V N Ram and Company v Nourul Asia Trading Co Pte Ltd and another matter

• Jurisdiction: Singapore
• Judge: Chua Wei Yuan
• Judgment Date: 12 June 2017
• Neutral Citation: [2017] SGDC 166
• Court: District Court (Singapore)
• Docket Number: DC/District Court Suit No 2468 of 2016 (DC/Summonses Nos 71 and 236 of 2017)
• Year: 2017
• Published date: 23 September 2017
• Hearing Date: 24 February 2017,22 March 2017
• Plaintiff Counsel: Assomull Madan D T (Assomull & Partners)
• Defendant Counsel: Namazie Mirza Mohamed & Ong Ai Wern (Mallal & Namazie)
• Subject Matter: Civil procedure - Judgment on admission,Civil procedure - Amendment
• Citation: [2017] SGDC 166

Deputy Registrar Chua Wei Yuan:

Before me are two applications: the first by the plaintiff to enter final judgment on an admission of liability under O 27 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed); the second by the defendant to amend its defence essentially to remove that admission and to add a counterclaim.

Facts

On 16 March 2012, the parties entered an agreement under which the plaintiff agreed to issue letters of credit (“L/C”) for the purchase of goods by the defendant, a trading company. According to the plaintiff, the defendant agreed to pay: an “additional monthly handling charge” at 4% of the “invoice amount”; “overdue handling charges” on a daily rated basis at 4% of the “outstanding amount” until full and final settlement; and “late payment fees” on a daily rated basis at 4% of the “cost of goods” until full and final settlement. Although the plaintiff says that this agreement was oral and that the oral agreement was not evidenced in writing, it also says that the “written agreement” was made “by way of a written guarantee”. This refers to a personal guarantee, dated 16 March 2012 and executed by four directors of the defendant, which backed the L/C agreement. The plaintiff says (although not in its pleadings but in a later affidavit) that this guarantee was preceded by its letter, also dated 16 March 2012, offering the defendant a L/C facility with the “rate” expressed to be “4% for period of 30 days”. Not unexpectedly, the defendant claims that this letter of offer was forged and that it had never seen this letter before.

Although the pleadings were not clearly drafted, the parties agree that there are in substance two fees in issue — (i) a one-off “handling charge” at 4% of the invoice amount, and (ii) a “late fee” on the outstanding amount at 4% per month, on a daily rated basis, until full and final settlement.

The present claim concerns Invoice No 32735, dated 9 July 2015, under which US$45,564.33 is allegedly owing. This amount comprises: US$32,858.89, being the cost of goods and insurance; US$1,314.36, being the one-off “handling charge” at 4% of the invoice amount; and US$11,391.08, being the monthly “late fee” from 6 August 2015 to 11 April 2016.

On 15 April 2016, the plaintiff’s lawyers sent the defendant a letter demanding this sum. The defendant replied three days later, admitting to owing the cost of goods and insurance and the one-off “handling charge” but not the monthly “late fee”:

We have received your letter dated: 15/04/2016.

We have noted the Outstanding Amount of US$34,173.25 as per your Client’s invoice No: 32735.

Please take note that the Quantity of the Goods mentioned in your letter is incorrect.

Our entire Business Transactions are held in the Middle East Region. Please be informed that our Business is very slow in the Middle East Market due [to] the Financial Crisis for the last 7 – 8 months. Hence, we are facing cash flow.

We hope to receive some funds from our buyers in the Middle East soon & will settle the Payment in due course.

As no payment was made, the plaintiff sued. The defendant, in its defence dated 1 September 2016, avers that the parties agreed only to a one-off 4% “interest charge” on every invoice. As was the case in its reply letter, it disputes the arrears for “late payment fees” of US$11,391.08, and avers that the amount due under Invoice No 32735 is only US$34,173.25.

It appears from the pleadings that the defendant was charged and paid the 4% monthly fee on 15 previous invoices dating between December 2013 and October 2015 (atop the principal sum and the 4% one-off charge). Those fees alone totalled US$23,332.25.

After the pleadings closed, both plaintiff and defendant changed their lawyers. On 6 January 2017, the plaintiff’s new lawyers sought to enter judgment on an admission on two independent grounds — the defendant’s reply letter, and its defence. Barely two weeks later, the defendant’s new lawyers sought to amend the defence essentially (i) to plead that the plaintiff’s claim was unenforceable because the transaction amounted to unlicensed moneylending, which was prohibited by the Moneylenders Act (Cap 188, 2010 Rev Ed) (“MLA”), and (ii) to add a counterclaim for the US$23,332.25, on the alternative grounds either that it had erroneously paid such amounts on the understanding that such payments were advances towards future services to be rendered by the plaintiff or that these payments were illegal and unenforceable. Part of this claim was in any event based on the claim that the plaintiff had overcharged some of the monthly fees.

