Relfo Ltd (in liquidation) v Bhimji Velji Jadva Varsani

Andrew Ang J:

[1] The application and two registrar’s appeals before me are the sequel to Relfo Ltd v Bhimji Velji Jadva Varsani [2008] 4 SLR 657 (“the Singapore Action”). The plaintiff company, Relfo Ltd (in liquidation), was incorporated in the United Kingdom in January 1996. From the inception, the defendant, Bhimji Velji Jadva Varsani, and his brother each held 25% of the plaintiff’s share capital while another 25% was held by Devji Ramji Gorecia (“Gorecia”) and his wife. Two other shareholders, Geoffrey David Roberts (“Roberts”) and Simon Patrick Wainwright (“Wainwright”) held the remaining 25% between them. From the time of its incorporation until June 2001, the plaintiff’s directors were Gorecia, Roberts, Wainwright and the defendant’s father. In June 2001, the plaintiff sold a property for more than £4m. The plaintiff’s tax liability was estimated to be about £1.26m. At a board meeting held in June 2001, it was agreed that a sum of £3,546,518 net of tax would be distributed to the shareholders of the plaintiff as dividends. The sum was duly paid out. Concurrently, all the directors (except Gorecia) resigned and Gorecia’s wife was appointed a director of the plaintiff. On the same day, the shareholders (other than Gorecia) transferred their shares in the plaintiff to Gorecia and his wife at nominal values. Thereafter, Gorecia and his wife were the plaintiff’s only directors and shareholders.

[2] On 26 April 2004, the UK Inland Revenue (“UKIR”) issued a “Notice Warning of Legal Proceedings” to the plaintiff in relation to the tax liability incurred in 2001 (see above at [1]). However, no payment by the plaintiff was made to the UKIR.

[3] Instead, on 4 May 2004, Gorecia gave instructions for a sum of £500,000 to be transferred from the plaintiff’s HSBC account into the account of one Mirren Ltd (“Mirren”), a company registered in the British Virgin Islands. On 5 May 2004, a sum of US$878,479.35 was remitted to the defendant’s account with Citibank, Singapore branch (“Citibank account”) by Intertrade Group LLC (“Intertrade”). On 10 May 2004, the sum of US$878,469.35 (after deducting US$10 for bank charges) was credited into the defendant’s Citibank account. On 3 May 2004, the defendant transferred a sum of US$100,000 from his Citibank account to Gorecia and his wife.

[4] On 23 July 2004, it was resolved at a meeting of the plaintiff’s members that the plaintiff be wound up voluntarily as it could not, by reason of its liabilities, continue its business. The only two creditors of the plaintiff at that time were Gorecia and the UKIR, which was the majority creditor. At the creditors’ meeting, Timothy James Bramston (“Bramston”) was appointed the liquidator. Gorecia informed Bramston that the sum of £500,000 (referred to above at [3]) was for an investment involving the purchase of a container of computer goods, but the investment had failed and there were no prospects of recovery of the payment. However, Bramston’s investigations eventually led to the discovery of the sum of US$878,469.35 in the defendant’s Citibank account. The plaintiff subsequently commenced the Singapore Action in the High Court against the defendant for knowing receipt of trust property.

[5] In the judgment in the Singapore Action ([1] supra), Judith Prakash J found that the money received in the defendant’s Citibank account was traceable to the £500,000 sent out of the plaintiff’s HSBC account on 4 May 2004. Prakash J held at [39]:

On the issue of knowing receipt, Prakash J at [51] held that:

[6] However, at the time of the suit, the only creditor of the plaintiff was the UKIR. Gorecia had withdrawn his claim on 3 November 2007, which was prior to the trial. In the light of this, the court found that the purpose of the claim was to recover funds to pay the outstanding taxes. Therefore, Prakash J held at [71]:

[7] The plaintiff’s subsequent appeal was dismissed. However, the Court of Appeal did not vary or interfere with the express findings made by Prakash J that the defendant had knowingly received the traceable proceeds of the £500,000 sent out of the plaintiff’s HSBC account. Following this, the plaintiff commenced proceedings in the UK on 26 January 2009 to recover the sum of US$878,469.35 from the defendant (“the UK Proceedings”).

