless but not helpless— this is where the liquidator steps in.

Liquidators are appointed by the court or creditors to realize and distribute the maximum value of assets of an insolvent company. This article aims to canvas the best existing remedies available for liquidators to ‘claw back’ monies paid out by an insolvent company under the Insolvency, Restructuring and Dissolution Act 2018 [2] (‘IRDA’) which came into effect on 30 July 2020. The IRDA is an ‘omnibus’, but admittedly not ‘omnipotent’, legislation [3] that consolidates corporate and personal insolvency laws formerly found under the Bankruptcy Act [4] and the Companies Act. [5]

This article shall discuss four available actions available for liquidators under the IRDA: 1) to avoid prior transactions made by the insolvent company; 2) to hold the owner-controllers behind-the-scenes responsible for the company’s debts, for improper trading; 3) to pursue a common law claim for damages against the directors for the breach of fiduciary duties; and 4) to establish a proprietary claim for a breach of constructive trust.

II. Avoiding Prior Transactions under the IRDA

By relying on an avoidance claim under the IRDA, the liquidator can ‘wind back the clock’ and avoid prior transactions entered into by the insolvent company that were: (a) undervalue transactions; and/or (b) unfair preferences.

A. Undervalue transactions

The elements of a claim for undervalue transactions are as follows:

a) the transactions were made within the relevant time; [6]

b) the transactions were at an undervalue; [7] and

c) the defence of good faith does not apply. [8]

The relevant period for which transactions can be avoided is 3 years prior to the commencement of winding-up proceedings. [9] The period is not relevant unless the company was insolvent or became insolvent in consequence of the undervalue transaction. ^[10] The company is presumed to be unable to pay its debts or presumed to become unable to pay its debts in consequence of the undervalue transaction, in the case of connected persons. ^[11]

A company enters into an undervalue transaction if the company enters into a transaction wherein it receives no consideration, [12] or the consideration received by the company thereunder is significantly less than the consideration incurred by the company. [13]

The courts will not make an order that a transaction is undervalued if the company entered the transaction in good faith and to carry on its business, ^[14] and there were reasonable grounds for believing that the transaction would benefit the company. ^[15] According to the Encus International v Tenacious Investment, [16] the defence of good faith will not apply if it were “obvious” that the transaction would not benefit the insolvent company. [17]

B. Unfair Preferences

The elements of a claim for unfair preference are as follows:

a) the payments were made within the relevant time; ^[18]

b) the defendant is a creditor, surety or guarantor of the insolvent company’s debts or liabilities; ^[19]

c) the insolvent company conducted itself in a manner which put the creditor in a more advantageous position during the relevant period; ^[20] and

d) in giving the preference, the insolvent company was influenced by a desire to improve the creditor’s position. ^[21]

The relevant period for which transactions can be avoided is 2 years prior to the commencement of winding-up proceedings. [22] As with an avoidance claim for undervalue transactions, this 2-year period is only relevant if the insolvent company was insolvent or became insolvent as a consequence of the unfair preference. [23]As is the case for undervalue transaction detailed above, a company is presumed to have been insolvent or have become insolvent as a consequence of the unfair preference, in the case of connected persons. [24]

A company gives an unfair preference to a person if the person is a creditor, surety or guarantor of the company, [25] and the company does anything which puts that person in a more advantageous position than that person would have been ordinarily in the event of the company’s winding up. [26] This element of being put in a more advantageous position should be easily satisfied for unsecured creditors because but for the preference payments, insolvency law would have taken claimants “exactly as it finds them” [27] according to the pari passu principle, which is the default mode of distribution. Without preference payments, unsecured creditors would ordinarily be relegated to scrape the bottom of the barrel and receive the leftover assets (if there are even any remaining) of the company.

The Court will only make an order that payment was preferential if the insolvent company, in making that payment, had a desire to place the creditor in a more advantageous position. [28] This desire is presumed if the preferred creditor is a connected person. [29] To determine whether the insolvent company had a desire to place the creditor in a more advantageous position, the courts will first consider the state of mind of the officers controlling the debtor [30].

Transactions which are actuated only by proper commercial considerations will not constitute a voidable preference. [31] An example of such a proper commercial consideration can be found in Re MC Bacon [32]. There, the bank creditor had placed pressure on the debtor company and demanded a debenture. In deciding that the debenture was not an unfair preference, Millett J found that the debtor company’s decision to grant the debenture to the bank creditor had been made as part of the director’s decision to continue trading in a genuine belief that the company could be salvaged and that they had no choice but to accede to the bank’s request for a debenture. [33]

If the claim is successful, the court has a wide discretion to make orders under s 227(1) of the IRDA. The available orders include, inter alia, an order requiring any beneficial recipient to account for benefits received from the company [34], an order requiring any property transferred as part of the transaction to be vested in the company [35] or the release or discharge of any security given by the company. [36]

III. Improper trading

It is trite law that a company, even if effectively managed and owned by one owner, is a separate legal entity from its owner-controllers. [37] However, this does not mean that owners of the company are insulated from all personal liability in the event of any personal wrongdoing. The liquidator can apply to court to hold the owners fully liable for the debts of the company under one of the two categories of “improper trading” under the IRDA: (1) wrongful trading; and (2) fraudulent trading. These two variants of “improper trading” shall be addressed in turn below.

For wrongful trading, a company liable if it, inter alia, incurs debts or other liabilities without reasonable prospect of meeting them in full. [38] The provision captures every person who was a party to the company trading in that manner who knew that the company traded wrongfully or ought to have known about the wrongful trading as an officer.

Fraudulent trading, on the other hand, is satisfied if in the course of winding up of a company, it appears that the business of the company has been carried on with intent to defraud creditors of the company.

In either case of “improper trading”, the liquidator may apply to the Court to hold knowing parties or officers who ought to have known about the company trading in that manner personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company. [39]

IV. Breach of Directors’ Common Law Fiduciary Duties

The liquidator may also have a common law claim against the directors of company for breach of fiduciary duties. This includes: (a) the duty to act bona fide in the company’s interests; (b) the duty to act for proper purpose; and (c) the duty to not be found in a position of conflict-of-interest without proper disclosure. [40] In addition, if a director procures a payment to be made by the company in breach of his fiduciary duty while the company is on the brink of insolvency, the liquidator may sue him personally to recover the money. [41]

A. Duty to act bona fide in the company’s interest

The duty to act bona fide in the company’s interests is theoretically a subjective test, based on what the director himself had honestly believed [42]. However, as a matter of evidence, courts have verged on an objective test based what an “an honest and intelligent man in the directors’ position, taking an objective view, could reasonably have concluded”. [43] If an act committed by a director is not in the objective interests of the company, the court may draw an inference that the director was not acting bona fide in the interests of the company. [44] In a modern setting, this rule may be better reframed as a duty to ensure that whatever transactions are authorised by the board must be commercially justifiable from the company’s point of view. [45]

B. Duty to act for proper purposes

If the main consideration for a director’s act or resolution was to benefit an individual and not the company, then the action is taken for an improper purpose. [46] An example of a breach of the duty to act for proper purposes is the use of a power to forestall one take-over bid in preference over another. [47] The general principle is that an exercise of a fiduciary power can be set aside if its exercise was actuated by an improper purpose. [48]

C. Duty to disclose conflicts of interests

The no-conflict rule obliges a director to avoid situations where his personal interest may conflict with those of the company. [49] In particular, when a director makes his own interests paramount, he will invariably not be acting in the interests of the company. This is a strict duty and applies even where the company itself could not have profited from the corporate opportunity that was diverted to the directors. [50] The fact that the director has acted bona fide does not preclude the court from imposing liability—the liability arises from the mere fact of a profit having, in the stated circumstances, been made. [51]

D. Duty to take into account interests of creditors when company is insolvent/approaching insolvency

There is a separate doctrine which states that, if a company is on brink of insolvency, its directors cannot dissipate the company’s assets unless there is a legitimate reason to do so. [52] In Chip Thye Enterprises Pte Ltd (in liquidation) v Phay Gi Mo and Others [53], the High Court held that certain transactions entered by the directors in the name of the company were not in the interest of the creditors, as they reduced the assets of the company, which should have been preserved for the benefit of its creditors. Therefore, the directors in Chip Thye were held personally liable to compensate the company. The underlying rationale is that when a company is insolvent, the interests of the creditors become the dominant factor in what constitutes as benefit to the company. [54] Simply put, in a company approaching insolvency, its creditors displace its shareholders as the primary stakeholder. [55]

V. Breach of Constructive Trust

The liquidator can also seek to establish a proprietary claim against an insolvent company for breach of a constructive trust. [56] In such a cause of action, the liquidator can pursue monies transferred out of the company’s accounts on the basis of knowing receipt and/or dishonest assistance.

The elements of a claim in dishonest assistance are: (a) the existence of a trust; (b) a breach of that trust; (c) assistance rendered by third party towards the breach; and (d) a finding that the assistance rendered by the third party was dishonest. [57]

The elements required to establish knowing receipt are: (a) a disposal of the plaintiff’s assets in breach of fiduciary duty; (b) the beneficial receipt by the defendant of assets which are traceable as representing the assets of the plaintiff; and (c) knowledge on the part of the defendant that the assets received are traceable to a breach of fiduciary duty. [58] As with dishonest assistance, one particular difficulty that remains is in determining precisely the degree of knowledge that is required for recipients of trust property to be fixed with liability.

VI. CONCLUSION

The commencement of winding-up proceedings is only the beginning of the end. Where their own actions are questionable, controllers of insolvent companies will not simply be able to wash their hands off the debts of the company once it fails. Liquidators, as the representative of all ‘corporate tomb raiders’, still have an extensive range of options to enrich an insolvent company’s depleted pool of assets, as outlined above. This will prevent one’s pound of flesh from being entombed in the sarcophagus of the company and lost forever.

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* LLB (Candidate) (NUS). All errors and views expressed in this article remain my own. Weblinks cited in the article are functioning as of the date of publication.

[1] Business Times (21 December 2020), “More restructuring, insolvency cases likely in 2021 as reliefs end” online: <https://www.businesstimes.com.sg/companies-markets/more-restructuring-insolvency-cases-likely-in-2021-as-reliefs-end>.

[2] No. 40 of 2018, Sing.

[3] Singapore Parliamentary Debates: Official Report (1 October 2018) vol 94 (Mr Edwin Tong Chun Fai, Second Minister for Law)

[4] Cap 20, 1985 Rev Ed Sing.

[5] Cap 50, 2006 Rev Ed Sing.

[6] IRDA, s 226.

[7] Ibid, s 224(3).

[8] Ibid, s 224(4).

[9] Ibid, s 226(1).

[10] Ibid, s 226(2).

[11] Ibid, s 226(3).

[12] Ibid, s 224(3)(a).

[13] Ibid, s 224(3)(b).

[14] Ibid, s 224(4)(a).

[15] Ibid, s 224(4)(b).

[16] [2016] SGHC 50.

[17] Ibid at para 65.

[18] IRDA, supra note 2, s 226.

[19] Ibid, s 225(3)(a).

[20] Ibid, s 225(3)(b).

[21] Ibid, s 225(4).

[22] Ibid, s 226(1)(b).

[23] Ibid, s 226(2).

[24] Ibid, s 226(3).

[25] Ibid, s 225(3)(a).

[26] Ibid, s 225(3)(b).

[27] See e.g. Re Smith, Knight & Co, ex p Ashbury (1868) L.R. 5 Eq. 223 at 226: “The Act of Parliament unquestionably says, that everybody shall be paid pari passu, but that means everybody after the winding-up has commenced. [The Act] takes them exactly as it finds them, and divides the assets amongst the creditors, paying them their dividend on their debts as they then exist”.

[28] IRDA, supra note 2, s 225(4).

[29] Ibid, s 225(5).

[30] DBS Bank v Tam Chee Chong and another [2011] 4 SLR 948 at para 22.

[31] Ibid.

[32] [1990] BCLC 324.

[33] Ibid at 336F–337E, explained by DBS Bank v Tam Chee Chong, supra note 32 at para 23.

[34] IRDA, supra note 2, s 227(1)(d).

[35] Ibid, s 227(1)(a).

