High Court · Decided 6 May 2014

Straits Advisors Pte Ltd v Michael Deeb (alias Magdi Salah El-Deeb) and others

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[2014] SGHC 94Case no. Suit No 349 of 2011

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Grounds of decision

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Chan Seng Onn J :
Introduction
[1] This dispute arose from the third defendant’s failure to achieve an initial public offering (“IPO”) of its shares on a recognised stock exchange.
[2] The plaintiff entered into a contractual engagement with the second and third defendants sometime in early 2006. The plaintiff was to provide corporate finance advisory services through two of its personnel with the aim of steering the third defendant towards an IPO. If this was successful, the plaintiff stood to be issued a portion of shares in the third defendant. Unfortunately, the planned IPO ground to a halt after an underwhelmingly short-lived pursuit which lasted not more than three months. The parties’ contractual engagement, however, did not end there. Instead, after protracted negotiations, the parties managed to enter into a new agreement in late 2006 to suit the changed circumstances. Their contractual relationship only came to an end sometime in early 2008. This was when it became clear to the third defendant that it would not be restarting an IPO in the foreseeable future. In the circumstances, the third defendant refused to issue any shares to the plaintiff. The plaintiff was aggrieved. It believed that it was entitled to the shares under the renegotiated contract so long as the parties’ engagement was terminated, regardless of whether the third defendant decided to pursue an IPO. The plaintiff thus commenced Suit No. 487 of 2008 (“Suit 487”) against the second and third defendants to claim the shares. However, its claim failed both before the High Court: see Straits Advisors Pte Ltd v Behringer Holdings (Pte) Ltd and another [2009] SGHC 86 (“Straits Advisors (HC)”) and the Court of Appeal: see Straits Advisors Pte Ltd v Behringer Holdings (Pte) Ltd and another and another application [2010] 1 SLR 760 (“Straits Advisors (CA)”).
[4] After careful deliberation, I find that the plaintiff has failed to establish any of the claims which it had brought. There is accordingly no need for me to consider the numerous issues which arose in relation to the quantification of damages for which expert evidence had been tendered and submissions made. I will therefore now proceed to set out the background to this dispute and the reasons for my decision to dismiss the plaintiff’s claims.
Background
The parties
[5] Straits Advisors Pte Ltd (“the plaintiff”) is a corporate finance advisory firm in Singapore. Its director, Dominic Andrla (“Dominic”), was its only factual witness and also a key character in these proceedings.
[6] Music Group Ltd (formerly Behringer Corporation Ltd) (“the third defendant”), incorporated in Bermuda, is the holding company of a group of companies which are in the business of manufacturing, distributing, and selling audio related products. This group is known as the MUSIC Group (formerly the BEHRINGER Group). Music Group Services SG (Pte) Ltd (formerly Behringer Holdings Pte Ltd) (“the second defendant”), is one such company within the MUSIC Group and is also the wholly-owned Singapore subsidiary of the third defendant. The MUSIC Group was founded by one Ulrich Bernhard Behringer (“Ulrich”) who is the chairman and current chief executive officer (“CEO”) of the second and third defendants (collectively “the Companies”).
[7] The first defendant, Michael Deeb (“Deeb”), was the former managing director and CEO of the second and third defendants respectively. At the commencement of trial, he was no longer employed by the Companies.
The facts
The aborted SGX IPO
[8] Sometime in late 2004 or early 2005, the third defendant decided to pursue a listing of its shares on the Singapore Exchange (“the SGX IPO”). In connection with this, the third defendant submitted a draft prospectus (“the Preliminary Prospectus”) to the SGX. It was not disputed that the academic qualifications of Deeb and one Stephen Fraser (“Fraser”), the then chief operating officer (“COO”) of the third defendant, were misleadingly represented in the Preliminary Prospectus. Whilst Deeb was stated as holding a “Bachelor of Science & Technology Degree from the American University, Cairo”, he admitted in these proceedings to having only attended, without graduating from, the said university. As for Fraser, he was stated as holding a “Bachelor of Arts Degree (Economics) from Canterbury University”, but Canterbury University is in fact an unaccredited institution that essentially sold degrees online; the defendants have not contested this.
[9] After lodging the Preliminary Prospectus with the SGX, the third defendant was granted a conditional eligibility-to-list (“ETL”) letter which contained certain conditions that had to be complied with before it could list on the SGX. Thereafter, the third defendant embarked on a book building roadshow to generate and record investor interest in its contemplated IPO.
[10] Shortly after the conclusion of the roadshow, the third defendant decided to abort the SGX IPO. The precise reason for doing so was disputed. The defendants claimed that the decision to abort was reached based on purely commercial considerations which related primarily to the third defendant’s inability to “fill the books” during the roadshow. The defendants were thus fearful that the third defendant’s shares would receive an unacceptably low valuation by listing on the SGX. In contrast, the plaintiff suggested that, for Deeb at least, the decision to abort was motivated by his own sense of self-preservation as he wished to avoid having his false qualifications uncovered by the relevant regulatory authorities upon a successful listing.
The pre-contractual negotiations relating to the NASDAQ IPO
[11] Sometime in November 2005 and shortly after the SGX IPO had been aborted, Deeb approached Dominic on behalf of the Companies. The purpose for doing so was to request for the plaintiff’s assistance in preparing the third defendant for an IPO on the NASDAQ securities exchange in the United States of America (“the NASDAQ IPO”), where the defendants believed a higher valuation for the third defendant’s shares could be achieved. In its pursuit of the NASDAQ IPO, the Companies also engaged the professional services of Jones Day and JP Morgan to provide legal advice and to perform the role of lead manager respectively.
[12] In these proceedings, Dominic claimed that during a particular meeting at the Companies’ Singapore office on 21 November 2005, Deeb made certain specific oral representations concerning, inter alia, the prospects of the NASDAQ IPO and the Companies’ commitment towards the same (“the Representations”). The Representations (set out at [48]) were the subject of the plaintiff’s first misrepresentation claim (“the 1st Misrepresentation Claim”). It suffices to say for now that Dominic claimed that the Representations had induced him to believe that the NASDAQ IPO would be completed successfully in a relatively short period of time, thus he was willing to accept the engagement on behalf of the plaintiff.
[13] The plaintiff also claimed that the Preliminary Prospectus, and hence the false qualifications of Deeb and Fraser contained therein, had been presented to it during these pre-contractual negotiations. In this regard, the plaintiff submitted that the negligence of the third defendant’s board of directors in verifying the accuracy of the Preliminary Prospectus had induced it to accept the engagement on the basis of incorrect information and it thereby suffered loss and damage (“the 1st Negligence Claim”). By accepting the engagement as a result of the Representations and/or the third defendant’s board of directors’ negligence, the plaintiff claimed that it gave up the opportunity of setting up certain private equity funds which would have generated income of US$2m to US$3m per annum each on a recurring basis (“the Opportunity Loss”).
The Original Agreements
[14] In any event, the plaintiff entered into a contractual relationship with the Companies under which two of the plaintiff’s personnel, namely Dominic himself and one Ricardo Villanueva (“Villanueva”), would provide services to the Companies in different capacities. This was done by the concurrent execution of four documents (collectively “the Original Agreements”), dated 11 January 2006, which are each described in brief terms as follows:
(a) a letter between the plaintiff and the Companies releasing Dominic from the plaintiff’s services to enable him to act as the group chief financial officer (“Group CFO”) of the Companies (“the Release Letter”);
(b) a letter between the plaintiff and the Companies clarifying the terms of the Release Letter (“the Side Letter”);
(c) an employment agreement between Dominic and the Companies appointing Dominic as Group CFO of the Companies (“the Employment Agreement”); and
(d) a secondment agreement between the plaintiff and the Companies providing for the secondment of Villanueva to the Companies to act as head of corporate finance (“the Secondment Agreement”).
