Telecom Credit Inc v Star Commerce Pte Ltd (Midas United Group Pte Ltd, garnishee)

JurisdictionSingapore
JudgeLai Siu Chiu SJ
Judgment Date17 November 2017
Neutral Citation[2017] SGHC 300
CourtHigh Court (Singapore)
Docket NumberSuit No 389 of 2016 (Registrar’s Appeals Nos 102 and 103 of 2017)
Published date03 November 2018
Year2017
Hearing Date07 July 2017,17 May 2017,12 May 2017
Plaintiff CounselMoiz Haider Sithawalla and Lau Yu Don (Tan Rajah & Cheah)
Defendant CounselWong Hin Phin Wendell, Denise Teo and Alexis Loo (Drew & Napier LLC)
Subject MatterCivil procedure,Judgments and orders,Garnishee orders
Citation[2017] SGHC 300
Lai Siu Chiu SJ: Introduction

This case involves a contested garnishee application relating to a Credit Card Processing Service Agreement dated 31 July 2012 as amended by a Memorandum dated 31 March 2015 (collectively “the Agreement”) made between Telecom Credit Inc (“the judgment creditor”) and Star Commerce Pte Ltd (“the judgment debtor”).

The facts

The garnishee Midas United Group Pte Ltd (“Midas”) and the judgment debtor are Singapore-incorporated companies while the judgment creditor is a Japanese company. The three companies sit in a downstream order relative to one another in terms of the flow of credit in the business of processing credit card payments in which all three companies are involved: monies which are debited to a credit card customer’s account would be transmitted from Midas to the judgment debtor and then from the judgment debtor to the judgment creditor.1

The judgment creditor’s general manager is Jun Takeuchi (“Takeuchi”) whilst Hyun Seung Moon (“Hyun”) is a director of Midas. The judgment debtor’s managing director is Toru Minamisawa (“Minamisawa”) who resides in Japan.

Pursuant to four service contracts signed between the two companies and variously dated between 20 February 2014 and 10 March 2015 (“the Midas Service Contracts”), monies collected by Midas from credit card transactions would be transferred to the judgment debtor after deducting Midas’ service fees. Although Midas was the party to the Midas Service Contracts, in practice the monies of Midas were held and transferred to the judgment debtor by IFKAP Pte Ltd (“IFKAP”), a wholly-owned subsidiary of Midas. According to Hyun’s first affidavit, Midas had entered into a cooperation agreement with IFKAP on or about 15 October 2011 (“the Cooperation Agreement”) pursuant to which IFKAP managed an account in accordance with Midas’ instructions and on behalf of Midas.2

Under the Midas Service Contracts, the judgment debtor agreed to pay Midas a fixed monthly fee with a minimum monthly amount in return for the provision of online payment services by Midas for three years. Midas claimed that the judgment debtor was in breach of these contracts as it had failed to pay Midas the monthly fee/minimum monthly amount since about 23 January 2016.3

Similar to what Midas did under the Midas Service Contracts, the judgment debtor had agreed, under the Agreement mentioned in [1] above, to collect for the judgment creditor credit card payments received from sales transactions between merchants and customers and forward the monies to the judgment creditor less the judgment debtor’s service fees. The payments included monies received from Midas.

The judgment creditor alleged that in breach of the Agreement, the judgment debtor had failed since October 2014 to make full payment of sums owed to the judgment creditor. On 11 and 15 March 2016, the judgment creditor sent letters of demand to the judgment debtor for payment of US$853,128.88 and JPY648,118,964 respectively.4 The defendant did not respond to the letters of demand nor make payment of the sums demanded. Apparently, Minamisawa became incommunicado around May 2015.5

On or about 28 March 2016, the judgment creditor executed a memorandum with IFKAP (“the Trading Performance Confirmation”) wherein IFKAP agreed to hold sums totalling JPY127,364,186 on behalf of the former instead of remitting the amount to the judgment debtor. The sums comprised the following:6 JPY90,324,586 being sums due to the judgment creditor for transactions made between 16 December 2015 to 31 January 2016; and JPY37,039,602 being the estimated rolling reserve due to be paid to the judgment debtor when it becomes due in future.

On the same day the judgment creditor also entered into an agreement with IFKAP (“the Remittance and Deposit Agreement”) pursuant to which IFKAP agreed to hold the above two sums for the judgment creditor until the latter submitted:7 a judgment or order of court from Japan or Singapore which proved that the judgment creditor is a creditor of the judgment debtor; or a document proving that the judgment debtor had assigned its interests in the two sums to the judgment creditor. The agreements in [8] and [9] were signed on behalf of IFKAP by its director Hashimoto Yutaka (“Hashimoto”). However, it was Midas’s contention that Hashimoto had no authority to bind the judgment debtor as he was neither its employee nor its representative.