[36] Ibid, s 227(1)(s).

[37] Salomon v A Salomon & Co Ltd [1896] UKHL 1.

[38] IRDA, supra note 2, s 239(12).

[39] Ibid, ss 238(1) and 239(1).

[40] Walter Woon, Walter Woon on Company Law, 3^rd Ed (Singapore: Sweet & Maxwell, 2005) at paras 8.09 to 8.12.

[41] Singapore Swimming Club v Koh Sin Chong Freddie [2016] SGCA 28 (CA). While the case was not strictly about a company (it involved a club), it was found that the management committee was a fiduciary of the club, and the fiduciary duties owed by the management committee to the club in that case could be analogized to the duties of a director of a company.

[42] Goh Chan Peng v Beyonics Technology Ltd [2017] SGCA 40 at para 36 [Beyonics].

[43] Intraco Ltd v Multipak [1994] SGCA 142 at para 29.

[44] Beyonics, supra note 45.

[45] Walter Woon, Walter Woon on Company Law, 3^rd Ed (Singapore: Sweet & Maxwell, 2005) at para 8.20.

[46] Goh Kim Hai Edward v Pacific Can Investment Holdings Ltd at 1 SLR(R) 540 at para 98 [Pacific Can].

[47] Howard Smith Ltd v Ampol Petroleum Ltd [1974] 2 WLR 689 (Privy Council on appeal from New South Wales),

[48] Pacific Can, supra note 49.

[49] Beyonics, supra note 45 at para 47.

[50] See Regal (Hastings) v Ltd v Gulliver [1967] 2 AC 134.

[51] Ibid at 145.

[52] Liquidators of Progen Engineering Pte Ltd v Progen Holdings Ltd [2010] SGCA 31; Parakou Investment Holdings Pte Ltd v Parakou Shipping Pte Ltd [2018] SGCA 3 (CA) [Parakou]; Chip Thye Enterprises Pte Ltd (in liquidation) v Phay Gi Mo and Others [2004] 1 SLR 434 [Chip Thye]; Cheng Wai Yuen, “Corporate Director's Common Law Duty to Creditors? - A Revelation of the Present State of Law” [2002] 22 SingLRev 104 at 106: “in light of recent judicial trends in the common law jurisdictions, as well as the unanimous recognition of such a duty by academics and jurists, this duty is so firmly entrenched in the common law that any attempt to dispute its existence would be futile”.

[53] Chip Thye, supra note 55.

[54] Ibid at para 13.

[55] Lee Eng Beng S.C, “The Duty to Maintain Equality in Collective Creditor Actions” (2008) 20 SAcLJ 369 at 371.

[56] This was successfully attempted in the recent Court of Appeal case of Parakou—see Parakou, supra note 55.

[57] George Raymond Zage III v Ho Chi Kwong [2010] 2 SLR 589 at para 20.

[58] El Ajou v Dollar Land Holdings plc and another [1994] 2 All ER 685 at 700, affirmed by the Singapore Court of Appeal in George Raymond Zage III v Ho Chi Kwong [2010] 2 SLR 589.

Algorithmic Contracts: Who is to Blame?

The PDF version of this article can be found here.

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ALGORITHMIC CONTRACTS: WHO IS TO BLAME?

Journe Fu*

I.          Introduction

Traditionally, all the elements leading to the formation of a valid contract require some form of human cognition. A party will make an offer, while the other party will receive the offer, deliberate the terms, and eventually decide to accept. Rapid advancements in artificial intelligence technology has allowed algorithms to form contracts without human cognition at the time of formation. This stretches traditional contract law principles, which are premised on two human beings reaching an agreement, into unchartered territory.

This article closely examines how the Singapore Court of Appeal (‘Court of Appeal’) in Quoine Pte Ltd v B2C2 Ltd[1] adapts the doctrine of unilateral mistake to contracts formed using a deterministic algorithm and evaluates the approach proposed by the Court of Appeal.

II. The Law on Unilateral Mistake

The law on unilateral mistake was comprehensively laid out by the Court of Appeal in Chwee Kin Keong v Digilandmall.com Pte Ltd.[2] A unilateral mistake occurs when one party is mistaken as to a fundamental term of the contract and the other non-mistaken party is aware of this.[3] At common law, the non-mistaken party must have actual knowledge of the mistake, which would render the contract void.[4] The Court of Appeal also accepted that there exists an equitable doctrine of unilateral mistake that operates when the non-mistaken party, having constructive knowledge of the mistake, engages in some form of unconscionable conduct pertaining to the mistake. In equity, the contract will be voidable.[5]

III. THE Facts of Quoine

Both B2C2 and Quoine were market-makers who created liquidity on the trading platform (the “Platform”) by actively buying and selling cryptocurrency. Both parties utilised deterministic algorithms[6] to complete these trades, meaning that the buy/sell contracts were concluded without any direct human involvement apart from the initial programming.

Quoine’s algorithm subsequently encountered software errors which set off a sequence of events ultimately triggering margin calls against counterparties (the ‘Counterparties’), who had borrowed Ethereum (‘ETH’) from Quoine to purchase Bitcoin (‘BTC’). Quoine’s algorithm automatically sold ETH to the counterparties in exchange for BTC, in order to repay the ETH loans (see diagram below, arrows 1 and 2).

These orders were in part met by B2C2’s orders to sell ETH for BTC (see diagram below, arrows 3 and 4). However, due to the software error, the ETH was sold at approximately 250 times the going market rate, leaving B2C2 with a windfall.[7] In response, Quoine then unilaterally cancelled and reversed these trades (see diagram below, arrows 1, 2, 3 and 4) leading B2C2 to claim against Quoine for breach of contract.

One of the defences raised by Quoine was that the underlying trades were void for unilateral mistake at common law or voidable in equity, therefore entitling them to reverse the trades. The main problem presented to the Court of Appeal in Quoine was ascertaining the type of knowledge possessed by the non-mistaken party, since the contract was formed solely using deterministic algorithms and neither party had any knowledge of its formation or the terms of the contract before the contract was concluded.

Quoine asserted that the Counterparties held two mistaken beliefs: first, that it was necessary to close out their positions in response to margin calls made by the Platform; second, that they were buying ETH for BTC at prices accurately representing the true market value of ETH relative to BTC.

(i) Unilateral mistake at common law

The first alleged mistake was held to be a mistaken assumption and not a mistake as to a term of the contract, and so in respect of which the doctrine of mistake would not operate. As for mistake (2), the Court of Appeal held that it was wrongly characterised and that since the prices had been arrived at by the parties’ respective algorithms as agreed upon, the actual premise for the mistake was the belief that the platform would not fail. In other words, the Counterparties mistakenly believed the Platform would either always operate as intended or would otherwise provide adequate identification and protection to stop trading. Even then, the Court of Appeal held this was merely a mistaken assumption as to the circumstances under which the Trading Contracts were entered into and not a mistake as to a contractual term.[8] The common law doctrine of unilateral mistake therefore did not apply.

(ii) Unilateral mistake in equity

The Court of Appeal left open the question of whether its equitable jurisdiction could be extended to mistaken assumptions,[9] but nevertheless explored the outcome on the assumption that it could. This led to a unique problem since, at both common law and equity, the requisite knowledge of the mistake must accrue prior to contract formation for the doctrine of mistake to operate. In the present case, the contracts were entered into without human cognition. The parties would therefore only have knowledge of the mistakes post-contract formation.

IV. Adapting the Knowledge Rule for Algorithmic Contracts

The majority, led by Menon CJ, held that to ascertain ‘knowledge’, the state of mind of the programmer of the algorithm at the time of programming would be examined. This was supported by the view of amicus curiae Professor Goh Yihan, who recognised that the time of programming is when the programmer’s knowledge is the most concretised.[10] The doctrine of unilateral mistake would apply if the programmer had contemplated or ought to have contemplated that a future party would be mistaken and specifically designed the algorithm to exploit such a mistake.[11] Alternatively, if after programming, but before the time of contracting, the programmer or user of the algorithm becomes aware that the party might be mistaken but allows the algorithm to continue running in order to exploit this mistake, the doctrine will likewise apply.[12] The Court of Appeal held that B2C2 had no such contemplation and therefore neither possessed the requisite actual nor constructive knowledge for the doctrine of unilateral mistake to operate.

In his dissenting judgment, Mance IJ held that a contract could be set aside if it would be obvious to a reasonable person aware of the prevailing circumstances that some fundamental error had occurred, the timing of the mistake being irrelevant.[13] Mance IJ emphasized that algorithmic transactions with no human involvement did not fit with the principles of unilateral mistake at common law but what was certain was the fundamentality of the mistake. He held that the mistake in Quoine was just as fundamental as the mistake in Digiland and that any human trader viewing the transaction would have realized there was a fundamental error.

The majority approach therefore focuses on the reprehensible conduct of the non-mistaken party, stemming from the principle that where both parties had agreed to transact in a manner which prevents them from knowing if a contract would be formed or the contractual terms, the court ought to uphold this agreement and not intervene. Contrastingly, Mance IJ asserts that the court may intervene where there is substantive unfairness of the contract, choosing to focus instead on whether the contract is exceedingly onerous to one party. This requires a comparison of the transaction in question with other similar transactions in the market.

V. Evaluation OF THE TWO APPROACHES

The Majority’s Approach

(i) Lack of protection for end users of trading platforms

The majority approach upholds contracts where the algorithm-induced mistake was neither contemplated nor ought to have been contemplated by the programmer. For protection against commercially unsound contracts formed by way of algorithmic errors, it is crucial that parties contract for such unwanted events by allowing for the reversal of transactions when such unforeseen circumstances arise. The problem here is that trading agreements are usually entered into based on standard forms put forth by the platform operator, with the end users having little say as to the terms of the agreement.

Conveniently, in Quoine, the mistake was caused by the Platform operator, who dictates the terms of the standard form agreements and can easily contract for such reversals. However, should the mistake arise due to the fault of the end user’s algorithm (ie, B2C2 or the Counterparties’ algorithms, in the case of Quoine), then there is little that the end user can do to contractually provide for a right to reverse transactions. The majority approach therefore overlooks whether parties are able to bargain for risk allocation when entering trading agreements, leaving the end users of trading platforms unduly vulnerable.

(ii) Distinction between contemplation and possibility: black swan events

In Quoine, B2C2 knew of the possibility that the mistake would occur but, because such an event was unlikely, never contemplated its actual occurrence.[14] Based on this finding, the Court of Appeal affirmed the Singapore International Commercial Court’s decision[15] that B2C2 did not have actual or constructive knowledge of the mistake since the B2C2 programmer had not turned his mind in any detail to the circumstances in which the mistake would happen.

By drawing a distinction between the possibility of a mistake occurring and the contemplation of that possibility, end users become more vulnerable to black swan events.[16] Such events are rare, and therefore may never be in the contemplation of the non-mistaken party, yet there is a real risk that they will occur and lead to severe consequences. The majority approach precludes a finding of unilateral mistake under black swan events since the non-mistaken party would not have considered the real possibility of it happening. This further exacerbates the vulnerability of end users.

(iii) Impracticality and unfairness

Low and Mik posit that the majority’s approach unduly focuses on the deterministic nature of the algorithm, using it as the grounds on which to assess the programmer’s knowledge at the time of programming by working backwards.[17] This overlooks how market conditions (and therefore prices) are likely to change between programming and contracting, and the parties’ state of mind at the time of contracting has to be evaluated in light of the prevailing market conditions.[18] ‘Working backwards’, merely because the algorithm is deterministic, would require the programmer to have near-prophetic knowledge which would undermine the doctrine’s practical operation tremendously.[19] The authors therefore argue that the focus should be on market indeterminacy and not algorithmic determinism. Moreover, the authors identified that the Court of Appeal’s approach may be largely impractical in certain situations. It is convenient that Mr. Boonen, who programmed B2C2’s algorithm, was also the director of B2C2 who made important business decisions.

In reality, this is the exception rather than the norm. Complex algorithms are generally written by multiple programmers over long periods of time, and these programmers typically follow the instructions of their bosses or clients. It is therefore appropriate for a distinction to be drawn between writing the program (a purely technical activity) and setting the transactional parameters (involving commercial decisions), as aptly demonstrated by Software Solutions Partners Ltd, R (on the application of) v HM Customs & Excise.[20] It would be useful for the Court of Appeal to clarify whose knowledge under such circumstances should be assessed, as well as the time at which to do so.

