PH Grace Pte Ltd and Others v American Express International Banking Corp

• Jurisdiction: Singapore
• Judge: Chua F A J
• Judgment Date: 21 October 1986
• Neutral Citation: [1986] SGCA 13
• Docket Number: Civil Appeal No 69 of 1985
• Date: 21 October 1986
• Year: 1986
• Published date: 19 September 2003
• Plaintiff Counsel: Simon Yuen (Khattar Wong & Partners)
• Citation: [1986] SGCA 13
• Defendant Counsel: Denis Singham (Rodyk & Davidson)
• Court: Court of Appeal (Singapore)
• Subject Matter: Counterclaim by defendants,Guarantees and indemnities,Civil Procedure,Credit and Security,Whether counterclaim bona fide,Application for stay of execution,O 14 Rules of the Supreme Court 1970,Summary judgment,Application for summary judgment,Whether guarantors could avail themselves of counterclaim of principal debtor

The plaintiffs are bankers, and claimed against their customer, the first defendant, a sum of $1,395,331.39, being the balance of the moneys lent by them to the first defendant and for moneys paid by them, as bankers for and at the request of the first defendant, together with interest on all such moneys and also claimed the same amount against the second, third and fourth defendants, as guarantors of the first defendant under a guarantee in writing dated 23 April 1984. They, the plaintiffs, applied for summary judgment under O 14 of the Rules of Supreme Court against all the defendants. Before the hearing of the application, the amount owing to the plaintiffs had been reduced to $640,565.32 and, accordingly, at the hearing before the senior assistant registrar, the plaintiffs asked for judgment for the sum of $640,565.32 together with interest and costs. The application was resisted by the defendants; they disputed the amount owing, and claimed, inter alia, that the plaintiffs were in breach of the contract with the first defendant relating to the grant of banking facilities o the first defendant. The breaches complained of principally were: (i) that the plaintiffs wrongfully refused to make payments under certain irrevocable letters of credit opened by the plaintiffs as the first defendant`s bankers, and (ii) that the plaintiffs on a number of occasions wrongfully refused to release to the first defendant goods pledged to the plaintiffs in exchange for trust receipts therefor, and in consequence the first defendant had suffered loss and damage. The senior assistant registrar gave judgment to the plaintiffs in the sum of $640,565.32 together with interest as claimed and costs.

Against that decision the defendants appealed to the judge in chambers. At the hearing of the appeal before the learned judge, the defendants did not dispute the amount of $640,565.32 as owing to the plaintiffs but contended that the first defendant had a counterclaim against the plaintiffs for damages for breach of contract and, accordingly, the defendants should be given unconditional leave to defend. The learned judge dismissed the appeal with costs but granted to the first defendant leave to proceed with the counterclaim against the plaintiffs; he refused to grant a stay of execution on the judgment pending the determination of the counterclaim. Against the decision of the learned judge this appeal is now brought.

Before us, Mr Yuen for the defendants did not dispute the amount owed by the first defendant to the plaintiffs, namely: the sum of $640,565.32 together with interest thereon. Nor did he dispute that the second, third and fourth defendants are guarantors of the first defendant for such amount and interest. He contended, however, that the first defendant had a bona fide counterclaim against the plaintiffs for damages for breach of contract, and the defendants should be given unconditional leave to defend. He relied on Morgan & Son v S Martin Johnson & Co [1949] 1 KB 107 In that case the plaintiff claimed for a liquidated sum of money for storage of defendant`s vehicles. The defendant alleged that one of its vehicles was lost while being stored by the plaintiff and claimed against the latter, as an equitable set-off, damages for breach of contract and breach of duty as a bailee and also for negligence. The Court of Appeal in England held that as the defendant had a bona fide claim which could be set up as an equitable set-off against the amount claimed by the plaintiff, unconditional leave to defend should be given to the defendant. Mr Yuen also relied on Adam & Harvey Ltd v International Maritime Supplies Co [1996] 1 Lloyd`s Rep 571 where the Court of Appeal held that where there was a counterclaim, whatever its merits might be, the defendant should be given unconditional leave to defend. Next and in the alternative, Mr Yuen argued that if unconditional leave to defend was refused, then in view of the bona fidecounterclaim of the first defendant, a stay of execution on the judgment should be granted until the counterclaim has been tried and decided upon. In support he relied on Sheppards & Co v Wilkinson & Jarvis (1889) 6 TLR 13. There the plaintiffs claimed for a sum of £7,500 advanced to the defendants. The latter alleged that certain agreements had been entered into between them and the plaintiffs, in accordance with whi ch the sum was advanced, and they counterclaimed that the plaintiffs were in breach of the agreements. The Court of Appeal held that if it was clear that the claim must succeed and that there was really no defence to it, the plaintiffs should not be put to expense of proving the claim and there ought to be judgment but execution on the judgment should be stayed until the counterclaim had been tried.

In response, Mr Singham for the plaintiffs argued that there was really no dispute as to the amount claimed by the plaintiffs. The judgment therefore should remain undisturbed. As for the stay of execution, he relied on the recent decision of the Court of Appeal in England in Continental Illinois National Bank & Trust Co of Chicago v Papanicolaou (The Times, 15 July 1986) which we shall discuss shortly, and submitted that no stay of execution on the judgment ought to be granted pending the determination of the first defendant`s counterclaim against the plaintiffs.

The principles as to whether on an application for judgment under O 14, where a counterclaim has been raised by the defendant, judgment should, notwithstanding the counterclaim, be given to the plaintiff, and if such judgment be given whether execution thereon should be stayed are briefly set out in the following part of the judgment of Lord Esher, MR in Sheppards & Co v Wilkinson & Jarvis (1889) 6 TLR 13.

The court had no power to try such a counterclaim on such an application, but if they thought it so far plausible that it was not unreasonably possible for it to succeed if brought to trial, it ought not to be excluded. If the counterclaim was for a less sum than that claimed, then judgment might be signed if there was no real defence for so much of the amount of the claim as was not covered by the counterclaim; but if the counterclaim over-topped the claim and was really plausible, then the rule, which had been often acted upon at chambers, of allowing the defendant to defend without conditions was the right one. There were, however, circumstances which might call on the court, as in the present case, to act differently. If it was clear that the claim, must succeed, and there was really no defence to it, and the plaintiff would only be put to expense in proving his claim, then there ought to be judgment on the claim, but the matter must be so dealt with that the defendants who had a plausible counterclaim must not be injured. That could be done by staying execution on the judgment until the counterclaim had been tried.

The approach, therefore, is to determine, first, whether it is `not unreasonably possible` for the counterclaim of the first defendant to succeed if brought to trial. The case so far as presented by the defendants is that the first defendant has a crossclaim against the plaintiffs for damages for breach of contract, and the claim is this. By a letter of 18 April 1984 the plaintiffs agreed to grant to the first defendant banking facilities in the form of, inter alia,establishing for the first defendant irrevocable documentary letters of credit and financing goods purchased by the first defendant by the use of trust receipts. The terms of this letter had been accepted by the first defendant and pursuant to the arrangement various letters of credit were opened by the plaintiffs in favour of suppliers of goods to the first defendant. The first defendant complained that in breach of such agreement, the plaintiffs wrongfully refused to effect payments under certain irrevocable letters of credit opened by them on the alleged ground of discrepancies in the documents, which discrepancies, however, the first defendant said had been resolved by the first defendant instructing the plaintiffs to effect payments notwithstanding the discrepancies. The first defendant also alleged that in a number of transactions where...