Chin Yoke Choong Bobby and Another v Hong Lam Marine Pte Ltd

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 15 November 1999
• Neutral Citation: [1999] SGCA 81
• Date: 15 November 1999
• Subject Matter: Civil Procedure,Order of costs a consequential order,Procedure for seeking order for costs,Receiver and manager,Costs of arbitration proceedings,Arbitration proceedings,s 218(1) Arbitration proceedings,s 218(1) Companies Act (Cap 50),Whether receivers personally liable for such costs,Jurisdiction of court to make order for costs,O 59 r 2(2) Rules of Court,Companies,Judgments and orders,Whether such costs were debts incurred in the course of receivership,Costs awarded to respondents
• Docket Number: Civil Appeal No 97 of 1999
• Published date: 19 September 2003
• Defendant Counsel: Scott Thillagaratnam and Robert Phua (Ramdas & Wong)
• Court: Court of Appeal (Singapore)
• Plaintiff Counsel: Leslie Chew, Lionel Tay and Genevieve Sim (Khattar Wong & Partners) and Mabel Mak (Gurbani & Co)

(delivering the grounds of judgment of the court): This is a case in which the respondents brought an action to recover the sums, representing costs of arbitration proceedings, that had been awarded in their favour by the arbitral tribunal. In the court below, Tay Yong Kwang JC (the `trial judge`) gave judgment in favour of the respondents. The appellants appealed against the decision. At the conclusion of the hearing, we allowed the appeal and we now give our reasons.

Background facts

The respondents (plaintiffs) entered into a shipbuilding agreement with Siong Huat Shipyard Pte Ltd (`Siong Huat`) in 1993. A dispute arose between them and on 14 February 1996 Siong Huat commenced arbitration proceedings against the respondents, who then lodged a counterclaim. On 12 July 1996 Siong Huat was placed under receivership and the appellants, Bobby Chin Yoke Choong and Michael Ng Wei Teck of KPMG Peat Marwick, were appointed as the receivers and managers of Siong Huat. When the arbitration hearings commenced on 24 July 1996, counsel for Siong Huat, Mr Michael Por, requested a three-month adjournment as the appellants required some time to consider whether or not to continue with the arbitration proceedings. The respondents objected to the request. The arbitral tribunal (the `Tribunal`) granted Mr Por time to take instructions from the appellants. The next day, on 25 July 1996, Mr Por reiterated his request for a three-month adjournment as he had no instructions from the appellants to proceed with the arbitration and they had not agreed to fund his costs for the proceedings. After being given more time to take further instructions, Mr Por informed the Tribunal that the appellants had agreed to proceed with the defence to the counterclaim. The American Home Assurance Co (`AHA`), who had a direct interest in the conduct of the defence, had agreed to indemnify the appellants for any costs incurred thereby. Mr Prem Gurbani, AHA`s solicitor, then took over the conduct of the defence from Mr Por. Mr Gurbani told the Tribunal that he had no instructions to prosecute Siong Huat`s claim. Subsequently, on 1 August 1996, Mr Por notified the Tribunal that he had been authorised to prosecute Siong Huat`s claim and he was being funded by the shareholders of Siong Huat. The proceedings with respect to Siong Huat`s claim were thus conducted by Mr Por.

On 15 August 1996, Mr Por applied to withdraw Siong Huat`s claim and this was allowed with costs and on the condition that no further proceedings be brought by Siong Huat against the respondents. The hearings relating to the respondents` counterclaim continued and were concluded on 30 August 1996. On 6 December 1996, a winding-up order was made against Siong Huat. The respondents then obtained leave of court to pursue the counterclaim against Siong Huat. Final submissions were made before the Tribunal on 7 January 1997. On 12 March 1997, the solicitors for the appellants wrote to the respondents` solicitors, informing them that the appellants were intending to finalize the receivership of Siong Huat and needed confirmation from the respondents of whether they had any claim against the appellants. The respondents` solicitors replied on 17 March 1997, saying that the Tribunal had awarded costs for the withdrawn claim against Siong Huat, that the costs were to be taxed if not agreed and that the respondents therefore had a claim against the appellants for such costs. In their response, the appellants` solicitors rejected the respondents` claim that the costs should be borne by the appellants and suggested that the respondents proceed to tax the costs to be paid by Siong Huat. On 2 April 1997, the arbitration award was published. The Tribunal decided in favour of the respondents and Siong Huat was ordered to pay some $3.87m to the respondents as well as the costs of the arbitration proceedings.

