Case Details
- Citation: [2016] SGHC 259
- Title: The Enterprise Fund II Ltd v Jong Hee Sen
- Court: High Court of the Republic of Singapore
- Date of Decision: 24 November 2016
- Judge: Hoo Sheau Peng JC
- Coram: Hoo Sheau Peng JC
- Case Number: Suit No 72 of 2016 (Registrar’s Appeal Nos 183 and 184 of 2016)
- Procedural Posture: Appeals against the Assistant Registrar’s dismissal of (i) an application to strike out a portion of the Statement of Claim and (ii) an application to expunge portions of affidavits and exhibits
- Plaintiff/Applicant: The Enterprise Fund II Ltd
- Defendant/Respondent: Jong Hee Sen
- Counsel for Plaintiff: Tan Wei Ser Venetia (Colin Ng & Partners LLP)
- Counsel for Defendant: Nandwani Manoj Prakash and Lester Lin (Gabriel Law Corporation)
- Legal Area: Evidence — Admissibility of evidence; “without prejudice” privilege
- Statutes Referenced: Evidence Act (Cap 97, 1997 Rev Ed), in particular s 23(1)
- Cases Cited: Greenline-Onyx Envirotech Phils, Inc v Otto Systems Singapore Pte Ltd [2007] 3 SLR(R) 40; Mariwu Industrial Co (S) Pte Ltd v Dextra Asia Co Ltd and another [2006] 4 SLR(R) 807; Cytec Industries Pte Ltd v APP Chemicals International (Mau) Ltd [2009] 4 SLR(R) 769; Sang Kook Suh and another v Mace (UK) Limited [2016] EWCA Civ 4; Schering Corporation v CIPLA Ltd and another [2004] EWHC 2587 Ch; Bradford & Bingley plc v Rashid [2006] 1 WLR 2066; Sin Lian Heng Construction Pte Ltd v Singapore Telecommunications Ltd [2007] 2 SLR(R) 433
- Judgment Length: 9 pages, 5,027 words
Summary
The Enterprise Fund II Ltd v Jong Hee Sen concerned whether certain pre-litigation communications between a fund manager and a director were protected by “without prejudice” privilege, such that they could not be disclosed or relied upon in court. The dispute arose from an alleged breach of a deed of undertaking relating to the sale of shares in International Healthway Corporation Limited (“IHCL”). After the defendant failed to procure or purchase shares during the contractual sale period, the plaintiff’s solicitors sent a “letter of demand” and the parties exchanged further emails and a payment proposal.
At first instance, the Assistant Registrar (“AR”) held that “without prejudice” privilege did not apply. The AR reasoned that there was no dispute between the parties and that the communications amounted to an implied admission of liability, or at least did not show a firm denial. The AR therefore dismissed the defendant’s applications to strike out part of the Statement of Claim and to expunge portions of affidavits and exhibits.
On appeal, Hoo Sheau Peng JC took a different view. The High Court held that “without prejudice” privilege applied to the communications, subject to an important carve-out: the correspondence from the plaintiff’s lawyers that initiated the exchange (the “Letter of Demand”) was not protected, and the defendant had agreed that it could be relied upon by the plaintiff. Accordingly, the appeals were allowed, reversing the AR’s decisions.
What Were the Facts of This Case?
The plaintiff, The Enterprise Fund II Ltd, is a public company engaged in fund management. The defendant, Jong Hee Sen, was a director of International Healthway Corporation Limited (“IHCL”), a healthcare services and facilities provider. The underlying commercial relationship involved the plaintiff’s acquisition of IHCL shares and a subsequent deed of undertaking signed by the defendant and four others (the “Warrantors”).
On 6 July 2013, as part of the deal involving the plaintiff’s 20,833,000 shares in IHCL (the “IHCL Shares”), the Warrantors executed a deed of undertaking (“the Deed”) in favour of the plaintiff. The Deed imposed obligations on the Warrantors in relation to the sale of the IHCL Shares to third parties within a defined “Sale Period” (nine months from the plaintiff’s purchase). Clause 2.1(a) required the Warrantors to use reasonable endeavours to procure, on the plaintiff’s behalf, the sale of the IHCL Shares to other parties at a price no less than $0.576 per share or the last traded price on the Singapore Exchange, whichever was higher.
