SIC College of Business and Technology Pte Ltd v Yeo Poh Siah and others [2016] SGCA 5

Introduction

It is axiomatic that in order to arrive at a fully considered decision based on justice and fairness, the court concerned must have all the relevant evidence before it. The present appeal turns on this one fundamental point. Put simply, was all the relevant evidence before the judge in the court below? If it was not, then there would have been no way for the judge to have arrived at a considered decision simply because he would not have been in receipt of the full picture. It would be akin to a viewer focusing on only one part of a canvas instead of the entire painting. Another analogy would be the old adage that one should not miss the wood for the trees. We hasten to add that this does not imply in the least that the trees are unimportant. After all, without the trees there would be no wood. When, however, one is lost in the midst of the wood and takes only some of the trees as representing the entire wood, the overall perspective may be skewed and distorted as a result.

We proceed to analyse this case more specifically by turning, first, to the facts of the case and decision below before rendering our decision.

The facts

Parties to the dispute

The Appellant is a company in the private education business. Kannappan s/o Karuppan Chettiar (“KC”) was the chairman of the Appellant at the material time. His wife (Cenobia Majella (“CM”)) and brother (Subramaniam s/o Karuppan Chettiar) are directors of the Appellant. CM is the Appellant’s majority shareholder while TSG Investments Pte Ltd (“TSG”) and KC are the other shareholders. At all material times, TSG was controlled by KC and CM.

The first three Respondents were the Appellant’s employees at the material time – the first Respondent (Ken Yeo) was a director of the Appellant, the second Respondent (Koo Khee Chong (“Koo”)) was the chief financial officer of the Appellant and the third Respondent (Chua Puay Choo Alvinna) was a senior management consultant of the Appellant. They were also the directors of the fourth Respondent, Lincoln Collegiate of Business and Technology Private Limited (“Lincoln College”), a company which was incorporated on 8 January 2009 and which had been contracted to operate the Appellant’s business under certain licensing agreements.

Background to the dispute

KC and Ken Yeo had known each other since about 1991 when Ken Yeo was KC’s personal assistant in the Singapore Institute of Commerce (“SIC”), which was the predecessor of the Appellant. KC lost touch with Ken Yeo sometime in 1992 or 1993 when KC left SIC, and Ken Yeo also later left SIC to set up Auston Business School.

Sometime in 2005, Ken Yeo was made an employee of TSG by KC. KC was the executive chairman of TSG, which had acquired SIC in 1999.

In 2007, there was a corporate reorganisation and Ken Yeo was appointed the executive director of the Appellant.

Between 2009 and 2010 a number of agreements were signed as follows:

(a) The Harbridge Agreement dated 16 January 2009 was an agreement between the Appellant and Lincoln College (which was then known as “Harbridge Holdings Pte Ltd”) in which it was agreed that Lincoln College would be allowed to jointly operate a subsidiary of the Appellant known as SIC Tampines. Lincoln College agreed to be solely responsible for the operational expenses of SIC Tampines and agreed to pay the Appellant a licence fee. It was Ken Yeo’s evidence that it was implied that Lincoln College was entitled to the income of SIC Tampines.

(b) The SICC Agreement dated 9 September 2009 was an agreement between TSG, the Appellant and SIC College Pte Ltd (“SICC”) (incorporated by Ken Yeo and with Ken Yeo and Koo as the shareholders) in which SICC was appointed to manage the operations of the Appellant for an initial period of two years in return for SICC paying TSG a monthly fee of $150,000 during the period. Ken Yeo claimed it was obvious to all involved that SICC was entitled to the income of the Appellant while bearing the expenses.

(c) The Mutual Release Agreement (“MRA”) dated 11 February 2010 was an agreement between TSG, the Appellant and SICC in which the parties released one another from liability and SICC warranted that the final payment of $150,000 due on 31 December 2009 for licensing fees from Lincoln College to the Appellant would be made.

