High Court · Decided 4 March 2014

Hady Hartanto v Yee Kit Hong and others

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[2014] SGHC 40Case no. Suit No 679 of 2011

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Grounds of decision

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Woo Bih Li J:
Introduction
[1] This is a claim in defamation by the plaintiff against the defendants for publishing various words (“the disputed words”) in two documents on an internet portal. The documents were in relation to four transactions which took place while the plaintiff was a director of a company with the defendants. The trial before me concerns only the liability of the defendants with regard to the disputed words. The issues are:
(a) The meanings of the disputed words;
(b) the defence of justification;
(c) the defence of qualified privilege; and
(d) the defence of consent or leave and licence.
[2] For ease of reference, a glossary containing various definitions is attached as Annexure A of this judgment.
[LawNet Admin Note: Annexure A is viewable only to LawNet subscribers via the PDF in the Case View Tools.]
[3] The plaintiff, Hady, was from 15 March 2011 to 25 October 2011 a director of SEH. He is suing the defendants, Yee, Chia and Ko, who were also directors of SEH at the material time for publishing the disputed words in:
The background
[4] SEH trades on the Catalist platform of SGX-ST.
[5] SEH’s subsidiaries include Scorpio East Pictures, Scorpio East Entertainment, and Scorpio East Production. SEH and its subsidiaries will hereinafter be referred to as “the Scorpio Group”.
[6] Hady was appointed as a director of SEH on 15 March 2011. He had acquired an indirect interest in 29.56% of SEH’s shares from John Ho and his family members.
[7] From 14 March to 21 March 2011, Shiong Jin acted as Hady’s advisor and participated in the management of SEH.
[8] From 15 March to 21 March 2011, the Scorpio Group engaged in various steps in respect of four transactions central to this case.
[9] Thereafter, on 23 March 2011, the Audit Committee of SEH, which comprised the defendants, recommended the appointment of SFCA as a special auditor to investigate the steps and the four transactions. The Board of SEH accepted the recommendation on the same day. Apparently, after the defendants met Chee on the same day, SFCA was formally appointed on 25 March 2011.
[10] After its investigation, SFCA produced the SFCA Report, which included the Executive Summary, highlighting SFCA’s concerns on these steps and the four transactions with recommendations for SEH. This was the same executive summary which was later annexed to the Announcement published on SGXNET on 7 September 2011.
[11] The steps and the four transactions highlighted by SFCA are stated below.
(1) The Scorpio Contracts
[12] Prior to Hady’s appointment as director of SEH on 15 March 2011, the Scorpio Group had entered into nine contracts for the production of Chinese language motion pictures and serials as well as some concerts, ie, the Scorpio Contracts. The Scorpio Group had paid S$4.1m to various producers in relation to the Scorpio Contracts.
[13] As Hady was interested in acquiring shares in SEH, he instructed Adept to conduct a financial due diligence on SEH sometime in December 2010. Adept prepared the Adept Report which stated that the Scorpio Contracts were potentially loss-making.
(2) The Alpha Contracts
[15] Hady executed contracts, on behalf of Scorpio East Pictures, with Alpha for the production of motion pictures and concerts, ie, the Alpha Contracts. These contracts were dated 17 March 2011. They were in fact signed earlier as I will elaborate later. The Alpha Contracts totalled S$6.2m.
(3) The “round-tripping” transactions between SEH and Alpha
[16] Between 17 and 21 March 2011, a total sum of S$3.2m was paid by the Scorpio Group to Alpha in respect of the Alpha Contracts. However, in the same period, Alpha then deposited sums totalling S$2.86m (from the S$3.2m) in cash into the bank accounts of companies in the Scorpio Group. These two transactions were referred to as “round-tripping” transactions in the Announcement and Executive Summary and I have adopted the term for the judgment.
(4) Proposed Investment
[18] On 21 March 2011, Shiong Jin sent an email to, inter alia, Hady and KN Lim proposing that:
[19] Hady replied to Shiong Jin’s e-mail with approval and instructed KN Lim to “proceed” with the proposed transfer of S$3.3m.
[20] However, after being alerted to the proposed transfer, Yee issued instructions to stop the payments on 21 March 2011.
The defendants’ concerns
[21] The appointment of SFCA arose out of the defendants’ concerns about the steps taken in respect of these four transactions. The SFCA Report and the Executive Summary reinforced their concerns. Consequently, SGX required SEH to disclose the Executive Summary, which SEH did by making the Announcement and appending the Executive Summary to it.
[22] I will first set out the situation which the defendants said they found themselves in. Most of the information stated below is from Yee’s affidavit of evidence-in-chief.
[23] SEH was incorporated in Singapore on 24 November 2004. Its original shareholders were John Ho and his family members: Ms Lian Lee Lee, Ms Lian Poh Heng and Ms Lian Poh Chey. SEH was listed on SGX Sesdaq, the predecessor of the Catalist platform, on 23 March 2006. After the Initial Public Offering was completed, John Ho and his family members held a 29.56% shareholding in the company.
[24] John Ho was the chief executive officer (“CEO”) and executive director of the company from 24 November 2004 to 15 or 16 March 2011. Lian Lee Lee was an executive director of the company from 24 November 2004 to 15 or 16 March 2011.
[25] Yee was appointed to SEH’s Board on 9 December 2005. Chia was appointed to the Board on 17 January 2006 and Ko was appointed to the Board on 15 August 2007. At all material times, the defendants were non-executive directors.
[26] On 14 March 2011, John Ho, Lian Lee Lee, Lian Poh Heng and Lian Poh Chey entered into an agreement to sell their 29.56% shareholding in SEH to Telemedia. Hady was the chairman and CEO of Telemedia.
[27] The sale was completed on 15 March 2011. Upon completion of the sale, Telemedia became the single largest shareholder of SEH.
[28] On 15 March 2011, a meeting was held by the Nominating Committee of the Board of SEH. The Nominating Committee comprised the defendants. This meeting was followed by a Board meeting which the defendants and Lian Lee Lee attended. The Board accepted the recommendation of the Nominating Committee to appoint Hady and Wong Teck Yenn as executive directors. At the same time, John Ho stepped down as CEO and executive director and Lian Lee Lee stepped down as executive director.
[29] On 17 March 2011, a Board meeting was held. Hady attended and introduced himself as a new executive director of SEH. He was accompanied by Shiong Jin whom he introduced as his consultant. Shiong Jin made a number of proposals in respect of SEH. No decision was made on his proposals.
[30] On 21 March 2011, Yee received a telephone call from SEH’s finance manager, Aoki. She informed him that:
(a) Hady had executed five contracts between Scorpio East Pictures and Alpha, ie, the Alpha Contracts;
(b) $3.2m had been paid by companies in the Scorpio Group pursuant to the Alpha Contracts;
(c) Hady had approved the transfer of a separate sum of S$3.3m from the Scorpio Group on 21 March 2011 for the Proposed Investment; and
(d) the consolidated cash balances of the Scorpio Group at that time was only S$2.2m.
[31] Yee was alarmed. Hady had not informed the defendants about the Alpha Contracts or the transfer or proposed transfer of funds. Yee told Aoki not to make any further payment without the defendants’ approval. He telephoned Chia and Ko to update them. They agreed to convene an urgent Board meeting the next day, ie, 22 March 2011 and that Hady should be asked to attend and explain these transactions.
[32] Yee had also learned on 21 March 2011 that Shiong Jin was an undischarged bankrupt and had in fact been blacklisted by SGX. In a public statement dated 13 April 2010, SGX stated that Shiong Jin had failed to demonstrate the qualities expected of directors and management of SGX-listed companies and SGX-listed companies should consult SGX before appointing Shiong Jin as a director or member of their management. Both Chia and Yee were extremely concerned that Hady had allowed Shiong Jin to participate in the Board meeting on 17 March 2011 despite the notice from SGX.
[33] Yee also briefed Ong Hwee Li and Bernard Lim from SEH’s Sponsor and invited them to attend the proposed Board meeting on 22 March 2011.
