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TRANSCRIPT
Legal BulletinA summary of developments in the law
At a glance
Competition
CCS clears anticipated merger involving supply of heavy-dutytrucks, buses, coaches and diesel engines
4
Corporate
SIC conducts public consultation on proposed changes toSingapore Code on Take-overs and Mergers
6
Employment
Retirement Age (Amendment) Act 2011 takes effect1 January 2012: Re-employment of older employees
11
Parliament introduces Work Injury Compensation(Amendment) Bill 2011: Streamlined time frame for makingclaims
12
Insurance
New MAS Notice 307 on investment-linked insurance policieswith effect 1 October 2011
13
Securities & Futures
Singapore Court of Appeal finds trades amounted to pricemanipulation
18
Tax
Parliament introduces Income Tax (Amendment) Bill 2011:Implementing Budget 2011 changes
21
General
MinLaw conducts public consultation on proposed changes toEvidence Act: Legal professional privilege for in-housecounsel, opinion evidence, computer output, hearsay
24
Singapore High Court allows company’s claim formisappropriated property subject to confiscation order issuedin favour of Public Prosecutor
27
Click here for Table of Contents
Vol 23 No 10 October 2011 ALLEN & GLEDHILL LLP
2Legal Bulletin October 2011
In this issue
Articles
Competition
CCS clears anticipated merger involving supply of heavy-dutytrucks, buses, coaches and diesel engines
4
CCS fines 16 employment agencies for price fixing 5
Corporate
SIC conducts public consultation on proposed changes toSingapore Code on Take-overs and Mergers
6
Dispute Resolution
English Court of Appeal rules on arbitrability of shareholders’claims
7
Supreme Court consultation paper entitled “Review of Discovery inCivil Litigation”
9
Employment
Retirement Age (Amendment) Act 2011 takes effect1 January 2012: Re-employment of older employees
11
Parliament introduces Work Injury Compensation (Amendment)Bill 2011: Streamlined time frame for making claims
12
Insurance
New MAS Notice 307 on investment-linked insurance policies witheffect 1 October 2011
13
MAS’ response to feedback on public consultation on “ProposedRevisions to the Regulatory Framework for Trade CreditInsurance, Political Risk Insurance and Mortgage Insurance”
14
Media & Telecoms
Telecommunications (Amendment) Bill 2011 introduced inParliament: Refining Government’s powers and updatinglegislative framework
16
Securities & Futures
Singapore Court of Appeal finds trades amounted to pricemanipulation
18
Tax
Parliament introduces Income Tax (Amendment) Bill 2011:Implementing Budget 2011 changes
21
Parliament introduces Goods and Services Tax (Amendment) Bill2011: Implementing Budget 2011 changes
22
Editorial Team
Margaret Chew
Elizabeth Wong
Soo Seong Theng
Hong Farn Ling
Anitha Rajaram
The contents of the LegalBulletin are intended to providegeneral information. Although weendeavour to ensure that theinformation contained herein isaccurate, we do not warrant itsaccuracy or completeness oraccept any liability for any lossor damage arising from anyreliance thereon. The information inthis Legal Bulletin should notbe treated as a substitute forspecific legal advice concerningparticular situations. If youwould like to discuss theimplications of these legaldevelopments on your businessor obtain advice, please do nothesitate to approach your usualcontact at Allen & Gledhill LLPor the editors of the Legal Bulletin,Margaret Chew (+65 6890 7500 [email protected]) and Elizabeth Wong (+656890 7559 or [email protected]).
3Legal Bulletin October 2011
Parliament introduces Stamp Duties (Amendment) Act 2011:Implementing Budget 2011 changes
23
General
MinLaw conducts public consultation on proposed changes toEvidence Act: Legal professional privilege for in-house counsel,opinion evidence, computer output, hearsay
24
Singapore High Court allows company’s claim for misappropriatedproperty subject to confiscation order issued in favour of PublicProsecutor
27
News
DBS Bank Ltd.’s US$15 billion Global Medium Term NoteProgramme
30
Pramerica Real Estate Investors closes S$3 billion PramericaAsiaRetail Fund with 11 retail malls in Singapore and Malaysia
30
Keppel Land Limited’s divestment of its 87.51% interest in OceanProperties Pte Ltd for a period of 99 years
30
Establishment of US$3 billion Medium Term Note Programme byHenderson Land MTN Limited and Henderson Land MTN (S) Pte.Limited, Guaranteed by Henderson Land Development CompanyLimited, and Issue of S$200 million 4% Notes due 2018 (the“Series 01 Notes”)
31
StarHub Ltd’s S$1 billion Multicurrency Medium Term NoteProgramme
31
Issue of Notes by SingTel Group Treasury Pte. Ltd. 31
Participation in Asialaw Leading Lawyers 2012 nominationprocess
32
Allen & Gledhill LLP also publishes the monthly Financial Services Bulletin.To view the October 2011 issue, please click here.
4Legal Bulletin October 2011
Articles
Competition
CCS clears anticipated merger involving supply of heavy-duty trucks, buses, coaches and diesel engines
On 20 September 2011, the Competition Commission of Singapore (the“CCS”) announced its decision to clear the proposed acquisition (the“Acquisition”) of sole control by Volkswagen Aktiengesellschaft (“VW”)over MAN SE (“MAN”) (collectively the “Parties”). This transaction is aglobal acquisition that has also been notified in various other countries.
This clearance decision follows a joint notification by the parties on 8August 2011 asking for the CCS to decide whether VW’s mandatoryoffer to acquire all no-par value ordinary bearer shares carrying votingrights and no-par preference bearer shares without voting rights of MANwill infringe section 54 of the Competition Act (the “Act”). Section 54 ofthe Act prohibits mergers that substantially lessen competition withinany market in Singapore for goods or services.
Pursuant to the joint notification, the CCS had consulted variouscustomers and suppliers for views in each of the markets for the supplyof the following:
heavy-duty trucks
city buses
inter-city buses and coaches
diesel engines
repair and maintenance services
This is the 19th merger filing advised on by Allen & Gledhill LLP, andwas secured within the CCS’ Phase 1 review period. It is the firstclearance by the CCS in the transport market.
Background
The merger control regime prescribed under the Act came into force on1 July 2007. Mergers parties are required to undertake self-assessments to determine if notifications should be made in accordancewith the relevant CCS guidelines and with reference to its decidedcases. Since the start of the regime, the CCS has received 27 mergercontrol notifications. The CCS has cleared 24 of the 27 notifications.Some of the notifications have been withdrawn by the merger parties.The CCS has also exercised its powers to issue Provisional Decisions toprohibit mergers.
Reference material
Please click here to view the table of notified mergers on the CCSwebsite www.ccs.gov.sg.
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This recent development was firsthighlighted in the Allen & GledhillCompetition Law Alert of30 September 2011. If you wouldlike to be on our competition andantitrust related electroniccommunications mailing list, pleasee-mail us [email protected]
For further information, pleasecontact:
Daren ShiauTel: +65 6890 [email protected]
Elsa ChenTel: +65 6890 [email protected]
5Legal Bulletin October 2011
CCS fines 16 employment agencies for price fixing
On 30 September 2011, the Competition Commission of Singapore (the“CCS”) issued an Infringement Decision against 16 employment agencies(the “EAs”) in Singapore for engaging in anti-competitive conduct byparticipating in a meeting that attempted to collectively fix the monthlysalaries of new Indonesian Foreign Domestic Workers (“FDWs”) inSingapore, with the object of restricting competition. The EAs were found tohave breached section 34 of the Competition Act which prohibits, amongother things, price fixing activities.
The current observed approach of the CCS is not to publicise itsinvestigations unless it has issued a Provisional Infringement Decision oran Infringement Decision. Accordingly, investigations where parties aresuccessfully defended do not appear to have been publicised by the CCS.
The total amount of financial penalties levied on the 16 EAs is in the regionof S$152,000 with one of the EAs being fined an amount exceedingS$42,000.
The CCS did not take a position on what should be the appropriate salaryfor new Indonesian FDWs. The unlawful conduct that the CCS isaddressing here is the collective fixing, by the EAs, of the salaries of newIndonesian FDWs, such that the employers’ ability to switch would bereduced (by reducing the number of lower cost options available for theemployers).
Daren Shiau, Head of Competition & Antitrust at Allen & Gledhill LLP notesthat: “There are two significant aspects of this decision. The first is that itwas irrelevant to the CCS whether the EAs had benefited from theagreement or concerted practice. The second was that it was irrelevantwhether an undertaking acted on the outcome of an anti-competitivediscussion so long as it did not publicly distance itself from the discussion”.
In the CCS’ view, the crux of the infringement is whether the competitiveprocess has been harmed and if consumers’ choice has been restricted,and not whether the EAs had benefited from the agreement or concertedpractice.
Similarly, the CCS notes that a passive mode of participation in adiscussion or the fact that an undertaking does not act on the outcome ofthe same having an anti-competitive purpose, does not relieve theundertaking of liability under the section 34 prohibition, unless theundertaking has publicly distanced itself from the anti-competitivediscussion.
Background
The CCS started its investigation following media reports in January 2011that a number of EAs had discussed to collectively raise the monthlysalaries of new Indonesian FDWs in Singapore to S$450. The CCSconducted interviews with the relevant personnel of the EAs and asked fordocuments and information relating to turnover for the financial year 2010.
