Championing Champerty

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Championing Champerty

Loo Fang Hui

INTRODUCTION

In the 1998 film “A Civil Action”, John Travolta plays Jan Schlichtmann, a flamboyant and tenacious American personal-injury attorney who engages clients almost exclusively on a contingent fee basis. Under such an agreement, the lawyer agrees to render professional services in obtaining a judgment or settlement for the client, in exchange for a fee equal to a certain percentage of the ultimate recovery. Where the claim is defeated and no recovery is made, the lawyer receives no fee whatsoever. Film-viewers follow Schlichtmann as he absorbs a torrent of legal costs and resources, even driving his firm to the brink of bankruptcy, in pursuit of a meritorious but nebulous and unduly drawn-out claim which is contested at every turn.

While all-or-nothing contingent fee agreements may make for dramatic Hollywood fodder, they do not always enjoy the same unanimous support in the legal sphere. The common law has traditionally condemned such agreements as a form of champerty. In Wallersteiner v Moir,¹ Lord Denning MR stated the general rule in the following terms:

In its origin champerty was a division of the proceeds (Campi partitio). An agreement by which a lawyer, if he won, was to receive a share of the proceeds was pure champerty... It mattered not whether the sum to be received was to be his sole remuneration, or to be an added remuneration (above his normal fee), in any case it was unlawful if it was to be paid only if he won, and not if he lost.

This essay seeks to outline the arguments for and against champertous agreements, before exploring whether such agreements have a role to play in our evolving legal landscape. Ultimately, I argue for the increased liberalisation of champertous agreements, in the name of enhancing access to justice.

HOW CHAMPERTOUS AGREEMENTS WORK

In the legal domain, champertous agreements often take the form of a lawyer offering to take up cases brought by clients who are unable to pay their legal fees upfront. In exchange for legal services, the client agrees to pay the lawyer a portion of the settlement or recovery if the claim is successful. The amount paid usually amounts to a higher sum than what the lawyer would have received under a conventional fee system. This is often referred to as a contingent fee agreement.

Variations on the contingent fee agreement also exist, such as the uplift fee agreement, where a basic minimum legal fee is agreed upon, but an additional sum is payable to the lawyer if the claim is successful.

Such agreements are generally referred to as champertous or conditional fee agreements, as payment of legal fees is conditional upon the success of the claim. Under such agreements, a person that is not well-to-do can nevertheless engage a lawyer, with the obligation to pay largely arising only if the claim is successful. The client is put at no financial risk if the claim is unsuccessful, as the burden is borne by the lawyer.

While such fee agreements seem like a surefire way to increase access to justice by enabling the less wealthy to have their day in court, the concept has seen more than its fair share of criticisms.

TRADITIONAL CRITICISMS

Critics have long contended that champertous agreements pose a risk to the sanctity of the legal industry. They argue that such agreements could tempt lawyers to cherry-pick the strongest claims as they would be investing their own time and money into uncertain prospects of recovery. Far from guaranteeing access to justice, champertous agreements could indeed have the opposite effect.²

There exists the fear that champertous agreements may tempt lawyers to inflame damages, suppress evidence, or even suborn witnesses for their own personal gain.³ This may potentially become the norm in a legal market where attorneys become financially invested in the suit, concerned with achieving a higher rate of return through an increased number of clients and suits. This could lead to a reduction in the quality of legal work and the commitment to principles of justice, as lawyers would be motivated to seek the quickest methods of settling a claim and getting a pay-out, instead of working towards the most beneficial solution for their clients. The role of a lawyer as an impartial advocate of his client's cause would correspondingly be perverted.⁴

Another criticism is the inevitable consequence that those who are forced to rely on such agreements end up paying much more for identical services than the wealthy, who are able to afford legal services charged on a conventional basis.⁵ This is especially apparent for claims involving large sums. While the wealthy client who can afford conventional legal fees pays a flat hourly rate for legal services, the impecunious client relying on a champertous agreement pays a percentage of the sum recovered, which may end up being much higher than the conventional rate.

This may be perceived as unjust and unfair discrimination, in essence offering “access to justice” to the impecunious at a significant mark-up.

THE POSITION IN SINGAPORE

All these criticisms seem to have been acknowledged locally, with s 107 of the Legal Profession Act⁶ prohibiting solicitors from acquiring any interest in any suit, action or proceeding, and from entering into agreements which provide for payment only if the claim is successful. Similarly, Rule 18 of the Professional Conduct Rules⁷ expressly prohibits contingent fee agreements. Both provisions seem to be premised on the conventional wisdom that advocates and solicitors must maintain their independent and professional standing (unaffected by any personal interest in the outcome of the matter) in order to be able to act effectively in representing the client's interests.⁸ Contravention of the aforementioned provisions may lead to disciplinary sanctions, including the offending lawyer being struck off the rolls.

The SGHC in Law Society of Singapore v Kurubalan [Kurubalan]¹⁰ recognized that a key element in effectively representing a client's interest is the ability of the lawyer to maintain a sufficient sense of detachment so as to be able to discharge his duty to the court. This duty ultimately paramount and trumps all other duties.¹¹

Such is the commitment of the Singaporean courts to preserve justice and safeguard confidence in the profession that the doctrine has been extended as a general principle beyond the confines of court proceedings. Steps have been taken to bar champertous agreements in other areas of legal work such as arbitration,¹² or even where local lawyers are involved in proceedings brought in foreign jurisdictions.¹³

VALID CONCERNS OR EXAGGERATIONS?

However, are such concerns well founded? While it is conceded that champertous agreements may potentially be abused, it is also undeniable that they allow cases to be brought which would otherwise never have had their day in court.

While lawyers may cherry-pick the most meritorious or profitable cases, this is surely only confined to the pool of potential cases where the claimant was in any case unable to afford conventional legal fees. There is no reason why less meritorious claims cannot continue to be brought by claimants willing and able to pay conventional legal fees. While the claims which are both unfunded and unmeritorious may continue to go unheard, this in no way detracts from the fact that champertous agreements can and will lead to a net increase in access to justice.

For truly meritorious claims, financial constraints will no longer be a barrier to justice. Although the claimant may be paying a higher proportion of legal fees than in a comparable claim with a conventional fee agreement, it must not be forgotten that the alternative is to recover nothing at all. Surely some recovery is better than none?

While this is a lacuna arguably fillable by pro bono, it is submitted that the local pro bono scene is not yet sufficiently developed to fully cater to the needs of society. It must first be acknowledged that commendable efforts and resources are being put in by the authorities, leading to more and more lawyers dedicating time to pro bono. However, it is undeniable that there is still a strata of society unable to avail themselves of publicly available pro bono services, perhaps due to the stringent means testing conducted by entities such as the Legal Aid Bureau.¹⁴ Unfortunately, such categorisation is unavoidable as long as manpower constraints remain. Until the day our pro bono system is sufficiently comprehensive and so well-staffed that it can cater to all meritorious but unfunded claims, it is submitted that champertous agreements should step in to provide some relief.

As for the concern that legal work will suffer as lawyers become more profit-focused, it is arguable that the converse could occur as well. Where lawyers stand to gain more or lose everything from each case, they could well be motivated to work even harder to champion their client's cause.

While some doubts may still remain regarding the potential abuses, it is submitted that we should not be ruled by fear. There is no clear evidence that relaxing the doctrine of champerty will definitely lead lawyers to pervert the law to win at all costs. Concerns regarding the possibility of profit-driven lawyers abandoning their duties to the court and instead abusing the legal process for personal gain, while valid, can be addressed through strict regulations. When lawyers “play by the rules”, champertous lawsuits can be fought just as honourably as those conventionally funded.

A SLOWLY CHANGING LEGAL LANDSCAPE?

There is some evidence that the local stance on champerty is slowly softening. The SGHC in Kurubalan recognized two previous local decisions¹⁵ concerning disciplinary proceedings arising out of champertous agreements. In both instances, the offending solicitors were struck off the roll. The court in Kurubalan however went on to dismiss the two decisions as dated and of “limited use or relevance”,¹⁶ instead proclaiming that the starting point for sentencing in such cases ought to be a period of suspension.¹⁷

In addition, the court took the deliberate step of clarifying that it was permissible and even honourable for a lawyer to act for an impecunious client in the knowledge that he would likely only be able to recover his appropriate fees if the claim was successful. This is premised on the idea that where a lawyer has examined a client's case and concluded in all honesty that there is a good cause of action or defence which, but for the client's impecuniosity would likely be litigated, then he would be doing no wrong to take on such an engagement.¹⁸

The decision in Kurubalan has since been construed as a local exception to the doctrine of champerty,¹⁹ and the apparent relaxation of the court’s stance on champerty has been extended recently in SATS Construction v Islam Md Ohidul [SATS]²⁰ to cover pro bono cases. In SATS, Debbie Ong JC held that there was no reason why legal costs should not be awarded when the pro bono lawyer had rendered substantial work.²¹ In both cases however, the courts drew the line at champertous agreements where fees are calculated as a percentage of or on the basis of the amount recovered in the claim.

