Legal Bulletin - Lexology

Legal Bulletin A summary of developments in the law

At a glance

Corporate

Singapore High Court finds ouster of minority shareholder as director constitutes oppression but not majority shareholder’s other ‘personal fiefdom’ acts

5

Dispute Resolution

Singapore Court of Appeal stays action on ground of forumnon conveniens and finds Indonesia the more appropriate forum

8

Employment

MOM announces S Pass and Employment Pass changes: New qualifying salary thresholds from 1 July 2011

14

Real Estate

URA public consultation on proposed changes to Housing Developers (Control & Licensing) Act and Housing Developers Rules: Giving home-buyers better access to accurate and timely information

24

SGX

SGX requires directors proposing restructuring and spin-offs to show detriment to shareholders if status quo is maintained

28

News

Allen & Gledhill wins IFLR Law Firm of the Year for Singapore award

32

Allen & Gledhill wins four Islamic Finance news Deals of the Year 2010 awards

32

Allen & Gledhill wins AsianMENA Counsel’s Deals of the Year 2010 awards

32

Allen & Gledhill extends its lead in Chambers Asia 2011 33

Click here for Table of Contents

Vol 23 No 3 March 2011 ALLEN & GLEDHILL LLP

In this issueArticles

Competition

CCS clears acquisition by Samwoh Corporation Pte Ltd of control of Highway International Private Limited

4

Corporate


5

Dispute Resolution

Singapore Court of Appeal stays action on ground of forum non conveniens and finds Indonesia the more appropriate forum

8

Employment


14

Parliament introduces Workplace Safety and Health (Amendment) Bill 2011: Extending coverage to all workplaces and additional duties on principals

15

Employer CPF contribution rate up by 0.5% from 1 March 2011 16

Insurance

Parliament introduces Deposit Insurance and Policy Owners’ Protection Schemes Bill 2011: Strengthening protection of depositors and policy owners

17

Parliament introduces Insurance (Amendment) Bill 2011: Dealing with distressed insurers

20

UK Supreme Court determines proximate cause of loss under marine insurance policy on cargo: Perils of the seas or inherent vice, question of fact based on commonsense principles

21

Real Estate


24

Securities & Futures

English High Court considers effect of section 2(a)(iii) of ISDA Master Agreement

25

SGX


28

Editorial Team

Margaret Chew

Elizabeth Wong

Soo Seong Theng

Hong Farn Ling

Anitha Rajaram

The contents of the Legal Bulletin are intended to provide general information. Although we endeavour to ensure that the information contained herein is accurate, we do not warrant its accuracy or completeness or accept any liability for any loss or damage arising from any reliance thereon. The information in this Legal Bulletin should not be treated as a substitute for specific legal advice concerning particular situations. If you would like to discuss the implications of these legal developments on your business or obtain advice, please do not hesitate to approach your usual contact at Allen & Gledhill LLP or the editors of the Legal Bulletin, Margaret Chew (+65 6890 7500 or [email protected]) and Elizabeth Wong (+65 6890 7559 or elizabeth.wong @allenandgledhill.com).

2Legal Bulletin March 2011

mailto:margaret.chew@allenandgledhill

General

Charities Act amended with effect from 1 March 2011: More charities to comply with controls relating to charity accounts and audits

29

News

Placement of shares in Noble Group Limited 29

CapitaMall Trust Management Limited’s S$2.5 billion Retail Bond Programme

30

ShangriLa Asia Limited’s onefortwelve rights issue 30

STATS ChipPAC Ltd.’s issue of US$200 million aggregate principal amount of 5.375% Senior Notes due 2016

30

Cathay Asset Management Company Limited’s mandatory general offer for Jaya Holdings Limited

31

Sunway City and SSTEC to develop Tianjin project 31


32


32


32

Allen & Gledhill extends its lead in Chambers Asia 2011 33

Allen & Gledhill LLP also publishes the monthly Financial Services Bulletin. To view the March 2011 issue, please click here.


Articles

Competition

For further information, please contact:

Daren Shiau Tel: +65 6890 7612 [email protected]

This recent development was highlighted in the Allen & Gledhill Competition Law Alert of 3 March 2011. If you would like to be on our competition and antitrust related electronic communications mailing list, please e-mail us at [email protected]

CCS clears acquisition by Samwoh Corporation Pte Ltd of control of Highway International Private Limited

On 27 January 2011, the Competition Commission of Singapore (the “CCS”) announced its clearance of the completed acquisition by Samwoh Corporation Pte Ltd (“Samwoh”) of control of Highway International Private Limited (“Highway”) (the “Acquisition”). This is pursuant to a notification for decision submitted by Samwoh to the CCS in April 2010 in relation to the Acquisition.

Both parties are involved in the business for the supply of asphalt premix and the provision of asphalt premix laying services in Singapore.

This is the first clearance decision issued by the CCS in relation to a completed merger involving competition concerns, which compelled a Phase 2 review and consideration of possible divestments as remedies by the CCS.

The CCS had notified Samwoh of its intention to proceed to a Phase 2 review of the Acquisition on 7 June 2010. In order to avoid a lengthy Phase 2 review process, Samwoh had proposed a commitment to divest, or otherwise dismantle one of its asphalt manufacturing plants to address the competition concerns raised by the CCS.

Following consultation with third parties, including competitors, customers and relevant authorities, and after evaluating all the evidence, the CCS concluded that the Acquisition will not infringe section 54 of the Competition Act (the “Act”). The CCS also concluded that, having regard to the evidence, it would not necessitate the acceptance of Samwoh’s proposed commitment.

The CCS, in finding that the Acquisition will not infringe section 54 of the Act, based its decision on the following considerations:

Sponsorship of new entry;

Inherent market structure;

Lack of evidence of the stability of market shares; and

Degree of capacity in the market.

Background

The merger control regime prescribed under the Act came into force on 1 July 2007. Section 54 of the Act prohibits mergers that substantially lessen competition within any market in Singapore for goods or services.

Since the start of the merger control regime, the CCS has received 22 merger control notifications. The CCS has cleared 19 of the 22 notifications. Some of the other notifications have either been withdrawn by the merger parties or are still undergoing a review by the CCS.


mailto:daren.shiau@alle

mailto:[email protected]

Please click here to view the table of notified mergers on the CCS website www.ccs.gov.sg.

Allen & Gledhill LLP advised Samwoh in this matter.

Back to Contents Page

Corporate


Tan Yong San v Neo Kok Eng & Ors [2011] SGHC 30

The Singapore High Court in Tan Yong San v Neo Kok Eng & Ors held that the ouster of the plaintiff minority shareholder, Tan Yong San (“Tan”), as a director of various companies in the Chip Hup Group and the subsequent denial to him of access to the companies’ accounts constituted oppressive conduct justifying relief under section 216 of the Companies Act. Notably, the court held that other allegations lodged by Tan against the first defendant, Neo Kok Eng (“Neo”), which included the misappropriation of monies from Chip Hup Hup Kee Construction Pte Ltd (“CHKC”), did not amount to oppressive conduct because the court found that there was an implicit understanding between Tan and Neo that Neo was entitled to run the Chip Hup Group as he saw fit and that Tan was not genuinely aggrieved at these other acts committed prior to his ouster.

Background

Neo was a director and registered shareholder of 99.11% in Chip Hup Holding Pte Ltd (“CHH”). Tan was a registered shareholder of the remaining 0.89%, and a director of CHH until he was removed in 2006. Tan became a shareholder and director in CHH due to the recommendation of Lim Leong Huat (“Lim”) who was the general manager of CHKC from 1994 to 2006, and who also happened to be Tan’s brotherinlaw. In 1998, Lim recommended Tan as a suitable candidate to become a shareholder and director in CHH and CHKC. After Tan became a director and shareholder of CHH and CHKC, he was paid a monthly fee, and over the years, became a director (but not shareholder) of other companies in the Chip Hup Group. By 2005, Tan was being paid approximately S$4,000 per month for his various directorships in the Chip Hup Group.

From the time that Tan became a director and shareholder of CHH and CHKC, he did not participate in the management of either company. Tan’s role was to come into the office once in a while and sign documents in his capacity as a director. These documents included counter-indemnities for various insurance companies as CHKC employed many foreign workers and were required to provide security bonds to the immigration authority in the form of insurance guarantees by insurance companies which required CHKC and its directors, Neo and Tan, to indemnify them for any liability under the guarantee. Neo and Tan also signed personal guarantees for credit facilities granted to CHKC.

It is relevant to note that Lim and Neo had a falling out in 2006 and were subsequently embroiled in litigation. Lim’s claims for loans he made to CHKC were, among other claims, decided in Lim Leong Huat v Chip Hup Hup Kee Construction Pte Ltd and another [2010] SGHC 170 (“Suit 779”), a case


www.ccs.gov.sg

described by the judge as “a falling out of thieves”. Soon after the commencement of Suit 779, Tan brought a separate action for oppression against Neo under section 216 of the Companies Act seeking, inter alia, a winding-up of CHH and for Neo (and his wife where she was involved) to account for monies allegedly misappropriated or misused from CHKC.