[34] At the Board meeting on 22 March 2011, Hady informed the defendants of the Alpha Contracts, totalling S$6.2m, which he had already signed on behalf of Scorpio East Pictures. Copies of the Alpha Contracts were distributed to those present. KN Lim confirmed that S$3.2m had been paid by companies in the Scorpio Group to Alpha.
[35] Yee commented that the amounts payable by Scorpio East Pictures under the Alpha Contracts were substantial and the Alpha Contracts were therefore material for the purpose of disclosure. Accordingly, Hady should have consulted and/or sought the approval of the other members of the Board prior to the execution of the Alpha Contracts and an announcement should have been made in respect of the Alpha Contracts.
[36] Yee and Chia also queried Hady on the identity of the counterparty, Alpha, which appeared to be incorporated in the British Virgin Islands (“BVI”). Hady said that:
(a) the Alpha Contracts were inherited from SEH’s previous management;
(b) the Alpha Contracts had been proposed by Alpha to John Ho, the former CEO of SEH;
(c) Hady was not involved in the negotiations with Alpha at all; and
(d) he believed that the necessary due diligence on Alpha had been conducted by John Ho.
[37] During the meeting, Hady confirmed that he knew Alan Chan, the CEO of Alpha, prior to the execution of the Alpha Contracts. Hady said that he had been introduced to Alan Chan by one Jessica Teo of DMG & Partners Securities Pte Ltd, who was John Ho’s broker in respect of the sale of his shares in SEH.
[38] Yee said that he was also surprised to hear from Ong Hwee Li at the meeting that Alan Chan appeared to occupy a room at SEH’s office premises. KN Lim said that Alan Chan was, at that time, working at SEH’s office premises and had left some of his belongings there.
[39] Following Hady’s disclosure of the Alpha Contracts, all the Directors (including Hady) resolved to call for a trading halt in respect of SEH’s shares so that the Board could consider the Alpha Contracts in greater detail.
[40] Another meeting of the Board was held on 23 March 2011. At the meeting, copies of the Certificate of Incumbency of Alpha and a Certificate of Change of Name were distributed to those present. The documents indicated that Alpha was incorporated on 23 July 2010 under the name of Banden International Limited. That company changed its name to Alpha Entertainment Group Pte Ltd on 13 December 2010. The registered shareholders and directors of Alpha were Jung Jin and Liu Woon San.
[41] At this meeting, Hady explained that:
(a) he had insisted that Alan Chan provide a personal guarantee in respect of the Alpha Contracts when he signed them;
(b) the Scorpio Contracts had been terminated and part of the deposits paid to the producers would be refunded to the Scorpio Group; and
(c) the Scorpio Group had paid money to Alpha as down payments for the Alpha Contracts. The money received by Alpha was paid back to the Scorpio Group, which would be treated by the Scorpio Group as the refund of deposits from the producers in the Scorpio Contracts, even though the payment had not actually been made by the producers. Alpha would then recover the amount of the refund directly from the producers, which, upon recovery, would be kept by Alpha for its own account.
[42] Chia queried Hady on the identity of Jung Jin, who was, according to the Certificate of Incumbency of Alpha, a registered shareholder and director of Alpha. Hady said that he did not know who Jung Jin was. Chia suggested that Alan Chan be contacted for the identity of Jung Jin. When contacted, Alan Chan first described Jung Jin as a Korean national. Upon further questioning, Alan Chan revealed that Jung Jin was in fact Shiong Jin’s wife.
[43] Yee said he was shocked to learn that Shiong Jin’s wife was a registered shareholder and director of Alpha. Since Shiong Jin appeared to be Hady’s advisor, the Alpha Contracts were potentially interested person transactions.
[44] At this juncture, Yee proposed that the Board meeting be adjourned so that the defendants could hold an urgent Audit Committee meeting. Hady, John Ho and KN Lim were asked to leave the room whilst the Audit Committee meeting was held.
[45] At the Audit Committee meeting, Yee proposed the appointment of a special auditor to ascertain the validity of the transactions disclosed by Hady on 22 and 23 March 2011 (namely, the termination of the Scorpio Contracts and the execution of the Alpha Contracts) and the payments related to those transactions. Before the Board meeting had started, Yee had contacted Pricewaterhouse Coopers, Ernst & Young and SFCA to enquire on their availability to act as special auditors and to ask for fee estimates. After considering their respective fee estimates, he proposed that either Ernst & Young or SFCA be appointed.
[46] Ong Hwee Li suggested that a telephone call be made to SGX to seek its views. A telephone call was then made to Charles Poon (Assistant Vice-President, Catalist Regulation) of SGX. They informed Mr Poon that the Audit Committee and the Sponsor believed that it would be necessary to appoint a special auditor to review the transactions in question. Mr Poon said that SGX agreed that a special audit be conducted. Mr Poon also said that SFCA had conducted a special audit of a listed company recently and was familiar with SGX’s expectations.
[47] After deliberation, the Audit Committee resolved to recommend to the Board that:
(a) SFCA be appointed as special auditor of SEH to review the transactions disclosed by Hady at the Board meetings on 22 and 23 March 2011 and the payments related to those transactions;
(b) the executive directors were not to enter into any new contracts without the approval of the Audit Committee; and
(c) no disbursement exceeding S$10,000 should be made without the approval of the Audit Committee.
[48] After the conclusion of the Audit Committee meeting, the Board meeting resumed. The Board resolved to accept the recommendations of the Audit Committee. Hady did not raise any objections.
[49] Following the Board meeting, the defendants met and briefed Chee of SFCA on that same day about the proposed scope of the special audit. They informed Chee that, upon the conclusion of the special audit, SFCA’s findings would be referred to SEH’s solicitors for legal advice. From the time they discovered the transactions under review (ie, from 22 March 2011 onwards), the defendants had been extremely conscious of the possibility of legal proceedings by SEH against Hady, as well as the possibility of legal and/or regulatory proceedings against SEH. They informed Chee that SEH would rely on SFCA’s findings in the event of any legal proceeding involving SEH, and that SEH would also rely on SFCA’s findings in considering whether to commence any legal proceedings against Hady.
[50] SFCA was formally appointed as a special auditor of SEH on 25 March 2011. SFCA completed the special audit in August 2011. The signed report was received by the defendants on 24 August 2011 although they received a draft of the final version on or about 11 August 2011.
[51] In the meantime, the trading halt for shares in SEH was converted into a suspension on 25 March 2011.
[52] On 31 August 2011, Yee sent an email to Edward Tan to call a Board meeting on Friday, 2 September 2011 to, inter alia, receive the SFCA Report and consider and approve an announcement relating to SFCA’s findings. Edward Tan sent the email to the other directors.
[53] On 1 September 2011 at 12.54am, Hady replied to state that he was not available to attend the Board meeting on 2 September 2011 as he was abroad. He asked for a copy of the SFCA Report and requested that the meeting be held one week after the SFCA Report was circulated.
[54] The defendants conferred by telephone on the morning of 1 September 2011. According to Yee, they agreed that Hady was not entitled to receive a copy of the SFCA Report because it was privileged. However, Hady would be provided a copy of the Executive Summary if the Executive Summary was released to the public.
[55] The defendants decided that SFCA’s findings were not to be disseminated to any individual whose conduct had been reviewed by SFCA as such conduct might give rise to potential legal proceedings by SEH against them. As Hady’s conduct was one of the subjects of the SFCA Report, Hady should not be given a copy of the SFCA Report. Nevertheless, it appears that Chia did have some reservation about whether Hady should be denied a copy of the report. In an email dated 2 September 2011 to Yee, Chia said:
[56] The defendants also took the view that, given the urgency of the matter, the Board meeting should proceed on 2 September 2011, as originally proposed. This was conveyed to Hady who preferred to attend the meeting in person. Eventually, the defendants agreed to postpone the meeting to 6 September 2011 to accommodate Hady and he was informed accordingly.