Increasingly, parties are also utilising ‘off the shelf’ algorithms, which are programmed by an external party and made available for purchase in a digital library. Surely, it would seem absurd to trace knowledge of a mistake back to the programmers of such software. Applying the majority approach in Quoine to such situations would find the mistaken party having to prove a prophetic and dishonest intent on the party using the algorithm, which seems plainly unfair. Further, the commercial reality is that the party employing the algorithm is also likely to be in a stronger bargaining position. Surely the doctrine of unilateral mistake ought not to exacerbate inequality.[21]

The Minority’s Approach

(i) Third-party interests

While Mance IJ’s approach appears to resolve the impracticality of the majority approach, problems arise with Mance IJ’s insistence on a purely equitable doctrine of unilateral mistake for automated contracts—supposedly because these contracts do not fit within the principles governing unilateral mistake at common law. This is especially since the operation of algorithms might lead to third-party interests arising before any human discovery of the mistake.[22]

Assuming Mance IJ was referring to algorithms which are capable of both contract formation and contract performance, if third-party interests are the sole reason for voiding contracts at common law, perhaps the consequences of unilateral mistake ought to be revised generally, as opined by Mik and Low.[23]

(ii) Reliance interests

In Singapore and England, benefits transferred under a contract that has been rescinded are reversed in the law of unjust enrichment. The law, however, will not allocate losses incurred in reliance of the transaction in the absence of any transferred benefits. Perhaps it would be apt for the court to protect the reliance interest of users since foreign jurisdictions have done so. In Germany, non-mistaken parties will be entitled to compensation if their reliance on the rescinded contract was justified. However, they might lose the right to compensation if they knew of the grounds for rescission vitiating the contract or ought to have known it (and were therefore negligent).[24] Provisions where reliance is given similar protection can also be found in the Principles of International Commercial Contracts[25] and the Second Restatement of Contracts in the US[26].

VI. Conclusion

The majority approach in Quoine remains the law on algorithmic contracts in Singapore. Nevertheless, it remains to be seen how the Singapore courts will assess knowledge in the context of non-deterministic algorithms (ie, machine learning) whereby the same input may lead to differing outputs. It is also clear that the approach in Quoine will benefit from further refinement over time. Until then, it seems prudent for parties to contract for the right to reverse a transaction should algorithmic errors occur.

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* LLB (Candidate) (NUS), Class of 2023. All errors and views expressed in this article remain my own.

[1] [2020] SGCA(I) 2 [Quoine].

[2] [2005] 1 SLR(R) 502 [Digiland].

[3] Ibid at paras 34 and 80.

[4] Ibid at para 37.

[5] Ibid at para 80.

[6] Quoine, supra note 1 at para 82 defines deterministic algorithms as those which ‘will always produce precisely the same output given the same input’.

[7] At the material time, the market rate was approximately 0.04 BTC to 1 ETH. The impugned trades in Quoine were made at the rate of 9.99999 BTC to 1 ETH.

[8] Quione, supra note 1 at para 115.

[9] Ibid at para 92.

[10] Quione, supra note 1 at para 99.

[11] Ibid at para 104.

[12] Ibid at para 99.

[13] Ibid at paras 181-183.

[14] Quione, supra note 1 at para 121.

[15] B2C2 Ltd v Quoine Pte Ltd [2019] SGHC(I) 3.

[16] A black swan event is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences.

[17] Kelvin F.K. Low & Dr Eliza Mik, “Lost in Transmission: Unilateral Mistakes in Automated Contracts” Law Quarterly Review (forthcoming, Jun 2020) [Low and Mik] at p 3.

[18] Ibid.

[19] Ibid.

[20] [2007] EWHC 971.

[21] Low and Mik, supra note 17 at p 4.

[22] Quoine, supra note 1 at para 182.

[23] Low and Mik, supra note 17 at p 5.

[24] § 122 BGB (Germany).

[25] Article 3.2.2(1)(a), Principle of International Commercial Contracts.

[26] § 153 Restatement (Second) of Contracts, The American Law Institute.

Empirical Legal Research in Singapore: Its Uses, Its Limitations, and the Way Forward

A PDF version of the article can be found here.

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Empirical Legal Research in Singapore: ITS USES, ITS LIMITATIONS, AND THE WAY FORWARD

Darren Ang*

I.               Introduction

A.    Lawyers against scientists

Let us begin with a simple proposition: the methods used to reach conclusions in law are inherently different from those used in the hard sciences.[1]

We can explain this with a quick thought experiment. Ask a lawyer to prove a point, and they would probably point to an authoritative source that is broadly related to the conclusion sought to be reached, then hammer in their conclusion with arguments from principle and logic (and sometimes, rhetoric).

In contrast, ask a scientist to prove a point, and their approach is quite different. They would probably make a hypothesis, then run experiments to collect data before analysing that data using statistical methods. Their conclusions are reached through careful observation, complete with declarations of percentage-accurate degrees of confidence in their results.

If these contrasting methodologies had to be summarised in one word each, it could be said that methods in law are “argumentative”, while those in the hard sciences are “empirical”. More broadly, it could also be said that law is “qualitative" while the hard sciences are “quantitative”.

B.     The landscape of empirical legal research

However, over the past half-century, empirical methodologies have increasingly found their way into legal scholarship, particularly in the United States.[2] Entire textbooks have been written on the subject,[3] and legal studies with empirical components have come to take on bolder inquiries—including assessing judges’ behaviour and explaining their individual writing styles.[4]

In Singapore, the empirical charge has just begun to take hold. Over the past decade, at least six studies have relied on some form of empirical methodology, and all of them have relied on published judicial decisions as quantitative data.[5]

It turns out that there is a well-developed discipline in communications research which neatly encapsulates methodologies which “proceed from text to results”—its name is “content analysis”.[6] However, among the six empirical legal studies in Singapore, only the study by Lo et al has expressly acknowledged that it was adopting a content analysis methodology.[7]

In light of the recent empirical legal research charge, this article seeks to shed some light on the nature of content analysis methodologies, its limitations in the context of analysing published judicial decisions, and some potential workarounds to these limitations. It concludes with a brief suggestion that, in such contexts, the “empirical” methodologies of content analysis achieve their objectives best when paired with conventional, “argumentative” legal analysis.

II.             What is Content Analysis, and why is it appropriate For Legal Research?

A.    Content analysis and its methodology

Content analysis is a research technique that seeks to make replicable and valid inferences from texts to the contexts of their use.[8] That is, it seeks to draw meaningful conclusions through analysing large bodies of text quantitatively, such that future researchers applying the same methodology would reach the same conclusions.

The methodology of content analysis is robust—in a leading text on the discipline, Krippendorff identified six “components” of content analysis, which are as follows:[9]

1)     Unitizing: distinguishing segments of text which are of interest to an analysis;

2)     Sampling: limiting observations to a manageable subset of units that is statistically or conceptually representative of the set of all possible units;

3)     Recording/Coding: interpreting the unitized data and stating one’s experiences either in the formal terms of an analysis (recording) or according to observer-independent rules (coding);

4)     Reducing: using established statistical techniques or other methods for summarising or simplifying data;

5)     Abductively inferring contextual phenomena: bridging the gap between texts and what the texts imply using analytical constructs;

6)     Narrating: making the results comprehensible to others.

While a full exposition of each of these six components is out of the scope of this article, some discussion of the component of “abductive inference” is apposite. This component is said to “distinguish content analysis from other modes of inquiry”,[10] and it materialises as “analytical constructs” which function as “the best hypothesis or explanation that the analyst can imagine or defend … backed by knowledge of the context of the analysed texts”.[11]

The distinctive element of “abductive inference” makes content analysis methodologies particularly appropriate for the analysis of published judicial decisions—in this context, the “analytical constructs” can take the form of legal principles derived from conventional legal analysis, and these can be employed to justify quantitative findings.[12] To illustrate this with an example from an upcoming empirical legal study involving the author, a quantitative finding that a traffic offender’s plea of guilt is given mitigatory weight about 80% of the time may be explained with an argument from the sentencing objective of specific deterrence.

B.     The history and development of content analysis in legal scholarship

The earliest examples of content analysis are found in the quantitative analyses of printed matter by the Church in the 17^th Century, to which the Church concluded that the printing of non-religious materials were a threat to its authority—this went on to inspire a significant 20^th Century movement where various researchers engaged in quantitative analyses of newspapers and propaganda publications in an attempt to uncover, among other things, the profit motives behind newspapers and their negative effects on society.[13] Around that time, the seeds to the content analysis movement in legal scholarship were sown.

It has been said that “[t]he epistemological roots of content analysis [in legal scholarship] lie in Legal Realism”.[14] Legal Realism was a movement within the American legal academic circle that first gained traction in the 1920s,[15] and while the Realists departed from each other at various points, they shared a common scepticism towards conventional legal theories and zeal for reform.[16] Among them, a significant faction of the Realists sought to predict judges’ decisions with some degree of certainty,[17] and the empirical analysis of recorded judicial opinions was a particularly appropriate means towards that end.[18]

While the full extent of Realist thought has since lost most of its force,[19] the Realists’ clarion call to empiricism survived:[20] following the explosion of quantitative studies involving the content analysis of published judicial decisions in the United States in the 1990s-2000s,[21] the systematic content analysis of published judicial decisions is now “a mainstay of legal and political science scholarship”.[22]

C.    The place of content analysis in modern legal scholarship

What, then, is the place of content analysis in modern legal scholarship? It is said that content analysis “trades the pretence of ontological certainty for a more provisional understanding of case law”.[23] That is, conventional legal analysis requires the subjective, “deeply reflective” interpretation of a narrower area of the law,[24] while content analysis reaches an objective, “thinner” understanding of a large number of decisions.[25] They are different tools within the toolbox of legal analysis.

It follows that the role of content analysis in legal scholarship is not to supersede conventional legal analysis; instead, its role is to complement and augment conventional analysis.[26] For example, while conventional legal analysis is best suited for landmark judgments with great legal and cultural significance,[27] content analysis is particularly useful at “proving a negative”—if Principle Y states that Factor X will not be given weight except in exceptional cases, it can only be tested by looking through a sample of cases where Factor X was brought to the court’s attention, and finding that Factor X was given no weight in almost all of the sampled cases. It follows that both tools can be used in tandem to reach more robust conclusions[28]—continuing off the above example, if the content analysis reveals that Factor X is actually given weight in a significant proportion of cases, this would strongly support an argument for Principle Y to be reformed (or repealed).

However, there exists a more compelling reason to use content analysis in tandem with conventional legal analysis—there are several limitations inherent in published judicial decisions which, in most cases, render content analysis methodologies incapable of reaching robust conclusions in and of themselves.

III.           Limitations and potential workarounds

A.    The problem of unpublished decisions

Not every dispute goes to court, and the ones that do are often resolved without written or published opinions. In Singapore, the existence of unpublished decisions is well-known[29]—judges generally do not owe a duty to issue written grounds of decision. The most common situation for the duty to issue a written grounds of decision to arise, in both civil and criminal cases, is when a notice of appeal is filed.[30]

From these circumstances alone, it could be assumed that published decisions would likely involve more contentious cases, while straightforward cases are more likely to be unpublished.[31] However, this forms an insurmountable hurdle for aspiring researchers at the “sampling” component of content analysis, as the sample of published judicial decisions would never be representative of the whole population of interest of an empirical legal study. [32]

One workaround suggested by Hall & Wright is to acknowledge this hurdle and explicitly limit the scope of the study to published judicial decisions.[33] For example, in the study on the development of Singapore law by Goh & Tan, the authors limited their sample to reported cases, justifying this by arguing that reported cases “perhaps provide more significant influence on our local jurisprudence”.[34] In the author’s view, Goh & Tan’s argument sufficiently addresses the problem of unreported cases while also providing a positive justification for their sample.