On 18 April 2016, the judgment creditor commenced Suit No 389 of 2016 (“this Suit”) against the judgment debtor for breach of contract. The judgment creditor also alleged that the judgment debtor was obliged to release to the judgment creditor rolling reserves after holding the monies for a period of six months. Rolling reserves are monies arising from the sales transactions which the judgment debtor is entitled to retain for a period of time as security for payment of any penalties. The amount of such reserves approximate 3% to 5% of the amount of sales in the credit card business flow per month.8

On 22 April 2016, the judgment creditor obtained an ex parte injunction (“the Freezing Order”) to restrain the judgement debtor from disposing of, dealing with or diminishing the value of any of its assets in Singapore up to the value of the two sums claimed. One of the assets identified in the injunction order was a debt of JPY127,364,188 was said to be owed by Midas. That sum was held by IFKAP.9

The judgment creditor served the writ of summons in this Suit on the judgment debtor but the latter failed to enter an appearance within the timeline stipulated under O 13 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) (“the Rules of Court”). In the result, on 13 May 2016 the judgment creditor obtained final judgment in default of appearance against the judgment debtor in the sums of US$853,128.88 and JPY648,118,964 with interest and costs of $2,300 (“the Judgment”).10

As the judgment debtor failed to satisfy the Judgment, the judgment creditor by way of execution proceedings applied ex parte by way of Summons No 5729 of 2016 (“the garnishee summons”) under Order 49 of the Rules of Court to garnish all debts due or accruing due from Midas to the judgment debtor.

Separately, the judgment creditor applied in Summons No 5728 of 2016 (“Summons No 5728”) for a garnishee order against IFKAP. Summons No 5728 has been adjourned pending the resolution of the garnishee summons.

An Order Nisi was granted on the garnishee summons by an Assistant Registrar (“AR”) on 29 November 2016 (“the Order Nisi”).11 However, on the return day of the Order Nisi, Midas appeared and challenged the Order Nisi contending that it should be discharged as the debt sought to be garnished from Midas was not a “debt due or accruing due to the judgment debtor from the garnishee” under O 49 r 1(1) of the Rules of Court.

The AR accepted the arguments of Midas and declined to make the Order Nisi absolute. Instead, he directed that the judgment creditor and Midas should proceed to trial to determine the issue of Midas’ liability to pay the sum of JPY127,364,188 to the judgment creditor with the judgment creditor standing in the position of judgment creditor and Midas standing in the position of the judgment debtor in those proceedings (“the AR’s Order”).

In the AR’s grounds of decision dated 29 March 2017 (see Telecom Credit Inc v Star Commerce Pte Ltd [2017] SGHCR 3), he stated that the burden of proof at the stage of the Order Nisi was on the garnishee (ie, Midas) to show cause as to why it would be inequitable or unfair for the debt due to the judgment debtor to be attached. Taking into account that the judgment creditor’s judgment was by default and not obtained on its merits, the AR felt that Midas had raised an arguable defence and a trial should be ordered.

On 24 March 2017, Midas’ solicitors issued a notice of termination of the Midas Service Contracts and a letter of demand to the judgment debtor.12 This was followed by the filing on 13 April 2017 of Suit No 324 of 2017 (“Midas’ suit”) claiming damages against the judgment debtor for breach of the Midas Service Contracts.

The judgment creditor through their solicitors was unable to persuade Midas to agree to a voluntary stay of proceedings in the Midas’ suit. Consequently, it applied in Summons No 1847 of 2017 (which was granted on 9 May 2017), to be added as a party to and for a stay of Midas’ suit until after the determination of the garnishee summons and this Suit.

Dissatisfied with the AR’s Order, both the judgment creditor and the judgment debtor appealed to a judge in chambers in RA Nos 102 and 103 of 2017 respectively (“collectively the Appeals”). The Appeals came up for hearing and both were dismissed by this court.

This court subsequently acceded to the judgment creditor’s request to hear further arguments. After hearing the judgment creditor’s further arguments, this court affirmed its earlier decision for the Appeals. As the judgment creditor has appealed against the court’s decision (in Civil Appeal No 138 of 2017), I now set out the reasons for dismissing the Appeals.

The judgment creditor’s affidavits

Both the judgment creditor and Midas filed affidavits in support of their respective positions. The deponent for the judgment creditor’s five affidavits was Takeuchi while Hyun filed three affidavits on Midas’ behalf. The court will only highlight some salient features in the parties’ affidavits that prompted the court to dismiss the Appeals.

In his first affidavit, Takeuchi claimed that he and other representatives of the judgment creditor had held several meetings with Minamisawa at which Minamisawa promised that the judgment debtor would pay the outstanding amounts owed to the judgment creditor. The judgment debtor did make some payments to the judgment creditor until 20 January 2016 when the judgment creditor received a letter from the judgment debtor’s...

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1 cases
  • Telecom Credit Inc v Midas United Group Ltd
    • Singapore
    • Court of Appeal (Singapore)
    • 26 October 2018
    ...respondent owed a debt to the judgment debtor: see Telecom Credit Inc v Star Commerce Pte Ltd (Midas United Group Pte Ltd, garnishee) [2017] SGHC 300. The appellant now appeals against that decision. Before the appeal came on for hearing, the respondent who was then represented filed a Resp......

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