WONGPARTNERSHIP ACTS IN

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1 EXECUTIVE SUMMARY WONGPARTNERSHIP ACTS IN Proposed acquisition by Nestlé S.A. of a 60% interest in Hsu Fu Chi International Limited for approximately S$2.1 billion RECENT COURT VICTORIES CONSTRUCTION & INFRASTRUCTURE Where a party to a construction contract incorporating the terms of the 1999 FIDIC Red Book gave a notice of dissatisfaction to a decision of a dispute adjudication board, held that an arbitral award issued as a final award without hearing the merits of the parties dispute should not be enforced INSOLVENCY Where a contract contains a non-assignment clause, a liquidator may not, as part of his liquidation of an insolvent company s assets, assign the contract to a third party without first seeking the consent of the contracting counterparty LITIGATION A claim involving revenue-related fraud was allowed to go to trial on the basis that the novel and complex issues involved merited full consideration by the Singapore courts

2 WONGPARTNERSHIP ACTS IN Proposed acquisition by Ne stlé S.A. of a 60% intere st in Hsu Fu Chi International Limited for approximately S$2.1 billion The Firm has recently acted for Baring Private Equity Asia Pte. Ltd. ( BPEA ), a significant selling shareholder in Hsu Fu Chi International Limited, a company incorporated in the Cayman Islands whose main business is to develop, manufacture and distribute candy, cookie and cake products in the PRC ( Company ). The transaction involves the proposed acquisition of a 60% interest in the Company by Nestlé S.A., the largest food and nutrition company in the world, through the purchase of: a 43.52% interest (including the 16.5% stake held by BPEA) by way of a scheme of arrangement under section 86 of the Cayman Companies Law (2010 Revision), and a 16.48% interest from certain majority shareholders of the Company. Based on the offer price of S$4.35 per share, the proposed offer values the 60% stake at approximately S$2.1 billion. NG Wai King DID: waiking.ng@ TAY Liam Kheng DID: liamkheng.tay@ This transaction, when completed, represents one of the largest foreign acquisitions of a mainland Chinese firm in 2011 and may pave the way for the delisting of China s largest confectioner by market value from the Main Board of the Singapore Exchange Securities Trading Limited. Ng Wai King, Head of both the Firm s Corporate Group and the Corporate/ Mergers & Acquisitions Practice, and Tay Liam Kheng, a partner in the Corporate/Mergers & Acquisitions Practice, acted for BPEA in the transaction. Wai King s experience encompasses mergers & acquisitions, capital markets, financial services advisory and regulatory work, and telecommunications regulatory and transactional matters. Wai King led the team in the acquisition of MMI Holdings Limited by Kohlberg Kravis Roberts & Co. L.P. ( KKR ), which was one of the largest buyouts of a Singapore company by a private equity fund, and advised Colony Capital in the acquisition of the Raffles and Swissotel hotel business from Raffles Holdings Limited. The KKR acquisition was recognised as the Best Leveraged Financing deal by FinanceAsia and the Raffles transaction was recognised as the Singapore M&A Deal of the Year by Asian Legal Business. His experience extends to cross-border transactions where he has advised parties involved in the acquisition of 1 < Previous item Front Page Next item >