With respect, it is submitted that Singapore is well-poised to go a step further and endorse a restricted version of champerty where fees may be derived from the amount recovered beyond a minimum legal fee. This might in fact further incentivise lawyers to act for impecunious clients with meritorious claims, giving a welcome boost to access to justice in Singapore.

As fears regarding the potential perversion of the law understandably remain, perhaps a cue can be taken from Australia, where limited forms of champerty have been legalised in some states. The Queensland Legal Profession Act [QLPA]²² provides a fine example, where conditional costs agreements involving uplift fees are allowed but subject to strict limits. Under the QLPA, where a cost agreement involves an additional uplift fee payable only on the successful outcome of the claim, such a fee is capped at 25% of the legal costs, and an estimate of the uplift fee must be provided before the agreement is signed.

The QLPA strikes an appropriate balance between the merits of increased access to justice and the perils of unrestrained and profit driven contingent fee agreements. Under an uplift fee agreement, the basic legal fee payable is usually lower than commercial rates, making it more affordable. If the claim is unsuccessful, the client need only pay the discounted basic legal fee. However, if the claim is successful, the client then pays the additional uplift fee out of the monies recovered such that the lawyer receives a total sum of remuneration similar to or slightly higher than conventional rates. Where clients are impecunious and unlikely to be able to pay any substantial legal fees for an unsuccessful claim, the availability of such a fee agreement might incentivise lawyers to bear the risk and take on such a claim.

Similarly, the United Kingdom has decriminalised champertous agreements in 1967.²³ In addition, conditional fee agreements are now permissible under the s 58 of the Courts and Legal Services Act,²⁴ albeit subject to certain conditions. This includes requiring the agreement to be in writing, as well as compliance with other conditions as may be prescribed by the Lord Chancellor.

It is submitted that Singapore can and should adopt a similar stance which could greatly enhance access to justice whilst restraining unscrupulous lawyers from abusing the system.

CONCLUSION

While some risks may remain, the potential of champertous agreements to carve out a substantial new avenue for access to justice cannot be ignored. As long as robust regulations and sufficient supervision remain in place, potential abusers of the system can likely be kept in check. Other common law jurisdictions such as the United Kingdom and Australia have already largely embraced champerty, and it is high time Singapore joins their ranks in championing champerty.

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[1] Wallersteiner v Moir (No 2), [1975] QB 373 at 393.

[2] Law Society of Singapore v Kurubalan [2013] SGHC 135, [2013] 4 SLR 91 at [27].

[3]M P Furmston, ed, Cheshire, Fifoot and Furmston's Law of Contract, 2nd ed, (Singapore: Butterworths Asia, 1998) at 639.

[4] Contingent Fee: Champerty or Champion, Arthur L. Kraut, 21 Clev. St. L. Rev. 15 (1972).

[5] Supra note 2, at [27].

[6] Legal Profession Act (Cap 161, 2001 Rev Ed Sing), s 107.

[7] Legal Profession (Professional Conduct) Rules 2015 (S 391/2011 Sing), r 18.

[8] Jeffrey Pinsler SC, Ethics and Professional Responsibility: A Code for the Advocate and Solicitor, (Singapore: Academy Publishing, 2007).

[9] Supra note 6, at s 83(2)(j).

[10] Supra note 2.

[11] Supra note 2 at [45].

[12] Otech Pakistan Pvt Ltd v Clough Engineering, [2006] SGCA 46, [2007] 1 SLR (R) 989 at [38].

[13] Supra note 2 at [64]-[66].

[14] Legal Aid Bureau, “Do I Qualify for Legal Aid?” (1 July 2016), online: Ministry of Law <https://www.mlaw.gov.sg/content/lab/en/eligibility/do-i-qualify-for-legal-aid.html>.

[15] See Law Society v Chan Chow Wang, [1974] SGHC 16, [1974-1976] SLR (R) 237 and Lau Liat Meng v Disciplinary Committee, [1967] SGPC 1, [1965-1967] SLR (R) 641.

[16] Supra note 2 at [69].

[17] Ibid at [78].

[18] Ibid at [86].

[19] Reynard Chua, “The Future of Champerty in Singapore?”, online: (2013) 5 Juris Illuminae 6 <http://www.singaporelawreview.com/juris-illuminae-entries/2015/the-future-of-champerty-in-singapore>.

[20] SATS Construction v Islam Md Ohidul, [2016] SGHC 99.

[21] Ibid at [19].

[22] Legal Profession Act 2007 (Qld), s 324.

[23] Supra note 2 at [62]-[63].

[24] Courts and Legal Services Act 1990 (UK), c 41.

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Application of Muslim Law and the Survivorship of Joint Tenancies in Singapore

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Application of Muslim Law and the Survivorship of Joint Tenancies in Singapore

Muhammad Nurshazny bin Ramlan

INTRODUCTION

The enactment of the Administration of Muslim Law Act [AMLA]¹ barely a few months after Singapore's independence followed the need to “make provision for regulating Muslim religious affairs”.² AMLA only covers Muslim personal law which “governs a person's family matters”,³ such as divorce and succession or inheritance. This article will discuss (1) the faraid, or the Islamic law of succession, in the context of AMLA; (2) the persuasiveness of fatwa, or religious rulings issued by the Islamic Religious Council of Singapore (MUIS); and (3) how faraid and fatwa come together where the right of survivorship arises in the succession of a deceased Muslim's joint tenancy. As the Syariah Court’s jurisdiction is limited to adjudicating Muslim divorces, the courts referred to hereafter are the State Courts and the Supreme Court of Singapore.

I. Muslim Personal Law on Joint Tenancy

MUIS is the statutory body created under AMLA to advise on and administer Muslim law in Singapore.⁴ Under s 32 of AMLA, MUIS is empowered to form a Legal Committee and issue a fatwa either upon request (by private parties or the courts⁵) or whenever it wishes to.⁶ These fatwas are written by MUIS scholars on behalf of the local Muslim community. However, since a fatwa is merely a non-binding opinion,⁷ a court has the discretion to accept or reject the fatwa as it deems fit.

In Singapore, the faraid is governed by ss 111 and 112 of AMLA. They require the estate of “any Muslim person domiciled in Singapore dying intestate” to be subject to faraid, save for where “Malay custom” apply.⁸ MUIS publicly issued a fatwa in 2008 about the faraid position on joint tenancies,⁹ following the Supreme Court decision in Shafeeg bin Salim Talib and Anor v Fatimah bte Abud bin Talib and Ors [Shafeeg]. The fatwa opined that in the absence of express alternative arrangements or agreements such as gifts inter vivos or vows, the surviving joint tenant cannot have full ownership of the property and is only entitled to 50 percent or a “half-share” of its value. The remaining 50 percent belongs to the estate of the deceased and would be distributed according to faraid. This fatwa is supported by the faraid principle that a deceased person’s estate constitutes everything that could be considered as her assets at the time of death. These assets would be part of her estate as long as they belonged to her by personal effort, or by way of a gift or will, or by faraid.¹¹ Assets excluded from this rule are those that have been disposed of as gifts inter vivos, by vows, or by will.

This position in faraid runs contrary to that in general law, where the central feature of joint tenancy – the right of survivorship– assumes that there are no ‘shares’ in the property. The right of survivorship prescribes that the interest of a joint tenant is extinguished upon her death, enabling her interest to be ‘survived’ by her other co–owners.¹² The death of a co-owner can be reflected in the Torrens system by an update of the Land Register. This will result in the surviving co-owner becoming the registered sole-proprietor of the property.¹³

II. Shafeeg on the Limits to the Application of Muslim Law to Joint Tenancy in Singapore

The facts in Shafeeg involved a married Muslim couple who registered as joint tenants of a property under the Land Titles Act [LTA]¹⁴ and Land Titles (Strata) Act [LTSA].¹⁵ When her husband died intestate, the respondent widow gave the Land Registry a Notice of Death and subsequently assumed sole-proprietorship of the property. The appellants were the administrators of the late husband’s estate. Relying on a MUIS fatwa that had previously been issued to the parties, the appellants argued that the “half-share” belonging to the deceased by virtue of the joint tenancy could not be survived by the respondent and must be distributed as part of his estate.

