Legal News & Analysis – Asia Pacific – Singapore – Dispute Resolution

A Catalist-listed company had issued an announcement implicating one of its directors of acting in breach of his fiduciary duty. Held that the announcement was defamatory but that the defence of qualified privilege applied:

— Hady Hartanto v Yee Kit Hong & Ors [2014] SGHC 40 (Singapore, High Court, 4 March 2014)

This case involved a claim for defamation arising from statements made in a company announcement. The case is interesting for the court’s consideration of the issue of whether the statements, assuming they were defamatory, were protected by the defence of qualified privilege because they had been made pursuant to the listing rules on continuous disclosure requirements.

Facts

The company that had made the announcement that was the focus of the case was Scorpio East Holdings Ltd (“SEH”). It was listed on Catalist, and accordingly, was obliged to abide by the listing rules applicable to Catalistlisted companies (“Catalist Rules”). The plaintiff was an executive director of SEH; the defendants were non-executive directors of the same company.

The plaintiff was appointed as an executive director on 15 March 2011 shortly after acquiring an indirect interest in SEH. Shortly after his appointment, he terminated nine contracts that SEH was party to and also caused its whollyowned subsidiary of, Scorpio East Pictures Pte Ltd, to enter into six contracts with Alpha Entertainment Group Pte Ltd (“Alpha”). These actions were taken without informing the Board of SEH.

When the defendants found out about the transactions, they were concerned for the following reasons:

• The termination of the contracts was materially significant and the intention to terminate them should have been disclosed to and approved by the SEH Board.
• The contracts entered into with Alpha were for a materially significant amount and the plaintiff should have obtained Board approval to enter into these contracts.
• The contracts with Alpha appeared to involve a “round-tripping” of funds, rather than involving genuine transactions.
• The plaintiff appeared to be interested in the transactions with Alpha as the wife of his consultant was its shareholder and director. Furthermore, the plaintiff’s consultant (the person who had recommended the entry into the contracts with Alpha) was an undischarged bankrupt who had been blacklisted by the Singapore Exchange (“SGX”) from participating in the management of a listed company.

Further investigation and consultation with the SGX led to a special auditor being appointed to review the transactions. The special auditors issued a report (“Report”) impugning the transactions which was accepted by the Board. The Board also noted that, in order to ensure compliance with SEH’s continuous disclosure obligations under the Catalist Rules, an announcement of the Report’s conclusions had to be made. At the same time, the SGX also emailed the Board requesting that an announcement of the Report’s conclusions be made. In the event, an announcement (“Announcement”) was drafted and sent out. To the Announcement was attached a copy of the Report’s executive summary.

The plaintiff objected to the Announcement and brought a claim for defamation. He asserted that the Announcement was defamatory of him in that it alleged that he had acted in his own self-interests in causing SEH to terminate certain contracts and enter into others, that the contracts he had caused SEH to enter into did not involve genuine transactions, and that he had breached his fiduciary duty as a director of SEH.

Decision

The Singapore High Court found on the facts that the Announcement had been defamatory of the plaintiff. It also found that the defendants’ defence of justification succeeded. 

Notwithstanding this finding (which would have been sufficient to dispose of the claim), it went on to consider whether the defence of qualified privilege would apply if the defamatory statements were untrue.

The Court noted that qualified privilege is a concept based on the principle that statements which are defamatory and untrue may be privileged on grounds of public policy and convenience. Whether qualified privilege succeeds depends on whether a relationship of interest and duty is made out.

The Court further noted that the duty that may give rise to such a privilege may arise from common law or statute. In this case, it found that the defendants had a duty to publish the two documents in view of rule 703 of the Catalist Rules and what the SGX had told them to do. It noted that the Catalist Rules were contractual requirements that SEH were to abide by, and which were enforced by the SGX. The defendants’ obligation to publish the Announcement pursuant to the Catalist Rules was also reinforced by the Securities and Futures Act which made it mandatory to abide by the continuing disclosure obligations.

The Court further found that a corresponding interest had arisen from the facts, i.e., the corresponding interest of the investing public to receive the information that the defendants had released on SGXNET. In the view of the Court, since the publication was made as required by the relevant rules, it could not be said that the parties receiving the information did not have a corresponding interest or that the publication was made to too large a class of people. As for the question of proportionality, the Court noted that the requirement to make the Announcement via SGXNET was specified in rule 702 of the Catalist Rules.
Accordingly, the Court found that the Announcement had been published on an occasion of qualified privilege as the defendants were under a duty to publish the Announcement on SGXNET and the readers of SGXNET, being SEH’s shareholders and potential investors, had a corresponding interest to receive the information.

Our Analysis / Comments

The case provides an interesting illustration of the requirements of the defence of qualified privilege, in particular, the need to establish a nexus between the content of the defamatory statement and the intended recipient of that statement. In this case, that the company had been under a duty to report would not have been sufficient in itself to allow its defence of qualified privilege to succeed. It also had to show that the recipient of the statement had a corresponding interest in receiving it. For this, the medium of publication and the intended audience for that medium are also important. As the statement was released on SGXNET, the audience here was the investing public receiving information on SGXNET. This is a more limited section of the public than publication to the public at large, say through the Straits Times or the Business Times.

The medium of the message can make all the difference, as shown by the 1998 Court of Appeal decision in Chen Cheng & Anor v Central Christian Church. There, in respect of statements published in the newspapers defaming a particular church as a cult, the Court held that the general public did not have a corresponding interest in receiving that information. However, in respect of similar statements published in the religious magazine Impact, it held that its readership—the main Protestant body of the Christian faith in Singapore—did have a corresponding interest in receiving that information. Similarly, in the case of Koh Sin Chong Freddie v Chan Cheng Wah Bernard & Ors, where a statement alleging that the former managing committee members of a swimming club had failed carry out their committee duties correctly had been published to members of that club, the members of the club were held to have had an interest in receiving the information (although there the defence failed as the plaintiff was able to establish malice in the publication).

For further information, please contact:

Chee Meng Tan, Partner, WongPartnership

[email protected]

Melanie Ho, Partner, WongPartnership
[email protected]

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