Материал: Amy C Kläsener

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Singapore

Philip Jeyaretnam SC and Lau Wen Jin1

Frequency of M&A disputes

M&A disputes, especially M&A disputes with a foreign element, have been increasing and are expected to increase in the coming years, fuelled by increased M&A activity in Singapore and the region.2 Singapore recorded 688 M&A deals valued at a total of $99 billion in 2018, compared with 698 deals valued at $75.4 billion in 2017 and 684 deals valued at $82.7 billion in 2016.

In 2018, there were 458 cross-border M&A deals in Singapore registering a total of $89.1 billion (an increase from $65.9 billion in 2017), and the bulk of total deal value came from 315 outbound transactions worth $81.1 billion, contributing to over 82 per cent of the total value in 2018 for M&A deals (cross-border M&A deals contributed to over 72 per cent of the total value of M&A deals in 2017).3 Domestic transactions contributed to only 10 per cent of total M&A deal value with 230 deals worth $9.9 billion.4 The increasingly large proportion of cross-border M&A deals is expected to increase the risk of disputes, perhaps because of differing cultures, expectations and practices. Indeed, there has been a steady increase in corporate disputes (which include M&A disputes) handled by the Singapore International Arbitration Centre (SIAC) from about 46 to 54 to 64 to 61 for the years 2015, 2016, 2017 and 2018, respectively.5

1Philip Jeyaretnam SC is a senior partner and Lau Wen Jin is a senior associate at Dentons Rodyk & Davidson LLP.

2Srividya Gopalakrishnan & Ashish McLaren,Transaction Trail Annual Issue 2018, accessible: https://www.duffandphelps.com/insights/publications/valuation/duff-and-phelps-launches- transaction-trail-2018-report (last accessed 4 September 2019).

3ibid.

4ibid.

5Annual reports of the Singapore International Arbitration Centre, 2015, 2016, 2017 and 2018.

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Form of dispute resolution

The increase in cross-border M&A deals means that many of the disputes are likely to find their way into arbitration instead of litigation because arbitration is often perceived to be a neutral mode of dispute resolution among parties of different nationalities. Arbitration also has the advantage of privacy and confidentiality, as well as relative ease of enforcement around the world, by virtue of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Hence, M&A agreements executed in Asia with a cross-border element frequently specify arbitration as the designated mode of dispute resolution, with Singapore being the most frequently chosen seat.

The establishment of the Singapore International Commercial Court (SICC) in 2015 now offers contracting parties an additional option.The advantages of the SICC over arbitration are its high-quality commercial bench comprising eminent judges from other jurisdictions and Singapore’s own strong local bench.

Expert determinations are often adopted when the dispute is one of price adjustment under express contractual provisions.

Grounds for M&A arbitrations

Fraud and failure to disclose

Tort of deceit

A person who claims to have suffered loss from a fraudulent representation can seek to claim under contract law or in the tort of deceit.

The elements to be established in a claim under the tort of deceit are as follows:

•there must be a representation of fact made by words or conduct;

•the representation must be made with the intention that it should be acted on by the

claimant, or by a class of persons that includes the claimant;

•it must be proved that the claimant had acted on the false statement;

•it must be proved that the claimant suffered damage by so doing; and

•the representation must be made with knowledge that it is false; it must be wilfully false, or at least made in the absence of any genuine belief that it is true.6

The claimant must prove actual fraud.7 The allegation of fraud is a serious one, and the standard of proof is that based on a balance of probabilities; but the more serious the allegation, the more the party on whose shoulders the burden of proof falls may have to do to