Chan Sek Keong CJ (as he then was) presided over the case in the Court of Appeal. He recognised that while property law in Singapore is governed by common law and legislation such as the LTA and LTSA, land-owning Muslims are simultaneously subject to Muslim personal law in relation to their legal capacity as Muslims.¹⁶ His Honour went further to clarify how Muslim personal law ought to be applied in Singapore by citing case law from Singapore, Malaysia, and India: (i) that Muslim personal law only applies if expressly stated by statute; and (ii) that fatwas are not binding on the courts.

i. Muslim personal law only applies if expressly stated by statute

With the existence of AMLA, statutes will contain express provisions exempting Muslims. Chan CJ held that in absence of such provisions in the LTA and LTSA, these statutes would apply to Muslims.¹⁷ Therefore, all rules governing property ownership in general law, including the rights of survivorship in a joint tenancy, would prevail over faraid rules in Singapore.

ii. Fatwas are not binding on the courts

This is further supplemented by the assertion in Shafeeg that any fatwa issued by MUIS has no binding effect on courts. On this issue, Chan CJ followed the decision in an earlier High Court case, Saniah bte Ali v Abdullah bin Ali [Saniah],¹⁸ where LP Thean J (as he then was) opined that “the fatwa is merely an opinion of the Majlis and is not binding on this court which has full jurisdiction to decide on the matter in issue. What is before me is not really a point of Muslim law on which the Majlis is empowered under s 32 to issue the fatwa.”¹⁹ On this reasoning, Thean J rejected a prior MUIS fatwa²⁰ and held that a statutory trust created by the CPF Act prevailed over the application of Muslim law to the fund in question.

Chan CJ in Shafeeg also explained that the MUIS fatwa cannot be binding especially in Saniah and Shafeeg because they were not obtained by the court, but by request of the private parties themselves. As such, they “will not ordinarily have the same standing”.²¹ It was acknowledged that there was a likelihood of these parties “framing a question based on assumed or hypothetical facts” in a way that misled MUIS, with the result that fatwas were irrelevant or inconsistent with existing law.²² All these re-emphasise the status of MUIS fatwas as nothing more than expert opinion which can be rejected if deemed irrelevant by the court.

CONCLUSION

It is now clear that Muslim law in Singapore applies only insofar as statutes allow it and MUIS’ fatwas are merely non-binding opinions. With regard to joint tenancy, the LTA, LTSA and other statutes concerning land law will continue to apply to Muslims and non-Muslims alike.

However, it is also important to recognise that the conflict between faraid and general law will arise only when succession is contested in the courts. Only then will the supremacy of general law be asserted, as in the decision in Shafeeg. When the beneficiaries and inheritors of an estate accept their standing and entitlements under faraid or the ‘alternative arrangements or agreements’ as specified by the MUIS fatwa, such a conflict will not arise at all. In Shafeeg, it was the estate of a Muslim joint tenant who brought the case to court.

In common inheritance disputes involving assets like CPF money and property, where statutes governing them do not make express exceptions for Muslims, the courts can now take Shafeeg as locus classicus. In fact, the holding in Shafeeg is a clear and helpful guide from the Court of Appeal for legal practitioners in advising their Muslim clients on Muslim personal law. It is also hoped that this would result in greater care and thought being put into estate planning as well as the purchase of matrimonial property as joint tenants.

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[1] (Cap 3, 2009 Rev Ed Sing).

[2] Parliamentary Debates Singapore: Official Report, vol 25 at col 245 (17 August 1966).

[3] Black’s Law Dictionary, 10th ed, sub verbo “personal law”.

[4] AMLA, s 3.

[5] AMLA, s 32(1).

[6] AMLA, s 32(6).

[7] AMLA, s 32(3).

[8] AMLA, s 112(1). See generally.  MB Hooker, Readings in Malay Adat Laws (Singapore: Singapore University Press, 1970). See also Nellie SL Tan–Wong & Vipin Patel, Adat Perpatih: a Matrilineal System in Negeri Sembilan, Malaysia and Other Matrilineal Kinship Systems Throughout the World (Malaysia: Wintrac Sdn Bhd, Malaysian Affiliate, Women's World Banking, 1992).

[9] Majlis Ugama Islam Singapura, “Fatwa on the Joint Tenancy”, Office of the Mufti, online: <http://www.officeofthemufti.sg/Fatwa/joint-tenancy(2008).html>.

[10] [2010] SGCA 11, [2010] 2 SLR 1123 at [23].

[11] Wan Noraini Mohd Salim, Islamic Law of Succession: A Practical Guide To The Laws of Faraid (Selangor, Malaysia: CLJ Publication, 2012) at 7, 53-133.

[12] Kevin Gray & Susan Francis Gray, eds, Elements of Land Law, 5th ed (Oxford: Oxford University Press, 2009) at 919.

[13] John Baalman, The Singapore Torrens System (Being a Commentary of the Land Titles Ordinance, 1956 of the State of Singapore) (The Government of the State of Singapore, 1961) at 191.

[14] (Cap 157, 2004 Rev Ed Sing).

[15] (Cap 158, 2009 Rev Ed Sing).

[16] Supra note 10 at [22].

[17] Supra note 10 at [44].

[18] [1990] SGHC 40, [1990] 1 SLR(R) 555.

[19] Ibid at [17].

[20] This fatwa was issued by MUIS in 1990 to clarify that under faraid, CPF moneys belong to the estate of the deceased CPF member.

[21] Supra note 10 at [65].

[22] Supra note 10 at [64]-[65].

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Considering Constructing Vulnerabilities in the Vulnerable Adults Act

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Considering Constructing Vulnerabilities in the Vulnerable Adults Act

Goh Hui Si Priscilla

Announced in January 2015, the Vulnerable Adults Act [the Act] is slated for possible implementation within the year. The purpose of the Act is to legislate for the provision and protection of “vulnerable adults” deemed unable to take care of themselves, particularly in cases of self-harm and neglect. While the Act is still in relatively early stages of development, there are a few possible issues to consider that straddle both legal and policymaking spheres. This article addresses two major issues – terminology and contextual applicability – that the author finds must be sufficiently addressed in order for the Act to function effectively in Singapore’s increasingly ageing society.

The first issue is how a “vulnerable adult” should be defined. The most straightforward element to consider would be the person’s mental state. Where an individual is rendered mentally incapable of looking after himself, his impaired decision-making abilities create a possible area of weakness wherein his actions cause harm to his health, physical self, or both. Consequently, the Act would effectively serve to protect the individual from himself during the period of impairment by, inter alia, providing appropriate social work or medical institutions with easier access to this individual. This relatively straightforward scenario complements the provisions of the Mental Capacity Act [MCA]¹ by providing an alternate legal pathway for family members or relatives to step in and make decisions on behalf of mentally incapacitated individuals.

The difficulty arises, however, where an individual is not mentally incapable of looking after himself, but is still deemed to be a “vulnerable adult” under the Act. This particular concern is raised in light of then Minister for Social and Family Development Chan Chun Sing’s speech during the introduction of the Act, where he pointed out that individuals who are not mentally incapable but undergo lack of care from their families or neglect may nevertheless fall within the Act’s purview.²

The present legal position per s 3(2) read with s (6) of the MCA is that individuals retain the freedom to choose whether or not to receive medical care, unless they are mentally incapable of making decisions in their best interest. In such exceptional situations, a legally appointed donee would make decisions relating to his life to promote the individual’s personal welfare.³ Consequently, the Act’s prerogative to legislate the intervention of an individual who is not mentally incapable of making decisions related to his life begs the question of what other factors can be so determinative as to override an individual’s validly held mental capacity to make his or her own life choices. Despite the Act’s focus on protecting individuals from their own actions, a possible factor is, ironically, the individual’s own choices and actions. There is then a need for the relevant stakeholders in the legislation to consider what actions would be so detrimental to an individual so as to necessitate overriding his freedom to choose his own actions in the course of his life, especially when he is in fact mentally capable of choosing so.

The mix of contributing factors to the definitions within the Act is ultimately an extremely pertinent matter affecting the boundaries of the Act. Such boundaries must be narrow enough to ensure distinct identification of an individual considered to be vulnerable, but wide enough such that it reaches individuals who are on the margins of the targeted class of individuals. This aspect is particular crucial not just for the effectiveness of the Act itself, but to prevent social stigma from the mischaracterization of individuals eventually affected by the implementation of the Act.