[15] It was agreed under the Employment Agreement that the remuneration for Dominic’s services as Group CFO was to be paid to the plaintiff. According to Clause (“Cl.”) 3.1 of the Employment Agreement, the plaintiff was entitled to monthly payments of S$28,333 and an additional annual performance-based bonus of S$85,000. However, of greater significance was the fact that the Employment Agreement also contemplated, as part of the remuneration, the issuance of 0.37% of the post-IPO share capital of the third defendant (“the Shares”). The Shares formed the bulk of the remuneration and its issuance was contingent upon a successful IPO (Cl. 3.1(i) Employment Agreement) or a substantial takeover of the business of the third defendant (Cl. 3.1(ii) Employment Agreement). The parties did not dispute that, additionally, the plaintiff would also be entitled to the Shares if its services had been terminated without just cause.
The suspension of the NASDAQ IPO and the subsequent renegotiations
[16] Sometime at the end of March 2006, which was not more than three months after the Original Agreements had come into effect, a decision was made to suspend the NASDAQ IPO. As with the abortion of the SGX IPO, the parties similarly disputed the reasons underlying the decision to suspend the NASDAQ IPO. The defendants claimed that the Companies were plagued by certain “operational issues” at the material time. These were assessed as requiring more immediate attention; hence it was commercially prudent to focus on resolving such issues before renewing the pursuit of an IPO. The plaintiff, on the other hand, contended that the significance of these “operational issues” was greatly exaggerated and that the NASDAQ IPO was suspended for reasons only known to the defendants.
[17] In any event, interest in an IPO had demonstrably cooled and that led Deeb and Dominic to renegotiate the terms under the Original Agreements on behalf of the Companies and the plaintiff respectively. The positions taken up by Deeb and Dominic in these negotiations were recorded in several email exchanges between themselves that began sometime in April 2006.
[18] To summarise, Dominic proposed, among other things, that the plaintiff should be entitled to an automatic vesting of a higher proportion of the third defendant’s shares at a time which accorded with the parties’ best estimation of a successful IPO, regardless of whether the third defendant did in fact achieve a listing. Dominic believed that this proposal was justified given the now longer time frame for an IPO and the uncertainty as to whether the third defendant would even float, as compared to what the parties had envisaged at the time of entering into the Original Agreements. However, Deeb’s immediate response was that he personally believed that Dominic’s proposal was a “non starter” and, after consulting with Ulrich, confirmed that the Companies would not approve it.
[19] Deeb’s own position on the way forward concerned recalibrating the scope of Dominic’s role to suit the changed circumstances. In this regard, Deeb provided Dominic with two options (“the Options”). First, Dominic could, as Group CFO, decide to “step up” and take on all the regular responsibilities associated with the day to day running of the finance department now that plans for an IPO had been suspended. Alternatively, Dominic could work towards certain deliverables during the short term and, once those were accomplished, take up an advisory role within the Companies until an IPO was sought and which he could then return to lead. However, Dominic did not commit to either of the Options.
Developments during the renegotiations: The poison pen emails and the Further Representations
[20] The renegotiations were fairly protracted but did eventually culminate in the execution of a new agreement (“the Consultancy Agreement”). The salient features of the Consultancy Agreement will be elaborated upon shortly, but before moving on it is perhaps appropriate to pause and mention that, during the currency of the Original Agreements, certain poison pen emails (“PPEs”) had been brought to the attention of the Companies. The plaintiff claimed that the Companies were aware of no less than five PPEs, but only two have been produced in these proceedings — one which was received by JP Morgan on 2 February 2006 (“the February 2006 PPE”), and the other by Jones Day on 27 September 2006 (“the September 2006 PPE”). Amongst several other allegations, the February 2006 PPE raised general doubts over the knowledge and skills possessed by Fraser. The September 2006 PPE made specific allegations about Fraser’s qualifications from Canterbury University as well as Deeb’s qualifications from the American University in Cairo.
[21] In these proceedings, the plaintiff claimed that the defendants had represented during the course of the renegotiations that there was no merit to the allegations in the PPEs when this was clearly not the case. It was further claimed that certain other false representations regarding the defendants’ continued commitment towards a future IPO had also been communicated to the plaintiff (collectively “the Further Representations”). The Further Representations are set out at [126] below.
[22] The Further Representations and the PPEs were central to several claims by the plaintiff. In brief, its claims were as follows:
(a) the Further Representations, being false in nature, constituted breaches of expressed or implied terms within the Original Agreements that required the Companies to provide accurate and non-misleading information during the course of the plaintiff’s engagement under the Original Agreements (“the 1st Breach of Contract Claim”);
(b) the Further Representations had been fraudulently made by the defendants in order to induce the plaintiff to enter into the Consultancy Agreements (“the 2nd Misrepresentation Claim”);
(c) even if the representations regarding the PPEs were not fraudulently made, the third defendant’s board of directors was negligent in failing to ensure that the allegations therein were properly investigated (“the 2nd Negligence Claim”); and/or
(d) the Further Representations constituted the unlawful means by which the defendants furthered a conspiracy to deprive the plaintiff of the Shares under the Employment Agreement (“the 1st Conspiracy Claim”).
Entry into the Consultancy Agreement
[24] I return now to elaborate upon the Consultancy Agreement. The Consultancy Agreement was dated 10 November 2006 and entered into between the plaintiff and the Companies. It was intended to supersede the Employment Agreement, the Release Letter, and the Side Letter. The Secondment Agreement for Villanueva’s services, however, remained in force.
[25] The Consultancy Agreement was structured such that it contained two distinct sets of terms — “Pre-Listing Terms” and “IPO Advisory Terms”. The operation of either set of terms depended on whether a contractually defined event known as “IPO Activation” had taken place. The relationship between these two sets of terms as well as what was contemplated for IPO Activation are stated in Cl. 3 of the Consultancy Agreement as follows:
[26] In this regard, a sub-clause under Cl. 2 of the Consultancy Agreement (“the Updates sub-clause”) also provided that:
[27] The Pre-Listing Terms were therefore to govern the parties’ contractual relations immediately after the Consultancy Agreement had been entered into as there had yet been no IPO Activation. IPO Activation would occur only when the plaintiff was given written notice of the third defendant’s decision to proceed with an IPO or an anticipated takeover action. In this regard, the parties agreed to meet periodically to consider, specifically, the likelihood of an IPO occurring before 31 December 2009.
[28] Under the Pre-Listing Terms, Dominic agreed to relinquish his position as Group CFO of the Companies and to assume the position of senior consultant. His duties as Group CFO were transferred to a new CFO of the Companies, one Roch Low (“Low”) who had been appointed prior to the Consultancy Agreement on or about 16 October 2006.
[29] The Pre-Listing Terms also provided for a reduction in the commitment expected from Dominic in respect of the Companies’ affairs and this was matched by a corresponding reduction in the monthly remuneration payable for his services. However, in the event of IPO Activation, the IPO Advisory Terms would come into force and result in an increase in Dominic’s time contribution and remuneration.
[30] Finally, it remains to be mentioned that, as with the now superseded Employment Agreement, the Consultancy Agreement also contemplated the issuance of the Shares in the event of a successful IPO or substantial takeover of the third defendant.
Termination of the Consultancy Agreement
[31] On or about 24 April 2007, the plaintiff and the Companies agreed to terminate the Secondment Agreement for Villanueva’s services as head of corporate finance. The Companies duly paid the plaintiff the contractually stipulated termination fee of S$75,000. To avoid confusion, nothing in these proceedings turns upon the termination of the Secondment Agreement.
