Deloitte & Touche v Baring Futures: Indemnification for Legal Costs & Priority of Claims in Liquidation
Deloitte & Touche Singapore sought indemnification from the liquidators of Baring Futures (Singapore) Pte Ltd in the High Court of Singapore, for legal costs incurred in proceedings in England and Singapore. D&T Singapore argued that Article 110 of BFS's Articles of Association entitled them to indemnity, and that these costs should be treated as an expense claim with priority. The court, Lai Kew Chai J, dismissed the motions, holding that Article 110 was not incorporated into the contract between BFS and D&T Singapore, and did not cover the costs of defending legal proceedings.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Motions dismissed
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Auditors Deloitte & Touche sought indemnification for legal costs from Baring Futures (Singapore) Pte Ltd's assets, but the court dismissed the motions.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Chaly Chee Kheong Mah, Po'ad bin Shaik Abu Bakar Mattar & 34 others practising in the name and style of Deloitte & Touche | Applicant | Partnership | Motions dismissed | Lost | Haridass Ajaib, Randhir Chandra |
| The Liquidators of Baring Futures (Singapore) Pte Ltd | Respondent | Corporation | Motions dismissed | Won | V K Rajah, Chong Yee Leong, Deanna Seow |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Lai Kew Chai | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Haridass Ajaib | Haridass Ho & Partners |
| Randhir Chandra | Haridass Ho & Partners |
| V K Rajah | Rajah & Tann |
| Chong Yee Leong | Rajah & Tann |
| Deanna Seow | Rajah & Tann |
4. Facts
- D&T Singapore was appointed auditor of BFS on 15 October 1986.
- BFS enclosed its Memorandum and Articles of Association under cover of a letter of 6 October 1986.
- D&T Singapore sought indemnity for legal costs incurred in proceedings in England and Singapore.
- Article 110 of BFS's Articles of Association provided for indemnification of officers.
- D&T Singapore claimed its legal costs should rank as an expense of liquidation with priority.
- The liquidators of BFS rejected D&T Singapore's Proof of Debt.
- Article 110 was amended from its equivalent in Table A of the Companies Act.
5. Formal Citations
- Chaly Chee Kheong Mah, Po'ad bin Shaik Abu Bakar Mattar & 34 others practising in the name and style of Deloitte & Touche v The Liquidators of Baring Futures (Singapore) Pte Ltd, CWU 246/1995 (No 2), M Nos 600141 & 600142 of 2001, [2002] SGHC 273
6. Timeline
| Date | Event |
|---|---|
| Baring Futures (Singapore) Pte Ltd incorporated | |
| BFS solicitors requested D&T Singapore's consent to be appointed as auditors | |
| D&T Singapore appointed auditor of BFS | |
| Coopers & Lybrand Singapore appointed auditor of BFS | |
| Settlement reached with C&L Singapore and C&L London | |
| Judgment given in favour of D&T Singapore in PAB proceedings | |
| D&T Singapore submitted Proof of Debt to BFS liquidators | |
| BFS liquidators rejected D&T Singapore's Proof of Debt | |
| D&T Singapore submitted another Proof of Debt to BFS liquidators | |
| Action against D&T Singapore brought by PLC and BSL was struck out | |
| BFS liquidators rejected D&T Singapore's Proof of Debt | |
| Motions dismissed | |
| Judgment given in favour of D&T Singapore in High Court of England |
7. Legal Issues
- Incorporation of Articles of Association into Contract
- Outcome: The court held that the Articles of Association were not incorporated into the contract between BFS and D&T Singapore.
- Category: Substantive
- Scope of Indemnification Clause
- Outcome: The court held that Article 110 was not intended to cover the expenses incurred by D&T Singapore in defending proceedings against it.
- Category: Substantive
- Priority of Claims in Liquidation
- Outcome: The court held that the indemnity element should not be treated as an Expense claim and accorded priority.
- Category: Substantive
8. Remedies Sought
- Declaration of Indemnity
- Priority of Claims in Liquidation
9. Cause of Actions
- Contractual Indemnity
10. Practice Areas
- Liquidation
- Commercial Litigation
- Auditing
11. Industries
- Accounting
- Finance
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| John v Price Waterhouse and another | N/A | Yes | [2001] All ER (D) 125 (Jul) | N/A | Cited regarding the incorporation of indemnity provisions in a company's articles into the contract with its auditors. |
| Kahn & Anor v Commissioners of Inland Revenue | UKHL | Yes | [2002] UKHL 6 | United Kingdom | Cited to disapprove of Re Atlantic Computer Systems PLC regarding the 'liquidation expenses' principle. |
| Re Atlantic Computer Systems PLC | N/A | Yes | [1992] Ch 505 | N/A | Cited regarding the liquidation expense rule, but disapproved in Kahn & Anor v Commissioners of Inland Revenue. |
| Re City Equitable Fire Insurance Company | N/A | Yes | [1925] Ch 407 | N/A | Cited regarding the articles of association constituting a contract between the company and its members, and the terms of engagement of auditors. |
| Re Famatina | N/A | Yes | [1914] 2 Ch 271 | N/A | Cited for the proposition that costs incurred by an agent in resisting claims are covered by the indemnity available to an agent. |
| Rowland & Ors v Gulfpac Limited | Commercial Court | Yes | [1999] Lloyd’s Rep Bank 86 | England | Cited regarding the interpretation of an indemnity clause in a company's articles of association. |
| Tomlinson v Adamson | House of Lords | Yes | (1935) SC 1 | N/A | Cited regarding the difficulty of providing indemnity for a successful defendant via general language. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50) | Singapore |
| Companies Act (Cap 50), s 172 | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Indemnity
- Liquidation
- Articles of Association
- Auditor
- Expense Claim
- Priority
- Proof of Debt
- Estate Costs Rule
- Liquidation Expenses Principle
15.2 Keywords
- Indemnification
- Legal Costs
- Liquidation Expenses
- Auditors
- Baring Futures
- Deloitte & Touche
16. Subjects
- Insolvency
- Auditing
- Contract Law
- Company Law
17. Areas of Law
- Insolvency Law
- Company Law
- Contract Law
- Auditing Law