Frantonios Marine Services Pte Ltd and Another v Kay Swee Tuan

• Jurisdiction: Singapore
• Judge: Chan Seng Onn J
• Judgment Date: 18 June 2008
• Neutral Citation: [2008] SGHC 91
• Docket Number: Suit No 235 of 2006 (Registrar's Appeal No 285 of 2007)
• Date: 18 June 2008
• Year: 2008
• Published date: 19 June 2008
• Plaintiff Counsel: Rasanathan s/o Sothynathan (Colin Ng & Partners LLP)
• Citation: [2008] SGHC 91
• Defendant Counsel: Chandran Mohan and Khoo Yuh Huey (Rajah & Tann LLP)
• Court: High Court (Singapore)
• Subject Matter: Policy behind security for costs,Section 388 Companies Act (Cap 50, 2006 Rev Ed),Whether condition to grant security for costs satisfied,Security,Costs,Relevant factors considered by court in exercising discretion to award security for costs,Civil Procedure

18 June 2008

Chan Seng Onn J:

1 This was an appeal against the decision of the Senior Assistant Registrar, Ms Sharon Lim (“SAR”), ordering, inter alia, the 1^st plaintiff to provide security of $100,000 in the form of a banker’s guarantee for the defendant’s costs of the action up to the commencement of the trial, failing which the 1^st plaintiff’s claim would be dismissed with costs paid by the 1^st plaintiff to the defendant without further order.

2 Two main reasons were advanced by the 1^st plaintiff at the appeal:

(a) There was no credible testimony to show or that gave reason to believe, that the 1^st plaintiff was unable to pay costs if required; and

(b) Even if such evidence existed, the circumstances of the case were such that the court should not exercise its discretion to order security for costs in favour of the defendant.

The claim

3 The 1^st plaintiff was a company incorporated in Singapore in 1982. Its main business was the provision of marine services, particularly, tank cleaning services for crude oil tankers, ship supply and repair work. The 2^nd plaintiff was a director and shareholder of the 1^st plaintiff together with Tan Keng Chye and Tan Keng Chuan (“K.C. Tan”). K.C. Tan is the husband of the 2^nd plaintiff.

4 In September 2000, the 1^st plaintiff was granted a long term loan of S$1,800,000 and trade finance facilities of US$500,000 (referred to collectively as “banking facilities”) by Chang Hwa Commercial Bank Ltd. These banking facilities were secured by a legal mortgage over a property at 1A Bright Hill Crescent Singapore belonging to the 2^nd plaintiff and K.C. Tan, as well as a joint and several guarantee signed by the 2^nd plaintiff, K.C. Tan and Tan Wee Lin (the son of the 2^nd plaintiff and K.C. Tan).

5 The defendant, an advocate and solicitor practising in Singapore, was a director of Marine and Environmental Services Pte Ltd (“MES”), a company engaged in, inter alia, the business of tank cleaning. Enrique Tan was a shareholder and also a director of MES. The defendant and a company belonging to Enrique Tan had beneficial interests in Kotor Bina Sdn Bhd (“Kotor”), a company incorporated in Malaysia engaged in the business of waste and sludge disposal.

6 In early 2001, the defendant together with one Enrique Tan proposed to K.C. Tan, the then managing director of the 1^st plaintiff, that they work together. The defendant also proposed that the two companies set up a cleaning base in Johore, Malaysia. K.C. Tan told the defendant to obtain the necessary approval from the Malaysian authorities first.

7 When the defendant called K.C. Tan in April 2001 to enquire how he was doing, K.C. Tan told her that he was experiencing business difficulties. The defendant then offered financial assistance, which K.C. accepted. A loan of $60,000 was given to the 1^st plaintiff, which was used to pay the arrears of Central Provident Fund contributions of the 1^st plaintiff’s employees as well as wages and payments due to its workers and contractors. When the 1^st plaintiff secured two tank cleaning jobs in June or July 2001 and needed some working capital, K.C. Tan requested for a further loan of $120,000, which was given to the 1^st plaintiff.

8 When the defendant requested K.C. Tan for the repayment of the total loan of $180,000, K.C. Tan asked for more time. Eventually the defendant and Enrique Tan met with K.C. Tan and the 2^nd plaintiff. According to the plaintiffs, it was agreed that a sum of interest of $80,000 would be charged and further that K.C. Tan was to work with them by sending all the 1^st plaintiff’s vessels to their sludge plant in Malaysia. An acknowledgement of loan dated 26 February 2002 for a purported sum of $260,000 to be repaid within 6 months was signed by K.C. Tan and the 2^nd plaintiff. When the purported loan was not repaid, judgment in default was obtained against them on 25 September 2002.

9 The 2^nd plaintiff averred that K.C. Tan and the 2^nd plaintiff subsequently met the defendant and Enrique Tan. The parties agreed to work together in that the defendant and Enrique Tan would finance all of the 1^st plaintiff’s operations through MES and the 1^st plaintiff would send all their vessels to the sludge plant in Malaysia. In return, Enrique Tan agreed not to enforce the judgment debt of $260,000, which would be repaid when the 1^st plaintiff’s business and income improved.