[57] Yee also sent an email dated 1 September 2011 to Hady to say that he was not entitled to receive a copy of the SFCA Report. In the meantime, the defendants appointed A&G to act for SEH on the matter. Based on the advice of A&G, the defendants considered the possibility of not releasing the Executive Summary or making an announcement about the steps and the transactions.
[58] Bernard Lim arranged a meeting on 5 September 2011 between the defendants, in their capacity as members of the Audit Committee, and SGX. The purpose of the meeting was to discuss SFCA’s findings and SEH’s proposed course of action in response to the findings.
[59] On 5 September 2011, the defendants and Bernard Lim met with June Sim and Eliza Tan of SGX. At the meeting, June Sim and Eliza Tan informed the defendants that, in compliance with SEH’s obligation under Rule 703 of the Catalist Rules, SEH was required to announce:
(a) SFCA’s findings by disclosing the Executive Summary and
(b) the steps SEH proposed to take in relation to the matter.
[60] A Board meeting was then held on 6 September 2011 at 2.30pm. Hady was given a copy of the Executive Summary (at about 2pm) but not of the SFCA Report.
[61] At this meeting, the defendants formally accepted the SFCA Report. Hady was asked to leave the room while the defendants deliberated on SFCA’s findings. The defendants’ position was that any individual whose conduct gave rise to potential legal proceedings by SEH against them would have to abstain from any deliberations of the Board in respect of SFCA’s findings. As Hady’s conduct was one of the subjects of the SFCA Report, Hady was excluded from the deliberations of the Board.
[62] At the meeting, the Board recommended that a draft of the Announcement in respect of SFCA’s findings be circulated for approval on the same day (6 September 2011). Edward Tan reminded the Board that the Announcement must be released promptly on SGXNET after it was cleared by the Board and SGX.
[63] At this meeting, the Board also accepted the resignation of Mr Wong Teck Yenn as a director of SEH which would be effective after the Announcement.
[64] On 6 September 2011 at 9.36pm, Eliza Tan of SGX sent an email to Bernard Lim stating:
This email was forwarded by Bernard Lim to the defendants on 6 September 2011 at 10.01pm.
[65] Thereafter, at 11.53pm, an email containing a draft of the Announcement was circulated to the members of the Board (including Hady and the defendants). The Directors were asked to respond by 10am of 7 September 2011.
[66] Hady protested that he did not have enough time to list out what he considered were obvious inaccuracies in the Announcement. None of the defendants or Bernard Lim or Ong Hwee Li had any such reservation. There were numerous emails that day amongst the defendants, between Ong Hwee Li and Hady, and between Yee and Hady about whether Hady should be given more time to respond. The deadline for Hady to respond by 10am was extended to 2pm and then to 5pm. In the meantime, Hady’s solicitors had sent a fax on the draft of the Announcement to state inter alia that it was inaccurate and deficient. Hady also sent two emails which were supposed to enclose his proposed amendments to the draft announcement but there were no enclosures. I will elaborate on the various emails later.
[67] Eventually, the Announcement was broadcast at about 7.11pm on SGXNET. The Announcement annexed a copy of the Executive Summary.
[68] Thereafter the defendants finally received Hady’s substantive proposed amendments on the draft of the Announcement at about 7.13pm. The defendants discussed his proposed amendments among themselves. Their position was that they would have rejected his proposed amendments in any event even if the amendments had been received by 5pm.
[69] The defendants stressed that the Announcement had been drafted with the advice of their solicitors and with inputs from Edward Tan and Chew Lee Sian of L&P, the Sponsor and SGX.
The disputed words
[70] The disputed words, as alleged by Hady, comprised numerous sections found in both the Announcement and the Executive Summary. Rather than setting them out here, I have attached:
(a) A copy of the Announcement in Annexure B. I have underlined and numbered the portions of the Announcement which contain the disputed words for ease of reference. However, Hady has withdrawn his claim in respect of one statement as elaborated below at [76], and
(b) Excerpts of the Executive Summary containing the disputed words in Annexure C.
[LawNet Admin Note: Annexure B and Annexure C are viewable only to LawNet subscribers via the PDF in the Case View Tools.]
The meanings of the disputed words
[71] The Court of Appeal has said that the test for determining the natural and ordinary meaning of the offending words in a defamation action is what the words would convey to an ordinary reasonable person, not unduly suspicious or avid for scandal, using his general knowledge and common sense. It is irrelevant what meaning was intended by the maker or publisher of the statement or what meaning was actually understood by the plaintiff, Review Publishing Co Ltd and other v Lee Hsien Loong and another appeal [2010] 1 SLR 52 (“Review (CA)”) at [27].
[72] The Court of Appeal said at [91] that the natural and ordinary meaning of the offending words is not limited to their literal or strict meaning, but includes inferences or implications that the ordinary reasonable person may draw from those words in the light of his general knowledge, common sense and experience. As such, a judge could rely on the principle of defamation by implication in determining the natural and ordinary meaning of the disputed words.
[73] Inferences or implications which the ordinary reasonable person may draw based on his general knowledge, common sense and experience are entirely permissible. It must be appreciated that such inferences or implications are not the same as inferences or implications based on extrinsic evidence, which evidence is not admissible as a matter of law in the construction of the natural and ordinary meaning of the offending words. Per the Court of Appeal in Review (CA) at [26], an innuendo meaning is one in some other meaning, apart from the natural and ordinary meaning, which:
The extrinsic facts are thus those that are not matters known to the general public, but are within the knowledge of the persons to whom they are addressed. If facts are so well known, then they cannot be relied on as forming an innuendo.
[74] The meanings of the disputed words must be read within the context of the publication as a whole. Words which are not in themselves defamatory may, from the whole context in which they are published, convey a defamatory imputation. So, while certain sentences may be considered defamatory, other passages may take away their sting and the claimant cannot pick and choose parts of the publication which, standing alone, would be defamatory. This was affirmed in the recent Court of Appeal decision of Chan Cheng Wah Bernard and others v Koh Sin Chong Freddie and another appeal [2012] 1 SLR 506 (“Chan Cheng Wah Bernard”) at [18], where the court observed that “the bane and the antidote must be taken together”.
[75] I am of the view that context here requires both the Announcement and the Executive Summary to be considered. The Announcement was published with the Executive Summary annexed to it and readers were informed to refer to parts of the Executive Summary for more details. So, both documents must be read together. In my view, the Announcement did not add much to the Executive Summary in so far as the allegation of defamation was concerned, although Hady alleged that the disputed words in the Announcement contained an even higher defamatory meaning than the Executive Summary. What the Announcement sought to do was to give some background to the trading halt, summarise the Executive Summary, state the steps which SEH was taking and to explain why trading in the shares of SEH would continue to be suspended.
[76] The meanings which Hady attributed to the disputed words were set out at great length in the Statement of Claim (Amendment No 2) (“SOC”) from paras 15(1)–(18), 16(1)–(4) and 18(1)–(10), and contained numerous allegations in respect of the steps and four transactions. The meanings pleaded by Hady are set out in full in Annexure D. I note that the meaning alleged in para 15(14) was withdrawn in Hady’s closing submissions. This was an allegation in respect of a statement in the Announcement, inter alia, that Hady had dishonestly represented to SEH that S$300,000 was payable to shareholders of Alpha for an acquisition of a 51% stake in Alpha.
[LawNet Admin Note: Annexure D is viewable only to LawNet subscribers via the PDF in the Case View Tools.]