3 assets/shares in jurisdictions outside Singapore. Wai King advised Singapore billionaire, Peter Lim, in his bid to acquire Liverpool Football Club, and Kookmin Bank s sale of its stake in Bank Internasional Indonesia to Maybank. Wai King is ranked in such publications as Chambers Global The World s Leading Lawyers, Chambers Asia Asia s Leading Lawyers, PLC Which Lawyer Corporate/M&A, The Legal 500: Asia Pacific, Asian Legal Business and AsiaLaw Leading Lawyers as a leading Singapore practitioner in the areas of Corporate/M&A and Private Equity Practice. Recent transactions which Liam Kheng has been involved in include advising certain controlling shareholders of Kim Eng Holdings Limited ( Kim Eng ) in relation to their conditional sale to Aseam Credit Sdn Bhd (the Offeror ), a wholly-owned subsidiary of Malayan Banking Berhad, of 44.63% of the issued shares in the capital of Kim Eng. In connection with this transaction, he also acted for Kim Eng as offeree in the possible mandatory conditional cash offer by the Offeror for all the ordinary shares in the capital of Kim Eng other than those shares already owned by the Offeror, its related corporations and their respective nominees. The transaction valued Kim Eng at approximately S$1.79 billion. Liam Kheng also acted as transaction counsel for Best Decade Holdings Limited in connection with Evraz Group SA s proposed acquisition of a 51% stake in Delong Holdings Limited and ATIC International Investment Company LLC, a wholly-owned indirect subsidiary of the Government of Abu Dhabi, in the S$5.6 billion acquisition of Chartered Semiconductor Manufacturing Ltd., by way of a scheme of arrangement. Other matters that the Firm has recently been involved in are as set out below: DESCRIPTION Acquisition by K-REIT Asia Management Limited of a 50% interest in Mirvac 8 Chifley Trust, which owns a property at 8 Chifley Square in the CBD of Sydney, Australia Refinancing for RCMS Properties Pte Ltd with security over, among other things, the Ritz Carlton, Millenia, Singapore Refinancing for PT Cipta Kridatama by way of a grant of club facilities from OCBC Bank, PT ANZ Panin Bank, PT Bank OCBC NISP Tbk, Standard Chartered Bank and The Royal Bank of Scotland N.V. TYPE Mergers and Acquisitions Banking & Finance Banking & Finance 2 < Previous item Front Page Next item >

4 DESCRIPTION Acquisition by Sunningdale Design Tech Pte. Ltd. ( Sunningdale ), a wholly-owned subsidiary of Sunningdale Tech Ltd., of Akciju Sabiedrība ATEC and ATEC of Sweden AB ( AOS ) from Plasticscommerce Pte Ltd ( PCC ) and the transfer and assignment from PCC to Sunningdale of a loan made by PCC to AOS Acquisition by Ascendas Real Estate Investment Trust of the Nordic European Centre, a s evenstorey building located in the International Business Park, from Nordic (CP) Private Limited after being one of the short-listed potentials from a closed tender The private placement by CapitaRetail China Trust ( CRCT ) of 59,829,000 new units in CRCT in order to finance the acquisition of New Minzhong Leyuan Mall by CRCT Advising on Leighton Holding s 4,800km telecommunications submarine cable project between Singapore and Perth Advising on the publishing, contributor agreements and other legal documentation relating to The Law & Practice of Singapore Income Tax published by LexisNexis, with contributions from 31 leading tax practitioners in Singapore Initial public offering of XinRen Aluminium Holdings Ltd., a large scale vertically integrated producer of primary aluminium products in the PRC Financing by a syndicate of 13 lenders to PT Saptaindra Sejati, a subsidiary of Adaro Energy, Indonesia s second largest thermal coal producer TYPE Mergers and Acquisitions Corporate Real Estate Equity Capital Markets Intellectual Property, Media & Technology Intellectual Property, Media & Technology Equity Capital Markets Banking & Finance 3 < Previous item Front Page Next item >