On 13 May 2011, the CCS issued a Proposed Infringement Decisionagainst the EAs. Only 12 of the EAs made representations to the CCS.
Reference materials
The following documents are available on the CCS websitewww.ccs.gov.sg:
This recent development was firsthighlighted in the Allen & GledhillCompetition Law Alert of 4 October2011. If you would like to be on ourcompetition and antitrust relatedelectronic communications mailinglist, please e-mail us [email protected]
For further information, pleasecontact:
Daren ShiauTel: +65 6890 [email protected]
Elsa ChenTel: +65 6890 [email protected]
6Legal Bulletin October 2011
Press release
Infringement decision
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Corporate
SIC conducts public consultation on proposed changes toSingapore Code on Take-overs and Mergers
The Securities Industry Council (the “SIC”) issued a consultation paper on10 October 2011 proposing changes to the Singapore Code on Take-oversand Mergers (the “Code”) to keep pace with market innovations andinternational practices. The consultation will close on 7 November 2011.
The proposed changes to the Code include:
Shares Charged, Borrowed or Lent: Requiring offerors to disclosewhether the shares they hold in the offeree company have beencharged, borrowed or lent;
SIC Actions: Clarifying that the SIC may have recourse to furtheractions against the offender in flagrant cases, and state explicitly thatadvisers may be required to abstain from Code-related work as asanction;
Shareholders Voting Together: Setting out the circumstances wherevoting together in a single resolution may cause shareholders to beregarded as parties acting in concert and possibly triggering a generaloffer obligation;
Joint Offerors: Providing that Rule 10, which prohibits special dealsbetween the offeror and selected shareholders, is not breached wheretwo or more persons (one or more of whom is already a shareholder inthe offeree company) come together to form a consortium on such termsand in such circumstances that each of them can be considered to be ajoint offeror;
Associates: Amending the definition of “associate” so that a holder of5% or more of equity share capital would be an associate;
Long Options or Derivatives: Treating all acquisitions of long optionsor derivatives as acquisitions of shares for the purposes of Rule 14;
Dealing Disclosures: Requiring disclosure of dealings in long optionsand derivatives during the offer period by persons holding 5% or more inthe offeree company’s issued share capital;
REITs and BTs: Clarifying the application of the Code in relation to realestate investment trusts and business trusts; and
Share Buybacks: Granting a class exemption for shareholderstriggering a mandatory offer as a result of a company buying back itsshares via a market acquisition under section 76E of the Companies Actor an off-market acquisition on an equal access scheme under section76C of the Companies Act.
For further information, pleasecontact:
Mergers & Acquisitions
Christopher KohTel: +65 6890 [email protected]
Lee Kee YengTel: +65 6890 [email protected]
Andrew M. LimTel: +65 6890 [email protected]
Lim MeiTel: +65 6890 [email protected]
Hilary LowTel: +65 6890 [email protected]
Christopher OngTel: +65 6890 [email protected]
Song Su-MinTel: +65 6890 [email protected]
Prawiro WidjajaTel: +65 6890 [email protected]
Zahedah Abdul RashidTel: +65 6890 [email protected]
REITs & BTs
Chua Bor JernTel: +65 6890 [email protected]
Foong Yuen PingTel: +65 6890 [email protected]
Jerry KohTel: +65 6890 [email protected]
7Legal Bulletin October 2011
Reference materials
The following materials are available on the MAS website www.mas.gov.sg:
SIC Press release
Consultation paper
Annex 1 - Marked up text of the amended Singapore Code on Take-overs and Mergers
Annex 2 - Draft Form 2
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Dispute Resolution
English Court of Appeal rules on arbitrability ofshareholders’ claims
Fulham Football Club (1987) Ltd v Sir David Richards & Anor[2011] EWCA Civ 855
The English Court of Appeal considered whether the fact that an arbitratorcannot make a winding-up order affecting third parties rendered it impossiblefor the members and a company to submit their disputes inter se asshareholders to arbitration.
Origin of Court of Appeal proceedings
The matter before the Court of Appeal originated as an appeal by FulhamFootball Club (1987) Limited (“Fulham”) against an order of the High Courtmade under section 9 of the English Arbitration Act (the “AA”) stayingproceedings brought by Fulham pursuant to section 994 of the EnglishCompanies Act (the “CA”) (Singapore has a similar provision in section 216of the Singapore Companies Act).
Section 9 of the AA provides that a party to an arbitration agreement mayapply to court for the stay of legal proceedings with regard to the samematter to allow for the arbitration to proceed (Singapore has a similarprovision in section 6 of the Singapore Arbitration Act). The Companies Actprovision relates to unfair prejudice (minority oppression in Singapore).
The dispute
The dispute arose between Fulham and the Football Association PremierLeague Limited (the “FAPL”) and the latter’s Chairman, Sir David Richards(the “Chairman”) in relation to the alleged interference in the transfer of anEnglish Premier League Football player, Peter Crouch, from Portsmouth CityFootball Club (“Portsmouth”).
The FAPL Rules provides that membership of the FAPL is deemed toconstitute an agreement between the FAPL and the member clubs andbetween clubs to be bound by and comply with the FAPL Rules, the Articlesof Association of the FAPL and the Football Association (the “FA”) Rules.
8Legal Bulletin October 2011
Portsmouth was at the material time in financial difficulties and sought toraise £9 million to avoid being wound up. Fulham had made an offer of£9 million for the transfer of Peter Crouch to it but this offer had beenrejected. Fulham was prepared to raise its offer to £11 million. Tottenhamwas known to be interested in Peter Crouch and the player had alsoexpressed his preference to play for Tottenham. The club, however, hadmade low offers for him and these had been rejected by Fulham.
Fulham alleged that the Chairman acted as an unauthorised agent in breachof the Football Association Football Agents Regulations when he assistedPortsmouth, pursuant to a request from that club’s chief executive, tofacilitate the transfer of Peter Crouch to Tottenham Hotspur Football &Athletic Company Limited (“Tottenham”). The Chairman apparently enteredinto negotiations with Tottenham on behalf of Portsmouth to secure a higheroffer for the player. It was not disputed that Tottenham then made an offer of£9 million which was accepted by Portsmouth, culminating in Peter Crouch’stransfer to Tottenham.
Fulham complained to the FAPL about the Chairman’s involvement in thetransfer of Peter Crouch to Tottenham but this was dismissed by the FAPL,which found that the Chairman did not broker the transfer. Fulham allegedthat the Chairman had acted in a way as to unfairly prejudice Fulham as amember of the FAPL. FAPL in response offered to place the matter before itsshareholders and also put Fulham on notice that if further action was takenby Fulham, it was bound by the FAPL Rules to submit the dispute toarbitration.
After receiving this response, Fulham commenced legal proceedings in theEnglish courts in order to “red-card” the Chairman from acting as anunauthorised agent or from participating in any way in negotiations regardingthe transfer of players. The FAPL and the Chairman then issued respectiveapplications to stay proceedings, which were granted by the High Court onthe basis that the conditions in section 9 of the AA had been fulfilled.
Fulham contended before the Court of Appeal that the High Court had erredin granting the application to stay proceedings as the nature of the disputebeing unfair prejudice in a company context made its subject matter non-arbitrable. The nexus of the argument was that an allegation of unfairprejudice (the “section 994 petition”) centres around the need to protectclass rights and to secure relief which will be effective to bind third parties,which lies within the sole purview of the courts.
Was the matter arbitrable?
The Court of Appeal noted that neither the AA nor the CA excludesarbitration as a possible means of determining disputes of this kind. Thesubject matter was the allegation of unfair prejudice and the court noted thatthe arbitrator would be able to, as relief, make an order against the Chairmanpreventing him from acting as an agent of any club in the future and couldalso order him to resign as chairman. The inability of an arbitral tribunal towind up a company or make third party orders in the context of a claim ofunfair prejudice was relied on by Fulham in support of its argument thatclaims where that or comparable relief could be sought in court proceedingslie outside the scope of arbitration. It was contended that therefore a petitionof unfair prejudice required the supervisory jurisdiction of the court. Thisargument was made despite the fact that Fulham did not seek the winding-up of the FAPL.
The court agreed that the decision to wind-up a company lies within thecourt’s exclusive jurisdiction and the discretion as to whether to make suchan order is for the court, not the arbitrator, to exercise. However, the court
9Legal Bulletin October 2011
went on to find that the determination of whether there had been unfairprejudice was plainly capable of being decided by an arbitrator and thespecific arbitral tribunal which would hear the current dispute would have thepower to grant the relief sought by Fulham in its section 994 petition.The court also held that a dispute between members of a company orbetween shareholders and the board about alleged breaches of the Articlesof Association or a shareholders’ agreement is an essentially contractualdispute which does not necessarily engage the rights of creditors or impingeon any statutory safeguards imposed for the benefit of third parties. Thecourt noted that the dispute at hand was a good example of where the onlyissue was whether the Chairman had acted in breach of the FA and FAPLRules in relation to the transfer of Peter Crouch. There was nothing in thecourt’s opinion which rendered the dispute unsuitable for arbitration as theonly restriction placed upon the arbitrator would be in respect of the kind ofrelief that can be granted.