[32] As for the Consultancy Agreement, this remained in effect until sometime in early 2008. Low, acting on behalf of the Companies, emailed Dominic to propose bringing an immediate end to the parties’ contractual engagement and also to discuss the mechanics of the termination. Low explained that this was because the Companies did not foresee that the third defendant would renew its pursuit of an IPO by 31 December 2009. Low further proposed that the parties could enter into a “separate arrangement” under which the Shares would still be payable to the plaintiff if the Companies subsequently decided to pursue an IPO before 31 December 2009. Dominic, however, was of the view that the plaintiff was contractually entitled to the Shares so long as the Consultancy Agreement was terminated. He thus replied that there was “no need for a separate arrangement”. This came as a surprise to Low who further replied that the Companies’ understanding was that the Shares were payable only as a “success fee” — in other words, that IPO Activation had to first occur before the plaintiff would be entitled to the Shares.
The previous suit
[33] The above disagreement over the proper interpretation of the terms of the Consultancy Agreement formed the backdrop against which the plaintiff proceeded, in August 2008, to commence Suit 487 against the Companies to recover the Shares. The plaintiff’s case, however, was dismissed by both the High Court and the Court of Appeal. The previous suit will be elaborated upon in greater detail below (at [193]–[197]).
The plaintiff’s discovery of new information
[34] After the conclusion of the previous suit and sometime in May 2010, the third defendant filed an originating summons to seek an order for Deeb to cease acting as its director. While that action was ongoing, the plaintiff discovered new information which raised its suspicions over the propriety of the defendants’ conduct during the now terminated engagement. In particular, Ulrich allegedly informed Dominic that the Companies had received a substantial offer for their businesses while the Consultancy Agreement was in force but did not inform the plaintiff of the same.
[35] In these proceedings, the plaintiff sought to prove that the substantial offer mentioned by Ulrich was received in connection with the defendants’ pursuit of a trade sale of the Companies with a separate advisor, namely KPMG, sometime in mid-2007. This was the central plank of the plaintiff’s claim that the Consultancy Agreement had been breached (“the 2nd Breach of Contract Claim”). In this regard, the plaintiff submitted that, first, the pursuit of a trade sale clearly constituted an IPO Activation event under Cl. 3 Consultancy Agreement. By deliberately withholding such notice, the Companies had breached an implied obligation to act in good faith. Even if the Companies’ pursuit of a trade sale did not constitute IPO Activation, the plaintiff had a further string to its bow. It submitted that by withholding information about the trade sale altogether, the Companies had, inter alia, breached the express Updates sub-clause.
[36] The plaintiff also claimed that, at the point of terminating the Consultancy Agreement, the defendants made certain representations to induce the plaintiff into believing that an IPO Activation event had yet to occur. This was claimed to be done in furtherance of a conspiracy by the defendants to deprive the plaintiff of the Shares which it would otherwise have been entitled to had it exercised its contractual right to terminate the Consultancy Agreement (“the 2nd Conspiracy Claim”).
The causes of action
Preliminary observations
[38] As one might gather thus far, this dispute is striking for the sheer quantity of claims which the plaintiff had brought. The plaintiff alleged misrepresentation, negligence, conspiracy, and breach of contract, and each of these general heads of action were further subdivided into standalone claims. I should also point out that while the claims in misrepresentation and conspiracy were brought against all the defendants, the claims in negligence and breach of contract were brought against only the Companies and did not implicate Deeb in his personal capacity.
[39] Moreover, I observe that this is not a case where the facts relied upon by the plaintiff to establish each of its claims were confined by reference to a single isolated incident in the parties’ commercial relationship. Rather, the relevant facts were strewn across a temporal continuum that spanned a period of roughly over two years, beginning from the parties’ pre-contractual negotiations sometime in late 2005 up to the termination of the Consultancy Agreement sometime in early 2008. This added yet a further layer of complexity to this case.
Categorising the causes of action into distinct time frames
[40] The above aspects of the present dispute can lead to a haphazard, and likely unilluminating, discussion. That is clearly undesirable. Therefore, for clarity, I am of the view that it is beneficial to delineate distinct time frames during the course of the parties’ engagement within which the plaintiff’s claims and alleged losses could be grouped. In this regard, I identified three distinct time frames which will provide the broad structure to my analysis. They are arranged in chronological order as follows — first, the period during the pre-contractual negotiations leading up to the Original Agreements (“Time Frame 1”); second, the period during the operation of the Original Agreements and prior to the Consultancy Agreement (“Time Frame 2”); and, third, the period during the operation of the Consultancy Agreement up to its termination (“Time Frame 3”).
[41] In Time Frame 1, the plaintiff claimed for the Opportunity Loss of accepting the engagement and entering into the Original Agreements. The plaintiff submitted that it was induced to do so by reasonably relying on one or all of the following:
(a) the Representations made by Deeb on behalf of the Companies, which formed the 1st Misrepresentation Claim; and
(b) Deeb and Fraser’s falsely stated qualifications in the Preliminary Prospectus for the SGX IPO, which formed the 1st Negligence Claim.
[42] In Time Frame 2, the plaintiff claimed for the value of the Shares which it would have been entitled to under the Employment Agreement had it exercised its contractual right to terminate the engagement. This contractual right to terminate arose due to the Companies’ failure to provide accurate and non-misleading information, which formed the 1st Breach of Contract Claim. Instead of terminating the engagement and claiming the Shares, however, the plaintiff’s case was that it had been induced into prolonging it as a result of the following:
(a) the Further Representations made by the defendants, which formed the 2nd Misrepresentation Claim;
(b) the conspiracy by the defendants to deprive the plaintiff of the Shares under the Employment Agreement, which formed the 1st Conspiracy Claim; and
(c) the negligence of the third defendant’s board of directors in verifying the two PPEs, which formed the 2nd Negligence Claim.
(a) the Companies’ failure to act in good faith by not issuing an IPO Activation notice and/or the Companies’ withholding of information related to the trade sale, both of which formed the 2nd Breach of Contract Claim; and
(b) the defendants’ false representations which misled the plaintiff into believing that an IPO Activation event had not occurred, which formed the 2nd Conspiracy Claim.
[45] The plaintiff further submitted that if it was found that IPO Activation had occurred by reason of the trade sale, then it ought also to be entitled to the Loss of Payment Increase.
Summary
[46] A summary of the foregoing is presented in a tabular form below:
[47] With this broad structure in place, I now provide my analysis of the plaintiff’s claims, beginning, naturally, with those within Time Frame 1.
Analysis of Time Frame 1
The 1st Misrepresentation Claim
The Representations
[48] The 1st Misrepresentation Claim centred upon certain oral representations which had allegedly been made by Deeb to Dominic during their pre-contractual negotiations leading up to the Original Agreements. These representations have thus far been referred to as “the Representations” and are now set out in full below:
(a) the third defendant had a well-qualified management team in place which would be well-suited to lead the third defendant to a listing on a reputable stock exchange and in particular that:
(i) Fraser, the then COO of the Companies, was a strong COO who was an economist by training;
(ii) Ulrich, the chairman of the Companies, had a Master’s Degree in Sound Engineering.
(Representation (a)”);
(b) there was nothing unsatisfactory in the documentation of the third defendant (“Representation (b)”);
(c) the SGX IPO was terminated only because the defendants believed that they would achieve a significantly higher valuation for the third defendant’s business by listing on NASDAQ (“Representation (c)”);
(d) there would be no significant hurdles to the successful completion of the engagement as a conditional ETL letter had been received from the SGX for the SGX IPO (“Representation (d)”);
(e) the management and owners of the Companies were committed and motivated to achieve a successful IPO of the third defendant and/or sale of the business of the Companies during 2006 (“Representation (e)”); and
(f) Deeb was particularly keen and motivated to successfully complete an IPO of the shares in the third defendant and/or sale of the business of the Companies because this was the only way he could realise the value of the shares in the third defendant (“Representation (f)”).
The parties’ submissions