5 RECENT COURT VICTORIES Recently, WongPartnership s Litigation and Dispute Resolution team helped their clients obtain successful outcomes in the following matters: In a significant decision, the Singapore Court of Appeal recently allowed our client s appeal against a High Court decision to set aside an interim arbitral award in our client s favour on the ground that the interim award was contrary to the public policy of Singapore. Chua Sui Tong successfully argued on our client s behalf that the High Court Judge had erred in reopening the findings of fact made by the arbitral tribunal and substituting his own views. The Court of Appeal held that findings of fact made in an arbitral award issued pursuant to the International Arbitration Act ( IAA ) were binding on the parties and could not be reopened except where there was fraud, breach of natural justice or some other recognized vitiating factor. The Court of Appeal held that this approach was in line with the legislative policy of the IAA of giving primacy to the autonomy of arbitral proceedings and upholding the finality of arbitral awards, and declined to follow a more interventionist approach advocated in a number of English court decisions (AJU v AJT [2011] SGCA 41). We acted for Her Majesty s Revenue and Customs ( HMRC ) in an appeal against a High Court decision to strike out its claim against two Singaporean businessmen for conspiracy by unlawful means to defraud HMRC of 40,391, through a form of fraud known as missing trader intra-community fraud, and to discharge a Mareva injunction freezing the assets of both respondents. The main claim was against the respondents (and their co-conspirators) as commenced in England, and thereafter simultaneous actions were commenced in Singapore and Hong Kong to obtain local Mareva injunctions against conspirators located in those jurisdictions. The respondents argued that as the claim involved the enforcement of a foreign governmental interest and/or the revenue rule, it was unenforceable in Singapore. The Court of Appeal took the view that this was a novel and complex issue of law which merited fuller consideration given the evolving environment of increasing cooperation between states to combat transnational crime. In the circumstances, the Court of Appeal held that it was not plain and obvious that the claim should be struck out; the appeal was allowed with HMRC s claim and the Mareva injunction restored. Andre Maniam SC, Joy Tan and Lim Wei Lee represented the successful appellant. (Her Majesty s Revenue & Customs v Hashu Dhalomal Shahdadpuri & Anor [2011] SGCA 30). CHUA Sui Tong DID: suitong.chua@ Andre MANIAM, Senior Counsel DID: andre.maniam@ Joy TAN DID: joy.tan@ 4 < Previous item Front Page Next item >

6 Our client, represented by Andre Maniam SC, appealed against the Assistant Registrar s decision to set aside service of our client s claim against two of the three defendants for being invalid. Our client was also defending a cross-appeal by the defendants for, among other things, a stay of proceedings on the ground that Singapore was not the proper forum to hear the dispute. The High Court agreed with our client that Singapore was indeed the proper forum and, although service on the second and third defendants out of the jurisdiction had not been properly effected, the Court held that this was an appropriate case to exercise its discretion to cure the irregularities in service. Our client s appeal was allowed and the defendants appeal was dismissed (ITC Global Holdings Pte Ltd (In liquidation) v ITC Ltd & Ors [2011] SGHC 150). The defendants subsequent application for leave to appeal to the Court of Appeal was also successfully resisted by our client. Our clients, the defendants, were former employees of the plaintiffs who had been accused of, amongst other things, conspiring with others to cause harm to the plaintiffs through the solicitation of the plaintiffs employees. There were numerous allegations against our clients which included unlawful conspiracy, defamation, malicious falsehood, unlawful interference with trade, and breach of contract. The trial lasted more than 13 weeks, and involved 55 witnesses and voluminous documents. In a 112-page judgment, the High Court dismissed the plaintiffs claims in their entirety and awarded costs to our clients. The Court found that under cross-examination, many of the plaintiffs witnesses retracted or contradicted much of what they had stated in their affidavits in support of the plaintiffs case, ultimately resulting in the plaintiffs failing to prove their case against the defendants. The Court also found that the plaintiffs had failed to prove that they had suffered loss which was caused by the defendants acts. In another related but separate proceeding by the plaintiff against another employee for breach of contract, the Court found in favour of the defendant employee and upheld her counterclaim for wrongful dismissal with costs. Tan Chee Meng SC, Melanie Ho and Chen Xinping represented the successful defendants in both proceedings (Walton International Group v Yay Kwok Seng Winston [2011] SGHC 144 and Walton International Group v Loh Pui-Pui Sharon [2011] SGHC 145). We successfully resisted a judicial review application filed by Dr Susan Lim, a prominent surgeon in Singapore, to quash the Singapore Medical Council s ( SMC ) decision to appoint a second disciplinary committee after the previous disciplinary committee had recused itself. Dr Lim also sought orders prohibiting the SMC from taking any further steps in disciplinary proceedings against her, and a LIM Wei Lee DID: weilee.lim@ TAN Chee Meng, Senior Counsel DID: cheemeng.tan@ Melanie HO DID: melanie.ho@ 5 < Previous item Front Page Next item >

