Riviera Co, Ltd v Toshio Masui [2023] SGHC 223

Introduction

Applying to amend one’s defence is often important to ensure that the real issues in controversy between the parties are determined, especially if the process of litigation, including discovery, brings to light new facts. However, it may sometimes be little more than a belated attempt to prolong litigation and postpone judgment. The latter was the case here, and I dismissed the defendant’s application to amend to introduce a new defence filed after the plaintiff had succeeded via a combination of a trial on preliminary issues and a striking out application in defeating the defendant’s pleaded defences to the plaintiff’s action herein. It was plain to me that the proposed amendment was as unsustainable as, and in large measure a paraphrasing of, its already struck out defence.

On 28 July 2023, the defendant appealed against my dismissal of his application to amend, and these grounds of decision explain why I dismissed it.

Facts

The parties

The plaintiff is Riviera Co, Ltd, a Japanese company. On 1 April 2021, the plaintiff succeeded to all the rights and obligations of another Japanese company, Aoi Corporation, by what is known as an absorption merger. Aoi Corporation bought, sold and leased real estate and also brokered real estate transactions. The defendant is a Toshio Masui, a Japanese national. I will refer to the parties respectively as Riviera Co and Mr Masui. Mr Masui is the founder and representative of Orange Grove Capital Management Pte Ltd, a real estate company incorporated in Singapore (“Orange Grove Capital”).

Background to the dispute

This action was for the enforcement of a foreign final and binding monetary judgment granted by the Tokyo District Court on 6 February 2020 and upheld by the Tokyo High Court on 22 October 2020. Mr Masui did not appeal further. The Tokyo District Court judgment was granted in respect of a loan agreement dated 16 January 2015 (“the Loan Agreement”).

Procedural history

This action was commenced on 1 July 2021. There were two amendments made by Riviera Co in respect of its name. Mr Masui raised two defences. One was that under Japanese law certain formal notice and certification requirements had not been met and hence the Tokyo judgments were not enforceable by Riviera Co (“the first defence”). The second was that the Tokyo District Court judgment had been procured by fraud and/or its enforcement would be contrary to public policy (“the second defence”).

On 30 January 2023, I heard the trial of the first defence as a preliminary issue. Experts in Japanese law testified and were cross-examined. I ruled in favour of Riviera Co. On the same day, I heard Riviera Co’s application to strike out the second defence, and I again ruled in Riviera Co’s favour. There was no appeal from my decision.

In striking out the second defence, I recorded the following:

Thus, at the hearing on 30 January 2023, I was ready to enter judgment against Mr Masui pursuant to Rules of Court O 18 r 19(1) (2014 Rev Ed), and would do so unless Mr Masui filed an application to amend within the time granted to him and in due course obtained leave to amend. After hearing counsel, I directed that any amendment application be filed by 20 February 2023. I later extended this to 13 March 2023, when this amendment application was filed. The new defence had two limbs:

(a) the underlying cause of action was to enforce a contract to deceive the Monetary Authority of Singapore (“MAS”); and

(b) the underlying cause of action was to enforce a contract which was not unlawful per se but entered into with the object of committing an illegal act.

The proposed amendment read in full as follows:

The proposed amendment differed from that foreshadowed on 30 January 2023 in that Mr Masui did not aver that he too was a party to the alleged deception of MAS. Instead, all blame was placed on Aoi Corporation, who was alleged to have effective control over Orange Grove Capital even though it nominated only one member of the board, a board which comprised two others including Mr Masui. The proposed amendment avers knowledge and intention only on Aoi Corporation’s part: see particulars (e) and (g).

Applicable law

After my decision in this matter, Goh Yihan JC released his judgment in a matter under the Rules of Court 2021 concerning an application to amend sought after entry of summary judgment in the case of Wang Piao v Lee Wee Ching [2023] SGHC 216. In that judgment, he undertook a comprehensive survey of the case law, and at [40] formulated the following three stage framework:

At [41(b)], Goh JC amplified materiality as follows:

Returning to the question of materiality, “leave to amend a defence should not be granted where the amendment raises no reasonable defence to the claim”: per the Court of Appeal in Lim Yong Swan v Lim Jee Tee and another [1992] 3 SLR(R) 940 at [43].

Reasons for my decision

This application to amend was brought after trial of Mr Masui’s first defence as a preliminary issue and after striking out of his second defence. It was filed about 21 months after the proceedings in Singapore began, about 40 months after the Tokyo District Court judgment and about eight years after the original transaction. The significance of this was that Mr Masui had had ample time to consider together with his advisers what his defences to liability might be, and that his delay in making the application raised the question of whether he was choosing to raise defences in a piecemeal fashion for purposes of delay. This in turn raised the question of his bona fides. Mr Masui provided no proper explanation for his delay. Allowing an amendment at this late stage would undoubtedly prejudice Riviera Co, who as a foreign judgment creditor has been entitled to the fruits of its judgment for more than three years.