[49] The plaintiff claimed that Deeb orally made the Representations to Dominic during a particular meeting at the Companies’ Singapore office on 21 November 2005. The plaintiff further claimed that each of the Representations was false in some material way:
(a) Representation (a) was false because Fraser was clearly not an “economist by training”. His academic qualifications were obtained from an unaccredited online degree mill.
(b) Since Fraser’s qualifications, and those of Deeb, were also incorrectly stated in the Preliminary Prospectus, this contributed to Representation (b) being false as well.
(c) Representation (c) was false because, for Deeb at least, the real motivation behind aborting the SGX IPO was to prevent his false qualifications in the Preliminary Prospectus from being exposed.
(d) Representation (d) was false as the fact that the qualifications of senior officers such as Deeb and Fraser were wrongly stated in the Preliminary Prospectus for the SGX IPO was a serious impediment to a successful future listing on NASDAQ.
(e) Representation (e) was false because the apparent lack of enthusiasm towards a listing after postponement of the NASDAQ IPO showed that the third defendants’ management was never in fact “committed and motivated” to achieve an IPO “during 2006”.
(f) Representation (f) was false because an IPO or sale of the Companies was not the “only” way in which Deeb could realise his shareholding in the third defendant. Deeb was apparently aware of interest in his shareholding by a company known as Apollo Capital Ltd, hence selling his shares privately was always known to be a viable exit strategy for him.
[50] The sting in the plaintiff’s case, however, was that Deeb had made the Representations with the knowledge that they were false or without an honest belief that they were true. In other words, the plaintiff claimed that the defendants were guilty of fraudulent, as opposed to merely negligent or innocent, misrepresentation. To support its allegation of fraud, the plaintiff submitted that it was crucial to appreciate the context within which the Representations were made. In particular, the plaintiff greatly emphasised that, at the time of the pre-contractual negotiations, the defendants were clearly “desperate” to have Dominic as the Companies’ Group CFO, and it was said that this could be gleaned from an internal email exchange between Deeb and Ulrich dated 6 January 2006 (“the 6 January 2006 email”) (reproduced below at [65]). In this email, Deeb stated his view that it would be unwise for the Companies to drag their feet in negotiations with Dominic because searching for an alternative candidate meant that the defendants “would need to postpone [their] IPO arrangements” and, further, that “any one coming this late [would] demand a pound of flesh”. The plaintiff’s case, therefore, was that the defendants badly wanted to secure Dominic’s services and thus made the Representations in a calculated attempt to induce Dominic to accept the engagement on the plaintiff’s behalf.
[51] The defendants’ submissions primarily centred upon the rather more elementary issue of whether the Representations had even been made. While Deeb admitted to making a part of Representation (e) above — that the Companies’ management and owners were committed to a successful IPO of the third defendant during 2006 — he denied making the rest. In this respect, the defendants argued that apart from Dominic’s affidavit and oral evidence, there was no other proof that the Representations had been uttered. There were neither contemporaneous attendance notes of the 21 November 2005 meeting nor any follow up correspondence which specifically recorded the Representations. The defendants also highlighted that if the Representations had indeed been made and were so material to the plaintiff, then it was puzzling that the plaintiff did not confront the defendants once the falsity of the Representations came to light. The only explanation for the plaintiff’s silence, they argued, was that the Representations had not been made. As for the only representation which Deeb admitted to making in part, ie, Representation (e), the defendants argued that this was certainly true when it was made.
The central element of dishonesty in the tort of fraudulent misrepresentation
[52] The essential elements of the tort of fraudulent misrepresentation were set out by the Court of Appeal in Panatron Pte Ltd and another v Lee Cheow Lee and another [2001] 2 SLR(R) 435 as follows (at [14]):
[53] I emphasise the final element in the passage above as it bears close attention in the present action. This final element essentially requires there to be proof of dishonesty on the part of the representor in the manner described by Lord Herschell in the leading House of Lords decision of Derry v Peek (1889) 14 App Cas 337 (“Derry v Peek”) (at 374). Anything short of this will not suffice. Thus, while proof of a falsehood is a common ingredient across all forms of actionable misrepresentation, that falsehood must further be shown to have been made with a dishonest intent in order to ground a claim for fraudulent misrepresentation. This was alluded to by Buller J in Pasley and another v Freeman (1789) 3 Term Rep 51 where he stated in a rather more succinct fashion (at 56) that, “Every deceit comprehends a lie, but a deceit is more than a lie …” It is therefore unsurprising that this subjective element of deceit or dishonesty has been variously described as being the “touchstone”: see The Law of Contract in Singapore (Andrew Phang Boon Leong gen ed) (Academy Publishing, 2012) (“The Law of Contract in Singapore") at para 14.011; or as the “core issue”: see John Cartwright, Misrepresentation, Mistake and Non-Disclosure (Sweet & Maxwell, 3rd Ed, 2012) (“Cartwright”) at para 5-14 of fraudulent misrepresentation which distinguishes it from other forms of misrepresentation. I hasten to add, however, that the foregoing should not be read as implying that the remaining elements are of any diminished significance where an action for fraudulent misrepresentation is concerned. That is certainly not the law, for just as the common stool cannot stand without any one of its legs, so too must a legal claim fall for want of proof of any of its constituent ingredients. My intention has simply been to highlight at the outset what I regard as the centrality of dishonesty in this particular action.
[54] The burden of proving dishonesty lies on the claimant and discharging it is no easy task. While the authorities have made clear that allegations of dishonesty in a civil claim are to be proven according to the civil standard, ie, on a balance of probabilities, and not according to the higher criminal standard of beyond reasonable doubt: see, for example, Tang Yoke Kheng (trading as Niklex Supply Co) v Lek Benedict and others [2005] 3 SLR(R) 263 (“Tang Yoke Kheng”) at [14] and Chua Kwee Chen and others (as Westlake Eating House) and another v Koh Choon Chin [2006] 3 SLR(R) 469 at [36] and [39]; the gravity of such allegations have led the courts to consistently emphasise the need for particularly cogent supporting evidence. This appears clearly from the following observation by Choo Han Teck J when delivering the judgment of the Court of Appeal in Tang Yoke Kheng (at [14]):
[55] The Court of Appeal has more recently affirmed its view on this matter in Wee Chiaw Sek Anna v Ng Li-Ann Genevieve (sole executrix of the estate of Ng Hock Seng, deceased) and another [2013] 3 SLR 801(at [30] and [31]):
The relevance of the representor’s motive in proving dishonesty
[56] Proving the representor’s subjective state of dishonesty seems an even more unenviable task when one further considers the inherent difficulty described by Bowen LJ in Angus v Clifford [1891] 2 Ch 449 at 471 of having to “look into a man’s mind”. However, in this regard, the courts have been willing to look to the surrounding circumstances in order to shed some light on the mental state of the representor. And, in the present case, focus will be centred on the representor’s motive as a particular aspect of the surrounding circumstances. This is because the plaintiff argued that it was proper to infer that the defendants had been dishonest in making the Representations from their apparent desperation to secure Dominic’s services.
[57] It is trite that, in one sense, proof of a good motive is irrelevant as a shield for the representor because “if fraud be proved … [i]t matters not that there was no intention to cheat or injure the person to whom the statement was made”: see Derry v Peek at 374, per Lord Herschell. However, clear proof of the representor’s sinister motive is certainly relevant as a sword for the representee because he can then more readily persuade the court with the simple logic that “A man is more likely knowingly to make a false statement if he has some reason for doing so”: see Barings Plc (In Liquidation) v Coopers & Lybrand (No. 5) [2002] EWHC 461 (Ch) at [62], per Evans-Lombe J).
[58] Here, the plaintiff relied on the defendants’ motive for the latter purpose. However, as discussed below, I find it to be misplaced.
The defendants were not dishonest
[59] Let me state at the outset, before even addressing the defendants’ submissions on whether the Representations had been made, that I am not convinced that the pre-contractual negotiations preceding the Original Agreements were somehow tainted by the defendants’ deceit.
