Hayate Investment Co Ltd v ManagementPlus (Singapore) Pte Ltd

JudgeChan Wei Sern Paul AR
Judgment Date09 May 2012
Neutral Citation[2012] SGHCR 3
CourtHigh Court (Singapore)
Docket NumberSuit No 929 of 2011(Summons No 222 of 2012)
Published date20 May 2013
Hearing Date27 April 2012,30 March 2012,13 April 2012,20 April 2012,19 March 2012,04 May 2012,22 March 2012
Plaintiff CounselChia Swee Chye Kelvin (Samuel Seow Law Corporation)
Defendant CounselGregory Vijayendran and Zheng Sicong (Rajah & Tann LLP)
Subject MatterCivil Procedure,setting aside of judgment,Debt and Recovery,right of set-off,Equity,defences,equitable set-off
Citation[2012] SGHCR 3
Paul Chan AR: Introduction

This is a judgment about the law of legal and equitable set-off.

The defendant, ManagementPlus (Singapore) Pte Ltd, was the manager of the Hayate Japan Equity Long-Short Master Fund (the “Master Fund”), a fund incorporated in the Cayman Islands. The Master Fund was established as an open-ended investment company, owned, at least beneficially, by its unitholders. Its source of investment capital was derived from a unit trust, the Hayate Japan Equity Long-Short Fund (the “Feeder Fund”), a fund which “feeds” capital into the Master Fund. Officially, these funds were established in early 2006 by a company known as Duet Research and Trading Pte. Limited who acted as the first manager of the funds. In September 2006, ManagementPlus took over from Duet as manager of the funds and, at the same time, appointed the plaintiff, Hayate Investment Co Ltd (“Hayate”), to provide investment advice in respect of the Master Fund.

The investment advisory agreement entitled Hayate to a substantial portion of the fee payable to ManagementPlus as manager. By the present suit, Hayate sued ManagementPlus to the tune of ¥46,869,291 for failure to make payment for advisory services rendered from 1 October 2009 to 15 October 2010. After the action was initiated, ManagementPlus failed to enter an appearance within the time period provided by the Rules of Court (Cap 322, R 5, 2006 Rev Ed) (“ROC”). Hayate consequently obtained a regular default judgment for its claim. ManagementPlus now seeks to set aside that judgment. It, however, does not deny the debt owing to Hayate. Rather, ManagementPlus contends that it is entitled to set-off various sums which it alleges Hayate owes against the ¥46,869,291 which it owes Hayate.

The issues, as I understand them, are as follows: Whether ManagementPlus’s quantum meruit for work done in respect of two other companies, Bianco Capital Ltd (“Bianco”) and Nero Partners Pte Ltd (“Nero”), entitles ManagementPlus to a set-off; Whether ManagementPlus’s quantum meruit for managing the Master Fund entitles ManagementPlus to a set-off; Whether ManagementPlus’s quantum meruit for Bloomberg services rendered to both the Master Fund and the Feeder Fund entitles ManagementPlus to a set-off; Whether any indemnity owing to ManagementPlus in respect of alleged acts of bad faith on the part of Hayate entitles ManagementPlus to a set-off; and Whether any damages resulting from an alleged unlawful conspiracy on the part of Hayate to injure ManagementPlus entitles ManagementPlus to a set-off; Whether an alleged compromise agreement struck between the parties for the sum of US$120,000 entitles ManagementPlus to a set-off.

The law Setting aside of regular default judgments

The present application is brought pursuant to Order 13, rule 8 of the ROC which reads:

The Court may, on such terms as it thinks just, set aside or vary any judgment entered in pursuant of this Order.

Where a regular default judgment is concerned, the Court of Appeal in Mercurine Pte Ltd v Canberra Development Pte Ltd [2008] 4 SLR(R) 907 (“Mercurine”) has conclusively held (at [60]) that:

... in deciding whether to set aside a regular default judgment, the question for the court is whether the defendant can establish a prima facie defence in the sense of showing that there are triable or arguable issues.

The Court of Appeal went on to state that the test for setting aside a regular default judgment should not be any stricter than that for obtaining leave to defend in an Order 14 application.

It must be stated at the outset that the standard of a triable or arguable issue is not high at all. In fact, the Court of Appeal in Mercurine rejected the “real prospect of success” test which imposes upon the defendant a greater burden. In Evans v Bartlam [1937] AC 473, Lord Wright expressed the triable issue test (at 489) as the defendant having “merits to which the Court should pay heed”. It is further said, in relation to an Order 14 application, that the test is satisfied if “a defendant shows that he has a fair case for defence, or reasonable grounds for setting up a defence, or even a fair probability that he has a bona fide defence”: see Habibullah Mohamed Yousuff v Indian Bank [1999] SLR(R) 880 (at [21]).