Given the lateness of the application, and the lack of proper explanation for the delay, as well as the prejudice to Riviera Co, I considered it all the more important to scrutinise the viability of the proposed defence closely.

In my judgment, the proposed amendment failed to raise any reasonable defence. This was first because on its face it did not implicate or impugn the Loan Agreement itself. It did not plead that the Loan Agreement was a sham drawn up to deceive MAS or that the loan was not in fact made. Rather it made allegations concerning Aoi Corporation’s motivations and intentions in respect of maintaining the base capital requirement of S$250,000. These allegations raised at most a collateral matter which it would be for MAS to investigate and consider whether any offence was committed by Riviera Co under s 97C of the Securities and Futures Act 2001 (2020 Rev Ed) (“Securities and Futures Act 2001”). Mr Masui’s counsel candidly confirmed that MAS has taken no action.

Secondly, even if the proposed amendment had averred that the Loan Agreement was a sham or the loan not made, such an averment would be precluded by the findings of the Tokyo District Court which are binding on parties (Mr Masui having given up on or failed in any defence that its judgment was procured by fraud). The Tokyo District Court had already held that the Loan Agreement was entered into and the loan disbursed (albeit with the flow of funds being directly to Orange Grove Capital), and its judgment was upheld by the Tokyo High Court. The Tokyo High Court also held that the Loan Agreement was “valid and its intent was not falsely expressed”. It followed from these findings that the Loan Agreement itself was not “a contract to deceive public authorities”.

Turning to the alternative ground that it was a lawful contract entered into with the object of committing an illegal act, there was no clear pleading of how the entry into the Loan Agreement and the disbursement of the loan would be tied to the commission of an illegal act. Logically, there was no link. The Loan Agreement stood in the background rather than as part of any scheme to deceive, even if there was such a scheme. Even if the plaintiff “knew that the arrangements related to the alleged Loan Agreement were insufficient for Orange Grove [Capital] to meet its obligation of maintaining the Base Capital of S$250,000 required by MAS” this did not mean that the Loan Agreement had the object of causing Orange Grove Capital to fail to meet the capital requirement or of disguising Orange Grove Capital’s failure to meet the capital requirements.

This analysis was strengthened by Mr Masui’s change of position since the hearing on 30 January 2023. Contrary to what was suggested he would do at that hearing, the proposed amendment did not include any averment that Mr Masui shared the object of causing or disguising Orange Grove Capital’s failure to meet capital requirements. This means that at the time when he received the loan, Mr Masui must be taken to have understood his obligations under the Loan Agreement, including to repay the loan at the end of its term.

Counsel for Mr Masui cited the Court of Appeal decision in Ochroid Trading Ltd and another v Chua Siok Lui (trading as VIE Import & Export) and another [2018] 1 SLR 363, at [35], describing the “broad and general category of contracts illegal at common law comprising contracts which are not unlawful per se but entered into with the object of committing an illegal act. This category depends on the intention of one or both of the contracting parties to break the law at the time the contract was made” [emphasis in original omitted].

The illegal act was pleaded to be that Aoi Corporation “caused Orange Grove [Capital] to give deceptive statements to the MAS stating that Orange Grove [Capital] would maintain the Base Capital of S$250,000 required by MAS” in breach of Section 92 of the Securities and Futures Act 2001. This section concerns false or misleading statements in connection with applications for the grant or variation of a capital markets services licence (“CMS Licence”).

Mr Masui’s own evidence was that the funds under the Loan Agreement were paid directly by Aoi Corporation to Orange Grove Capital as a capital injection in order to obtain the CMS Licence. Orange Grove Capital then used the funds from the capital injection to repay liabilities it owed to Aoi Corporation. This could not be said to have been an illegal object of the entry into the Loan Agreement. Indeed, shareholders’ injecting equity which is then used to pay off liabilities of the company is a commonplace method of improving a company’s liquidity and solvency.

A further point was that Mr Masui’s original plea by his second defence included the contention that the Loan Agreement was “illegal and unenforceable”. This plea was struck out by me on 30 January 2023 as being unsustainable. I agreed with Riviera Co’s counsel that much of the proposed amendment was a paraphrase of Mr Masui’s second defence and unsustainable for the same reasons.

Conclusion

While I did not consider the application to amend as in itself an abuse of process, I concluded that it was a last-gasp grasping at a straw that was insufficient to keep the defence afloat.

For these reasons, I dismissed Mr Masui’s application to amend his defence and proceeded to enter judgment as foreshadowed on 30 January 2023.