Active Timber Agencies Pte Ltd v Allen & Gledhill

• Jurisdiction: Singapore
• Judge: MPH Rubin J
• Judgment Date: 28 September 1995
• Neutral Citation: [1995] SGHC 230
• Citation: [1995] SGHC 230
• Defendant Counsel: Michael Hwang, K Shanmugam and Foo Maw Shen (Allen & Gledhill)
• Published date: 19 September 2003
• Plaintiff Counsel: James L Ponniah and Kenny Khoo (Wong & Lim)
• Date: 28 September 1995
• Docket Number: Suit No 1728 of 1994
• Court: High Court (Singapore)
• Subject Matter: O 18 r 19 Rules of the Supreme Court,Striking out,Statement of claim disclosing no reasonable cause of action,Civil Procedure

This is an appeal by the plaintiffs against an order made by the learned assistant registrar, striking out their statement of claim on the ground that it discloses no reasonable cause of action against the defendants, pursuant to O 18 r 19 of the Rules of the Supreme Court (`RSC`).

The facts which gave rise to the action herein as could be gathered from the pleadings (including the further and better particulars) and the affidavits filed by both parties including the exchange of correspondence between the respective solicitors could be summarised as follows.

During the period August-September 1993, the services of the defendants, a firm of solicitors in Singapore, were retained by one Mr David Cam (`Mr Cam`) on behalf of Toro Holdings Ltd of Vanuatu and one Mr Noel A Adam. During this period Mr Tiang Ming Sing (`Mr Tiang`), who is said to be the beneficial owner of all the issued shares in the plaintiffs, a Singapore registered company, was in negotiation with Mr Cam in relation to the purchase of the entire shareholdings of another Vanuatu company known as Veneer Enterprises (Vanuatu) Ltd.

On or about 31 August 1993, Mr Tiang after signing the relevant sale and purchase agreement, caused to be paid to Mr Cam a sum of US$100,000 pursuant to the terms of the agreement. On or about 1 September 1993, Mr Tiang caused to be paid into the clients` account of the defendants, by way of telegraphic transfer, a further sum of US$250,000.

It is evident from the pleadings that apart from payment of the said sum of US$250,000 into the clients` account of the defendants, there was no communication of whatsoever nature between Mr Tiang and the defendants.

Apparently, Mr Tiang and Mr Cam encountered problems in connection with some proposed amendments to the agreement. Negotiations which ensued in August-September 1993 resulted in a stalemate. The said agreement came to grief and according to the plaintiffs consequently aborted.

After a lapse of about nine months, Mr Tiang instructed his then solicitors, Messrs Tan Lee & Partners, to demand from the defendants the return of the sum of US$250,000 which his solicitors labelled as `earnest money` paid into their clients` account by the plaintiffs. The said letter, insofar as it bespeaks the background scenario to the proceedings, is reproduced hereunder:

26 May 1994

M/s Allen & Gledhill

Claim for refund of earnest money paid

We act for Tiang Ming Sing and understand that you act for Noel A Adam and Toro Holding Ltd of Vanuatu, represented by one David Cam, its managing director.

2 We are instructed that sometime in August 1993, our client negotiated with your clients to buy over the entire shareholding of Veneer Enterprises (Vanuatu) Ltd and upon completion of negotiation, our client paid to you on 1 September 1993 a sum of US$250,000 being the earnest money. We enclose hereto a copy of remittance advice for your perusal.

(3) On or about 31 August 1993, after our client signed the sale and purchase agreement, our client paid a further sum of US$100,000 pursuant to the said agreement. However, on the same day, and before your clients signed on the said agreement, our client also suggested some amendments and a subsequent discussion ensued. We are now informed that the proposed sale of shares under the said agreement had been aborted, and a refund of the said US$100,000 is pending.

(4) We are instructed to and do hereby demand from you the refund of the said US$250,000 to our client and trust that the refund shall be forthcoming within the next seven days.

Yours faithfully

(signed)

The foregoing letter did not result in anything fruitful; no refund was forthcoming from the defendants, for as early as in September 1993 the defendants had paid out the said sum to their clients in accordance with their instructions. The matter then went into hibernation some time until 22 September 1994 when the present solicitors for the plaintiffs issued a fresh demand letter to the defendants. The tenor of this letter is somewhat different in substance from that of the plaintiffs` former solicitors. It introduced amongst other things, a new element, ie the interests of the plaintiffs. The letter reads:

22 September 1994

M/s Allen & Gledhill

Re: Refund of US$250,000

We act for Mr Tiang Ming Sing and Active Timber Agencies Pte Ltd. We refer to the letter of 26 May 1994 from M/s Tan Lee & Partners and your reply dated 11 July 1994.