(d) The Second Harbridge Agreement dated 11 February 2010 was an agreement between TSG and Lincoln College wherein it was agreed that the latter was to manage the business of the Appellant and pay TSG monthly licensing fees and that it would be entitled to claim management fees from TSG, which was defined as the surplus of the Appellant’s licensed operation subject to the Appellant being able to accumulate an annual profit of $10,000 and being able to maintain its balance sheet as at 1 January 2010 or a net tangible asset of $600,000, whichever is higher.

It should be noted that the interpretation of the terms of the clauses in the above agreements was disputed.

Cracks in the relationship between KC and Ken Yeo emerged in February 2010 when KC sought arrears of the licensing fee and Ken Yeo wanted to terminate the SICC Agreement. These cracks were exacerbated when Ken Yeo shifted some furniture between the Appellant’s premises at Upper Serangoon Road and SICC’s premises. Eventually, a compromise was reached, resulting in the conclusion of the MRA and Second Harbridge Agreement.

On 10 December 2012, the Appellant and TSG filed a Writ of Summons against the first three Respondents. The Writ and Statement of Claim were subsequently amended for TSG to be removed as a plaintiff and for Lincoln College to be added as a defendant.

To summarise, the Appellant’s claim – ie, the main claim – concerned a number of heads of claim, to the effect that the first three Respondents were parties to a scheme to enrich Lincoln College (ie, the fourth Respondent) at the Appellant’s expense, and this included (amongst others) claims for a number of alleged unauthorised payments to Lincoln College between 30 October 2009 and 21 October 2010, the alleged misappropriation of funds from the Appellant’s students, and the alleged making of fraudulent payments to the Respondents which were fraudulently authorised as personal claims. These alleged unlawful acts were accomplished (at least in part) by the entering of fictitious entries into the Appellant’s books.

The Respondent’s defence against the aforementioned heads of claim were, besides the denial of the averments, essentially, that under the relevant licensing agreements, Lincoln College (or SICC) was entitled to the Appellant’s proceeds less expenses.

On 6 December 2013 (almost a year after the original writ was filed), the Defence was amended to institute the counterclaim by Ken Yeo against the Appellant. The counterclaim stated as follows:

The running account, consisting of 18 transactions, is particularised in a table which is set out at [9] of the GD.

The Appellant’s defence to the counterclaim stated as follows:

The decision below

In so far as the counterclaim was concerned, the Judge referred to a ledger which had been printed out from the Appellant’s system listing the alleged 18 transactions in the alleged running account showing a balance of $244,844 owing from the Appellant to Ken Yeo (“the Printout”). There were a number of bank receipts that showed certain cash withdrawals from Ken Yeo’s and Lincoln College’s account. The Judge also considered that the ledger provided by Ken Yeo was substantiated by a document produced by Supramaniam s/o Nasaiah (“Supramaniam”), who was the Appellant’s own witness. We shall hereinafter refer to that document as “Supramaniam’s Document”.

While the Judge also referred to the Appellant’s asserted entitlement to set off a series of unauthorised payments against Ken Yeo’s counterclaim as well as the Appellant’s argument that the 18 transactions in the Printout were just part of a larger scheme to defraud the Appellant, the Judge considered that the Appellant was not entitled to prove the alleged instances of misappropriation which necessarily pertained to the main claim.

The Judge also made a number of other findings as follows:

(a) The sums recorded as originating from Lincoln College were in fact advances by Ken Yeo, which were made by Lincoln College on Ken Yeo’s behalf.

(b) The Appellant might have required advances to smoothen its cash flow, even if it had sufficient finances to support itself.

(c) The Printout could be admitted under s 32(1)(b) of the Evidence Act (Cap 97, 1997 Rev Ed) as a statement that was made in the course of trade, business, profession or other occupation. Furthermore, s 34 of the Evidence Act stated that entries in account books that are regularly kept in the course of business are relevant whenever they refer to a matter into which the court has to inquire. The Judge also found that the Printout was not entirely unreliable.

(d) Ken Yeo had the authority to, and did, make the advances under the auspices of the licensing arrangements pursuant to which Lincoln College and SICC were required to manage the Appellant’s business.

(e) An adverse inference was to be drawn against the Appellant for not disclosing bank statements on certain dates when the Appellant was able to do so for others.