My decision The defendant’s application to amend the pleadings The principles

Whether an amendment should be allowed is a matter of discretion based on an assessment of where justice lies (Ketteman v Hansel Properties Ltd [1987] AC 189 at 220D per Lord Griffiths). Amendments should be made “for the purpose of determining the real question in controversy between the parties to any proceedings or of correcting any defect or error in any proceedings” (GL Baker Ltd v Medway Building and Supplies Ltd [1958] 1 WLR 1216 at 1231 per Jenkins LJ). However, this principle is subject to limits. The court will also consider whether the proposed amendments will prejudice the other party and whether the applicant is effectively asking for a second bite at the cherry (Asia Business Forum Pte Ltd v Long Ai Sin [2004] 2 SLR(R) 173 at [18] per Chao Hick Tin JA). Among other things, a proposed amendment will be disallowed if it: is inconsistent, immaterial, useless or purposeless (Sinclair v James [1894] 3 Ch 554 at 557; Hong Leong Finance v Famco (S) [1992] 2 SLR(R) 224 per Judith Prakash JC (as she then was); RBS Coutts Bank Ltd v Shishir Tarachand Kothari [2009] SGHC 273 (“RBS Coutts”) at [25] per Judith Prakash J (as she then was)); raises no reasonable or viable defence (Jeyaretnam Joshua Benjamin v Lee Kuan Yew [1990] 1 SLR(R) 337 at [4] per Wee Chong Jin CJ; RBS Coutts at [25]; Jeffrey Pinsler SC, Singapore Court Practice 2017 (LexisNexis, 2017) at para 20/5/12); adds an unnecessary counterclaim (Factories Insurance Co Ltd v Anglo-Scottish, etc (1913) 29 TLR 312 (CA (Eng))); or is made in bad faith (Lawrence v Lord Norreys (1888) 39 Ch D 215 at 235).

Application to the facts

In my judgment, it is curious that the defendant sought to amend its defence and plead a counterclaim more than 4½ months since its defence was filed, and more than 11 weeks after its present lawyers came on record. More significantly, this application was filed two weeks after the plaintiff sought to enter judgment on an admission. To me, it is clear that this application was made in a bid to frustrate the plaintiff’s application for judgment. I am inclined to agree with the plaintiff that this application was largely brought in bad faith, but little turns on this because the merits of the proposed amendments are largely sufficient to determine the application.

Whether the defendant should be allowed to aver that the transaction was illegal and unenforceable

Whether the defendant should have leave to amend its defence turns, in essence, on whether there is any merit in its plea that its L/C agreement with the plaintiff was an unlicensed moneylending arrangement.

In my view, such a plea would not be viable because an L/C arrangement clearly falls outside the scope of moneylending in the MLA.

What constitutes lending is a question of fact in every case, but its essence is the promise of repayment (Donald McArthy Trading Pte Ltd and others v Pankaj s/o Dhirajlal (trading as TopBottom Impex) [2007] 2 SLR(R) 321 (“Donald McArthy”) at [11]–[12]). Conceptually, the rental of credit facilities entails A paying B for using credit facilities that B has with C (and not A repaying B for using funds that a B himself extends) and, as such, differs from loans. Indeed, the L/C arrangement has invariably been held not to constitute moneylending. Four examples will demonstrate this point.

First, in Nissho Iwai International (Singapore) Pte Ltd v Kohinoor Impex Pte Ltd [1995] 2 SLR(R) 170, Lim Teong Quee JC held at [18]: 17 I return now to the arrangements between the plaintiff and the first defendant. According to the second defendant the object was for the plaintiff to provide purchase financing but I respectfully agree with Branson J and Lord Devlin that it is the nature of the arrangement and not the object which the court has to look at. The transactions relating to the bid bonds and performance bonds are clearly not loans of any kind. The plaintiff has not made any payment or agreed to make any payment to the first defendant or to any of its buyers as a loan of money and there is no promise of repayment. The bonds may not even be called on. The arrangements as regards the letters of credit appear to me to come to this. The first defendant says:

We have agreed to buy a shipment of timber. We have to provide a letter of credit. We have sold the timber. Here is our buyer’s letter of credit or here is the contract with our buyer. You apply to your bank to issue the letter of credit. On shipment all documents will be delivered to you for negotiation through your bank. We will pay you the value of the letter of credit, commission, bank charges and interest on the letter of credit amount from the date of payment by your bank.

18 This is a practice well known to those concerned with the import and export trade and I think not a few importers who use the available letter of credit lines of banking facilities of their business associates from time to time would be surprised if they were told that they were borrowing money by doing that and that their business associates would require a licence under the Moneylenders Act. The second defendant himself saw the transactions as credit sales and not loans and it was only well into the hearing before the senior assistant...