Nominee shareholder defence

Neo contended that Tan was only holding the shares in CHH and CHKC as a nominee shareholder and was therefore not entitled to complain of oppressive conduct. On the one hand, Tan was seen as an apathetic shareholder who was not interested in the value of his shares and who was simply content to collect director’s fees every month. On the other hand, however, during the restructuring of the Chip Hup Group in 1999, Tan was issued 169,250 shares where, if he were merely a nominee shareholder, he could have been issued a token or round number of shares.

The court was of the view that the issue of 169,250 shares showed that Tan’s and Neo’s respective shareholdings in CHH were carefully calibrated, since the number of shares issued by CHH was equivalent to the cash value of the shares Tan and Neo had transferred to CHH pursuant to a share swap in the restructuring exercise. Furthermore, Tan had to sign numerous guarantees and counter-indemnities as a director of CHKC, and that liability was considerable compared to what he was paid as a director, thereby indicating that the shares were as much an incentive for Tan assuming this liability as the director’s fees he received. Upon surveying the evidence, the court held that Tan did not hold the CHH and CHKC shares as a nominee, but as a beneficial shareholder.

Oppressive ouster

The court found that Neo did not have good reason to remove Tan as a director of the various companies in the Chip Hup Group when he did so in 2006. It appeared that Neo simply wanted to remove Tan because Neo believed he was aligned with Lim. The court added that even if that suspicion was subsequently justified, that was not a good reason for removing Tan at the time, in particular, taking into account his personal liabilities under the numerous counter-indemnities that he had signed. So long as any of the counterindemnities remained alive, he should be entitled to his director’s remuneration.

It was this aspect of Tan’s complaints, namely his ouster from directorships and his subsequent denial of access to the accounts of the relevant companies, that formed the basis upon which the court held that there was oppression justifying relief under section 216(2) of the Companies Act.

Misappropriation of monies by Neo

The court found that Neo had been misappropriating monies due to CHKC. The conduct of Neo impugned by the court included the misappropriation of commissions which CHKC’s foreign workers were supposed to pay to it, artificially inflating the amounts which Neo (and his wife) charged CHKC for the purchase of groceries, the misappropriation of funds from CHKC in the guise of reimbursements due to Neo for paying the salaries of non-existent workers, as well as the misuse of CHKC’s funds for Neo’s own purposes.

Implicit understanding between Tan and Neo

Although the wrongdoings of Neo in relation to CHKC seemed egregious, the court held that such conduct did not amount to oppression justifying relief under section 216(2) of the Companies Act. The court observed that in


considering what constitutes unfair or oppressive conduct in a quasi-partnership, the impugned conduct may be assessed with reference to the legitimate expectations of minority shareholders, which may arise from informal or implied understandings visàvis the majority. The court observed that while such informal or implied understandings are usually relied on to subject the actions of the majority to greater scrutiny, they can conversely also be used to prevent the minority from complaining about matters in which they had given the majority carte blanche.

The court found that there was an informal or implied understanding between Tan and Neo that Neo could run the Chip Hup Group as his personal fiefdom. As such, Tan could not then complain that Neo had been manipulating CHH and its subsidiaries for his own personal gain. The court added that it did not matter that Tan was unaware of and could not have acquiesced to the specific acts Neo had done throughout the relevant period.

Collateral purpose

Furthermore, in deciding whether or not there was oppression justifying relief under section 216(2) of the Companies Act, the court took into account Tan’s motive for bringing the action. While Tan was genuinely aggrieved at being ousted from the Chip Hup Group, the court was of the view that Tan was also using the oppression action to assist Lim in his ongoing legal war with Neo. Despite Lim’s close involvement in many of the alleged acts of oppression, Tan had chosen not to add Lim as a defendant, and it was clear that Tan had been co-operating with Lim in pursuing the oppression action against Neo.

Laches and acquiescence

It is worth noting at this stage that Neo had raised the equitable defences of laches and acquiescence. On the evidence, the court was satisfied that there was no inordinate delay or laches as Tan only became aware of Neo’s various acts complained of after he was removed from his directorships in late 2006 and the oppression action was filed in 2007. As to the issue of acquiescence, Tan was not aware of Neo’s said acts until after he was ousted from the Chip Hup Group and therefore could not be said to have acquiesced to them.

The court further clarified that in an action under section 216 of the Companies Act, equitable defences are not meant to operate in an all-or-nothing fashion. It is not the case that inordinate delay or the absence of clean hands on the part of a plaintiff would automatically disentitle him to relief. Rather, any inequity on the part of a plaintiff would simply be a relevant factor in the court’s overall assessment of whether there had been unfairness warranting relief, and in deciding what type of relief would be just and equitable in the circumstances.

Relief and outcome

The court held that Tan had made out a case of oppression justifying relief under section 216(2) of the Companies Act on the grounds of his ouster as a director of the various companies in the Chip Hup Group and the subsequent denial to him of access to the companies’ accounts. Tan could not complain of the other acts of oppression prior to his ouster because he had an implicit understanding with Neo that the latter was entitled to run the Chip Hup Group as he saw fit, and because he was not genuinely aggrieved at these prior acts of oppression. Nonetheless, the implicit understanding with Neo came to an end after Tan was ousted from the Chip Hup Group in 2006, and as Tan remained a beneficial shareholder of CHH, the court found that his expulsion and continued exclusion from CHH’s affairs was oppressive to him.


In the circumstances, the court ordered Neo to buy out Tan’s shares. The court was not minded to grant any other form of relief on account of Tan’s own conduct and the fact that he only held 0.89% of the shares in CHH. The court declined to grant the other reliefs sought by Tan such as a winding-up of CHH and for Neo (and Neo’s wife) to account for monies allegedly misappropriated or misused from CHKC. With regard to valuing Tan’s shares, the court held that, as Tan left the running of the Chip Hup Group to Neo without any expectation of profitsharing, the fairest price for Tan’s shares would be their initial capitalised value of S$169,251 after the group restructuring.

If you would like to discuss the impact of this case on your business, please contact:

Ang Cheng Hock, SC Tel: +65 6890 7832 [email protected]

Kenneth Lim Tel: +65 6890 7811 [email protected]


Dispute Resolution

Singapore Court of Appeal stays action on ground of forumnon conveniens and finds Indonesia the more appropriate forum

JIO Minerals FZC & Ors v Mineral Enterprises Ltd [2010] SGCA 41

The Singapore Court of Appeal in JIO Minerals FZC & Ors v Mineral Enterprises Ltd applied the two-stage test set out in the seminal House of Lords decision, Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 (the “Spiliada”), in determining that Indonesia was the more appropriate forum for the parties’ dispute.

Facts

This was an appeal against a High Court decision refusing to grant the defendants (referred to collectively as “the appellants” hereinafter) a stay of the action brought against them by the plaintiff (referred to as “therespondent” hereinafter).

The respondent was Mineral Enterprises, an Indian company with expertise in mining and marketing iron ore in India and internationally. The first appellant was JIO Minerals, a company incorporated in the UAE. The first appellant had been set up by the second and third appellants, who were Indonesian residents. The second appellant was also the President and Director of an Indonesian company known as PT JIO Energi Resources (“PTJIO”) and a commercial licensee and manager of the first appellant. PT JIO owned iron ore mining concessions in Pelaihari, Kalimantan, Indonesia (the “Pelaihari Concession”). The respondent’s representatives engaged in negotiations with the second and third appellants during meetings in Indonesia.

On 7 August 2006, the first appellant entered into an agreement (the “Exclusive Mining Agreement”) with PT JIO, under which PT JIO appointed the first appellant as “its sole and exclusive international agent with irrevocable rights of exploration, exploitation, mining and marketing of Iron Ore Concession”. The Exclusive Mining Agreement was stated to be governed by the laws of Ajman, UAE. On 7 September 2006, PT JIO sent the respondent a copy of the Exclusive Mining Agreement via e-mail. PT JIO sent the copy from Indonesia and the copy was received by the respondent in India.




On 7 September 2006, the first appellant sent an offer letter, signed by the second appellant, from Indonesia to the respondent in India (the “Letter of Offer”). The terms of the Letter of Offer were that the first appellant offered the respondent a 50% shareholding in the first appellant, and the first appellant represented that it had a stipulated amount of high grade iron ore reserves.

The respondent accepted the offer in the Letter of Offer by paying the requisite consideration (the “Investment Funds”) into the Singapore bank accounts of the second and third appellants, thereby resulting in a contract between the parties (the “Investment Agreement”).

Thereafter, the respondent commenced but then stopped drilling at the Pelaihari Concession. The appellants alleged that the respondent’s drilling was insufficient for it to have formed a firm view of the amount of iron ore deposits in the Pelaihari Concession. The appellants also contended that there were Indonesian witnesses to the respondent’s drilling activities.

