Singapore courts confirm their "zero-tolerance" policy in respect of agreements that have an illegal object

In a judgment handed down on 3 May 2013, the Singapore High Court confirmed that it will not allow a plaintiff to enforce rights under an agreement which has an illegal object, even if capable of being performed in a number of legal ways. In this case, therefore, an agent could not claim commission for contracts procured for the principal, where both parties signed the commission agreement knowing that the agent was likely to use bribery to win the contracts.  Maurice Burke, Alastair Henderson and Daniel Waldek provide an analysis of the decision.

1. The facts of the case

In ANC Holdings Pte Ltd v Bina Puri Holdings Bhd [2013] SGHC 97, ANC Holdings Pte Ltd ("ANC") and Bina Puri Holdings Bhd ("Bina Puri") had entered into a written agreement under which ANC was appointed by Bina Puri to assist it and its subsidiaries in bidding for two construction projects from the Saudi General Housing Authority (the "Authority"), in exchange for commission amounting to 5% of the total value of any contract that Bina Puri secured.

Bina Puri secured both of the bids but refused to pay ANC any commission so ANC commenced proceedings against Bina Puri.

The only fact to be determined by the court was supposed to have been whether ANC's assistance was the reason that Bina Puri was awarded the construction projects by the Authority.

However, during the course of cross-examination, Bina Puri's witnesses gave evidence that, from the outset, it had been the common intention of both parties that ANC would assist Bina Puri through paying bribes to people in Saudi Arabia. Consequently, Coomaraswamy JC considered:

1. if the parties had a common intention to secure the award of the construction projects by way of bribery; and
2. if so, whether the parties' common intention to secure the award of the construction projects by way of bribery meant that ANC's right to commission is unenforceable.

2. The findings

Having determined that ANC's assistance did not cause Bina Puri to be awarded the construction projects, Coomaraswamy JC nevertheless went on to find as follows:

1. Based on the evidence before the court, it was more likely than not that at the time they entered into the agreement, the parties did have the common intention that ANC would engage in bribery in order to secure the contracts for Bina Puri (although he went to pains to point out that he made no finding as to whether any bribes were, in fact, paid).
2. The parties' common intention to secure the award of the construction projects by way of bribery rendered ANC's claim unenforceable under the doctrine that a party who knowingly engages in illegal activity may not claim damages arising out of that activity ("ex turpi causa").
3. The Singapore courts cannot permit a plaintiff to enforce its rights under an agreement which has been held to have been entered into with the intention of committing an illegal act.

The court also considered that Bina Puri could rely on the ex turpi causa doctrine notwithstanding that it did not form part of its stated case.

3. Conclusion

Clearly, the Singapore courts take seriously their obligation to prevent parties from using the courts to uphold their rights under a contract with an illegal object, even if capable of being performed in a number of legal ways and even where the fact has not been raised in pleadings or in evidence.

The decision clearly demonstrates the Singapore courts' zero-tolerance approach to bribery. This case is a salutary warning to parties engaging consultants and agents to procure business opportunities – particularly in relation to jurisdictions where there is a high risk of bribery and corruption.