7 declaration that the Medical Registration (Amendment) Regulations 2010 are void. The judicial review proceedings arose from disciplinary proceedings against Dr Lim, in which 94 charges were for professional misconduct in relation to excessive fees invoiced by Dr Lim for services rendered to a member of the Royal Family of Brunei. The High Court found entirely in favour of the SMC noting that Dr Lim had not been able to establish in court any of the grounds to challenge the SMC s decision. Alvin Yeo SC, Melanie Ho, Lim Wei Lee and their team represented the SMC (Lim Mey Lee Susan v Singapore Medical Council [2011] SGHC 133). Alvin Yeo SC, Monica Chong and their team represented five plaintiffs in their action against the defendant for breach of the provisions of a termination agreement. The defendant had commenced an action against the plaintiffs in the United States of America claiming founder s benefits. The plaintiffs sought declarations that the defendant was not entitled to bring such a claim by virtue of the express terms of the termination agreement, and that he was in breach of these terms. The plaintiffs also sought an anti-suit injunction to restrain the defendant from continuing or commencing any such further proceedings in the USA. The High Court granted the declarations and the anti-suit injunction (SetClear Pte Ltd v Ashlock William Grover [2011] SGHC 130). The High Court agreed with our clients, the defendants, that Switzerland and not Singapore was the most appropriate forum to determine the claim filed by the plaintiff. In evaluating the connecting factors relied on by the opposing parties, the Court found that the applicable law for the tort of misrepresentation was the law of Switzerland and accordingly Switzerland was the more appropriate forum for the determination of the dispute. Further, the plaintiff had not shown that substantial injustice would result if the matter was heard in Switzerland. The plaintiff s appeal against the stay of proceedings order was thus dismissed. Koh Swee Yen acted for the successful defendants (Vorobiev Nikolay v Lush John Frederick Peters & Ors [2011] SGHC 55). Alvin YEO, Senior Counsel DID: alvin.yeo@ Monica CHONG DID: monica.chong@ KOH Swee Yen DID: sweeyen.koh@ 6 < Previous item Front Page Next item >

8 CONSTRUCTION & INFRASTRUCTURE Where a party to a construction contract incorporating the terms of the 1999 FIDIC Red Book gave a notice of dissatisfaction to a decision of a dispute adjudication board, held tha t an arbitral award issued as a final award without hearing the merits of the parties dispute should not be enforced: -- CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK (Singapore, Court of Appeal, 13 July 2011) To discuss the possible implications of this for your business, please contact: Facts The appellant, CRW Joint Operation, and the respondent, PT Perusahaan Gas Negara (Persero) TBK, were parties to arbitration proceedings. The proceedings related to a dispute which had arisen from a construction contract ( Contract ) between the two parties. This contract had incorporated the provisions in Conditions of Contract for Construction: For Building and Engineering Works Designed by the Employer (1st Ed, 1999) (the 1999 FIDIC Red Book ) published by the Fédération Internationale des Ingénieurs-Conseils ( FIDIC ), and its terms set out a system for the adjudication and subsequent arbitration of disputes. When the dispute arose, in accordance with the terms of the Contract, the parties referred the dispute to a Dispute Adjudication Board ( DAB ) comprising a single adjudicator. The DAB issued a decision ( DAB s Decision ) in favour of the appellant. The respondent filed a notice of dissatisfaction ( NOD ) and the appellant filed a request for arbitration for the sole purpose of giving prompt effect to the [DAB s Decision]. Christopher CHUAH DID: christopher.chuah@ TAY Peng Cheng DID: pengcheng.tay@ The terms of reference ( TOR ) of the arbitration stated, among other things, that: the arbitral tribunal shall resolve all issues of fact and law arising from the claims and defences and pleadings as submitted by the parties; and the parties accept the jurisdiction of the arbitral tribunal to hear and adjudicate upon all matters in dispute between them in these arbitration proceedings. On the order of the arbitral tribunal, a preliminary hearing was convened in order to consider the following questions: Whether the appellant was or was not entitled to immediate payment pursuant to the DAB s Decision? In either case, whether the respondent was entitled to request the tribunal to open up, review, and revise the DAB s Decision? 7 < Previous item Front Page Next item >

