Creative Elegance (M) Sdn Bhd v Puay Kim Seng and Another

• Jurisdiction: Singapore
• Judgment Date: 13 January 1999
• Date: 13 January 1999
• Docket Number: Civil Appeal No 155 of 1998
• Court: Court of Appeal (Singapore)

Creative Elegance (M) Sdn Bhd

Plaintiff

and

Puay Kim Seng and another

Defendant

[1999] SGCA 4

Yong Pung How CJ

,

M Karthigesu JA

and

L P Thean JA

Civil Appeal No 155 of 1998

Court of Appeal

Civil Procedure–Interim orders–Security for costs–Foreign company ordinarily resident out of jurisdiction–Considering all relevant circumstances in deciding whether to order security for costs–Whether court would order security for costs as matter of course if foreign company ordinarily resident out of jurisdiction–Whether strength or weakness of foreign company's case a relevant consideration–Whether foreign company had bona fide claim with reasonable success on claim–Whether just to order security for costs–Whether any distinction existed in application under O 23 r 1 (1) (a) The Rules of Court 1996 and under s 388 Companies Act (Cap 50, 1994 Rev Ed)–Order 23 r 1 (1) (a)The Rules of Court 1996–Section 388 Companies Act (Cap 50, 1994 Rev Ed)

The appellant Creative Elegance (M) Sdn Bnd (“CE”), a Malaysian company, sued the respondents (“the suppliers”) for not supplying watches according to their representations and contractual descriptions. They claimed damages for misrepresentation and breach of contract. The suppliers counterclaimed on a dishonoured cheque for RM 17,720 issued by CE. They also applied for an order requiring CE to provide security for costs on the ground that CE was ordinarily resident outside jurisdiction. The assistant registrar dismissed the application. The High Court allowed the application and ordered provision for security for costs by way of a bank guarantee within 14 days failing which its statement of claim would be struck out. CE appealed. It was unable to provide the necessary security for costs.

Held, allowing the appeal:

(1) The distinction between O 23 r 1 (1) (a) of The Rules of Court 1996 and s 388 of the Companies Act (Cap 50, 1994 Rev Ed) lay in the condition to be satisfied before the respective provisions could be invoked. Under O 23 r 1 (1) (a) the condition which had to be satisfied before the court proceeded to exercise its discretion was whether it appeared to the court that the plaintiff was ordinarily resident out of the jurisdiction. Under s 388, the condition was whether it appeared by credible testimony that there was reason to believe that the plaintiff would be unable to pay the costs of the defendant if successful in his defence. Once the condition under the respective provision was satisfied, the court's discretion was invoked, and in exercise of that discretion the court would decide whether or not to order security for costs against the plaintiff. In such an event, whether the discretion was one under O 23 r 1 (1) (a) or under s 388, the same principles were applicable: the court would consider all the circumstances and decide whether it was just to order the plaintiff to provide security for costs and the extent of such security: at [13].

(2) The strength or weakness of the plaintiff's claim was one of the relevant circumstances to be taken into account by the court in the exercise of its discretion. This applied whether the court was considering an application under s 388 or O 23 r 1 (1) (a). It was not the law that once the plaintiff had shown that he had a bona fide claim with a reasonable prospect of success under s 388 or that he was likely to succeed in the sense that he had a high probability of success under O 23 r 1 (1) (a), it followed as a matter of course that the court would not make an order for security for costs. Such a fact, if established prima facie, was only one of the circumstances that the court would take into consideration in determining whether in exercise of its discretion an order for security for costs should be made or should be refused. The court had to examine all the other circumstances and come to the conclusion whether it was just that an order for security for costs should or should not be granted: at [25].

(3) On the facts, CE had shown that it had a bona fide claim against the suppliers with reasonable prospect of success on its claim. In view of the prevailing economic condition, it was unable to provide security for costs as ordered, and such an order if remained would undoubtedly stifle its claim. Moreover, CE was still carrying on business in Malaysia and it was open to the suppliers, if they succeeded in this action, to enforce the order for payment of costs there. The court did not agree with the suppliers' argument, based on the Aeronave SPA case, that the availability of registering a judgment under the Reciprocal Enforcement Act against the plaintiff was not a ground for refusing an order for security. Having regard to all the relevant circumstances, it would be unjust to make an order for security for costs. The appeal was accordingly allowed: at [31] to [34].