The Judge then allowed the counterclaim in the sum of $218,000 after excluding four transactions in the Printout as they appeared to be entirely uncorroborated.

The issues

(a) With respect to the appeal in relation to the counterclaim, the first issue is whether the Judge was correct in determining the scope of the evidence to be considered; and if the Judge had erred in respect of the first issue, there is a second issue of whether this caused a substantial wrong, and if it did, what would be the appropriate remedy.

(b) In so far as the appeal against the order of costs is concerned, the issue is what the appropriate costs order should be in the circumstances, in particular, whether third party costs should have been ordered against KC and CM.

The parties’ respective arguments

The Appellant’s arguments

In the Appellant’s submission, the Judge had erred in failing to consider facts in issue and evidence which are relevant to the defence to the counterclaim (“the Rejected Evidence”). The Appellant argues that there is a clear link between the defence to the counterclaim and the material facts in the main claim and that this is apparent when the pleadings are read in their totality and in the proper context, such that there is no question of a failure of pleading. It further submits that the Rejected Evidence would have made a difference to the outcome of the trial.

The Appellant also contends that Ken Yeo had failed to prove the existence of a “running account”, which is clearly different from an argument that each individual advance was a debt in itself. The Judge had merely considered whether each advance was made, and not why the advance was made (if indeed they were). Even if there was a running account, it was still necessary for the Judge to consider the transactions in their totality and not merely those particular transactions which Ken Yeo had picked to reflect a balance that was positive to him.

The Respondents’ arguments

The Respondents argue that, as the proper enquiry is whether the advances claimed were made or not, the Appellant has mischaracterised the true issue. Furthermore, even if the Judge had erred in excluding the Rejected Evidence, it would not justify setting aside the decision, as it has not resulted in any substantial wrong.

The Respondents also submitted that the Appellant has misunderstood what “running account” was meant by the Respondents – all they meant was an “ongoing account”. The Respondents have not sought an account as a final relief; they are just seeking the repayment of an advance. Even if the relief sought is for an account, the evidence demonstrates that the liability is between Lincoln College and the Appellant and not between Ken Yeo and the Appellant. In any event, the evidence relied on by the Appellant to demonstrate sums owing to them were inadmissible and/or unreliable. The Judge was correct to allow the counterclaim as the evidence is sufficient to prove that the sum allowed was transferred.

Our decision

The counterclaim

The proper scope of the evidence

The Judge had summarised his understanding of the Appellant’s pleaded defence to the counterclaim at [5] of the GD:

According to the Judge, the Appellant could and should have done more for its pleaded case, for example, by producing bank documents which would demonstrate whether any of the advances had entered the Appellant’s account (see the GD at [22]). The Judge also noted that because the Appellant’s claim had been dismissed, alleged instances of misappropriation by the Respondent could not be proven as they pertained to the main claim (see the GD at [16]).

In our view, it is not, with respect, correct for the Judge to have denied the Appellant the opportunity to prove relevant facts in respect of the counterclaim simply because these facts would also prove the main claim, which had been stayed and subsequently dismissed. This is so for several reasons.

Secondly, in our view, the various allegations of misappropriation of funds were sufficiently pleaded as part of the defence to the counterclaim. Much reliance was placed by the Respondent on the fact that the substantive defence to the counterclaim was encompassed within para 44 of the Reply and Defence to the Counterclaim (Amendment No 1) under the heading “DEFENCE TO COUNTERCLAIM”, which we had set out above at [17]. We shall simply refer to that paragraph hereinafter as “Para 44”.