9 The parties were also informed that if the response to the second of the two questions was affirmative, then the tribunal would issue appropriate directions to the parties for further steps to be taken in the arbitration proceedings. After the preliminary hearing, the tribunal, by a majority, issued its decision which was described as a Final Award. It decided that the appellant was entitled to immediate payment, and that the respondent was not entitled to request the tribunal to open up, review, and revise the DAB s Decision. However, it also decided that the respondent had a right to commence another arbitration to revise the DAB s Decision. Pursuant to this final award, the appellant applied to the Singapore courts to enforce the arbitral award against the respondent. Legal Background As noted above, the 1999 FIDIC Red Book sets out terms for adjudication and arbitration in the event of a dispute. A key issue before the Court was the effect of the DAB s Decision. The terms of the 1999 FIDIC Red Book provide in sub-clause 20.4 that: The decision [of the DAB] shall be binding on both Parties, who shall promptly give effect to it unless and until it shall be revised in an amicable settlement or an arbitral award as described below. Once a decision has been given by the DAB, sub-clause 20.4 goes on to provide that a party who is dissatisfied with the decision may give the other party notice of this. If the NOD is not given within 28 days after receiving the DAB s decision, the decision becomes final and binding on both parties. The giving of a NOD is a pre-condition for the commencement of an arbitration of the dispute, and sub-clause 20.6 provides that any dispute in respect of which the DAB s decision (if any) has not become final and binding shall be finally settled by international arbitration. Clause 20.6 also states that arbitrator(s) shall have full power to open up, review, and revise any decision of the DAB, relevant to the dispute. Decision As noted above, the Singapore Court of Appeal stated that the first issue it was faced with in this case was the status or effect of the DAB s Decision 8 < Previous item Front Page Next item >

10 under the 1999 FIDIC Conditions of Contract. In particular, it had to consider the effect of sub-clause 20.4 of the 1999 FIDIC Conditions of Contract, which provides that a decision of a DAB shall be binding on the parties, who shall promptly give effect to it unless and until it shall be revised in an amicable settlement or an arbitral award. In considering the effect of a DAB decision, the Court drew a distinction between the terms binding and final, noting that they were not synonymous: Under the 1999 FIDIC Conditions of Contract, if a NOD is not given, the DAB s decision becomes both binding and final. As such, it is unalterable and is not open to further review. Under those circumstances, non-compliance with the DAB s decision can be referred to arbitration for the sole purpose of enforcement. If, on the other hand, a NOD is given, the DAB s decision remains binding and has contractual force; each party is bound to give effect to that decision. However, it is not conferred the status of a final decision. If that decision calls for payment to be made by one party to the other, then the decision should be enforceable directly by an interim or partial award. Where arbitral proceedings are held to consider non-compliance with a DAB s decision in respect of which a NOD has been given, sub-clause 20.6 contemplates a single arbitration where all the existing differences between the parties arising from the DAB s decision concerned will be resolved. The respondent to the proceedings may raise the issues which it wishes the arbitral tribunal to consider either in its defence and or in the form of a counterclaim. Even if both parties were to file NODs in respect of the DAB s decision, all the disputes have to be resolved in one consolidated arbitration. In this case, the tribunal had placed emphasis on the fact that the respondent had not served any counterclaim (and had confirmed that they were not submitting any counterclaim), and considered that the respondent s request for a review of the DAB s Decision to be merely a defence to the appellant s claim for immediate payment. The tribunal found such defence to have failed, and therefore issued a final award in respect of the issue placed before the tribunal. The tribunal however emphasised that such decision did not affect the respondent s right to commence an arbitration to seek to reverse the DAB s Decision, a process which the tribunal noted that the appellant had agreed that the respondent may do. The Court however held that it was not open to the arbitral tribunal to issue a final award without reviewing the merits of the NOD and the DAB s 9 < Previous item Front Page Next item >