[77] In their pleadings, the defendants did not admit to the meanings Hady had attributed to the disputed words in his pleadings. On the other hand, the defendants did not assert what the disputed words meant or plead any alternative meanings in their defence. In their closing submissions, the defendants disputed the meanings of some of the disputed words, and instead put forward lower meanings for certain disputed words. They also accepted that some of the disputed words had the defamatory meanings pleaded by Hady.
[78] The defendants should have pleaded the alternative meanings that were mentioned in their submissions. This is especially important when the meanings that the defendants are seeking to put forward are relevant to their substantive defences. Since the defendants omitted alternative meanings in their pleadings, the defendants were obliged to justify the meanings pleaded by Hady, see Review (CA) at [133]–[135]. The consequence of this is that they can seek to justify only the meanings alleged by Hady provided that the court also concludes that the disputed words bear the meanings alleged by Hady. The defamatory imputation is also presumed to be false and the burden is upon the defendant to prove that they are substantially true (see Gatley on Libel and Slander (Patrick Milmo and WVH Rogers eds) (Thomson Reuters (Legal) Limited, 11th Ed, 2008) (“Gatley”) at para 11.3). Also, I observe that there was therefore no actual need for the defendants to have disputed the meanings pleaded by Hady since they had not pleaded their own meanings.
[79] To establish whether the disputed words were defamatory of Hady, and in light of the numerous disputed words and meanings pleaded, I have approached the issue in the following manner: I will first set out what I consider the meanings of the disputed words to be, followed by a comparison with the pleaded meanings. I will then conclude with the findings of what was defamatory of Hady.
Scorpio Contracts
[80] The termination of the Scorpio Contracts was significant to the Scorpio Group and the intention to terminate them should have been disclosed to the Board to obtain the Board’s approval, but this was not done. The termination of the Scorpio Contracts should also have been disclosed by SEH on SGXNET but was not.
[81] It was implied, if not expressly stated, that John Ho (not Hady) was responsible for the failure to disclose to the Board the intention to terminate and the failure to obtain the Board’s approval for the termination. It was implied that he also failed to inform the Board of the termination immediately after the termination and consequently SEH failed to promptly disclose the termination on SGXNET.
[82] For various reasons, the termination of the Scorpio Contracts was not done in the interest of the Scorpio Group, and John Ho (not Hady) had breached his fiduciary duties as a director of various companies in the Scorpio Group in terminating them. It was implied that Hady knew that it was not in the interest of the Scorpio Group to terminate the Scorpio Contracts. Yet, for his own interests, he caused John Ho to do so, as he wanted the Scorpio Group to switch to the Alpha Contracts. It was implied that he ought not to have caused John Ho to do so.
Alpha Contracts
[83] Hady had signed the Alpha Contracts on behalf of Scorpio East Pictures.
[84] The Alpha Contracts were for an amount which was significant to the Scorpio Group. Hady should have obtained Board approval to enter into these contracts but did not. He informed the Board about these contracts on 22 March 2011 after they had been executed. The Alpha Contracts should also have been disclosed by SEH under Rule 703 of the Catalist Rules which has been breached. It was also implied that Hady was also responsible for SEH’s consequent failure to disclose the Alpha Contracts.
[85] Hady did not conduct any due diligence on Alpha and was reckless in executing the Alpha Contracts. The Alpha Contracts were of dubious veracity and were not entered into in the interest of Scorpio East Pictures. It was implied that Hady executed the Alpha Contracts for his own financial interest.
[86] Hady had breached his fiduciary duties as a director of SEH.
The “round-tripping” transactions
[87] The “round-tripping” transactions were an idea conceived by Shiong Jin and approved by Hady in connection with the termination of the Scorpio Contracts and the entry into the Alpha Contracts. Hady was aware that the money to be returned to the Scorpio Group would be done using cash.
[88] John Ho (not Hady) gave instructions for official receipts to be issued for S$1m and S$1.36m (totalling S$2.36m) to Long Red and Dream Movie respectively. The receipts were false as the money was not in fact received from these producers.
[89] It was implied that John Ho also gave instructions for the accounting ledgers of the Scorpio Group to reflect that S$2.86m (which includes the S$2.36m referred to above at [88]) was received from Long Red, Dream Movie and Speedy Video. Such entries were false as the money was not in fact received from these producers.
[90] The round-tripping transactions resulted in fictitious accounting entries being made in the books of the Scorpio Group, and were intended to mislead the external auditors that the Scorpio Group had received the money from these producers (so that the external auditors would not recommend impairment provisions).
[91] The conduct of Hady in approving the round-tripping was dishonest. It was implied that Hady may have committed various offences. The round-tripping transactions may have to be disclosed to SGX.
The Proposed Investment
[92] Hady had given instructions for the Scorpio Group to pay S$3m to an escrow account of JLC and S$300,000 to Jung Jin and Liu Woon San even though Hady was told by Shiong Jin that the Scorpio Group had only S$2.2m in its bank accounts.
[93] The S$3m payment was actually for the acquisition of a 51% stake in Alpha. If the payments for the Proposed Investment had been effected, it would have potentially created serious cashflow problems for the Scorpio Group.
[94] The S$3m formed 18% of the NAV of the Scorpio Group. It was implied that Hady ought to have known this. The Proposed Investment was a significant one and prior approval of the Board ought to have been obtained but was not.
[95] No due diligence was carried out on the Proposed Investment which appeared highly speculative.
[96] Hady’s failure to obtain Board approval was all the more significant in the light of his role in the steps in respect of the earlier transactions. Hady had breached his fiduciary duties as a director of SEH. It was implied that the Proposed Investment was not in the interest of the Scorpio Group.
Other meanings
[97] It was implied that SFCA did not consider Hady to be fit to remain as an executive director.
[98] The Board was of the view that Hady might not be fit to remain even as a director of the Scorpio Group and were reviewing the findings of SFCA to decide whether Hady should continue as a director.
[99] As the termination of the Scorpio Contracts and the execution of the Alpha Contracts involved significant amounts of money, the Board had called a trading halt of SEH’s shares (on 22 March 2011) which was converted into a suspension (on 25 March 2011). The suspension would continue as SEH was unable to reasonably assess its affairs and financial state for various reasons including the termination of the Scorpio Contracts and the entry into the Alpha Contracts. This implied that the Board was concerned about the financial viability of SEH.
Allegations in the Announcement but not in the Executive Summary
[100] I move on to Hady’s other allegations of defamation from the Announcement. During the trial, Hady’s counsel tendered a table to identify allegations in the Announcement which were not in the Executive Summary. A copy of the table was helpfully included as an annexure to the defendants’ closing submissions. As mentioned above, one of the statements is no longer the subject of these proceedings (see [76]).
[101] The main thrust of Hady’s complaint was that parts of the Announcement referred to the “purported” termination or cancellation of the Scorpio Contracts and the “purported” entry into or formation of the Alpha Contracts.
[102] Hady was suggesting that the use of the word “purported” in the Announcement had a higher defamatory meaning than the rest of the disputed words in the Executive Summary because that word suggested that the steps taken in respect of these two transactions and the transactions themselves were dubious.
[103] Hady also complained that the Announcement contained the following passage (at p 3):
This passage came after a paragraph which set out some information about Alpha and which also stated that Jung Jin, a registered shareholder and director of Alpha, is the spouse of Shiong Jin. However, Hady did not plead this passage about Shiong Jin, as part of the defamation action. Accordingly, I say no more on it.
