ARS v ART and ARU [2015] SGHC 78

In ARS v ART and ARU, the Singapore High Court had to determine numerous factual disputes between the parties with limited contemporaneous documentary evidence.  The Singapore High Court also determined interesting issues concerning the relationship between companies in a group of companies.

Background facts

The plaintiff brought claims against the first defendant for the inducement of breach of contract, conspiracy to injure by breach of contract, conspiracy to injure by malicious falsehood and unjust enrichment.  The basis of these claims was the alleged involvement of the first defendant in the replacement of the plaintiff as the CCTV supplier in the redevelopment of a project. The plaintiff’s claim against the second defendant was struck out in earlier proceedings as it was time-barred.

The dispute arose from events which took place in 2001-2002 between the plaintiff and the first defendant’s subsidiary. The trial only came to be held in Singapore around 12 years later as the plaintiff or its affiliated entities first commenced various proceedings against the first defendant or its affiliated entities in the United States and Israel and in arbitration.

In this case, the plaintiff’s claim was dismissed as there was insufficient evidence to support the same. 

High Court’s assessment of evidence

The High Court made the following observations on non-documentary evidence:

  • Adverse inference to be drawn for failure to call material witnesses: The court found that the plaintiff’s failure to call certain witnesses was “conspicuous”, given their involvement in the matter.
  • Witness’s demeanour goes towards credibility: The court did not place much reliance on the plaintiff’s sole witness’ oral evidence as it found that the witness “tended to refuse to answer questions or answered before the question was completed” and that there was “frequent recurrence of such behaviour”. In contrast, the court found the first defendant’s witness to be truthful as “[h]e was direct in his answers, did not evade questions and frankly admitted he could not remember certain facts”.
  • Significance of subpoenaed witness: The fact of being subpoenaed does not mean that greater weight should be accorded to such a witness’ evidence. However, it does show that the witness is neutral and not a “willing supporter” of the party who subpoenaed him or her.
  • Parties’ conduct not given much weight in proving existence of contract: The court expressed its reservations about using the conduct of parties to prove the existence of a contract as “given the complex relationships between human beings, more often than not, conduct can be explained by a number of reasons which does not have only one explanation or there may be varying degrees of weight pointing to one conclusion”.

High Court’s decision on issues of company law

A key plank of the plaintiff’s case was that the acts and knowledge of certain individuals within the group of companies which the first defendant belonged to should be attributed to the first defendant, even when the individuals were neither employees nor directors of the first defendant and did not manage or control the business of the first defendant (which is a holding company). The court found that the plaintiff’s argument ignored the fundamental principle of company law that a company is a separate legal entity as it presupposes that the entire group of companies and the first defendant are one and the same. The court found this view to be unjustified and emphasised that the “single economic concept” is not recognised as law in Singapore.

Another interesting point is that, in relation to the plaintiff’s claim in inducement of breach of contract, the plaintiff asserted that the first defendant had induced its subsidiary to breach alleged agreements with the plaintiff by virtue of its act of approving the subsidiary’s decision to remove the plaintiff as CCTV supplier. The court did not accept the plaintiff’s assertion that a holding company’s concurrence with the decision of its subsidiary amounted to inducement.

The court also dismissed the plaintiff’s assertion that a holding company’s control over its subsidiary, without more, could constitute inducement. This, again, ignores the subsidiary’s separate legal personality. In particular, the court rejected the proposition that the fact that the subsidiary adhered to company policy by submitting a decision to the first defendant for approval proved that the subsidiary was a sham company.

Practical impact

Bearing in mind that the plaintiff bears the burden of proving its case on a balance of probabilities, a plaintiff should consider carefully the difficulties and implications of basing its claim heavily on the oral testimonies and conduct of its witnesses, especially if there has been a long passage of time since the point the dispute arose