George Wei J:
There are two Registrar’s Appeals before me, both of which are appeals against the Assistant Registrar’s (“the AR”) decision in Summons No 1460 of 2015 (“SUM 1460/2015”). In brief, the AR ordered: that final judgment be entered against the defendant for outstanding charges in the sum of S$28,118.23, together with interest levied on this sum at the rate of 10% per annum compounded on a daily basis from 2 December 2014 until the date of full payment of this sum to the plaintiff; that the defendant be granted leave to defend the plaintiff’s claim for the sum of S$907,408.16 on the condition that it pays this sum into court by 4 pm on 4 August 2015; and the costs of SUM 1460/2015 be costs in the cause.
Registrar’s Appeal No 217 of 2015 (“RA 217/2015”) is the plaintiff’s appeal. The plaintiff seeks the following orders: that the AR’s decision ((b) and (c) above) be set aside; that final judgment be entered against the defendant for the sum of S$907,408.16 together with interest levied on this sum at the rate of 10% per annum compounded on a daily basis from 2 December 2014 until the date of full payment of this sum to the plaintiff; and that the costs of SUM 1460/2015 and this appeal be paid by the defendant to the plaintiff on an indemnity basis.
Registrar’s Appeal No 218 of 2015 (“RA 218/2015”) is the defendant’s appeal. It appears that the defendant is appealing the whole of the Order: (a) entry of final judgment for S$28,118.23; (b) conditional leave to defend the claim for S$907,408.16; and (c) costs. In short, based on the Notice of Appeal, it appears that the defendant seeks unconditional leave to defend the plaintiff’s entire claim. That said, as will be seen, the defendant did not contest the claim for S$28,118.23 in the arguments in the appeal.
Facts
The plaintiff’s principal business activity is the provision of various financial services.1Plaintiff’s submissions, para 9. The defendant was a Singapore-incorporated company whose principal business was the trading of futures and options on the Osaka Stock Exchange (“OSE”), the Tokyo Stock Exchange (“TSE”) and the Singapore Stock Exchange (“SGX”).2Plaintiff’s submissions, para 10. The defendant’s trading activity was conducted primarily by Mr Jerome Andrew Moutonnet (“Mr Moutonnet”).
Relationship between the parties
On 12 October 2010, the defendant entered into a Standard Client Agreement (“the Agreement”), a Multicurrency Credit Facility Agreement (“the Facility Agreement”) and a Security Deed, with the plaintiff.3Plaintiff’s submissions, para 12. For ease of narration, I shall hereinafter refer, collectively, to them as “the Contracts”.
Under the Contracts, the plaintiff agreed to provide the defendant with the following services: direct market access (“DMA”) to various exchanges, namely the OSE, the TSE and the SGX;41st Affidavit of Robert Sim, para 8(b). execution, clearing and/or settlement of all trades conducted through the defendant’s client account;51st Affidavit of Robert Sim, para 8(a). and an uncommitted multicurrency credit facility (“the Facility”) with an upper credit limit US$50m (the “Credit Limit”) for the purpose of funding the defendant’s trades through its client account.62nd Affidavit of Robert Sim, para 70. The defendant’s credit limit was subsequently reduced to US$35m.72nd Affidavit of Robert Sim, para 70.
As part of its DMA services, the plaintiff permitted the defendant to utilise its exchange and/or clearing house memberships to place electronic orders for the derivatives traded on the OSE, the TSE and the SGX. As a result of the defendant’s placement of such electronic orders, the plaintiff was directly liable to the relevant clearing houses (ie, the Japan Securities Clearing Corporation (“JSCC”) and the Singapore Exchange Derivatives Clearing (“SGX-DC”)) for the following sums which it paid in the first instance on the defendant’s behalf:82nd Affidavit of Robert Sim, para 50(b). the costs of, among other things, the derivatives purchased on behalf of the defendant; and the daily margins imposed on the defendant’s portfolio, being the amount of monies the plaintiff was obliged to maintain in its clearing accounts in order to execute further trades and maintain its existing positions.
In the event that the plaintiff failed to meet the daily margins, it would be prevented from executing any further trades.92nd Affidavit of Robert Sim, para 52. Moreover, its entire portfolio of securities and derivatives, purchased on behalf of all its customers, was liable to be liquidated by the JSCC and SGX-DC in order to meet its liabilities.102nd Affidavit of Robert Sim, para 54. Insofar as the plaintiff paid the aforesaid sums and the defendant had insufficient monies in its accounts to reimburse the plaintiff, the defendant was deemed to have requested a drawdown of an advance on the Facility.112nd Affidavit of Robert Sim, para 57.
