7 May 2015 – Arm’s Length Definition (MrsLightnFriends: 7 May 2015)

“This sounds like Humpty Dumpty and Alice in Wonderland, where Humpty Dumpty told Alice, ‘a word means what I want it to mean’.” said SC Sreenivasan.

This comment was made after no clear definition of the term “arm’s length” from Deputy Public Prosecutor Christopher Ong on Thursday, May 7.

Recount of the exchanges on 7 May 2015
SC Sreeni: Your Honour, I have one point on clarification. It has been suggested that my client proposed certain terms and the term “arm’s length” has been used. In fact, it has been used throughout this case by everyone. I think it might be useful, insofar as the questions put by the prosecution are concerned to define what is meant by “arm’s length”.
 

I will explain, your Honour. The impression I get is transactions between related parties cannot be arm’s length. I’m not sure, I may be wrong. There is legal definition, accounting definition and tax definition that allows arm’s length transactions between related parties. Perhaps my learned friend, after the break, can tell us what the prosecution understands or intends to convey in the use of the term “arm’s length”

….

DPP: Your Honor, before I carry on with the cross-examination, I’ll address Mr Sreenivasan’s query.
 

The prosecution’s position, insofar as “arm’s length” goes, is very much similar to the position we had in relation to the other issue that was raised yesterday, which is on what the authorized investments under the Building Fund were.
 

Ultimately, it’s the same situation that we were in yesterday, that the issue of arm’s length comes up because the accused persons take the position, not only in court but also in documents that we have seen and in communications with, for example, the auditors, that these were arm’s length transactions.
 

What we have done with each of the accused persons is to establish what they understood and meant when they said these were arm’s length transactions and to then examine the transactions on the basis of that understanding they say they had.
 

Ultimately, this goes towards showing that when they made these representations to auditors or members, or whoever, the reality of the transactions did not mesh with the representations they were making. It’s evaluated on the basis of what they say they were communicating when they made these representations that these were arm’s length transactions and when they say in this court that these were arm’s length transactions.
 

Again, as with the issue of what authorized investments of the Building Fund are, yesterday, our position is not that they were not arm’s length transactions. Our position is much more fundamental than that, which is that these were sham investments. One of the reasons we say these were shams is that the representations the accused persons made are, when you look at the objective evidence, not true on the basis on which those representations were made by them.

Judge: That sounds to me, offhand, like you are saying that they are not arm’s length.

DPP: Your Honour, the difficulty arises if we say “arm’s length” means X, then the accused persons say, “Well, when I told the members, or when I told the auditors, or when I say in court these are arm’s length transactions, what I really means is “Y”. In that situation what we are trying to disprove is on the basis of Y, not on X. It doesn’t advance our case if we prove it on X but the defendants premise their understanding of “arm’s length” on Y.

Judge: Mr Sreeni do, you want to respond to that or is that sufficient clarification for you?

SC Sreeni: You Honour, I really can’t understand what my learned friend had said, because my question was a simple one, not why “arm’s length” is important, not important. What is the meaning of the word when the prosecution uses it in a question to a witness?

This sounds like Humpty Dumpty and Alice in Wonderland, where Humpy Dumpty told Alice, “A word means what I want it to mean”.

Judge: We have been talking about meanings of different words throughout the trial, so obviously words mean a lot of different things in different contexts.

SC Sreeni: All I want from the prosecution, your Honour, is when they use the term “arm’s length” the witnesses can say it’s Y. When the prosecution uses it, all I want to know is what is X. However, if this is the explanation, I’m very happy to live with it, your Honour, and deal with it in submissions.

DPP: Your Honour, perhaps if I can try to make it simple and adopt what Mr Sreenivasan said about meanings of word. The approach we have quite clearly taken with all the accused persons is to first ask them, “What did you mean when you said that this was arm’s length?” Then we examined the objective evidence to see whether what they say they meant is borne out. That’s, hopefully, a bit clearer than referring to “X” and “Y”, your Honour.

Judge: All right.

DPP: For completeness, and perhaps also to illustrate, earlier when Mr Sreenivasan first posed his query, one of the things he asked was whether it’s our position that a transaction between related parties can never be arm’s length, but to show why we do not see the need to define exhaustively what the prosecution considers can and cannot be an arm’s length transaction, the accused persons themselves, possibly with the exception of Mr Chew, who takes a slightly different approach, maintain that these weren’t related parties and that certainly Xtron wasn’t controlled by the church.
 

If that is the defence that we are rebutting, then there is no need to go into the question of whether a transaction between related parties can be arm’s length, because that is not a premise that is being put forward.

SC Sreeni: Your Honour, can I respectfully ask your Honour to look at page 41 of the transcript, because this is what had sparked my query.

DPP: Why were you seeking Ye Peng’s opinion?

Serina: Your Honour, because he’s involved in the bonds as well and he was one of the two that went to speak to Mr Foong about the bonds, so that’s why he’s involved in the bonds.

DPP: If the bonds were an arm’s length transaction, isn’t it up to Xtron to decide what it wants to use the proceeds for and then Xtron….

Ms Wee didn’t use the term “arm’s length” here. It’s not Y, it’s X. The prosecution uses the words “if the bonds were at arm’s length”. They have to explain what they mean, because they say my client made the suggestion, went to speak to Mr Foong about it, so does it mean what my client says it was, what Ms Wee says it was, or using the common English usage of the word, which pops into a question without prior reference by the witness or any specific reference by the witness.
 

