SK Lateral Rubber & Plastic Technologies (Suzhou) Co Ltd v Lateral Solutions Pte Ltd

• Jurisdiction: Singapore
• Court: International Commercial Court (Singapore)
• Judge: Roger Giles IJ
• Judgment Date: 17 April 2020
• Neutral Citation: [2020] SGHC(I) 9
• Citation: [2020] SGHC(I) 9
• Defendant Counsel: Tan Chuan Thye, SC, Disa Sim, Jared Kok, Chiang Yuan Bo and James Kwong (Rajah & Tann Singapore LLP)
• Hearing Date: 30 March 2020
• Subject Matter: Civil Procedure,Costs,Security
• Date: 17 April 2020
• Plaintiff Counsel: Jimmy Yim, SC, Kevin Lee, Eunice Lau and Ho Wah Jiang (Drew & Napier LLC)
• Docket Number: Suit No 6 of 2019 (Summons No 13 of 2020)
• Published date: 24 April 2020

Roger Giles IJ:

The defendant/counterclaimant, Lateral Solutions Pte Ltd (“Lateral”), applies for an order that the plaintiff/counterdefendant, SK Lateral Rubber & Plastic Technologies (Suzhou) Co Ltd (“SKL”), furnish security for its costs to the end of the trial. For the reasons which follow, the application should be dismissed.

Facts The parties

SKL is a company established under the laws of the People’s Republic of China. Its business includes the manufacture and sale of polymer parts (“parts”) used in electronic consumer goods. Lateral is a Singapore incorporated company, engaged in the supply of electronic components for such goods. Lateral has no manufacturing facilities of its own, and outsources the components from companies such as SKL.

Background to the dispute

In 2011, SKL and Lateral entered into an agreement (“the Agreement”) under which SKL was to manufacture and supply parts for Lateral, which Lateral would in turn supply to Apple and perhaps others. Business was done for some years, but the relationship deteriorated and ended in acrimony in 2017.

SKL claims USD 10.3 million from Lateral, for parts supplied and for tooling procured, equipment purchased and expenses incurred for the manufacture of parts.

Lateral’s defence to the parts claim is that, by virtue of “operational realities” and a course of discussion and conduct, payment of SKL’s invoices was due only when Lateral’s cash flow permitted it to pay (“the cash flow defence”). To this is added that one Wei Fengpin, said to be the controller of SKL, had engaged in conduct intended to damage Lateral’s business and “take it out as a competitor” in favour of other entities he controlled. It is alleged that Wei himself is responsible for Lateral’s cash flow problems and its subsequent inability to pay, and that the proceedings themselves are part of a scheme to drain Lateral’s finances (“the Wei conduct”). As to tooling, the defence appears to be that SKL was not entitled to payment unless Lateral’s customer had agreed to pay for the tooling and had paid, or until Lateral was being paid for the parts produced by the tooling. The claims as to equipment and expenses were simply denied.

SKL’s reply to the defence includes that the Wei conduct is not relevant.

Lateral counterclaims against SKL on a number of grounds. First, it says that it paid USD 1.1 million for parts supplied, which parts were then found to be defective, and that SKL had refused to repay it. Secondly, it says that SKL owes it USD 1.3 million, such sums being the amount paid to a casings supplier for casings required by SKL for the manufacture of parts. SKL had allegedly agreed to repay Lateral but had so far failed to do so. Thirdly, Lateral claims that it owns a large number of items of equipment purchased and held by SKL for the manufacture of parts. Lateral claims damages for wrongful detention or conversion of the equipment. Fourthly, Lateral says that SKL wrongfully ceased to supply parts under the Agreement, which it alleges by discussion and conduct was or became a long term supply agreement, and claims damages for its breach.

Procedural history

The proceedings were commenced in the High Court in October 2017. In November 2017 it was ordered by consent that SKL provide security for Lateral’s costs up to the conclusion of discovery in the sum of $30,000. The security was duly paid into court (“the initial security”). By the end of February 2018, particulars of the claim had been requested and given and the pleadings had closed.

In April 2018, SKL applied for summary judgment. The hearing of the application was delayed by an application to amend the defence and counterclaim and applications to file affidavits. An amended defence and counterclaim was allowed, and in January 2019 the application for summary judgment was dismissed by Kannan Ramesh J on the basis that Lateral had a defence of set-off against SKL’s claim.

In May 2019, the defence and counterclaim was again amended. Over the next five months particulars were requested and given of the defence and counterclaim and of the reply and defence to counterclaim, with a number of disputed applications. Following amendment of the claim, the defence and counterclaim was also again amended. Lists of documents were filed in November 2019.

In December 2019 the proceedings were transferred to the SICC. Order 24 of the Rules of Court (“the Rules”), relating to discovery, was to continue to apply. There was no condition relating to security for costs.

A case management conference was held on 2 March 2020. This application, and a cross-application by SKL for security for its costs of the counterclaim, were foreshadowed. Directions were given for filing the applications and the exchange of affidavits and written submissions, ending on 27 March 2020, the decision of the applications to be on the papers. In the event, SKL did not file an application.

Pursuant to leave given on 2 March 2020, on 6 March 2020 the defence and counterclaim were amended yet again. Until then, Lateral’s defence to the parts claim had been that payment of SKL’s invoices was due only when Lateral received payment from its customers (“the pay when paid defence”). In the amendments, it became the cash flow defence. Other directions were given, and have been given, leading to a trial fixed for seven days commencing on 21 July 2020.

The present application

On 3 November 2017, Lateral wrote to SKL requesting the initial security in the sum of $40,000, giving as the basis for the request that SKL was “domiciled in China” and “it does not appear that [it] has any assets of a permanent nature in Singapore”. SKL’s reply on 7 November 2019 made no comment on these assertions, and simply said that it was agreeable to the request, but in the sum of $30,000. The consent order followed.

On 27 February 2020 Lateral wrote to SKL, saying that SKL had not disputed the earlier assertions and that it (Lateral) was entitled to further security for costs to the end of the trial. SKL replied on 2 March 2020, declining to provide the security and saying:

“As you know, the SICC approaches the issue of security for costs by foreign plaintiffs differently. Moreover, since SIC 6 was first...