The Judge had concluded that the pleading was that the entries were “fictitious” in the sense that monies never entered the Appellant’s account and therefore the only issue in controversy was whether these monies had in fact entered the Appellant’s account. In our view, even taken in isolation, the reference to “fictitious entries” in Para 44 could reasonably be interpreted to encompass the argument that the entries were inaccurately characterised as “advances”, thereby rendering them a fiction. This could legitimately mean both that monies had never entered the Appellant’s account or that the monies were never intended as advances, thereby amounting to spurious entries. This is a fortiori the case when the pleadings are viewed holistically and Para 44 is understood in its proper context, rather than in a vacuum. At the time the Reply and Defence to the Counterclaim (Amendment No 1) was filed, there was no indication that the main claim would not be proceeded with; there was no separate discovery exercise, there were no separate AEICs filed, and the Reply and Defence to Counterclaim was one composite whole embodied in a single document. In the paragraphs preceding Para 44, the Appellant had raised facts to allege that the Respondent had misappropriated funds from the Appellant. For example, at para 42, it was pleaded that: “the [Appellant] avers that the [Respondents] have no legitimate and/or valid defence whatsoever towards the unlawful withdrawal of $1.59mil”. Although these facts did not fall under the heading “DEFENCE TO COUNTERCLAIM”, and were pleaded for the purpose of establishing the main claim, they provide the context to what the Appellant meant when it stated in its defence that the entries were “fictitious”.

As argued by the Appellant, “the point is that the 18 transactions formed part of a larger series of transactions”. The Appellant also sought to establish this point during the first day of the trial, although this was met with resistance by counsel for the Respondents:

In our view, the pleadings sufficiently encompass the averment that the monies that were credited into the Appellant’s account (if any) were part of the Respondents’ fraudulent scheme and under the guise of being “advances”. The purpose of the transactions is being called into question, and it is not simply whether the monies did or did not in fact enter the Appellant’s account. When viewed through this lens, the Respondents’ misappropriation of funds and facts relating to this purported fraudulent scheme did form part of the Appellant’s pleaded defence to the counterclaim.

Thirdly, it must be emphasised that procedure is the handmaiden of justice, not its master. In V Nithia (co-administratrix of the estate of Ponnusamy Sivapakiam, deceased) v Buthmanaban s/o Vaithilingam and another [2015] 5 SLR 1422 (“Nithia”), this court embarked on a review of the law of pleadings and observed (at [2]) that the process of pleadings is to ensure, inter alia, that the plaintiff knows the nature and substance of the defence. A court should not adopt “an overly formalistic and inflexibly rule-bound approach” which might result in injustice (see Nithia at [39]). Ultimately, the underlying consideration of the law of pleadings is to prevent surprises arising at trial (see, for example, the Singapore High Court decision of Lu Bang Song v Teambuild Construction Pte Ltd and Another and Another Appeal [2009] SGHC 49 at [17]). In the present case, it can hardly be said that the Respondents had been taken by surprise. From the pleadings as well as the AEICs, the Respondents were clearly apprised of the line of argument which the Appellant was seeking to advance but attempted to limit the pleaded defence on the technical basis that there was no “pleading that incorporates the entire claim”. However, it could not have escaped the Respondent’s attention that the Appellant had never regarded the 18 transactions as legitimate “advances” and that this formed a basis of its defence as articulated in Para 44.

We therefore find that the Judge had wrongly determined the scope of the evidence and had erred in excluding the Rejected Evidence.

Whether the error led to substantial injustice

While we find that the Judge should have considered the Rejected Evidence it does not necessarily follow that his decision must be reversed or a new trial ordered, if it can be shown that the result was correct in any event. Order 57 r 14 of the Rules of Court states as follows:

In so far as the error relates to the improper rejection of evidence, s 169 of the Evidence Act states as follows:

Section 39(2) of the Supreme Court of Judicature Act (Cap 322, 2007 Rev Ed) (“SCJA”) similarly provides as follows:

The question therefore turns on whether any substantial wrong had been caused by the exclusion of the Rejected Evidence. The Respondents say that, even if the Rejected Evidence was considered, it would not have made any difference to the Judge’s decision. However, before we proceed to answer this question, we note that the Appellant had pitched its case at an even higher level. It argues that, on the evidence actually adduced, the Respondents have not proven the counterclaim and therefore the Judge’s decision must be reversed. We first address this argument advanced by the Appellant.