However, even in studies where limiting the sample to published or reported cases cannot be similarly justified, it is said that a “skewed view” is better than having no view on the matter, and published decisions, as one of the significant sources of law for lawyers in the common law tradition, are still a “highly valuable source for systematic study”.[35] The limitations to empirical legal studies only mean that researchers must be “less expansive … in drawing conclusions from their findings”.[36] For example, while empirical studies measuring the effects of extra-legal factors on appellate decision-making in the United States had been subject to harsh attacks on their accuracy, more nuanced empirical legal studies that have acknowledged the limitations of their methodologies and employed more sophisticated techniques have been taken to more kindly.[37]

B.     The problem with analysing causative relationships between facts and decisions

In addition to the problem of unpublished decisions, Hall & Wright argue that a “circularity problem” arises when content analysis is employed to find causative relationships between legally relevant factors and judicial opinions, as the written facts and opinions may not fully capture the “real world facts” or the entirety of the case process.[38] This raises an issue at the “abductive inference” component of content analysis—abductive inference contemplates finding the best explanation to a particular set of facts, but if the facts themselves are incomplete, any inferences made from them will be similarly imperfect.

Unfortunately, to the author’s knowledge, no workaround is available to deal with this problem, and various empirical legal studies have faced harsh attacks on their validity for failing to take it into account.[39] While some empirical legal researchers have resorted to gathering data by physically attending court hearings,[40] and those studies have a stronger claim to their validity, no empirical study could possibly account for the closed-door and confidential nature of judicial decision-making.[41] Therefore, a similar attitude as with that towards unpublished decisions must be adopted: the problem must be acknowledged, and the conclusions sought to be reached must be restricted accordingly.

To that end, it is suggested that any empirical legal study that seeks to find the “weight” or “significance” attached to factors considered in judicial decisions may overreach the boundaries of content analysis—as “weight” or “significance” is a qualitative inquiry, best suited for conventional legal analysis. Most of the empirical legal studies in Singapore appear to have recognised this, and they have generally involved the counting of factors without any evaluation of causative significance, coupled with qualitative analyses of the findings using more conventional techniques of legal analysis.[42] In the author’s view, this combination the best balance between depth and objectivity of understanding.[43]

IV.           Conclusion

This article has set out the basic methodology and historical development of content analysis as a methodology in empirical legal scholarship, as well as its uses, limitations, and potential workarounds to those limitations. In summary, it has been argued that in the context of analysing published judicial decisions, content analysis methodologies achieve their objectives best when paired with conventional legal analysis, and while the problems with unpublished decisions and analysing causative relationships can be mitigated to some degree by such a pairing, they should be explicitly dealt with (or simply acknowledged) where they arise.

The empirical legal research charge has already begun—it should be welcomed with open arms. It is hoped that aspiring empirical legal researchers remain cognisant of the unique capabilities and limitations of their methodologies, and that the introduction of empirical methodologies into legal scholarship in Singapore will be the catalyst for fruitful discussions and developments in the law.

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* LL.B. (Hons.) Candidate, National University of Singapore. The author wishes to express his most heartfelt gratitude to Mr. Benny Tan (Sheridan Fellow, National University of Singapore) for leading the empirical legal research charge within the Singapore Law Review, and for the many illuminating discussions about empirical methodologies in law—from which the seeds to a forthcoming empirical legal research paper and this companion piece were sown.

[1] For more variants on this illustration and the inspiration for this section, see Robert Lawless et al, Empirical Methods in Law, 2nd ed (Alphen aan den Rjin: Wolters Kluwer, 2016) at 7-20.

[2] Mark A Hall & Ronald F Wright, “Systematic Content Analysis of Judicial Opinions” (2008) 96:1 Cal L Rev 63 at 72.

[3] See eg, Lawless et al, supra note 1.

[4] James C Phillips & Edward L Carter, “Oral Argument in the Early Roberts Court: A Qualitative and Quantitative Analysis of Individual Justice Behaviour” (2010) 11:2 J App Pr & Pro 325; Keith Carlson et al, “A Quantitative Analysis of Writing Style on the U.S. Supreme Court” (2016) 93:6 Wash ULO 1461.

[5] These are: Goh Yihan & Paul Tan, “An Empirical Study on the Development of Singapore Law” (2011) 23 SAcLJ 176; Lee Zhe Xu et al, “The Use of Academic Scholarship in Singapore Supreme Court Judgments” (2015) 33 Sing L Rev 25; Cheah W L & Goh Yihan, “An Empirical Study on the Singapore Court of Appeal’s Citation of Academic Works: Reflections on the Relationship Between Singapore’s Judiciary and Academia” (2017) 29 SAcLJ 75; Agnes Lo et al, “The Evaluation of Medical Expert Opinions in Litigation: An Empirical Study” (2018-2019) 36 Sing L Rev 247; Jerrold Soh, “A Network Analysis of the Singapore Court of Appeal’s Citations of Precedent” (2019) 31 SAcLJ 246; and Professor Gary Chan’s monograph at Gary Chan Kok Yew, Tort of defamation before the Singapore Courts, 1965-2015: A comparative and empirical study (Singapore: Academy Publishing, 2017).

[6] Klaus Krippendorff, Content analysis: an introduction to its methodology, 2nd ed (California: Sage Publications, Inc., 2004) at 83

[7] Agnes Lo et al, “The Evaluation of Medical Expert Opinions in Litigation: An Empirical Study” (2018-2019) 36 Sing L Rev 247 at 254, 255.

[8] Krippendorff, supra note 6 at 18.

[9] Ibid at 83-85, 126, 171. Also note that these components do not have to be organised linearly, and a content analysis design can contain iterative loops: see ibid at 85.

[10] Ibid.

[11] Ibid at 171.

[12] See ibid at 90 for a research design framework that seeks to “operationalise expert knowledge”; this directly supports the use of legal principles as analytical constructs.

[13] Ibid at 3-6.

[14] Hall & Wright, supra note 2 at 76.

[15] Michael Freeman, Lloyd’s Introduction to Jurisprudence, 9th ed (London: Sweet & Maxwell, 2014) at 845.

[16] Ibid.

[17] Brian Z Tamanaha, Law as a Means to an End: Threat to the Rule of Law (Cambridge: Cambridge University Press, 2006) at 70.

[18] Karl Llewellyn famously read thousands of cases randomly selected from various American appellate courts to determine the factors which would influence a judge’s decision. See Karl N Llewellyn, The Common Law Tradition: Deciding Appeals (Boston: Little, Brown & Co, 1960).

[19] Tamanaha, supra note 17 at 1, 72.

[20] Hall & Wright, supra note 2 at 76.

[21] See Table 1 in Ibid at 72.

[22] Carlson et al, supra note 4 at 1466.

[23] Hall & Wright, supra note 2 at 87.

[24] Ibid.

[25] Ibid at 78.

[26] Ibid at 88. See also the concept of “triangulation” in the social sciences, in ibid at 83.

[27] Ibid at 84, citing the well-known case of Roe v Wade 410 U.S. 113 (1973).

[28] Ibid at 81.

[29] For a readily observable example, it appears that the Singapore courts have added the word “unreported” in brackets to indicate that a case cited as authority is an unpublished decision.

[30] For the position in the civil law, see Rules of Court (Cap 322, s 80, 2014 Rev Ed Sing), O 42 r 8(1). For the position in the criminal law, see Criminal Procedure Code (Cap 68, 2012 Rev Ed Sing) at ss 377(5) and (7). See also ss 394A-B and 397(3A) of the Criminal Procedure Code for more exceptional situations where a written grounds of decision must be issued.

[31] This assumption is backed by some literature. Judge Edwards wrote that “any assessment of the work of the courts of appeals that does not include unpublished decisions cannot be seen as complete”, and that according to official statistics, less than 17 percent of all opinions in courts of appeals were published. See Harry T Edwards & Michael A Livermore, “Pitfalls of Empirical Studies that Attempt to Understand the Factors Affecting Appellate Decisionmaking” (2009) 58:8 Duke U 1895 at 1923. In Singapore, this is likely to be the case as well—as an illustration, the State Courts had heard 303,487 criminal cases in the year 2018 alone, while searching the term “Public Prosecutor” in LawNet yields 15,482 results across all years. See “One Judiciary Annual Report 2018”, Supreme Court Singapore, online: <https://www.supremecourt.gov.sg/docs/default-source/default-document-library/ojar_full-8.pdf>.

[32] In Singapore, there is at least one channel for researchers to access court archives—the Empirical Judicial Research Programme. However, there appear to be no channels for application for this programme that are available to the general public. See “About the Empirical Judicial research Programme”, Singapore Judicial College, online: <https://www.supremecourt.gov.sg/sjc/empirical-judicial-research>.

[33] Hall & Wright, supra note 2 at 92.

[34] Goh Yihan & Paul Tan, “An Empirical Study on the Development of Singapore Law” (2011) 23 SAcLJ 176 at para 43.

[35] Hall & Wright, supra note 2 at 92.

[36] Harry T Edwards & Michael A Livermore, “Pitfalls of Empirical Studies that Attempt to Understand the Factors Affecting Appellate Decisionmaking” (2009) 58:8 Duke U 1895 at 1907.

[37] Ibid at 1904-1905.

[38] Hall & Wright, supra note 2 at 95.

[39] See Edwards & Livermore, supra note 36 at 1930-1944.

[40] See eg, Jessica Jacobson & Mike Hough, “Personal Mitigation: An Empirical Analysis in England and Wales” in Julian V Roberts eds, Mitigation and Aggravation at Sentencing (Cambridge: Cambridge University Press, 2011) at 146-167.

[41] Edwards & Livermore, supra note 36 at 1903.

[42] A notable exception is Lo et al, supra note 8, which the author is immensely grateful to have been involved in—the methodology of the study involved various coders identifying certain factors and assigning “scores” from 1 to 5 to them based on their “significance”. While a critical examination of the methodology used is out of the scope of this article, it suffices to say that this is a novel methodology which warrants much closer examination. See also Jerrold Soh, “A Network Analysis of the Singapore Court of Appeal’s Citations of Precedent” (2019) 31 SAcLJ 246, the first empirical legal study to adopt network analysis in Singapore.

[43] Hall & Wright, supra note 2 at 88.

A Matter of Interpretation: Wong Souk Yee Revisited at the Court of Appeal

A PDF version of the article can be found here.

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A MATTER OF INTERPRETATION: WONG SOUK YEE REVISITED AT THE COURT OF APPEAL

Benjamin Low

I. INTRODUCTION

In an earlier piece for this publication,[1] I had noted the Singapore High Court’s reliance on canons of statutory interpretation normally designed for ordinary legislation, for the purpose of interpreting provisions belonging to the Constitution of the Republic of Singapore[2] in its decision in Wong Souk Yee v Attorney-General.[3] I considered that the recourse to such interpretative tools under the banner of the so-called “purposive approach”[4] towards constitutional interpretation carried with it the latent risk of the judiciary straying, in effect, into the arena of judicial legislation, and had expressed the hope that such a methodology be further clarified by the Court of Appeal.[5]

The Court of Appeal has since delivered its judgment on the matter in Wong Souk Yee v Attorney-General.[6] Although the judgment largely upheld the original decision of the lower court in Wong Souk Yee (HC), there are certain aspects of the Court of Appeal’s decision that arguably present rather intriguing, if not troubling, implications for constitutional law in Singapore and which, accordingly, necessitate further discussion and scrutiny. This article endeavours to go some way towards meeting that need.