After the cessation of the respondent’s drilling activities, the appellants returned a sum of US$699,000 to the respondent. The parties disputed the purpose of this repayment, with the appellants contending that they had no choice but to return the unutilised portion of the Investment Funds because the respondent was not going to restart drilling, and the respondent alleging that the sum was returned because the appellants admitted that the Pelaihari Concession did not contain sufficient deposits.

The respondent began proceedings in the Singapore High Court for (1) a declaration that it had validly rescinded the Investment Agreement, (2) the return of the balance of the Investment Funds, (3) damages, and (4) further or alternatively, damages for fraudulent misrepresentation or misrepresentation under the Misrepresentation Act. The appellants sought a stay of the proceedings on the ground of forum non conveniens and this was granted in the first instance by an assistant registrar. The respondent appealed and the High Court reversed the assistant registrar’s decision, holding that Singapore was not forum non conveniens.

The issue

The Court of Appeal identified the sole issue before it as being whether the respondent’s action in Singapore should be stayed on the ground of forumnon conveniens. In particular, the court was concerned with whether or not Indonesia was a clearly or distinctly more appropriate forum than Singapore for the hearing of the dispute between the parties.

Spiliada test

The Court of Appeal re-affirmed that the general principles to be applied in an application for a stay of an action on the grounds of forum non conveniens are as have been set out in the seminal UK House of Lords decision, Spiliada. The Spiliada principles have been approved and applied many times by the Singapore courts. Stage one of the Spiliada test involves the court determining whether there is some other available and more appropriate forum for the trial of the action. In this regard, the court will take into consideration the relevant connecting factors such as personal connections, connections to events and transactions, the governing law, other proceedings and the shape of the litigation. The burden rests on the defendant to show that there is another available and more appropriate forum than Singapore for the trial of the action. It is not enough to show that


Singapore is not the natural or appropriate forum (although the lack, in number and/or quality, of connecting factors to Singapore is relevant from a comparative perspective of whether there is another more appropriate forum).

If, at stage one of the Spiliada test, the court concludes that there is no other available forum which is clearly more appropriate for the trial of the action, it will ordinarily refuse a stay. If the court concludes that there is some other available forum which prima facie is clearly more appropriate for the trial of the action, it will ordinarily grant a stay.

Stage two of the Spiliada test concerns whether there are circumstances by reason of justice why, notwithstanding that there is some other available forum which prima facie is clearly more appropriate for the trial of the action, the court should nonetheless exercise its jurisdiction to try the dispute and refuse to grant a stay of the action.

The Court of Appeal also emphasised that the Australian approach, which applies the test of whether the local forum is the “clearly inappropriate forum”, is not applicable in Singapore.

Application of Spiliada to the present matter

Noting that the decision whether to grant or refuse a stay of proceedings was discretionary, the Court of Appeal stated that an appellate court would not interfere with the exercise of this discretion unless the judge of the lower court had misdirected himself on a matter of principle, or had taken into account matters which he ought not to have taken into account or had failed to take into account matters which he ought to have taken into account or his decision was plainly wrong. As the appellants’ arguments suggested that the High Court might have misapplied certain principles, the Court of Appeal considered that it was necessary to apply the Spiliada test afresh to the facts.

Stage one of the Spiliada test

The residence and place of business of the parties

The Court of Appeal considered that, whilst the first appellant was a UAE corporation, it had a representative office in Jakarta. The first appellant appeared to have conducted most of its business from that office, as evidenced by the fact that it sent the Letter of Offer to the respondent from Indonesia, conducted its meeting of its board of directors to increase its share capital at the representative office, and sent the respondent a copy of the Exclusive Mining Agreement from Indonesia. The second and third appellants were resident in Indonesia. The respondent was an Indian company with operations in Indonesia.

Witnesses

The Court of Appeal considered that there were two factors to be considered: (1) the convenience of having the case decided where the witnesses were ordinarily resident (the “witness convenience factor”), and (2) the compellability of those witnesses (the “witness compellability Factor”).

(a) Witness convenience factor

The Court of Appeal was of the view that a court hearing an application for a stay should not predetermine the witnesses that the parties should call. The Court of Appeal also took the view that whilst it would not be appropriate to


require the appellants to demonstrate exactly how they would use the testimony of the Indonesian witnesses at this interlocutory stage, a defendant should at least show that evidence from foreign witnesses is at least arguably relevant to its defence, which threshold the court found the appellants met.

However, whilst it appeared that, since the appellants required the testimony of Indonesian witnesses, this factor pointed to Indonesia as the natural forum, the court further considered that (1) the possibility of obtaining evidence from the Indonesian witnesses through video-link, and (2) the fact that Indonesia is relatively close to Singapore operated against the appellants, and indicated that this factor should not be given substantial weight.

(b) Witness compellability factor

The appellants had contended that the Indonesian witnesses might need to be compelled to testify. The Court noted that a Singapore court cannot compel a foreign witness to testify in a Singapore court, and therefore, the fact that the Indonesian witnesses cannot be compelled by a Singapore court to either testify in person in Singapore or to give evidence via video-link was a factor that pointed to Indonesia as being the natural forum.

The respondent argued that the appellants had not shown that Indonesian witnesses would be compellable in an Indonesian court if this dispute were heard in Indonesia. The Court considered that although it would have been preferable to have had expert evidence on whether the Indonesian witnesses were compellable to testify in an Indonesian court, it was more likely that the Indonesian witnesses would testify if the dispute were heard in an Indonesian court.

The governing law of the claims

The Court of Appeal observed that the governing law of the claims raised by the parties is a significant factor in stage one of the Spiliada test, and that the first stage of any choice of law analysis is to characterise the issues raised by the claims. The court characterised the respondent’s claims as being in contract, restitution, tort and arising from statute.

(a) Contractual and restitutionary claims

The court reiterated the well-established three-stage approach to determining the governing law of a contract. First, the court considers if the contract expressly states its governing law (the “Express Law”). If the contract is silent, the court proceeds to the second stage and considers whether it can infer the governing law from the intentions of the parties (the “Implied Law”). If the court is unable to do so, it moves to the third stage and determines the law which has the closest and most real connection with the contract (the “Objective Law”).

The Court of Appeal held that it was clear that there was no Express Law. However, it was of the view that it was possible to determine the Implied Law. It was reasonable to infer that the parties intended that UAE law governed the Investment Agreement given the choice of that law in a closely related contract, viz. the Exclusive Mining Agreement. The Exclusive Mining Agreement was, in fact, sent to the respondent. The Letter of Offer also referred to the Exclusive Mining Agreement three times. Further, the Exclusive Mining Agreement was essential to the Investment Agreement. Without it, the first appellant would have had nothing of value to offer the respondent in exchange for its provision of expertise. The court did not consider it to be material that the Exclusive Mining Agreement and the


Investment Agreement were not between the same parties. The crucial point was that the relevant two contracts should be so closely related that the parties could not reasonably be considered as having intended that different laws governed the related contracts.

The court considered that the choice of law analysis for the restitutionary claim was the same as the choice of law analysis for the contract claims because the restitutionary claim was consequential on the failure of the Investment Agreement.

(b) Tort claim

The Court of Appeal reaffirmed that the choice of law rule that Singapore courts apply for torts is the double actionability rule. This rule provides that the tort must be actionable under both the lex fori and the lex loci delicti.

The court had to first determine the place of the tort in order to ascertain the lex loci delicti. The test that is commonly applied for determining the place of the tort is that which looks at the events constituting the tort and asks where, in substance, the cause of action arose (the “Substance Test”). Applying the general Substance Test, the court held that the place of the tort was Indonesia. Indonesia was the place where most of the negotiations took place. The respondent also took steps in reliance of the representations in Indonesia. The only reason why the representations in the Letter of Offer and the Mining Agreement were received in India was because the respondent was based in India. Accordingly, the Court of Appeal found that the lex loci delicti was Indonesian law.

The respondent had contended that Indonesian law had not been shown to be different from Singapore law. However, the court noted that strict proof of the differences between Indonesian and Singapore law was not necessary, as the Singapore courts could take notice that the laws of other jurisdictions are likely to be different.

(c) Statutory claim

In relation to the respondent’s claim based on the Misrepresentation Act, the Court of Appeal considered that the issue of whether the Misrepresentation Act potentially applied was a relevant consideration under stage one of the Spiliada test - for example, if the scope of the Misrepresentation Act was such that it potentially applied to the present case, then that would be a factor against Indonesia being the natural forum because greater expense and inconvenience would result in having the application of a Singapore statute heard in an Indonesian court.

As to whether the Misrepresentation Act applied to the present case, the court considered that the starting point was to characterise the issue that the respondent had raised with its claim that the appellants had induced it to enter into a contract through misrepresentation. The competing characterisations were a tort and a contract characterisation. On either characterisation, the applicable law was not Singapore law. Therefore, it could be presumed that Parliament did not intend that the Misrepresentation Act should apply to the present case because Singapore law did not govern the issues which the respondent had raised.

