Why DBS Should Not Pay $2 Million
The recent payment of $2 million by DBS Bank over two mistaken paragraphs in its hostile takeover bid is proof that the libel law in Singapore needs to be reformed. Especially in the rough and tumble of the business world.
One continually hears that this is the era of the New Economy. Well, the defamation laws that apply in Singapore hail from literally half a century and more of case law. This was a time when there was not even the concept of an information economy. The phrase developed only from the 1960s.
The peculiarities of libel law hailing from a pre-information economy era are evident in the case at hand.
First, the libel does not appear to have had any effect whatsoever. It did not and will not improve the odds of DBS Bank elbowing out UOB (United Overseas Bank) in its bid to take over OUB (Overseas Union Bank). And there was apparently no damage suffered by the “victims” of the libel. The directors were called some unseemly name but I do not know anyone who believes the libel.
Next, the error was corrected very quickly. This reflected the accidental nature of the error: there was no intention.
So why is $1 million being paid to each of the boards of UOB and OUB?
Well, in line with the rationale for civil suits that money can be used to compensate for the harm inflicted on the aggrieved party, so the $2 million was the settlement reflecting the damage done on the two banks.
But was there real damage? Did any body believe that the directors would be so foolish as to sacrifice their reputation in one takeover?
The answers are irrelevant. The law deems damage to the reputation, regardless of whether there is actual damage or not.
If there was any damage at all, surely the damage was to the reputation of the originator of the message.
And there are peculiarities to the case. First, the statement was made in the heat of the takeover battles. Who has not made a rash statement in the heat of battle? Should everyone be held accountable for every statement made anytime all the time? Or is there room for some non-fatal (i.e. correctable) error?
(The position taken by the Monetary Authority is that implicitly DBS has not acted responsibly. Proof? They made a mistake. This, however, equates responsibility with not making mistakes. But one can be responsible and yet make mistake. And in the New Economy, isn’t there supposed to be a greater tolerance for mistakes?)
Further, it is ironic but it is through the apology that the rest of Singapore knows about the defamation. If indeed words can have such a powerful effect, then the apology should be made in Europe and very quietly, if at all, in Singapore. After all, the audience was in Europe, not Singapore.
Another irony is that of the two sets of takeover documents sent to the shareholders of OUB (I happen to hold some shares until I sold them recently), DBS’s is milder. UOB had comparison charts that, in essence, ran down the takeover by DBS.
What are some possible reforms?
First, there should be a determination of actual impact. There should be at least some hint of damage. If there is no damage (as seems to be the case here), there should be no payment beyond full reimbursement of legal fees and an apology. (Lest this be seen as a wrist slap, it should be noted that in most instances although perhaps not this one, the legal fees for a defamation suit in Singapore and a few Commonwealth countries far outweigh the compensation collected.)
In the determination of damage, various factors should be taken into account. For example, in the present case, the audience is a significant factor. It is a takeover that is not called hostile for nothing. The message addresses an audience that cannot be naïve or they should not be holding shares in the first case.
Will the proposed reform of the law lead to rampant false and malicious statements being made?
Here, one needs to look at the present. In the information economy, information is valued in the abstract but not in the particular. Everyone says he or she wants more information. But give them the specific information and they ask for a second opinion. That is, many recipients of information these days do not take information at face value. (As a teacher and parent, I believe I can speak for many teachers and parents.)
The check on rumour-mongering is the reputation of the originator. And in the information economy, that is how information-users decide to use information—by looking at the reputation of the originator. The penalty for shoddiness is public embarrassment through the apology, a sort of Corrective Word Order, which lowers the reputation of the originator.
Last week, Harvard business professor Michael Porter talked about allowing a more “chaotic” Singapore. Chaos is often a reason given for lifting rules that affect the media. Well, if Singapore companies venture overseas, some of those chaos may have to be allowed. Otherwise, Singapore companies will be called all sorts of names and flung all kinds of mud in Australia, Asia and Europe while they go about “nicely, nicely, thank you”.
NB. Confirming the stringency of Singapore’s defamation law, the article was not run by Business Times because OUB was “reserving its rights” over potentially defamatory remarks made by BT.
Posted: August 2001