[104] As for the use of the word “purported” in the Announcement, I am of the view that it suggested that the Board was uncertain whether the termination of the Scorpio Contracts or the execution of the Alpha Contracts were valid. The use of the word “purported” did not add any higher defamatory meaning when reading the Announcement and the Executive Summary together.
Conclusion on the defamatory meanings
[105] The meanings stated in the paragraphs above that were potentially defamatory of Hady were:
(a) The second, third and fourth sentences of [82];
(b) [83]–[86];
(c) [87] and [91];
(d) [92]–[96]; and
(e) [97]–[99].
I will now consider whether the meanings I have found were pleaded by Hady.
[106] It must be noted that the SOC did not contain many common stings among the disputed words. Eventually, the closing submissions for Hady (contained in Annexure B of his submissions) sought to set out common stings of the disputed words with cross-references to the meanings pleaded in his SOC as follows:
I observe that the stings submitted were not only summaries but also variations of the meanings pleaded in Hady’s SOC.
[107] According to Review (CA), the plaintiff who relies on a variant of the pleaded meaning must not substantially change the meaning pleaded, nor argue a more defamatory meaning than which he had originally pleaded. The Court of Appeal in that case dealt with the issue of the plaintiff pleading the most injurious meaning which the words are capable of bearing. The plaintiff is thus bound by the meaning which he has pleaded, subject to any change brought about by an amendment to his statement of claim so as to plead a more defamatory or variant meaning from that originally pleaded (see [128]–[132]). Consequently, the court may not find a meaning more defamatory than a meaning pleaded by the plaintiff.
[108] Before arriving at this conclusion, the Court of Appeal (at [125]) quoted a passage from Chakravarti v Advertiser Newspapers Ltd (1998) 193 CLR 519 (“Chakravarti”) which stated at [60]:
The Court of Appeal went on to observe at [127] that:
[109] I am of the view that the observations made in Review (CA) are relevant to the case at hand. While Hady had pleaded many meanings, he now relies on five stings. As a case progresses, it is not unforeseeable that certain pleadings may be dropped or a lesser meaning is eventually relied upon. What is important is that the pleaded case does not change substantially and prejudices the defendant. What is interesting in this case is that Hady’s stings not only summarise the common meanings in the disputed words, but also contain slight variations as will be seen below. In most cases, the plaintiff would plead the defamatory meanings and the court would find the sting of the meanings, but in light of the many meanings, Mr Suresh Nair (“Mr Nair”), counsel for Hady, had helpfully prepared a table to concisely summarise the gist of the pleadings and point out common stings. I am thus guided by counsel in using these stings as the basis of finding whether the disputed words are defamatory of Hady. Furthermore, the submissions by Mr Nair referred to the stings rather than the pleaded meanings in Hady’s SOC. I also note that Hady’s submissions covered only four stings although his annexure contained five, but for completeness, I will deal with all five stings in my decision. Even though I may be relying on the stings, similarly as with the pleadings, I am not bound to find that the stings are correct. However, the stings submitted are an indication of what Hady considers to be defamatory of him.
[110] On the other hand, the defendants have disputed the use of the stings. On a general level, the defendants argued that the alleged defamatory meanings pleaded were specific to the Announcement and the Executive Summary and are not interchangeable. However, this is a flawed argument as the sting is meant to summarise the defamatory point of each transaction, of which the Announcement and Executive Summary both cover. The meanings only arise because of the words used in the documents, and having found that the reasonable reader would have read the Announcement and Executive Summary together in the light of each other, a common sting summarising the pleadings relevant to each particular transaction can be permitted. I will now consider the defendants’ contentions in relation to specific stings.
[111] The defendants argued that the second sting related to a common motivating factor ie, Hady’s interest in Alpha when dealing with the Scorpio Contracts and Alpha Contracts, and that this was not pleaded in the SOC. Hady’s pleading at para 18(6) does not go so far as to say that there was a motivation of financial interest in Alpha when he participated in the transactions of the Scorpio Contracts and the Alpha Contracts. I agree with the defendants’ contention and find that the sting as submitted by Hady would be tantamount to a substantial change in the thrust of the meanings pleaded. Therefore, Hady cannot rely on this correlation.
[112] The defendants also pointed out the incompatibility of the alleged meanings pleaded in paras 15(8) and 18(6) of the SOC. Even so, based on the sting submitted by Hady, the two meanings convey the meaning that Hady was motivated by his own financial interest and control over Alpha and that he had entered into the Alpha Contracts recklessly and/or negligently. I therefore reject the defendants’ contention.
[113] The next argument raised by the defendants was that “conceal[ment]” as stated in the second sting did not mean a failure to disclose or announce the Scorpio Contracts and Alpha Contracts. Even so, Hady had pleaded in para 15(5) read with para 15(10) about the “surreptitious” nature of the Plaintiff’s action which, in my view, includes concealment. Therefore, the Defendant was inaccurate in arguing that there was a distortion of the meanings pleaded by Hady.
[114] The defendants also argued that Hady had not pleaded that the Alpha Contracts were a “sham”. I agree that this was not pleaded in Hady’s SOC and hence this part of the second sting cannot be relied upon by Hady as this would attribute a new and more injurious meaning to the meanings pleaded in his SOC. Hady’s pleadings only went so far as to state that the contracts were of “dubious veracity” (see para 15(9)) ie, a doubtful nature, but this was certainly not the same as calling a contract false.
[115] With regard to the fourth sting, the defendants argued that this was not pleaded. However, it is clear from para 18(8) of the SOC that this was expressly pleaded, and I say no more of it. I note that the other meanings pleaded in the SOC ie, paras 15(15), 15(16) and 18(10) contained more meanings than that of the fourth sting, hence the sting ought to be expanded to include these meanings as well.
[116] With regard to the fifth sting, the defendants argued that the pleading in para 15(17) of the SOC does not result in such a meaning. In my view, the defendants are not in the position to dispute the meaning Hady ascribed to the disputed words as they had failed to plead an alternative meaning in their defence (see above at [78]). In any case, whether the meaning pleaded by Hady eventually succeeds would depend on my finding of what the meaning is.
[117] Additionally, Hady had pleaded meanings by way of innuendo at para 16 and para 18 of the SOC. An innuendo meaning is another meaning which requires knowledge of the special meaning of the offending words or the relevant extrinsic facts (see above at [73]). However, no extrinsic facts or special meanings were pleaded and I note that they were not submitted upon either. Therefore, Hady is not entitled to rely on the innuendos.
[118] In conclusion, I am aware that the defendants submitted on the individual meanings in their defence of justification but I do not think that the defendants have been prejudiced by my use of the stings as the point of comparison rather than the specific pleadings. As a sting is meant to summarise the meanings of the words, a fortiori, proving each pleading would go to show that the sting has also been proven. In fact, there may be a technical advantage on the side of the defendants by the use of the stings as will be noted below at [130]. Furthermore, other than the defendants’ contentions that the stings were substantial variations of the pleaded meanings, which I have already dealt with above, there are no other reasons submitted by the defendants to show that a reliance on the stings would prejudice their case.
[119] For clarification, I will first state the meanings of the disputed words that I have found and compare them with the alleged stings. With respect to the first sting:
(a) The disputed words did not mean that Hady actively concealed the Scorpio Contracts and Alpha Contracts transactions from the Board and the public but that he failed to inform the Board about the latter transaction when he was a director of the Board, in breach of his duties to SEH.
[120] With respect to the second sting:
(a) The disputed words did not mean that Hady had acted dishonestly in respect of the Scorpio Contracts and Alpha Contracts. However, they did mean that the two transactions were not in the interest of the Scorpio Group.
(b) The disputed words meant that Hady was motivated by his own financial interest in the termination of the Scorpio Contracts and the execution of the Alpha Contracts but there was no suggestion that he had done so because he had a financial interest in and control over Alpha. In any event, the latter part was not pleaded (see above at [111]).
(c) The disputed words meant that Hady had signed the Alpha Contracts without due diligence.
(d) The disputed words meant that the Alpha Contracts were dubious, but they did not mean that such contracts were in fact a sham even though that was what the defendants were thinking (in any case, the allegation of the sham was not pleaded by Hady (see above at [114])).
(e) The disputed words did not mean that Hady failed to make reasonable efforts to collect the deposits from the Scorpio producers but they did mean that he signed the Alpha Contracts which he should not have done in the circumstances.
(f) The disputed words did not mean that Hady actively concealed the Scorpio Contracts and Alpha Contracts from the Board and the public but that he had failed to inform the Board about the latter transaction when he was a director of the Board, in breach of his duties to SEH.
[121] With respect to the third sting:
(a) While the disputed words did mean that Hady had acted dishonestly in the “round-tripping” transactions, they did not mean that Hady had dishonestly represented to the Board that the round-tripping transactions were connected with the Scorpio Contracts and Alpha Contracts transactions.
(b) The disputed words did not mean that Hady had personally falsified the accounts of SEH although they did mean that he had acted dishonestly in approving the “round-tripping” transactions which resulted in the falsification of accounting entries which were intended to mislead the external auditors.
[122] With respect to the fourth sting:
(a) The disputed words did mean that Hady had approved the Proposed Investment without the Board’s prior approval, but it was not an investment which had already been entered into. They did mean that the Proposed Investment was not in the interest of the Scorpio Group and the omission to get the Board’s approval was in breach of his duties to SEH.
[123] With respect to the fifth sting:
(a) While the disputed words did mean that the Board was uncertain of the overall impact of the termination of the Scorpio Contracts and the execution of the Alpha Contracts and, hence, the financial viability of SEH, it did not mean that there were untold but substantial losses for the Scorpio Group. Aside from the specified losses in respect of the Scorpio Contracts, there was no reference to substantial losses from the Alpha Contracts.
(b) The disputed words did not mean that Hady’s role in relation to the Scorpio Contracts and Alpha Contracts was the only reason that justified the continued suspension of trading SEH’s shares. However, it did mean that Hady’s role was one of the reasons.
[124] In conclusion, the stings that were defamatory of Hady, as couched in the same language used in his submissions on the stings, stood as:
(a) First sting: Hady failed to inform the Board about the Alpha Contracts when he was a director of the Board, in breach of his duties to SEH.
(b) Second sting: Hady, motivated by his financial interest, had a role in terminating the Scorpio Contracts and had entered into the Alpha Contracts. The latter were of dubious veracity. The transactions were not in the interest of the Scorpio Group. Hady failed to conduct any form of due diligence on Alpha and signed the Alpha Contracts hastily. Hady failed to inform the Board about the Alpha Contracts when he was a director of the Board, which consequently meant a failure of SEH to disclose the Alpha Contracts.
(c) Third sting: Hady had acted dishonestly in the “round-tripping” transactions which resulted in the falsification of accounting entries and which were intended to mislead the external auditors that the Group had received the Scorpio Deposits so that they would not recommend impairment provisions.
(d) Fourth sting: Hady had approved of the Proposed Investment without referring the proposal to the Board. The Proposed Investment was not in the interest of the Scorpio Group and the omission to get the Board’s approval was in breach of his duties to SEH.
(e) Fifth sting: Hady’s role in relation to the Scorpio Contracts and the Alpha Contracts resulted in specified losses and unspecified potential losses for the Scorpio Group that may imperil its financial viability.
Defences
[125] Aside from the non-admission of the meaning of the disputed words, the defendants relied on the following defences:
(a) Justification;
(b) Qualified Privilege; and
(c) Consent or leave and licence.
[126] Before going to the defences, it is apt to consider the principles of the defences of justification and qualified privilege. In their defence, the defendants first raised the defence of qualified privilege, followed by the defence of justification. The defences do not seem to have been pleaded in the alternative but in conjunction with one another.
[127] For the plea of justification, something that is substantially true cannot be used by the claimant to recover damages (see Littledale J’s observations in M’Pherson v Daniels (1829) 10 B & C 263 at 272). Furthermore freedom of speech should not be curtailed unless the publication of the defamatory matter is a wrongful act – the publication of the truth is not a wrongful one and hence should not be curtailed (see Duncan and Neill on Defamation (Sir Brian Neill et al) (LexisNexis, 3rd Ed, 2009) (“Duncan and Neill”) at para 12.04). For qualified privilege, publications are protected based on the principle that statements which are defamatory and untrue may be privileged on grounds of public policy and convenience (Gatley at para 14.1, and approved in the recent Court of Appeal decision of Low Tuck Kwong v Sukamto Sia [2013] SGCA 61 (“Low Tuck Kwong”) at [58]). In such cases, the public interest in ensuring freedom of communication outweighs the competing public interest in protecting the reputation of the individual (Duncan and Neill at para 16.01). This also explains why malice can be used to defeat qualified privilege as express malice or using the privileged occasion for some other purpose or with the intent to injure connotes that the occasion of privilege has been misused (Duncan and Neill at para 18.04).
[128] As the basis of the defence of justification is truth, the state of mind of the publisher is not relevant. This means that a defendant can succeed in such a defence even when he publishes the material, believing it to be false, for no amount of malice, bad faith or belief in the falsity of the statement will make it actionable when the allegation is true (Carter-Ruck on Libel and Privacy (Alastair Mullis and Cameron Doley gen eds) (Lexis Nexis, 6th Ed, 2010) at para 9.1; Evans on Defamation in Singapore and Malaysia (Doris Chia and Reuben Mathiavaranam) (Lexis Nexis, 3rd Ed, 2008) at p 85). However, if the defence of qualified privilege is relied upon in such a scenario, and where a duty-interest relationship is found to have arisen, then the lack of honest belief in the material would be a clear example of malice and the defence of qualified privilege would fail, “for no sense of duty or desire to protect his own legitimate interests can justify a man in telling deliberate and injurious falsehoods about another” (Horrocks v Lowe [1975] AC 135 (“Horrocks”) at 149–150, applied in Chan Cheng Wah Bernard at [89]–[90]). Therefore, while ill-will and spite may matter in a defence of qualified privilege, it will not for justification.