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establish his case.8 This fraud is proved only when it is shown that a false representation has been made knowingly, or without belief in its truth, or recklessly, without caring whether it be true or false.9 Dishonesty is the touchstone that distinguishes fraudulent misrepresentation from other forms of misrepresentation.10 It is the representor’s own (subjective) belief that is crucial.This must be ascertained by the court based on the objective evidence available, but the court cannot substitute its own view as to what it thinks the representor’s belief was.11 Even if a reasonable person would think that the belief the representor claimed to have had at the time he or she made the statement was unreasonable, that would not render that particular statement fraudulent if the representor honestly believed in what he or she was representing.12 The concept of recklessness means indifference to or wilful disregard of the truth.13

Negligent misrepresentation

There are two different causes of action available for negligent misrepresentation: (1) liability in the tort of negligence for negligent misstatement, and (2) liability pursuant to Section 2(1) of the Misrepresentation Act.14 Liability for negligent misstatement in the tort of negligence requires the claimant to establish a duty of care owed by the representor to the representee that has been breached. On the other hand, liability under the Misrepresentation Act does not require the duty of care to be owed (but it does require a contractual relationship between the representor and the representee). Representees only need establish the elements of actionable misrepresentation, and the representors would be liable unless they can prove their honesty and that they were reasonable in their belief of the truth of the representation.

Innocent misrepresentation

An innocent misrepresentation would be actionable misrepresentation that has been proven but is not fraudulent or negligent.The following must be proven:15

•the representor made a false representation of fact; and

•the representation induced actual reliance on the part of the representor.

8TangYoke Kheng v. Lek Benedict [2005] 3 SLR(R) 263 at [14]; Alwie Handoyo v.Tjong Very Sumito and another and another appeal [2013] 4 SLR 308 at [159] to [161].

9Panatron Pte Ltd and another v. Lee Cheow Lee and another [2001] 2 SLR(R) 435, at [13].

10Raiffeisen Zentralbank Osterreich AG v.Archer Daniels Midland Co and others [2007] 1 SLR(R) 196 at [40].

11Wee 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 [37].

12ibid.

13ibid., at [34].

14Cap 390, 1994 Rev Ed.

15Andrew Phang Boon Leong (ed.),The Law of Contract in Singapore (Academy Publishing, 2012), at paras. 11.006 to 11.096.

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Burden of proof

Sections 103 and 105 of the Evidence Act16 place the burden of proving a fact on the party that asserts the existence of any fact in issue or relevant fact respectively.17 However, the Evidence Act, which applies to all judicial proceedings in any court in Singapore, expressly states that it does not apply to arbitration proceedings.18 Accordingly, the arbitral tribunal is not bound by the rules of evidence that apply in the courts of Singapore. Indeed, the parties are free to agree on the procedure to be followed by the arbitral tribunal.19 Failing such agreement, the tribunal may conduct the arbitration as it considers appropriate; and the power conferred on it includes the power to determine the admissibility, relevance, materiality and weight of any evidence.20 Nevertheless, it is commonly accepted that parties shall have the burden of proving the facts relied on to support their claim or defence,21 and the standard of proof is that of ‘balance of probability’.22

Section 2(1) of the Misrepresentation Act provides the claimant a significant advantage in terms of burden of proof in an action for misrepresentation under common law. This is because a claimant representee need only show that the representor made a false representation that induced the representee to enter into the contract, and the burden of proof then shifts to the representor to show that he or she had reasonable grounds to believe, and did believe up to the time the contract was made, that the facts represented were true.23 In contrast, the burden on a claimant suing for negligent misstatement in tort is significantly heavier as the claimant must establish a duty of care owed by the representor to the representee and that the representor breached this duty of care.

Unlike Section 2(1) of the Misrepresentation Act, it is not a defence in an action for innocent misrepresentation for the representor to claim a belief in a representation that was objectively false.24

Remedies

In domestic arbitration, the parties may agree on the arbitral tribunal’s powers as regards remedies,25 and unless otherwise agreed by the parties, the tribunal may award any remedy or relief that could have been ordered by the Singapore High Court if the dispute had been the subject of civil proceedings in that court.26 In international arbitration, subject to the law applicable to the dispute, the tribunal may grant similarly broad relief.27

16Cap 97, 1997 Rev Ed.