Our instructions are that on or about 1 September 1993 our client M/s Active Timber Agencies Pte Ltd paid into your account at OCBC bank the sum of US$250,000. The said payment was made by M/s Active Timber Agencies Pte Ltd at the behest of Mr Tiang Ming Sing on per a transaction outlined in the letter of 26 May 1994 from M/s Tan Lee & Partners to yourself. A copy of the remittance advice is enclosed for your easy reference.

We have further been instructed that subsequent to the payment of the money into your account neither of our clients gave you any instructions as per the disbursement of the money.

We have now been instructed to and hereby demand from you the refund of the said US$250,000 to be paid in favour of our firm. If you have incurred any administrative expenses kindly inform us of same.

Yours faithfully

(signed)

...

The response from the defendants was crisp. They alleged that they received the sum of US$250,000 on their Vanuatu clients` instructions as their agents; those moneys were paid out from their account in September 1993 in accordance with their clients` instructions and that neither the plaintiffs nor Mr Tiang gave them any instructions nor imposed any conditions as to how the moneys should be dealt with.

In the context of the foregoing exchange, the action by the plaintiffs commenced. By para 10 of their statement of claim the plaintiffs alleged that the defendants received the said sum of US$250,000 into their clients` account as agents for the plaintiffs. The alternative contention under para 11 was that the defendants, by electing to retain the said sum and disbursing it subsequently, were also acting as solicitors for the plaintiffs. Additionally, it was averred that by disbursing the said sum without instructions and without prior communication from the plaintiffs, the defendants had acted negligently and were in breach of the duty of care owed to them in contract as well as in tort. Particulars provided by the plaintiffs straddle three distinct but inter-related causes of action, ie contract, tort (negligent action or omission) and trust. The trust aspect was however abandoned at the hearing of this appeal.

The defendants by their defence denied liability to the plaintiffs in contract or in tort. Their position was that they acted as agents for their own clients and were never the agents for the plaintiffs (see paras 10, 11 and 12 of the defence). Insofar as material to these proceedings, the particulars provided by the defendants under para 12 of their defence read as follows:

(1) The defendants did not know of the identity of the plaintiffs prior to the receipt of the said sum of US$250,000 in the defendants` client account;

(2) at all material times, there was never any contractual relationship between the plaintiffs and the defendants;

(3) the plaintiffs did not appoint or retain the defendants to act as their solicitors;

(4) there was no communication between the plaintiffs and the defendants prior to the letter from the defendants` solicitors dated 22 September 1994;

(5) the defendants were instructed by their own client to receive the said sum of US$250,000 and did so receive the said sum of US$250,000 in the defendants` client account; and

(6) the said sum of US$250,000 was disbursed from the defendants` client account in accordance with the instructions given to the defendants by their client.

The defendants further denied that there was any solicitor and client contract or relationship between them and the plaintiffs. They averred that they were under no duty to communicate with or seek instructions from or make inquiry of the plaintiffs before disbursing the said sum to their clients (para 18 of the defence).

A threshold question in this appeal relates to the ambit of the court`s powers under O 18 r 19 of the RSC. The said rule provides, inter alia, that the court may at any stage of the proceedings order to be struck out any pleading on grounds that: (a) it discloses no reasonable cause of action or (b) it is scandalous, frivolous or vexatious. On the subject of reasonable cause of action, cases annotated in the Supreme Court Practice 1995 (see para 18/19/11) support the view that a reasonable cause of action means a cause of action with some prospect of success when only the allegations in the pleadings are considered (per Lord Pearson in Drummond-Jackson v British Medical Association & Ors [1970] 1 All ER 1094 (CA)). Another principle enunciated by the courts over the years underpins the proposition that so long as the statement of claim or the particulars disclose some cause of action or raise some question to be decided by a judge or a jury, the mere fact that the case is weak and not likely to succeed, is no ground for striking it out. The central point which seems to emerge in all the decided cases is that the object of the rule is to stop cases which ought not to be launched - cases which are obviously unsustainable or patently frivolous or vexatious (see the observations of Lindley LJ in A-G of the Duchy of Lancaster v London And North Western Railway Co [1892] 3 Ch D 274 at p 277).

In Ban Guan Sdn Bhd v United Malaysian Steel Mills Bhd [1977] 2 MLJ 52 at p 53, the Malaysian High Court approved the following passage from Mallal`s Supreme Court Practice

under O 25 r 4 under the heading `Striking Out a Pleading`:

It is only in plain and obvious cases that recourse should be had to the

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