An additional issue to consider is the function of the Act as part of the Ministry of Social and Family Development’s three-pronged approach towards reaching out to this targeted class of individuals. In his speech, the then-Minister strongly emphasised that the Act is to be used as a last resort, with the primary twin foci being on building family support for such individuals and strengthening community and social service support. It is evident that the Act developed as a safety net meant for cases that fall through the cracks of the twin foci. This has a significant impact on the Act’s scope. The tension lies between the need for legislation that covers a broad enough range of factual matrices in order to function as an effective legal safety net to catch cases requiring state intervention, and the need for legislation with narrow enough definitions that draw effectively enforceable boundaries.

The principal motivations behind the Act make discussion of its substance a particularly timely one in light of Singapore’s ageing population. However, given the conspicuous difficulties that legislators and drafters will face in crafting the Act, it is worth pondering if the Act suffices as a solution to the increasingly prevalent issues of self-harm and neglect, or if the relevant institutions should look towards improving present legislation to resolve these issues instead.

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[1] Cap 177A, 2010 Rev Ed Sing

[2] Chan Chun Sing, Speech at MSF Committee of Supply 2015, online: Ministry of Social and Family Development <http://app.msf.gov.sg/Press-Room/Speech-at-MSF-Committee-of-Supply-Debate-2015>.

[3] Wong Meng Cheong and Ling Ai Wah and another, [2012] 1 SLR 549, [2011] SGHC 233 at [108]).

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Law, Justice, Truth, and Forgiveness? A Case Study of South Africa

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Law, Justice, Truth and Forgiveness? A Case Study of South Africa

Nguyen Vu Lan

Established in December 1995 in South Africa, the post-apartheid Truth and Reconciliation Committee (TRC) has received both praise and criticism from many legal, historical, philosophical, and political viewpoints. One of the most contentious issues about the TRC is its conditional amnesty provision¹ for the perpetrators of wrongs under the apartheid, which provided amnesty on the condition that they come forward and tell the truth about what they did. Normally, one of the most common (and significant) goals of criminal law is to mete out retributive justice, punishing the offenders for the wrongs they have done. However, the conditional amnesty provision, premised on the concepts of truth and forgiveness, turned this notion on its head and pursued restorative justice instead. After all, laws are enacted for the good of the nation and the society, and here was one instance where the normal rule of law was bent to, presumably, serve the greater good of the “reconciliation” of the nation. But is the route of restorative justice really the best way to achieve national reconciliation, or would retributive justice have done a better job? This essay seeks to argue that firstly, the route of restorative justice embodied in the conditional amnesty provision was theoretically the best option in light of this aim of reconciliation, and secondly, despite many flaws, the TRC did achieve a somewhat modest reconciliation of the nation.

Truth, Forgiveness, Justice and Reconciliation

The TRC is unique in that it directly linked truth to exoneration from responsibility. Amnesty was promised to individuals guilty of politically motivated “gross violation of human rights”² who told the whole truth about what they did. From a legal perspective, this intimate link inevitably raises questions about contentious concepts like truth, forgiveness, and justice. With the over-arching goal of national reconciliation in mind, this paper argues that the route of truth and forgiveness was theoretically better than prosecution and retributive justice.

According to Asmal et al,³ reconciliation is the “ending of the divisive cycle of accusation, denial and counter-accusation; not a forgetting of these accusations and counter-accusations, but more a settling of them through a process of evaluation”.⁴

One very important criticism against the TRC is that justice should be a pre-requisite of reconciliation, and not an alternative to it.⁵ This is the popular view in many legal systems. However, this depends on how we define “justice”. Normally, we tend to associate “justice” with “retributive justice” – the idea that justice requires the criminal to be punished proportionately to the crime he/she has done.⁶ Many families who had lived through the apartheid system opposed the TRC precisely because it was not meant to mete out retributive justice.

However, the TRC may well be in right in disassociating justice with retribution. One limit of retributive justice is that it may never be enough. Punishing the apartheid perpetrators cannot bring the victims back, and because of the lack of the death penalty in South Africa, the punishments would never be proportionate to the crimes (many of which were murder). Furthermore, there is always the risk of families of victims taking retributive justice into their own hands if they remain unsatisfied with the punishment meted out by the state. Reconciliation with the past would then be all the more difficult.

Another issue with retributive justice is that in the apartheid conflict where there were human rights abuses on all sides, it was difficult to assign blame and thus punishment to an individual. To quote Miriam Aukerman,⁷ “the central premise of individual responsibility portrays defendants as separate people capable of autonomous choice—when the phenomena of mass atrocities render that assumption at best problematic”. Many perpetrators of violence might have believed that they were acting for a just cause – and this was true for both pro-apartheid and anti-apartheid perpetrators. Although this does not mean that their actions were justified, it does show that retributive justice in this case might be too rigid an option. It might even cause uproars and protests from both sides, which would severely damage the reconciliation efforts.

Perhaps the TRC process was exploring justice in a more magnanimous form with reconciliation in mind – restorative justice, which “points beyond conventional retribution into a realm where justice and mercy coalesce”.⁸ This is a concept not too often acknowledged in traditional courts of law, but it should be looked at in the context of a freshly wounded nation wanting to start over. This restorative justice was supposed to be brought about by truth and forgiveness. When the victim forgives the perpetrator, the two can reconcile and move on together. Archbishop Desmond Tutu, chairman of the TRC, emphasized the concept of Ubuntu,⁹ and called for forgiveness, which would lead to peace and reconciliation. This forgiveness can only be brought about by truth. On a more symbolic level, because the apartheid system was founded on a lie (that blacks were inferior to whites), a truth commission would signify the dawn of a new day. Truth hurts but it also heals, and knowing what happened to their family members might bring a sense of closure to the victims. As Benedict Anderson argues, “The formulation of a shared national past is simultaneously the basis of the assertion of a shared national future.”¹⁰ With truth comes understanding, and with understanding comes peace and hope for a new future. Reconciliation would then be achieved, because both sides in the apartheid conflict would be able to move on with their lives, having understood and hopefully made peace with their past.

Evaluation of the Amnesty Provision

While the idea behind the TRC has been argued to be the best option for national reconciliation, in reality the TRC did not achieve its ideal completely. There were many flaws that meant that the TRC came rather short of what it wanted to achieve. However, overall, it did lead to some kind of modest national reconciliation.

One flaw of the TRC is that it had a very narrow focus. The amnesty is only provided for those who committed “gross violation of human rights”. This results in the perpetrators – more of the “trigger-pullers” rather than the political masterminds – having to bear the collective shame of the apartheid system. At the same time, the TRC also allowed those who committed wrongful acts under the apartheid that affected others socially and economically to get away. This ignores the various ways in which the apartheid system damaged human rights and human dignity, and even allows whites who did not commit murderous acts (but who discriminated blacks in other ways, and otherwise benefited from the apartheid system) to think of themselves as morally untainted by apartheid. This could be seen as a grave failure of the legal system, as certain wrongs went unpunished and moreover even “tolerated” or “glossed over”.

More importantly, the narrow focus meant that the TRC’s goal of documenting a collective history – by collecting “truths” from the perpetrators of violence – fell short. According to Piers, there was much disagreement over whether the whole truth had been told or not.¹¹ The apartheid system was not just about physical violation of human rights; it was also about political, social and economic discrimination, and “truth” cannot be attained without these missing pieces. For instance, no senior member of any political party – the “masterminds” – came forward and told their versions of the truth. For those who did apply for amnesty, there was doubt that they only told the version that would fulfil the amnesty requirements.

This partial failure to collect truth made forgiveness and closure difficult. Many victims left the process feeling more bitter and frustrated because they felt that the perpetrators did not provide the whole truth of their accounts, and yet received amnesty. Oftentimes, the opposite of closure happened. For example, Sylvia Dlomo-Jele, the mother of murdered activist Sicelo Dlomo, believed that the perpetrators of her son’s murder disclosed the truths selectively to fulfil the amnesty requirements. She refused to forgive, as did many families who believed that the perpetrators had told half-truths.¹² Coupled with the fact that there was little or no follow-up investigation of the perpetrators’ accounts, there was a justifiable feeling that TRC was not living up to its promises.