17Cooperatieve Centrale Raiffeisen-Boerenleenbank BA (trading as Rabobank International), Singapore Branch v. Motorola Electronics Pte Ltd [2011] 2 SLR 63 at [30].

18Evidence Act (Cap 97, 1997 Rev Ed), s. 2(1).

19Arbitration Act (Cap 10, 2002 Rev Ed), s. 23(1);Art 19(1) Model Law.

20Arbitration Act (Cap 10, 2002 Rev Ed), s. 23(2);Art 19(2) Model Law.

21See UNCITRAL Arbitration Rules,Art 27(1).

22Sundaresh Menon (ed.), Arbitration in Singapore:A Practical Guide (Sweet & Maxwell, 2nd Ed., 2018) at para. 11.038.

23Lim Koon Park and another v.Yap Jin Meng Bryan and another [2013] 4 SLR 150 at [38]–[39].

24 Forum Development Pte Ltd v. Global Accent Trading Pte Ltd and another appeal [1994] 3 SLR(R) 1097 at [19].

25Arbitration Act (Cap 10, 2002 Rev Ed), s. 34(1).

26ibid., s. 34(2).

27International Arbitration Act (Cap 143A, 2002 Rev Ed), s. 12(5).

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The Supreme Court of Judicature Act28 provides that the Singapore High Court has the power to ‘grant all reliefs and remedies at law and in equity, including damages in addition to, or in substitution for, an injunction or specific performance’.

In the case of actionable misrepresentation under contract law, the representee may rescind or affirm the contract.The right to rescind a contract entitles representees to have the contract set aside and be restored to their original position.This entails the avoidance of the transaction ab initio, and the restoration of the parties to the position occupied prior to the entry into the contract.The effect is the cancellation of all future obligations, and the retrospective restoration of any benefits that may already have been transferred at the date of the rescission.29 Until the moment of rescission (at the option of the representee), the contract is effective to create rights and obligations, and to transfer property.30 In the case of non-fraudulent (i.e., innocent and negligent) misrepresentation, the court may award damages in lieu of rescission under Section 2(2) of the Misrepresentation Act if the court is of the opinion that it would be equitable to do so, having regard to the nature of the misrepresentation and the loss that would be caused if the contract were upheld, as well as to the loss that rescission would cause to the other party.

Damages are available as of right for negligent and fraudulent misrepresentation, and breach of contract.

Measure of damages

The object of damages for breach of contract is to put the victim, so far as money can do it, in the same situation as if the contract had been performed. In other words, victims are entitled to be compensated for the loss of their bargain, so that their expectations arising out of or created by the contract are protected.31

On the other hand, the object of damages in tort (as in fraudulent and negligent misrepresentation) is to put victims into the position in which they would have been, had the tort not been committed.Tortious misrepresentation does, indeed, create new expectations, but the purpose of damages even for that tort is to put victims into the position they would have been in if the misrepresentation had not been made, rather than if the representation had been true.Victims may even be compensated for loss of profit if the tort impairs expectations which exist independently of it.32

The general principle is that damages for fraudulent misrepresentation would include all loss that flowed directly as a result of the entry by the plaintiff (in reliance on the fraudulent misrepresentation) into the transaction, regardless of whether the loss was foreseeable, and would include all consequential loss.33 The approach to awarding damages for the tort of deceit is broader than the tort measure applicable to that for negligent misrepresentation. In particular, damages awarded with respect to a negligent misrepresentation

28Cap 322, 2007 Rev Ed, Schedule 1, para. 14.

29Andrew Phang Boon Leong (ed.),The Law of Contract in Singapore (Academy Publishing, 2012), at para. 11.098.

30ibid., at para. 11.100.

31Wishing Star Ltd v. Jurong Town Corp [2008] 2 SLR(R) 909 at [28].

32ibid., at [28].

33ibid., at [21].

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