As part of its services, the plaintiff was required to supply the defendant daily reports of, inter alia:121st Affidavit of Robert Sim, para 8(d). the trades conducted through the defendant’s client account which have been executed, settled and cleared; the financial products held on trust by the plaintiff for the defendant; the sums payable by the defendant to the plaintiff (and vice versa) in connection with the trades conducted through the defendant’s client account; and the defendant’s net liquidation value (“NLV”) as defined in cl 2 of Schedule 1 of the Agreement.
Material events
The defendant’s portfolio with the plaintiff comprised trades in futures and options in the Nikkei 225 Index.131st Affidavit of Robert Sim, para 17. Under cl 14.2(d) of the Agreement, an event of default would arise if the defendant’s NLV fell below the Risk Amount.142nd Affidavit of Robert Sim, para 17. The Risk Amount was set at US$750,000.152nd Affidavit of Robert Sim, para 17.
At 9.52 am on 5 November 2014, the defendant was informed that the NLV of its portfolio had fallen below the Risk Amount and stood at S$30,313.161st Affidavit of Jerome Andrew Moutonnet, para 65(a). At 11.34 am on the same day, the plaintiff declared the deficit cleared with the NLV of the defendant’s portfolio at S$2.3m.171st Affidavit of Jerome Andrew Moutonnet, pp 56 and 82. Later that day, things took a turn for the worse. By the close of business on 5 November 2014, the defendant’s NLV reflected a deficit of S$663,157.181st Affidavit of Robert Sim, para 19. This constituted an event of default under cl 14.2(d) of the Agreement. The defendant was informed of the deficit by way of a haircut report (“5 Nov Haircut Report”) issued at the close of business on the same day.19Plaintiff’s written submissions, para 37. There is no evidence that the defendant disputed the contents of the 5 Nov Haircut Report.
On 6 November 2014, at 7.50 am, the plaintiff’s officers informed Mr Moutonnet over the telephone that, at the close of business the previous day, the defendant’s NLV reflected a net deficit of approximately S$600,000.201st Affidavit of Robert Sim, para 20. They further requested that the defendant top up its client account to meet the Risk Amount.211st Affidavit of Robert Sim, para 20. Mr Moutonnet replied that the defendant was unable to do so.221st Affidavit of Robert Sim, para 20. Consequently, on that same day, the plaintiff sent a Notification of Default to inform Mr Moutonnet that it would be exercising its right to liquidate the defendant’s portfolio.231st Affidavit of Robert Sim, para 21. The proceeds of the liquidation actions were to be applied to discharge all liabilities of the defendant’s portfolio.242nd Affidavit of Robert Sim, para 19. In the event the proceeds were insufficient for that purpose, the defendant was obliged to pay the deficit immediately upon receiving notice of said amount from the plaintiff.252nd Affidavit of Robert Sim, para 19.
On the same day, the plaintiff decided to liquidate the defendant’s entire portfolio by way of auction. To this end, the plaintiff obtained an independent valuation of the defendant’s portfolio from a third party, Eclipse Options. Eclipse Options valued the defendant’s portfolio at approximately JPY 19,589,340,106 and opined that, given the market volatility, any bid within a JPY 50m range of its indicative valuation would be reasonable.262nd Affidavit of Robert Sim, para 113.
Soon after, the plaintiff identified three parties which might be willing and able to acquire the defendant’s positions, namely, Liquid Capital, IMC Financial Markets and Asset Management and Optiver Australia Pty Ltd (“Optiver”). These parties were established global market traders. These parties were invited to bid for the defendant’s portfolio. Optiver’s bid proved to be the best and fell within the indicative price range provided by Eclipse Options.272nd Affidavit of Robert Sim, para 114. The portfolio was sold to Optiver.
In the evening of 6 November 2014, ABN informed the plaintiff that its portfolio had been sold to Optiver by auction.281st Affidavit of Robert Sim, para 22. The sale and the amount of sale proceeds were brought to the defendant’s attention on 7 November 2014 through the daily trader report issued on or around that date (“7 Nov Daily Trader Report”).292nd Affidavit of Robert Sim, para 23. Again, there is no evidence that the defendant raised any objections to the sale of its portfolio or the 7 Nov Daily Trader Report.
The defendant’s trading positions were fully closed out by 11 November 2014. The cash position report issued to the defendant (“11 Nov Cash Position Report”) showed that the final net liabilities in its client account were in the sum of S$907,408.18 (“the Loan Monies”).
On 20 November 2014, the cash position report that was issued to the defendant (“20 Nov Cash Position Report”) reflected outstanding liabilities in the sum of S$935,526.39...