The Appellant contends that the key piece of evidence relied upon by the Judge was the Printout. The Printout had been extracted from the Appellant’s system and provided by Koo, but Koo was not called to give evidence, and the admissibility of this piece of evidence was challenged on the basis of hearsay. While the Printout was prima facie admissible under s 32(1)(b) of the Evidence Act as a statement made in the course of trade, business, profession or other occupation, the court is nevertheless required to properly consider the discretion to exclude such evidence under s 32(3). This involves a balancing exercise involving weighing the significance of the evidence against its unreliability or other harm which might compromise fair adjudication (with the effect of being substantively unjust or procedurally oppressive): see the decision of this court in Gimpex Ltd v Unity Holdings Business Ltd and others and another appeal [2015] 2 SLR 686 at [105]–[109].

The Judge made two key findings with respect to the Printout. First, the Judge considered that Supramaniam’s Document corroborated the Printout (at [13] of the GD). However, considering that this document and the Printout were all derived from the same source, ie, the Appellant’s accounting software, we are unable to see why Supramaniam’s Document is corroborative of the facts stated in the Printout, the same way a partial photocopy of a book does not corroborate the truth of the contents of the book.

Secondly, the Judge found that even though Ken Yeo was not the person who made the entries, he was the supplier of the information on the transactions, which were (partly) substantiated by bank statements (see the GD at [20]). However, the Printout was relied on to corroborate or prove Ken Yeo’s assertions, which was that the moneys were transferred on a certain basis (which we will come to). One of the reasons why Koo should have been called in the first place is examine the veracity of facts found within the Printout. As the Judge had previously held in the Singapore High Court decision of Wan Lai Ting v Kea Kah Kim [2014] 4 SLR 795 at [19], it is highly prejudicial for a party to rely on evidence that the maker of the statement can testify to but chooses not to do so, as it may give rise to the possibility that the party was trying to prevent the maker from being cross-examined because the evidence might not withstand cross-examination.

While it was ultimately within the scope of the Judge’s discretion to admit the evidence, the admission of the Printout was not in itself sufficient, without other evidence, to prove a debt because s 34 of the Evidence Act states that such statements “shall not alone be sufficient evidence to charge any person with liability”. The obvious danger of relying on account book entries is even greater if the claimant or one of his affiliates was the one who was making the records. This danger remains even if accountants had given an unqualified opinion on the previous consolidated accounts that formed the basis for the first transaction on the ledger.

The Singapore High Court decision of Re Ice-Mack Pte Ltd (in liquidation) [1989] 2 SLR(R) 283 is illustrative. The issue in that case was whether the pages from the applicant’s own ledger books were sufficient proof of debt against a company that was being wound up. The applicant and the company were associated companies as one Mr Valibhoy managed both companies. The applicant also adduced an audit confirmation of the sum owed. Yong Pung How CJ found that, in an arms-length situation, an audit confirmation would be strong evidence of the correctness of the credit or debit balance. However, because that confirmation was signed on behalf of the company by Mr Valibhoy, it could not be accepted as evidence of the debt unless it was corroborated by more independent evidence (at [11]). Further, at [20]−[21], Yong CJ stated:

While we have accepted in the foregoing analysis that there is some merit to the Appellant’s arguments, taking the evidence that was considered by the Judge in isolation, we are unable to say that Ken Yeo has failed to discharge his burden of proof on the counterclaim. We therefore cannot allow the appeal simply on this basis alone.

We turn now to consider whether the exclusion of the Rejected Evidence caused a substantial wrong such that either a retrial ought to be ordered or this court should set aside the decision below based on its own evaluation of the Rejected Evidence. In our view, the factual matrix in the present case warrants a retrial.

In Basil (at [55]), this court noted that a new trial would ordinarily be ordered only where (a) the improperly rejected evidence would, if admitted, have a substantial and realistic prospect of making a meaningful difference to the outcome of the case, and (b) the appellate court is in no position to evaluate the improperly rejected evidence itself.