In such cases where winding-up is a relief that is sought, the arbitrationagreement would operate as an agreement not to present a winding-uppetition unless and until the underlying dispute had been determined atarbitration. Whether a winding-up order should be made will always be left tothe court to determine. The court said that an arbitrator could legitimatelydecide whether a complaint of unfair prejudice had been made out andwhether it would be appropriate for winding-up proceedings to take place.
Addressing the concern of the effect of arbitration on third parties, the courtstated that if the relief sought is of a kind which may affect other memberswho are not parties to the arbitration, their views could be canvassed by thearbitrators before deciding whether to make such an award.
For the reasons above, the court rejected the appeal.
Practical effect
As English cases are not binding, but merely persuasive, the Singaporecourts may seek guidance from this case in the event that a dispute arisesbetween the shareholders of a Singapore incorporated joint venturecompany containing similar arbitration clauses. However, as the relevantprovisions in the English Arbitration Act and Companies Act are not in parimateria with their Singapore counterparts, the Singapore courts may verywell take a different position to that adopted by the English court.
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Supreme Court consultation paper entitled “Review ofDiscovery in Civil Litigation”
On 19 October 2011, the Supreme Court announced a public consultationentitled “Review of Discovery in Civil Litigation” (the “consultation paper”).The consultation paper reviews the discovery process to ascertain whether itshould be modified and updated to bring it in line with present and futurebusiness practices and needs. The review is being undertaken by the Rulesof Court Working Party (the “ROCWP”).
Feedback on the existing rules in the form of a prepared survey was soughtby the ROCWP from various stakeholders, including the Civil PracticeCommittee of the Law Society of Singapore, the Singapore CorporateCounsel Association, local and foreign banks and some multinationalcompanies. The responses to the ROCWP survey highlighted concerns
If you would like to discuss theimpact of this case on yourbusiness, please contact:
Tham Wei ChernTel: +65 6890 [email protected]
Edwin TongTel: +65 6890 [email protected]
10Legal Bulletin October 2011
regarding time, costs and procedure employed in the discovery process, withparticular concerns raised on the test to be applied in determining the scopeof discovery and the electronic discovery regime.
Some of the amendments suggested in the consultation paper are set outbelow.
The consultation closes on 9 November 2011.
E-discovery reform
Electronic discovery is concerned with the discovery of documents that areelectronically stored, and extends to inspection and supply of copies of thesame. The current framework of electronic discovery is found in the SupremeCourt Practice Direction No 3 of 2009, which sets out the procedure forparties to request for discovery and inspection of electronically storeddocuments.
The following are some of the proposals with regard to the electronicdiscovery regime:
Order 24, rule 1 of the Rules of Court to be amended to make itmandatory for parties to adopt an electronic discovery plan where:
more than 200 documents relevant to the proceedings have beencreated, or are stored, in an electronic format; and
the use of technology in the management of documents and conductof the proceedings will help facilitate the quick, inexpensive andefficient resolution of the matter.
Making it mandatory for parties to meet and discuss the adoption of adiscovery plan (for both hardcopies and electronic documents);
Mandating the adoption of search terms during general discovery in lieuof a manual identification of the three categories of documents underOrder 24, rule 1(2) of the Rules of Court;
Certain categories of documents should be presumed to be notreasonably accessible, to save time and costs;
To provide that the court may order that the party seeking discovery bearpart or all of the costs for producing the documents sought where thedocuments are not reasonably accessible and the party seekingdiscovery has not been able to demonstrate that the documents soughtare, though relevant, sufficiently material; and
A new rule is suggested, where an electronic discovery plan is in place,to allow the conduct of discovery by direct exchange of documents andfor inspection to be deferred and ordered only when shown to benecessary.
General proposals for reform
General proposals regarding the discovery procedure were also suggestedas set out below:
Imposing costs sanctions where an “over-inclusive” approach todiscovery is adopted;
11Legal Bulletin October 2011
A “menu” or differentiated approach to discovery allowing for theadoption of different basic standards of disclosure for different types ofcases to help alleviate the costs of discovery and avoid unnecessarilybroad discovery exercises, particularly where complex cases areinvolved; and
Adopting discovery plans to facilitate electronic discovery.
Reference materials
Please click on the titles below to access the materials from the SupremeCourt website www.supremecourt.gov.sg:
Supreme Court announcement
Consultation paper
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Employment
Retirement Age (Amendment) Act 2011 takes effect1 January 2012: Re-employment of older employees
With effect from 1 January 2012, re-employment legislation will be introducedin Singapore in the Retirement Age Act, which will be re-named theRetirement and Re-employment Act (the “RRA”).
Under the RRA, employers will be required to offer re-employment to thoseemployees who have reached the statutory retirement age, if the employeesfulfill certain eligibility criteria and are willing and able to continue to work.
The RRA currently prescribes a retirement age of 62, with re-employment foreligible employees up to the age of 65.
An employee is eligible for re-employment if that employee’s workperformance is assessed to be at least satisfactory, and the employee ismedically fit to continue working. The onus will be on employers to prove thatan employee is not eligible for re-employment.
In the event that an employer is unable or declines to offer re-employment toan employee who is eligible for re-employment and who wishes to continueto work beyond the retirement age, the RRA requires the employer to grantthe employee financial assistance in the form of an “Employment AssistancePayment”. There are guidelines in determining the amount of theEmployment Assistance Payment to be paid to an employee.
Relevant subsidiary legislation issued
On 30 September 2011, the following subsidiary legislation was issued underthe Retirement and Re-employment Act and it will only come into effect from1 January 2012:
Retirement and Re-employment (Composition of Offences) Regulations2011
Retirement and Re-employment (Prescribed Minimum Retirement Age)Regulations 2011
For further information, pleasecontact:
Ang Cheng Hock, SCTel: +65 6890 [email protected]
J. SathiaTel: +65 6890 [email protected]
12Legal Bulletin October 2011
Retirement and Re-employment (Exemption) Notification 2011
Retirement and Re-employment (Fees) Regulations 2011
Retirement and Re-employment (Prescribed Form) Regulations 2011
Retirement and Re-employment (Prescribed Specified Age) Notification2011
Reference material
For more information about the Retirement Age (Amendment) Act 2011,please read the article featured in a previous issue of the Allen & GledhillLegal Bulletin (December 2010) when the Retirement Age (Amendment) Bill2011 was passed in Parliament. To access the article entitled “Parliamentpasses Retirement Age (Amendment) Bill 2010: Facilitates older employeesworking longer”, please click here.
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Parliament introduces Work Injury Compensation(Amendment) Bill 2011: Streamlined time frame for makingclaims
The Work Injury Compensation (Amendment) Bill 2011 (the “Bill”) wasintroduced in Parliament and read for the first time on 17 October 2011.
Background
In January 2011, the Ministry of Manpower (the “MOM”) conducted a publicconsultation on a draft version of the Bill. On 17 October 2011, the MOMreleased its response to the feedback received.
Key changes
The following are some of the changes that will be made to the Work InjuryCompensation Act (the “Act”) arising from the Bill:
Time limit for filing claims under the Act: The Act will be amended toprovide that all applications to claim under the Act, including thosesubmitted after an earlier withdrawal from the Act to pursue a commonlaw claim, have to be filed within one year from the date of theemployee’s accident. This amendment will remedy the current situationwhere some employees who have lodged a claim under the Act withinthe one-year timeframe have subsequently withdrawn the claim topursue civil litigation, and then attempted to revert to claiming under theAct more than a year later.
Enhancing requirements for work injury compensation insurance:The Act will be amended to provide that the employer’s insurer is notentitled to raise any objection or defence on the ground that there is inforce another policy of insurance issued by another party covering thesame liability as the policy issued by the employer’s insurer. The changefollows the MOM’s proposal that when a claim for compensation iscovered by insurance policies held by multiple parties, the employer’sinsurance policy shall be used first to satisfy the claim. In its response tothe feedback received from its public consultation, the MOM stated that itwill allow flexibility for the employer’s insurer to bring in a third party (e.g.
For further information, pleasecontact:
Sophie LimTel: +65 6890 [email protected]
Kelvin WongTel: +65 6890 [email protected]
13Legal Bulletin October 2011
main contractor’s insurer) to pay compensation to the injured worker ifthe third party consents to making such payment. However, in order toensure that the worker receives his compensation promptly, the thirdparty has to commit in writing to the MOM before the notice ofassessment is issued, that he accepts liability for the claim. If not, theemployer’s insurance policy will be used by default to satisfy the claim.
Compensation for occupation diseases: The Bill will amend the Act toallow compensation for diseases resulting from exposure at work tochemical or biological agents. Currently, an employee can claimcompensation for contracting an occupational disease (“OD”) in twoinstances: (a) where the OD resulted from a specific accident at work,and (b) where the employee contracts an OD listed in the SecondSchedule of the Act, provided he meets the criteria specified in theSecond Schedule.
Compensation for injuries sustained in work-related fights:Currently, injuries sustained in work-related fights are compensable. TheBill will exempt an employer totally from liability to pay compensationunder the Act for injury sustained by aggressors in a work-related fight.Nevertheless, employers remain liable to compensate if the injuries aresustained in work-related fights while the employee is acting in self-defence, acting in the defence of another or under the instruction orconsent of the employer to break up the fight. Employees who areassaulted and did not retaliate and employees who are involved in a fightwhilst safeguarding property or life, or maintaining law and order, remaineligible for compensation.