The respondents` claim

On 4 September 1998, the respondents commenced the present action against the appellants to recover the costs of the arbitration proceedings that had been awarded to them. The respondents claimed the sums of $126,617.13 and $201,355.59 or alternatively damages. The first sum was the balance of the costs and expenses of the arbitration proceedings, after deducting the security deposit paid by Siong Huat. The second sum was the respondents` taxed costs and disbursements for the arbitration proceedings.

The respondents` contention was that the appellants, in their capacity as receivers and managers of Siong Huat, were personally liable for the costs of the arbitration proceedings that were awarded against the company. The respondents relied on the conduct of the appellants in the arbitration proceedings and argued that, although the claim and counterclaim were both instituted prior to the appointment of the appellants as receivers and managers, the appellants in authorising the continuation of the claim and defence of the counterclaim had therefore adopted the proceedings.

The respondents based their claim on the application of s 218(1) of the Companies Act (Cap 50). They contended that the costs of the arbitration proceedings were debts incurred by the appellants in the course of their receivership that fell within the scope of s 218(1), thereby rendering the appellants personally liable for such costs. They further contended that the proper course that the appellants should have taken was to apply to the court for directions pursuant to s 218(3), Companies Act.

In the alternative, it was contended that, even if s 218(1) of the Companies Act did not apply, the law recognised that a receiver and manager can be made personally liable for costs of legal proceedings which he has adopted and maintained in the name of the company. In this respect, the respondents relied on the cases of Bacal Contracting Ltd v Modern Engineering (Bristol) Ltd [1980] 2 All ER 655 and Anderson v Hyde [1996] 2 BCLC 144.

The defence

The appellants first contended that, as receivers and managers, they were agents of Siong Huat and were personally liable only in limited circumstances, all of which did not apply in the present case. As agents, they could not be made liable for debts which were incurred by the principal, Siong Huat. Furthermore, the appellants were never parties to the arbitration proceedings and the costs awarded were against Siong Huat alone and not against them as well. The appellants submitted that s 218(1), Companies Act, did not apply here as the costs of the arbitration proceedings were not debts incurred` by them. Next, the appellants maintained that they had agreed to the continuation of the claim, which was later withdrawn, and the defence, only on the basis that they would not be personally liable for the costs of the proceedings. The appellants had an understanding with the directors and shareholders of Siong Huat as well as AHA, which had an interest in defending the counterclaim on behalf of Siong Huat, that they, and not the appellants, would be funding the costs of the proceedings.

In the event that they were found liable for the costs, the appellants contended that the liability should not extend to the costs of the entire arbitration proceedings but should be limited to the period during which the appellants were the receivers and managers of Siong Huat.

The decision below

The trial judge allowed the claim made by the respondents as he was of the view that `there does not appear to be any good reason to distinguish such arbitration/litigation costs from the "debts" that fall within the ambit of s 218(1), Companies Act.` In his opinion, the appellants had clearly adopted the arbitration by authorizing the solicitors to continue acting for Siong Huat. The trial judge held that the fact that the appellants could have directed the conduct of the claim and defence but chose not to do so, did not entitle them to now allege that they took no part in the proceedings. Therefore, by virtue of the section, the appellants were to be personally liable for the costs of the arbitration. The trial judge expressed the view that the indemnities provided by AHA and the shareholders of Siong Huat did not exonerate the appellants but merely gave them someone else to turn to if the arbitration proceedings failed.

As for the contention that the appellants were merely acting as agents of Siong Huat, this was dismissed by the trial judge as he found that the appellants had failed to adduce any evidence to support such a contention.

The trial judge further held that the appellants`...