II. BACKGROUND

In Wong Souk Yee (HC), the Appellant had applied for a mandatory order requiring that the Members of Parliament (“MPs”) for the Marsiling-Yew Tee Group Representation Constituency (“GRC”) vacate their seats and that the Prime Minister advise the President to issue a writ of election for the Marsiling-Yew Tee GRC.[7] Her application was predicated on the basis that a vacancy had arisen in the Marsiling-Yew Tee GRC after one of its MPs, Madam Halimah Yacob, vacated her seat in Parliament on 7 August 2017 to contest in the 2017 Presidential Election.[8] Since Madam Halimah’s departure, the Marsiling-Yew Tee GRC continued to be represented by its three remaining MPs from the ruling People’s Action Party. The Appellant submitted that the occasion of such a vacancy was sufficient to trigger the by-elections mechanism in Article 49(1) of the Singapore Constitution.[9]

The Appellant also applied, in the alternative, for a declaratory order that section 24(2A) of the Parliamentary Elections Act[10] be interpreted as requiring all the MPs of a GRC to vacate their seats (i) when one or more MPs of the GRC vacate their seats; or (ii) in the alternative, when the only MP in the GRC who belongs to a minority community vacates his or her seat.[11] On the flip side, if such an interpretation was not possible, the Appellant further sought a declaratory order that s 24(2A) be declared void for inconsistency with the Singapore Constitution as per Article 4 read with Article 49.[12]

The High Court rejected the Appellant’s claim chiefly on the basis that her application for mandatory orders was grounded on a legal improbability.[13] In short, the Court below held that there was no express provision in the Singapore Constitution justifying or permitting the ‘mandated’ vacation by the remaining MPs of the Marsiling-Yew Tee GRC of their seats in the event of a single vacancy arising in the constituency.[14] Although the Singapore Constitution does provide for several grounds on which an MP’s seat may be vacated,[15] there was nothing in these grounds that pointed to the vacation of seats by the remaining MPs of a GRC in the event a vacancy first arose in any one of the seats.[16] This, in the judgment of Chua Lee Ming J, presented the single most significant legal hurdle in the Appellant’s case which she could surmount, and which sufficed to doom her application. Nor was the Appellant able to succeed in her alternative case for declaratory orders.[17]

At the same time, while Chua Lee Ming J found that the Appellant could not successfully make out her case for the mandatory and declaratory orders, the learned Judge was prepared to accept the Respondent Attorney-General’s contention that Article 49(1) could be interpreted to mean that a by-election in a GRC could only be held if all MPs vacated their seats mid-term[18] or, alternatively, that Article 49(1) applied only to Single-Member Constituencies (“SMC”) and not GRCs.[19] Crucially, the High Court accepted the Attorney-General’s reasoning that either an updating or rectifying or even a strained construction could be applied to Article 49(1) so as to fully accommodate Parliament’s intent when it sought to introduce the GRC scheme in 1988.[20] On that basis, the High Court found in favour the Respondent Attorney-General and dismissed the Applicant’s case. The Appellant duly appealed to the Court of Appeal.

III. THE COURT OF APPEAL’S DECISION

Both parties appealed largely on the same grounds that they had raised earlier in the High Court below.[21] The Appellant however also took the opportunity to address the Attorney-General’s submissions concerning the applicability of an updating and/or rectifying construction to the Singapore Constitution, contending that such rules of statutory interpretation “would entail the court overstepping its constitutional role”[22] and thus had no basis in the province of constitutional interpretation. There was an additional issue for the Court of Appeal’s consideration concerning the matter of costs[23] which we will not go into for the purposes of this article. Suffice to say, our concern is chiefly with the primary substantive issues that the Court of Appeal had to grapple with, namely the proper interpretation of Article 49(1) vis-à-vis the GRC scheme and the means by which this proper interpretation ought to be reached.

A. The Ambiguity of Article 49(1) and the Will of Parliament

From the outset, the Court of Appeal recognised that the meaning of Article 49(1) of the Singapore Constitution had become ambiguous vis-à-vis the mechanism of by-elections for a GRC, as opposed to an SMC.[24] Article 49(1) in its present incarnation reads as such:

49.—(1) Whenever the seat of a Member, not being a non-constituency Member, has become vacant for any reason other than a dissolution of Parliament, the vacancy shall be filled by election in the manner provided by or under any law relating to Parliamentary elections for the time being in force.

As the Court of Appeal observed, and as has been well-documented elsewhere, Article 49(1) preceded the introduction of GRCs in 1988 and was clearly applicable to SMCs.[25] Furthermore, it was also decided by the Court of Appeal in its earlier decision of Vellama d/o Marie Muthu v Attorney-General[26] that Article 49(1) imposed a duty on the Prime Minister to call a by-election “to fill casual vacancies of elected MPs which may arise from time to time”[27] in the event of such vacancies arising in an SMC. All well and good, but could this interpretation of Article 49(1) extend to GRCs as well?[28] The Court of Appeal in Wong Souk Yee (CA) further noted that such an interpretation was possible on the one hand[29] and yet, on the other, noted that the express wording of Article 49(1) “presupposes the existence of a vacancy in a particular seat before a by- election has to be called for that seat”[30] which, when read together with the proviso in Article 39A of the Singapore Constitution that elections to a GRC could only be conducted “on the basis of a group”,[31] suggested that “a by-election in a GRC can only be conducted if all the Members representing that GRC have vacated their seats”.[32] So while it appeared to be fairly undisputed that by-elections for a GRC have to be held on a group basis, which in turn is only possible in a situation involving the vacating by all MPs of a GRC of their seats, this still left unaddressed the pertinent issue as to what ought to be the proper procedure in a situation involving the vacating of one or more seats by one or more MPs,[33] short of a complete vacating of all seats by all MPs of a GRC.

Here the Court of Appeal found itself to be in a dilemma. The Court rightly observed that nothing in the texts of Articles 49 and 39A, nor in Article 46 for that matter, was capable of supporting the proposition that the remaining MPs of a GRC had to vacate their seats in the event one or more MPs vacated their seats in the first place.[34] By contrast, there was an express provision in s 24(2A) of the PEA which made clear that no writ for an election to a GRC could be issued unless all MPs in that GRC had vacated their seats.[35] In short, there was something of a “legislative oversight”[36] concerning the implementation of the GRC scheme so as to make the meaning of Article 49(1) ambiguous where vacancies in a GRC arose. The Court thus considered it necessary to have recourse to extraneous material for the purpose of ascertaining Parliament’s intention regarding the operation of the GRC scheme in order to arrive at a purposive interpretation of Article 49.[37]

What then did Parliament intend in the event of a single vacancy arising in a GRC? In this it was clear, and remains so to this day, that Parliament expressly intended that by-elections would only be called for a GRC in the event that all MPs of that constituency vacated their seats and not in the event one or more MPs vacated their seats.[38] And yet, despite this evident clarity in the will and intent of the Legislature, the extraneous material, in the Court’s opinion, fell short of clarifying “how Parliament thought it would effect this outcome [of permitting by-elections in a GRC only upon the vacating of all seats by all MPs]”[39] given that the extraneous material had the effect of creating three distinct possibilities as to how Parliament intended to effect such an outcome, namely that (i) Parliament intended to amend Article 49(1) to reflect its intention concerning GRC by-elections but omitted to do so; (ii) Parliament intended for Article 39A to be the operative provision regulating all matters pertaining to GRCs, including the filling of vacancies, and that Article 39A contained sufficient reference to s 24(2A) PEA to achieve its desired outcome; or (iii) Parliament intended that Article 49(1) would apply to GRCs but the wording in that provision was sufficiently broad to include references to s 24(2A) PEA so as to render an express amendment unnecessary.[40] This ultimately served to compound the Court of Appeal’s difficulty in ascertaining the proper interpretation of Article 49(1) in the context of by-elections for a GRC.

B. The Proper Interpretation of Article 49(1) and the Role of Updating and Rectifying Constructions

The Court of Appeal next considered three possible interpretations of Article 49(1) vis-à-vis vacancies in a GRC, based on the submissions of the Appellant and the Attorney-General, which were that:

(a) the vacancy arising in a GRC, as and when it arises, shall be filled by a by-election for all the seats in the GRC (“the Appellant’s Interpretation”);

(b) the vacancy in a GRC shall only be filled by a by-election if and when all the seats in the GRC have been vacated (“the Respondent’s First Interpretation”); or

(c) the “seat of a Member” in Art 49(1) refers only to the seat of a Member of an SMC, and Art 49(1) does not apply to seats in a GRC at all (“the Respondent’s Second Interpretation”).[41]

The Court of Appeal rejected the Appellant’s Interpretation as being contrary to the will and intent of Parliament and thus incompatible with the purposive approach in interpreting Article 49(1).[42] As for the Respondent’s First Interpretation, which the Respondent submitted could be achieved by way of either an updating or rectifying construction, the Court held that neither of these two canons of statutory interpretation was appropriate to the present case before it and thus declined to accept the Respondent’s First Interpretation.[43]

Having rejected the Respondent’s First Interpretation, and by extension, the High Court’s preferred interpretation of Article 49(1),[44] the Court of Appeal opted instead to adopt the Respondent’s Second Interpretation.[45] The Court justified its holding for several reasons, such as the textual limitations arising from the express words of Article 49(1) itself as well as the fact that Article 49(1) was first enacted when Singapore’s electoral divisions consisted only of SMCs and the GRC scheme had yet to come into existence.[46]

The problematic implication of this decision is that the Respondent’s Second Interpretation effectively denudes the GRC by-elections mechanism of any constitutional basis on which it may stand. If Article 49(1), being the only provision in the Singapore Constitution that deals with the filling of vacancies in parliamentary seats by way of by-election, is limited in scope to SMCs only, that means, in effect, that Singapore’s constitutional scheme recognises only the permissibility of by-elections for SMCs and not so for GRCs.[47]

In turn, this arguably creates the worrisome inference that any attempt by Parliament to establish a separate by-elections scheme for a different type of constituency such as the GRC must necessarily fall outside of the ambit of the Singapore Constitution.[48] If the Singapore Constitution does not recognise the holding of by-elections in a GRC, and in the absence of any other constitutional provision authorising or enabling the enactment of a separate by-elections mechanism to fill vacancies arising in a GRC,[49] this can only mean that s 24(2A) PEA is for all intents and purposes inconsistent with the terms of the Singapore Constitution.[50] It would seem that in trying to remedy the ambiguity concerning Article 49(1)’s relation with vacancies in a GRC, the Court of Appeal might have perhaps inadvertently called into question the very legitimacy of the GRC scheme itself.[51]

C. The Role of Updating and Rectifying Constructions in Constitutional Interpretation

At this point, some words may also be said about the Court of Appeal’s observations regarding the appropriateness of applying either an updating or rectifying construction to the interpretation of the Singapore Constitution. It was evident that the Court of Appeal had reservations about the applicability of these canons of statutory interpretation in the context of constitutional interpretation, given the unique nature of constitutional provisions as opposed to ordinary statutory provisions. As the Court pithily observed, the provisions of a constitution “are designed to be more deeply entrenched and are generally regarded as fundamental in nature, and there may be a concern that applying such tools of statutory interpretation may not be consistent with the nature of constitutional provisions”.[52]

The Court of Appeal was cognisant, and arguably correctly so, in recognising that simply importing such canons of statutory interpretation, which have the practical effect of introducing substantive changes into the constitutional provisions, could potentially distort the constitutional schema while establishing potentially undesirable knock-on effects. After all, a constitution is generally meant to serve as a supreme or paramount law that supersedes all other laws subsisting in a legal system.[53] In line with this element of paramountcy, constitutions have often—although this is not always necessarily the case—been designed with a certain degree of rigidity in mind by rendering their amendment subject to more cumbersome procedures and requirements as compared to ordinary statutes, with the understanding that the provisions of a constitution are not meant to be easily amended.[54] At the heart of the matter, there is something principally incongruent with attempting to apply a rule of statutory interpretation, such as a rectifying construction which “involves the addition or substitution of words to give effect to Parliament’s manifest intentions”,[55] to a fundamental law that is supposed to be amended or altered only in accordance with the special amendment procedure that the constitution sets out for itself.[56]

Unfortunately however, the Court of Appeal tentatively declined to make any express finding as to whether an updating or rectifying construction could be applied to a constitutional provision,[57] notwithstanding its earlier observations on the unsuitability of relying on these rules of statutory interpretation and its conclusion that the two canons were not appropriate in the present case.[58] This leaves open the possibility that similar arguments may yet arise in the future, given the Court’s refusal to expressly rule on this particular issue.[59] It would have been far better if the Court of Appeal had simply rejected completely the applicability of either an updating or rectifying construction to the Singapore Constitution from the outset, thereby clarifying the proper scope and operability of rules of statutory interpretation in the context of constitutional interpretation. This sadly, has not been done.