Reference materials
Please click here to access the full text of the Work Injury Compensation(Amendment) Bill 2011 from the Singapore Parliament websitewww.parliament.gov.sg
To read the MOM’s response to feedback from the consultation on the draftBill from the REACH portal www.reach.gov.sg, please click here.
An article about the draft Bill was featured in a previous issue of the Allen &Gledhill Legal Bulletin (February 2011). To read the article entitled “MOMproposes enhancements to Work Injury Compensation Act framework:Streamlined time frame for making claim, no exclusions from insurancepolicies”, please click here.
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Insurance
New MAS Notice 307 on investment-linked insurancepolicies with effect 1 October 2011
With effect from 1 October 2011, a new MAS Notice 307 on Investment-Linked Life Insurance Policies replaces the earlier Notice dated 2 September2004 which was cancelled with effect from 30 September 2011.
On 23 September 2011, when the Monetary Authority of Singapore (the“MAS”) re-issued the new MAS Notice 307, it also issued a circular whichhighlighted the key changes in the new Notice.
For further information, pleasecontact:
Ho Chien MienTel: +65 6890 [email protected]
Sanjiv RajanTel: +65 6890 [email protected]
14Legal Bulletin October 2011
MAS Notice 307 sets out the mandatory requirements and non-mandatorystandards in relation to disclosure, investment guidelines, borrowing limitsand operational practices for investment-linked life insurance policies (“ILP”).The Notice applies to any direct insurer registered to carry on life business.
Under the new MAS Notice 307, an insurer may send statements and reportsto policyholders by electronic means. The new Notice also provides a list ofprohibited activities which an ILP sub-fund should not engage in: (a) directlending of monies, (b) granting of guarantees, (c) underwriting, or (d) shortselling except where this arises from financial derivatives which are investedin accordance with the relevant sections of Appendix 1 of the Code onCollective Investment Schemes. Further, core investment requirements willbe strengthened and there will be new guidelines for certain ILP sub-fundcategories. Other key changes include safeguards to enhance investorprotection such as standardising the methods used to calculate performancefees and new principles on the naming of ILP sub-funds. The use ofsimulated past performance data will be prohibited under the new Notice.
Reference materials
The following materials are available on the MAS website www.mas.gov.sg:
MAS Circular dated 23 September 2011
MAS Notice 307 dated 23 September 2011
MAS Notice 307 dated 2 September 2004
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MAS’ response to feedback on public consultation on“Proposed Revisions to the Regulatory Framework forTrade Credit Insurance, Political Risk Insurance andMortgage Insurance”
Following a 2010 public consultation on “Proposed Revisions to theRegulatory Framework for Trade Credit Insurance, Political Risk Insuranceand Mortgage Insurance”, the Monetary Authority of Singapore (the “MAS”)has, on 14 October 2011, issued a response to the feedback received. TheMAS has considered the feedback received, conducted further review andhas incorporated the relevant feedback.
Set out below are the key points of the MAS response:
Trade credit insurance (“TCI”)
Two-tier approach to the contribution rules: In light of industryfeedback that the contribution rules appear more stringent than otherjurisdictions for the more established insurers, the MAS will adopt a two-tier approach to the contribution rules to cater to both growing andestablished insurers. Under this approach, insurers would contribute thehigher of 12% of Net Premium Written (“NPW”) or 50% of underwritingprofit when the total contingency reserves is less than 50% of the highestNPW in each of the preceding five years. However, when thecontingency reserves exceed 50% of the highest NPW in each of the
For further information, pleasecontact:
Francis MokTel: +65 6890 [email protected]
Sanjiv RajanTel: +65 6890 [email protected]
Corina SongTel: +65 6890 [email protected]
15Legal Bulletin October 2011
preceding five years, insurers will contribute the lower of 12% of NPW or50% of underwriting profit. This will allow for an accelerated building upof contingency reserves for new and growing insurers, but would adjustfor a slower build up when the insurers are more established.
Captive insurers to maintain contingency reserves unlessexempted: The MAS clarifies that it is advisable for a captive insurerassuring TCI business to set aside adequate reserves, includingcontingency reserves, unless exempted by the MAS in relation toin-house risks.
Political risk insurance (“PRI”)
Terrorism risk included: In response to a comment by one of therespondents, the MAS clarifies that the definition of “political risk” in theconsultation paper, which was released in the 2010 public consultation,includes terrorism risks.
Domicile of PRI risk determines volatility category: It is MAS’ policyintent for the domicile of the PRI risk to determine the volatility category(and hence the insurance risk requirements) that should be applied tothat risk. This should be differentiated from whether the risk is classifiedin the Singapore Insurance Fund or Offshore Insurance Fund forstatutory reporting to the MAS.
Short-term TCI policies with small political risk cover classified asTCI business: The MAS has clarified that short-term TCI policies thatoffer some form of political risk cover as a bundled package, and forwhich political risk cover is only a small element of the overall cover, canbe classified as TCI business for statutory purposes.
Mortgage insurance (“MI”)
Definition of short-tailed liabilities: In response to a request forclarification, the MAS explains that short tailed liabilities for reinsuranceinward business could arise from reinsurance provided that does notcover the whole term of the loan as per direct insurance contracts. Thecover could be provided to protect the insurer against losses on aportfolio basis for only a limited period of time (for example, one or twoyears).
Reference materials
For the full text of the MAS consultation paper issued in 2010 and the recentresponse to feedback on the MAS website www.mas.gov.sg, please clickon the following titles:
Consultation paper dated July 2010
MAS’ response dated 14 October 2011
To read an article entitled “MAS issues consultation paper on ProposedRevisions to the Regulatory Framework for Trade Credit Insurance, PoliticalRisk Insurance and Mortgage Insurance” featured in a previous issue of theAllen & Gledhill Financial Services Bulletin (July 2010), please click here.
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For further information, pleasecontact:
Francis MokTel: +65 6890 [email protected]
Sanjiv RajanTel: +65 6890 [email protected]
Corina SongTel: +65 6890 [email protected]
16Legal Bulletin October 2011
Media & Telecoms
Telecommunications (Amendment) Bill 2011 introduced inParliament: Refining Government’s powers and updatinglegislative framework
On 20 October 2011, the Telecommunications (Amendment) Bill 2011(the “Bill”) was introduced in Parliament. The Bill seeks to amend theTelecommunications Act (the “TA”) following a public consultation whichwas conducted between August and October 2010. Essentially, the TA willbe amended to ensure that it remains relevant and sufficient to regulate afast-changing telecommunications sector. Since the TA was last revised in2005, there have been significant developments in the telecommunicationssector.
Key proposed amendments
Set out below is a summary of the key proposed amendments to the TA:
Maximum financial penalty raised: Presently under the TA, breachesof licence conditions, codes of practice, standards of performance, ordirections attract a financial penalty of a sum not exceeding S$1 million.The Bill seeks to amend the TA by revising the maximum financialpenalty to 10% of the annual business turnover of licensable services(including spectrum rights), or S$1 million, whichever is higher.
Non-payment of financial penalty may suspend or cancel licence:The TA will be amended to empower the Info-communicationsDevelopment Authority of Singapore (the “IDA”) to suspend or revoke alicence, or to reduce the period for which a licence is to be in force, on acase-by-case basis, in the event of a licensee’s failure or refusal to pay afinancial penalty.
Transfer of installation or plant on or after 1 July 2011: The Billintroduces a new section 14A in the TA to provide for the deemedtransfer of rights and obligations in respect of land, building or property inconnection with any transfers by a public telecommunication licensee(“PTL”) of an installation or plant used for telecommunications to anotherPTL on or after 1 July 2011. This means that when a PTL transfers aninstallation or plant used for telecommunications to another PTL on orafter 1 July 2011, any rights conferred or obligations imposed on thetransferor PTL in respect of land, building or property under, over, along,across, in or upon which the transferred installation or plant has beenlaid, placed, carried on or erected are deemed on the transfer date tohave been transferred to the transferee PTL.
Provision of space or facility under code of practice: Following theBill, the IDA may issue codes of practice for the provision, maintenanceand use of, and access to, space and facilities within or on any land orbuilding for the operation of any installation, plant or system used fortelecommunications, and for the allocation of costs and expensesincurred for such provision, maintenance, use and access. Where anycode of practice applies to a developer or owner of land or building andthere is a breach of any of the provisions in the code, the IDA may issuewritten orders for the purpose of securing compliance with the code.Failure to comply with such written orders shall be an offence.
17Legal Bulletin October 2011
New Part VA: To provide greater clarity on the scope of theconsolidation provisions of the TA and ensure consistency with otherlegislation, the Bill proposes amending the TA to introduce a new PartVA which will include the following:
(a) New concepts of “holding of voting shares”, “control of votingpower”: The concepts of “holding of voting shares” and “control ofvoting power” in place of “ownership interest”, to take into accountan acquiring party’s control over a designated licensee as definedunder the TA, through the acquisition of voting shares or the controlof voting power; and
(b) New concepts of “associates”: The concept of “associates” whichincludes persons who may control or influence an acquiring party,or persons who may be controlled or influenced by an acquiringparty.