The lack of a requirement for remorse also made the goal of forgiveness difficult sometimes. When victims met perpetrators and the perpetrators showed no repentance, the victims had to re-live the horrors of the past again without anything to comfort them. Admittedly, there were valid reasons why remorse was not required, because it would have deterred many people or forced people to put on a façade, thus impeding the goal of acquiring truth. Also, if it did, it would have devalued the moments when genuine remorse was present. To quote Peter Storey:¹³

In one case, a police officer who masterminded the butchering of a number of families in an attack on a rural village faced his victims: “I can never undo what I have done,” he said. “I have no right to ask your forgiveness, but I ask that you will allow me to spend my life helping you to rebuild your village and put your lives together.” In such moments, anger at the unrepentant is superseded by a glimpse of something more. Out of the horrors of the past, the TRC makes space for grace, and the potential for newness in South Africa shines through.

There were other weaknesses of the TRC as well. One of them is the fact that very few cases that were rejected for amnesty were actually followed up in criminal or civil courts. Effectively, there was not much difference between those who did receive amnesty (i.e. those who had to go through all the public hearings and spectacles), and those who did not (i.e. common criminals). This, again, shows a defect in the implementation, if not the substance, of the amnesty provision.

However, there were indeed things that the TRC did well. One of them is the fact that the TRC did not discriminate between black and white perpetrators – both sides committed acts that violated human rights. Justice and the law should be impartial, and in this respect, they were. The commission considered amnesty applications from all sides, from the apartheid state to the liberation forces, including the African National Congress. Some have decried this as a failure to make a moral distinction between one side which fought for equality and one side which were the oppressors, but such criticism treads dangerously close to the realm of victor’s justice. Indeed, this aspect of the TRC went far in the goal of reconciliation precisely because it acknowledged the fact that both sides did play a part in the brokenness of the nation, and this very acknowledgement was necessary for both sides to move on. It also sent out the important message that a morally justified struggle does not justify immoral and indiscriminate violence, which will remind the nation not to repeat its history.

Another more fundamental requirement was that the amnesty was conditional upon the perpetrators telling the truth. People were made to realize that their tormentors do not just get away freely – that “there is a difference between impunity, implying escape from accountability, and amnesty, which carries profound inward and social consequences”.¹⁴ These perpetrators will have to bear the shame for the rest of their lives, and will have to face their families, their friends, their communities with a black mark. The shame and the social disgrace may be nothing compared to what they did, but perhaps it was enough to restore the nation – not as harsh as retributive justice, but not too lenient either.

For the few perpetrators who truly felt remorseful, the TRC helped in reconciliation in another way: it somewhat cleansed their conscience. At least they came forward, told the truth, and perhaps had the chance to apologise to the victims. Some will live with shame for the rest of their lives, but some will live with grace, not letting their past define them and being able to move forward after “purging” their guilty conscience.

Conclusion

With all the flaws and strengths of the TRC, whether it has achieved its goal of national reconciliation is still debatable. However, with all the public hearings and media surrounding the TRC, perhaps it is fair to say that TRC has achieved its goal to a moderate extent. Many accounts of the truth have been provided in the TRC Report in 1997, allowing many to move on with their lives. This is an interesting instance where the law, by meting out restorative justice instead of retributive justice, might have achieved the greater good. Of course, there is no easy answer to the issue of whether restorative or retributive justice is better in the grand scheme of things, because truth and justice and reconciliation are rather intangible concepts that cannot be easily measured or seen. South Africa is an interesting case study for this question, but it leaves us with more questions than answers, and only time will tell what kind of justice or “mixture” of kinds of justice is required of the legal system in such a scenario.

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[1] Promotion of National Unity and Reconciliation Act, No 34 of 1995, Cap 4.

[2] Promotion of National Unity and Reconciliation Act, No 34 of 1995, s 1(1).

[3] Kader Asmal, Louise Asmal, Ronald Suresh Roberts, Reconciliation Through Truth: A Reckoning of Apartheid's Criminal Governance, (Cape Town: David Philip Publishers, 1996), 46.

[4] Emphasis by author.

[5] Peter Storey, “A Different Kind of Justice: Truth and Reconciliation in South Africa” (1997) The Christian Century. 

[6] Antony Duff, “Legal Punishment” (2003) The Stanford Encyclopedia of Philosophy.

[7] Aukerman Miriam J., “Extraordinary Evil, Ordinary Crime: A Framework for Understanding Transitional Justice” (2002) 15 Harvard Human Rights Journal 39-97.

[8] Supra note 5.

[9] “A person with Ubuntu is open and available to others, affirming of others, does not feel threatened that others are able and good, based from a proper self-assurance that comes from knowing that he or she belongs in a greater whole and is diminished when others are humiliated or diminished, when others are tortured or oppressed.” (Tutu, Desmond, No Future Without Forgiveness (1999)).

[10] Wilson Richard A., “The Politics of Truth and Reconciliation in South Africa: Legitimizing the Post-Apartheid State” (Cambridge: Cambridge University Press, 2001).

[11] Piers Pigou, “False Promises and Wasted Opportunities? Inside South Africa’s Truth and Reconciliation Commission” in Deborah Posel & Graeme Simpson (eds), Commissioning the Past: Understanding South Africa’s Truth and Reconciliation Commission (Johannesburg: Witwatersrand University Press, 2002), 37.

[12] Ibid.

[13] Supra note 5.

[14] Supra note 5. 

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Occupying New Territory: How the Tort of Occupier's Liability Fits into the Modern Day of Spandeck

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Occupying New Territory: How the Tort of Occupier's Liability Fits into the Modern Day of Spandeck

Kelvin Ho

The Spandeck test established in Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency¹ [Spandeck] laid out a clear framework to determine duty of care in tort of negligence cases, and was further extended to apply to cases previously brought under the separate nominate tort of occupier’s liability in See Toh Siew Kee v Ho Ah Lam Ferrocement (Pte) Ltd² [STSK]. This article will evaluate the effectiveness of the Spandeck test in resolving the two main issues that plagued the tort of occupier’s liability as highlighted by the Court of Appeal in STSK, namely (1) the often illogical and arbitrary static-dynamic dichotomy, and (2) the invitee-licensee-trespasser trichotomy.

A brief outline of the Spandeck test involves the threshold stage of factual foreseeability, followed by the first stage of legal proximity between the plaintiff and the defendant to find a prima facie duty of care imposed on the latter, and then the second stage of whether there are any negating policy reasons to disaffirm this duty of care. Although it is to be applied incrementally by referring to analogous cases at each stage, the court is allowed to establish new categories of duty where appropriate.

The first problem of the static-dynamic dichotomy regarding the tort of occupier’s liability is that it is never always possible to clearly separate the static and the dynamic. The concept of static refers to the condition of the property while dynamic refers to the activities that take place on it. For example, in the seminal case of Australian Safeway Stores Proprietary Limited v Zaluzna³ [Zaluzna], the plaintiff suffered injuries after slipping on the wet floor of the foyer, which was part of the defendant’s supermarket. The Court opined that on one hand, the condition of the floor was due to the rain and was unrelated to any of the supermarket’s activity, but on the other, the supermarket was running a business at the exact premises where the accident occurred and the very movement of shoppers in the supermarket could definitely be seen as dynamic. As such, the factual matrix in Zalunza seemed to be equally susceptible to both classifications. The use of the Spandeck test can effectively eliminate this issue as it can now be transparently examined under the two stages of the test. With the application of the Spandeck framework, it is no longer necessary to distinguish between static or dynamic. This eliminates the arbitrariness and difficulty of the static-dynamic dichotomy that plagued the tort of occupier’s liability previously.

The second problem addressed by the Spandeck test is the invitee-licensee-trespasser trichotomy, which only arises when the case has been established to be one under the static category. The issue with this trichotomy is that “first (from the viewpoint of logic), it is potentially ambiguous whether an entrant is to be classified as an invitee, a licensee or a trespasser; and second (from the viewpoint of practice), the distinctions between the categories could turn on inconsequential details that potentially lead to injustice”, as opined by V K Rajah JA⁴. In eliminating the preliminary issue of the static-dynamic dichotomy as explained in the preceding paragraph, the Spandeck test effectively nips this problem in the bud. However, the Spandeck approach is not without its flaws in resolving cases of occupier’s liability.

When the Court first subsumed the tort of occupier’s liability under the general tort of negligence in STSK⁵, V K Rajah JA emphasized the control of the premises as the key factor in determining a prima facie duty of care in most cases. Admittedly, the concept behind the static-dynamic dichotomy and the invitee-licensee-trespasser trichotomy is intertwined with the idea of control, since there tends to exist a higher degree of control over the static rather than the dynamic, and similarly over an invitee or licensee as opposed to a trespasser. However, the factor of control was not explicitly examined vis-à-vis the Spandeck stages: in particular, whether control should be examined under the proximity stage or the policy stage was left unclear by the Court. Control can be discussed either way: in the proximity stage as the “defendant’s control over the source of the risk of harm to the claimant”, or in the policy stage as the defendant’s control over “a class of individuals of which the claimant is a member”, as noted by Professor David Tan in The Phoenix Rises: Resurrecting Occupier’s Liability Within The Negligence Framework⁶. Thus, there remains a grey area on whether the factor of control should be examined under the proximity or policy limb of the Spandeck test and this will affect future applications of the test in cases of occupier’s liability.

