Woon Kim Soon Benny v Nex-G Systems Pte Ltd and Others

• Jurisdiction: Singapore
• Judge: James Leong Kiu Yiu
• Judgment Date: 21 February 2007
• Neutral Citation: [2007] SGDC 91
• Court: District Court (Singapore)
• Year: 2007
• Published date: 26 April 2007
• Plaintiff Counsel: Charmaine Cheong (TSMP Law Corporation)
• Defendant Counsel: Krishnana Nadarajan (Tan Lim & Wong)
• Citation: [2007] SGDC 91

4 April 2007 Judgment reserved.

District Judge James Leong:

Introduction

1 This was a registrars’ appeal by the plaintiff against part of the decision of the Learned Deputy Registrar ordering the stay of execution of part summary judgment for $200 000 entered in favour of the plaintiff against the defendants, pending the determination of the defendants’ counterclaim. The plaintiff also appealed against the order for unconditional leave to defend in respect of the contractual interest for the aforesaid sum.

2. I allowed the appeal and lifted the stay of execution and entered judgment for the plaintiff for the contractual interest of $33 987.07 and continuing contractual interest at 6.5% per annum from 12 April 2006 to payment. The defendants have appealed against my decision to allow the appeal.

Background Facts

3. The dispute in this case arises from a Binding Term Sheet Agreement entered on 4 June 2004 between the parties. The plaintiff was at all material times a shareholder and business consultant of the 1^st defendant, who were in the business of providing technology for wireless broadband connectivity solutions. The 2^nd and 3^rd defendants are the founders and shareholders of the 1^st defendant.

4. In essence, pursuant to clause 2 of the Term Sheet, subject to terms and conditions including the parties entering into Definitive Documents, by or on 30 June 2004, the plaintiff agreed to invest in the 1^st defendant by extending an interest free shareholders loan to the 1^st defendant of up to $1 470 000.00. Under clause 3.1 of the Term Sheet, the 2^nd and 3^rd defendants jointly and severally guaranteed the 1^st defendants compliance with the Term Sheet (including clause 6.6) as principle debtors and not just as guarantors. Clause 6.6 of the Term Sheet provided as follows:

“Upon this Binding Term Sheet executed by all Parties, the Investor shall make payment of an initial amount of $300,000 to the Company (receipt of which is hereby acknowledged by the Company and Founders), which shall be applied by the Company firstly towards the subscription monies for the Investment Shares on completion of the investment, with the balance to be applied towards the Shareholder’s Loan on completion of the investment. The said amount S$300,000 shall be repaid in full to the Investor as follows:

6.6.1 if the Definitive Documents are not executed by all parties by 30 June 2004, on 30 June 2004; or

6.62 if the Definitive Documents are executed by all Parties by 30 June 2004 but completion of the investment by the Investor does not take place in accordance therewith on before 2 August 2004, on 2 August 2004”.

5. It is not in dispute that the parties did not enter into the Definitive Documents by or on 30 June 2004. It is also not in dispute that the defendants paid $100 000 to the plaintiff on or about 10 November 2005 although it is the defendants’ position that this was paid out of goodwill. It is also apparent from the various exchange of email documented in the plaintiff’s first affidavit of 27 June 2006 that the defendants had prior to the Writ of Summons admitted responsibility and liability to refund the $300 000 with interest.

6. It is against this backdrop that at the hearing before the deputy registrar, defendants’ counsel did not deny the amount owed. Instead, he challenged the contractual interest and also sought a stay of execution of the judgment, indicating to the Court that he had “No objections to entering of judgment for the $200 000 with a stay pending trial of the counterclaim”.

Issues

7. The defendants did not appeal against the decision of the deputy registrar for summary judgment and the hearing before me thus centred on the issues of

(i) whether the stay of execution should be confirmed or lifted

(ii) whether the order for unconditional leave to defend the claim for contractual interest should be confirmed, varied or reversed.

Legal Position

8. These issues turn on the exercise of the court’s discretion under O14 r 3 (2) and O14 r 4 (1) of the Rules of Court which provide as follows:

“O 14 r 3 (2)

(2) The Court may by order, and subject to such conditions, if any, as may be just, stay execution of any judgment given against a defendant under this Rule until after the trial of any counterclaim made or raised by the defendant in the action.

O 14 r 4 (1)

(1) The Court may give a defendant against whom an application under Rule 1 is made leave to defend the action with respect to the claim, or part of a claim, to which the application relates either unconditionally or on such terms as to giving security or time or mode of trial or otherwise as it thinks fit”.

9. The legal position in relation to a defence of set off and counterclaim in the context of summary judgment applications is outlined in Hua Khian Ceremics Tiles Supplies v Torie Construction [1992] 1 SLR 884 at 890 where the High Court stated

“It must be borne in mind that the jurisdiction under O 14 to give leave to defend and the power to stay execution is essentially a discretionary matter. It is axiomatic that a defendant who invites the court to exercise the discretionary power must produce sufficient relevant material for the court to justify a decision in his favour. Granting a stay of execution is not a matter of course”.

10. In Cheng Poh Construction Pte Ltd v First City Builders Pte Ltd [2003] 2 SLR 170 at [11], the Court of Appeal ruled that:

“It is settled law that where claims and counterclaims arise out of the same transaction, and while the claims are admitted and the counterclaims are disputed, then so long as the counterclaims are plausible, the correct order to make would be that while judgment should be entered in respect of the claims, it should be stayed pending trial of the counterclaims”.

11. As to what constitutes a plausible counterclaim, the High Court in International Factors Leasing Pte Ltd v The Personnel Representative of Tan Hock Kee (deceased) and Ors [2003] 2 SLR 1 at [51] observed that:

“… while I do not go so far as to say that there is no merit whatsoever in all of the counterclaims, the nature of many of the allegations made by the defendants did not engender confidence in their bona fides “.

12. In PH Grace Pte Ltd v American Express International Banking Corp [1986] SLR 128 at 131, the Court of Appeal observed that a plausible counterclaim was a bona fide claim that was ‘not unreasonably possible’ to succeed if brought to trial.

13. With regard to the judicial approach towards applications for summary judgment and...