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    04:05 PM Tan Tian Hui (Practice Trainee, Rajah & Tann Singapore LLP) and Jason Teo (Legal Trainee, Rajah & Tann Singapore LLP)

    A distinction without a difference: L Capital Jones Ltd v Maniach Pte Ltd [2017] SGCA 3

        

    Order 57, Rule 9A(5) of the Rules of Court (Cap 322, 2014 Rev. Ed.) (“the Rule”) provides: “A respondent who, not having appealed from the decision of the Court below, desires to contend on the appeal that the decision of that Court should be varied in the event of an appeal being allowed in whole or in part, or that the decision of that Court should be affirmed on grounds other than those relied upon by that Court, must state so in his Case, specifying the grounds of that contention.”

    The Rule was introduced to simplify the procedure for such a variation or affirmation, by doing away with the need for the respondent to file a respondent’s notice. Instead, respondents are only required to state such points of contention in its Case.

    However, in the subsequent decision of Lim Eng Hock Peter v Lin Jian Wei [2010] 4 SLR 331 (“Peter Lim”) the Court of Appeal suggested that there was a distinction between “decisions”, which could be varied or affirmed, and “mere consequences” of those decisions, which could not. Unfortunately, the Court of Appeal failed to adequately explain this distinction, leaving a confused area of law and a significant source of further dispute.

    The Court of Appeal in L Capital Jones Ltd v Maniach Pte Ltd [2017] SGCA 3 (“L Capital”) recently had the opportunity to consider the application of the Rule and revisit its earlier decision in Peter Lim. The Court held that the limitations it had earlier imposed on the application of the Rule were unjustified, and should therefore be cast aside. As a result, a respondent to an appeal no longer needs to concern himself with the largely artificial distinction raised in Peter Lim.

    Facts of L Capital

    In an earlier suit, the respondent had brought a minority oppression claim pursuant to s 216 of the Companies Act against the first and second appellants. The parties both made a number of interlocutory applications, including an application made by the appellants to stay the suit in favour of arbitration. The appeal in L Capital arose from the Judge’s decision in that stay application.

    The Judge had identified three main issues for resolution: (a) whether the appellants had taken a step in the proceedings; (b) whether the subject matter of the dispute fell within the scope of the arbitration agreement; and (c) whether the dispute was arbitrable (L Capital at [15]). The judge refused the stay application solely on this third ground, holding that the statutory minority oppression claim was a type of dispute which was not arbitrable (L Capital at [18]).

    The appellants then appealed against the Judge’s finding on arbitrability. The respondent did not file a cross-appeal, but instead sought to rely on the Rule to challenge the Judge’s findings on the first two issues, whilst still affirming the Judge’s ultimate decision on arbitrability. The respondent essentially contended that contrary to the Judge’s findings: (a) the appellants by their conduct in the various summonses had in fact taken a step in the proceedings, thereby precluding them from applying for a stay; and (b) in any case, the dispute in question did not fall within the scope of the arbitration agreement (L Capital at [2]). These were referred to as the “Step Issue” and “Scope Issue” respectively.

    Judgment

    The Court of Appeal held that the Judge’s decision that minority oppression claims in general are non-arbitrable was not consistent with case law, nor were there any concerns in the present dispute which would render it non-arbitrable (L Capital at [32]). Given that this effectively overturned the sole grounds of the Judge’s decision, the next issue was whether the respondent was entitled to rely on the Rule to challenge the Judge’s findings on the Step Issue and the Scope issue without filing a cross-appeal.

    This question turned on whether the Judge’s refusal of the stay could be considered a “decision” under the Rule, which the respondent would be entitled to have the court affirm on grounds other than those relied upon by the Judge (L Capital at [34]).