Second, the Court of Appeal considered the Singapore Parliament’s intention was for the Misrepresentation Act to apply to misrepresentations occurring outside Singapore territory only if the applicable law of the relevant contract were Singapore law. The court considered that the purposes underlying the Misrepresentation Act appeared to be two-fold: (a) to supplement the remedies available to a representee under common law, and (b) to confer


the courts with flexibility in remedial matters by allowing courts to award damages in lieu of rescission. These purposes would not appear to be enhanced if the Misrepresentation Act were applicable to misrepresentations occurring outside Singapore territory in relation to contracts governed by foreign law. A statute that merely supplements existing common law remedies with respect to the Singapore common law of contract, without serving a conduct regulating or protective function does not appear to require general extraterritorial application to have its purposes advanced. If, however, the relevant contract were governed by Singapore law, it would appear to be consistent with the purposes of the Misrepresentation Act to say that it applies even to misrepresentations occurring outside the Singapore territory.

In the present case, the Court of Appeal had already determined that the Investment Agreement might be governed by UAE law. It followed, therefore, that the Misrepresentation Act did not apply because the misrepresentation occurred outside the territory of Singapore and the Investment Agreement was not governed by Singapore law. Therefore, the court found that the fact that the respondent had raised a claim based on the Misrepresentation Act should not be a relevant factor in stage one of the Spiliada test.

Other connecting factors

It is accepted law in Singapore that for tort claims, the place of the tort - which the Court of Appeal had already determined to be Indonesia - is prima facie the natural forum. The court found that there was nothing in this matter to displace the prima facie position.

The general connections with Singapore and the fact that the Investment Funds were paid into Singapore bank accounts, on which the respondent sought to rely, were not considered to be relevant to the claims that the respondent had framed. The court held that only connections that are relevant to the disputes should be considered in the forum non conveniens analysis.

Conclusion on stage one of the Spiliada test

On the whole, the Court of Appeal was satisfied that Indonesia was clearly or distinctly a more appropriate forum than Singapore for the trial of the claims concerned. Even though the Investment Agreement might be governed by UAE law, this was not a factor that favoured Singapore’s candidacy as the natural forum. The court emphasised that the forum non conveniens analysis was a relative one. Singapore would not become the natural forum simply because a third forum - such as the UAE - had a better or as strong a claim as Indonesia as the natural forum.

Stage two of the Spiliada testIf you would like to discuss the impact of this case on your business, please contact:

Kristy Tan Tel: +65 6890 7879 [email protected]

Tham Hsu Hsien Tel: +65 6890 7820 [email protected]

The court noted that no arguments were proffered with respect to stage two of the Spiliada test.

Judgment

For the above reasons, the Court of Appeal allowed the appeal and granted a stay of the action.





Employment


In a move to reduce reliance on foreign workers in Singapore, the Minister for Manpower (the “Minister”), Mr Gan Kim Yong, has announced changes relating to the S Pass and Employment Pass (“EP”). The overall aim is to keep the foreign share of the total workforce to around one-third in the long term and encourage employers to invest in productivity. The changes include raising the qualifying salary thresholds for EP holders and S Pass holders and imposing a higher levy in relation to S Pass holders.

The Minister also announced an increase in the salary threshold for part-time workers.

These changes were disclosed in a speech delivered by the Minister in Parliament before the Committee of Supply on 9 March 2011.

Raising qualifying salary thresholds for EP and S Pass holders

The following table provides an overview of the revised salary thresholds for EP and S Pass holders, which will come into force on 1 July 2011:

Work Pass Current Qualifying Salary

Revised Qualifying Salary

EP P1 S$7,000 S$8,000

EP P2 S$3,500 S$4,000

EP Q1 S$2,500 S$2,800

S Pass S$1,800 S$2,000

Employers of existing EP and S Pass holders will be given a one-time renewal of up to two years to meet the salary thresholds. Further renewals thereafter will be subjected to the new salary criteria. Existing EP and S Pass holders who cannot meet the new salary threshold may also apply for lower pass types if they are eligible.

Higher levy for S Pass

The monthly levy for S Pass will be increased by between S$190 and S$300. This move is to moderate the demand for S Pass holders to avoid an over dependence on S Pass workers.

Increase in salary threshold for part-time employment

Under the Dependency Ratio framework administered by the Ministry of Manpower (the “MOM”), a company needs to have a requisite number of fulltime local workers before it may qualify for foreign workers. To ensure that local workers are employed meaningfully rather than being employed on token salaries just to allow the employer access to foreign workers, the MOM currently adopts a threshold salary of S$650 below which local workers are deemed to be working part-time. Employers will need two such part-time workers to be counted as one full-time worker.

With effect from July 2011, the MOM will increase the threshold salary for part-time workers from S$650 to S$850.


Reference materials

For further information about the changes announced by the Minister, please refer to the following materials which are available from the MOM website www.mom.gov.sg:For further information, please

contact:

Patricia Seet Tel: +65 6890 7650 [email protected]

Kelvin Wong Tel: +65 6890 7644 [email protected]

Speech Delivered by the Minister for Manpower

Factsheet on Salary Threshold for Part-Time Employment

Factsheet on Changes to Employment Pass and S Pass Qualifying Salaries


Parliament introduces Workplace Safety and Health (Amendment) Bill 2011: Extending coverage to all workplaces and additional duties on principals

On 10 March 2011, the Workplace Safety and Health (Amendment) Bill 2011 (the “Bill”) was introduced in Parliament. Among other things, the Bill seeks to amend the Workplace Safety and Health Act (the “WSHA”) to:

Expand the scope of the WSHA to cover all workplaces (instead of certain classes or descriptions of workplaces which are specified in the WSHA);

Amend the definitions of certain words used in the WSHA; and

Create new duties on principals and persons at work.

Background

The WSHA came into force on 1 March 2006, repealing the Factories Act and establishing the legal framework for the new occupational safety and health regulatory system. In its inception, the coverage of the WSHA was limited to factories. However, unlike the Factories Act, which only applied to factories, the WSHA is intended to cover all workplaces. Coverage under the WSHA has been rolled out in phases. The MOM announced in March 2010 that the coverage would be extended to all workplaces by September 2011.

Application to all workplaces

When the Bill comes into force, section 2 of the WSHA will expressly provide that the WSHA “shall apply to all workplaces”.

Additional duties of principals in relation to contractors

A new section 14A will be introduced to provide that it will be the duty of every principal to take, so far as is reasonably practicable, such measures as are necessary to ensure that any contractor engaged by the principal:

Has the necessary expertise to carry out the work for which the contractor is engaged to do. In this regard, the principal needs to ascertain that the contractor has sufficient experience and training to carry out the work and has obtained any necessary licence, permit, or certificate to carry out the work; and


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Has taken adequate safety and health measures in respect of any machinery, equipment, plant, article or process used, or to be used, by the contractor or any employee employed by the contractor. In this regard, the principal needs to ascertain that the contractor has conducted a risk assessment in relation to the safety and health risks posed to any person who may be affected by the work, and has informed any person who may be affected by the work of the nature of the risk involved in the work and any measure or safe work procedure which is implemented at the workplace.

MOM response to feedback from public consultation

From 6 to 20 January 2011, the Ministry of Manpower (the “MOM”) conducted a public consultation and sought comments on a draft version of the Bill. On 15 March 2011, the MOM issued its response to the feedback received.

In its response, the MOM has stated that it will clarify in the WSHA the “reasonably practicable” measures that principals should undertake to ensure the competency of contractors they appoint. Further, the MOM will make it clear that the duty will only apply in relation to contractors directly engaged by the principal, and not the sub-contractors several levels down.

Reference materials

To view the full text of the Bill from the Singapore Parliament website www.parliament.gov.sg, please click here.


Ho Chien Mien Tel: +65 6890 7502 [email protected]

Sanjiv Rajan Tel: +65 6890 7800 [email protected]

To access the MOM response from the Reach portal, please click here.

An article about the MOM public consultation was featured in a previous issue of the Allen & Gledhill Legal Bulletin (January 2011). To read the article entitled “MOM conducts public consultation on proposed enhancements to Workplace Safety and Health Act: Extending coverage to all workplaces”,please click here.


Employer CPF contribution rate up by 0.5% from 1 March 2011

At the May Day Rally on 1 May 2010, Prime Minister Mr Lee Hsien Loong announced that, to help Singaporeans save more for their medical and retirement needs, the Government will increase the employer Central Provident Fund (“CPF”) contribution rate by 1%.

The increase has been carried out in two steps to moderate the impact on employers. The first 0.5% increase was implemented on 1 September 2010, and is payable into the Medisave Account. The remaining 0.5% increase was effected on 1 March 2011, and will be made to the Special Account.

To implement the 0.5% increase from 1 March 2011, the First Schedule to the Central Provident Fund Act was amended with effect from 1 March 2011 pursuant to the Central Provident Fund Act (Amendment of First Schedule) Notification 2011.


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An article about this development when it was announced in May 2010 was featured in the Allen & Gledhill Legal Bulletin (May 2010). To read the article entitled “Increase in employer CPF contribution rates from 1 September 2010”, please click here.

