The rule against hearsay evidence prevents the admission of information from a third party unless that third party testifies. Evidence from a third party is generally regarded as hearsay and inadmissible, applying to both factual and opinion evidence.
However, how should this rule be applied when experts rely on third-party information in their reports? When, if ever, should such evidence be admissible? These questions were addressed by the Singapore International Commercial Court (SICC) in Kiri Industries Ltd v Senda International Capital Ltd [2020] SGHC(I) 27.
This article focuses on the SICC’s treatment of hearsay in expert evidence, particularly the distinction between general and specific hearsay.
Case Background
In DyStar Global Holdings (Singapore) Pte Ltd v Kiri Industries [2018] 5 SLR 1, the SICC previously found that Senda International Capital Ltd (‘Senda’) had engaged in oppressive conduct against Kiri Industries Ltd (‘Kiri’). Senda was ordered to purchase Kiri’s shares in their joint venture, DyStar Global Holdings (Singapore) Pte Ltd (‘DyStar’).
Disputes later arose over the valuation of Kiri’s shares. Both parties appointed experts:
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Kiri: Ms. Harfouche
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Senda: Mr. Lie (and other supporting experts)
Both experts applied the Discounted Cash Flow (DCF) Method, but differed in the data relied upon:
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Ms. Harfouche: Independent market and broker forecast reports on comparable companies (Independent Reports)
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Mr. Lie: Forecasts prepared by DyStar’s management (April 2019 Forecasts) and a financial model updating those forecasts (February 2020 Model)
One key issue: whether Ms. Harfouche’s reliance on the Independent Reports was admissible given hearsay concerns.
SICC Decision on Hearsay
Judgment of Kannan Ramesh J and Anselmo Reyes IJ
The judges emphasised:
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The purpose of Ms. Harfouche relying on the Independent Reports was to substantiate, supplement, and fortify her expert opinion, not to prove the underlying facts.
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The opinions in the reports reflected market sentiment, i.e., what the market thinks about a company or industry at a given time.
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The hearsay rule could be relaxed for two reasons:
- Impracticality of calling report authors as witnesses
- Purpose of reports: to inform expert opinion, not to prove factual data
The judges distinguished between:
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General hearsay: Where an expert relies on widely accepted professional sources or industry reports to inform their opinion.
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Specific hearsay: Where an expert relies on another’s opinion as proof of truth, which is contested.
Ms. Harfouche’s reliance on Independent Reports was considered general hearsay, warranting relaxation of the hearsay rule.
Judgment of Roger Giles IJ
Roger Giles IJ held that the Independent Reports constituted specific hearsay because they included historical financial information. However:
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An exception under section 32 of the Singapore Evidence Act 1997 allowed admission.
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Failure to give prior notice under section 32 could be remedied under Order 2 of the Singapore Rules of Court.
Outcome on Valuation
The SICC ultimately preferred Ms. Harfouche’s approach, noting her methodology and application of the DCF Method were more reasonable than Mr. Lie’s reliance on internal forecasts.
Commentary and Lessons
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Experts may rely on third-party information to form opinions, provided it is not used to prove a fact in issue.
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The distinction between general and specific hearsay is crucial but can be difficult to draw. Neither the Singapore Evidence Act 1997 nor the Malaysian Evidence Act 1950 formally recognise this distinction.
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Ms. Harfouche’s reliance on the Independent Reports is best viewed as part of her process of forming an opinion. The primary facts in issue were DyStar’s financial position and share value, not the accuracy of the reports themselves.
Practical implications:
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Experts should clearly explain the purpose of third-party information in forming their opinions.
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Courts or arbitral tribunals may relax the hearsay rule for general hearsay, but caution is needed where the evidence is used to establish contested facts.
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Consider reforms to evidence laws, similar to Singapore, to clarify rules on expert reliance on hearsay, particularly in complex financial or technical disputes.
Arbitration Considerations
In arbitration, parties are not bound by statutory hearsay rules. Distinguishing between general and specific hearsay can guide tribunals on the weight to give expert reports, ensuring reliance on sound reasoning while avoiding over-dependence on unverified third-party data.
Contacts
Foo Joon Liang FCIArb FSIArb FHKIArb
Partner, Gan Partnership
E: joonliang@ganlaw.my
Carissa How
Associate, Gan Partnership
E: carissa@ganlaw.my
References
- Kiri Industries Ltd v Senda International Capital Ltd and another [2020] SGHC(I) 27
- DyStar Global Holdings (Singapore) Pte Ltd v Kiri Industries [2018] 5 SLR 1
- Pathmanabhan A/L Nalliannen v Public Prosecutor and another [2017] MLJU 257
- Amita Damu v Public Prosecutor [2020] 3 SLR 825
- Jeffrey Pinsler SC, The Expert and The Hearsay Rule – Recent Developments and Proposals for Updating the Evidence Act (2021) 33 SAcLJ 1
DISCLAIMER: This article is for general information only and should not be relied upon as legal advice. The position stated herein is as at 6 July 2021.