Clause 2.1(b) addressed a shortfall scenario. If the consideration received from the sale of the IHCL Shares fell short of a target sale proceeds figure (calculated as $0.576 multiplied by the total number of IHCL Shares, being $11,999,808), the Warrantors were obligated to purchase or procure the purchase of the remainder of the IHCL Shares at a price that would make up the shortfall from the Sale Proceeds Target. It was undisputed that none of the IHCL Shares were sold to other parties or purchased by the Warrantors during the Sale Period.
After the Sale Period ended without performance, the plaintiff’s solicitors sent an email on 1 December 2015 headed “Letter of Demand” (“LOD”), attaching a formal letter titled “Re: DEED OF UNDERTAKING DATED 6 JULY 2013 LETTER OF DEMAND”. The LOD asserted that, contrary to the Deed, the defendant had not purchased or procured the purchase of any IHCL Shares. It requested a written proposal to resolve the claim within five days and warned that if the defendant failed to comply, the plaintiff reserved the right to enforce its claim, including commencing legal proceedings.
The defendant replied on 3 December 2015, explaining that he was overseas and requesting an extension of five days to respond so that he could meet with the plaintiff’s representatives to discuss a “firm payment plan”. A meeting occurred on 8 December 2015. Following the meeting, the defendant emailed the plaintiff’s solicitors that he was enclosing a written proposal (“the Proposal”) containing an offer to pay a lower sum calculated as a percentage of what he considered to be the shortfall. No final agreement was reached and the defendant made no payments. The plaintiff then commenced proceedings to enforce clause 2.1 of the Deed, alleging breach by the defendant.
What Were the Key Legal Issues?
The central issue was whether the communications exchanged between the parties—namely the LOD, the defendant’s Reply Email, and the Proposal—were protected by “without prejudice” privilege. This required the court to determine whether the communications were made “in the course of negotiations to settle a dispute” and whether any exception applied that would remove the privilege.
A secondary but closely related issue concerned the consequences of privilege for pleadings and affidavits. The defendant sought (i) to strike out a portion of the Statement of Claim that referred to the plaintiff’s solicitors’ letter and the defendant’s proposal, and (ii) to expunge portions of affidavits and the exhibits of the LOD and Reply Email. The court therefore had to consider not only whether privilege existed, but also whether the plaintiff could rely on the communications in the litigation.
Finally, the court had to address the AR’s approach, which focused on whether there was a dispute and whether the defendant’s communications amounted to an admission of liability. The High Court needed to assess whether the AR was correct to conclude that the communications were not protected because liability was essentially conceded or not genuinely disputed.
How Did the Court Analyse the Issues?
Hoo Sheau Peng JC began by restating the governing principles. “Without prejudice” privilege is a rule of evidence that prevents a communication protected by the privilege from being disclosed or relied upon in court. The rationale is public policy: encouraging litigants to settle their differences rather than litigate them to the finish, without fear that statements made during negotiations will be used against them.
The court then linked the common law principle to the statutory framework in Singapore. Section 23(1) of the Evidence Act provides that in civil cases no admission is relevant if it is made (a) upon an express condition that evidence of it is not to be given, or (b) upon circumstances from which the court can infer that the parties agreed evidence should not be given. Where communications appear “open” (not expressly marked “without prejudice”), the relevant limb is s 23(1)(b), which covers situations where the law infers that the parties intended confidentiality for the purposes of settlement negotiations.
In applying these principles, the court emphasised that the determination is objective. Whether a communication was made in the course of negotiations to settle a dispute is assessed by construing the communication as a whole in context. The court considers how a reasonable recipient would understand the communication and what the author’s intention would reasonably be taken to be. Contextual factors include whether the communication was made in response to an invitation to negotiate as to what was due, or merely in response to an invitation to say how the amount due would be repaid.
Hoo Sheau Peng JC also addressed the “admission” exception. Even if a communication appears to be part of settlement negotiations, privilege may not apply if the communication contains a clear admission of liability such that there is no longer a dispute between the parties. The court explained that this is not a separate policy-based exception so much as the absence of a pre-condition: “without prejudice” privilege is designed to protect negotiations where there is a genuine dispute. If the debtor clearly acknowledges liability, there is no legitimate policy interest in protecting “appeals for leniency or mercy”.