[60] First, even accepting the plaintiff’s case that the 6 January 2006 email demonstrated the defendants’ “desperation” to secure Dominic’s services, I am of the view that there is still an evidential gap which must be bridged before I can conclude that the defendants must have therefore resorted to the nefarious means of fabricating the Representations to achieve their intended purpose. This is especially so in light of the abovementioned authorities which make clear that more will be required to prove the serious allegation of fraud. In this vein, the plaintiff’s case would, for example, have been made more convincing if there was some evidence that Ulrich and Deeb had agreed to take any means necessary to secure Dominic’s services. In the absence of evidence of this nature, I do not see why it cannot equally be said that the defendants had acted legitimately within the bounds of commercially acceptable practices to attract Dominic’s services despite their purportedly desperate circumstances. Therefore, I find that the plaintiff’s case requires me to take a leap in logic to arrive at its desired conclusion, and I am not willing to do that.
[61] Second, I also find it unsatisfactory that the plaintiff had relied on the 6 January 2006 email to prove Deeb’s dishonesty when the Representations had purportedly been made by Deeb on 21 November 2005, which was certainly during a very early part of the parties’ negotiations. This is because while the email might show that the defendants had grown desperate during the course of negotiations with Dominic, I am far less inclined to treat it as evidence that the defendants had started off desperate to secure Dominic’s services. To my mind, it is highly unlikely that Deeb, on behalf of the Companies, was already so gripped by a sense of desperation at such an early stage of the negotiations that he came to the meeting prepared to lie through his teeth to Dominic.
[63] I reached this view after considering the 6 January 2006 email in the context of earlier emails from Deeb to Ulrich. These emails essentially showed that Deeb was genuinely attempting to convince Ulrich that the tentative remuneration package offered by the Companies to Dominic was not over-generous and that it would thus be in the Companies’ best interests to reach an agreement with Dominic quickly. For instance, in one such email, Deeb made the following comments to Ulrich:
[64] Shortly afterwards, in response to Ulrich’s queries about Dominic’s proposed salary, Deeb stated thus:
[65] Finally, in the 6 January 2006 email itself, Deeb cautioned Ulrich again as follows:
[66] The plaintiff relied on the second part of Deeb’s comments above to argue that the defendants were desperate to secure Dominic’s services. However, as the prior exchanges between Deeb and Ulrich show, the plaintiff appears to have taken these comments out of context.
[67] In light of the above, I am not persuaded by the plaintiff’s claim that the defendants had been desperate to secure Dominic’s services. This therefore meant that the defendants’ supposed motive for falsifying the Representations was removed and, with that, the plaintiff’s allegations of dishonesty immediately appear more far-fetched. However, even if it was accepted that the 6 January 2006 email did evidence desperation to secure Dominic’s services, I am of the view that this alone was not sufficient to support an inference of dishonesty which, it bears repeating, is a very grave allegation.
The Representations had not been made except for a part of Representation (e)
[68] The above analysis has so far proceeded on the assumption that the Representations had been made by the defendants to begin with. However, save for a part of Representation (e), this was strongly disputed by the defendants with whom I am inclined to agree.
(1) None of the Representations were recorded down by Dominic except for a part of Representation (e)
[69] A false statement which is the subject of a misrepresentation claim need not be in writing. It may be communicated to the representee orally or even by conduct: see Cartwright at para 3-04. That the Representations in this case were alleged to have been made orally at the 21 November 2005 meeting is therefore certainly not fatal to the plaintiff’s claim. However, what I consider to be of significance is the fact that none of the Representations had subsequently been recorded down in writing by Dominic. This is because Dominic had, by his own admission, a conscientious habit of following up on the oral discussions between himself and Deeb by reproducing these discussions in writing. As Dominic explained during his cross-examination, it was “helpful to have clarity”. In light of this, it would be reasonable to expect that, if the Representations were so material as to induce Dominic to accept the engagement on the plaintiff’s behalf, then he would likely have sought to record them down and register them with Deeb so as to avoid any confusion or misunderstanding further down the road.
[70] It is therefore striking that the only documentary proof which went towards illuminating what had been communicated during the 21 November 2005 meeting did not make any references to the Representations, except for a part of Representation (e). This crucial email was sent by Dominic to Deeb on 22 November 2005 with the subject “Follow up from yesterday’s meeting” and the material portions are set out below:
[71] The above email by Dominic clearly constitutes strong evidence of what had been discussed at the 21 November 2005 meeting. In particular, from the second paragraph of the quoted email, it appears that Deeb spent the bulk of this meeting outlining the expected scope of Dominic’s duties if he accepted the engagement to act as Group CFO. It also appears that the parties had exchanged their views on succession planning once the third defendant had moved into the post-listing phase.
[72] I also find that this email was highly probative of what had not been discussed at the meeting just the day before. In all of what had been recorded by Dominic, the absence of any reference to the Representations is certainly conspicuous. There is clearly no mention whatsoever of Deeb having represented, even obliquely, that Fraser was an “economist by training” (Representation (a)); that there was “nothing unsatisfactory” in the third defendant’s documentation (Representation (b)); that the SGX IPO had been terminated “only” because a higher valuation could be achieved by listing on NASDAQ (Representation (c)); that there were “no significant hurdles” to the NASDAQ IPO (Representation (d)); or that the “only” way which Deeb could realise the value of his shares in the third defendant was through an IPO and/or a sale of the business of the Companies (Representation (f)).
[73] Finally, I also note that in the single-lined third paragraph of the email quoted above, Deeb appears to have represented that the third defendant was expected to list sometime during 2006. This might be regarded as evidence that part of Representation (e) had been made, viz, that the Companies were committed and motivated to achieve a successful IPO of the third defendant during 2006. This is perfectly consistent with the defendants’ case that this was the only part of the Representations that Deeb had made at the 21 November 2005 meeting (see above at [51]). It should also be noted that Deeb did not admit to representing the remaining part of Representation (e), which was that the Companies were also committed and motivated in the alternative to achieve a trade sale of the business of the Companies during 2006. This appears logical since the focus was only on achieving a successful IPO at the material time of the pre-contractual negotiations. Accordingly, I find that the defendants’ case as to which of the Representations had been made to be more believable on the balance of probabilities.
[74] This position which I have reached may also be further buttressed by the following discussion which undertakes a closer analysis of whether each (as opposed to all) of the Representations had been made.
(2) Representation (a)
[75] In relation to Representation (a), I agree with the defendants that had it been represented that Fraser was an “economist by training”, then the plaintiff would have sought reassurances about this once Fraser’s knowledge and skills as COO were called into question a mere three months later by the February 2006 PPE. This is especially if the purported representation was, as the plaintiff claimed, material enough to induce it to accept the engagement. However, as no action was taken by the plaintiff, this suggested to me that Deeb did not in fact make any representation as to Fraser’s qualifications. At trial, Dominic sought to explain his apparent lack of concern on the basis that the February 2006 PPE only cast doubt on Fraser’s knowledge and skills, hence there was no need for him to worry about Fraser’s qualifications, which was what Deeb’s representation related to. However, I have no hesitation in rejecting this explanation as it is based on an artificially fine distinction that would not realistically be made.
(3) Representations (b) and (d)
