APPEAL – FRESH EVIDENCE & POSTPONEMENT OF LIMITATION PERIOD
This week’s blog covers SW Trustees Private Limited (in compulsory liquidation) & Anor v Teodros Ashenafi Tesemma & 5 Ors (“SW Trustees”) [2023] SGHC 273, an interesting High Court decision which discusses several aspects of civil procedure law.
Facts. The plaintiffs, a company in insolvent liquidation and its appointed liquidator, commenced an action against six defendants, alleging that the defendants had caused assets belonging to the plaintiff to be sold at an undervalue to, among others, the sixth defendant and that the transaction was liable to be reversed under section 224 of the Insolvency, Restructuring and Dissolution Act 2018.
More specifically, the plaintiff’s case centred on the sixth defendant’s purchase of the plaintiff company’s shareholding in AMBO, a company incorporated in Mauritius, under the terms of a sale and purchase agreement which provided for the sixth defendant to pay US$10,796,784 to the plaintiff and its nominees, with the plaintiff receiving US$4,375,000 (the “Transaction”).
The sixth defendant argued that the Transaction was a genuine commercial, arms-length transaction that was not at an undervalue. It stated that the Transaction was advised by reputable international counsel, that the payment mechanics for the Transaction was proposed by the plaintiff itself, and provided records showing that the entire sum of US$10,796,784 as provided for in the terms of the agreement was duly paid out.
In this context (presumably to strengthen their case against the defendants), the plaintiffs brought an application to amend the Statement of Claim to, among others, introduce new causes of action alleging:
That all six defendants (except the fifth defendant) and one Mr Jacques Vermeulen (“Vermeulen”) engaged in unlawful means conspiracy to cause loss to the first plaintiff; and
That the first defendant, sixth defendant and Vermeulen knowingly, intentionally and fraudulently withheld from Trident Trust Company Mauritius (Limited), the managing agent of AMBO negotiating the sale of the shares, the fact that the payments for the purchase price of the shares were to be paid to parties other than the plaintiff.
The learned Assistant Registrar granted the plaintiffs’ application to amend the SOC.
In response, the sixth defendant brought the current case before the learned Goh Yihan JC in the High Court (“Court”) to appeal against the learned Registrar’s decision.
One of the reasons that the sixth defendant gave was that the limitation period for the new causes of action that the plaintiffs sought to introduce has lapsed at the time when the amendment applications were made, and hence the amendments should be disallowed since the court should not be asked to adjudicate on a pleading that was clearly unsupported in law.
In addition, the sixth defendant also applied to admit further evidence for the purposes of its appeal.
This blog will only focus on the legal principles relating to (1) the introduction of fresh evidence on appeal and (2) postponement of limitation periods as set out by the Court.
Introduction of fresh evidence on appeal. The introduction of new evidence on appeal is governed by the threefold test in the seminal English Court of Appeal decision of Ladd v Marshall [1954] 1 WLR 1489, which has been accepted by subsequent Singapore decisions. The three requirements are (SW Trustees at [19]):
The evidence could not have been obtained with reasonable diligence for use at the trial or hearing;
The evidence must be such that it would probably have an important influence on the result of the case, though it need not be decisive; and
The evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible.
However, these requirements not apply with full force in all appeals. The court will adopt a two-step analysis to determine if the Ladd v Marshall requirements should be relaxed (“SW Trustees” [20]).
The first stage is to consider the nature of the proceedings below and evaluate the extent to which it bore the characteristics of a full trial (“SW Trustees” [20]). If the proceedings below bore the characteristics of a full trial, the courts will apply the test in its full rigour when deciding whether fresh evidence can be introduced on appeal. If the proceedings below lack the characteristics of a full trial, the court will adopt a less stringent approach and take the requirements of the test as merely a set of guidelines.