Against this legal backdrop, the High Court disagreed with the AR’s conclusion that there was no dispute. The AR had found that the communications, taken as a whole, showed implied admission of liability or at least no firm denial. The High Court instead took the view that the communications were properly characterised as settlement negotiations. The defendant’s Reply Email and the Proposal were understood as responses to the plaintiff’s demand and as part of an attempt to resolve the claim without litigation. The court treated the Deed as the backdrop but focused on the objective character of the exchange: the defendant was engaging in discussions about payment terms and proposing a resolution rather than conceding liability in a manner that would remove privilege.
Importantly, the High Court also considered the nature of the plaintiff’s initiating correspondence. While the AR had treated the communications collectively, Hoo Sheau Peng JC drew a distinction between the correspondence that initiated the exchange and the subsequent communications that followed. The court held that “without prejudice” privilege applied to the communications exchanged after the initiation, but not to the plaintiff’s lawyers’ letter that started the process. This was consistent with the practical reality that the LOD was a demand letter setting out the claim and requesting a response, rather than itself being a protected settlement communication.
Accordingly, the High Court allowed the defendant’s appeals in substance by recognising privilege for the Reply Email and the Proposal, while permitting reliance on the LOD because the defendant agreed it could be used. This approach reflects a nuanced application of the objective test and the admission/dispute framework: privilege is not an all-or-nothing label attached to every document in the chronology, but a protection that depends on the function and character of each communication within the negotiation context.
What Was the Outcome?
The High Court allowed both Registrar’s Appeals. It held that “without prejudice” privilege applied to the relevant communications, thereby reversing the AR’s dismissal of the defendant’s applications to strike out and to expunge. The practical effect was that the plaintiff could not rely on privileged communications in the manner sought by the defendant’s applications, subject to the carve-out relating to the LOD.
Specifically, the court held that the correspondence from the plaintiff’s lawyers that initiated the exchange (the LOD) was not protected by “without prejudice” privilege. However, because the defendant agreed that the plaintiff could rely on the LOD, the court’s orders reflected that limited exception while still granting privilege protection to the subsequent negotiation communications.
Why Does This Case Matter?
This decision is significant for practitioners because it illustrates how Singapore courts apply “without prejudice” privilege in a context where communications may not be expressly labelled. The case reinforces that the inquiry is objective and contextual: courts will look at the substance and function of the communications, including whether they are part of settlement negotiations and whether a dispute genuinely existed.
For litigators, the case also demonstrates the importance of distinguishing between (i) demand letters or initiating correspondence and (ii) subsequent settlement communications. Even where a negotiation process is underway, not every document in the chain will necessarily be protected. Lawyers should therefore carefully consider how they draft and sequence communications, particularly where they intend to preserve privilege.
Finally, the case provides a useful reminder about the “admission” concept. The court’s approach suggests that implied or partial indications may not automatically defeat privilege; rather, the debtor must clearly acknowledge liability such that the dispute ceases. This is valuable when assessing whether communications can be relied upon to show admission or whether they remain protected as settlement negotiations.
Legislation Referenced
- Evidence Act (Cap 97, 1997 Rev Ed), s 23(1) — Admissions in civil cases when relevant
Cases Cited
- Greenline-Onyx Envirotech Phils, Inc v Otto Systems Singapore Pte Ltd [2007] 3 SLR(R) 40
- Mariwu Industrial Co (S) Pte Ltd v Dextra Asia Co Ltd and another [2006] 4 SLR(R) 807
- Cytec Industries Pte Ltd v APP Chemicals International (Mau) Ltd [2009] 4 SLR(R) 769
- Sang Kook Suh and another v Mace (UK) Limited [2016] EWCA Civ 4
- Schering Corporation v CIPLA Ltd and another [2004] EWHC 2587 Ch
- Bradford & Bingley plc v Rashid [2006] 1 WLR 2066
- Sin Lian Heng Construction Pte Ltd v Singapore Telecommunications Ltd [2007] 2 SLR(R) 433
Source Documents
This article analyses [2016] SGHC 259 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.