Assuming control is to be studied in the first stage of proximity, control itself is also insufficient to impose a prima facie duty of care, contrary to what was suggested in STSK that “control of the premises concerned is a sufficient foundation per se for imposing on an occupier a prima facie duty of care under the Spandeck approach”⁷. Other factors such as the occupier’s knowledge of potential entrants entering onto its controlled premises and the vulnerability of such entrants must be considered in light with the factor of control. For example, in cases where the occupiers are aware of the high possibility that children, who are usually deemed vulnerable, may trespass onto their controlled premises, there should be a closer relationship between the occupier and the trespasser. Thus, it is insufficient to use control as the only factor when considering proximity.

V K Rajah JA made an exception to this by stating that the control factor is alone sufficient when dealing with cases involving lawful entrants⁸. However, making this reference only seems to bring back remnants of the invitee-licensee-trespasser trichotomy which the Spandeck test initially tried to dismiss, as lawful entrants can be seen as an invitee or a licensee. In fact, the distinction of lawful and residual entrants should no longer be an issue since the enquiry is effectively subsumed under the first stage of proximity in Spandeck; by examining the circumstantial relationship between the occupier and the entrant. Thus, as Sundaresh Menon CJ⁹ opined, it is better to take full advantage of the flexibility of the Spandeck test itself and do away completely with the distinction between lawful and residual entrants.

In conclusion, the concept of classifying the tort on occupier’s liability under the general tort of negligence, and hence the application of the Spandeck test for cases involving occupier’s liability, was only established recently in the case of STSK in 2013. Even though it was a valiant attempt to make uniform the tort of occupier’s liability via the general Spandeck test, there are still certain unresolved areas as highlighted above, owing perhaps due to the problems in force fitting an age-old tort under an already well-established two-staged test. Nonetheless, the drawbacks of the Spandeck test can still be rectified in future cases, such as clearly defining the factor of control as either a stage one or stage two consideration. Indeed, since the origins of the primary issue of occupier’s liability, being the static-dynamic dichotomy, was “not founded on logic or principle” but rather because “it is rooted in convoluted English legal history” ¹⁰, the application of a more recent and established approach such as the Spandeck test in such cases is still very much welcomed.

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[1] Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency, [2007] SGCA 37, [2007] 4 SLR (R) 100.

[2] See Toh Siew Kee v Ho Ah Lam Ferrocement, [2013] SGCA 29, [2013] 3 SLR 384.

[3] Australian Safeway Stores Proprietary Limited v Zaluzna, [1987] HCA 7, [1987] 162 CLR 479.

[4] Supra note 2 at [48].

[5] Supra note 2 at [100].

 [6] [2013] 21 TLJ 59 at page 70.

[7] Supra note 2 at [100].

[8] Ibid at [80].

[9] Ibid at [130].

[10] Ibid at [21].

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The Tangle of the Tort of Unlawful Means Conspiracy

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The Tangle of the Tort of Unlawful Means Conspiracy

Laura Lim

In EFT Holdings, Inc v Marinteknik Shipbuilders (S) Pte Ltd¹ [EFT], the Singapore Court of Appeal (SGCA) discussed the tort of unlawful means conspiracy. While the Court addressed several interesting questions, much was ultimately left to be decided in future cases. Although arguably the more prudent approach, this leaves the tort of unlawful means conspiracy in a tangled mess. Of all the unanswered questions about the tort, one strikes me as particularly fundamental, but was scarcely addressed in EFT – precisely what constitutes “unlawful means”? At first blush, the answer may seem simple enough, but the history of the tort and its development in other jurisdictions suggest that there is more than meets the eye. Before we proceed, it may be useful to understand the elements of unlawful means conspiracy as helpfully laid out by the SGCA in EFT²:

1. there was a combination of two or more persons to do certain acts;
2. the alleged conspirators had the intention to cause damage or injury to the plaintiff by those acts;
3. the acts were unlawful;
4. the acts were performed in furtherance of the agreement; and
5. the plaintiff suffered loss as a result of the conspiracy.

The scope of “unlawful means” therefore evidently relates to the substance of the third element. This requirement of unlawfulness is particularly crucial to distinguish unlawful means conspiracy from conspiracy by lawful means, which is a separate tort requiring not only that the alleged conspirators had the intention to injure the plaintiff (as per element (2)), but that they did the acts with the predominant intention of injuring the plaintiff.

In considering the substance of “unlawful means”, perhaps the best starting point is a statement by Lord Walker in the case of Total Network SL v Revenue and Customs Commissioners³, cited with approval by the SGCA in Beckkett Pte Ltd v Deutsche Bank AG⁴, that “unlawful means, both in the intentional harm tort and in the tort of conspiracy, include both crimes and torts (whether or not they include conduct lower on the scale of blameworthiness)”. This statement not only (1) suggests that the content of “unlawful means” includes “crimes and torts”, but also (2) reminds us of similar torts involving “unlawful means” such as the intentional harm tort. These will be examined in turn.

Firstly, specifying the content of “unlawful means” to include “crimes and torts” seems intuitively fair. Given that this is not an exclusive definition, however, it remains unclear if other forms of “unlawful” behaviour can also be considered. Pertinently, it remains to be determined if a breach of contract or a breach of confidence constitutes unlawful means for the purpose of establishing unlawful means conspiracy (as has been held in several High Court cases⁵ in which the breaches were simply assumed to be unlawful). Given the existence of the tort of lawful act conspiracy, which has a higher threshold for establishing intention, it is submitted that as long as the distinction between lawful and unlawful conspiracy is preserved, a breach of contract or confidence would have to be considered “lawful” so as not to render the tort of lawful act conspiracy devoid of substance and, consequently, otiose⁶.

Secondly, the question of what constitutes “unlawful means” may ultimately turn on the larger issue of whether the tort of unlawful means conspiracy can be considered a species tort to the genus of a broader unlawful means tort or the general body of economic torts such as conspiracy, indirect interference with contract, and intimidation. This issue is relevant to the discussion about “unlawful means” because the term is often an element that requires definition in these torts. While the question of whether to consider the torts together was discussed by the SGCA in EFT, the court eventually made no definite pronouncement. The furthest the court went was to note that while economic torts were traditionally understood as being related, this view has since been rejected by the House of Lords in OBG Ltd v Allan⁷ [OBG] on the basis that each tort within the supposed “genus” is in fact supported by a distinct underlying rationale.

It would be helpful for the SGCA to clarify whether or not a unified body of economic torts can be said to exist in Singapore. If the English position in OBG is accepted, the task of clarifying the content of “unlawful means” in the tort of conspiracy becomes much less daunting, since courts would no longer have to consider the many potential knock-on effects on other doctrines. Conversely, if Singapore courts reject the English position and recognise a unified doctrine of economic torts, it becomes all the more critical to develop a robust definition of “unlawful means” to apply uniformly to the whole body of economic torts for the sake of clarity and doctrinal coherence.

Until then, this area remains mired in uncertainty.

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[1] [2013] SGCA 64, [2014] 1 SLR 860.

[2] Ibid at [112].

[3] [2008] UKHL 19, [2008] 1 AC 1174.

[4] [2005] SGCA 34, [2009] 3 SLR (R) 452 at [120].

[5] See The Monarch Beverage Company (Europe) Ltd v Kickapoo (Malaysia) Sdn Bhd [2009] SGHC 55; Nagase Singapore Pte Ltd [2007] SGHC 169, [2008] 1 SLR(R) 80; Clearlab SG Pte Ltd v Ting Chong Chai [2014] SGHC 221, [2015] 1 SLR 163.

[6] See Lee Pey Woan, "A Rare Case of Conspiracy by Lawful Means", Singapore Law Blog (25 December 2014) (http://www.singaporelawblog.sg/blog/article/72), in which Lee notes that in SH Cogent Logistics Pte Ltd v Singapore Agro Agricultural Pte Ltd [2014] SGHC 203, “possibly the first and only instance of lawful means conspiracy in Singapore”, the means employed by the defendants were “not, on closer examination, entirely lawful in nature”.

[7] [2007] UKHL 21, [2008] 1 AC 1.

