Ong Commodities Pte Ltd v Ng Kok Kwan and Others

• Court: High Court (Singapore)
• Judge: S Rajendran J
• Judgment Date: 28 September 1998
• Neutral Citation: [1998] SGHC 320
• Citation: [1998] SGHC 320
• Defendant Counsel: Second defendant unrepresented and fourth defendant in person
• Plaintiff Counsel: Chia Ho Choon and Boey Swee Siang (Bih Li & Lee)
• Published date: 19 September 2003
• Docket Number: Suit No 2512 of 1996
• Date: 28 September 1998
• Subject Matter: Words and Phrases,s 2 Futures Trading Act (Cap 116, 1986 Ed),Whether such contracts within ambit of futures contracts and hence requiring a licence,Whether amendment affects past transactions,s 2 and s 11 Futures Trading Act (Cap 116, 1986 Ed),Amending,Statutory Interpretation,Illegality and public policy,Effect of Act,Contract,'Forward contracts',Statutes,Plaintiff transacting foreign exchange contracts outside of Exchange or future market,Futures Trading (Amendment ) Act 1995

Judgment:

S RAJENDRAN J

The plaintiffs are a firm of commodity and foreign exchange brokers. The first defendant had been a customer of the plaintiffs since August 1986 and had entered into foreign exchange transactions through them up to April 1994 by which time he had chalked up debts of over $400,000 to the plaintiffs. On 11 March 1996, the first defendant entered into a settlement agreement (`the first settlement agreement`) with the plaintiffs wherein he agreed to repay his debts by instalments with interest at 5.5% per annum and to provide a guarantee by the second defendants. After having paid a total of $125,000 to the plaintiffs, the first defendant defaulted and the plaintiffs sued the first and second defendants.

2.On 2 August 1996 the plaintiffs entered into a second settlement agreement (`the second settlement agreement`) in which the first defendant agreed to pay the remaining amount of $297,941.70 by instalments with interest at 6% per annum. As required by the second settlement agreement the first defendant secured a further guarantee by the second defendants and guarantees from the third defendant (his wife) and the fourth defendant (limited to $100,000) for the due payment of the instalments. Upon the guarantees being executed the plaintiffs withdrew their writ.

3.The first defendant also defaulted on the second settlement agreement. By these proceedings the plaintiffs sought the balance due thereunder from the first defendant as principal and from the other defendants as guarantors. In their defences, each of the defendants, inter alia, relied on the defence that the trade that the first defendant conducted through the plaintiffs was illegal. Prior to the hearing, it was agreed between the parties that the defendants waive any dispute on quantum and that the sole issue for determination at the hearing would be the question of illegality.

4.On the morning of the hearing, Mr Chia Ho Choon, counsel for the plaintiffs, informed the court that as the first defendant and the third defendant (his wife) had both been adjudicated as bankrupts he would not be pursuing the claim against them but would only be proceeding against the second and fourth defendants. Mr Jacob Chacko, who was acting for all the four defendants, then informed the court that he had had no further instructions on the matter and asked to be discharged from further acting for the defendants. The application had the consent of the defendants and it was granted.

5.Upon Mr Chacko being discharged from further acting, Mr Liew Chong Fatt, who told the court that he was a director of the second defendants, applied for an adjournment to instruct new solicitors. He told the court that the second defendants were expecting some funds in about three months` time and that if the matter could be adjourned for that period the second defendants would be able to generate sufficient income to pay for the legal fees. The fourth defendant associated himself with the request of Mr Liew.

6.The sole issue for determination at the hearing was whether the underlying foreign exchange contracts in this case were illegal contracts. In determining the question of illegality the practice of the trade could be a relevant factor. The plaintiffs had filed evidence-in-chief dealing with the practice of the trade. The defendants, however, had not done so nor was there any indication that they would be calling any expert in the trade to challenge the evidence put forward by the plaintiffs. The only real issue before the court was therefore one of law.

7.I was not inclined to grant the adjournment but as this case had been set down for hearing for five days and the only issue was the question of illegality, it seemed to me that two days would suffice for the hearing. I therefore granted the defendants a two-day adjournment and informed them that at the adjourned date the hearing would proceed whether they had counsel acting for them or not. At the adjourned date Mr Charan Singh appeared for the second and fourth defendants. He told the court that he could act for the second and fourth defendants only if the court granted an adjournment of at least one month for him to get up the case. I rejected this application.

8.Order 12 r 1(2) of the Rules of Court provides that a defendant to an action who is a body corporate may not defend the action otherwise than by a solicitor. In view of that provision I informed Mr Liew that he was welcome to remain in court to observe the proceedings as a representative of the second defendants but that he could not participate in the proceedings.

9.It was the defendants` case that the foreign exchange transactions entered into by the first defendant were futures contracts within the definition of those words in s 2 of the Futures Trading Act 1986 (`the Act`). The plaintiffs were required, under s 11 of the Act (which came into operation soon after the first defendant commenced trading with the plaintiffs), to be licensed as futures brokers in order to carry on such a trade. It was the defendants` case that the plaintiffs by entering into the transactions with the first defendant, without holding such a licence, were in breach of the Act and the claims against the first defendant were consequently unenforceable.

10.The plaintiffs contended, however, that the transactions in question were not futures contracts but foreign exchange transactions or leveraged foreign exchange transactions placed directly with banks and not on any futures exchange and therefore not within the ambit of the Act. Such transactions, they submitted, came within the ambit of the Act only after the Futures Trading (Amendment) Act 1995 came into force.

11.The Futures Trading (Amendment) Act came into force on 1 April 1995 - well after the first defendant had ceased trading with the plaintiffs. The amendments effected by the Amendment Act are therefore not relevant to these...