[76] Representations (b) and (d) shall be considered together. In my judgment, it is highly unlikely that Deeb would have made either of these representations given their distinctly unqualified nature. For example, in relation to Representation (d), it seems odd that Deeb would have said that there were “no significant hurdles” to the NASDAQ IPO merely on the basis that a conditional ETL letter had been received in relation to the SGX IPO. First, the listing requirements on NASDAQ and the SGX are conceivably very different; hence whilst receipt of conditional approval from the latter securities exchange may at least be some indication of the likelihood of a successful listing on the former, this did not explain why Deeb would effectively represent that listing on NASDAQ would be no more than a formality. This is especially because, as a matter of logic, one would imagine that a representation as to whether the NASDAQ IPO faced “significant hurdles” or not would more probably come from the lips of the advisor (Dominic) rather than that of the party seeking advice (Deeb). Second, the conditional ETL letter received from the SGX itself listed some 14 conditions which remained to be fulfilled before listing on the SGX was possible. This also made it implausible that Deeb would have been so over-confident as to have represented that there were “no significant hurdles” to the NASDAQ IPO. In my judgment, therefore, the very breadth of both Representations (b) and (d) — that there was nothing unsatisfactory in the third defendant’s documentation and that there were no significant hurdles to listing respectively — had exposed them as being contrived to support Dominic’s claim that he was induced to believe that the NASDAQ IPO would be completed in a relatively short period of time.
(4) Representation (c)
[77] Representation (c) was not borne out by the evidence. I am not persuaded that Deeb represented to Dominic that the “only” reason for aborting the SGX IPO was because a significantly higher valuation could be achieved on NASDAQ. First, I note that there was an email from Dominic to Deeb on 24 November 2005, which was three days after the 21 November 2005 meeting, where Dominic made the following statement:
[78] Dominic’s use of the words “presume” and “primary”, as emphasised above, is key. This showed that Deeb did not unambiguously specify a single reason for aborting the SGX IPO during his meeting with Dominic. Indeed, in Deeb’s subsequent email reply on 25 November 2005, he informed Dominic that there was more than one reason for the decision to abort the SGX IPO. His reply was as follows:
[79] In this email reply, Deeb identified, as it appears to me, both a “pull” and a “push” factor for aborting the SGX IPO. The “pull” factor here was the potentially higher listing value on NASDAQ. This, however, was not the “only” reason communicated to Dominic because, as can be seen, Deeb also explained that there was a “push” factor, viz, the lack of understanding of the Companies and their markets shown by potential investors during the book building road show for the SGX IPO, which indicated that the likelihood of the value of the shares trading upwards on the SGX subsequent to the IPO was going to be remote. I therefore inferred from the above email correspondence between Deeb and Dominic that Representation (c) had not been made by Deeb at the 21 November 2005 meeting.
(5) Representation (f)
[80] Finally, regarding Representation (f), I find that while Deeb may have said that he was personally motivated to achieve a listing of the third defendant on NASDAQ, it is unlikely that he would have represented that this was because a listing and, in the alternative a sale of the business, was the “only” way he could realise his shares in the third defendant. I agree with the defendants’ submission that, had this representation been made, then Dominic would have immediately sought assurances once he learnt that Deeb could realise the value of his shares through means other than a listing or a sale of the business. Specifically, Deeb was able to extract value for his shares through a “phantom share scheme” for certain MUSIC Group employees (which was a staff retention incentive scheme rolled out in the wake of the decision to suspend the NASDAQ IPO) and had also negotiated with Ulrich to sell back some of his stock options. However, despite coming to know of these arrangements which were directly contradictory to Representation (f), there was never a point in the parties’ subsequent correspondence where Dominic made any direct references back to the 21 November 2005 meeting to remind Deeb, politely or otherwise, of the latter’s alleged representation then of the exclusive means for divesting his shares which, as matters worryingly unfolded, now appeared to be untrue. Hence, I am able to infer that Representation (f) was not made.
[81] In light of the above, I find that Representations (a), (b), (c), (d), and (f) were not made by Deeb as alleged by the plaintiff.
The part of Representation (e) which was made was not false
[82] This leaves me to deal with Representation (e) which Deeb admitted to making in part. The plaintiff argued that there was ample evidence to show that the defendants had simply allowed a listing of the third defendant to fall off the radar once the NASDAQ IPO had been suspended. For instance, the plaintiff relied on a board resolution dated 3 May 2006 which showed that the third defendant’s focus had turned away from a possible listing towards exploiting opportunities within the mass retail market. The plaintiff urged me to infer from this lack of interest in a listing that the defendants were never in fact committed or motivated to achieve the same during 2006; hence Representation (e) was false at the time it was made.
[83] To my mind, the plaintiff’s submission is a highly fanciful one. The defendants were clearly invested in the NASDAQ IPO. They had engaged professionals such as JP Morgan and Jones Day whose services would not have come at a small expense. In fact, the defendants were ready to fork out even more to secure Dominic’s services as Group CFO to head the NASDAQ IPO. Therefore, I do not see how it could be said that the defendants were only mildly, if at all, committed to a listing. Certainly, enthusiasm for a listing had dissipated over time but that was only natural once a collective decision had been reached to suspend the NASDAQ IPO. More so since, as discussed in greater detail below (at [137]–[140]), the suspension was intended to allow the MUSIC Group to address certain “operational issues” which had disrupted its business. Further, while Deeb may have represented to Dominic that there was a commitment to achieve a listing “during 2006”, I find that this was an estimate and nothing more. I do not think that it is reasonable to say that Deeb had meant this as a strict time frame within which a listing had to be achieved regardless of changes in the circumstances. Accordingly, I find that the part of Representation (e) relating to the commitment to achieve a listing during 2006 was not false at the time it was made. This is to be contrasted with the remaining part of Representation (e) relating to the commitment to achieve in the alternative a sale of the business during 2006 which, as I have earlier found at [73] above, was not even made to begin with.
[84] In light of the above, I dismiss the 1st Misrepresentation Claim.
The 1st Negligence Claim
The parties’ submissions
[85] The parties’ submissions regarding the 1st Negligence Claim can be simply stated. The plaintiff asserted that it was normal business practice for external consultants, such as itself, to rely on the correctness of information provided by its corporate clients. Accordingly, it was argued that the Companies owed a duty of care to provide accurate and complete information to the plaintiff. However, this duty was breached during the pre-contractual negotiations as the plaintiff was given the Preliminary Prospectus with Deeb and Fraser’s false qualifications. The plaintiff claimed that this inaccurate information induced it to accept the engagement and concomitantly to forgo the opportunity of setting up its intended income generating private equity funds. Hence it now sought to recover the Opportunity Loss. For the Companies, it was disputed that any duty of care could be owed in the present circumstances.
The Spandeck two-stage test
[86] The nub of the dispute in this claim relates to whether the Companies owed the plaintiff a duty of care. In this regard, the starting point must be the leading case of Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency [2007] 4 SLR(R) 100 (“Spandeck”) where the Court of Appeal set out (at [73]) a basic two-stage test of proximity and policy considerations, preceded by a threshold inquiry of factual foreseeability, for determining whether a duty of care existed. Since the claim in the present case involved the recovery of a purely economic loss, it is also pertinent to recall the Court of Appeal’s emphasis (at [115]) that the two-stage test was intended to be the test applied regardless of the nature of the damage caused. This view was reached after the Court of Appeal considered (at [65]–[72]) that there was neither sound justification for a general exclusionary rule against recovery of all economic losses (thus declining to follow the approach in the United Kingdom), nor any practical need to adopt a different test in such cases (thus introducing a coherent, consistent and reliable approach in Singapore).