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Cooperation and Concession: Whaling in the Antarctic (Australia v Japan: New Zealand Intervening)

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Cooperation and Concession: Whaling in the Antarctic (Australia v Japan: New Zealand Intervening)

Reuben Ong

PART I: INTRODUCTION

In its most recent judgment, the International Court of Justice (ICJ) ruled against Japan on the issue of whether its whaling program, JARPA II, complied with Art VIII of the International Convention for the Regulation of Whaling (ICRW). Interestingly, instead of subjecting JARPA II to an objective review based on the relevant international framework, the Court seemed content to focus on a standard of review based on Japan’s own self-conceived and conceded standards. Based on JARPA II’s own objectives, the Court then found inconsistencies between those objectives and key elements of JARPA II’s methodology; particularly, the usage of lethal sampling. This short commentary will briefly examine the merits of the Court’s focus on cooperation and concession, and will discuss whether this cautious approach is the best way forward.

PART II: CASE SUMMARY

Although commercial whaling has been banned ever since a 1982 moratorium adopted by the International Whaling Commission (IWC), Art VIII of the ICRW permits whaling for “purposes of scientific research”.¹ Under this veneer of compliance, Japan continued the harvest and distribution of whale meat for consumption under the auspices of its allegedly scientific whaling programs—JARPA and JARPA II. The controversial program continued into the 21st century, until 2010 where Australia formally instituted proceedings against Japan.

In argument, Australia submitted that JARPA II should be subjected to an objectively ascertained standard of scientific rigour. Japan countered that each nation reserved the right to issue whaling permits at its own discretion, and that any resolutions proposing an objective standard were at best recommendatory. Although the court agreed that the standard of “scientific purpose” cannot depend simply on each state’s perception,² it ultimately declined to define an objective standard, noting that “scientific research” is not defined in the ICRW.³ Instead, the Court based its review on JARPA II’s own stated research objectives. Ultimately, inconsistencies between its objectives, methodology and implementation led to the finding that the lethal sampling of whales under JARPA II was not reasonable in relation to achieving its objectives.⁴

PART III: DISCUSSION

The overall tenor of academic response to the decision has been rather subdued. Most were disappointed by what they perceived as the Court’s failure to enunciate a clear standard of scientific review. However, due consideration must be given to motives behind the Court’s rather cautious approach. By declining to give a definitive meaning to “scientific research”, the Court probably had an eye on acting de lege ferenda; amidst a sea of obligations both binding and non-binding, the Court was rightly wary of transforming mere recommendations into binding orders.⁵ In so doing, the Court deftly sidestepped the need to give a definition of a controversial and multifaceted term. Instead of imposing its own interpretation of an international framework on Japan, the Court based its decision on relatively uncontroversial benchmarks—JARPA II’s own stated research objectives, as well as legal obligations which Japan conceded it owed. Doling out equal parts justice and diplomacy, the Court astutely framed Japan’s obligation in terms of a duty to cooperate within a self-conceived and conceded standard of review.⁶

A growing willingness to defer to each state’s interpretation of what constitutes a scientifically rigorous research plan seems evident in the Court’s approach of ‘reasonableness’. Telesetsky, Anton and Koivurovac argue that the Court’s focus on ‘reasonableness’ shifted the burden of proof from Australia having to prove bad faith, to Japan needing to demonstrate that its methodology, design and implementation of JARPA II was reasonable.⁷

It has been further argued that the ‘reasonableness’ test formulated might be exported to other issues that are not necessarily scientific in nature.⁸ If this approach were adopted in a general manner, it would underscore the greater emphasis on cooperation and concession in the enforcement of international law.

PART IV: THE WAY FORWARD

The cautious approach undertaken by the Court has left questions as to its efficacy. A few months after JARPA II was shut down by the ICJ, Japan announced that its whaling program would be resurrected under a scaled-down program called NEWREP-A.⁹ A similar but smaller whaling program which Japan conducts in the North Pacific, JARPN, was not even the subject of argument during the proceedings, and will carry on unhindered.¹⁰ Conservationists may be forgiven for thinking that the decision confers no lasting legal protection on whales.

Be that as it may, the Court’s approach represents a win from a compliance perspective. Although NEWREP-A is a whaling program similar in many respects to JARPA II, Japan acknowledged the decision and stated that it would abide by it. NEWREP-A is only at the proposal stage, and Japan has made clear that it would consider the advice of the IWC’s Scientific Committee in ensuring that the program design complies with the spirit of the Australia v Japan decision.¹¹

In sum, the Court’s cautious approach based on cooperation and concession deserves credit where it is due. Although it does not go far enough to please hardline conservationists, it has nudged Japan in the direction of greater accountability. By confining its comments strictly to JARPA II, the Court succeeded in stopping JARPA II and programs of its scale, without foreclosing the possibility of smaller programs by Japan. The Court has thus once again showed its penchant for eschewing a winner-takes-all solution in favour of one which gives both parties something to take home.

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[1]  International Convention for the Regulation of Whaling, 2 December 1946, 161 UNTS 74, [1948] ATS 18.

[2] Case concerning Whaling in the Antarctic (Australia v Japan: New Zealand intervening), Judgment of 31 March 2014, online: International Court of Justice < http://www.icj-cij.org/docket/files/148/18136.pdf> [Whaling] at para 61.

[3] Ibid, at para 86.

[4] Ibid, at para 127.

[5] Erik Franckx, “The Legal Nature of Resolutions of Intergovernmental Organizations: The Contribution of the Whaling in the Antarctic Case” (Lecture delivered at the Japanese Society of International Law), at 9.

[6] Ibid, at 13.

[7] Anastasia Telesetsky, Donald K Anton & Timo Koivurova, “ICJ’s Decision in Australia v Japan: Giving up the Spear or Refining the Scientific Design?” (2014) 45:4 Ocean Development & International Law 328 at 336.

[8] Ibid.

[9] Japan, Ministry of Agriculture, Forestry and Fisheries, Proposed Research Plan for New Scientific Whale Research Program in the Antarctic Ocean (NEWREP-A) (Nov 2014).

[10] Jeffrey J Smith, “Evolving to Conservation?: The International Court’s Decision in the Australia/Japan Whaling Case” (2014) 45:4 Ocean Development & International Law, 301 at 303.

[11] Japan, Chief Cabinet Secretary, Statement by Chief Cabinet Secretary, the Government of Japan, on International Court of Justice “Whaling in the Antarctic (Australia v. Japan: New Zealand intervening)“, 31 March 2014, <http://www.mofa.go.jp/press/danwa/press2e_000002.html>.

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Successor Liability: Acquirers of Indian Businesses beware!

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Successor Liability: Acquirers of Indian Businesses Beware!

Harsh Kumar*

In India, the principle of successor liability typically applies in mergers of companies, transactions for the fraudulent purpose of escaping liability for the seller’s obligations, or situations where it is imposed by statute (for example, cases involving the breach of environmental law or certain labour laws.¹) However, the Indian Supreme Court has, in McLeod Russel India Limited v Regional Provident Fund Commissioner, Jalpaiguri and others², recognised the principle of successor liability in the case of a business transfer, for historical non-compliances by a seller in payment of provident fund (social security) dues.

BACKGROUND

McLeod Russel India Limited (“Acquirer”) acquired M/s Mathura Tea Estate (“Business”) from Saroda Tea Company Limited (“Seller”) pursuant to a Memorandum of Understanding (“MOU”). At the time of the acquisition of the Business, the Seller had an outstanding claim for provident fund payment to its employees under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952³ (“EPF Act”). The Acquirer discharged the provident fund dues of employees who were transferred to the Acquirer as part of the Business. However, the Acquirer sought to ring-fence its liability for damages on account of non-payment of the provident fund contributions. Accordingly, the MOU recorded the Seller as exclusively liable for the damages resulting from its failure to pay provident fund contributions to the employees of the Business, prior to the date of transfer of the Business.

In respect of proceedings before the Regional Provident Fund Commissioner (“RPFC”), the Acquirer sought to absolve itself from any liability for damages on the basis that historical non-compliances with the EPF Act were to the Seller’s account, as such non-compliances occurred prior to the date of transfer of the Business. Under section 17B of the EPF Act, an acquirer is jointly and severally liable with the seller for non-payment of provident fund dues prior to the date of transfer of an establishment or business. However, there prevailed divergent views amongst the various High Courts in India regarding an acquirer’s liability to pay for damages for past non-compliances with the EPF Act. Nonetheless, on a conjoint reading of the relevant sections of the EPF Act, the RPFC held that the Acquirer and the Seller were jointly and severally liable for damages for non-payment of provident fund dues prior to the date of transfer of the Business. Accordingly, the RPFC imposed a penalty on the Acquirer for its delay in depositing damages within the period stipulated by law.