11 decision. What the arbitral tribunal ought to have done was to make an interim award in favour of the appellant for the amount assessed by the DAB (or such other appropriate amount) and then proceed to hear the parties substantive dispute afresh before making a final award. The tribunal s decision to not go into the merits of the NOD ran counter to the scheme set out in sub-clause 20.6 of the 1999 FIDIC Conditions of Contract, and also its TOR. The Court considered that there was no clear legal basis for the arbitral tribunal to reserve to the respondent the right to commence another arbitration in respect of the NOD. The Court also opined that if the tribunal had considered that the respondent had to file a counterclaim in order to pursue its objections to payment, it was open to the tribunal to direct that such counterclaim be filed. Accordingly, it held that the failure of the tribunal to consider the merits of the DAB s Decision before making the final award meant that it exceeded its jurisdiction in making that award, and the Court would refuse enforcement on that basis. The Court further held that it would also refuse enforcement of the award on the basis that a breach of natural justice had occurred in the making of the award. It noted that the respondent had not been able present its case on the substance of the dispute before the tribunal issued its final award. In this respect, the Court noted that the arbitral tribunal had criticised the respondent for not giving details at the preliminary hearing of what it thought the correct sum of the DAB s Decision should have been. However, the preliminary hearing had been convened for the limited purpose of making a decision on the question of whether the tribunal could reopen and review the parties dispute. On this basis, it was entirely reasonable for the respondent to not have expected to be required to produce evidence on how much it believed it owed to the appellant. The Court hence found that the respondent had therefore not been accorded a proper opportunity to comprehensively present its case on the DAB s Decision, with all the relevant submissions and evidence. Comment The issue of the status of a DAB s decision and the manner of its enforcement has been an open question both in Singapore and internationally for some time. Academic opinion on the subject has been divided. This decision by the Singapore Court of Appeal settles the position for Singapore. In this respect, it is worth noting the Court s final observation that: 10 < Previous item Front Page Next item >

12 There appears to be a settled practice, in arbitration proceedings brought under sub-clause 20.6 of the 1999 FIDIC Conditions of Contract, for the arbitral tribunal to treat a binding but non-final DAB s decision as immediately enforceable by way of either an interim or partial award pending the final resolution of the parties dispute. The tribunal in this case may have been constrained by how the appellant had framed the issues for determination before the tribunal. It would therefore be important that a party seeking enforcement of a DAB s decision be careful to frame the issues for determination correctly, and refer the underlying dispute under the DAB s decision to arbitration (instead of merely seeking immediate enforcement of the DAB s decision). In the course of such a reference, the referring party may then seek an interim award on the enforcement of the DAB s decision pending the determination of the dispute. Such process would be akin to the process of giving effect to the temporary finality of a payment certificate under the Singapore Institute of Architects Articles and Conditions of Building Contract, where the party seeking payment would commence action in court on the underlying payment dispute, and seek summary judgment on the certified sum. INSOLVENCY Where a contract contains a non-a ssignment clause, a liquidator may not, as part of his liquidation of an insolvent company s a ssets, assign the contract to a third party without first seeking the consent of the contracting counterparty: -- Owners of Strata Plan 5290 v CGS & Co Pty Ltd (Australia, New South Wales, Court of Appeal, 30 June 2011) Facts The issue in this case was the validity of the assignment of a certain contract. The contract in question was a contract for the carrying out of building repairs ( Contract ). It had been entered into between the body corporate of the residential apartment building ( Defendant ) and the builder, BMP Industrial Pty Ltd ( BMP ). BMP subsequently went into liquidation, and the liquidator purported to assign its benefits under the Contract to CGS & Co Pty Limited ( Plaintiff ). However, when the Plaintiff sought to enforce its assigned 11 < Previous item Front Page Next item >