[87] The threshold inquiry of factual foreseeability was described by Andrew Phang Boon Leong J (as he then was) in Sunny Metal & Engineering Pte Ltd v Ng Khim Ming Eric (practising under the name and style of W P Architects) [2007] 1 SLR(R) 853 as one which “will almost always be satisfied” [emphasis in original omitted] (at [55]). That has proven to be the case here as I have no difficulty in finding that it was factually foreseeable that a failure to provide accurate information during the pre-contractual negotiation stage could result in economic loss to the plaintiff.
[88] The critical issue to my mind, however, was whether legal proximity could be established. In Spandeck, the court stated (at [77]) that “[t]he focus here is necessarily on the closeness of the relationship between the parties themselves” and (at [81]) that such closeness may, in turn, be borne out by certain significant relational indicia as expressed by Deane J in Council of the Shire of Sutherland v Heyman (1985) 157 CLR 424 (“Sutherland”) which included the physical, circumstantial and causal facets of proximity between the parties as well as the twin criteria of voluntary assumption of responsibility and reliance (at 499).
Proving proximity in cases of pure economic loss
[89] At this juncture, I pause to make a brief observation regarding the application of these indicia, which is that there is certainly no strict requirement that a claimant has to canvass and prove all of these indicia to establish proximity and, depending on the precise factual matrix at hand, some of these indicia may assume greater prominence. As Deane J remarked in Sutherland (at 499), “Both the identity and the relative importance of the factors which are determinative of an issue of proximity are likely to vary in different categories of cases.”
[90] For the particular purposes of this claim, I note that our courts seem to take the view that, where pure economic loss is concerned, it may be more practicable to adjudge whether the requisite proximity existed based on the twin criteria of voluntary assumption of responsibility and reliance. The following observation of Quentin Loh J in Resource Piling Pte Ltd v Geospecs Pte Ltd [2014] 1 SLR 485 (“Geospecs”) is apposite (at [26]):
[91] In a similar vein, it has also been commented in Gary Chan Kok Yew & Lee Pey Woan, The Law of Torts in Singapore (Academy Publishing, 2011) at para 03.059 that:
[92] In light of these observations, I propose to determine whether a duty of care was owed here according to the twin criteria of voluntary assumption of responsibility and reliance. However, before doing so, I wish to clear the ground on what is meant, particularly, by the first criteria of “voluntary assumption of responsibility” as this will be relevant to my analysis later.
Voluntary assumption of responsibility
[93] Robby Bernstein has observed in Economic Loss vol 1 (Sweet & Maxwell, 3rd Ed, 2013) (at para 3-056) that the term “assumption of responsibility” can be used in two distinct senses. First, it may be used rather broadly for the purposes of conveying that the defendant has assumed responsibility for the performance of a certain task, eg, the making of a statement, the giving of advice, or the performance of a service. This is arrived at after an entirely factual inquiry into whether the defendant had consciously performed the particular task. However, proof of such factual assumption of responsibility, though an important first step, does not carry one all the way towards a definitive finding of legal liability. In Bernstein’s words (at para 3-057), “[t]he mere assumption of responsibility for performing a certain task does not have legal consequences, but assumption of responsibility for performing the task needs to be established as a fact before the analysis of whether legal liability can attach, can even begin.”
[94] At this point, it is appropriate to introduce the second and more specific sense in which the term “assumption of responsibility” is also often used, that is, in its legal sense. As Loh J made clear in Geospecs (at [38]), this is how the term is to be understood for the purposes of determining liability.
[95] What “assumption of responsibility” conveys in this context is that the defendant has performed a task in circumstances where he is “deemed” to have assumed responsibility for the consequences in law of the task being performed negligently. This does not mean that the defendant must have knowingly and deliberately accepted responsibility for the potential loss which he had foreseen might flow from his negligence; his subjective intentions are irrelevant: see Customs and Excise Commissioners v Barclays Bank plc [2007] 1 AC 181 (“Customs and Excise Commissioners”) at [5], per Lord Bingham of Cornhill; Phelps v Hillingdon London Borough Council [2001] 2 AC 619 at 654, per Lord Slynn of Hadley. All that it means is that, after an objective assessment of the circumstances in which the defendant had performed the task in question, the court, as a matter of law, “imposes” a duty of care on the defendant. And, in undertaking this objective assessment, the “primary focus” for the court must be, as Lord Steyn stated in Williams and anor v Natural Life Health Foods Ltd [1998] 1 WLR 830 (“Williams”), on exchanges which may take the form of statements and conduct that “cross the line” between the claimant and the defendant (at 835-G).
[96] The preceding discussion on the first limb of the twin criteria has sought to draw a distinction between factual and legal assumption of responsibility. In essence, the latter is what the law is concerned with and, in this regard, proof of the former is a necessary prerequisite though not sufficient on its own. With this distinction in mind, I turn now to the facts of this case.
The Companies did not voluntarily assume responsibility towards the plaintiff
[97] It was not disputed that the Companies had provided the plaintiff with the Preliminary Prospectus during the parties’ pre-contractual negotiations. The plaintiff submitted that in so doing, the Companies had duly assumed responsibility for the accuracy and completeness of the information in the Preliminary Prospectus; hence there was sufficient proximity to find that a duty of care was owed in the circumstances.
[98] In my view, the plaintiff’s description that there was an “assumption of responsibility” by the Companies here was relevant, but only in the broad factual sense, as Lord Hoffman says in Customs and Excise Commissioners (at [38]), of “drawing attention” to the bare fact that the Companies had made a conscious decision to provide the plaintiff with the Preliminary Prospectus. It does not answer the further (and more fundamental) question of whether, as a matter of law, the Companies ought to be “deemed” to have assumed responsibility for the losses arising out of any inaccuracy in the information provided. The answer to the latter question ultimately depended on an objective view of the surrounding conditions which, in my judgment, militated against imposing a duty of care on the Companies. My reasons are as follows.
[99] First, I begin with an analysis of the immediate circumstances attendant to the Companies’ provision of the Preliminary Prospectus to the plaintiff. I had earlier found that Deeb did not make any express representation that the documentation of the third defendant at the time, which would have included the Preliminary Prospectus, was entirely free from error (at [76] above). Other than this alleged representation, the plaintiff did not point me towards any other relevant communication or conduct by the Companies from which I could infer an assumption of the risk of losses that might flow from any inaccuracy in the Preliminary Prospectus. Neither did the plaintiff place any degree of stress on the Preliminary Prospectus which might have reasonably put the Companies on notice that the information therein was of particular importance. In fact, it appears that the Preliminary Prospectus was merely one of various seemingly unrelated documents which Dominic had requested from Deeb in an email dated 23 November 2005. One might have thought that this would dilute the apparent importance of the Preliminary Prospectus to the plaintiff. Therefore, it seems that nothing other than the Preliminary Prospectus itself had, to use the description in Williams, “crossed the line” between the plaintiff and the Companies. In these circumstances, I find it difficult to say that the Companies had assumed responsibility towards the plaintiff in the sense which is necessary for attributing liability.
[100] Second, I am minded to consider the wider context within which the pre-contractual negotiations took place. In this regard, I noted the plaintiff’s argument which effectively sought to justify proximity on the basis of the parties’ relationship alone since, as it was claimed, external consultants ordinarily relied on its corporate clients to provide accurate and complete information before accepting a potential engagement. However, I find this assertion to be sweeping, unsupported by evidence, and essentially a call to this court to desensitise itself from the factual circumstances peculiar to each case before it. That would clearly be undesirable, as is amply illustrated by the present case.

