RELYING ON DOCUMENTS DISCLOSED IN ONE ACTION IN A SEPARATE ACTION
This week’s blog covers Third Eye Capital Corp v Pretty View Shipping SA and others [2024] SGHC 96, a High Court (the “Court”) case on the use of documents disclosed under discovery for separate proceedings.
Facts. The plaintiff, Third Eye Capital Corp ("Third Eye”), obtained two arbitration awards (the “Awards”) against the 1st – 3rd Defendants ([3]).
The 3rd Defendant (“Parakou”) was the holding company of the 1st Defendant ("Pretty View”) and 2nd Defendant ("Pretty Urban”) ([2]).
And at all material times, Parakou’s sole shareholder, director and CEO was one Liu Por ([2]).
Third Eye subsequently sought and obtained leave to enforce the Awards and entered judgment against the Defendants in Singapore ("SG Judgment”) ([4]) and in the Republic of Marshall Islands (the “RMI Judgment”) ([4])
Third Eye then successfully obtained an order to examine Liu Por to determine the Defendant’s assets (the “EJD Proceedings”) and orally examined Liu Por on 4 days (the “EJD Hearing”) ([5]).
This case was Third Eye’s application for permission to use all the documents and information (the “EJD Information”) disclosed in the EJD Proceedings for an intended proceedings in the Republic of the Marshall Islands for an order to pierce the corporate veil of Parakou and hold Liu personally liable under the RMI Judgment (the “RMI Application”).
The Riddick principle. The Riddick principle provides that a party who discloses in an action a document under compulsion is protected against any use of the document otherwise than in that action ([7]).
As stated in Ong Jane Rebecca v Lim Lie Hoa and other appeals and other matters [2021] 2 SLR 584 ("Ong Jane Rebecca"), situations involving the Riddick principle can be broadly classified under three categories ([9]):
“(a) First, it must be determined if a document is produced, or information furnished, out of compulsion. If so, it is covered by the Riddick undertaking. If not, the document or information may be used without the permission of the court.
(b) Second, if the Riddick undertaking applies, the question is whether the protected document or information may nonetheless be used without permission due to the nature of the related enforcement proceedings for which it is being used.
(c) Third, if neither of the above is satisfied, the party relying on the protected document or information to commence or sustain related proceedings must seek the court’s permission for the undertaking to be lifted.”
Issues. There were three issues before the Court (at [14]):
“(a) Whether Third Eye requires permission to use the EJD Information for the RMI Application?
(b) Assuming permission is required, whether it should be given?
(c) Whether the permission should be limited to the transcripts of the EJD Hearing?”
This blog post will focus on the first two issues only.
Whether permission is required. There was no dispute that the documents and information were disclosed under compulsion ([10]).
Hence, the Riddick undertaking applied, and the issue was whether Third Eye was required to obtain permission.
This hinged on whether the RMI Application was a “related enforcement proceeding”.
On this question, the Court considered (a) the nature of the proceedings in which the documents were disclosed; and (b) the nature of the proceedings in which the documents are being used ([15]).
On the first point, the Court noted that the Defendants would know that the information disclosed during the EJD Proceedings would be used to aid Third Eye in the satisfaction of the Awards ([18]).
On the second point, the Court noted that there was no identity of parties in the EJD Proceedings and in the RMI Application. While Liu Por would be the defendant in the RMI Application, he was not the party to the arbitrations that resulted in the Awards, and he only appeared and furnished the EJD Information in his capacity as an officer of Parakou in the EJD Proceedings ([19]).
The Court also noted that it “… also cannot be said that the Defendants and Liu Por furnished the EJD Information knowing or expecting that it may be used to support proceedings to make Liu Por personally liable for the judgment debt.” ([19])
Further, the RMI Application also could not be considered as an enforcement proceeding in the ordinary sense, as it was, in substance, a “fresh action” to establish Liu Por as an appropriate party against whom enforcement proceedings may be brought ([22]).
Additionally, if the RMI Application was successful, Liu Por may be exposed personally to claims by Parakou’s other creditors, and the Court held that this meant that the RMI Application “may therefore have implications beyond the enforcement of the judgment debt” ([23]).
The Court thus concluded that permission was required for Third Eye to use the EJD Information for the RMI Application, falling under the third category in Ong Jane Rebecca.
Whether permission should be granted. The Court then undertook a balancing exercise to consider the factors in favour of lifting the Riddick undertaking against the interests sought to be protected by the Riddick undertaking ([25] – [27]).
In brief:
1. The Court found that the nature of the RMI Application was a strong factor in favour of granting permission ([31]) as the objective was to enable Third Eye to enforce and satisfy the RMI Judgment and SG Judgment, which was consistent with the purpose of the EJD Proceedings ([32] – [33]).
2. The Court also noted the close connection between the SG Judgment and the RMI Application and observed that the “… EJD Information suggests that Liu had transferred assets out of Parakou to frustrate the enforcement of the Awards” ([34]).
3. The Court noted that the EJD Information was “plainly relevant” to the RMI Application as the EJD Information “… suggests that Liu had engaged in deliberate conduct to place the assets of Parakou out of the hands of its creditors, and had done so in a manner which evidences his complete control of Parakou and that he regards and treats Parakou’s assets as his own” ([46] – [47]).
4. Additionally, the “… the EJD Information is intended to be used to support the RMI Application, which is for the ultimate purpose of satisfying the Awards, and therefore the SG Judgment. This is consistent with the objective of the EJD Proceedings.” ([49])
No countervailing considerations. The Court also found no countervailing considerations at [64] – [67]. Among others, the Court noted that concerns of Liu Por’s right to privacy “should not be given significant weight” given the fiduciary duties that he owed to Parakou ([65]), and noted that rejected that Liu Por would suffer from prejudice
First, there was no express preservation of Liu Por’s rights not to incriminate himself in the EJD Proceedings. Third Eye also did not give any express undertaking not to use the EJD Information ([64]).
Second, Liu Por’s right to privacy should not be given significant weight. As a director who owed fiduciary duties, if Liu Por had transferred Parakou’s assets to himself in a manner that suggests he treated those assets as his own, then his right of privacy should not be used to prevent the lifting of the Riddick undertaking ([65]).
Third, while the Defendants argue that Liu Por has suffered prejudice because Third Eye intended to use the information Liu Por disclosed in the EJD Proceedings against him, the simple fact was that Third Eye was not required to notify Liu Por of this because it was not advancing that proposition in the EJD Proceedings ([66]).
Fourth, Liu Por was also not prevented from explaining the answers he gave in the EJD Proceedings at the RMI Application and the RMI court can then independently determine the weight to be given to Liu Por’s answers given at the EJD Proceedings ([67]).
The Court therefore granted permission for Third Eye to use the EJD Information in the RMI Application.
Significance. While the Riddick principle exists to prevent parties from relying on documents disclosed in one action in a separate proceeding, the principle is not an immutable one. In an appropriate case (just like in this case), the Court will give permission to lift the Riddick undertaking and allow parties to rely on the information in a separate action. Hence, litigants should always be mindful of the potential implications when disclosing documents or information.
This publication is not intended to be, nor should it be taken as, legal advice; it is not a substitute for specific legal advice for specific circumstances. You should not take, nor refrain from taking, actions based on this publication. Chancery Law Corporation is not responsible for, and does not accept any responsibility for, any loss or damage that may arise from any reliance based on this publication.