13 rights, the Defendant asserted that it was not bound by the assignment. The Defendant pointed to, in particular, the non-assignment clause in the Contract. To discuss the possible implications of this for your business, please contact: This clause read as follows: Neither party shall, without the prior written approval of the other and except on such terms and conditions as are determined in writing by the other, assign the Contract or any payment thereunder. As neither the liquidator nor the Plaintiff had sought the Defendant s prior written approval before entering into the assignment, it argued that the assignment was invalid. CHOU Sean Yu DID: seanyu.chou@ The Plaintiff hence commenced proceedings against the Defendant seeking to enforce the Contract against it. Legal Background Section 477(2)(c) of the Australian Corporations Act empowers the liquidator of a company to sell or otherwise dispose of, in any manner, all or any part of the property of the company. Property is defined in the Corporations Act as including a thing in action. Manoj Pillay SANDRASEGARA DID: manoj.sandra@ The Singapore Companies Act confers a similar power on the liquidator of a Singapore company: section 272(2)(c) provides that a liquidator may sell the things in action of the company with power to transfer the whole thereof to any person or company. The language used in this section is the same as the historical predecessor to section 477(2)(c) of the Australian Corporations Act, namely, section 231(2) of the Companies Act 1936 (NSW). This case is relevant to Singapore as the New South Wales Court of Appeal held in this case that the meaning of the term things in action in sections 477(2)(c) of the Australian Corporations Act and 231(2) of the Companies Act 1936 (NSW) was the same. Decision The New South Wales Court of Appeal held that a liquidato r s power to sell or dispose of a chose in action under section 477(2)(c) could not be exercised so as to defeat a limitation on assignability resulting from an express agreement entered into by the company and the obligor. 12 < Previous item Front Page Next item >

14 It explained that to hold otherwise would mean that a liquidator could, by exercise of the statutory power, affect adversely the right of a third party who has entered into a contract with the company on the express basis that the contract is not to be assignable. Such a party who had, for good commercial reasons, negotiated a non-assignable contract with the company would find the character of its contractual obligations changed if the company goes into liquidation and the liquidator chooses to exercise the statutory power to sell the company s property. In the Court s view, this result could not be correct for the following reasons: The parties may have entered into a non-assignment clause in order to prevent an obligor dealing with a party with whom he or she would not have chosen to deal. The obligor may wish to preserve set-off claims which might be prejudiced if a contract is capable of being assigned. An assignor of a chose in action may be less interested in performing his or her contractual obligations if the benefit of the contract has been assigned to a third party. On the other hand, there was nothing anomalous in construing section 477(2)(c) so as not to permit a liquidator, in effect, to override a nonassignability clause in a contract entered into by the company itself. Furthermore, the Court noted that there are other powers available to the liquidator to enable the company s assets to be realised. The policy of facilitating realisation of those assets does not require the contractual rights of third parties who have dealt with the company to be overridden. The Court therefore dismissed the Plaintiff s claim against the Defendant. Comment This aspect does not appear to have been considered by the Singapore courts to date and the decision of the New South Wales Court of Appeal will be a persuasive authority for the contention that section 272(2) of the Singapore Companies Act would not override any non -assignment agreements. If this position is upheld in Singapore, liquidators will have to be cautious and ensure that any proposed sale of contractual claims to third parties are not prohibited by a non-assignment clause. 13 < Previous item Front Page Next item >

15 LITIGATION A claim involving revenue-related fraud was allowed to go to trial on the basis that the novel and complex issue s involved merited full consideration by the Singapore courts: -- Her Majesty s Revenue & Customs v Hashu Dhalomal Shahdadpuri & Anor (Singapore, Court of Appeal, 29 June 2011) To discuss the possible implications of this for your business, please contact: This case involves a claim by the Plaintiff, Her Majesty s Revenue & Customs, against the Defendants, Hashu Dhalomal Shahdadpuri and Notandas s/o Premchand Jamnadas Udasi. The Defendants applied to strike out the Plaintiff s claim and have the Mareva injunction (which froze the Defendants assets) discharged. While the Defendants succeeded in the High Court, on appeal to the Court of Appeal, the Plaintiff succeeded in having the claim and the injunction reinstated. WongPartnership s lawyers, Andre Maniam SC, Joy Tan, Lim Wei Lee and Sim Hui Shan, act for the Plaintiff. Andre MANIAM, Senior Counsel DID: andre.maniam@ Facts As this was a striking out application, the case proceeded on the basis of the facts alleged by the Plaintiff, which were as follows. The Defendants held themselves out to be representatives of an Indonesian company ( Defendants Company ). The Defendants Company introduced certain suppliers in Europe (the EU Suppliers ) to a Danish company which defrauded the Plaintiff through a form of fraud known as Missing Trader Intra-Community fraud. The fraud essentially involved a manipulation of the UK tax system to extract monies from the Plaintiff. Joy TAN DID: joy.tan@ The EU Suppliers were the start of a chain of fraudulent transactions through which goods were imported into the UK by traders registered in the UK for VAT (the UK Importer ), then sold to other parties registered for VAT in the UK (the Buffers ) and finally exported out of the UK through an Exporter. The Exporter then made a claim for VAT reimbursement from the Plaintiff (since the goods were exported out of the UK), but the Buffers failed to account to the Plaintiff for the output tax. The Buffers instead paid the purchase price of the goods, together with the output tax payable thereon, to a third party recipient the Danish company. The UK Importer and the Buffers subsequently went missing or bankrupt. The net effect of the fraudulent transactions ended with the Plaintiff paying out on claims for reimbursement of input tax, without receiving any corresponding payment LIM Wei Lee DID: weilee.lim@ 14 < Previous item Front Page Next item >