[129] In most cases where the defamatory words are true in substance and fact, the defendant will succeed on a plea of justification if it has been pleaded. However, as the defamatory imputation is presumed to be false and the burden is on the defendant to show that it is substantially true, then where the defendant fails in its defence of justification, the presumption naturally remains. In that event, the defendant who also relies on a defence of qualified privilege must ensure that there was no malice in the publication, assuming that the duty-interest relationship is established. It cannot be that when the court finds the publication to be false or untrue and then not protected by qualified privilege that the defendant can then argue that the publication was true in fact and substance. When the defendant pleads justification and qualified privilege in the same defence, the latter defence operates when the former fails, as seen in the approach taken by the court in Chan Cheng Wah Bernard (see [85]). This means that when justification does succeed, and qualified privilege is being considered, it must be in the alternative where justification is assumed to have failed because the truth has not been proven on the balance of probabilities. In such a circumstance, the defendant’s belief, or lack thereof, in the truth of the publication is relevant only in the alternative.
Justification
[130] In relation to justification, it is an absolute defence that the meanings of the disputed words are true in substance and in fact. The meanings which need to be justified do not depend upon the meaning of the words complained of as pleaded by the claimant but upon the meanings which the words are reasonably capable of bearing (Gatley at para 11.14(4)). As it is the imputation contained in the words which has to be justified, ie, the sting, not every word that was in the original text needs to be justified. As stated by Borroughs J in Edwards v Bell (1824) 1 Bing 403 at 409, and approved in Chan Cheng Wah Bernard at [44]:
Additionally, where there are separate allegations in the defamatory material that have a common sting, the defendant can succeed by justifying the truth of the sting, notwithstanding that each specific allegation is not met (see ANB v ANF [2011] 2 SLR 1 at [76], following Polly Peck (Holdings) Plc v Trelford [1986] QB 1000 at 1032). It is thus clear that although the defendants disputed the use of the stings, finding the sting of the charge also assists the defendants in their ability to justify them. I will now deal with the evidence for the defence of justification.
Scorpio Contracts
[131] As regards the Scorpio Contracts and Alpha Contracts, it is clear to me from the evidence that SFCA was correct in asserting that it was Hady who wanted the Scorpio Contracts to be terminated when he was contemplating buying the shares from John Ho and his family members.
[132] Hady argued that the Adept Report advised that the Scorpio Contracts related to movies should be written out of the Group’s NAV altogether. I do not give much weight to the Adept Report which Hady had obtained because it was given for a different purpose, ie, in the context of Hady’s intended purchase of the shares. Significantly, the Adept Report did not recommend that the Scorpio Contracts be terminated.
[133] The fact that there was a risk that the Scorpio Contracts might not be profitable was not enough to terminate them without discussion with the Board. Obviously when John Ho caused the Scorpio Group to enter into these contracts, he must have thought that they would be profitable for the Scorpio Group. There was no evidence as to why John Ho would change his assessment except for the fact that he wanted to sell his shares and he did not want to guarantee that the Scorpio Contracts would be profitable, or at least not loss-making. The total sum which the Scorpio Group forfeited under the Scorpio Contracts was S$550,000. This was for the production contracts and there was no loss for the concert contracts. Altogether, this was a substantial loss to the Scorpio Group and the Scorpio Contracts were not terminated in the interest of the Scorpio Group.
[134] Moreover, the reason for terminating the Scorpio Contracts was the intended and eventual entry into the Alpha Contracts. Hady had orchestrated the two transactions for his own financial interest. Even though Hady was not a director in the Scorpio Group when the Scorpio Contracts were terminated, he knew that it was a matter of time that he would become a director once John Ho agreed to the termination of the Scorpio Contracts. His subsequent actions as director of the Scorpio Group revealed that he had an interest in the Alpha Contracts. Therefore, Hady, motivated by his financial interest, had a role in terminating the Scorpio Contracts.
The Alpha Contracts
[135] As for the Alpha Contracts, it is clear to me that they were not entered into at arm’s length and were of dubious veracity as suggested by the Executive Summary. Accordingly, the transaction was not entered in the interest of the Scorpio Group.
[136] First, Jung Jin, the wife of Hady’s consultant Shiong Jin, was a shareholder and director of Alpha.
[137] Secondly, her relationship with Shiong Jin was only revealed hesitantly when Chia pressed to find out who she was at the Board meeting on 23 March 2011.
[138] Thirdly, Hady admitted that he did not do any due diligence on Alpha. While Hady said he knew Alpha’s CEO, Alan Chan, who had been introduced to him by Jessica Teo, he did not say that he knew that Alan Chan (or Alpha) had any experience in producing concerts by Korean artistes. In addition, Hady confirmed with SFCA that he had no experience in the entertainment industry.
[139] Indeed, Hady either told the defendants lies or painted an incomplete picture about the Alpha Contracts. Although he said that he was not involved in the negotiations of the Alpha Contracts which had been proposed by Alpha to John Ho, he had in fact signed the Alpha Contracts on behalf of Scorpio East Pictures, in anticipation of his becoming a shareholder and director of SEH in circumstances which he chose to lie about as I will elaborate on later (at [224]–[230]). Furthermore, as stated above, it was he, not John Ho, who wanted the Scorpio Group to enter into the Alpha Contracts.
[140] Hady also told the defendants at the Board meeting on 23 March 2011 that Alan Chan had provided a personal guarantee for the Alpha Contracts but he did not disclose that in fact, Alan Chan was released from his guarantee by an undated letter, which Hady had signed on the letterhead of SEH on or about 11 February 2011. That letter released both Alpha and Alan Chan from a guarantee they had given. This information surfaced later and illustrated that Hady’s loyalty was to Alan Chan (and Alpha) and not to the Scorpio Group.
[141] Fourthly, the fact that Alpha returned S$2.86m out of the S$3.2m paid to it under the Alpha Contracts, as refund of the deposits under the Scorpio Contracts, less the S$550,000 to be forfeited, suggested that Alpha did not require the S$2.86m from the Scorpio Group in the first place.
[142] Fifthly, as SFCA noted in the Executive Summary at [3.15(g)], the fact that Hady could confidently propose a variation of the Alpha Contracts so that “each show will be organised and financed sequentially, [and] so that Scorpio will not make payments for any performance of event until the previous one has been completed” did suggest a loose arrangement between Scorpio East Production and Alpha.
[143] I add that Hady’s attempts to show that the Alpha Contracts were not dubious contracts did not assist him. He suggested that Alpha eventually organised several concerts for Korean artistes in Singapore. His affidavit exhibited material on such concerts which appeared to have been printed from the internet.
[144] I agree with the defendants’ closing submissions that the provenance of the internet material was not properly established by Hady. In any event, the internet material merely suggested that some artistes were popular. It did not establish that Alpha was the organiser or, more importantly, that the concerts were profitable. Neither did the material identify the terms of the underlying contracts for the production of these concerts. The material was therefore a red herring.
[145] Even if it could be shown that the Alpha Contracts became profitable, one must consider the disputed words at the time they were published. At that time, no one could say with certainty that they would be profitable. Furthermore, it was the manner in which they were entered into that caused concern.
[146] The Board was also not informed of the existence of the Alpha Contracts which were dated 17 March 2011. The Board was apprised of the Alpha Contracts on 22 March 2011 only.
[147] In light of the dubious veracity of the Alpha Contracts and my view that it was not entered in the interest of the Scorpio Group, it was unknown if the $3.2m that was transferred to Alpha would result in a loss to the Scorpio Group and imperil its financial viability.
[148] In the circumstances, it seems to me that Hady was not only acting recklessly but quite deliberately to advance his own financial interest rather than those of the Scorpio Group, and had accordingly breached his fiduciary duties as a director of SEH.
The “round-tripping” transactions
[149] Regarding the “round-tripping” transactions, they constituted another reason for doubting the veracity of the Alpha Contracts.