With respect to the first requirement, the Appellant contends that the Rejected Evidence consists of, inter alia, the following evidence:

(a) Ken Yeo and Koo’s control over the Appellant and Ken Yeo and Koo’s ability to implement and falsify transactions;

(b) Koo was part of Ken Yeo’s fraudulent scheme to defraud the Appellant as Koo prepared the Printout, and nearly all of the vouchers and payments for the unauthorised transactions made from the Appellant’s account were approved by Ken Yeo and verified by Koo;

(c) Ken Yeo’s admission that he maintained the alleged “running account” between the Appellant and Lincoln College without informing other directors of the Appellant’s board;

(d) Ken Yeo’s admission that, when he transferred $190,000 on 10 March 2011 to Lincoln College, he acted in contravention of the Board’s resolution dated 8 March 2010 that he could not approve transfers of monies to Lincoln College;

(e) evidence exhibited in KC’s AEIC of two cheques signed by Ken Yeo that were issued to Lincoln College that were part of five transactions in Ken Yeo’s counterclaim (ie, the supposed repayments by the Appellant in the running account);

(f) 126 transactions between the Appellant, Ken Yeo and Lincoln College based on the Appellant’s general ledger evidenced by a spreadsheet in Supramaniam’s reply AEIC; and

(g) Ken Yeo’s admissions that he had withdrawn monies from Lincoln College’s bank account that had originally been transferred to Lincoln College from the Appellant.

In its written submissions, the Appellant raises more examples of evidence that if accepted might have played a role in the decision (which we consider to be part of the Rejected Evidence):

(a) the evidence that even if a running account existed, it was created by Ken Yeo or Koo to hide their transactions to make secret profits;

(b) the suspicious circumstances surrounding the entries created in the Appellants’ books between 30 October 2009 and 21 October 2010;

(c) the alleged fraudulent misappropriation of sums that were actually received from several students by altering the records to reflect discounts that were not in fact given; and

(d) five transactions in the counterclaim that were identical to five transactions that were part of the Appellant’s main claim.

Having regard to the Rejected Evidence, the Appellant makes the argument that the Rejected Evidence is relevant to the following questions of fact:

(a) whether there was in fact a “running account” and whether there were fictitious entries created over the course of the alleged “running account”;

(b) whether the alleged transactions were fictitious or were part of the alleged “running account”;

(c) whether the alleged transactions formed part of a scheme to enrich Lincoln College at the Appellant’s account; and

(d) whether there was a balance from the alleged “running account” and who that balance was in favour of.

The Respondents argue, on the other hand, that the exclusion of the Rejected Evidence had caused no substantial wrong as the evidence would not have made a difference to the result. Three points were emphasised by the Respondents in the hearing before us. First, they argue that the Rejected Evidence would at best go towards demonstrating a modus operandi and/or a propensity to create fictitious entries. If the specific entries were truly “fictitious”, the Appellant could simply have produced the bank statements to prove that the alleged advances had not been made. The Appellant failed to do so in the trial below. Secondly, the Respondents argue that the concept of a “running account” had been misunderstood by the Appellant. The Respondent does not seek an “account” as a form of final relief but specifically seeks the precise sum of $244,844 owned. Such a “running account” is not amorphous inasmuch as it is without start or end, and the appropriate delineation of the running account is from the period of 1 April 2010 to 8 October 2010 (ie, the time period in which the 18 transactions were made). Thirdly, the Respondents contend that the counterclaim was brought by Ken Yeo against the Appellant and that the Rejected Evidence related only to alleged liabilities owing from Lincoln College to the Appellant. Therefore, it would not have been appropriate to consider the alleged liabilities of Lincoln College in the counterclaim.

In their first objection, the Respondents focus on the fact that the Appellant was unable to refute that the “advances” had actually entered the Appellant’s account. However, as noted above at [43], this is not the only way in which the entries may be construed to be “fictitious”. The fiction could conceivably lie in their characterisation as “advances”. Bank statements produced by the Appellant would not aid it in advancing this point. Instead, it is necessary for a court to look at the full context of the transactional history between the parties in order to arrive at a fair decision as to whether the sums were transferred, whether the transfers were in the nature of an advance or something else, and whether in the overall scheme of things Ken Yeo was the creditor and not the debtor. These issues could not be divorced from the allegations raised in the main claim.