(c) New concepts of “business trusts” and “trusts”: A businesstrust is a new model by which telecommunications licensees maywish to structure ownership of their telecommunications systems orassets. As such, in order to enable the IDA to oversee acquisitionsinvolving telecommunications systems that have been placed inbusiness trusts or other forms of trusts, it is proposed to subjectsuch trusts to the IDA’s regulatory oversight. To minimise businessuncertainty, only a business trust or trust that is established inrespect of a telecommunications system operated by atelecommunications licensee may be designated under the TA forthe purpose of enabling the IDA to monitor ownership changes inthe relevant business trust or trust.
(d) Penal sentences for acquiring parties who are non-licensees:Currently, there is no explicit penalty in cases where acquiringparties who are non-licensees under the TA fail to comply with theIDA’s directions and conditions in approving or denying anacquisition. As such, it is proposed that the TA be amended tosubject such acquiring parties who are non-licensees to relevantpenal sentences under the TA should they breach the IDA’sdirections and conditions.
In August and September 2011, the IDA conducted a public consultationon Section 10 of the Code of Practice for Competition in the Provision ofTelecommunication Services 2010 (the “Code”) and related guidelines.By way of background, the regulatory framework governing mergers andacquisitions within the telecommunications sector comprises the generalobligations in Part VA of the TA as well as the procedural requirementsunder section 10 of the Code. The IDA had suggested amendments toSection 10 of the Code and related guidelines so as to make themconsistent with the key amendments which have been proposed inrelation to Part VA of the TA. Please click here to read an article titled“IDA conducts public consultation on proposed amendments to Section10 of Telecommunications Competition Code and Consolidation andTender Offer Guidelines” which was featured in a previous issue of theAllen & Gledhill Legal Bulletin (August 2011).
Minister may direct take-over of control of a licensee’s affairs,business and property: The Bill will amend the TA to provide theMinister for Information, Communications and the Arts (the “Minister”)with the powers to make Special Administration Orders (“SAO”).Essentially, the SAO provision will enable the Minister to direct the take-over of the telecommunications network and business to achieve specific
18Legal Bulletin October 2011
policy objectives, such as ensuring the security and reliability of thesupply of telecommunications services and the carrying out of functionswhich have been vested in the licensee pending the transfer ofownership. The Minister may issue a SAO only in the followingcircumstances:
The telecommunications licensee is unable to continue to hold itslicence;
The telecommunications licensee is or is likely to be unable to pay itsdebts;
It is in the interest of the security and reliability of supply oftelecommunications services in Singapore; and
It is in the public interest.
Powers for Minister to direct separation of telecommunicationslicensee: A new section 69C will be introduced to the TA to empowerthe Minister to impose structural or operational separation on a vertically-integrated operator controlling networks or wholesale services that areimportant or necessary for the effective functioning of a competitivemarket, subject to certain criteria and conditions.
Reference materials
For the full text of the Bill which is available on the Parliament websitewww.parliament.gov.sg , please click here.
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Securities & Futures
Singapore Court of Appeal finds trades amounted to pricemanipulation
Tan Chong Koay & Anor v Monetary Authority of Singapore [2011] SGCA 36
In Tan Chong Koay & Anor v Monetary Authority of Singapore [2011] SGCA36, the Singapore Court of Appeal dismissed an appeal by the appellantsagainst a judgment of the Singapore High Court ordering them to pay to theMonetary Authority of Singapore (the “MAS”) a civil penalty of S$250,000each for infringing section 197(1)(b) of the Securities and Future Act (the“SFA”). Section 197 deals with false trading and market rigging transactions,in particular, price manipulation.
Overview and background
The appellants were Dr Tan Chong Koay (“Dr Tan”) and Pheim AssetManagement Sdn Bhd (“Pheim Malaysia”). Pheim Malaysia and PheimAsset Management (Asia) Pte Ltd (“Pheim Singapore”) - together the PheimGroup - are licensed to carry on fund management business in Malaysia andSingapore respectively. The Pheim Group was founded by Dr Tan who isalso their largest shareholder, chief executive officer and chairman of theirinvestment committees.
For further information, pleasecontact:
Tan Wee MengTel: +65 6890 [email protected]
Tham Kok LeongTel: +65 6890 [email protected]
19Legal Bulletin October 2011
Pheim Malaysia started investing in the shares of United Envirotech Ltd(“UET”) in April 2004 when it acquired UET shares in their initial publicoffering at S$0.47 each. UET shares were listed on the Singapore ExchangeLimited. Pheim Malaysia continued to buy UET shares in various quantitiesfor its accounts until September 2004. All purchases made after May 2004were at prices below the IPO price, and the lowest price paid by PheimMalaysia during this period was S$0.34 per share.
On 15 December 2004, Pheim Malaysia’s investment committee decidedto increase Pheim Malaysia’s investment in UET shares. However, nopurchases of UET shares were made from this date until the last threetrading dates of the year, namely between 29 and 31 December 2004(the “Relevant Period”). Beginning on 29 December 2004, a remisiernamed Tang Boon Siah (“Tang”) started purchasing UET shares foraccounts managed by Pheim Malaysia, and in the Relevant Periodpurchased a total of 360,000 UET shares costing a total of S$152,470.95at a weighted average price of S$0.424. All (except one) of the purchasesmade by Tang during the Relevant Period were made between threeseconds and 35 minutes from the close of each trading day.
Following the purchases made by Tang, the closing price of UET sharesrose from S$0.38 per share on 27 December 2004 to S$0.445 per share on31 December 2004. This increase in the price of UET shares at the end ofthe year resulted in an increased net asset value of accounts managed bythe Pheim Group, with some of Pheim Singapore’s accounts outperformingtheir benchmark returns for 2004 and thereby earning an additionalS$50,000 in fees.
Section 197(1) of the SFA
Section 197(1) of the SFA provides that no person shall create, or doanything that is intended or likely to create a false or misleading appearance(a) of active trading in any securities on a securities market, or (b) withrespect to the market for, or the price of, such securities.
Section 197(1) therefore has three limbs, namely (1) creating a false ormisleading appearance of active trading in the market for or the price ofsecurities, (2) doing anything that is intended to create such a false ormisleading appearance, and (3) doing anything that is likely to create such afalse or misleading appearance. Limb (2) expressly requires the presence ofan intention to create a false or misleading appearance, but there is no clearauthority as to whether limb (1) or limb (3) of section 197(1) requires proof ofintention or mens rea.
In the High Court
The High Court based its decision on limb (2) or that part of section 197(1)(b)which requires intention, and held that the MAS had proved its claim in so faras the appellants’ purchases of UET shares during the Relevant Period weredone with the intention of creating a false or misleading appearance withrespect to the price of UET shares. It was therefore not necessary for theHigh Court to consider the appellants’ liability under limb (1) or limb (3) ofsection 197(1) and the High Court declined to do so because it was not clearwhether, as a matter of statutory construction, liability under those limbsrequired an element of mens rea.
The High Court had rejected a number of the appellants’ defences andarguments, for instance, that Tang had full discretion to buy UET shares atsuch prices as he thought fit, that the purchases were based on legitimateinvestment purposes and made to bring down the average cost of PheimMalaysia’s holding. The appellants also sought to explain that Pheim
20Legal Bulletin October 2011
Malaysia did not make purchases of UET shares before the Relevant Periodbecause the specified accounts had reached their foreign equity limits. TheHigh Court, however, rejected this explanation as it found on the evidencethat Pheim Malaysia could have purchased the UET shares before theRelevant Period without breaching those regulatory limits for some or all ofthe said accounts.
On appeal
With respect to limb (2) of section 197(1) or that part of section 197(1)(b)which requires an intention to create a false and misleading appearance, theCourt of Appeal accepted the High Court’s finding that the pattern of theappellants’ trades in UET shares during the Relevant Period showed that thepurpose of those trades was to set the price of UET shares for the end of thetrading year in 2004. The appellants’ pattern of trading was not consistentwith either the actions of an investor who genuinely believed that UETshares were undervalued or those of a contrarian investor. Pheim Malaysiastopped buying UET shares in September 2004 - the lowest transacted pricethen was S$0.384 per share - and resumed buying UET shares only on29 December 2004. Notably, prior to 29 December 2004, Pheim Singaporehad sold UET shares in the market at an average price of S$0.359 pershare, but Pheim Malaysia did not purchase them. Dr Tan’s explanation thatPheim Malaysia did not buy those UET shares because the Pheim Grouphad an internal practice of not allowing one company to buy from the otherwas not accepted by the court as credible.
The Court of Appeal noted that although the sellers of the UET shares duringthe Relevant Period were genuine sellers at the prices which they posted,the dominant buyer of UET shares (buying 88% of all UET shares during theRelevant Period) then was Pheim Malaysia which was not a genuine buyer.The prices at which Pheim Malaysia purchased UET shares during theRelevant Period were not genuine prices in that they were not chosen aspart of a legitimate investment strategy, but were instead chosen for theextraneous purpose of setting or maintaining the market price. The marketfor UET shares during the Relevant Period, therefore, did not reflect theforces of genuine supply and demand - the supply was genuine, but not thedemand.
