Rankine Bernadette Adeline v Chenet Finance Ltd

• Jurisdiction: Singapore
• Judge: Kan Ting Chiu J
• Judgment Date: 31 March 2011
• Neutral Citation: [2011] SGHC 79
• Published date: 15 April 2011
• Date: 31 March 2011
• Year: 2011
• Hearing Date: 19 May 2010
• Plaintiff Counsel: Cavinder Bull SC and Gerui Lim (Instructed) (Drew & Napier LLC), and Dawn Tan (Eldan Law LLP)
• Citation: [2011] SGHC 79
• Defendant Counsel: N Sreenivasan and K Gopalan (Straits Law Practice)
• Court: High Court (Singapore)
• Docket Number: Suit No 971 of 2009 (Registrar's Appeal No 122 of 2010)

Kan Ting Chiu J:

In this action, the Defendant, Chenet Finance Limited, was given conditional leave to defend the claim of the Plaintiff, Rankine Bernadette Adeline. The Defendant has appealed against my order. In the meantime, final judgment has been entered after the Defendant failed to comply with the condition imposed.

The claim

The Plaintiff was a holder of 1,000,000 shares of a company Berlian Ferries Pte Ltd (“Berlian”) in May 2004. The Plaintiff discovered that those shares in Berlian (“the shares”) had purportedly been sold by her with consideration paid to her, and that the Defendant was the purchaser of the shares. As the Plaintiff had not agreed to sell the shares to the Defendant and had not received any consideration from the Defendant, she sought from Berlian copies of any transfer of shares signed by her. Berlian in turn informed the Defendant that it (Berlian) did not have the transfer forms relating to the shares. Berlian also informed the Defendant that as the Defendant’s representatives had inspected and made copies from the secretarial files of Berlian, the Defendant should reply to the Plaintiff, but the Defendant had not supplied copies of the transfer forms to the Plaintiff.

When she received no satisfactory reply to her queries, the Plaintiff sued the Defendant. She asserted that the alleged transfer was a fraud and was void, that the Defendant is not the legal or beneficial owner of the shares, and claimed for the return of the shares and damages.

The pleaded defence

The Defendant filed its defence to the Plaintiff’s claim. In the defence, the Defendant stated that it was the holder of 24,017,983 shares of Berlian including the 1,000,000 shares claimed by the Plaintiff. The Defendant pleaded that it was unable to give full particulars of the acquisition of the Plaintiff’s shares, and the best particulars that the Defendant could give was that “1,000,000 shares was acquired from the Plaintiff around 2005”.¹

The Defendant pleaded further that: 7. ... The Plaintiff was well aware of the transfer of her shares in Berlian to the Defendant and also signed all relevant documents including the share transfer form to transfer her shares to the Defendant. Further, the Plaintiff was at all times also aware of the corporate structure of Berlian and the fact that [the Defendant] had invested further sums of monies to increase its shareholding in Berlian over time. 8. By reason of the matters aforesaid, the Plaintiff is estopped from denying the transfer of the shares to the Defendant. Further, the Defendant’s claim to be unaware of the transfer of her shares in Berlian to [the Defendant] is frivolous, vexatious, and scandalous and/or the claim herein is an abuse of process.

The unpleaded defence

The Defendant resisted the Plaintiff’s application for summary judgment and filed an affidavit through its director and shareholder, Tan Yeang Tze Tobby (“Tan”). In this affidavit, it was alleged that: 9. As far as the Defendant is concerned, the shares were lawfully acquired in 2005 from the Plaintiff, and certainly not by fraudulent means. The Plaintiff’s shares were issued to her in 2004 at a time when the Defendant stepped into Berlian to rescue it from its severe business difficulties by injecting S$2,000,000 in cash into Berlian. This sum was converted to 2 million shares at S$1.00 per share. 1 million shares were then allocated to the Plaintiff by the Defendant as part of a re-structuring arrangement for no consideration, as the Plaintiff and the Defendant were on friendly business terms at that point in time. In 2005, the 1 million shares were transferred from the Defendant back to the Plaintiff for no consideration. Since 2005 up to the commencement of the Suit, the Defendant has never objected to or raised any of her alleged concerns as regards the transfer.

[emphasis added]

I refer to this defence as the “re-structuring arrangement defence”, and will comment on this later.

Tan also referred to the absence of the records of the transfer. He deposed that: 13. ... the Defendant unable to access to its documents which were located in Berlian’s premises. These document have been relocated to a warehouse in Tanjong Pagar Distripark, as they are allegedly part of a group of documents which are the subject of competing claims by various parties. ... In order to fully explain to the Court the circumstances behind the transfer of the shares to the Defendant, the Defendant requires access to these documents and to adduce them before the Honourable Court at trial.