In so far as the Respondents’ second objection is concerned, it seems to us that the parties have been overly fixated on the phrase “running account”, when the question should, instead, be whether the Rejected Evidence, if admitted, would go towards proving or disproving the basis for Ken Yeo’s argument that he is entitled to be repaid. The fact that some monies were transferred (if that is indeed the case) is only one small element of the dispute. The legal nature and purpose of the transfer is, if anything, just as important in determining liability. Thus, one must still ask what the transfer was truly for. Were the “advances” in the nature of loans (for the purpose of supplementing cash flows), gifts, consideration under a contract, repayment of loans, transfers to replenish funds that were taken out (whether properly or improperly), or transfers used to cover up a fraudulent scheme to misappropriate funds? Even if they were loans, one might ask whether they were just part of a larger set of interdependent transactions which were always intended to be netted off. One could not come to a full and considered decision by looking at a mere snapshot of one part of the transactional history between the parties.

Finally, the Respondents’ third objection may appear superficially attractive since liabilities owing from Lincoln College to the Appellant are technically separate and distinct from liabilities which the Appellant may owe to Ken Yeo, especially since the defence of set-off had not been pleaded by the Appellant. However, if it were indeed the case that Lincoln College had been siphoning off money from the Appellant without approval, and this was perpetrated by Ken Yeo, it could, in our view, shed light on the true nature of the transfer of monies from Ken Yeo to the Appellant. Again, the key question to be addressed is the nature of the transactions which form the basis of the counterclaim. Proof of a fraudulent scheme which was engendered as amongst the Respondents would be relevant to such an inquiry.

We hasten to add, and this bears emphasis, that our rejection of the Respondents’ objections above is not, in fairness to them, an indication that the Rejected Evidence would definitely have made a difference to the outcome of the case. It must be recalled that the threshold is that of “a substantial and realistic prospect of making a meaningful difference to the outcome of the case” and in our view, this threshold had been met. Indeed, the Judge’s own recognition that “the [Appellant] was hamstrung to the extent that its case was that the 18 transactions in the ledger [were] just part of a larger scheme to defraud the plaintiff” (see the GD at [17], also reproduced above at [2]) buttresses our conclusion that the Rejected Evidence did have the requisite prospect of making a meaningful difference to the outcome of the case. For this reason, the decision below cannot be allowed to stand.

We must next consider whether this court is in a position to evaluate the Rejected Evidence and determine the appeal on its substantive merits (ie, the second requirement in Basil). The following observations of this court at [56] of Basil are instructive:

Similarly, it is impossible, in relation to the present case, to say precisely what would have transpired if the Appellant had not been wrongfully denied the opportunity to present its full case, and what the crucible of cross-examination might have elicited from the various witnesses. Attempting to predict such an outcome would be an exercise in speculation and we are not prepared to venture into such murky waters. The Federal Court decision of Chia Bak Eng and another v Punggol Bus Service Co [1965–1967] SLR(R) 270 is illustrative. In that case, the trial judge had erred in rejecting the evidence of one Lim Ah Huat (“Lim”), who was a bystander to an accident. The appellate court declined to simply reverse the conclusions of the learned judge and accept the evidence of Lim as true, primarily on the basis that this required a determination of Lim’s credibility, who was the only witness called by the plaintiff, and it was difficult to estimate correctly the credibility of the witness from the printed evidence (at [21]).

However, as the Judge had only allowed the counterclaim in the sum of $218,000, which is less than the District Court limit of $250,000, we consider it appropriate that the trial of the counterclaim be held in the District Court, as we take the view that the Respondents, even if entirely successful, would not recover anything more than what the Judge had awarded. This was also the situation in Basil (at [81]) where this court exercised its powers under para 10 of the First Schedule to the SCJA and s 54C(2) of the Subordinate Courts Act (Cap 321, 2007 Rev Ed) (now the State Courts Act (Cap 321, 2007 Rev Ed)), read with s 29A(3) of the SCJA, to send the case to the District Court to be heard. We so order.

Security for costs

Like in most matters involving the exercise of discretion, the appropriate decision often rests on a nuanced appreciation of the factual matrix in the totality of the instant case. In the Singapore High Court decision of L & M Concrete Specialists Pte Ltd v United Eng Contractors Pte Ltd [2001] 3 SLR(R) 208, Judith Prakash J accepted the following non-exhaustive circumstances as being among those which the court might take into account in the following terms (at [10]):

(a) The first was the delay in taking out the application. Numerous steps had been taken in the proceedings by the time it was filed, and substantial work had already been undertaken by the solicitors of both parties.