[8] The applications and appeals made by the defendant in Summons No 1527 of 2009, Registrar’s Appeals Nos 112 and 111 of 2009 are the following respectively:

(a) An order that the plaintiff and its liquidator be restrained from commencing or pursuing any legal action against the defendant in the United Kingdom or any other jurisdiction (also known as an anti-suit injunction) for matters or issues related to Suit No 612 of 2006.

(b) An appeal against the decision of the assistant registrar (“AR”) allowing the plaintiff’s application in Summons No 663 of 2009 to adduce documents obtained for Suit No 612 of 2006 in foreign proceedings.

(c) An appeal against the decision of the AR dismissing the defendant’s application in Summons No 1158 of 2009 to stay proceedings in Summons No 663 of 2009 pending payment by the plaintiff to the defendant of the balance of the cost awarded by the Court of Appeal.

[9] This was an application by the defendant for an anti-suit injunction to restrain the plaintiff and its liquidator from pursuing any legal action against the defendant in other jurisdictions for matters relating to Suit No 612 of 2006. In particular, the defendant sought to restrain the plaintiff from continuing with the UK Proceedings.

[10] The law relating to the granting of anti-suit injunctions is well settled. In Bank of America National Trust & Savings Association v Djoni Widjaja [1994] 2 SLR 816 (“Bank of America”), the Court of Appeal adopted the principles enunciated by the Privy Council in Société Nationale Industrielle Aerospatiale v Lee Kui Jak [1987] 1 AC 871 (“Aerospatiale”). Those principles were summarised succinctly by Lord Goff of Chieveley at 892:

[11] In Bank of America ([10] supra), LP Thean JA at 822 held that:

[12] The Court of Appeal again applied those principles in Koh Kay Yew v Inno-Pacific Holdings Ltd [1997] 3 SLR 121 (“Koh Kay Yew”). Most recently, the Court of Appeal in John Reginald Stott Kirkham v Trane US Inc [2009] SGCA 32 affirmed the same principles. Therefore, the issue whether an anti-suit injunction ought to be ordered cannot be determined solely on grounds that the plaintiff had commenced proceedings in more than one jurisdiction. Instead the court is entitled to look at all the relevant factors.

[13] The defendant’s application for an anti-suit injunction against the plaintiff was clearly unmeritorious. The UK proceedings are neither vexatious nor oppressive, and injustice would be suffered by the plaintiff if it was not allowed to pursue proceedings in the UK.

[14] Crucially, the plaintiff’s claim in the Singapore Action was dismissed on the basis that it was an indirect enforcement of a foreign revenue law, and not on the grounds that the defendant was not liable for knowing receipt. The issue of enforcing foreign revenue law would not arise in the UK proceedings. It would be absurd for a Singapore Court, having declined to grant judgment (in a case of proven knowing receipt) on the ground that so to do would be an indirect enforcement of UK revenue law, to then step beyond that to restrain proceedings in the UK for recovery of the same money knowingly received. It cannot be said that this was a “case of vexation and oppression” (per Lawrence Collins J in Masri v Consolidated Contractors International Company SAL [2008] 2 Lloyd’s Rep 301 [95]). There was no real prejudice to the defendant given that the court has already found that the defendant knew that the money emanated from a breach of duty and that it would be unconscionable for him to retain it (see above at [5]). In Koh Kay Yew, the Court of Appeal at [23] stated:

[15] In contrast, potential injustice to the plaintiff was obvious. An anti-suit injunction would be directed towards preventing the plaintiff from pursuing its claim over the property, despite the court’s finding in its favour with respect to the knowing receipt.

[16] I was mindful of the caution by the Court of Appeal in Koh Kay Yew at [25]:

[18] This was an appeal by the defendant against the decision of AR Lim Jian Yi on 2 April 2009 in Summons No 663 of 2009. The AR allowed the plaintiff’s application for leave to adduce, in the UK Proceedings, certain documents and affidavits that were disclosed in the Singapore Action.

