CGS-CIMB Securities (Singapore) Pte Ltd v Koh Yew Choo

• Jurisdiction: Singapore
• Judge: Elton Tan Xue Yang AR
• Judgment Date: 21 December 2020
• Neutral Citation: [2020] SGHCR 9
• Court: High Court (Singapore)
• Docket Number: Suit No 607 of 2020 (Summons No 3914 of 2020)
• Published date: 30 December 2020
• Year: 2020
• Hearing Date: 28 September 2020,10 November 2020
• Plaintiff Counsel: Ho Seng Giap (He Chengye) and Adly Rizal Bin Said (Tito Isaac & Co LLP)
• Defendant Counsel: Tan Kia Hua (Chen Jiahua) (WongPartnership LLP)
• Subject Matter: Civil Procedure,Pleadings,Rejoinders,Leave
• Citation: [2020] SGHCR 9

Elton Tan Xue Yang AR: Introduction

This was an application under O 18 r 4 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) (“the Rules of Court”) by a defendant for leave to serve a rejoinder. Applications of this nature are uncommon and it has been observed that “[a]lthough it is possible to obtain leave to file rejoinders, the courts are rarely inclined to grant such leave in the absence of exceptional circumstances”: see Chua Lee Ming ed, Singapore Civil Procedure 2020, vol 1 (Sweet & Maxwell, 2020) (“Singapore Civil Procedure”) at para 18/4/1. Because of the rarity of such applications, there is also relatively little case law or elaboration on the nature of the circumstances in which leave may be granted.

In the proceedings before me, the plaintiff brought a claim against the defendant to recover the price of certain unpaid securities. The defendant denied liability to make payment of the securities and counterclaimed for breaches of terms and conditions governing the parties’ relationship, alleging that the plaintiff failed to comply with her instructions to transfer the securities to her margin trading account and pay for the securities using that account, and instead mistakenly transferred the securities to her CDP account. The plaintiff only sought payment of the securities several months later when the mistake was discovered. In its reply and defence to counterclaim, the plaintiff relied on certain other clauses in the terms and conditions which, in its view, entitled it to refuse to carry out the defendant’s instructions without giving notice or reasons.

The defendant then applied for leave to serve a rejoinder, principally to advance two allegations: first, the clauses the plaintiff relied on were unenforceable under the Unfair Contract Terms Act (Cap 396, 1994 Rev Ed) (“the UCTA”); and second, the plaintiff’s reliance on these clauses constituted unfair practice under the Consumer Protection (Fair Trading) Act (Cap 52A, 2009 Rev Ed) (“the CPFTA”). In the proposed rejoinder, the second allegation served as the basis of an additional counterclaim and an additional ground for the defence of set-off. The defendant’s application therefore called for consideration of the circumstances in which leave to serve a rejoinder may be granted, and whether and if so, when a rejoinder may contain a new or additional counterclaim.

Background facts

The plaintiff is a Singapore incorporated company with its principal activities in the business of stocks, shares and bond brokerage, as well as security dealings and commodity contracts brokerage. The defendant was a customer of the plaintiff.¹

The Cash Trading and Margin Trading Accounts

On or around 4 January 2013, the defendant opened a Cash Trading Account (“CTA”) and a Margin Trading Account (“MTA”) (collectively, “the Accounts”) with the plaintiff, through which the defendant traded securities. It is not disputed that the operation of the Accounts was governed by the plaintiff’s General Terms and Conditions (“the General T&Cs”), which incorporated by reference the prevailing SGX-ST Rules.²

On 25 April 2019, the defendant instructed the plaintiff to purchase various securities (“the Securities”) using the Cash Trading Account. The plaintiff alleged (but the defendant denied) that the purchase price payable by the defendant for the securities, inclusive of fees and taxes, amounted to S$606,244.98 (“the Purchase Price”).³ According to the plaintiff, the Securities were duly delivered to the defendant and the due date for payment of the Purchase Price was 29 April 2019.⁴ The plaintiff alleged that the Purchase Price was not paid by the due date nor since then, and that formed the basis of its claim to recover the Purchase Price, together with interest and costs.