Furthermore, the Court of Appeal affirmed the High Court’s decision on thequantum of civil penalty imposed on the appellants. The court took into accountfactors listed by the MAS, namely, that through the impugned behaviour, thePheim Group had obtained significant reputational benefits to its fundmanagement businesses. In this regard, there was an increase of overS$1 million in the net asset value of the Pheim Group’s funds, Pheim Singaporeearned S$50,000 in additional performance fees and during the RelevantPeriod, the Pheim Group had significant level of earnings (S$2.5 millioncombined profits after tax), against which the combined civil penalty ofS$500,000 was not disproportionate or unreasonable.
On mens rea
Both the High Court and the Court of Appeal were satisfied that liability in thiscase had been established under the limb of section 197(1)(b) of the SFA,which required intention. As to the other two limbs in section 197(1), underwhich it was unclear whether or not intention or mens rea was required, theCourt of Appeal surveyed case law and discussed the issue at length, eventhough it was not necessary for the court to express a conclusive view, whichit did not. However, it appears that the court seems to favour an approachwhich nonetheless involves an element of identifying purpose, intention,knowledge or mens rea, which could be said to be present or inherent in anaction which causes or is likely to cause a false and misleading appearance
21Legal Bulletin October 2011
in the markets. The court acknowledged that to displace the common lawpresumption that generally a statute does not impose criminal liability withoutmens rea, one requires clarity which is clearly lacking here. Notably, theCourt of Appeal indicated that it must be recognised that if section 197(1)proscribes the effects of an investor’s activities in the securities marketwithout considering his intention or knowledge regarding those effects, therewould be nothing he could do in advance to prevent himself from incurringliability, short of not trading at all, and this, the court pointed out, is arguablynot the policy intention of section 197(1).
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Tax
Parliament introduces Income Tax (Amendment) Bill 2011:Implementing Budget 2011 changes
The Income Tax (Amendment) Bill 2011 (the “Bill”) was read the first time inParliament on 17 October 2011. Primarily, the Bill seeks to implement the taxchanges announced in the Singapore Government’s 2011 BudgetStatement. Some non-Budget changes will also be implemented.
Some of the key changes are highlighted below.
Budget 2011 changes
Enhancement of the Productivity and Innovation Credit (“PIC”) Scheme.Most notably, the quantum of PIC deduction is increased to 400% ofqualifying expenditure (up from 250% currently), for the first S$400,000spent on each qualifying activity (up from S$300,000 currently).
One-off corporate income tax rebate of 20% (subject to a cap ofS$10,000), or one-off cash grant to small and medium-sized companiesbased on 5% of the company’s revenue for YA 2011 (subject to a cap ofS$5,000).
Introduction of the foreign tax credit pooling system.
Introduction of the new Maritime Sector Incentive.
250% deduction on qualifying donations extended till 2015.
Non-Budget 2011 changes
Application of exchange of information (“EOI”) provisions to not onlyAvoidance of Double Taxation Arrangements, but EOI arrangements aswell.
According bills and notes issued by the Monetary Authority of Singaporetax parity with Singapore Government Securities.
Public consultation and MOF response
From 11 July 2011 to 1 August 2011, the Ministry of Finance (the “MOF”)conducted a public consultation and sought feedback on a draft version ofthe Bill (the “draft Bill”). On 12 October 2011, the MOF issued its responseto the feedback received. The areas where the MOF received the mostfeedback included the following:
If you would like to discuss theimpact of this case on yourbusiness, please contact:
Aaron LeeTel: +65 6890 [email protected]
William OngTel: +65 6890 [email protected]
22Legal Bulletin October 2011
Productivity and Innovation Credit scheme
Foreign Tax Credit Pooling
Tax deduction for Equity-Based Remuneration (EEBR) scheme
Reference materials
Please click here to access the full text of the Income (Amendment) Bill 2011from the Singapore Parliament website www.parliament.gov.sg
Please click here to access from the MOF website www.mof.gov.sg theMOF response to the feedback received from the public consultation.
An article about the draft Bill was featured in a previous issue of the Allen &Gledhill Legal Bulletin (July 2011). To read the article entitled “MOF consultson draft Income Tax (Amendment) Bill 2011: Implementing Budget 2011changes”, please click here.
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Parliament introduces Goods and Services Tax(Amendment) Bill 2011: Implementing Budget 2011changes
The Goods and Services Tax (Amendment) Bill 2011 (the “Bill”) was readthe first time in Parliament on 17 October 2011. The Bill seeks primarily toimplement the tax changes announced in the Singapore Government’s 2011Budget Statement.
Some of the key changes are highlighted below:
Approved marine customers: A new scheme for “approved marinecustomers” to buy or rent zero-rated goods for use or installation oninternationally-bound commercial ships will be introduced. Under thescheme, a supplier may zero-rate the supply of such goods to an“approved marine customer” without having to maintain the requisitedocumentary proof.
GST measures for the biomedical industry: The Approved ContractManufacturer and Trader (ACMT) Scheme will be enhanced andextended to include qualifying biomedical contract manufacturers.Approved contract manufacturers (including those in the biomedicalsector) will also be allowed to disregard GST on services rendered onfailed or excess production, and to recover GST on local purchases ofgoods used in the contract manufacturing process.
New zero-rating relief for supplies related to goods kept in“approved specialised warehouses”: A new zero-rating relief forspecified supplies made to overseas persons for goods kept in“approved specialised warehouses” in Singapore will be introduced. Theoperator of an “approved specialised warehouse” will also be able tozero-rate his supply of storage space (a supply of goods) which areprovided in his business of storing specified goods for his overseascustomer.
For further information, pleasecontact:
Sunit ChhabraTel: +65 6890 [email protected]
Tang Siau YanTel: +65 6890 [email protected]
23Legal Bulletin October 2011
Goods imported for overseas persons: There will be an expansion ofthe scope for recovery GST on goods imported on behalf of overseaspersons.
By way of background, the Ministry of Finance (the “MOF”) conducted apublic consultation in July 2011 and sought feedback on a draft version ofthe Bill. On 30 September 2011, the MOF issued its response to thefeedback received.
Reference materials
Please click here to access the full text of the Goods and Services(Amendment) Bill 2011 from the Singapore Parliament websitewww.parliament.gov.sg
Please click here for the MOF press release dated 30 September 2011 formore details of the MOF’s response to the feedback from the publicconsultation. The response is available from the MOF websitewww.mof.gov.sg
An article about the draft Bill was featured in a previous issue of the Allen &Gledhill Legal Bulletin (July 2011). To read the article entitled “MAS consultson draft Goods and Services Tax (Amendment) Bill 2011: ImplementingBudget 2011 changes”, please click here.
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Parliament introduces Stamp Duties (Amendment) Act2011: Implementing Budget 2011 changes
The Stamp Duties (Amendment) Act 2011 (the “Bill”) was introduced inParliament on 17 October 2011. Changes arising from the Bill will implementmeasures first announced in the Singapore Government’s 2011 BudgetStatement, as well as other changes.
The following are some of the key changes the Bill seeks to make.
Provide for stamp duty relief for instruments relating to the conversion ofa private company to a limited liability partnership, as well as relief fromseller’s stamp duty for instruments relating to an amalgamation,reconstruction, transfer of assets between associated entities, orconversion to a limited liability partnership.
Remove most S$2 and S$10 nominal and fixed duties on prescribeddocuments not liable for ad valorem stamp duty to reduce thecompliance costs for taxpayers.
Fine-tune the procedure for granting stamp duty relief for shareacquisitions made in the course of mergers and acquisitions.
Make provision for the Minister for Finance (the “Minister”) to waiveconditions for any relief, remission or exemption of stamp duty to providemore clarity and flexibility for the remission of stamp duties;
By way of background, the Ministry of Finance (the “MOF”) conducted apublic consultation in August 2011and sought feedback on a draft version ofthe Bill (the “draft Bill”). On 10 October 2011, the MOF released itsresponse to the feedback received from the public consultation.
For further information, pleasecontact:
Sunit ChhabraTel: +65 6890 [email protected]
Tang Siau YanTel: +65 6890 [email protected]
24Legal Bulletin October 2011
Reference materials
Please click here to access the full text of the Stamp Duties (Amendment)Bill 2011 from the Singapore Parliament website www.parliament.gov.sg
Please click here for the MOF Summary of Responses which provides moreinformation about the MOF’s response to the feedback received from theconsultation paper. The Summary of Responses is available from the MOFwebsite www.mof.gov.sg
An article about the draft Bill was featured in a previous issue of theAllen & Gledhill Legal Bulletin (August 2011). To read the article entitled“MOF consults on proposed changes to Stamp Duties Act: ImplementingBudget 2011 changes”, please click here.
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General
MinLaw conducts public consultation on proposedchanges to Evidence Act: Legal professional privilege forin-house counsel, opinion evidence, computer output,hearsay
On 30 September 2011, the Ministry of Law (the “MinLaw”) issued aconsultation paper (the “consultation paper”) setting out proposedamendments to the Evidence Act (the “Act”). The Act provides the legislativeframework relating to the admissibility of evidence in court proceedings.
The proposals in the consultation paper arise as a result of feedbackreceived from the Law Reform Committee, the Technology LawDevelopment Group of the Singapore Academy of Law and the SingaporeCorporate Counsel Association.
The consultation period ended on 30 October 2011.