IV. CONCLUSION

The Court of Appeal, as we have seen, ultimately upheld the High Court’s decision by dismissing the Appellant’s appeal although it did diverge significantly from the High Court insofar as the proper interpretation of Article 49(1) of the Singapore Constitution was concerned. The failure of the Appellant’s appeal ought not to come as a surprise to anyone, given that the main thrust of the Appellant’s case was hampered by the critical absence of any provision in the Singapore Constitution capable of buttressing her claim for mandatory orders seeking the vacating of the seats of the remaining MPs of Marsiling-Yew Tee GRC. Nor was the Appellant’s case assisted by the presence of a clear Parliamentary intention that militated against her interpretation of the GRC by-elections mechanism.

Unfortunately, by rejecting the High Court’s interpretation of Article 49(1) in favour of its own interpretation of that proviso, the Court of Appeal appears to have inadvertently opened up several cans of worms with rather problematic implications for the development of constitutional law in Singapore. The applicability of canons and rules of statutory interpretation in the context of constitutional interpretation remains tainted by uncertainty and ambiguity while the constitutional basis for the existence of the GRC by-elections mechanism contained in s 24(2A) PEA appears to have been called into question in light of the Court of Appeal’s decision that Article 49(1) does not extend to GRCs.[60] It remains to be seen whether Parliament or a future court may be able to provide more definitive solutions capable of remedying this legal quandary.

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[1] Benjamin Low, “Leaving an Empty Seat: Wong Souk Yee’s answer to By-Elections in a Group Representation Constituency” (30 May 2018), Singapore Law Review: Juris Illuminae, online: <http://www.singaporelawreview.com/juris-illuminae-entries/2018/leaving-an-empty-seat-wong-souk-yees-answer-to-by-elections-in-a-group-representation-constituency> [Low, “Leaving an Empty Seat”].

[2] Constitution of the Republic of Singapore (1999 Rev Ed) [Singapore Constitution].

[3] [2018] SGHC 80 [Wong Souk Yee (HC)].

[4] The “purposive approach” here refers to a method of constitutional interpretation, that is to say, it is the interpretation of the provisions of the Singapore Constitution in a manner that “would promote the purpose or object underlying the written law”: see Interpretation Act (Cap 1, 2002 Rev Ed Sing), s 9A; see also the decision of Tan Cheng Bock v Attorney-General, [2017] 2 SLR 850 (CA) [Tan Cheng Bock] at para 54.

[5] Low, “Leaving an Empty Seat”, supra note 1.

[6] [2019] 1 SLR 1223 (CA) [Wong Souk Yee (CA)].

[7] Wong Souk Yee (HC), supra note 3 at para 3.

[8] Ibid at para 2.

[9] Singapore Constitution, supra note 2, art 49(1).

[10] Parliamentary Elections Act (Cap 218, 2011 Rev Ed Sing), s 24(2A) [PEA].

[11] Wong Souk Yee (HC), supra note 3 at para 4.

[12] Ibid.

[13] Ibid at paras 22-26.

[14] Ibid at para 26.

[15] Singapore Constitution, supra note 2, art 46(2).

[16] As the High Court so correctly identified: see Wong Souk Yee (HC), supra note 3 at para 24.

[17] Wong Souk Yee (HC), supra note 3 at paras 58-60.

[18] Ibid at paras 38, 41, and 44.

[19] Ibid at para 45. More importantly, although the High Court ultimately opted for the Attorney-General’s first interpretation of art 49(1) as the correct interpretation of that provision, it was prepared to accept that the Attorney-General’s second interpretation was a possible interpretation of art 49(1) as well, rather than rejecting it outright.

[20] Ibid at paras 27-43.

[21] Wong Souk Yee (CA), supra note 6 at para 16.

[22] Ibid at para 17.

[23] Ibid at para 21 and paras 88-96.

[24] Ibid at para 27.

[25] Ibid at para 28.

[26] [2013] 4 SLR 1 (CA) [Vellama].

[27] Ibid at para 82.

[28] Interestingly, the Court of Appeal in Vellama merely stated rather obliquely that the general duty imposed by art 49(1) on the Prime Minister “will only apply to a SMC as there is a special provision where a vacancy arises in a GRC” which seems to suggest that this duty does not apply where a vacancy arises in a GRC: see Vellama, ibid.

[29] Wong Souk Yee (CA), supra note 6 at para 34.

[30] Ibid at para 35.

[31] Singapore Constitution, supra note 2 at art 39A.

[32] Wong Souk Yee (CA), supra note 6 at para 37.

[33] Thus, to borrow the original factual matrix of Wong Souk Yee (HC), even if additional MPs besides Madam Halimah vacated their seats in the Marsiling-Yew Tee GRC, this would not be considered a complete vacating of all seats in the GRC as long as at least one MP remained to occupy one seat in Marsiling-Yew Tee GRC.

[34] Wong Souk Yee (CA), supra note 6 at paras 38-39.

[35] Ibid at para 44.

[36] Ibid at paras 46-47.

[37] Ibid at para 48.

[38] Ibid at paras 49-53; see also Parliamentary Debates Singapore: Official Report, vol 50 at cols 334–335 (12 January 1988) (Deputy Prime Minister Goh Chok Tong).

[39] Wong Souk Yee (CA), supra note 6 at para 54 [additions added].

[40] Ibid.

[41] Ibid at para 58.

[42] Ibid at para 71.

[43] Ibid at paras 65-69.

[44] Wong Souk Yee (HC), supra note 3 at paras 27-44.

[45] Wong Souk Yee (CA), supra note 6 at paras 72-73.

[46] Ibid.

[47] Thus, while the by-elections mechanism for SMCs derives its fundamental constitutional validity from the justifying proviso in art 49(1) of the Singapore Constitution, the by-elections mechanism for GRCs cannot likewise claim constitutional validity by the same art 49(1).

[48] Assuming we follow the Court of Appeal’s own reasoning that art 49(1) only applies to SMCs and not to GRCS, or any other types of constituencies for that matter, to its logical conclusion.

[49] This becomes evident when one takes a cursory look at the remaining provisions of the Singapore Constitution.

[50] If s 24(2A) PEA is inconsistent with the terms of the Singapore Constitution, then it must ipso facto be void by virtue of art 4 of the Singapore Constitution: see Singapore Constitution, supra note 2 at art 4; see also Taw Cheng Kong v Public Prosecutor, [1998] 1 SLR(R) 78 (HC) at paras 14-15 for an enunciation of the principle of constitutional supremacy.

[51] The Court of Appeal appears to have recognised the problematic implications of its own decision when it referred to the Respondent’s Second Interpretation as “not ideal” and expressed its hope that the Singapore Constitution be amended to rectify this legal quandary: see Wong Souk Yee (CA), supra note 6 at para 72. However, to date, more than a year has elapsed since the decision of the Court and the hoped-for amendment to art 49(1) has not yet materialized.

[52] Ibid at para 64.

[53] For an exposition of the general principles of constitutional supremacy, see Kevin Tan & Thio Li-anne, Constitutional Law in Malaysia and Singapore, 3rd ed (Singapore: LexisNexis, 2010) at 102–103 and 106.

[54] Ibid; see also Jutta Limbach, “The Concept of the Supremacy of the Constitution” (2001) 64:1 Mod L Rev 1 at 2–3.

[55] Wong Souk Yee (CA), supra note 5 at para 63.

[56] There has already been criticism levelled at such a mode of constitutional interpretation as potentially turning courts in Singapore into “mini-legislatures”: see Po Jen Yap & Benjamin Joshua Ong, “Judicial Rectification of the Constitution: Can Singapore Courts Be Mini-Legislatures” (2018) 48:2 Hong Kong LJ 389 at 395–398; see also my own comments in Low, “Leaving an Empty Seat”, supra note 1.

[57] Wong Souk Yee (CA), supra note 5 at para 65.

[58] Ibid at para 65.

[59] At this point, we may ask ourselves: If the Court of Appeal was evidently uncomfortable with the use of updating and rectifying constructions as part of the process of constitutional interpretation, why then hold back from expressly rejecting their applicability?

[60] I had earlier suggested, in a separate piece, that a far more elegant solution for the Court of Appeal would have been to simply accept that s 24(2A) PEA had the effect of implicitly amending the provisions of the Singapore Constitution. Such an argument would have obviated any lingering doubt as to the constitutional validity of s 24(2A) PEA and the by-elections mechanism for GRCs as a whole: see Benjamin Low, “Full Powers and the Constitutional Doctrine of Implied Amendments” (2019) Sing JLS 390 at 413–414.

The Narrow, Broad And Middle Grounds: The Muddled Doctrine Of Unconscionability

A PDF version of the article can be found here.

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THE NARROW, BROAD AND MIDDLE GROUNDS: THE MUDDLED DOCTRINE OF UNCONSCIONABILITY

TOH DING JUN^*

I. INTRODUCTION: BOM V BOK

In 2018, the Singapore Court of Appeal (“SGCA”) in BOM v BOK^[1]confirmed that the doctrine of unconscionability formed part of the law in Singapore.^[2] To this end, the SGCA stated that for the doctrine of unconscionability to be invoked, the plaintiff must show:

1.      That he was suffering from an infirmity; and

2.      That the infirmity was exploited by the other party exploited in procuring the transaction.^[3]

Once the plaintiff has satisfied the requirements, the burden then shifts to the defendant to show that the transaction was fair, just and reasonable.^[4] To this end, the court will invariably consider, inter alia, whether:

1.      Whether the transaction was at an undervalue; and

2.      Whether the plaintiff had received independent legal advice.^[5]

The SGCA stated that this approach was a modification of the ‘narrow’ doctrine of unconscionability that was first espoused by the House of Lords in Fry v Lane[6] and Cresswell v Potter^[7].^[8] In doing so, the SGCA stressed that the approach to be adopted in Singapore was not the ‘broad’ doctrine of unconscionability adopted by the Australian courts.^[9] In other words, it would seem that the SGCA was adopting a ‘middle’ ground to the doctrine of unconscionability. However, this leads to the question—what exactly is this ‘middle’ ground?

In this article, it is submitted that the difference between the ‘broad’ and ‘middle’ grounds is more apparent than real. Further, it will be argued that the court ought to take a broader approach to invoking the doctrine of unconscionability, which could include situational infirmities such as emotional dependence and infatuation.

II. THE ORIGINAL NARROW DOCTRINE OF UNCONSCIONABILITY

At this stage, it is apposite to briefly state the ‘narrow’ doctrine of unconscionability that was originally conceptualised by the English courts to prevent expectant heirs from being exploited and deprived of their inheritances.^[10] The ‘narrow’ doctrine involves the consideration of three requirements:

1.      Whether the plaintiff is poor and ignorant;

2.      Whether the sale was at a considerable undervalue; and

3.      Whether the vendor had independent advice.^[11]

By accepting that the plaintiff may have other forms of infirmities besides being poor and ignorant, the SGCA has certainly broadened the doctrine of unconscionability from its ‘narrow’ beginnings.^[12] However, the question remains—what is the scope of the doctrine of unconscionability as espoused by the SGCA? This is a question we now turn to.

III. THE ‘BROAD’ DOCTRINE ADOPTED IN AUSTRALIA

The position as adopted in Australia will be discussed first, followed by Singapore’s latest position in BOM.

The SGCA in BOM used the High Court of Australia (“HCA”) decision of Commercial Bank of Australia Limited v Amadio[13] to exemplify the ‘broad’ doctrine of unconscionability. Briefly, this ‘broad’ doctrine of unconscionability requires the plaintiff to prove that [“Amadio formulation”]:

1.    He was “…under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them…”[14]; and

2.    “…[T]hat the disability was sufficiently evident to the stronger party to make it prima facie unfair or ‘unconscientious’ that he procure[d], or accept[ed], the weaker party’s assent to the impugned transaction…”.[15]

Once these elements were established by the plaintiff, the onus is then on the defendant to show that the transaction was fair, just and reasonable.[16]

Further, the HCA emphasised that a mere difference in bargaining power of the parties was ipso facto insufficient to invoke the doctrine of unconscionability. As Mason J put it:

I qualify the word “disadvantage” by the adjective “special” in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to [emphasise] that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party.[17]

Two points can be distilled from this quote:

1.  There is a standard of “special” disadvantage, presumably taken from the objective person’s point of view, ie it must be “special” in the circumstances, presumably taken from a reasonable man’s standpoint.

