ARTICLES: GUEST WRITER 1
Section 9A of the Interpretation Act (Cap 1) states: 9A.—(1) In the interpretation of a provision of a written law, an interpretation that would promote the purpose or object underlying the written law (whether that purpose or object is expressly stated in the written law or not) shall be preferred to an interpretation that would not promote that purpose or object. Companies are often used as a means to evade uncomfortable consequences of a statute or to take advantage of certain benefits. The classic case would be taxing statutes. In the interpretation of a statute a Singapore court will consider whether treating the company as an entity separate from the corporators will defeat the purpose of the legislation. If the answer is ‘yes’, then the court will ignore the Salomon rule. From an academic’s point of view this is unsatisfyingly vague. From a practitioner’s point of view the advice one gives to a client is that if he is incorporating a company for the purpose of avoiding a statutory provision or exploiting a statutory benefit, this may not work if the client in reality controls and owns the company. In other words, if the reality is that the company is not a separate entity, the court may ignore it when purposively interpreting a statute. In the second class of cases, remember that the eye of equity is not blind to reality. If the reality is that the company is not independent of the corporators, a court of equity may decline to grant an equitable remedy like specific performance of a contract or an injunction. This applies also in situations where the court is exercising a discretion akin to an equitable one. So, for instance, in Raffles Town Club Pte Ltd v Lim Eng Hock Peter [2012] SGCA 62 (Court of Appeal) RTC was marketed as an exclusive premier club. Its membership drive was wildly successful and it recruited over 19000 members (the members of the club were not shareholders of RTC). 4885 members began a representative action against RTC for breach of 188
contract. The suit was dismissed by the High Court but allowed on appeal. As RTC had not enough cash to pay the damages a scheme of arrangement was agreed which cost RTC $53m. Subsequently, some of the former directors sued the current directors for defamation in relation to statements made in relation to the scheme of arrangement. The current directors were found liable. In the present litigation RTC sued the former directors for breach of directors’ duties. The claim was dismissed and so was the appeal. The Court of Appeal held that the suit against the former directors was essentially an action by the new shareholders/ directors using the company as a vehicle. They were ordered to personally bear the costs on an indemnity basis. The third class of cases is the most amorphous. One traces the origin of the alter ego doctrine to dicta by V K Rajah JA in two cases. In Singapore Tourism Board v Children’s Media Ltd [2008] SGHC 77 (High Court) [affirmed by the Court of Appeal in Children’s Media Ltd v Singapore Tourism Board [2008] SGCA 45] STB contracted with Children’s Media (D1, UK company) and Tribute Third Millenium (D2, UK company limited by guarantee, holding company of D1) to stage Listen Live. D3 was CEO and sole shareholder of D2. D3 claimed to have expertise in organising such events. He represented to STB that Listen Live would be the culmination of a 180-day worldwide campaign that would raise substantial funds and feature film and music stars and reach 500 million people in 80 countries. The contract was signed by STB with Children’s Media, a special purpose vehicle. Children’s Media failed to provide the necessary artistes, broadcasters and financing, ostensibly due to events beyond its control (the 2004 tsunami). STB accepted this and agreed to a second agreement. Children’s Media again failed to secure the artistes etc by the stipulated deadline. D3 represented to STB that if the event could be postponed, they could still proceed. STB then entered a third agreement. Children’s Media still couldn’t live up to its obligations and STB terminated