At the second stage, the court determines whether there are any other reasons that the test ought to be relaxed in the interests of justice, balancing between the interests of finality and the right of an applicant to put forth relevant and credible evidence, having regard to the considerations of proportionality and prejudice (“SW Trustees” [21]).
Goh JC found that the proceedings before the learned Assistant Registrar below was an interlocutory hearing that is unlike a trial or the taking of oral evidence. Goh JC hence held that the three requirements of the Ladd v Marshall test serve only as a guideline that the court was entitled, but not obliged, to refer to when deciding whether to allow fresh evidence to be introduced.
Nonetheless, Goh JC was satisfied that the evidence that the sixth defendant sought to introduce at appeal satisfied all three requirements under the Ladd v Marshall test and allowed the sixth defendant’s evidence to be admitted.
Law on postponement of limitation period. The relevant provisions on limitation considered by Goh JC in this case is section 29(1) of the Limitation Act 1959 (2020 Rev Ed) (“LA”).
Section 29(1)(a) LA provides that the limitation period for a cause of action that is “based upon the fraud of the defendant or his agent or of any person through whom he claims” shall not begin until the claimant has discovered the fraud or could with reasonable diligence have discovered it.
Given the dearth of local authority on this section, Goh JC reviewed English decisions which have interpreted substantially similar provisions.
In the end, Goh JC held that section 29(1)(a) only applies where fraud is an element of the cause of action. It is not sufficient if fraud is “merely present but not an element of the cause of action (SW Trustees at [46]).
The Court also observed that the scope of section 29(1)(a) LA cannot be expanded to include “dishonesty” (SW Trustees at [58]).
As for section 29(1)(b) LA, this section provides that the limitation period for a cause of action which is “concealed by the fraud” by the defendant shall not begin until the claimant has discovered the fraud (SW Trustees at [59]).
Goh JC held that the plaintiff must show that the defendant fraudulently concealed his right of action, which is “not limited to the common law sense of fraud or deceit, and includes unconscionability in the form of a deliberate act of concealment” (SW Trustees at [59]).
Furthermore, the fraudulent concealment must be done by the defendant against whom the limitation period is sought to be postponed and not by any other parties (SW Trustees at [64]).
Goh JC emphasised that the meaning of fraud in section 29(1)(b) LA extends beyond the common law meaning of fraud and is distinct from the meaning of fraud referred to in section 29(1)(a) LA (SW Trustees at [59]).
Application to facts. For the claim in conspiracy, Goh JC held that section 29(1)(a) LA does not apply because fraud is not a necessary element for a claim of conspiracy (SW Trustees at [67] – [70]).
Furthermore, as the sixth defendant is not a part of any fraudulent concealment, section 29(1)(b) LA likewise does not apply (SW Trustees at [71] – [72]).
Significance. This decision sets out the test to be applied when deciding whether fresh evidence should be admitted on appeal and more importantly, clarified the meaning of fraud in section 29(1)(a) and 29(1)(b) LA.
The Court’s observation that the scope of section 29(1)(a) LA cannot be expanded to include “dishonesty” is interesting and merits further discussion.
This is because there is often a fine line between “fraud” and “dishonesty”, and it can be difficult to distinguish between what amounts to “dishonesty”, but not “fraud”.
Indeed, in the context of fraudulent misrepresentation, Singapore Courts have opined that:
“dishonesty is the touchstone” of fraudulent misrepresentation (see Raiffeisen Zentralbank Osterreich AG v Archer Daniels Midland Co [2007] 1 SLR(R) 196 at [40]); and
“if an allegation of fraud is successfully made, the representor would be justifiably found to have been guilty of dishonesty” (see Wee Chiaw Sek Anna v Ng Li-Ann Genevieve [2013] SGCA 36 at [30]).
These statements suggest that there is likely to be a significant overlap between “dishonesty” and “fraud”.
While we grant that these cases are in respect of a different context, SW Trustees is an important reminder that, depending on the context, “dishonesty” can have quite different consequences from “fraud”, and it is important to bear this in mind.
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