2.  The content of this standard is that the condition or circumstance must have “seriously” affected the ability of the innocent party to protect his own best interests.

Seen in this light, it is puzzling as to why the SGCA rejected this ‘broad’ doctrine on the basis that “it affords the court too much scope to decide on a subjective basis”[18], because it comes dangerously close to empowering the court to subjectively decide whether there was an inequality of bargaining power as between the parties.[19] This seems to go against the express wording of the judgment, as made by Mason J, where he stated that the inequality of bargaining power must have arose from the “disabling condition” of the weaker party, and must have “seriously [affected]” the weaker party’s ability to make a judgment as to his best interests.[20] It is submitted that Mason J’s words suggest that the courts have an objective standard to guide its inquiry into whether there was an inequality of bargaining power for the purposes of invoking the doctrine of unconscionability – that of a “disabling condition” which “seriously affects” the innocent party’s ability to make a judgment as to his own best interests. Indeed, it is submitted that where the disadvantage merely amounts to inequality in bargaining positions seen in the normal course of business, the innocent party’s ability will not be said to be “seriously affected” such that the doctrine of unconscionability can be invoked.

Moreover, it is unclear as to why the SGCA was concerned with the “subjectivity” of the ‘broad’ doctrine of unconscionability. When the HCA applied the law to the facts of Amadio, Deane J stated:

[T]he result of the combination of their age, their limited grasp of written English, the circumstances in which the bank presented the document to them for their signature and, most importantly, their lack of knowledge and understanding of the contents of the document … [the plaintiffs] lacked assistance and advice where assistance and advice were plainly necessary if there were to be any reasonable degree of equality between themselves and the bank.[21]

As stated in the Amadio formulation, the court is to determine the inequality of bargaining power through the lens of what is reasonable in the circumstances that the transaction was completed (ie “reasonable degree”).[22] This has since been suggested to be a comparison of the relative disparity between the positions of the stronger and weaker party rather than focusing upon the inherent weakness of the latter.[23] If this is true, it seems to suggest an objective test being used, where the “relative disparity” is seen from a third party’s point of view, with the third party necessarily objective and neutral. Again, this is certainly not a subjective test which the SGCA was concerned would lead to uncertainty in contract law.[24]

Further, it is submitted that the use of the term “plainly necessary”[25] fortifies the opinion that a reasonable man standard was used by the HCA in establishing the first element to the Amadio formulation. In other words, it is submitted that the HCA was suggesting that any reasonable person not party to the transaction would have known that, without assistance and advice, there would not be any reasonable degree of equality between the parties. To conclude, and with due respect, it is submitted that had the SGCA considered the position in Amadio in this light, the Amadio formulation may have well been adopted in Singapore.

IV. THE POSITION IN SINGAPORE: DIFFERENCE MORE APPARENT THAN REAL?

It is also submitted that the doctrine of unconscionability may be similar, if not the same, in both Singapore and Australia. Briefly, there are three reasons why this may be so:

1.   In both jurisdictions, the doctrine of unconscionability is primarily concerned with procedural fairness and not substantive fairness.

2.  Prima facie, both jurisdictions seem to accept the same range of infirmities or special disabilities.

3.   In both jurisdictions, the evidential burden of proof is shifted to the defendant once the plaintiff has made out a prima facie case of unconscionability.

First, it is submitted that the focus of the inquiries in Australia and Singapore is on procedural fairness as opposed to substantive fairness. In BOM, the SGCA held:

We stress that the absence of independent advice and the characterisation of a transaction as being at an undervalue are not mandatory elements to be satisfied … However, as this case demonstrates, the presence of these factors will often underscore and highlight the exploitation of an infirmity that renders a transaction improvident.[26]

In an article, Professor Rick Bigwood wrote:

[T]he Australian doctrine is purely procedural in its focus, [with] substantive unconscionability serving merely an important forensic role, namely, ‘as supporting the inference that a position of disadvantage existed’, and also ‘as tending to show that an unfair use was made of the occasion’.[27]

As such, it can be seen that both the ‘broad’ and ‘middle’ grounds of unconscionability are primarily concerned with procedural unfairness, with the SGCA making it clear that an undervalue only goes to “underscore and highlight the exploitation of an infirmity”[28], rather than ipso facto allowing the doctrine of unconscionability to be invoked.

Second, while different terms were used by the SGCA and HCA, ie “infirmities” and “special disability” respectively, it would seem that both courts had the same definition in mind. In BOM, the SGCA stated:

[I]n addition to considering whether or not the plaintiff is poor and ignorant, we would also include situations where the plaintiff is suffering from other forms of infirmities – whether physical, mental and/or emotional in nature … [The infirmity] must have been of sufficient gravity as to have acutely affected the plaintiff’s ability to “conserve his own interests” … Such infirmity must also have been, or ought to have been, evident to the other party procuring the transaction.[29]

Similarly, in Amadio, the HCA stated:

The adverse circumstances which may constitute a special disability for the purposes of the principles relating to relief against unconscionable dealing may take a wide variety of forms and are not susceptible to being comprehensively catalogued … [They include] poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance of explanation is necessary …[30]

It bears mentioning that the definition of “special disability”, as stated by the HCA, is intended to be non-exhaustive.[31] Likewise, it seems that the SGCA left the categories of “infirmities” broad. As such, it is submitted that the list of specific “special disabilities”, as stated by the HCA, could very well be mapped onto the broad categories stated by the SGCA. For example, the concepts of “age” and “sex”, as espoused by the HCA, could very be placed under the broad categories of “physical” or “emotional”. Likewise, the idea of “drunkenness” may well be categorised under “emotional” or “mental”. In other words, there exists an argument that the list of infirmities as stated by the SGCA may be as broad as the position taken by the HCA. To this end, we will now discuss the boundaries of what constitutes an “infirmity”.

V. INFATUATION: WHAT SHOULD SINGAPORE’S POSITION BE?

With regards to the criterion of “infirmity”, it would seem that both the courts and academics have drawn a distinction between “situational infirmities” and “constitutional infirmities”.[32]

As noted by Le Miere J in Warren v Lawton (No 3)[33]:

I use the descriptions constitutional and situational disadvantage to distinguish between disadvantages which are inherent characteristics of a person, for example, lack of intelligence, infirmity and illiteracy – and disadvantages which arise because of the circumstances in which an otherwise normal and ordinary person finds herself.[34]

Further, as noted by Professor Burton Ong:

The SGCA’s choice of the noun “infirmity” to describe the disadvantageous position of the weaker party appears confined to a limited range of constitutional qualities personal to him or her. It would probably not be enough, for example, to plead vulnerability on the basis that a party faced difficult circumstances in his personal life (ie, a situational disadvantage) …[35]

Furthermore, not every constitutional disadvantage is likely to be regarded as an “infirmity” for the purposes of the Singapore doctrine of unconscionability … it is far from certain whether “infirmity” would cover a foolish, naïve or immature individual … who has entered into a bad bargain.[36]

One such “situational infirmity” immediately comes to mind—emotional dependence arising out from an intimate relationship, or infatuation, as accepted by the HCA in Louth v Diprose[37].

Indeed, at the boundaries of the doctrine of unconscionability lies the “situational infirmity” of emotional dependence and infatuation. This area of the law is fraught with much difficulties because courts are generally ill-equipped to determine the emotional state of parties to the impugned transaction.[38] Indeed, it is likely that the weaker party will find it hard to furnish scientific evidence to the courts to establish his “emotional weakness” at the time when the transaction was completed.

Further, as noted by the dissenting judgment given by Toohey J in Louth:

The [weaker party] was well aware of all the circumstances and of his actions and their consequences … That knowledge and his clear appreciation of the consequences of what he was doing run directly counter to a conclusion that he was suffering from some special disability or was placed in some special situation of disadvantage. It is clear that the respondent was emotionally involved with the appellant. But it does not follow that he was emotionally dependent upon her in any relevant legal sense.[39]

Admittedly, there is certainly much force in this statement. Why should the law intervene to vitiate a transaction where parties are fully aware of their what they are doing, notwithstanding that there may be certain situational disadvantages? After all, inequality in bargaining position may very well make the weaker party ‘feel’ as if he needs the transaction to be completed more than the stronger party ie, emotional pressure. Seen in this light, a strong argument exists against allowing “emotional weakness” to be seen as an “infirmity”. In other words, a person may be “emotionally weak” in the factual sense but is taken as a normal person in the legal sense, when the court determines whether the doctrine of unconscionability should be invoked.

However, this cannot be right, and it is submitted that situational infirmities should be considered as an “infirmity” for the purposes of invoking the doctrine of unconscionability. The kernel of the doctrine of unconscionability lies in the element of exploitation, where the stronger party exploits the weaker party’s infirmity, with the actual or constructive knowledge of that infirmity.[40] As such, it should follow that the law should not allow the stronger party to keep any gains he received from the transaction, notwithstanding that the “infirmity” exploited is a situational infirmity and not a constitutional one. In other words, where an offeror intentionally manipulates and exploits the offeree’s emotions and the prevailing situation, knowing that the offeree has a certain emotional weakness vis-à-vis him or her, the transaction should be vitiated.

Further, perhaps the Singapore courts should not be overly concerned with limiting the list of legally acceptable “infirmities” for the purposes of the doctrine. As the SGCA rightfully noted:

The inquiry [into the weaker party’s infirmity] … would, of course, be an intensely fact-sensitive one … [The infirmity] must have been of sufficient gravity as to have acutely affected the plaintiff’s ability to “conserve his own interests” …[41]

As such, it is submitted that the list of “infirmities” should not be limited or restricted. In the context of “emotional weakness”, it is submitted that there is conceivably a myriad of situations where emotional manipulation or exploitation may take place in, and which would not attract the doctrines of duress or undue influence eg, emotional manipulation of one party by another over cyberspace.

It is further submitted that fears of contractual uncertainty, arising from a broad conception of “infirmity”, are misplaced because:

1.   Such an “infirmity” must still be proven by the plaintiff to have acutely affected his ability to conserve his own interests; and

2.   The court is entitled to consider other factors such as, inter alia, the presence of independent legal advice and the entire factual matrix in which the transaction took place in.

Ultimately, this gives effect to both certainty, in the sense that parties know for certain that they want to partake in the transaction, and fairness, in the sense that nobody should be allowed to manipulate and exploit others beyond what is reasonably acceptable in commercial or domestic negotiations.

VI. CONCLUSION

In conclusion, it is submitted that, for the foregoing reasons established in this article, the Armadio formulation of the doctrine of unconscionability and the conception of the doctrine as espoused by the SGCA in BOM are more alike than initially thought. To recapitulate:

1.  It is submitted that the SGCA was mistaken in its belief that adopting the Armadio formulation would introduce greater subjectivity into the doctrine of unconscionability. This possibly led to fears of greater contractual uncertainty.

2.  Additionally, it is worth noting that the ‘broad’ conception of the doctrine was objectively applied by the HCA in Armadio.

3.  Seen in this light, the ‘middle’ ground, as stated by the SGCA resembles the ‘broad’ ground espoused by the HCA. While different terms may have been used, it is submitted that the difference is more apparent than real.

4.  To this end, it is submitted that the Singapore courts should interpret the term “infirmity” broadly because the doctrine of unconscionability is fundamentally concerned with exploitative conduct on the stronger party’s part.

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* Third Year Student, Faculty of Law, National University of Singapore.

^[1] [2019] 1 SLR 349 (CA) [BOM].

^[2] Ibid at para 114.

[3] Ibid at para 142.

^[4] Ibid.

^[5] Ibid.

^[6] (1888) 40 Ch D 312.

^[7] [1978] 1 WLR 255.

^[8] BOM, supra note 2 at para 141.

^[9] Ibid at para 144.

^[10] Ibid at para 127.

^[11] Ibid at para 130.

^[12] Ibid at para 141.

^[13] (1983) 46 ALR 402 (HCA) [Amadio].

^[14] Ibid at 422.

^[15] Ibid.

^[16] Ibid.

^[17] Ibid at 413.

^[18] BOM, supra note 1 at para 133.

^[19] Ibid at paras 133, 134.

