EC-Asia International Ltd v PricewaterhouseCoopers: Pre-Action Discovery & Auditor Negligence
EC-Asia International Ltd (in liquidation) applied to the High Court of Singapore for pre-action discovery from PricewaterhouseCoopers, its former auditor, alleging potential negligence in failing to detect fraudulent activities by EC-Asia's managing director, Kelvin Ang. The Assistant Registrar dismissed the application, but Justice Kan Ting Chiu allowed EC-Asia's appeal, finding the discovery necessary to determine if a viable negligence claim existed. The court rejected PricewaterhouseCoopers' arguments based on ex turpi causa and time limitation.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Appeal Allowed
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
EC-Asia sought pre-action discovery from its auditor, PricewaterhouseCoopers, for potential negligence. The court allowed the appeal, granting the discovery application.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| EC-Asia International Ltd (in liquidation) | Plaintiff, Appellant | Corporation | Appeal Allowed | Won | Anthony Lee, Gan Kam Yuin |
| PricewaterhouseCoopers | Defendant, Respondent | Partnership | Appeal Dismissed | Lost | Aurill Kam, Douglas Chi |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Kan Ting Chiu | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Anthony Lee | Bih Li & Lee |
| Gan Kam Yuin | Bih Li & Lee |
| Aurill Kam | Rajah & Tann LLP |
| Douglas Chi | Rajah & Tann LLP |
4. Facts
- EC-Asia International Ltd sought pre-action discovery from PricewaterhouseCoopers, its former auditor.
- EC-Asia alleged potential negligence by PricewaterhouseCoopers in failing to detect fraudulent activities by its managing director, Kelvin Ang.
- Kelvin Ang admitted to falsifying invoices to deceive creditors and obtain credit facilities.
- KPMG discovered that a substantial portion of the company’s sales and purchases were not genuine transactions.
- A 'Poison Pen Letter' alleged fraudulent practices by EC-Asia, including inflating profits and violating intellectual property rights.
- The liquidator believed PricewaterhouseCoopers may be liable for negligently conducting its audit, allowing the fraud to occur.
- Kelvin Ang held 37% of the company’s shares and was the managing director.
5. Formal Citations
- EC-Asia International Ltd (in liquidation) v PricewaterhouseCoopers, Originating Summons No 1032 of 2009/N (Registrar's Appeal No 433 of 2009), [2010] SGHC 372
6. Timeline
| Date | Event |
|---|---|
| EC-Asia International Ltd registered under the Companies Act. | |
| PricewaterhouseCoopers became the statutory auditor of EC-Asia International Ltd. | |
| Monetary Authority of Singapore issued an interim stop order after receiving the Poison Pen Letter. | |
| EC-Asia International Ltd listed on the Australian Stock Exchange. | |
| PricewaterhouseCoopers' engagement as statutory auditor of EC-Asia International Ltd ended. | |
| Board of directors of EC-Asia International Ltd appointed KPMG Business Advisory Pte Ltd to undertake an independent financial review. | |
| KPMG presented its findings to the company’s creditors. | |
| Liquidator of the Company commenced an action in the High Court against Kelvin Ang. | |
| Neo Ban Chuan was appointed as liquidator of EC-Asia International Ltd. | |
| EC-Asia International Ltd obtained interlocutory judgment against Kelvin Ang. | |
| Final judgment was entered against Kelvin Ang. | |
| EC-Asia International Ltd, through Shook Lin & Bok LLP, wrote letters to PricewaterhouseCoopers. | |
| The Liquidator issued his report. | |
| Shook Lin & Bok LLP wrote to PricewaterhouseCoopers requesting documents. | |
| EC-Asia International Ltd applied for an order under O 24 r 6 of the Rules of Court for the pre-action discovery of the audit papers and working papers. | |
| High Court allowed the appeal and granted the application for pre-action discovery. |
7. Legal Issues
- Pre-Action Discovery
- Outcome: The court allowed the appeal and granted the plaintiff's application for pre-action discovery.
- Category: Procedural
- Related Cases:
- [2004] 4 SLR(R) 39
- [1996] 3 SLR(R) 485
- Auditor's Negligence
- Outcome: The court did not make a final determination on negligence but found that pre-action discovery was necessary to determine if a viable claim existed.
- Category: Substantive
- Ex Turpi Causa
- Outcome: The court rejected the defendant's argument that the ex turpi causa defense applied, finding that the facts did not support the contention that the company could not claim against the defendant.
- Category: Substantive
- Related Cases:
- [2008] EWCA Civ 644
- [2008] 3 WLR 1146
- [2009] 3 WLR 455
- Time Limitation
- Outcome: The court rejected the defendant's argument that the claim was time-barred, finding that the defendant's conduct throughout the period of its engagement as the company's auditor was relevant.
- Category: Procedural
8. Remedies Sought
- Pre-Action Discovery
9. Cause of Actions
- Negligence
10. Practice Areas
- Commercial Litigation
- Insolvency Litigation
11. Industries
- Accounting
- Finance
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Public Prosecutor v Ang Ah Peng | District Court | Yes | [2009] SGDC 94 | Singapore | Cited to show that Kelvin Ang was charged and convicted for his fraudulent activities in respect of sham transactions. |
| Moore Stephens (a firm) v Stone & Rolls Limited (in liquidation) | English Court of Appeal | Yes | [2008] EWCA Civ 644 | England and Wales | Cited by the defendant to argue that the plaintiff's potential claim was not viable in law based on the ex turpi causa principle. |
| Stone & Rolls Ltd (in liquidation) v Moore Stephens (a firm) and another | English Court of Appeal | Yes | [2008] 3 WLR 1146 | England and Wales | Cited by the defendant to argue that the plaintiff's potential claim was not viable in law based on the ex turpi causa principle. |
| Stone & Rolls Limited (in liquidation) v Moore Stephens | House of Lords | Yes | [2009] 3 WLR 455 | United Kingdom | Cited by the defendant to argue that the plaintiff's potential claim was not viable in law based on the ex turpi causa principle. |
| Bayerische Hypo-und Vereinsbank AG v Asia Pacific Breweries (Singapore) Pte Ltd | Singapore Court of Appeal | Yes | [2004] 4 SLR(R) 39 | Singapore | Cited as a main decision from Singapore courts on pre-action discovery, affirming that discovery would not be ordered if an applicant already knew that he had a viable claim and was able to plead his case. |
| Kuah Koh Kim v Ernst & Young | Singapore High Court | Yes | [1996] 3 SLR(R) 485 | Singapore | Cited as a main decision from Singapore courts on pre-action discovery, affirming that discovery would not be ordered if an applicant already knew that he had a viable claim and was able to plead his case. |
| Holman v Johnson | Court of King's Bench | Yes | (1775) 1 Cowp 341 | England | Cited for the ex turpi causa principle. |
13. Applicable Rules
| Rule Name |
|---|
| Order 24 Rule 6 of the Rules of Court |
| O 24 r 7 |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Rules of Court | Singapore |
| Companies Act | Singapore |
| Limitation Act (Cap 163, 1996 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Pre-action discovery
- Auditor's negligence
- Ex turpi causa
- Poison Pen Letter
- Sham transactions
- Audit papers
- Working papers
- Liquidator
- Fraudulent activities
- Financial review
15.2 Keywords
- pre-action discovery
- auditor negligence
- EC-Asia International Ltd
- PricewaterhouseCoopers
- Singapore High Court
16. Subjects
- Auditing
- Civil Procedure
- Company Law
- Negligence
17. Areas of Law
- Civil Procedure
- Auditing
- Company Law
- Negligence