10 The defendant told K.C. Tan to hand over letters or other documents relating to claims against the plaintiffs and himself from their creditors for her to take care of. She would assume control of the finances and bank accounts of the 1^st plaintiff but K.C. Tan could continue to run its business. K.C. Tan agreed to the arrangement as he felt he had no choice in view of the judgement debt against him and the 2^nd plaintiff. In June 2003, the defendant became the sole signatory of the 1^st plaintiff’s bank accounts.

11 After the defendant took over the management and control of the 1^st plaintiff’s finances and bank accounts, K.C. Tan continued to canvass for business which began to improve.

12 In early 2004, when K.C. Tan and the 2^nd plaintiff received claims from UOB Ltd as well as the 1^st plaintiff’s contractors, they requested the defendant to make the necessary payments as she had full control of the 1^st plaintiff’s bank accounts. The plaintiffs alleged that the defendant failed to do so and informed K.C. Tan that the payments from the 1^st plaintiff’s customers had not been received yet. The defendant similarly refused to effect payments to Chang Hwa Bank as well as to other creditors of the 1^st plaintiff. Consequently, their property at 1A Bright Hill Crescent Singapore was re-possessed and sold off by Chang Hwa Bank in 2005. The Pandan Loop office which belonged to the 1^st plaintiff was also re-possessed by its mortgagees, UOB Ltd, in October 2004 and sold off, leaving an outstanding sum of $183,005.19 still due and owing to UOB Ltd as at 1 August 2005.

13 In May 2004, K.C. Tan was made a bankrupt arising from a sum of about $13,000 due to one Gopi Bala.

14 In October and November 2004, the defendant closed the 1^st plaintiff’s accounts with RHB Bank Berhad and Standard Chartered Bank.

15 The plaintiffs claimed that the defendant wrongfully withdrew a total sum of $2,526,546.77 between 1 January 2004 and 31 October 2004 from the 1^st plaintiff’s bank account with RHB Bank Berhad. In addition, the defendant also wrongfully withdrew a total sum of S$438,606.95 from the 1^st plaintiff’s bank account with Standard Chartered Bank between 1 June 2004 and 24 November 2004.

16 In addition, the plaintiffs alleged that the defendant failed to act in a proper manner as the solicitor for the plaintiffs which resulted in Chang Hwa Bank obtaining judgment against the plaintiffs and Tan Wee Lin in Suit No. 641/2005/A for a sum of $1,126,865, interest of $249,329.60 and costs.

17 The plaintiffs further alleged that in consequence of (a) the defendant’s mismanagement of the 1^st plaintiff; (b) her misappropriation of the 1^st plaintiff’s monies; and (c) her negligence as a solicitor, the 1^st plaintiff had to cease operations and suffered loss and damage, which the plaintiffs particularised at paragraphs 26 and 27 of their statement of claim. By depleting the 1^st plaintiff’s finances, the defendant had allegedly caused loss, expenses and damage arising from, inter alia, the forced sale by the banks of the mortgaged properties owned by the plaintiffs in order to discharge the outstanding secured loans made by the banks to the 1^st plaintiff.

18 The plaintiffs further claimed against the defendant for an account of all monies withdrawn from the 1^st plaintiff’s bank accounts and an order to pay the 1^st plaintiff all monies due and payable to the 1^st plaintiff as monies had and received by the defendant or, in the alternative, damages for conversion.

19 Although not pleaded, counsel for the plaintiffs submitted that the defendant had also acted in breach of her fiduciary duties by acting as the plaintiffs’ solicitor whilst having an interest in the 1^st plaintiff and in the companies in which the 1^st plaintiff was having business dealings with. The defendant was therefore liable for damages and loss occasioned by her breach of fiduciary duty.

The defence

20 The defendant averred in her defence that a friendly interest free loan of $260,000 was given by Enrique Tan to the 2^nd plaintiff and K.C. Tan at their request. It was to be repaid within 3 months from 26 February 2002. After the 4 cheques of S$65,000 issued by K.C. Tan for the repayment of the loan were dishonoured upon presentation for payment, Enrique Tan instructed the defendant, in her capacity as his solicitor, to file a claim. Judgment in default of appearance for S$260,000 was obtained against the 2^nd plaintiff and K.C. Tan.

21 At the request of the 2^nd plaintiff and K.C. Tan, and upon K.C. Tan’s proposal that the 1^st plaintiff would engage the waste disposal services of Kotor, Enrique Tan agreed not to enforce the judgment for the time being. When the 1^st plaintiff still did not engage the services of Kotor by 25 January 2003, Enrique Tan instructed the defendant to request K.C. Tan to make monthly payments of the said judgment debt owing to Enrique Tan in the sum of $30,000 per month.

22 In April 2003, K.C. Tan requested for more time to repay but Enrique Tan refused to accede to his request. K.C. Tan then approached the defendant, in her capacity as director of MES, to propose that the 1^st plaintiff collaborate with MES in exchange for further extension of time to repay the debt. Specifically, the 1^st plaintiff would procure and handle the tank cleaning jobs but MES would manage the jobs. The profits would be shared between the 1^st plaintiff and MES. K.C. Tan said that he would repay the debt from the 1^st plaintiff’s share of the profits from the collaboration. MES and Enrique Tan agreed to the arrangement.

23 In May 2003, the defendant alleged that it was...