Millennium Commodity Trading Ltd v BS Tech Pte Ltd

• Jurisdiction: Singapore
• Judge: Vinodh Coomaraswamy J
• Judgment Date: 27 March 2017
• Neutral Citation: [2017] SGHC 58
• Plaintiff Counsel: Chong Xin Yi, Yeo Mui Lin and Wong Jun Weng (Ignatius J and Associates)
• Docket Number: Suit No 182 of 2016 (Registrar’s Appeal No 237 of 2016)
• Date: 27 March 2017
• Hearing Date: 20 July 2016,18 July 2016,17 October 2016,19 September 2016
• Subject Matter: Summary judgment,Bills of exchange and other negotiable instruments,Banking,Shadowy defence,Proof of foreign law,Cheques,Delivery,Civil procedure,Post-dated,Conditional,Conflict of laws
• Year: 2017
• Defendant Counsel: Ganga Avadiar and Asik Sadayan (Advocatus Law LLP)
• Court: High Court (Singapore)
• Citation: [2017] SGHC 58
• Published date: 13 February 2018

Vinodh Coomaraswamy J: Introduction

This is an action on a cheque. The cheque was drawn by the defendant in favour of the plaintiff in the sum of $678,016.94. The cheque having been dishonoured upon presentation, the plaintiff commenced this action. In due course, the plaintiff applied for summary judgment. The assistant registrar granted the defendant leave to defend the plaintiff’s claim, but made that leave conditional on the defendant furnishing security for the plaintiff’s claim in the sum of $450,000.

Both parties appealed against the assistant registrar’s decision. I have upheld the entirety of his decision and dismissed both appeals. The defendant has appealed to the Court of Appeal against my decision. I therefore set out my grounds.

Facts The parties

The plaintiff is an investment company incorporated in Hong Kong.¹ Its sole director and shareholder is one Kin Lam (“Lam”).²

The defendant is a company incorporated in Singapore. It provides technical testing and analysis services.³ The defendant’s managing director at the time the cheque was drawn was Nadeem Tahir (“Tahir”). The defendant’s other two directors at that time were Balakrishnan Padmapathi (“Padma”) and B Shamalah Reddy (“Shamalah”).⁴

Tahir ceased to be the defendant’s managing director on 15 July 2015. The current directors and shareholders of the defendant are Redhy @ B Balamurugan (“Bala”) and Padma.⁵ Bala is Padma’s son and Shamalah’s husband.⁶

There are material differences between the plaintiff’s and the defendant’s accounts of the facts. In the interests of clarity, I shall canvass each party’s account of events separately in setting out the background to the plaintiff’s application for summary judgment.

The plaintiff’s account

The following is the plaintiff’s account of events.

In 2014, Lam was trying to raise €50m to finance a potential investment in a project in China using the plaintiff as his vehicle.⁷ He was introduced to Bala and Tahir. Bala and Tahir told Lam that they controlled the defendant and that Padma and Shamalah were merely their nominees.⁸ By a letter on the defendant’s letterhead dated 2 May 2014,⁹ Tahir authorised Khir Johari Bin Mohamed (“Johari”) to represent the defendant in discussing, negotiating and executing an agreement with Lam. Johari was then the defendant’s Head of Business Development.¹⁰

The agreement between the parties comprises a “Financial Joint Venture Agreement” dated 13 June 2014¹¹ as varied by an addendum dated 20 June 2014.¹² The purpose of the parties’ agreement was for the defendant to procure a standby letter of credit (“SBLC”) in favour of the plaintiff in the amount of €10m.¹³ The precise mechanics of the agreement were as follows. Within seven banking days of signing the agreement, the plaintiff was to transfer €400,000, being 4% of the value of the SBLC, to the defendant. Upon receipt of the €400,000, the defendant was to deliver to the plaintiff a post-dated cheque drawn in the plaintiff’s favour of equivalent value. Within 15 banking days of receiving the €400,000, the defendant was to procure a SBLC and transfer €10m to the plaintiff. If the plaintiff failed to deliver the €400,000 to the defendant, the plaintiff was obliged to pay the defendant €200,000 within 15 banking days. If the defendant failed to procure the SBLC or transfer the €10m to the plaintiff, it was obliged to pay €200,000 to the plaintiff within 15 banking days.