16 in respect of output tax. The Defendants received a share of the monies extracted from the Plaintiff through the Defendants Company. The Plaintiff thus claimed against the Defendants and their coconspirators for damages for conspiracy. The issue The Defendants argued that the Plaintiff s claim is a claim for tax and/or an enforcement of a foreign governmental interest; consequently it was unsustainable and/or an abuse of process of the courts. As a general rule, the Singapore courts would not enforce the revenue law of a foreign state or a foreign governmental interest. The Defendants therefore applied to strike out the claim. Decision The general rule is that a claim should only be struck out if it is plainly and obviously unsustainable. The Court of Appeal hence considered whether it was plain and obvious that the Plaintiff s claim was a claim for unpaid output tax and/or a claim involving the enforcement of a foreign governmental interest. The Court of Appeal agreed with the Plaintiff s submissions and held that the Plaintiff s claim could be interpreted as a claim for the recovery of monies which the Plaintiff had been deceived into paying out; it was arguable that such a claim was not barred by the revenue rule. The position was not plain and obvious, and the Plaintiff s claim should not have been struck out. The Court of Appeal observed that the proper characterisation of the Plaintiff s claim was a novel and complex issue of law which merited a fuller consideration of the revenue rule and/or the rule against enforcing the sovereign rights of a foreign state in view of the evolving environment of co-operation between states to combat transnational crime. Comment In this decision, the Court of Appeal found that Plaintiff s claim might arguably not be a tax claim even though the Plaintiff is the UK tax authority and the claim involved a fraudulent manipulation of the UK tax system. It was at least arguable that the Plaintiff s claim was simply a common law claim for damages for conspiracy to defraud. 15 < Previous item Front Page Next item >

17 SOME OF OUR OTHER UPDATES DATE TITLE July 2011 LawWatch: July 2011 June 2011 LawWatch: July 2011 Green Laws Edition 15 August 2011 LegisWatch: New Obligations to Conduct Product Due Diligence, Customer Assessments and Advise on Product Suitability 17 August 2011 CaseWatch: Court of Appeal: Banks Have a Duty to Exercise Skill and Care When Giving Investment Advice 5 September 2011 CaseWatch: Court of Appeal: Narrow Scope of Public Policy Ground for Challenging Arbitral Awards Reaffirmed Sin gapore WongPartnership LLP Financial Services / Corporate / Intellectual Property One George Street #20-01 Singapore Tel: Fax: WongPartnership LLP Litigation & Dispute Resolution / Tax 63 Market Street #02-01 Singapore Tel: Fax: Ch ina WongPartnership LLP Beijing Representative Office Unit 3111 China World Office 2 1 Jianguomenwai Avenue Chaoyang District Beijing , PRC Tel: Fax: WongPartnership LLP Shanghai Representative Office Unit 5006 Raffles City Office Tower 268 Xizang Road Central Shanghai , PRC Tel: Fax: Middle East WongPartnership LLP A bu Dhabi Branch A l Bateen Towers Bu ilding C3 Office (P1) P.O. Box N o A bu Dhabi, UAE Tel: Fax: WongPartnership LLP Licensed by the QFCA Office 12-20, Amwal Tower, West Bay P.O. Box N o Doha, Qatar Tel: Fax: Website: www. 16 < Previous item Front Page Next item >