Thus, all that ManagementPlus has to do to succeed in the present application is demonstrate that it has a bona fide defence which has some chance of success. This, however, does not mean that any assertion in an affidavit of any given situation will suffice. Given that it is the defendant who has failed to enter an appearance and is attempting to set aside a properly obtained judgment, the burden is generally on the defendant to provide sufficient, although not necessarily conclusive, evidence to anchor his putative defence. The court must be persuaded that the application is not merely one to delay or deny the execution of the judgment already obtained.


As mentioned, ManagementPlus is endeavouring to set-off various sums that it claims Hayate owes it against the debt it owes Hayate. It is uncontroversial that a claim of set-off, although not a direct rebuttal against the initial claim made, constitutes a defence if properly established. This is reflected in Order 18, rule 17 of the ROC:

Where a claim by a defendant to a sum of money (whether of an ascertained amount or not) is relied on as a defence to the whole or part of a claim made by the plaintiff, it may be included in the defence and set-off against the plaintiff’s claim, whether or not it is also added as a counterclaim.

While the particular principles that are contested in the present application are necessarily discussed in detail later, it is useful to begin by briefly and broadly examining the contours of the law of set-off.

In Engineering Construction Pte Ltd v Sanchoon Builders Pte Ltd [2011] 1 SLR 681, Quentin Loh J defined a set-off (at [12]) as “the taking of two competing money cross-claims, setting off one against the other and producing a single balance...” It is of course important to be clear about the terminology used at the outset. As Andrew Ang J pointed out in American International Assurance Co Ltd v Wong Cherng Yaw and Others [2009] SGHC 89 (at [24]):

The act of deducting from sums otherwise due is known variously as set-offs, counterclaims and cross-claims. Some of these terms carry different meanings. As far as legal terminology is concerned, the terms “cross-claim” and “counterclaim” are used interchangeably. It is important to appreciate, however, that set-off has a narrower meaning than cross-claim. All set-offs are cross-claims but not all cross-claims are set-offs.

Set-offs are a subset of counterclaims because they possess one additional quality. Counterclaims are essentially procedural in nature in that they afford a defendant a mechanism by which separate actions may be tried in the same proceedings. In contrast, set-offs have, in addition to this procedural quality, also a substantive aspect. At their best, set-offs allow the defendant a self-help remedy. Even if not, set-offs, at the very least, have the potential to affect the rights and interests of third parties. For that reason, set-offs are considered to constitute a proper defence to any claim while counterclaims in general are not.

There are various types of set-offs. The main ones I shall outline. To fully appreciate the development of set-offs, however, one must first have reference to the prior common law position. On this subject, Rory Derham, the learned author of Derham on The Law of Set-off (Oxford University Press, 4th Ed, 2010) (“The Law of Set-off”) had this to say (at para 2.01):

Prior to the enactment of the first Statute of Set-off in 1729, there was no general right of set-off available to a defendant in a common law action when he or she was being sued by a solvent plaintiff, as opposed to the assignees of a bankrupt. This denial of a set-off has been explained as being consistent with the adoption by the common law courts of strict rules of pleading and of forms of action, which were designed to reduce the question to be decided by the court as far as possible to a single, well-defined issue. It would have been contrary to that approach to introduce collateral issues through consideration of a cross-claim. [Emphasis added.]

Another motivation for the vintage common law disdain for set-offs is proffered in Philip Wood, English and International Set-Off, (Sweet & Maxwell, 1989) ( at para 1-17):

The English hostility to self-help set-off is in sharp contrast to many civil code jurisdictions... The policy informing the English exclusion of independent set-off as a self-help remedy would seem to be based on the proposition that creditors are entitled to be paid by legal tender unless otherwise agreed and upon the need for predictability and certainty of payments in commercial transactions – the cash-flow principle. [Emphasis added.]

Regardless of which explanation is accurate, it would not be unfair to say that the common law courts historically placed a premium on certainty in their attempts to achieve justice. It is a reaction to this starting position that doctrine of set-off was first developed. The legal set-off

One of the most important types of set-off is what is today commonly called the legal set-off, so-called because it was applied by the English common law courts. It was originally derived from the Statutes of Set-off enacted in 1729 and 1735. The immediate purpose of these statutes appears, from the title of the first statute - ‘An Act for the Relief of Debtors with respect to the Imprisonment of their Persons’ - to be to provide relief from incarceration for debtors who were unable to pay their debts. Although the statutes were eventually repealed in 1879, the repeal was expressly stated to not affect any principle of law...

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