I kept quiet and said, “I would wait until 11 o’clock to see when they ask if the bonds were arm’s length, what does that mean?” My learned friend hasn’t answered the question. I take it the prosecution doesn’t want to answer the question and they want to say that “arm’s length” can mean different things at different times. Fine. The point I want to make is it is not right for them to say that they are challenging witnesses on the use of the word, because ….. was initiated entirely in a prosecution question.

DPP: Your Honour, right at the beginning of cross-examination Ms Wee, I had asked her quite a lengthy series of questions about what she understood “arm’s length” to mean. She started by saying that “arm’s length” mean “fair”. I asked her to clarify what she meant by “fair”, for example, from whose perspective, who determines it’s fair, and eventually she clarified that “arm’s length” to her meant something that was fair as determined by the separate considerations of both sides to the transaction. Subsequently, as we’ve gone along, she has taken the position that the Xtron bonds were an arm’s length transaction that Xtron and the church entered into separately and independently. I think it would be quite clear that when I asked her if the bonds were an arm’s length transaction, is it really up to Xtron to decide what it wants to used the proceeds for and then Xtron proposes that the church, that transcript Mr Sreenivasan just read out proceeds on the premise that she has established her understanding of an arm’s length transaction to be.
 

Your Honour, we’re certainly not saying that “arm’s length” means different things at different time, nor have we given it different meanings at different times. What we do acknowledge, and as I’ve explained, is that it may mean different things to different people, but what’s important for the purpose of this trial and the evidence that we’re examining is what did it mean to the accused persons and then, based on that meaning, it is borne out.

Judge: Ms Wee, of course, has also answered your question at page 42 to say the bonds were arm’s length transactions.

DPP: Thank you, your Honour, yes.

Counsel Paul who is acting for Sharon Tan stood up.

Counsel Paul: Your Honour, I do apologize for having to jump into the fray, but I do need to seek a clarification. I may be mistaken, but my impression was that part of the prosecution’s case is that one of the indicia of a sham investment was the fact that these were not arm’s length transactions between City Harvest and Xtron, because City Harvest controlled Xtron. Am I to understand from Mr Ong that that is not their case?

DPP: Your Honour, as I’ve explained, the accused say it was arm’s length. They explain what they mean when they say it was arm’s length and we are telling them that, by those standards, these were not arm’s length transactions. Again, as I’ve said, the overarching and the more fundamental point in our case is that these were sham investments.

Counsel Paul: I apologize perhaps I wasn’t clear. My question was it was my impression that one of the indicia that the prosecution is making a case of as being indicia of sham investments is that investments were not arm’s length because City Harvest controlled Xtron. Am I now hearing Mr Ong to be saying that this is not their case but something that they see as part of the defence rather than a positive assertion by the prosecution?

DPP: Your Honour, I think I’ve already made it clear that what we say insofar as the concept of “arm’s length” goes, where it becomes as indicia of sham investments in our case is that, as I’ve already explained, more than once, the accused say they were arm’s length and that means they had certain characteristics and on the evidence, those characteristics are not made out. So the transactions are not what the accused claim they were.

SC Screeni: Your Honour, can I follow up from Mr Paul Seah’s point, reading the prosecution’s submission on close of prosecution:

“The sham nature of a bond transaction can be observed from several factors including: the absence of independence or arm’s length negotiations between the two contracting parties…”

Your Honour, at that point in time, none of the accused persons had given evidence, so it cannot be their interpretations. If they have said very clearly at paragraph 138 that the absence of independence or arm’s length negotiation is an indicia of a sham transaction, then really they have to tell us what they mean. Our clients read this, and I don’t think the prosecution can dance between the raindrops. With respect, I think that may be the point that my learned friend Mr Seah was making. Please don’t say it depends on what my client says.

DPP: Your Honour, if Mr Sreenivasan reads the entirety of that paragraph, it then becomes clear that in that paragraph we do set out, for example, that this:

“… would require inter alia consideration of whether both parties had a role in determining the terms of the agreement; as well as the absence of serious consideration of the viability of promised returns or of the recoverability of the principal amounts.”
 

Your Honour, I think the issue is that this issue is being raised now in the midst of cross-examination of the 6th accused. As far as I can recall, in relation to the previous five accused persons, we have not taken the position with any of them, when they explain what they understood “arm’s length” to mean, that their understanding was wrong or sought to put to them a different interpretation of the definition of “arm’s length”. We’ve proceeded on the basis of what they have said. I’m really not sure where there is confusion. It’s not the situation where we have taken on the accused persons on their definition of “arm’s length”.

Judge: All right. I don’t want to enter into too much of a discussion on this. It is still open, of course, for submissions to be made fully on this point, but I should point out that in your opening submission, paragraph 13, there is a reference to absence of negotiations. You don’t use the term “arm’s length”, but if Mr Sreeni is right, then it is there in the submission at the close of the prosecution’s case.

SC Maniam: Your Honour, purely for the record, the phrase is also used in paragraph 140 and 169 of the same submissions at the close of the prosecution’s case. I told my learned friend in the break that I did not expect the prosecution to advance a definition of “arm’s length”, and I think that’s where we are.