(b) The other factor was the fact that, given the substantial overlap between the appellant’s defence to the claim and the counterclaim, no significant additional costs would be incurred by the appellant whether or not the claim of the respondent was stayed. It was a significant consideration that granting security in such a situation could amount to indirectly aiding the appellant to pursue its counterclaim.

Returning to the point on intersecting cross-claims, Prakash J, in the Singapore High Court decision of Ong Jane Rebecca v Pricewaterhousecoopers and others [2009] 2 SLR(R) 796 held (at [27]) that, even if there is some overlap between the defences and counterclaims, it does not mean that no security can be ordered, and the degree of overlap can be taken into account in considering both whether security should be ordered and the quantum of security to be ordered.

Costs

Whether third party costs should have been ordered in the circumstances

(a) A court is not precluded from awarding costs in favour of or against a third party (at [23]).

(b) Such costs orders are exceptional in the sense that it is outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense – the ultimate question is whether in all the circumstances it is just to make the order (at [26]–[27], citing the Privy Council decision of Dymocks Franchise Systems (NSW) Pty Ltd v Todd and others (Associated Industrial Finance Pty Ltd, Third Party) [2004] 1 WLR 2807 (“Dymocks”) (at [25]).

(c) There are two factors, among the myriad of possibly relevant considerations, that ought to almost always be present to make it just to award costs against a non-party, even though they do not necessarily have to be present (see generally at [29]−[36]):

(i) There must be a close connection between the non-party and the proceedings – it is sufficient that the non-party either funds or controls legal proceedings with the intention of ultimately deriving a benefit from them – and whether there is a close connection depends on the facts of the case (at [30] and [34]).

(ii) The non-party must have caused the incurring of the costs – it would not be fair to order costs against the non-party if the litigant would have incurred the costs regardless (at [35]).

The principles in DB Trustees (as well as Dymocks) have also been elaborated upon in two Singapore High Court decisions as follows:

(a) The fact that the non-parties are the only shareholders and directors of a company and would therefore be the real and only beneficiaries of any successful outcome in the litigation should not be the overriding factor in consideration for otherwise “any court which rules against any closely-held company would have to order costs against its shareholders and directors personally” and “drive a coach and horses through the doctrine of the separate liability of the company” (see Raffles Town Club Pte Ltd v Lim Eng Hock Peter and others (Tung Yu-Lien Margaret and others, third parties) [2011] 1 SLR 582 at [26]).

(b) Ordering costs against a non-party and shareholder of an impecunious litigant company is to pierce the corporate veil and it is not a principle of law that where a litigant company is unable to pay costs the successful party can look to the person with a close connection to that company for costs; the corporate veil is usually only lifted where there is fraud or highly unconscionable conduct: see Nanyang Law LLC v Alphomega Research Group Ltd [2012] 4 SLR 1153 (at [5]).

The decisions referred to in the preceding paragraph are consistent with the holdings in the well-known English Court of Appeal decision in Metalloy Supplies Ltd v MA (UK) Ltd [1997] 1 WLR 1613 (“Metalloy”) where it was stated by Millett LJ (as he then was) at 1620:

Third party costs for the main claim

It was also held in Metalloy (at 1619) that there is nothing unreasonable or irresponsible about continuing an action just because the company has not the funds to fight a trial. As Millett LJ stated (at 1620), “[i]t is obviously risky for a plaintiff to begin proceedings which he cannot afford to finish, but it is not unreasonable, still less improper, for him to do so”.

Third party costs for the counterclaim below

To begin, and as counsel for the Respondents acknowledges, different considerations may apply where a company is forced to defend a claim as compared to a case where the company itself is the claimant (see, for example, the English Court of Appeal decision of Goodwood Recoveries Ltd v Breen [2006] 1 WLR 2723 at [48]).

Guidance can be found in the following passage in the pre-Dymocks decision of Taylor & Anor v Pace Developments Ltd [1991] BCC 406, a decision of the English Court of Appeal (at 409):

The appropriate order of costs

Conclusion