Instructions to transfer Securities into Margin Trading Account

The defendant denied the claim and relied on an additional set of facts in her defence and counterclaim (“the Defence & Counterclaim”), certain key aspects of which were undisputed. The parties did not dispute that on or around 2 May 2019, the defendant ordered or instructed the plaintiff to use the MTA to pay for the Securities and deposit or transfer them into the MTA.⁵ It was also not disputed that despite the defendant’s order or instruction, the Securities were never paid for using the MTA.⁶

The plaintiff explained that this was due to the fact that the defendant did not have sufficient credit limit, collateral and/or excess margin in the MTA to pay for and receive the Securities. According to the plaintiff, one of its representatives messaged the defendant on 3 May 2019, asking her to either top up S$400,000 in the MTA or dispose of other securities then held in the MTA to the value of about S$1.4m. The defendant failed to comply with either of these requirements and hence the plaintiff did not transfer the Securities into the MTA.⁷

Mistaken transfer into CDP Account

A few days later, on or around 6 May 2019, the plaintiff transferred and credited the Securities into the defendant’s CDP account (“the CDP Account”).⁸ The plaintiff attributed the transfer of the Securities to the CDP Account to an “internal administrative error”, the plaintiff having mistakenly recorded that payment had been made for the Securities.⁹

The plaintiff only discovered the mistake three months later in mid-August 2019 during an internal accounting reconciliation exercise, through which the plaintiff realised that the Securities had not been paid for (whether through the MTA or at all), and that they had been transferred into the CDP Account. The plaintiff then contacted the defendant to inform her that the Securities had not been paid for and to request that she check her trading records. It was only in October 2019 that the defendant met the plaintiff at the latter’s request and provided copies of her CDP Account statements for April to June 2019.¹⁰ The plaintiff alleged that the defendant had sold off or transferred out all the Securities from her CDP Account by mid-July 2019.¹¹

In January 2020, meetings were held between the defendant and the plaintiff’s representatives. According to the defendant, the plaintiff’s representatives admitted at the meetings that it was due to negligence on the part of the plaintiff that the Securities had been credited into the CDP Account rather than the MTA.¹²

On 7 July 2020, the plaintiff commenced these proceedings against the defendant.

Pleadings

As the present application centres on the parties’ pleadings, it will be necessary to have closer regard to the pleaded arguments and responses. In its statement of claim, the plaintiff sought recovery of the Purchase Price, interest and costs. It relied on cll 5 and 6 of the General T&Cs, which the plaintiff interpreted as requiring the defendant to immediately satisfy all liabilities that might become due to the plaintiff.¹³

The defendant admitted that she had not made payment of the Purchase price.¹⁴ Her defence was in essence that she was not liable to pay any such sums to the plaintiff. She accompanied that defence with a number of counterclaims against the plaintiff.

The defendant first referred to certain SGX-ST Rules applicable in April 2019, which stipulated that if a buying customer (such as the defendant) failed to make payment to its “Trading Member” (such as the plaintiff) for its trade on the “Intended Settlement Day”, the Trading Member was to force sell the securities on the following “Market Day”, which was a day on which the SGX-ST was open for trading in securities or futures contracts. If the Trading Member reasonably expected full payment from the buying customer, the Trading Member might defer the forced sale for up to two Market Days. The defendant argued, and the plaintiff did not deny, that these rules were incorporated by reference into the General T&Cs (see [5] above). The defendant further alleged that the plaintiff breached these rules by failing to force sell the Securities on the following Market Day after the Settlement Date of 29 April 2019 (see [6] above), or at the latest by two Market Days after the Settlement Date.

In addition, the defendant pleaded that the plaintiff owed her several implied duties, including the obligations to (a) make timely requests to the defendant for payment of any purchased securities; (b) inform her in a timely manner in the event of non-payment; (c) obtain and/or act on her instructions in relation to the manner of payment; (d) comply with her instructions regarding the account(s) into which the securities were to be deposited or transferred; and (e) inform her if these instructions had not been complied with.¹⁵ The plaintiff breached these implied duties by, amongst other things, failing to comply with the defendant’s instructions to pay for the Securities from the MTA and to deposit the Securities into the MTA.¹⁶

By reason of these breaches, the defendant claimed that she had suffered loss and damage as a result of the fall in market prices of the Securities and her inability to carry out her usual trading activities in respect of the Securities.¹⁷ Based on the same facts, she added a further counterclaim for damages arising from the plaintiff’s negligence. In the event that the defendant was found liable to pay any sums to the plaintiff, she claimed an entitlement to set off the damages sought in her counterclaims in diminution or extinguishment of the plaintiff’s claim.

In its Reply and Defence to Counterclaim (Amendment No. 1) (“the Reply & Defence to Counterclaim”), the plaintiff admitted that the Securities were mistakenly transferred to the CDP Account (see [9] above). The plaintiff nevertheless denied that it had committed any breach of the SGX-ST Rules, on the basis that it was “reasonable for the Plaintiff to expect full payment from the Defendant” since the defendant had instructed it on 2 May 2019 that the Securities be paid...