CPF changes in the pipeline

Measures proposed in the Budget Statement for the Financial Year 2011 delivered on 18 February 2011 included the following CPF changes:

The employer CPF contribution rate will be raised by another 0.5 percentage point, from 15.5% to 16% (for employees aged 50 years and below). The 0.5 percentage point increase will take effect from 1 September 2011. For further information, please

contact:

Michèle FooTel: +65 6890 7614 [email protected]

Kelvin Wong Tel: +65 6890 7644 [email protected]

The CPF salary ceiling will be revised from S$4,500 to S$5,000 per month. The change will apply to all age groups and will take effect from 1 September 2011.

For more information about these CPF changes from the CPF website www.cpf.gov.sg, please click here.


Insurance

Parliament introduces Deposit Insurance and Policy Owners’ Protection Schemes Bill 2011: Strengthening protection of depositors and policy owners

On 10 March 2011, the Deposit Insurance and Policy Owners’ Protection Schemes Bill 2011 (the “DI-PPF Bill”) was tabled in Parliament for first reading. The DI-PPF Bill will provide for enhancements to the Deposit Insurance Scheme (the “DI Scheme”) and the Policy Owners’ Protection Scheme (the “PPF Scheme”).

Background information

The DI Scheme and the PPF Scheme aim to compensate depositors and policy owners respectively, in the event that their bank or insurer fails. Currently, the DI Scheme is governed under the Deposit Insurance Act and the PPF Scheme is governed under the Insurance Act. The provisions on the DI and PPF Schemes will be consolidated under the DI-PPF Bill with modifications which are intended to strengthen the protection of depositors and policy owners. Some of these key changes are elaborated below.

The Monetary Authority of Singapore (the “MAS”) had conducted a few rounds of consultation exercise in 2005, 2009 and 2010 on proposed enhancements to the DI and PPF Schemes. The latest consultation paper released by the MAS in December 2010 focused on the legislative amendments to implement the enhancements to the Schemes. On 7 March 2011, the MAS issued its response to feedback received pursuant to the MAS consultation in December 2010 (the “MAS Response”). The summary below also covers salient issues which were addressed in the MAS Response.




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Enhanced DI Scheme

Coverage of Scheme

As with the current DI Scheme, the DI Scheme under the DI-PPF Bill (the “Enhanced DI Scheme”) will cover Singapore dollar deposits in savings, fixed deposit and current accounts placed with a member of the DI Scheme. All full banks or finance companies must be members of the DI Scheme (the “Scheme Members”).

The following changes will be introduced to the scope of coverage of the Enhanced DI Scheme:

Insured depositors to include entities other than individuals and charities. Depositors who are insured under the Enhanced DI Scheme will be extended to all non-bank depositors (for e.g. companies, partnerships, unincorporated entities, etc.) in addition to individuals and charities who are covered under the current DI Scheme.

Common coverage limit to increase. The coverage limit for deposits in savings, fixed deposit and current accounts of an insured depositor (the “common coverage limit”) of each Scheme Member will be raised from S$20,000 to S$50,000.

CPF monies coverage limit to increase. An insured depositor’s monies placed with a Scheme Member under the Central Provident Fund (the “CPF”) Investment Scheme enjoys a separate coverage limit (the “CPF coverage limit”) which will be raised to S$50,000 as well. The depositor’s monies under the CPF Minimum Sum Scheme that is currently aggregated under the common coverage limit will be aggregated under the CPF coverage limit instead.

Insured deposits to include deposits used as security. Depositscovered under the Enhanced DI Scheme will include any deposits of an insured depositor including his deposits which have been pledged, charged or secured as collateral to a Scheme Member. However, the MAS Response clarified that funds which are debited from an insured depositor’s current account and placed in a pooled account not attributable to any single customer will not be covered under the Enhanced DI Scheme. Scheme members are reminded to ensure their depositors understand the implications of any transaction including collateral arrangements on the depositors’ coverage under the Enhanced DI Scheme.

Gross payout approach

Currently, in the event of a Scheme Member fails, the compensation payable to an insured depositor is to be offset against the depositor’s liabilities to the Scheme Member. The compensation payout approach under the Enhanced DI Scheme will be based on the gross amount of insured deposits of each insured depositor without offsetting his liabilities. The liquidator of the Scheme Member will be empowered to recover the depositor’s liabilities from him.

Transitional DI coverage for merged Scheme Member

The DI-PPF Bill provides that when a Scheme Member merges with or acquires another Scheme Member, deposits of an insured depositor which were previously insured separately in each of the merging Scheme


members, will remain separately insured up to the coverage limit, and will not need to be aggregated for a period of one year from the date of the merger or acquisition.

Enhanced PPF Scheme

All direct insurers registered to carry on life business or general business under the Insurance Act must participate in the PPF Scheme under the DIPPF Bill (the “Enhanced PPF Scheme”).

Coverage of Scheme

The following changes will be introduced to the scope of coverage of the Enhanced PPF Scheme:

Scheme extended to accident and health policies and additional classes of general insurance policies. Two Funds have been established under the PPF Scheme governed by the Insurance Act, namely, the Policy Owners’ Protection Life Fund (the “PPF Life Fund”)which covers all life insurance policies and the Policy Owners’ Protection General Fund (the “PPF General Fund”) which covers compulsory motor third party injury and work injury compensation insurance policies. The Enhanced PPF Scheme will extend its coverage to accident and health (“A&H”) policies and additional classes of general insurance policies, including, individual and group A&H insurance and personal motor insurance.

Level of coverage to increase. Currently, the PPF Life Fund covers 90% of all life policies while the PPF General Fund covers 100% of all compulsory insurance policies. The PPF Life Fund will be enhanced to cover 100% of protected liabilities up to a maximum limit prescribed in the DI-PPF Bill. The PPF General Fund will also provide 100% coverage but there will not be any maximum limit for protected liabilities of general insurance policies.

Pre-funded approach

The Enhanced PPF Scheme will introduce a pre-funded approach which will require the members of the scheme to pay levy contributions annually into the PPF Life Fund and PPF General Fund.

Reference materials

Please click on the links below to view the reference materials relating to the above developments:

DI-PPF Bill (available from the Singapore Parliament website www.parliament.gov.sg);

Explanatory Brief: Deposit Insurance and Policy Owners’ Protection Schemes Bill (available from the MAS website www.mas.gov.sg);

Annex 1: Key Provisions in the DI-PPF Bill (available from the MAS website www.mas.gov.sg); and

MAS Response to Feedback Received - Consultation on Deposit Insurance and Policy Owners’ Protection Schemes Bill (available from the MAS website www.mas.gov.sg).



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Articles about earlier MAS consultation exercises concerning the Enhanced DI Scheme were featured in previous issues of the Allen & Gledhill Legal Bulletin. To read the articles, please click on the following links:

MAS issues consultation paper on “Review of Deposit Insurance Scheme in Singapore” (March 2010)

MAS responds to feedback on proposals to enhance Deposit Insurance Scheme: Insuring all non-bank depositors and raising coverage to S$50,000 (September 2010)

MAS conducts public consultation on draft Deposit Insurance and Policy Owners’ Protection Schemes Bill: Strengthening protection of depositors and policy owners (January 2011)

Articles about earlier MAS consultation exercises concerning the Enhanced PPF Scheme were featured in previous issues of the Allen & Gledhill Legal Bulletin. To read the articles, please click on the following links:


Francis Mok Tel: +65 6890 7786 [email protected]


Corina Song Tel: +65 6890 7570 [email protected]

MAS consults on Policy Owners’ Protection Fund schemes and insurance resolution (January 2010)

MAS issues response to feedback received on two insurance related public consultations: (1) Policy Owners’ Protection Fund (2) Insurance Resolution (August 2010)

MAS conducts public consultation on draft Deposit Insurance and Policy Owners’ Protection Schemes Bill: Strengthening protection of depositors and policy owners (January 2011)


Parliament introduces Insurance (Amendment) Bill 2011: Dealing with distressed insurers

On 10 March 2011, the Insurance (Amendment) Bill 2011 (the “Bill”) was introduced in Parliament. The Bill seeks to amend the Insurance Act to empower the Monetary Authority of Singapore (the “MAS”) to deal with a distressed registered insurer and to facilitate the transfer of policies from the distressed insurer.

It is stated in the Explanatory Brief issued by the MAS that “the insurance regulatory framework will be strengthened to allow MAS to act swiftly when dealing with a distressed insurer, in order to preserve financial stability and protect policy owners”. For example, the MAS will be able to take control of a distressed insurer and determine the sale or transfer of assets and liabilities, or ownership, of the insurer, or to approve the appointment of a liquidator for an insurer in liquidation.

Another change arising from the Bill is the abolition of the current requirement for registered insurers to maintain a S$500,000 statutory deposit for each class of insurance business that they are registered to carry out. The deposit was intended to provide some security for policyholders if their insurer was wound up. With the enhanced protection for policyholders under the Deposit Insurance and Policy Owners’ Protection Schemes Bill 2011, the MAS had decided to abolish the statutory deposit.