    The starting point of the court’s analysis was its earlier decision in Peter Lim. In Peter Lim, the respondents had sought to invoke the Rule to affirm the High Court’s dismissal of the defamation claim on a ground that the Court had not relied on. The Court of Appeal, in interpreting the Rule, held that there was a distinction between “decisions”, which could be varied or affirmed, and “mere consequences” of those decisions, which could not. The Court held that the dismissal of the claim was a mere consequence of the judge’s finding that there was no malice, and did not constitute a separate and independent decision within the meaning of the Rule (Peter Lim at [27]). Thus, the respondents were not allowed to rely on the Rule.

    In L Capital, the Court observed that if Peter Lim were to apply to the present case, the respondent would not be allowed to challenge the judge’s decision on the Step and Scope issues. However, the Court of Appeal decided that the Peter Lim approach towards the Rule was no longer sustainable, observing that it had given rise to fundamental logical and practical difficulties in its application.

    Indeed, it is worthy to note (as the Court observed at [68]) that subsequent decisions that applied Peter Lim did not analyse or consider the merits of that judgment. In previous cases, Peter Lim was applied simply as a relevant precedent, without analysis or application of its principles, and warranted no more than a sentence or a paragraph in the Court’s judgment (see e.g. Chiam Heng Hsien v Chiam Heng Chow and others [2015] 4 SLR 180 (at [101]); Rals International Pte Ltd v Cassa di Risparmio di Parma e Piacenza SpA [2016] 5 SLR 455 (at [23])).

    The Court made several observations about its earlier decision in Peter Lim. First, it was noted that the Peter Lim approach did not accord with the legislative purpose of the Rule. The predecessor to the Rule, O 57 r 7 of the 1990 Rules of Court, required respondents to file a respondent’s notice if it wished to contend in the appeal that the decision of the court below should be varied or affirmed on grounds other than those relied upon by the court. The Rule was introduced to abolish this need to file a respondent’s notice, and was motivated by a desire to simplify the procedure for respondents by doing away with “otiose documents” such as the petition of appeal and the need to file a separate respondent’s notice (L Capital at [51]). The Court of Appeal in L Capital observed that in fact, the effect of Peter Lim was to make things more onerous for respondents, by requiring them to file a cross-appeal when they could under the previous rules have just filed a respondent’s notice. The decision in Peter Lim was therefore plainly contrary to the legislative intent behind the introduction of the Rule in the first place.

    Second, the Court noted that the distinction drawn between a “mere consequence” and a “finding of law or fact” raises a fundamental logical and practical difficulty: it is not easy to distinguish between what are properly to be treated as findings on the one hand, and consequences of anterior findings on the other. Many of the decisions that a Court reaches on the primary issues before it will be premised on its findings on sub-issues, which themselves may be premised on decisions on further sub-issues (L Capital at [57]).

    Third, the Court held that expanding the scope of “decision” under the Rule would be fairer to respondents, who might otherwise find themselves in the position of having to file an application for an extension of time to file a cross-appeal (if the opposing party had filed its appeal at the last minute). A more generous reading of what constitutes a “decision” under the Rule would allow a successful respondent to indicate in its Respondent’s Case that it intends to contend at the appeal that the Judge’s decision in its favour should additionally or alternatively be affirmed on other grounds that were not relied upon by the Judge (L Capital at [60]).

    Having considered the above factors, the Court of Appeal held that a departure from Peter Lim was “necessary and justified” (L Capital at [65]). The Court held that a broader interpretation of “decision” under the Rule should be adopted, such that the court’s ultimate decision on the claim or application falls within the meaning of “decision”. A respondent may now mount a case on appeal to affirm the Judge’s ultimate decision on grounds which were not accepted by the Judge below, without the need to file a cross appeal.

