Otto Ventures Pte Ltd v ECYT Law LLC

• Jurisdiction: Singapore
• Judge: Pang Khang Chau JC
• Judgment Date: 28 April 2017
• Neutral Citation: [2017] SGHC 98
• Year: 2017
• Date: 28 April 2017
• Published date: 10 May 2017
• Hearing Date: 12 April 2017
• Plaintiff Counsel: Tham Wei Chern and Akshay Kothari (Selvam LLC)
• Defendant Counsel: Anil Murkoth Changaroth and Lim Muhammad Syafiq (ChangAroth Chambers LLC)
• Court: High Court (Singapore)
• Citation: [2017] SGHC 98
• Docket Number: Originating Summons No 96 of 2017

Pang Khang Chau JC: Introduction

This case raises the following issues: Where a solicitor gives an undertaking to hold a sum of money “as security for costs in our clients’ account” without any elaboration concerning the terms governing the release of such security, what is the extent of his duty concerning release of the security after the liability for and quantum of costs are determined? Where an arbitrator has ordered the claimants to provide security for the respondent’s costs in the arbitration, and the arbitrator’s final award provides for costs be taxed and assessed by the Registrar of the Supreme Court without dealing with the release of the said security, what are the court’s powers in relation to the said security?

Background

The plaintiff in the present application (“Plaintiff”) is the respondent in Singapore International Arbitration Centre (“SIAC”) Arbitration No. 52 of 2015 (“the Arbitration”). The defendant in the present application (“Defendant”) is the firm of solicitors representing the claimants in the Arbitration (“the Arbitration Claimants”).

The Arbitration was heard by a sole arbitrator (“the Arbitrator”) who made two orders requiring the Arbitration Claimants to provide security for the Plaintiff’s costs in the Arbitration. The security was provided in the form of two letters of undertaking from the Defendant to the Plaintiff’s solicitors. The letter of undertaking dated 16 October 2015 provides: 2. Please be informed that we have received $50,000.00, being the security for costs pursuant to the Order for Direction No. 2, from our clients. 3. We undertake that we will hold the said $50,000.00 as security for costs in our Clients’ Account. The letter of undertaking dated 14 March 2016 is in similar terms. I shall refer to these two letters collectively as “the Undertaking”.

The Arbitrator’s orders for security for costs did not prescribe the form of the security nor did they specify how the security should be dealt with after the termination of the Arbitration. The orders merely provided that the security “is to be furnished in a manner and form acceptable to the Respondent”.

On 15 August 2016, the Arbitrator issued his final award (“the Final Award”) which provided, inter alia, that:

The Claimants shall bear all the legal costs and expenses incurred by the Respondent with reference to this arbitration;

…

This is a Final Award on all issues in dispute in this arbitration including liability for cost and expenses of the arbitration and the Tribunal’s fees and expenses. The quantum of legal costs and expenses are to be agreed between the Claimants and the Respondent, failing which they shall be taxed and assessed by the Registrar of the Supreme Court.

Pursuant to the Final Award, the Plaintiff’s costs in the Arbitration were taxed and assessed by the Registrar as $175,200. On 21 December 2016, the Plaintiff’s solicitors wrote to the Defendant in the following terms: 2. By way of service, please find enclosed the Registrar’s Certificate in HC/BC 168/2016. The aggregate sum of S$175,200 is due and payable to our client, as shown in the breakdown in the Registrar’s Certificate. 3. With reference to your letters of undertaking dated 16 October 2015 and 14 March 2016, which are enclosed for your reference, we note that your firm is holding the sum of S$100,000 as security for our client’s costs. 4. In the circumstances, kindly let us have payment of (a) the sum of S$100,000 from your firm, and (b) your client’s payment of the remaining sum of $75,200 within seven (7) days hereof, failing which our client will take all necessary action(s) to enforce the Registrar’s Certificate without further reference to you and/or your clients.

On 9 January 2017, the Defendant wrote to the Plaintiff’s solicitors requesting that the payment of costs be held in abeyance until the proceedings in Originating Summons 1187 of 2016 (“OS 1187/2016”) were completed. (OS 1187/2016 is an application by the Arbitration Claimants to set aside the Final Award.) The Plaintiff did not accede to this request.