The Acquirer challenged the decision of RPFC before a single-judge bench of the Kolkata High Court. The single-judge bench upheld the Acquirer’s appeal on the basis that no punitive liability could arise on the Acquirer, for historical non-compliances by the Seller, prior to the date of transfer of the Business. On a further appeal, the division bench of the Kolkata High Court reversed the order of the single-judge bench by relying on a previous judgment rendered by the division bench of the Kolkata High Court. Aggrieved by the judgment of the division bench, the Acquirer filed an appeal before the Supreme Court challenging that judgment.

SUPREME COURT'S VERDICT

The issue before the Supreme Court was whether the Acquirer was liable for the Seller’s non-compliance in paying provident fund dues. Based on a review of sections 14B and 17B of the EPF Act, the Supreme Court held as follows: (a) damages, on account of non-payment of the provident fund dues was a joint and several liability of the Acquirer and the Seller (regardless of the date of transfer of the Business), (b) transfer of the Business did not preclude an employee of the Business from initiating a case against the Acquirer and/or the Seller for recovery of his statutory dues; until an employee’s provident fund dues were paid, such dues would have the first charge over the assets of the Business in priority to all other debts of the Business, and (c) liability of the Acquirer for previous non-compliance by the Seller with the EPF Act could not be assigned or mitigated through any contractual arrangement. Per section 17B of the EPF Act, the Acquirer’s liability extended up to the value of the assets acquired by it.

IMPLICATIONS OF THE JUDGMENT

The Supreme Court has clarified that, in the case of a transfer of a business or establishment, in respect of which provident fund dues are pending, the seller and the acquirer will be jointly and severally liable to pay not only the pending provident fund amount but also damages, if any, imposed by the government authorities. It is now imperative for an acquirer to undertake a detailed diligence on the status of provident fund payments by a company or establishment, otherwise it may have to shoulder all pre-closing provident fund liabilities.

From a transactional perspective, acquirers of a business should consider an escrow to appropriately ring-fence their liability for provident fund dues of a company or establishment. If an escrow is not commercially feasible, then acquirers may consider adjusting the valuation for the business, or seeking a specific indemnity from the seller for liabilities not expressly assumed by the acquirers. An insurance cover may also be obtained to appropriately safeguard against pre-closing liabilities. These safeguards and the manner in which parties will bear associated costs for implementing these safeguards should be negotiated with the seller while finalising the business purchase agreement.

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*Mr Harsh Kumar is Associate Partner in the Corporate (M&A and Private Equity Team) at Khaitan & Co, New Delhi. The Singapore Law Review would like to thank Mr Kumar for his contribution to Juris Illuminae.

[1] Please see Central Inland Water Transport Corporation. Ltd. v Workmen (1975) SCC 348, (1975) Supp. SCR 4434, and Anakapalla Cooperative Agricultural and Industrial Society Ltd. v Workmen (1963) Supp.1 SCR 730, where the Supreme Court set out the factors that ought to be taken into consideration before determining whether a transferee was a successor-in-interest of the transferor in respect of a business carried on in an establishment transferred to the transferee. 

[2] 2014 (8) SCALE 272.

[3] (19 of 1952).

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Downstream Investments in India

Downstream Investments in India

Akshata Srinath

Foreign investment coming into India comprises of both direct and indirect investments. These investments are from non-residents and resident Indian entities. A Downstream Investment¹ means such investment which is indirect foreign investment by one Indian company into another Indian Company by acquisition of shares and way of subscription. The framework until 2009 depended upon the press release by the DIPP wherein prior permission was required to be taken from Foreign Investment Promotion Board (“FIPB”) or any other concerned authority. The complication further arose when there were investments made by foreign owned Indian holding companies where not only the prior permission was required, but pre-requisite conditions were to be fulfilled, which included to keep checks on the foreign equity levels and the time period to keep track of the transfer.² To understand such investment structure, it is important to analyse the key issues involved wherein before due diligence initiates all the parties to the transaction need to understand the investment structure along with the other approvals required from the relevant authorities.

A Core Investment Companies (“CICs”) also known as a ‘shell company’ is the company which only exists in India for the purposes of investment in other Indian companies.³ A foreign owned Indian company which is a CIC requires to fulfillment of the conditions of the regulations framed by the Reserve Bank of India (“RBI”). CICs, as per the law, needs to be registered with the RBI and they need to obtain a Certificate of Registration. It is to be noted that neither the amount being invested nor the ownership or the control of the CICs is significant for acquiring the approvals. Furthermore, when such downstream investments are made through such companies, it will need to comply with other subsequent and relevant conditions on entry route, other caps and conditions. Also while allowing such foreign investments to come in India. FIPB approval along with the RBI approval is required.⁴ Furthermore, the guidelines also bring out the procedure for the calculation of foreign investment in Indian Companies, transfer of ownership and control of Indian Companies along with the downstream investment of the Indian Companies.

Consequently, after seeing into the foreign investment rules and regulation, it can be indicated that even if a company tries to bring in investment in India without any approval by the relevant authorities, the foreign owned Indian company needs to make a report/disclosure to the RBI at the end of the financial year, declaring the utilization of the said investment made. Moreover, for the purpose of downstream investment, the Indian companies making the downstream investments would have to bring in requisite funds from abroad. As the new policy steps in, funds from the domestic market cannot be used. However this does not preclude downstream operating companies, from raising debt in the domestic market. Downstream investments through internal accruals are permissible by an Indian company, subject to the provisions of clause 6⁵ which proposes a suitable regulatory framework for the CICs to comply with the registration process with the RBI. The RBI has also made further clarification on when a downstream investment is made by an Indian company which is not owned and controlled by residents into another Indian company, this investment will be subjected to the sectoral norms on entry route, conditions and caps applicable to the sector in which latter company operates.⁶

When downstream investments are made by a CIC which is owned and controlled by a non resident entity, further notification needs to be made to the Department of Industrial Policy & Promotion (“DIPP”) and Secretariat for Industrial Assistance (“SIA”) along with FIPB and RBI.⁷ Also issue, transfer pricing and valuation of shares should be in accordance with the Securities and Exchange Board of India (“SEBI”).⁸ The Indian company needs to comply with the provisions of the Companies Act 1956 like investments by the way of induction of foreign equity needs to be backed up by a resolution of the Board of Directors and a shareholders’ agreement.⁹

Therefore, the parties before the commencement of the process of due diligence, should clarify any concerns with respect to the above mentioned laws, the suitability of the investment structure to bring in foreign investments in the company, clarity on whether certain approvals are applicable to them or not.

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[1] The term ‘Downstream Investment’, is widely used in practice but it is not specifically defined. It only came into definition by the Press Note 4 [2009 Series] issued by the Department of Industrial Policy & Promotion, Government of India (DIPP) as indirect foreign investment by one Indian company into another Indian company by way of subscription or acquisition in terms of Press Note 2 of 2009.

[2] “Press Note No. 9 (1999 Series)” Government of India, online: <http://dipp.gov.in/English/acts_rules/Press_Notes/press9_99.htm>.

[3] “Master Circular– Regulatory Framework for Core Investment Companies (CICs)” Reserve Bank of India, online: <http://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=7391>. It has to be understood that any such method in which investments enter in India, need approval from the RBI which includes declaration of the amount of investment coming into the company.

[4] “Foreign Investment in India – Guidelines for calculation of total foreign investment in Indian companies, transfer of ownership and control of Indian companies and downstream investment by Indian companies” Reserve Bank of India, online: <http://rbidocs.rbi.org.in/rdocs/Notification/PDFs/01APDIR040713.pdf>.

[5] “Regulatory Framework for Core Investment Companies (CICs)” Reserve Bank of India, online: <http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=5944&Mode=0>.

[6] Supra note 4.

[7] “Consolidated FDI Policy” Government of India (5 April 2013) online: <http://dipp.nic.in/English/Policies/FDI_Circular_01_2013.pdf>, “Press Note No. 6 (2013 Series)” Government of India online: <http://dipp.nic.in/English/acts_rules/Press_Notes/pn6_2013.pdf>.

[8] “Foreign Investments in India” Reserve Bank of India, online: <http://www.rbi.org.in/commonman/English/scripts/faqs.aspx?id=15>.

[9] Indian Companies Act, 1956, Act No. 1, s 31, s 40, and s 94 (1)