    Commentary

    The Court’s decision abolishes the need to delve into the distinction between a “mere consequence” and a “finding of law or fact” - which is essentially a distinction without a difference. This recognises that much of legal reasoning is intertwined, and it is unhelpful to draw a distinction between the two where it does not exist. The Court considered an example in its judgment (L Capital at [58]) where a court has to decide the following issues in a claim for breach of contract: (a) whether there was a binding contract; (b) whether there was a breach; and (c) the extent of loss. According to Peter Lim, the court’s decision to allow or dismiss the contractual cause of action as a whole would seem not to be a “decision” under the Rule. It would also be difficult to determine what constitutes a “finding of law or fact” - for instance, would a decision that there was no binding contract be a mere consequence of the court’s anterior findings, or a decision on its own? Thus, the distinction drawn in Peter Lim is unhelpful - as the Court noted, it is not helpful to distinguish between a decision on a sub-issue from one on the main issue, or from the final outcome of the case (L Capital at [67]).

    Further, the reinterpretation of the Rule in L Capital is welcome as it restores the legislative purpose behind the Rule, by allowing respondents to circumvent the need to go through the procedure of filing a notice, when it would be sufficient to raise the same points in the respondent’s Case. The Rule was introduced to simplify the procedure involved for respondents who did not seek to challenge an order, but simply wished to raise grounds that were not relied on by the court below. The restrictive interpretation in Peter Lim was never intended, and L Capital acknowledges this in its overruling of Peter Lim.

    The expansive interpretation of the Rule offers greater clarity and certainty for respondents. However, it also greatly expands the scope of potential disputes on appeal, and there is now a real risk that respondents will consider it a matter of course to reopen all of their unsuccessful arguments before the Court of Appeal. This threatens to dilute the issues and bring focus away from the key questions of law that should be the basis of the appeal, and instead forces both the parties and the Court to devote time and energy towards issues that need not have been reopened. Nor can an appellant choose to ignore the contentions of a respondent who invokes the Rule, given that O 57 r 9A(5A)-(5C) states that the appellant must file an Appellant’s Reply within 2 weeks after service on him of the Respondent’s Case.

    While it remains to be seen how the courts will treat unmeritorious invocations of the Rule on the respondents’ part, one plausible avenue of circumscribing these concerns is an adverse costs order granted under, for instance, O 59 r 6A. The principle underlying such an adverse order of costs was elucidated by the Court of Appeal in Chwee Kin Keong v Digilandmall.com [2005] 1 SLR(R) 502 at [105]: “While the respondent had ultimately succeeded in defending the action, and for that the costs properly incurred should go to the respondent, we are unable to see why costs which had been incurred on issues which the respondent had unsuccessfully raised should be borne by the appellants (see also O 59 r 6A of the Rules of Court).”

    For a party that was unsuccessful at first instance, the expansive interpretation of the Rule may also prove to be a significant factor weighing against a decision to appeal, especially if the judge had made certain findings in his favour while ultimately ruling against him. The L Capital decision has heightened the risk that these findings will be reopened by the respondent and reversed on appeal, leading to an adverse declaration or increased quantum of liability. A potential appellant in this position might be well advised to consider cutting their losses and accepting the ultimate ruling made against them.

    Finally, the Court of Appeal in L Capital clearly indicated that the Rule was intended to reduce procedural complexity, but it is unclear where this leaves the residual application of the cross-appeal process. It may simply be the case that a respondent who seeks to reverse, rather than vary, an order made by the court below cannot rely on the Rule to do so, and will have to file a cross-appeal.

    Conclusion

    In conclusion, the expansive interpretation of the Rule in L Capital is largely preferred to the restrictive approach in Peter Lim, as it abolishes a superfluous distinction between a “mere consequence” and a “finding of law or fact”, and restores the legislative purpose behind the introduction of the Rule. However, the expansive interpretation is not without difficulty, and parties should be wary of being flippant with their invocation of the Rule, at the risk of diluting the issues and wasting the Court’s time. Parties considering bringing an appeal should also be advised on the greater risk that findings in their favour will be reopened before the Court of Appeal.

    * This blog entry may be cited as Tan Tian Hui and Jason Teo, “A distinction without a difference: L Capital Jones Ltd v Maniach Pte Ltd [2017] SGCA 3” (9 February 2017) (http://www.singaporelawblog.sg/blog/article/176)

    ** A PDF version of this entry may be downloaded here

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