^[20] Amadio, supra note 13 at 413.

^[21] Ibid at 425.

^[22] Ibid.

^[23] Burton Ong, “Unconscionability, Undue Influence and Umbrellas: The “Unfairness” Doctrines in Singapore Contract Law After BOM v BOK” [2020] SJLS 295 at 307 [Ong, Unconscionability].

^[24] BOM, supra note 2 at para 121.

^[25] Amadio, supra note 11 at 425.

^[26] BOM, supra note 1 at para 155.

^[27] Rick Bigwood, “Knocking Down the Straw Man: Reflections on BOM v BOK and the Court of Appeal’s “Middle-Ground” Narrow Doctrine of Unconscionability for Singapore” [2019] SJLS 29 at 47.

^[28] BOM, supra note 1 at para 155.

^[29] BOM, supra note 1 at para 141.

^[30] Amadio, supra note 13 at 423.

^[31] Ibid.

^[32] Ong, Unconscionability, supra note 23 at 306.

^[33] [2016] WASC 285.

^[34] Ibid at para 158.

^[35] Ong, Unconscionability, supra note 23 at 306-307.

^[36] Ibid at 307.

^[37] (1992) 110 ALR 1 (HCA) [Louth].

^[38] Chong Yee Ka v Public Prosecutor [2017] 4 SLR 309 (HC) at paras 55-56, where the court there noted that “psychiatry is an inexact science” and that it would generally be acceptable for different psychiatrists to have different expert opinions. Further, see Ngiam Kong Seng v Lim Chiew Hock [2008] 3 SLR(R) 674 (CA) at para 97, where the court recognised that the “recognised psychiatric illness” requirement at the threshold stage of the Spandeck test was “more easily stated than ascertained”.

^[39] Louth, supra note 38 at 28.

^[40] BOM, supra note 1 at para 141.

^[41] Ibid.

Counting Double Counting

The PDF version of this article can be found here.

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counting double counting

Desmond Chye & Russell Vaz*

I.               INTRODUCTION

The law against double counting is seldom taught but remains an important part of the criminal law. It ensures an offender is not punished twice for the same crime. This is especially vital in this day and age where the preponderance of similar offences makes double counting far more likely. In this article, we will attempt to explain the law on double counting; in particular, the dispute over the test for ‘same offences’ and the effect that Tan Khee Koon v Public Prosecutor[1] has had on this dispute.

II.            WHAT IS DOUBLE COUNTING?

Double counting is not to be confused with its more famous relative, double jeopardy. As helpfully explained by the Singapore High Court in Chong Kum Heng v Public Prosecutor, “[t]he rule against double jeopardy is that a person cannot be made to face more than one trial for the same offence”.[2] In contrast, the rule against double counting prevents double punishment for the same offence, where the same set of facts gives rise to liability under more than one written law.

The statutory basis for the prohibition on double counting derives from section 40 of the Interpretation Act:[3]

“Where any act or omission constitutes an offence under 2 or more written laws, the offender shall, unless the contrary intention appears, be liable to be prosecuted and punished under any one of those written laws but shall not be liable to be punished twice for the same offence.” [emphasis added]

A plain reading makes it clear that the determining factor in finding double counting is whether the offences charged constitute the ‘same offence’. However, as this was not defined in the IA, case law is instructive on what it means.

III.           THE MEANING OF ‘the saME OFFENCE’ IN CASE LAW

The starting point would be the Singapore High Court case of Tan Khee Koon,[4] where the court applied the test in the Malaysian case of Jamali Bin Adnan v PP.[5] However, the endorsement of Jamali, which is a double jeopardy case, indicates that the definition of the ‘same offence’ is shared with double counting, thus introducing some complications.

In the area of double jeopardy, the locus classicus on what constitutes the ‘same offence’ is the English House of Lords case of Connelly v Director of Public Prosecutions.[6] In Connelly, there were two proposed approaches to finding similarity. Lord Morris adopted a more generous approach where the similarity need only be substantial.[7] On the other hand, Lord Devlin took a stricter view that the offence must be exactly the same in law because “legal characteristics are precise things and are either the same or not”.[8] However, it is unclear from the remaining Law Lords’ judgements which approach is to be preferred.

The most authoritative court to have weighed in on the conflicting approaches is the Privy Council (on appeal from Singapore). In Wee Harry Lee v Law Society of Singapore,[9] a solicitor was subject to two disciplinary proceedings for violations under section 84(2) of the Legal Profession Act.[10] The provisions violated were:

“[The solicitor] (a) has been convicted of a criminal offence, implying a defect of character which makes him unfit for his profession; or (b) has been guilty of … grossly improper conduct in the discharge of his professional duty …”[11]

The first proceeding arose from (b), which resulted in a two-year suspension, while the second proceeding founded on (a) resulted in a further two year suspension.

Their Lordships ultimately allowed the solicitor’s appeal against the further suspension, holding that the second proceeding was “an abuse of the disciplinary process”.[12] In coming to their conclusion, the court endorsed both approaches proposed in Connelly, but stopped short of deciding which approach was to be preferred as the result would be the same regardless. Even if the case fell outside the narrow scope of Lord Devlin’s test, it would still be covered “by the alternative form of relief which [Lord Devlin] favoured as mitigating the rigour of his strict test”.[13] This is likely the rule in Reg v Elrington,[14] where Cockburn CJ held that “[w]here a person has been charged with an offence (whether he be acquitted or convicted), he cannot be again tried “on the same facts in a more aggravated form””.[15] This leaves only two possible conclusions: the offences were the same using either Lord Morris’ or Lord Devlin’s test, or that the Elrington approach was used instead.

Assuming it was the former, it would appear impossible for their Lordships to have used Lord Devlin’s approach in Harry Lee if we were to examine the offences charged closely. This is because the emphasis in (a) is on the lawyer’s character (in other words, propensity for future professional misconduct) for which his criminal conviction is evidence thereof whereas (b)’s emphasis is on the lawyer’s actual act of wrongdoing. These are two conceptually distinct requirements that would certainly fail the exact similarity test. Therefore, in reaching the conclusion that they did, their Lordships must have considered the offences substantially—but not exactly—similar.

It is also interesting to note that the subsequent Singapore High Court case of Lim Keng Chia v Public Prosecutor[16] interpreted Harry Lee to stand for the former, as evidenced by the learned judge’s description of the case:[17]

“In Wee Harry Lee’s case, the Privy Council was asked to determine whether the two successive sets of disciplinary proceedings brought against the appellant were based on the same instance of misconduct; and if so, whether the second set of such proceedings amounted to a violation of the doctrine of autrefois convict and acquit or at the very least, an abuse of the disciplinary process provided for in the Legal Profession Act (Cap 217). The Privy Council answered these questions in the affirmative. It must be pointed out, however, that the Privy Council in Wee Harry Lee’s case was faced with two sets of the same sort of proceedings.”

The use of the phrase “same sort of proceedings” implied the learned judge’s belief that it was the similarity between the offences that was critical to the outcome. It would thus be reasonable to believe that in the future, the courts will not treat Harry Lee as a case applying the rule in Elrington.

We return to the decision in Tan Khee Koon, which began the controversy by citing Jamali. Ironically, this citation is the closest thing we have to a resolution. The test in Jamali involves an inquiry into whether essential ingredients of the offences are the same. In Jamali, the offences were held to be different because the essential ingredients of armed robbery differed from that of an offence under the Malaysian Internal Security Act 1960.[18] “[A]rmed robbery can be regarded as an aggravated form of theft causing fear of instant death or hurt on the intended victim voluntarily by means of a deadly weapon” while “the essential ingredients under the Internal Security Act 1960 are simply control of firearms and/or ammunitions without lawful authority”.[19] This bears a striking similarity to Lord Morris’ test, which the court in Jamali treated as the majority judgement without making any mention of Lord Devlin’s test. This signals an implicit endorsement of Lord Morris’ test over Lord Devlin’s by the court in Tan Khee Koon, albeit in obiter.

However, as the citation in Tan Khee Koon was merely obiter and no court has yet to make a definitive pronouncement, there regrettably remains some element of uncertainty as to whether Lord Morris’ substantial similarity approach is truly preferred.

IV.           TAN KHEE KOON’S SIGNIFICANT ADDITION TO DOUBLE COUNTING

Double counting arose as an issue in Tan Khee Koon. The case involved an accused who tried to steal $20,000 but was only able to obtain $4,500. He was charged with two separate offences: the first for obtaining $4,500 (“1st Offence”) and the second for attempting to obtain $20,000 (“2nd Offence”), with the former sum naturally being a component of the latter sum.[20] Although one concerned an attempt and the other concerned the actual commission of an act, statutory provisions prevent one from being punished with both.[21] The court therefore had to decide the following: can obtaining $4,500 be considered the same offence as attempting to obtain $20,000 if the $4,500 was a part of the $20,000?

The answer was simple: the 2nd Offence did not consist of an attempt of the 1st Offence alone. It consisted of a series of attempts; only one of which was committed. The learned judge approached the problem in an ingenious manner. His Honour broke down the 2nd Offence into 2 ‘sub-offences’, ie, (1) obtaining $4,500, and (2) attempting to obtain $14,740. In the result:

(a)   1^st Offence: Obtaining $4,500

(b)  2^nd Offence: Obtaining $20,000 = Obtaining $4,500 (‘Sub-offence 1’) + Attempting to obtain $15,500 (‘Sub-offence 2’)[22]

It becomes clear that Sub-offence 1 is identical to the 1^st Offence.[23] In order to avoid double counting, it became necessary to separate the offending ‘sub-offence’ from the remaining portions.[24] However, the nature of the 2nd Offence prevented that, causing it to be struck out entirely.[25]

Tan Khee Koon represents a significant addition to our legal firmament. A single offence can now be considered an amalgamation of several smaller ‘sub-offences’. Double counting is now far easier to successfully plead, especially with infinitely divisible elements like money.

Unfortunately, this rule introduces uncertainties into the already fractious law on double counting. Chiefly, how far can an offence be broken down? Such ramifications can only be answered by the courts.

V.             CONCLUSION

Given the importance of double counting as a statutory safeguard against punitive punishment, the considerable uncertainty over what is required to find it is highly undesirable. The endorsement of Jamali’s essential ingredient test in Tan Khee Koon, albeit in obiter, suggests it will be used going forward. Being the practical embodiment of Lord Morris’ substantial similarity test, it would appear that the debate is somewhat provisionally resolved. However, while resolving one uncertainty, Tan Khee Koon has created another: the court’s method of breaking down offences bypasses the need for offences to be holistically similar. As such, it would be in the interest of the courts to demarcate the boundaries of Tan Khee Koon’s rule to avoid stretching the concept of similarity too far and conclusively decide which test for similarity they prefer.

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^* LLB (Candidate) (NUS), Class of 2023. All errors and views expressed in this article remain our own.

[1] [1995] 3 SLR(R) 404 [Tan Khee Koon].

[2] [2020] SGHC 21 at para 50.

[3] (Cap 1, 2002 Rev Ed) [IA].

[4] Tan Khee Koon, supra note 1 at para 105.

[5] [1986] 1 MLJ 162 [Jamali]

[6] [1964] AC 1254 [Connelly].

[7] Ibid at 1306.

[8] Ibid at 1340.

[9] [1983–1984] SLR(R) 768 (PC) [Harry Lee].

[10] (Cap 217, 1970 Rev Ed); that provision has since been redesignated as Section 83(2) of the Legal Profession Act (Cap 161, 2009 Rev Ed Sing), where it remains otherwise unchanged.

[11] Harry Lee, supra note 9 at para 2.

[12] Ibid at para 27.

[13] Ibid.

[14] 1 B. & S. 688 [Elrington]; cited in Connelly, supra note 6, at 1202.

[15] Ibid at 696.

[16] [1998] 1 SLR(R) 1.

[17] Ibid at para 8.

[18] Jamali, supra note 5 at 166.

[19] Ibid at 167.

[20] Tan Khee Koon, supra note 1 at para 100.

[21] Ibid at para 122.

[22] Ibid at paras 114-117.

[23] Ibid at para 115.

[24] Ibid at para 116.

[25] Ibid at para 119.