In the Defendants’ Submissions, the same matter was brought up, that:

Some time in April 2009, a series of events began, which resulted in the Defendant losing possession, custody and control of its Company Kit and other corporate secretarial documents, ...

The Plaintiff’s application

After the statement of claim and defence were filed, the Plaintiff applied for summary judgment under O 14, Rules of Court (Cap 322, R5, 2006 Rev Ed). The matter went on for hearing before an Assistant Registrar who dismissed the application and gave the Defendant unconditional leave to defend the action. The Plaintiff appealed against the Assistant Registrar’s decision and the appeal came before me.

The appeal

The Plaintiff started its submission in the appeal with the law governing applications for summary judgment. This has been succinctly stated by Justice Judith Prakash in Associated Developments Pte Ltd v Loong Sie Kiong Gerald [2009] 4 SLR(R) 389 at [22]:

... that in order to obtain judgment, a plaintiff has first to show that he has a prima facie case for judgment. Once he has done that, the burden shifts to the defendant who, in order to obtain leave to defend, must establish that there is a fair or reasonable probability that he has a real or bona fide defence.

Counsel submitted that the Plaintiff had established that she was the owner of 1,000,000 Berlian shares by producing a copy of the share certificate. In any event, the Defendant acknowledged that the Plaintiff held 1,000,000 shares, and the Defendant claimed ownership over them.

For the purpose of the application under O 14, the Plaintiff had a prima facie case for judgment on her claim that she was the owner of the shares, and the shares were transferred to the Defendant without her consent or knowledge. Although the Defendant disputes the Plaintiff’s ignorance over the transfer, the Plaintiff had put forward a prima facie case for judgment in that she can get judgment if her case is accepted. It does not mean that she is entitled to judgment as of right; that is the very question to be decided at the hearing of her application, when her claim as well as the defence is examined.

Admissibility of the re-structuring arrangement defence

Counsel for the Plaintiff questioned the Defendant’s right to rely on the re-structuring arrangement defence. The objection was taken because the arrangement was not raised as a defence to the Plaintiff’s claim, and was not even mentioned in the defence filed.

There have been several decisions on this question. In Lim Leong Huat v Chip Hup Hup Kee Construction Pte Ltd [2008] 2 SLR(R) 786 (“Lim Leong Huat”), Justice Woo Bih Li addressed the issue with admirable thoroughness in his decision delivered on 25 January 2008. He took note of the Malaysian decision in Lin Securities (Pte) Ltd v Noone & Co Sdn Bhd [1989] 1 MLJ 321 (“Lin Securities”) where it was said in p 322:

No doubt a defendant is bound by the four corners of his pleading at the trial of the action but he is not so bound at the O 14 proceedings. Order 14 r 4(1) provides that a defendant may show cause against an application for summary judgment by affidavit or otherwise. He is entitled to show at the hearing of the O 14 application that over and above what has been pleaded in the statement of defence he has other defences. The issue at an O 14 application is whether the defendant has a defence and not whether the statement of defence provides him with a defence.

but he was not content to adopt that approach to the issue. He went on to give further thought to the matter. He explained:

22 I had some reservation about the correctness of the decision in Lin Securities for various reasons. It is one thing for a rule to say that a defendant may show cause against an application for summary judgment by affidavit or otherwise. In such a rule, a defendant need not file an affidavit to show cause if, for example, he is able to rely on the statement of claim and/or the affidavit for the plaintiff to establish that summary judgment should not be granted. The rule does not necessarily mean that a defendant may say something in his affidavit which is not pleaded in his defence. Let me elaborate. Supposing a defendant were to be allowed to rely on an allegation in his affidavit which is not in his defence and, solely because of that allegation, he is able to avoid summary judgment. What happens if, when he subsequently applies to amend his defence to include this allegation he is not allowed to amend? This would mean that summary judgment should have been entered in the first place. Such an incongruous situation would be avoided if he were not to be allowed to rely on the allegation unless the defence is first amended to include that allegation. I was also of the view that the pleadings govern the issues between the parties throughout the action and the pleadings apply to all interlocutory proceedings. On the other hand, the decision in Lin Securities seemed to suggest that for the purpose of applications for summary judgment, the pleadings did not govern.

23 It should also be remembered that previously, applications for summary judgment were often made before a defence was filed. Accordingly, there was usually no question of an affidavit for a defendant raising an allegation which was not in the defence. Such a problem would...