Aeronave SPA v Westland Charters Ltd [1971] 1 WLR 1445; [1971] 3 All ER 531 (distd)

Amar Hoseen Mohammed Revai v Singapore Airlines Ltd [1994] 3 SLR (R) 290; [1995] 1 SLR 77 (refd)

Faridah Begum bte Abdullah v Dato Michael Chong [1995] 2 MLJ 404 (refd)

Hudson Strumpffabrik GmbH v Bentley Engineering Co Ltd [1962] 2 QB 587 (refd)

Kohn v Rinson & Stafford (Brod) Ltd [1948] 1 KB 327 (refd)

K S Oriental Trading Pte Ltd v Defmat Aerospace Pte Ltd [1996] 1 SLR (R) 448; [1996] 2 SLR 606 (refd)

Omar Ali bin Mohd v Syed Jafaralsadeg bin Abdulkadir Alhadad [1995] 2 SLR (R) 407; [1995] 3 SLR 388 (refd)

Porzelack KG v Porzelack (UK) Ltd [1987] 1 WLR 420; [1987] 1 All ER 1074 (refd)

Sembawang Engineering Pte Ltd v Priser Asia Engineering Pte Ltd [1992] 2 SLR (R) 358; [1992] 2 SLR 806 (refd)

Simaan General Contracting Co v Pilkington Glass Ltd [1987] 1 WLR 516; [1987] 1 All ER 345 (refd)

Sir Lindsay Parkinson & Co Ltd v Triplan Ltd [1973] QB 609; [1973] 2 All ER 273 (refd)

Companies Act (Cap 50, 1994 Rev Ed) s 388 (consd)

Rules of Court 1996,The O 23 r 1 (1) (a) (consd)

Rules of Court (UK) O 23 r 1 (1) (a)

Kenneth Tan SC (instructed), Leslie Phua and Ronnie Wai (Phua Wai Partnership) for the appellants

Herman Jeremiah and Samuel Lee (Helen Yeo & Partners) for the respondent.

L P Thean JA

(delivering the grounds of judgment of the court):

1 This was an appeal against the decision of the High Court allowing the appeal brought against the decision of the assistant registrar dismissing the application by the respondents for an order that the appellants provide security for costs. We allowed the appeal and now give our reasons.

Facts

2 The appellants are a company carrying on the business of dealing in watches in Malaysia. The respondents carry on in partnership the business of manufacturers and suppliers of watches and clocks in Singapore. The respondents supplied watches to the appellants during the period between December 1991 and January 1996.

3 On 1 August 1997 the appellants commenced proceedings against the respondents in respect of some of the watches supplied by the respondents, claiming damages for misrepresentations and breach of contract. The basis of their claim was briefly as follows:

(a) the respondents had represented to the appellants that the watches supplied would have a brass or stainless steel casing and a plating of either 3 micron 18K gold or 1 micron 18K gold. The appellants had relied on this representation in purchasing the watches. The watches supplied did not conform with the representations made as to casing and plating;

(b) it was a term of the sale and purchase agreement that the watches supplied should have either brass or stainless steel casing and a plating of either 3 micron 18K gold or 1 micron 18K gold. The watches supplied did not conform to these contractual descriptions;

(c) the respondents had refused to return to the appellants S$22,128.60 worth of watches which the appellants had sent to the respondents for repairs; and

(d) the respondents had refused to accept S$63,388.20 worth of watches which the appellants had rejected on the ground that they were not of merchantable quality and/or were not reasonably fit for the purpose for which they were required.

4 The claim was resisted and the respondents' defence was as follows:

(a) the respondents had made no such representations to the appellants;

(b) it was not a term of the sale and purchase agreement that the watches supplied should have either brass or stainless steel casing and a plating of either 3 micron 18K gold or 1 micron 18K gold;

(c) the respondents did not admit that the watches referred to by the appellants in their statement of claim had been sold to the appellants by the respondents. The watches could have been sold to the appellants by a third party;

(d) some of the watches returned to the respondents were not defective at all;

(e) the appellants only had a reasonable time to reject the watches on the ground that they were not of merchantable quality and/or were not reasonably fit for the purpose for which they were required. This period had expired by the time the appellants had actually sought to reject the watches; and

(f) some of the defects in the watches were caused by the appellants' mishandling of the watches.

The respondents also made a counterclaim for a total sum of S$89,363.30 on the following basis:

(1) seven of the invoices issued by the respondents to the appellants had been left unpaid. This amounted to an outstanding sum of S$52,616.30; and

(2) as a result of errors and omissions in past payments, there was also outstanding a sum of S$36,747.00.

In respect of this counterclaim the respondents relied, inter alia, on a cheque for RM17,720 issued by the appellants in favour of the respondents which had been dishonoured upon presentation.

5 On 17 March 1998, the respondents applied for an order requiring the appellants to give security for costs on the ground that the appellants were ordinarily resident outside the jurisdiction...