Proposed amendments
The consultation paper proposes the reform of four specific areas of the lawof evidence, namely:
(a) to extend the ambit of legal professional privilege to in-house counsel;
(b) to provide the courts with greater discretion in the admission of expertopinion evidence;
(c) to align the rules on admission of computer output evidence with thosegoverning other forms of evidence; and
(d) to broaden and align the categories of admissible hearsay evidence forboth criminal and civil proceedings.
Legal professional privilege
The rule of legal professional privilege provides that documents and othercommunications between a lawyer and client for the purposes of legal adviceare considered “privileged” and are therefore protected from disclosure incourt proceedings. At common law, courts in a number of jurisdictions -
For further information, pleasecontact:
Sunit ChhabraTel: +65 6890 [email protected]
Tang Siau YanTel: +65 6890 [email protected]
25Legal Bulletin October 2011
including the United Kingdom and Australia - have extended the applicationof privilege, to varying degrees, to communications between an in-housecounsel and his employer.
The consultation paper sets out proposed amendments to the Act whichwould clarify the position in Singapore by statutorily conferring the benefit oflegal professional privilege to in-house counsel. This would be achievedthrough the introduction of a new section 128A in the Act to provide for legalprofessional privilege for “qualified legal counsel”. “Qualified legal counsel”as defined in a new section 3(7), would encompass persons who areemployed to undertake the provision of legal advice or assistance inconnection with the application of the law or any form of resolution of legaldisputes. These persons would have to be qualified to practice law either inSingapore or any other jurisdiction and they would be covered by legalprofessional privilege when they act in their capacity as legal advisors and inthe context of rendering legal advice, regardless of whether they hold apracticing certificate. The term “qualified legal counsel” will also apply toLegal Service Officers posted to a Government ministry, department orstatutory body.
The consultation paper also proposes to amend references to “advocatesand solicitors” in the Act for the purposes of legal professional privilege toinclude legal officers from the Attorney-General’s Chambers.
Opinion evidence
Section 47 of the Act sets out the rules in relation to the admission of expertopinion and allows the admission of opinions in five areas - “foreign law,science or art, handwriting or finger impressions”.
The consultation paper proposes to amend section 47 to broaden the scopeof what could be admitted under the purview of opinion evidence. Theamendments seek to replace the present test of “necessity” as the basis ofadmissibility of expert evidence with the more general test of “assistance”.To guard against expert opinion of marginal utility, the court must, however,consider it “likely” that the assistance derived from the expert evidence willbe “substantial”.
The consultation paper also proposes to replace the enumerated five areasof specialised knowledge that can benefit from expert evidence with thebroader term “scientific, technical or other specialised knowledge”. The newsection 47(3) will allow expert opinion on matters of common knowledge(i.e. matters that a person without instruction/experience in the area would beable to form a sound judgment on) to be admitted if the new criteria ofadmissibility under the new section 47 are met.
While this proposed amendment does not appear in the draft Evidence(Amendment) Bill, MinLaw is also considering implementing the Law ReformCommittee’s proposal that the court be given the discretion to excludeotherwise admissible expert opinion evidence under the new section 47 if itis unfairly prejudicial, misleading or confusing, or will lead to an undue wasteof judicial time.
Computer output
Sections 35 and 36 of the Act presently impose more stringent requirementsfor the admission of computer output evidence (such as, computer generateddocuments and digital readings) than other types of evidence. This higherthreshold for the admission of computer output evidence had initially beenintroduced due to concerns over the reliability of such evidence. However,with significant improvements and developments in information technology,
26Legal Bulletin October 2011
it is now thought that such caution in relation to computer output evidence isno longer warranted and has instead made it difficult in practice for parties toadmit electronic evidence in court.
The consultation paper proposes repealing the relevant computer output-specific sections in this regard and subjecting computer output evidence tothe same rules of admission as other types of evidence. Computer-specificdefinitions in section 3 of the Act would also be repealed.
The consultation paper also proposes the introduction of a new section 116Ato provide for certain evidentiary presumptions in relation to certain classesof reliable electronic records which are unlikely or difficult to be tamperedwith, so as to facilitate the admissibility of such electronic records.
Hearsay
The hearsay rule provides that statements are generally inadmissible asevidence unless the maker of the statement testifies in court as a witness.This is to enable the statement’s veracity to be tested through the cross-examination of its maker. At present, the Act allows for certain exceptions tothis hearsay rule.
The hearsay rule is applicable to both civil and criminal proceedings though ithas been somewhat relaxed in relation to the latter through amendments tothe Criminal Procedure Code. There have been no major reforms to the rulesof hearsay in civil proceedings and MinLaw now seeks to align the civil andcriminal evidential rules concerning hearsay, so that the same exceptionsmay generally apply to both.
The consultation paper recommends amending section 32 by widening thescope of the existing statutory hearsay exceptions (including broadening theexisting “business statement” exception by removing existing limitations) andintroducing new exceptions (including allowing parties to the proceedings toagree to the admission of hearsay evidence). To prevent abuse, the courtwould be given overriding discretion under the new section 32(2) to excludehearsay evidence whose admission would not be in the interests of justice.Furthermore, except where hearsay evidence is admitted by the parties’agreement, a party seeking to rely on hearsay evidence would be requiredunder the new section 32(3) to give notice to the other parties.
Reference materials
The following materials are available on the MinLaw websitewww.minlaw.gov.sg:
MinLaw press release on Public Consultation on ProposedAmendments to the Evidence Act
Consultation Paper on Proposed Amendments to the Evidence Act
Draft Evidence (Amendment) Bill
The following materials are available on the Singapore Academy of Lawwebsite www.sal.org.sg:
Law Reform Committee Report on Reforming Legal ProfessionalPrivilege
Law Reform Committee Report on Opinion Evidence
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For further information, pleasecontact:
Jason ChanTel: +65 6890 [email protected]
Tan XeauweiTel: +65 6890 [email protected]
27Legal Bulletin October 2011
Singapore High Court allows company’s claim formisappropriated property subject to confiscation orderissued in favour of Public Prosecutor
Public Prosecutor v Ng Teck Lee (Centillion Environment & Recycling Ltd(formerly known as Citiraya Industries Ltd) & Anor, other parties)(Ung Yoke Hooi, intervener) and another matter [2011] SGHC 205
The recent Singapore High Court judgment in Public Prosecutor v Ng TeckLee deals with various issues arising under the Corruption, Drug Traffickingand Other Serious Crimes (Confiscation of Benefits) Act (the “CDSA”).
The CDSA is aimed at combating the laundering of benefits derived fromdrug trafficking, corruption and other “serious offences” (as defined in theCDSA) and provides a statutory framework for the identification anddisgorgement of such benefits.
The High Court’s judgment is noteworthy for, amongst other things, itsdiscussion on:
The principles governing the issuance of a confiscation under the CDSA;and
The scope of protection afforded under section 13 of the CDSA to thirdparties having an interest in property that may be realised by the PublicProsecutor (the “PP”) to satisfy the confiscation order.
Facts
Ng Teck Lee (“NTL”) was the Chief Executive Officer cum President ofCitiraya Industries Ltd (as it was then named) (the “Company”). TheCompany’s business was in recycling and recovering precious metals fromelectronic components. Between 2003 and 2004, NTL misappropriatedcomputer chips delivered to the Company for destruction. He thenrepackaged and sold the misappropriated computer chips to buyers in HongKong and Taiwan.
NTL’s fraud against the Company constituted “serious offences” under theCDSA. The PP applied for a confiscation order under the CDSA in respect ofthe benefits derived by NTL from his criminal conduct and the realisation ofseveral properties connected to NTL to satisfy the confiscation order. At thesame time, three parties including, the Company, asserted their interests incertain of the properties which the PP was seeking to realise. NTL hadabsconded and did not take any part in the proceedings.
This case summary focuses on the PP’s application for the confiscation orderand the Company’s application under section 13 of the CDSA for adeclaration of its interest in certain of the properties.
PP’s application for confiscation order
The PP’s application for the confiscation order was made pursuant to section5(1) of the CDSA which provides that:
“… where a defendant is convicted of one or more seriousoffences, the court shall, on the application of the PublicProsecutor, make a confiscation order against the defendantin respect of benefits derived by him from criminal conduct ifthe court is satisfied that such benefits have been soderived.” (Emphasis added)
28Legal Bulletin October 2011
The court noted that section 8(1)(a) of the CDSA provides that the benefitsderived by a person from criminal conduct are to be determined by way of aprocess whereby:
The person’s property or interest in the property is established;
The person’s known sources of income are established; and
It is established that the property or interest in the property isdisproportionate to the person’s known sources of income, and thedisproportionality is not explained to the satisfaction of the court.
However, the PP’s application did not refer to section 8(1)(a) or specificallydeal with the requirements therein. Instead, the PP presented directevidence that NTL had derived benefits amounting to US$51,196,938.52from the sale of the misappropriated computer chips.
After considering the legislative history of section 8(1)(a) and otherprovisions in the CDSA, the court concluded that section 8(1)(a) should notbe interpreted as containing an exhaustive definition as regards “benefitsderived by a person from criminal conduct”. Instead, the court’s view wasthat section 8(1)(a) is intended to facilitate the confiscation of the property ofa person who has engaged in criminal conduct by creating presumptionswhich could be applied even where there is no proof that the person hadderived direct benefit from such criminal conduct.