Background

From 29 December 2010 to 28 January 2011, the MAS conducted a public consultation and sought comments on a draft version of the Bill.

An article about the MAS public consultation was featured in a previous issue of the Allen & Gledhill Legal Bulletin (January 2011). To read the article entitled “MAS conducts public consultation on proposed changes to Insurance Act: Insurance resolution”, please click here.

Reference materials For further information, please contact:



Corina Song Tel: +65 6890 7570 [email protected]

Please click on the following links to access the required reference information:

Insurance (Amendment) Bill 2011 (available from the Singapore Parliament website www.parliament.gov.sg)

Explanatory Brief (available from the MAS website www.mas.gov.sg)

Annex 2: Key Provisions in the Insurance (Amendment) Bill(available from the MAS website www.mas.gov.sg)


UK Supreme Court determines proximate cause of loss under marine insurance policy on cargo: Perils of the seas or inherent vice, question of fact based on commonsense principles

Global Process Systems Inc v Syarikat Takaful Malaysia Berhad [2011] UKSC 5

In Global Process Systems Inc v Syarikat Takaful Malaysia Berhad, the UK Supreme Court had to consider whether loss relating to the broken legs of an oil rig was covered under a marine insurance policy on cargo which incorporated the Institute Cargo Clauses (A) of 1 January 1982. The policy covered “all risks of loss or damage to the subject-matter insured”. However, one of the clauses in the policy excluded cover for “loss, damage or expense caused by inherent vice or nature of the subject matter insured”. The central issue before the court was as to the meaning of this exception to the cover. In addressing this issue, the court had to determine the proximate cause of the loss, which in this case, could either be a “peril from the sea” or “inherent vice”. If it was the latter cause, then the loss from the broken legs of the oil rig would be excluded from the policy. The court also referred to, among others, the Marine Insurance Act 1906 which is applicable in Singapore by virtue of the Application of English Law Act. The court decided that the proximate cause of the loss was a “peril of the sea” and not “inherent vice”. As such, the insurers could not rely on the exception in the policy to avoid liability.

Facts

The subject matter of the marine insurance policy was an oil rig which had been laid up in Galveston, Texas. It was then purchased by the respondents (the assured under the policy) for conversion into a mobile offshore production unit for use off the coast of East Malaysia. The insurance covered the loading, carriage and discharge of the oil rig on a towed barge from






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Galveston in the United States to Lumut in Malaysia. The rig was carried on the barge with its legs in place above the jackhouse, so that the legs extended some 300 feet into the air. The barge made a stop at Saldanha Bay, just north of Cape Town, where repairs were made to the legs before the voyage resumed. A few days later, the starboard leg broke off at the 30 foot level and fell into the sea. The following evening the forward leg broke off at the same level, followed by the port leg which broke off at the 18 foot level about half hour later. Both these legs also fell into the sea. The loss resulted from the metal fatigue in the three legs. Fatigue is a progressive cracking mechanism resulting from repeated or fluctuating (cyclic) stresses each at a level lower than that required to cause fracture of an uncracked component. Once the first leg had failed, the stresses on the remaining leg would increase.

The stresses in the present case were generated from the effect that the height and direction of the waves had on the pitching and rolling motion of the barge and thus on the legs. It was common ground that what the barge experienced was within the range of weather that could reasonably have been contemplated for the voyage.

It was known from the outset that the legs of the rig were at risk of fatigue cracks during the voyage. The legs were inspected at Galveston by experts appointed by the assured and approved by the insurers. It was a condition of the policy that the appointed surveyors approved the arrangements for the tow. These surveyors issued a Certificate of Approval which required the legs be inspected when the barge reached Cape Town (roughly the half way point) for crack initiation; so that remedial work could be undertaken should it be found necessary. When the rig was examined at Saldanha Bay, a considerable degree of fatigue cracking was found; and repairs were made to reduce the stress concentrations in some areas. However, the repairs did not prevent the final failure of the legs a few days later.

It was the loss of the three legs that was the subject matter of the claim under the policy. The insurers rejected the claim. The matter went before the Commercial Court and then on appeal to the Court of Appeal before finally reaching the Supreme Court.

Proximate cause of loss

Both at first instance and in the Court of Appeal, the judges expressed their task as seeking to find the “proximate cause” of the loss because section 55(1) of the Marine Insurance Act 1906 provides that:

“Subject to the provisions of this Act, and unless the policy otherwise provides, the insurer is liable for any loss proximately caused by a peril insured against, but, subject as aforesaid, he is not liable for any loss which is not proximately caused by a peril insured against.”

In general terms therefore, whether or not a loss is covered by a marine policy depends on ascertaining its proximate cause. In the present case, the two main candidates for “proximate cause” were perils of the seas, in the form of the stresses put upon the rig by the height and direction of the waves encountered by the barge, and inherent vice or nature of the subject matter insured.

Commercial Court decision

The trial judge held that the insurers had proved that “the proximate cause of the loss was the fact that the legs were not capable of withstanding the normal incidents of the insured voyage from Galveston to Lumut, including


the weather reasonably to be expected”. The judge relied on the case of Mayban General Insurance v Alstom Power Plants Ltd [2004] 2 Lloyd’s Rep 609 (“Mayban”) which held that goods tendered for shipment must be capable of withstanding the forces that they could ordinarily be expected to encounter in the course of the voyage and that if the conditions encountered by the vessel were no more severe than could reasonably have been expected, the conclusion must be that the real cause of the loss was the inherent inability of the goods to withstand the ordinary incidents of the voyage. The trial judge regarded the case as applying the correct test although this was later rejected by the Court of Appeal and the Supreme Court.

As such, the trial judge concluded that the cause of the loss was inherent vice within the meaning of the policy and that accordingly the insurers were not liable for the claim.

Court of Appeal decision

The Court of Appeal took a different view and concluded that the proximate cause of the loss was an insured peril in the form of the occurrence of a “leg breaking wave”, which resulted in the starboard leg breaking off, leading to greater stresses on the remaining legs, which then also broke off. The insurers appealed to the Supreme Court.

Supreme Court decision

The Supreme Court agreed with the submission by the assured that the effect of applying the test adopted by the trial judge would be to reduce much of the purpose of cargo insurance, for the cover would then only extend to loss or damage caused by perils of the seas that were exceptional, unforeseen or unforeseeable, and not otherwise. This, it was submitted, would go far to frustrate the very purpose of all risks cargo insurance, which is to provide an indemnity in respect of loss or damage caused by, among other things, all perils of the seas.

The Supreme Court referred to the Marine Insurance Act 1906 and took the view that the provisions of the 1906 Act do not fit easily with the proposition that inherent vice or nature of the subject-matter insured means that unseaworthy goods are not covered against loss or damage attributable to that unseaworthiness. The court was of the view that, under the 1906 Act, the fact that goods were not reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure insured would not automatically deprive the assured of cover.

The Supreme Court held the view that perils of the seas were not confined to cases of exceptional or unforeseeable weather; while inherent vice or nature of the subject-matter insured had never, before Mayban, been defined as encompassing any fortuitous external accident or casualty that was unexceptional or foreseen or foreseeable.

The Supreme Court found the trial judge to have erred in giving the phrase “inherent vice or nature of the subjectmatter insured” too wide a meaning and giving the risk of perils of the seas too narrow a meaning, by in effect including in the former and excluding from the latter external fortuities that were unexceptional or which were foreseen or foreseeable, and then answering the question of fact on this erroneous basis. All or virtually all goods are susceptible to loss or damage from the fortuities of the weather on a voyage. However this would not mean that such loss or damage arises from the nature of the goods. Conversely, it arises from the fact that the goods have encountered one of the perils of the seas.


The Supreme Court also decided that the proximate cause of loss was a question of fact based on commonsense principles. Based on this, the Supreme Court concluded that the proximate cause of the loss in the present case was neither inherent vice nor ordinary wear or tear or the ordinary action of the wind and waves. The proximate cause of the loss was an external fortuitous accident or casualty of the seas which took the form of the rolling and pitching of the barge in the sea conditions encountered catching the first leg at just the right moment to produce stresses sufficient to cause the leg to break off, thereby leading to increased stresses on the remaining legs and their subsequent breakage.


Corina Song Tel: +65 6890 7570 [email protected] Accordingly, the Supreme Court dismissed the insurers’ appeal.


Real Estate


On 16 March 2011, the Urban Redevelopment Authority (the “URA”) issued a consultation paper on proposed amendments to the Housing Developers (Control & Licensing) Act (the “HDCLA”) and the Housing Developers Rules (the “HDR”). Details of the proposed changes are set out in Annex A to the consultation paper.

The purpose of these amendments is to give home-buyers better access to accurate and timely information about the market and the units they are buying.

The proposed amendments cover a range of areas. The key amendments are set out briefly below.

Showflats: There are currently no requirements to ensure that a showflat depicts the actual unit accurately. The proposed amendment in this regard would require developers to comply with a prescribed list in setting up a showflat, to ensure accurate final depiction.