On 15 February 2017, after the Plaintiff commenced the present application, the Defendant wrote to the Law Society of Singapore (“Law Society”) to seek guidance from the Council of the Law Society on whether the Defendant was bound to release the security to the Plaintiff against the Arbitration Claimants’ instructions, in the absence of an order from either the court or the Arbitrator to do so. The Law Society replied on 21 February 2017 that as the matter was already before the court, the Advisory Committee considered that it should not give guidance without the court’s clearance.

On 22 February 2017, the Defendant wrote to the Plaintiff’s solicitors, informing them that the Arbitration Claimants were agreeable to the transfer of the $100,000 to the Plaintiff’s solicitors on the latter’s undertaking that they would hold the sum as security for costs and would not release the sum to the Plaintiff unless and until OS 1187/2016 was finally disposed of in the Plaintiff’s favour. The Plaintiff did not take up the offer.

Decision

After hearing parties on 12 April 2017, I ordered the Defendant to release the security for costs to the Plaintiff. I now provide my grounds of decision.

Summary of parties’ arguments

The Defendant argued that: based on the terms of the Undertaking, the Defendant merely undertook to hold the $100,000 in the Defendant’s clients’ account; the Undertaking does not contain any term which obliges the Defendant to release the said amount to the Plaintiff once the Final Award is issued; in this regard, the Undertaking is to be contrasted with the undertaking considered in PT Bumi International Tankers v Man B&W Diesel S E Asia Pte Ltd [2004] 3 SLR(R) 69 (“PT Bumi”) which included the phrase “hereby undertake to pay”.

The Defendant further submitted that, on its true construction, the Undertaking is an undertaking by the Defendant to hold the $100,000 until the Arbitrator makes an order on how the security for costs should be dealt with.

The Plaintiff argued that: a solicitor’s undertaking creates a personal obligation on the part of the solicitor which the solicitor is required to honour notwithstanding any contrary instructions from his client; an undertaking to hold a sum of money as security for costs necessarily gives rise to an obligation to pay out the money upon the Arbitration’s conclusion; there is therefore no need to seek a further order from the Arbitrator; further, having issued the Final Award, the Arbitrator is functus officio and is no longer in a position to make any further orders concerning the disposal of the security for costs.

Issues arising for determination

The issues arising for determination in the present application are: whether, on a true construction of the Undertaking, the Defendant is presently obliged to pay the $100,000 over to the Plaintiff; and whether the matter should be remitted to the Arbitrator for the Arbitrator to make a further order concerning the disposal of the security for costs. I shall deal with these two issues in turn although, as will be apparent from the ensuing discussion, there is some overlap between the two issues.

Issue 1 – Whether the Undertaking obliges the Defendant to release the security to the Plaintiff

As a starting point, I agree with the Plaintiff that a solicitor’s undertaking is a personal undertaking by the solicitor, as opposed to an obligation undertaken on behalf of clients. This means that a solicitor cannot cite his client’s instructions (or, conversely, their absence) as an excuse for not honouring his undertaking – see Re A Solicitor, ex parte The Singapore Bar Committee [1932] SSLR 195 and Law Society of New South Wales v Waterhouse [2002] NSWADT 204 at [13]. However, accepting this proposition merely means that I should ignore the Arbitration Claimants’ contrary instructions to the Defendant when evaluating whether the Defendant is obliged to release the security to the Plaintiff. It brings me no closer to determining whether the Defendant has assumed such an obligation in the Undertaking.

I also agree with the Defendant’s submission, relying on PT Bumi at [5], that a solicitor’s undertaking must be governed by the terms set out in the undertaking itself. Similarly, this proposition does not really advance the Defendant’s case. In PT Bumi, the solicitor’s undertaking contained an express term that it would be discharged “upon payment of the sum above and/or if the Defendants are paid all their costs without having to call on this undertaking, whichever is earlier”. The court in PT Bumi held that it would not...