The material terms of the parties’ agreement, as varied by the addendum, were as follows:¹⁴ 1. Upon 2 (Two) originals of the Financial Joint Venture Agreement having been delivered to the [plaintiff], the [plaintiff] obliges to confirm the fact of the present Agreement is concluded, and that the Parties are willing to follow the below stated procedures and conditions of the Agreement. 2. Upon the present statement is signed within 7 (Seven) international banking days [the plaintiff] shall Wire Transfer in favor of the [defendant] the amount equal to 4 (Four) Percent of the face value of the BG/SBLC. After [the defendant] received the 4% face value of the bank instrument, the [defendant] will then deliver a 60 days post dated bank cheque in favour of [the plaintiff] equivalent to 4% (Four Percent) to [the defendant]. The mentioned posted date cheque shall be returned to [the defendant] after the transaction is completed. 3. Within 15 (fifteen) international banking days from the moment the [defendant] receive 4%, [the defendant] as facilitator shall arrange the Bank instruments and also discount the Bank instruments. 4. [The defendant] shall transfer Euro 10,000,000.00 (Euro Ten Million Only) to [the plaintiff] designated account. 5. The balance payment of 8 (eight) percent will be deducted after the MT760 been monetized. 6. If the [plaintiff] fails to deliver to the [defendant] the 4% of the face value by Wire Transfer within 7 (Seven) international banking days after signing the Agreement, it is considered to be a breach of this Agreement. The penalty is 2 (Two) Percent of the face value of the BG/SBLC that must be paid within 15 (Fifteen) International Banking days to the [defendant]. 7. The same penalty should be applied if the [defendant] fails to monetize the bank instrument after reception of the 4% by bank draft from [the plaintiff].

…

LAW & ARBITRATION: This contract is a full recourse commercial commitment enforceable under the laws of jurisdiction of the countries where this transaction is effectuated, and any dispute is to be resolved under the ICC rules for arbitration, unless the aggrieved party takes legal action in a court of jurisdiction. The U.S.A., British or European Union country Law shall be the applicable law, as the aggrieved party may choose, and shall govern the interpretation, construction, enforceability, performance, execution, validity and any other such matters regarding this contractual agreement.

The Parties hereto acknowledge and agree that any discrepancy and/or dispute in application of this Agreement will be solved amicably, but if this is not possible, the arbitration procedure is to be followed.

It will be immediately appreciated that the agreement was not professionally drafted. That is especially clear from the curiously-drafted, multiple-jurisdiction choice of law and arbitration clause. I consider this clause further at [48] below.

On 20 June 2014, as agreed, the plaintiff transferred the €400,000 to the defendant.¹⁵ It did so in two tranches as instructed by the defendant: €200,000 was credited to the defendant’s bank account with DBS Bank¹⁶ and €200,000 was credited to Tahir’s personal bank account with HSBC Singapore.¹⁷ The defendant then drew in the plaintiff’s favour, as also agreed, a cheque in the sum of S$678,016.94. That sum was the equivalent in Singapore dollars of €400,000 at the exchange rate at that time.¹⁸ Johari filled in the sum on the cheque after confirming the figure with Tahir. Bala then delivered the cheque to Lam.¹⁹ The cheque was post-dated to 15 August 2014.²⁰

Between June and September 2014, Lam contacted Tahir and Johari repeatedly to ask for the €10m.²¹ They persuaded him to wait. In September 2014, Lam, Johari, Tahir and Bala went to China to visit the factories involved in the project that the plaintiff was investing in. The visit gave Lam confidence that defendant would honour its obligations.²² But in the end, the defendant failed to procure the SBLC or to transfer the €10m or any part of it to the plaintiff.

On 21 November 2014, Lam presented the cheque for payment. It was dishonoured. Lam informed Johari of this.²³ After consulting Tahir, Johari told Lam that the defendant had insufficient funds but that this problem would be rectified. Lam told Johari that he would present the cheque again at a later date.

On 24 November 2014, Lam again presented the cheque. Again, it was dishonoured.²⁴ The plaintiff has not to date recovered the S$678,016.94 from the defendant.

On 15 July 2015, Tahir ceased to be the defendant’s managing director.

On 23 February 2016, the plaintiff commenced this action seeking judgment on the cheque for S$678,016.94. On 8 April 2016, the defendant filed its defence. I summarise the defendant’s defences below at [37] – [42]. On 26 April 2016, the plaintiff applied for summary judgment.

The defendant’s account

The following is the defendant’s account of events.

The defendant does not deny that Tahir was its managing director at the material time,²⁵ nor does it dispute the general sequence of events which plaintiff has pleaded. But according to the defendant, Tahir, Johari and the plaintiff conspired to defraud the defendant or to cause loss to the defendant by unlawful means.²⁶

In particular, Tahir and Johari acted in the defendant’s name but without the defendant’s authority in order personally to obtain a “commission” of €400,000 from the plaintiff.²⁷ The parties’ agreement was not authorised by a resolution of the defendant’s directors or shareholders.²⁸ Tahir and Johari even created a fake company stamp that differed in shape from the defendant’s official stamp, and used it to endorse the agreement purportedly on the defendant’s behalf.²⁹

They did so in order personally to obtain a “commission” of €400,000 from the plaintiff.³⁰ Out of the €400,000 which the plaintiff paid to the defendant under the agreement, €200,000 went straight into Tahir’s personal bank account. And even the €200,000 which went into the defendant’s bank account was immediately withdrawn by Tahir and Johari for their personal benefit.³¹

The plaintiff knew that the defendant obtained no benefit from the parties’ agreement. Nevertheless, it wanted the defendant to be the counterparty to the agreement because it wanted a basis to recover €400,000 from the defendant should Tahir and Johari fail to perform the obligations under the agreement.³²

The defendant accepts that its...