Price lists: At present, developers are not obliged to display the price list of the units available for sale. The proposed amendment stipulates that price lists should be made available at least two days before the launch. Those projects being launched in phases would require updated price lists to be made available at each phase.

More information on housing project: Currently, developers are required to provide basic information on a housing project before the issuance of an Option-to-Purchase. The proposed amendments would enhance this list, requiring developers to provide more detailed information to home-buyers (such as a drawn-to-scale location, site and floor plan).

Developer’s track record: There is currently no requirement for developers to disclose their track record in real estate development to home-buyers. In order to allow home-buyers to determine whether they wish to buy from less experienced developers or new developers with no



track record, the proposed amendments require developers to provide information on at least one completed project, if any, to prospective home-buyers before the issuance of the Option-to-Purchase. This completed project could have been completed by the developer itself, a related company or by a director of the developer company.

Publish transacted prices: Transacted prices are currently compiled via the URA’s monthly survey and published on the 15th day after the end of the month. This means that the data is published about two to six weeks after the transactions. The consultation paper proposes to require developers to lodge the prices of transacted units with the URA on a weekly basis - meaning that the data will be published one to two weeks after the transaction. This proposal aims to give prospective home-buyers access to more timely and comprehensive information on the prices of units sold.

Obtaining consent for changes: There are currently no restrictions on developers making minor changes to the approved plans of the units without consulting with the home-buyers. The proposed amendment in this regard seeks to require developers to obtain the homebuyer’s consent for changes made after the sale of the units to the approved plans or specifications which affect the homebuyer’s unit.

Extension of current controls on adverts to those on websites: It is proposed to extend the current requirement to provide basic information on the housing project to websites, and not only newspapers and sales brochures.

Consultation period

The consultation period for the proposed changes to the HDCLA and the HDR runs from 17 March 2011 to 18 April 2011.

Reference materials For further information, please contact:

Ho Kin San Tel: +65 6890 7928 [email protected]

Ernest Teo Tel: +65 6890 7967 [email protected]

The following materials are available from the URA website www.ura.gov.sg. Please click on the links below to access.

URA public consultation

Annex A - List of proposals


Securities & Futures

English High Court considers effect of section 2(a)(iii) of ISDA Master Agreement

Lomas v JFB Firth Rixson Inc & Ors [2010] EWHC 3372 (Ch)

The English High Court’s decision in Lomas v JFB Firth Rixson Inc & Ors is a noteworthy case which deals with the interpretation of a term in the ISDA Master Agreement (the “Master Agreement”), a set of widely used standard terms for a majority of over-the-counter derivatives transactions globally.




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The court held that section 2(a)(iii) of the Master Agreement, which provided that the payment obligations of the parties in the Master Agreement were subject to the conditions precedent in the provision, would suspend the payment obligations of the parties when a condition precedent set in. If the condition precedent continued to apply until the expiry of the term of a derivative transaction, the parties would be released from their payment obligations which arose after the condition precedent had set in.

Facts

This matter centred on the construction of five interest rate swap agreements (the “Swaps”) entered into by Lehman Brothers International Europe (“LBIE”) and a few commercial manufacturing and/or trading companies (the “Counterparties”) for the purpose of hedging floating interest rate risk arising from the Counterparties’ borrowings. Each Swap incorporated the terms of the Master Agreement.

When LBIE went into administration, the Counterparties relied on section 2(a)(iii) of the Master Agreement (“section 2(a)(iii)”) to refuse making payments under the Swaps which would otherwise have fallen due to LBIE on subsequent payment dates. Section 2(a)(iii) provided that payment obligations of the party to the Swaps were subject to “the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing…”. LBIE’s entry into administration constituted an “event of default” under the Swaps.

The Counterparties argued that as long as LBIE was in administration, the condition precedent in section 2(a)(iii) applied, and so, there was no payment due to LBIE under the Swaps. The administrator challenged the Counterparties’ interpretation of section 2(a)(iii) and sought the English High Court’s directions in this regard.

Interpretation of each Master Agreement peculiar to its facts

The English High Court highlighted, at the outset, the general principles for construing the Master Agreement. It held that the context in which each Master Agreement is used is important in interpreting section 2(a)(iii) because the Master Agreement does not ordinarily constitute the entirety of the parties’ bargain in relation to a transaction. Each transaction is normally regulated by the Master Agreement together with schedules and confirmations which are transaction specific and the latter prevail over the Master Agreement in the event of any inconsistency.

Condition precedent in section 2(a)(iii) was suspensory

Some of the Counterparties argued that section 2(a)(iii) was “once and for all” in its effect, namely, that if an “event of default” had occurred and was continuing on a subsequent payment date by the non-defaulting party, then that payment obligation never arose, and would not thereafter arise in the event that the default was cured. The English High Court disagreed with the Counterparties’ argument and held that section 2(a)(iii) merely suspended the coming into effect of the payment obligation of a non-defaulting party until the default was cured and the condition precedent in section 2(a)(iii) was satisfied.

Suspended payment obligation remained until expiry of term of transaction

After concluding that the effect of section 2(a)(iii) was merely suspensory, the English High Court considered the duration of the suspension. It was held that the Counterparties’ suspended payment obligation remained in


suspense until the expiry of the term of the Swaps. In this regard, the court rejected the alternative argument that the payment obligation was suspended indefinitely pursuant to section 2(a)(iii).

Further, the English High Court held that if the “event of default” continued upon the expiry of the term of a transaction, any payment obligation that was suspended by section 2(a)(iii) would not survive the termination of the transaction at the end of its natural term.

No infringement of anti deprivation rule

It is a tenet of the insolvency law in England as well as Singapore that the property of an insolvent company that is being liquidated must be applied in settlement of its liabilities pari passu (i.e. to be shared pro rata among all creditors). Any contract made by the company providing for a distribution of its property for the benefit of a few selected unsecured creditors which runs counter to the pari passu rule is contrary to public policy, and the law relating to the distribution of the insolvent’s property under the insolvency legislation must prevail (the “anti deprivation rule”).

In England, the anti deprivation rule extends to a company that has been put under administration. The administrator of LBIE argued that section 2(a)(iii) infringed the anti deprivation rule because, by virtue of the operation of the condition precedent in section 2(a)(iii), LBIE was deprived of the payments due from the Counterparties under the Swaps when LBIE went into administration. So, section 2(a)(iii) had removed these payments from the assets of LBIE which were, meant for distribution to LBIE’s creditors paripassu, or for beneficial utilisation in the course of its administration.

The English High Court rejected the administrator’s argument and held that section 2(a)(iii) did not contravene the anti deprivation rule in relation to LBIE. As a general rule, the court noted that where the asset of an insolvent company is a chose in action representing the quid pro quo (i.e.value/consideration) for something already done, sold or delivered before the onset of insolvency, the court is slow to deprive the insolvent company of such asset. By contrast, if the asset is a chose in action consisting of the quid pro quo (i.e. value/consideration) for services yet to be rendered or something still to be supplied by the insolvent company in an ongoing contract, as in the present matter, then the court will be ready to “insert a flaw” in such asset and hold that the anti deprivation rule does not apply to such asset.

However, the English High Court was prudent to limit its decision that section 2(a)(iii) did not contravene the anti deprivation rule to the interest rate swaps agreements which were the subject matter in the present context. The court left open an option that a different conclusion may be reached for a Master Agreement that is used for a different kind of transaction.

In addition, the court highlighted that if the parties of the Swaps had not taken the position that section 2(a)(iii) operated on a net as opposed to a gross basis, the court would not have held that the anti deprivation rule did not apply in the present matter. Contrary to what an earlier English decision on forward freight agreements had held in respect of section 2(a) of the Master Agreement, the parties of the Swaps had conceded that section 2(a)(iii) operated on a net basis, namely, the non-defaulting party in the interest rate swaps agreement could not enforce the defaulting party’s payment obligations without having its own reverse payment obligation taken


Aaron Lee Tel: +65 6890 7852 [email protected]





into account. The court added that if section 2(a)(iii) was construed to operate on a gross basis, it would hold that section 2(a)(iii) contravened the anti deprivation rule because it would impose a greater financial obligation on LBIE in favour of a particular creditor by reason of LBIE’s insolvency.


SGX


The Singapore Exchange (the “SGX”) has reminded all listed companies that they may restructure their assets or spin off their existing businesses for a separate listing only if such proposals are in the interests of their shareholders. To show this, directors must demonstrate that it would be detrimental to shareholders to maintain the listed company’s current listing structure.


Shawn Chen Tel: +65 6890 7896 [email protected]

Leonard Ching Tel: +65 6890 7730 [email protected]

Chua Bor Jern Tel: +65 6890 7772 [email protected]

Foong Yuen Ping Tel: +65 6890 7622 [email protected]

Jerry Koh Tel: +65 6890 7770 [email protected]

Long Pee Hua Tel: +65 6890 7746 [email protected]

Tan Tze Gay Tel: +65 6890 7712 [email protected]

Teh Hoe Yue Tel: +65 6890 7116 [email protected]

Sharon Wee Tel: +65 6890 7089 [email protected]

Yeo Wico Tel: +65 6890 7775 [email protected]

The SGX has also reiterated that directors of listed companies must be able to demonstrate to the SGX that the proposals will bring about tangible economic benefits to shareholders that are substantial, quantifiable and clearly achievable. The SGX will take these factors into account when applying the requirements for restructuring and spin-off proposals by listed companies.