[150] Leaving aside for the time being the question of whether Hady had approved expressly or implicitly the falsification of accounting documents such as receipts and ledgers, the main question to answer regarding the “round-tripping” transactions was whether they were as innocuous as Hady claimed or as misleading as suggested by SFCA. It will be remembered that Hady’s explanation was that Alpha had taken upon itself the obligation to pay the Scorpio Group the refunds due from the producers of the Scorpio Contracts and the additional responsibility of collecting the refunds from the producers.
[151] Mr Nair argued that there was nothing in the arrangement “not to like”. The Scorpio Group would be paid the refunds, after deductions were made for the sums to be forfeited, and the responsibility for collecting the refunds from the producers of the Scorpio Contracts would lie with Alpha.
[152] Mr Nair suggested that there was nothing wrong with one person paying off the debt of another and it did not matter how the payment was effected, whether by way of cash or otherwise.
[153] Mr Nair also argued that there was no reason to mislead the external auditors.
[154] Yet, for all his arguments, Mr Nair did not address an obvious and important question. If the “round-tripping” transactions were really innocuous, why did Alpha go through the trouble of withdrawing substantial amounts of cash from its bank account and then depositing them into an account or accounts of the Scorpio Group from whom Alpha had received the money in the first place? The “round-tripping” transactions were unnecessary if the motive was innocuous. Letters to confirm the arrangement which Hady was alleging so that Scorpio East Production only needed to pay the difference between S$3.2m and S$2.86m, ie, S$340,000 would have been sufficient. The S$2.86m which Scorpio East Production was to pay to Alpha could be treated as having been set-off against the refunds from the producers of the Scorpio Contracts. Even if it was genuinely considered preferable for Scorpio East Production to physically effect payment of the S$3.2m, the multiple transactions of cash refunds to the Scorpio Group in these circumstances must raise a red flag. The logical inference was that the motive was to hide the identity of the source of funds coming (back) into the bank accounts of the Scorpio Group by making it look as if the Scorpio Group had attained the deposits from the producers under the Scorpio Contracts and would have the money to pay the consideration under the Alpha Contracts.
[155] Furthermore, although the risk of collecting the refunds from the producers of the Scorpio Contracts would now lie with Alpha, this raised an important question which Chee mentioned while he was being cross-examined. The relevant transcript states:
[156] In my view, Mr Chee’s oral response had hit the nail on the head. If it was known that Alpha was using the Scorpio Group’s own money to repay them, although it was on behalf of the producers of Scorpio Contracts, this would have aroused suspicion that the Alpha Contracts were not entered into at arm’s length. Why, indeed, would Alpha be so “nice” to the Scorpio Group to take on the Scorpio Group’s responsibilities? This in turn would have raised the next question, which was also mentioned in Chee’s testimony: how was Alpha going to perform their part of the bargain under the Alpha Contracts if they were returning a large portion of what they had received? As stated by Chee, “… Alpha [will be] left with no money, they [would be] unable to fulfil the [Alpha Contracts] …”.
[157] I come now to SFCA’s suggestion that the purpose of the cash transfers was to give the impression that the refund of the deposits was in fact received so that the external auditors would not recommend impairment provisions. I agree with Mr Nair’s argument that there would be no reason for the auditors to recommend impairment provisions for the deposits if the deposits were in fact treated as having been paid pursuant to Hady’s explanation. However, that explanation would in turn have raised even more questions as I elaborated above.
[158] Therefore, contrary to Mr Nair’s simplistic arguments, this was not just a case of one person paying the debt of another. The payer (Alpha) was using the money he had received from the payee (the Scorpio Group), pursuant to various contracts he had with the payee, to repay the payee and discharge an obligation which was not his to discharge in the first place. While that in itself need not be suspicious, the circumstances of this case made the difference.
[159] Was Hady’s conduct in approving the round-tripping transactions dishonest? According to SFCA, Shiong Jin had told SFCA that he (Shiong Jin) had suggested to both Hady and Alan Chan about the idea of the “round-tripping” transactions using cash. Hady was in favour of the idea. However, during cross-examination, when Shiong Jin was asked to go through a transcript of an interview which Rick Seah (of SFCA) had with him, he stated that much of what he had told Rick Seah regarding the termination of the Scorpio Contracts, the entry of the Alpha Contracts and the “round-tripping” transactions, was a lie. This was a surprising development. Shiong Jin’s explanation for the lies was that when he spoke to Rick Seah, he decided to take the blame for everything because he realised or had come to learn that the defendants were targeting him because of some other past matters which I need not go into.
[160] I do not accept Shiong Jin’s explanation in court that he had lied to Rick Seah or as to why he had lied. If he was really going to take the blame for everything, as he was alleging at trial, why did he tell Rick Seah that Hady was aware of the “round-tripping” transactions before they were executed? He would have said that he had kept Hady in the dark. I conclude that he did tell the truth when he said to Rick Seah that he had told Hady about the “round-tripping” transactions before they were executed. However, by the time he gave oral evidence, he decided to try and help Hady in his defamation claim against the defendants by saying that what he had told Rick Seah was a lie.
[161] Rather, Shiong Jin’s explanation in court was the lie and there was no need for him to lie unless he knew that the “round-tripping” transactions were not as innocent as Hady was suggesting.
[162] I am of the view that Hady was told and was aware of the “round-tripping” transactions before the transactions were executed. He must also have been aware that the purpose of the cash transfers was to hide the fact that the money to pay the refund came from the same money which the Scorpio Group was paying to Alpha under the Alpha Contracts. This was to avoid the questions which I have mentioned. As a consequence of the execution of the transactions, false accounting entries stating that the Scorpio Group had received cash refunds from the producers of the Scorpio Contracts were made.
[163] In my view, Hady acted dishonestly in approving the “round-tripping” transactions and I agree with what was stated in the Executive Summary, ie, that he may have committed various offences including the breach of his duty as a director.
The Proposed Investment
[164] I come now to the transfers that Hady had authorised.
[165] Mr Nair argued that there was in fact no investment at all. The money was to be held in JLC’s client account and would only be used properly with the necessary authority of the Scorpio Group. I am of the view that Mr Nair’s argument did not assist Hady. First, if there was no investment at all, then Hady should not have authorised any payment to JLC even though it was to be held in escrow. If it was only a proposal, then he ought not to have instructed the payment to be made unless the S$3m payment was meant to be a demonstration of good faith to invest or was done without regard to the interest of the Scorpio Group. Here, Hady did not suggest that the payment of S$3m (as opposed to an intended payment of another S$300,000 to shareholders of Alpha) was to be a demonstration of good faith.

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Hady Hartanto v Yee Kit Hong and others

Grounds of decision

Introduction

The background

(1) The Scorpio Contracts

(2) The Alpha Contracts

(3) The “round-tripping” transactions between SEH and Alpha

(4) Proposed Investment

The defendants’ concerns

The disputed words

The meanings of the disputed words

Scorpio Contracts

Alpha Contracts

The “round-tripping” transactions

The Proposed Investment

Other meanings

Allegations in the Announcement but not in the Executive Summary

Conclusion on the defamatory meanings

Defences

Justification

Scorpio Contracts

The Alpha Contracts

The “round-tripping” transactions

The Proposed Investment