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Straits Advisors Pte Ltd v Michael Deeb (alias Magdi Salah El-Deeb) and others

Grounds of decision

Introduction

Background

The parties

The facts

The aborted SGX IPO

The pre-contractual negotiations relating to the NASDAQ IPO

The Original Agreements

The suspension of the NASDAQ IPO and the subsequent renegotiations

Developments during the renegotiations: The poison pen emails and the Further Representations

Entry into the Consultancy Agreement

Termination of the Consultancy Agreement

The previous suit

The plaintiff’s discovery of new information

The causes of action

Preliminary observations

Categorising the causes of action into distinct time frames

Summary

Analysis of Time Frame 1

The 1st Misrepresentation Claim

The Representations

The parties’ submissions

The central element of dishonesty in the tort of fraudulent misrepresentation

The relevance of the representor’s motive in proving dishonesty

The defendants were not dishonest

The Representations had not been made except for a part of Representation (e)

(1) None of the Representations were recorded down by Dominic except for a part of Representation (e)

(2) Representation (a)

(3) Representations (b) and (d)

(4) Representation (c)

(5) Representation (f)

The part of Representation (e) which was made was not false

The 1st Negligence Claim

The parties’ submissions

The Spandeck two-stage test

Proving proximity in cases of pure economic loss

Voluntary assumption of responsibility

The Companies did not voluntarily assume responsibility towards the plaintiff