The SGX stated these requirements in its Regulator’s Column on 24 February 2011.

Earlier guidance on key considerations for restructuring and spin-offs

Previously on 3 February 2010, the SGX had provided guidance on the key areas it will consider when reviewing such proposals. Some key considerations are:

(i) whether the proposal complies with the chain listing principle set out in the Listing Manual;

(ii) whether the entities seeking a separate listing have clearly differentiated businesses and assets that are independently managed; and

(iii) whether the remaining businesses of the listed entities are viable, profitable and continue to comply with the Mainboard admission criteria.

Reference material

To read the full text of the SGX release in the Regulatory Column of the SGX website www.sgx.com, please click here.













www.sgx.com

General

Charities Act amended with effect from 1 March 2011: More charities to comply with controls relating to charity accounts and audits

Amendments to the Charities Act (the “Act”), which were passed in Parliament on 22 November 2010 in the form of the Charities (Amendment) Act 2010, came into effect on 1 March 2011.

The Act has been amended to facilitate its operation, in particular:

To clarify the Act by replacing various terms with terms that are more readily understood by the charity sector, namely, the term “trusts” is replaced by the term “governing instruments”, and the term “charity trustees” is replaced by the terms “governing board members” or “key officers”, as appropriate;

To provide relief for governing board members of charities from personal liability, similar to relief currently available to trustees and directors under the Trustees Act, the Companies Act and the Business Trusts Act;

To make provision to extend the controls relating to charity accounts and audits, including the application of accounting standards issued by the Accounting Standards Council, to more charities, including exempt charities and companies registered under the Act, and to make a related amendment to the Companies Act; and

To consolidate and enhance the provisions relating to the regulation of fundraising appeals.

Reference materials

Please click here to access the Act, which is available on the Charity Portal, www.charities.gov.sg

An article about the changes to the Act when they were first introduced in Parliament were featured in a previous issue of the Allen & Gledhill Legal Bulletin (October 2010). To read the article entitled “Parliament introduces Charities (Amendment) Bill 2010: More charities to comply with controls relating to charity accounts and audits”, please click here


Chan Hian Young Tel: +65 6890 7813 [email protected]


News

Placement of shares in Noble Group Limited

Noble Group Limited (the “Company”) has completed the placement of 306,546,000 ordinary shares in the capital of the Company. The placement raised net proceeds of approximately S$625 million.

The placement agents were Goldman Sachs (Singapore) Pte. and The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch.


www.charities.gov.sg


Advising the Company as to Singapore law are Allen & Gledhill LLP Partner Leonard Ching and Senior Associate Alvin Zhuang.


CapitaMall Trust Management Limited’s S$2.5 billion Retail Bond Programme

CapitaMall Trust Management Limited (as manager of CapitaMall Trust (“CMT”)) (the “CMT Manager”) has announced the establishment by HSBC Institutional Trust Services (Singapore) Limited, as trustee of CMT (the “Issuer”), of a S$2.5 billion Retail Bond Programme.

The CMT Manager has also announced an offer of up to S$200 million in principal amount of bonds due 2013 by way of:

(a) An offer of up to S$50 million in principal amount of bonds to the public in Singapore through electronic application; and

(b) An offer of up to S$150 million in principal amount of bonds to institutional and other investors.

Advising DBS Bank Ltd. (in its capacities as the Arranger, the Issuing and Paying Agent and the Agent Bank), Boardroom Corporate & Advisory Services Pte. Ltd. and DBS Trustee Limited as to Singapore law are Allen & Gledhill LLP Partners Margaret Chin, Jerry Koh, Long Pee Hua and Teh Hoe Yue, Senior Associate Tan Ngee Hao and Associates Gillian Cheong and Daniel Yeo.


ShangriLa Asia Limited’s one-for-twelve rights issue

ShangriLa Asia Limited (the “Issuer”) has raised approximately HK$4.69 billion via a rights issue to its shareholders (the “Rights Issue”). The proceeds of the Rights Issue will be used to settle the Issuer’s bank loans and fund its on-going hotel expansion programme, primarily in the People’s Republic of China.

Advising the Issuer as to Singapore law are Allen & Gledhill LLP Partners Lim Mei and Hilary Low and Associate Au Yeong Wai Mun.


STATS ChipPAC Ltd.’s issue of US$200 million aggregate principal amount of 5.375% Senior Notes due 2016

STATS ChipPAC Ltd. (the “Company”) has issued US$200 million aggregate principal amount of 5.375% Senior Notes due 2016 (the “Notes”).The proceeds from the issue of the Notes, together with cash in hand, were used to prepay in full the US$234.5 million outstanding under the Company’s US$360 million senior term loan facility. Deutsche Bank AG, Singapore Branch acted as the initial purchaser for the offer of the Notes.


Advising the Company are Allen & Gledhill LLP Partners Tan Tze Gay and Bernie Lee.


Cathay Asset Management Company Limited’s mandatory general offer for Jaya Holdings Limited

Cathay Asset Management Company Limited (the “Offeror”), on behalf of itself and a consortium of acquirers (the “Consortium”), entered into a share purchase agreement for the acquisition of 422,093,958 ordinary shares in the capital of Jaya Holdings Limited (“Jaya”) held by Nautical Offshore Services. This represents approximately 54.70% of the issued share capital of Jaya (the “Initial Acquisition”). The Initial Acquisition is valued at approximately S$202.6 million.

Pursuant to the Initial Acquisition, the Offeror (on behalf of itself and the Consortium) has made a mandatory unconditional cash offer (the “Offer”) for all of the ordinary shares in the capital of Jaya, excluding those shares owned, controlled, or agreed to be acquired by the Offeror and other parties acting in concert with it.

The Offer is valued at approximately S$167.8 million.

Advising the financial adviser of the Offeror, being Deutsche Bank AG, Singapore Branch, are Allen & Gledhill LLP Partner Christopher Koh and Senior Associate Wong Yi Jia.


Sunway City and SSTEC to develop Tianjin project

Sunway City Bhd (“SunCity”) has entered into a collaboration agreement with Sino-Singapore Tianjin Eco-City Investment and Development Co Ltd (“SSTEC”) to form a 60:40 joint venture to codevelop an ecothemed project in Tianjin Binhai New Area in China with an expected total investment value of about RMB 5 billion. SunCity has also nominated its wholly owned Singapore subsidiary Sunway City (S’pore) Pte Ltd to enter into an equity joint venture contract with SSTEC to start Phase 1 of the joint venture development.

Advising SSTEC are Allen & Gledhill LLP Partners Penny Goh and Tan Boon Wah and Associates Shalene Jin and Jamie He.




Allen & Gledhill LLP has secured top honours at the International Financial Law Review (IFLR) Asia Awards 2011 by winning the Law Firm of the Year for Singapore award. The Firm was also awarded Private Equity Deal of the Year for its involvement in CVC Capital Partners’ acquisition of shares in PT Matahari Department Store.

For more information, please click here.



Allen & Gledhill LLP has won the following Islamic Finance news Deals of the Year 2010 awards:

Singapore Deal of the Year: Danga Capital (Khazanah)

Corporate Finance Deal of the Year: Danga Capital (Khazanah)

IPO Deal of the Year: Sabana S$533 million REIT

Real Estate Deal of the Year: Sabana S$533 million REIT




Allen & Gledhill LLP has won the AsianMENA Counsel’s Deals of the Year 2010 awards for the following deals:

ATIC’s acquisition of Chartered Semiconductor Manufacturing

Singapore Sports Hub

Global Logistic Properties IPO





Allen & Gledhill extends its lead in Chambers Asia 2011

Allen & Gledhill LLP has added to its top tier rankings in the 2011 edition of Chambers Asia for the following practice areas within the Singapore jurisdiction:

Banking and Finance

Capital Markets

Corporate / M&A

Intellectual Property

Investment Funds

Projects and Energy

Real Estate

Restructuring / Insolvency

Shipping

Tax



Allen & Gledhill LLP One Marina Boulevard #28-00 Singapore 018989

Telephone +65 6890 7188 Facsimile +65 6327 3800 EFS mailbox Id ale7001

ale7003 E-mail [email protected] Website www.allenandgledhill.com

Allen & Gledhill LLP (UEN/Registration No. T07LL0925F) is registered in Singapore under the Limited Liability Partnerships Act (Chapter 163A) with limited liability. A list of the Partners and their professional qualifications may be inspected at the address specified above. Contact particulars of the Partners may be found on the Allen & Gledhill LLP website www.allenandgledhill.com


www.allenandgledhill.com

www.allenandgledhill.com

Legal Bulletin - Lexology

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Transcript of Legal Bulletin - Lexology