[19] The documents sought to be adduced were:

(a) The consolidated statements and screen shots of the defendant’s Citibank account that were disclosed by Citibank Singapore Limited to the plaintiff pursuant to an order of court dated 3 November 2006 (“the Citibank documents”).

(b) The defendant’s 1st, 2nd, 8th, and 10th affidavits, and the defendant’s affidavit of evidence-in-chief (collectively “the affidavits”).

[20] The Citibank documents showed that a sum of US$878.479.35 was remitted to the defendant’s Citibank account on 5 May 2004. The defendant submitted that the Citibank documents were tainted because they were obtained with the assistance of inadmissible documents. However, the Citibank documents did not form part of the inadmissible documents and had been allowed at trial in the Singapore Action.

[21] The defendant’s affidavits contained the defendant’s statements on financial information relating to the plaintiff. The affidavits also included the defendant’s assertions regarding his domicile. In support of his argument that the Singapore courts had no jurisdiction to hear the plaintiff’s claim in the Singapore Action, the defendant had claimed that he was domiciled in UK. Quite understandably, the plaintiff sought leave to adduce the affidavits because, in seeking to challenge the jurisdiction of the UK courts, the defendant maintained in the UK Proceedings that he was domiciled in Kenya.

[22] It is settled law that where a party to litigation has been ordered to give discovery, the discovering party may not use the discovered documents and the information obtained therefrom for a purpose other than pursuing the action in respect of which discovery is obtained. This rule is commonly termed the “Riddick principle” after the English Court of Appeal decision in Riddick v Thames Board Mills Ltd [1977] QB 881 (“Riddick”). The Riddick principle has been applied in Singapore on numerous occasions, eg, in Beckkett Pte Ltd v Deutsche Bank AG [2005] 3 SLR 555 (“Beckkett”).

[23] Technically, an affidavit, being a document voluntarily disclosed in legal proceedings, does not fall within the Riddick principle. In Hong Lam Marine Pte Ltd v Koh Chye Heng [1998] 3 SLR 833, the Court of Appeal held that where documents were voluntarily disclosed in legal proceedings, the privacy of the documents was destroyed by the party which chose to produce those documents, and such documents were not subject to the Riddick principle. However, in the present case, an application was made by the plaintiff because there were references to the Citibank documents elsewhere in the affidavits. As noted above in [22], the Riddick principle applies likewise to information derived from the discovered documents.

[24] However, the Riddick principle is not absolute. The Court of Appeal in Beckkett at [16] and [19] held that:

[25] The Citibank documents and affidavits were relevant given the commonality of parties and causes of action in the UK Proceedings and the Singapore Action. In particular, the Citibank documents were relevant to the UK Proceedings to show that a sum of US$878.479.35 was paid into the defendant’s Citibank account. The defendant’s affidavits were relevant for the financial information contained therein and to show inconsistencies between the affidavits and the defendant’s statements in the UK Proceedings regarding his domicile.

[26] The defendant sought to rely on Halcon International Inc v The Shell Transport and Trading Co [1979] RPC 97 (“Halcon”) and Bayer AG v Winter & Ors (No 2) [1986] ECC 465 (“Bayer”) for the proposition that the court would not allow the use of documents obtained under compulsion for the purposes of litigation in separate foreign proceedings. In Halcon, the plaintiff applied for an injunction against the defendant to restrain it from infringing UK letters patent. Contemporaneously, the defendant brought proceedings against the plaintiff in the Netherlands Patent Office opposing applications made by the plaintiff for patents in the Netherlands. The subject matter was the same in both proceedings. The plaintiff applied for documents discovered in the English action to be made available in the Dutch proceedings. The English Court of Appeal dismissed the plaintiff’s application and appeal. However, it must be observed that in Halcon the court’s decision was influenced by the unique provisions of Dutch procedural law. In particular, the court was concerned that under Dutch proceedings, highly confidential research documents relating to patents, which were disclosed in the English action, would be made available to the public without restriction. At 119, Lord Justice Megaw held:

[27] The Halcon case therefore was decided on its own special facts. As acknowledged in Bayer by Justice Hoffmann in the English High Court at [7]:

The defendant contended that Bayer could be distinguished from the case before me because there, the English High Court, in granting leave, dealt with the narrower question whether information discovered in the English courts should be made available in ancillary foreign proceedings. The defendant contended that the English High Court did not rule on the question whether information discovered should be disclosed in separate foreign proceedings, as in the present case. I was not persuaded.

[28] I preferred the reasoning of Lord Justice Waller in Halcon at 124:

In my view, Waller LJ implicitly accepted that the fact that the parties and issues are the same may constitute cogent and persuasive reason for the release of the implied undertaking. I noted that a similar view was expressed by AR Teo Guan Siew in Ser Kim Koi v William Merrell Fulton [2009] SGHC 5 at [26] where he opined:

I agree.

[29] The main contention by the defendant was that the plaintiff’s application was an indirect enforcement of UK revenue law. In Dicey, Morris and Collins on The Conflict of Laws, vol 1 (Sweet & Maxwell, 14th Ed, 2006) (“Dicey”), the rule against enforcing foreign revenue law (“Revenue rule”) is stated at para 5R-019 as follows:

Dicey goes on to explain at para 5-025 that:

[30] The Revenue rule was recognised and applied in the Singapore Action by Prakash J at [71].

[31] The defendant submitted that the court would be indirectly enforcing UK revenue law if it permitted the plaintiff to adduce documents discovered in the Singapore Action in the UK proceedings. However, a distinction should be made between enforcing foreign revenue law and assisting the foreign court. In the latter case, any enforcement of revenue law would only be in the foreign country itself. In In re State of Norway’s Application [1990] 1 AC 723 (“In re State of Norway”) Lord Goff of Chieveley held at 809:

[32] In that case, the House of Lords held that the State of Norway’s application requesting the oral examination of two witnesses residing in England did not fall foul of the Revenue rule. As observed in Wahr-Hansen v Compass Trust Co Ltd, 10 ITELR 580 at [69]:

[33] The circumstances in the appeal before me were distinguishable from those of the earlier Singapore Action. In the Singapore Action, the court was asked to enforce a claim to recover funds which would be used to repay the UKIR. Such circumstances fell within the ambit of “indirect enforcement”. In the present case, however, the court was asked to permit the plaintiff to adduce documents in its UK proceedings. While that would assist the plaintiff in the UK proceedings, there was no enforcement in Singapore of UK revenue law. The decision of the High Court in the Singapore Action should not be read as precluding “assistance” as distinct from “enforcement”. In her judgment, Prakash J referred to in In Re Tucker (Jersey) [2000] BPIR 876. In that case, a trustee in bankruptcy applied to the Jersey court for assistance in holding private examination of a Jersey resident. The Royal Court of Jersey declined, holding that that amounted to an indirect enforcement of foreign revenue laws. In referring to In Re Tucker (Jersey), Prakash J, in my view, merely sought support for her holding that the Singapore court would not indirectly enforce foreign revenue law. The learned judge was not endorsing the decision in In Re Tucker (Jersey) on the particular facts of that case which were quite distinct from those before her. If she was, I would respectfully differ as I am satisfied that on the weight of the authorities, a distinction ought to be made between assisting a foreign court and enforcing a foreign revenue claim.

[36] The law relating to the inherent jurisdiction of the court to grant a stay of proceedings is set out in Roberto Building Material Pte Ltd v Oversea-Chinese Banking Corp Ltd [2003] 2 SLR 353 (“Roberto”). At [17] the Court of Appeal held that:

[39] I did not think so. Moreover, the defendant was still holding on to money which properly belonged to the plaintiff. I therefore agreed with the AR’s decision not to stay proceedings.