Johnny Lian Tian Yong v Tan Swee Wan

• Judge: Foo Tuat Yien
• Judgment Date: 04 August 2014
• Neutral Citation: [2014] SGDC 301
• Citation: [2014] SGDC 301
• Court: District Court (Singapore)
• Published date: 18 August 2014
• Docket Number: District Court Suit No. 2084 of 2013, Registrar’s Appeals No. 31 and 34 of 2014, RAS No 144 of 2014
• Plaintiff Counsel: Ravindran with Venetia Tan (Colin Ng & Partnership LLP)
• Defendant Counsel: Wendel Wong with Alvin Low (Drew & Napier LLC)
• Subject Matter: Striking Out,Quasi-Partnership
• Hearing Date: 04 June 2014,30 June 2014,21 April 2014

Senior District Judge Foo Tuat Yien: Introduction

This appeal relates to a plaintiff’s application under Order 18 Rule 19 to strike out the defence and counterclaim.

The plaintiff claims $101,905.40 with interest against the defendant, being the latter’s share of liability under two joint and several guarantees relating to a company, “Tecbiz Frisman Pte Ltd”, for which the plaintiff had made payment to Bank A as a co-guarantor.

It was pleaded in the Defence and counterclaim that the plaintiff was not entitled to claim contribution under the guarantees, as the plaintiff was coming to court with “unclean hands”, having been the cause of the company’s default on the loans not only to Bank A but also to another Bank. It is the defendant’s case, that the parties, together with another person (“KL”), had incorporated the company on the basis of mutual trust and confidence. The plaintiff had breached his fiduciary duty to the defendant by giving false information on the company and another company, “Solvesam International Private Limited” later known as “SS International Pte Ltd” (“SSI”), failing to transfer funds rightly due to SSI and conducting the affairs of the company and SSI in a manner, that culminated in the default of the company’s obligations to the two banks. The defendant counterclaimed for: a) damages to be assessed for breach of fiduciary duties arising from the quasi-partnership; and b) the plaintiff ‘s contribution of a third of the amounts, which the defendant had paid to Bank A and another bank under separate Deed of guarantee relating to the company.

Plaintiff’s application to strike out under Order 18 Rule 19 - The plaintiff applied under Order 18 Rule 19 to strike out: i) paragraphs 10 to 30 of the Defence; ii) paragraphs 33 to 43 of the Counterclaim; and iii) prayers and reliefs in (c), (d),(e), (f) and (g) in the last paragraphs of the Counterclaim. The Deputy Registrar dismissed (i) and granted (ii) and (iii). Both parties appealed the orders. The plaintiff filed 2 affidavits whilst the defendant filed one affidavit.

I heard the matter on 21 April and 4 June 2014. On 30 June 2014, after considering the defendant’s proposed amendments to the Defence and Counterclaim, I allowed the defendant’s appeal in RA 31/2014 and gave leave for the Defence and Counterclaim to be amended and filed. I dismissed the plaintiff’s appeal in RA 34/2014. The plaintiffs have appealed my decision.

RA 31 of 2014

This is the defendant’s appeal against the Deputy Registrar’s decision striking out paragraphs 33 to 43 of the Counterclaim and prayers and reliefs in (c), (d),(e), (f) and (g) in the last paragraphs of the Counterclaim.

RA 34 of 2014

This is the plaintiff’s appeal against the Deputy Registrar’s decision refusing to strike out paragraphs 10 to 30 of the Defence.

Defence and Counterclaim

The defence rests on the defendant’s allegation that the plaintiff was not entitled to claim contribution under the guarantees as the plaintiff was coming to court with “unclean hands”, having been the cause of the company’s default on the loans not only to Bank A but also to another Bank. The plaintiff denies that there was a quasi-partnership. It was also alleged in paragraph 30 of the Defence that by virtue of clause 22 of the relevant Deeds of Guarantee, (not reproduced in the pleadings) that the plaintiff had agreed to irrevocably waive and/or abandon his rights at law to require his liabilities under each Deed of Guarantee to be divided or apportioned with the Defendant.

As originally pleaded, the defence case was that parties, on the basis of mutual trust and confidence, incorporated the company on 8 August 2001 to provide computer forensic and security services, with all 3, including KL, to serve as directors. The defendant was to run the company as Chief Executive Officer with KL as Chief Operating Officer, whilst the plaintiff would be a passive investor with no executive role. Sometime in 2008, parties agreed to develop a new software to manage software assets called Solvesam (“SS Project”). In 2010, parties agreed on the basis of mutual trust and confidence, to form SSI to undertake this project. SSI was incorporated in December 2010. The parties and KL would hold 51% of SSI shares with the remainder to be held by investors to be sourced from the People’s Republic of China. The ultimate objective was to list SSI on NASDAQ, a stock exchange in the United States of America. The plaintiff was to be responsible for sourcing for prospective investors, whilst the defendant and KL would deal with technical queries from investors. The plaintiff was to raise US$20 million on SSI’s behalf to be held by a Hong Kong registered fund management entity known as Universal Investment Holdings Ltd (“UWI”), of which the plaintiff was and remained a director. The plaintiff was to procure the transfer of such funds subsequently to SSI.

In breach of the spirit of mutual trust and confidence, the plaintiff instead, stated wrongly on the UWI website that the funds were being raised by the company, which was to be listed on NASDAQ instead of SSI. The plaintiff directed UWI to only transfer HK$33 million out of US$20 million raised to SSI and failed to account for the remainder. In June 2011, the defendant and KL resigned as directors of SSI and sold their shares to the plaintiff for a total sum of $1 each. In July 2011, KL resigned as director of the company and thereafter sold his shares therein for $100,000 to the plaintiff, who promised to indemnify KL against his liabilities as co-guarantor for all of the company’s loans with the two banks (OCBC and SCB). In December 2011, the defendant resigned as director of the company but retained and continues to retain his shareholding in the company.

Subsequently the plaintiff appointed two additional directors. Between May and June 2012, the directors conducted the company’s affairs in a way that culminated in the company’s default of its obligations under various loans from the two banks. Sometime in May 2012, the plaintiff and one of the additional directors set up Inquiro Consulting Pte Ltd (“Inquiro”) to compete with the company in the same business. From August 2012, the plaintiff began to direct or cause to be directed all potential business due to the company to Inquiro. The plaintiff failed to take steps to recover accounts receivables due from SSI to the company. The plaintiff also declared that the company had ceased business, depleted all monies in the company’s bank account and procured the sale of the whole or substantially the whole of the company’s undertaking and property to Inquiro at a heavily subsidised price of S$500 without the approval of a general meeting. In December 2011, the plaintiff procured the transfer, without consideration, of intellectual property in the SSI project, that was...