The court therefore found that the PP had adduced sufficient proof toestablish the value of the benefits derived from NTL’s criminal conduct, andthe court issued a confiscation order against NTL for US$51,196,938.52.
The Company’s application
The Company’s application was for a declaration of its interest in certain ofthe properties the PP was seeking to realise in order to satisfy theconfiscation order. The Company’s application was taken out pursuant tosection 13 of the CDSA. Section 13 of the CDSA enables a third party toassert an interest in a property thereby affected by a confiscation orderprovided that certain conditions are satisfied.
The Company’s application under section 13 was based on two grounds:
First ground: The Company was a judgment creditor of NTL and, thus,had an interest in those properties beneficially owned by NTL as theycould be applied towards the satisfaction of the judgment debt. TheCompany’s argument was essentially that the right to seek enforcementof a judgment debt against a property was a right protected undersection 13 of the CDSA.
Second ground: As NTL had misappropriated the chips from theCompany in breach of his fiduciary duties, the proceeds of the sale of thechips and, in turn, the properties traceable to those proceeds were heldon constructive trusts for the benefit of the Company.
First ground: Judgment creditor
On the first ground, the Company’s argument focused on the meaning of“interest” in section 2 of the CDSA. Section 2 defines “interest” in relation toproperty to include “any right”. Reference was made to the policy underlyingsection 13 of the CDSA, i.e. the protection of the rights of innocent third
29Legal Bulletin October 2011
parties, and it was argued that “any right” included the right to take outenforcement proceedings against those properties beneficially owned byNTL to satisfy the judgment obtained by the Company against NTL.
The court disagreed and held that “right” under section 2 of the CDSAreferred to a right relating to a specified property. The court held that, in asituation where an application for a realisation order is being sought inrespect of specified properties, “any right” asserted by a third party undersection 13 of the CDSA must relate to those specified properties. In thecourt’s view, a general right to take out enforcement proceedings pursuant toa judgment is not sufficient to constitute a right in any specific property.
Second ground: Beneficiary of constructive trust
The Company’s argument on the second ground centred on thecircumstances under which a principal would be entitled to assert aconstructive trust (i.e. a proprietary interest) interest over unauthorised profitsmade by an errant fiduciary.
The court agreed with the decisions cited by counsel for the Company andheld that two forms of constructive trusts may arise in respect ofunauthorised profits obtained pursuant to a breach of fiduciary duties:
The first type is in the nature of the constructive trusts which have beenrecognised in respect of bribes obtained in breach of fiduciary duties.When a bribe (akin to an unauthorised profit) is accepted in money or inkind in breach of fiduciary duties, the fiduciary holds the bribe on aconstructive trust for the person to whom his duties are owed (asestablished in Attorney-General of Hong Kong v Charles Warwick Reid &Ors [1994] 1 AC 324 and Thahir Kartika Ratna v PT PertambanganMinyak dan Gas Bumi Negara (Pertamina) [1994] 3 SLR(R) 312).
In the second type, a constructive trust is recognised over unauthorisedprofits obtained by a fiduciary by reason of a breach of his dutiesinvolving wrongful disposal of property belonging to his principal (as wasrecognised in J J Harrison (Properties) Ltd v Harrison [2002] 1 BCLC162).
The court held that both of the above forms of constructive trust arerecognised in Singapore. On the facts, the court was satisfied that thoseproperties which could be traced to the proceeds of the sale of themisappropriated chips were held on constructive trust for the benefit of theCompany.
Accordingly, the court ordered a declaration under section 13 of the CDSA ofthe Company’s interest in those properties which were derived from theproceeds of the sale of the misappropriated chips.
The Company was represented by Allen & Gledhill LLP Partner Ang ChengHock, SC and Senior Associate Ramesh Kumar.
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If you would like to discuss theimpact of this case on yourbusiness, please contact:
Ang Cheng Hock, SCTel: +65 6890 [email protected]
Jason ChanTel: +65 6890 [email protected]
30Legal Bulletin October 2011
News
DBS Bank Ltd.’s US$15 billion Global Medium Term NoteProgramme
DBS Bank Ltd. (“DBS”) has updated its existing US$10 billion Debt IssuanceProgramme, established in 2010, to a US$15 billion Global Medium TermNote Programme (the “Programme”), under which DBS may now issuesenior or subordinated notes to certain non-U.S investors outside the UnitedStates and to “qualified institutional buyers” as defined in Rule 144A of theUS Securities Act of 1933, as amended, inside the United States.
DBS, Bank of America Merrill Lynch and Goldman Sachs (Singapore) Pte.are the Joint Arrangers for the Programme and have been appointed asProgramme Dealers.
Advising DBS as to Singapore law are Allen & Gledhill LLP Partners GlennDavid Foo and Bernie Lee and Associate Jeremy Lin.
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Pramerica Real Estate Investors closes S$3 billionPramerica AsiaRetail Fund with 11 retail malls in Singaporeand Malaysia
Pramerica Real Estate Investors (“PREI”), the real estate investmentmanagement unit of Prudential Financial, Inc., completed the transfer andconsolidation of 11 retail malls in Singapore and Malaysia, from three closed-end property funds into a new S$3 billion open-end real estate fund.
Advising PREI are Allen & Gledhill LLP Partners Penny Goh, Tan Boon Wahand Danny Tan, Senior Associate Shalene Jin and Associates Jamie He andThong Kin Wai.
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Keppel Land Limited’s divestment of its 87.51% interest inOcean Properties Pte Ltd for a period of 99 years
Keppel Land Limited’s (“KLL”) subsidiary Straits Property Investments PteLtd (“SPIPL”) entered into a conditional agreement for the sale of its 87.51%.interest in Ocean Properties Pte Ltd (which owns a 999-year leaseholdinterest in Ocean Financial Centre) to K-REIT Asia for approximately S$1.58billion, for a period of 99 years with SPIPL having the right to re-acquire theequity interest at the expiry of the 99 years. The transaction is subject toKLL’s shareholders’ approval and K-REIT Asia’s unitholders’ approval.
Advising KLL are Allen & Gledhill LLP Partners Penny Goh, Steven Seow,Christine Chan and Lim Pek Bur and Senior Associates Leong Weng Tat,Tay Ser Bee and Tan Li Ping.
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31Legal Bulletin October 2011
Establishment of US$3 billion Medium Term NoteProgramme by Henderson Land MTN Limited andHenderson Land MTN (S) Pte. Limited, Guaranteed byHenderson Land Development Company Limited, and Issueof S$200 million 4% Notes due 2018 (the “Series 01 Notes”)
Henderson Land MTN Limited and Henderson Land MTN (S) Pte. Limited(the “Issuers”) have established a US$3 billion Medium Term NoteProgramme (the “Programme”). Notes to be issued under the Programmewill be unconditionally and irrevocably guaranteed by Henderson LandDevelopment Company Limited (the “Guarantor”). Both Issuers aresubsidiaries of the Guarantor. The aggregate nominal amount of Notesissued will not at any time exceed US$3 billion (or the equivalent in othercurrencies). Henderson Land MTN (S) Pte. Limited has issued the Series 01Notes as the inaugural issue under the Programme.
Advising the Issuers and the Guarantor as to Singapore law are Allen &Gledhill LLP Partners Au Huey Ling and Bernie Lee and Senior AssociateLam See Wai.
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StarHub Ltd’s S$1 billion Multicurrency Medium Term NoteProgramme
StarHub Ltd (“StarHub”) has established a S$1 billion Multicurrency MediumTerm Note Programme (the “Programme”), under which StarHub may issuenotes. Australia and New Zealand Banking Group Limited and DBS BankLtd. have been appointed as the Arrangers of the Programme.
Advising StarHub as to Singapore law are Allen & Gledhill LLP PartnersTan Tze Gay and Glenn David Foo and Associate Wu Zhaoqi.
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Issue of Notes by SingTel Group Treasury Pte. Ltd.
SingTel Group Treasury Pte. Ltd. (the “Issuer”), a wholly-owned subsidiaryof Singapore Telecommunications Limited (the “Guarantor”), has issuednotes denominated in HK$, S$ and US$ totalling approximatelyS$471 million in S$ equivalent. The notes are unconditionally and irrevocablyguaranteed by the Guarantor. Advising the Issuer and Guarantor as to Singapore law are Allen & Gledhill LLP Partners Yeo Wico, Glenn David Foo and Sunit Chhabra and Associate Katerina Seow. Back to Contents Page
32Legal Bulletin October 2011
Participation in Asialaw Leading Lawyers 2012 nominationprocess
The research process for Asialaw Leading Lawyers 2012 - the guide toAsia’s leading commercial lawyers - is underway and the Asialaw researchteam is seeking feedback and nominations from our clients. If you think thatAllen & Gledhill’s work and lawyers are deserving of mention, we wouldappreciate your nomination and support.
You may contact Asialaw directly at [email protected] andprovide the research team with your feedback and/or nominations. You needonly provide the lawyer’s name, firm, jurisdiction and area of practice, andmay nominate up to seven lawyers. Alternatively, you may take an onlinesurvey at www.asialawprofiles.com/leadinglawyersurvey2012.The deadline for nominations is 11 November 2011.
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