B2C2 Ltd v Quoine Pte Ltd [2018] SGHC(I) 08

Introduction

Background facts

It is not necessary for the purpose of this judgment to rehearse the facts in any further detail, beyond the following.

The Defendant is a Singapore registered company which operates a currency exchange platform (the “Platform”) enabling third parties to trade virtual currencies for other virtual currencies or for fiat currencies such as Singapore or US dollars. The two virtual currencies involved in this action are Bitcoin (“BTC”) and Ethereum (“ETH”).

The Plaintiff is a company registered in England and Wales trading inter alia as an electronic market maker providing liquidity on exchange platforms by actively buying or selling at the prices it quotes for virtual currency pairs, thereby generating trading revenue.

On 19 April 2017, the Plaintiff placed a number of ETH/BTC orders on the Defendant’s platform, of which seven orders are the subject of this litigation.

According to the Defendant, sometime after 23:30 on that day, a “technical glitch” arose on the Platform as a result of which those orders were met at a rate approximately 250 times the then market rate previously quoted for ETH/BTC exchange. On discovering this, the Defendant unilaterally reversed the trades, which the Plaintiff contends constituted a breach of the agreement between them.

The action was originally commenced in the Singapore High Court but was subsequently transferred to the Singapore International Commercial Court (“SICC”) on 24 August 2017.

In response to the plaintiff’s application for summary judgment (referred to at [1] above), the Defendant put forward a number of proposed defences, two of which I held to be arguable. These were referred to in the judgment under the headings “Issue (b): The Risk Disclosure Statement argument” and “Issue (c): Unilateral mistake at common law”. Of the other proposed defences, I said this at [29]:

Since that date, the Defendant has decided to have all the issues considered at trial with the consequence that the current estimate of the length of trial is about six days.

The present application

(a) The Plaintiff, being a UK company, is a foreign registered company that is ordinarily resident out of the jurisdiction.

(b) The Plaintiff does not have a place of business in Singapore and has no fixed assets here.

(c) Although there is a bilateral enforcement regime between Singapore and the UK, if it will be necessary to enforce any order as to costs, this would involve the expense of instructing solicitors in the UK.

(d) The order for security will not stifle the Plaintiff’s claim.

The Plaintiff opposes the making of the order on the following grounds.

(a) In contrast to O 23 r 1, foreign residency is not a ground for ordering security for costs under O 110 r 45 of the Rules.

(b) On the facts of this case it would not be just to order security because:

(i) the Plaintiff is an established company, both in the UK and globally, with over $6 million of paid-up capital and millions of dollars in retained earnings;

(ii) it has an aggressive growth strategy in South-East Asia, particularly in Singapore;

(iii) there are no grounds for suggesting that the Plaintiff will not comply with any order for costs since the Plaintiff has throughout the action complied with all orders and directions of the Court;

(iv) enforcement through the UK courts will be a relatively easy matter if the Plaintiff did not comply with orders made by the Court; and

(v) the Plaintiff’s case is a strong one.

(c) In any event, the Plaintiff contends that the quantum sought is far too high and that the security already provided is adequate. In particular, any increased costs were due to the Defendant’s decision to continue pursuing all issues raised.

Order 23 r 1 and O 110 r 45 of the Rules

Order 110 r 45 is however the rule which applies to cases in the SICC. The relevant parts of the rule provide:

So far as concerns an action commenced in the SICC, the position is clear. Order 23 r 1(1) and (2) of the Rules do not apply. The mere fact that the plaintiff is a foreign company does not entitle the defendant to obtain security; it must demonstrate that one or other of the threshold conditions set out in O 110 r 45(1B)(a) of the Rules applies and then the Court has a discretion whether or not to order security on the basis of the facts of each individual case.

A difficulty however arises in the case of an action transferred from the High Court. Order 23 r 1(1) of the Rules again does not apply, yet O 110 r 45(2) (but not O 110 r 45(1B)) is expressly disapplied by virtue of O 110 r 45(2A) of the Rules. So, on a literal reading, O 110 r 45(1B) of the Rules still sets out the threshold conditions, one of which which must be met in order to obtain security, and these do not include the mere fact that the plaintiff is a foreign company. Yet, the prohibition against ordering security on the sole ground that the plaintiff is a foreign company (as contained in O 110 r 45(2)) is excluded by O 110 r 45(2A) of the Rules.

Mr Paul Ong, for the Defendant, submits that the effect of the exclusion is to add a further threshold condition to O 110 r 45(1B) of the Rules which is the same as that in O 23 r 1(1)(a) of the Rules, ie, “that the plaintiff is ordinarily resident out of the jurisdiction”. He further contends that this does not serve merely to reinstate O 23 r 1 of the Rules since the threshold conditions in the two rules are different. He urges upon me that it would be wrong to interpret the rules as denying a defendant who had been initially sued in the High Court of the protection that O 23 r 1(1)(a) of the Rules provides merely because the action has been transferred.

Accordingly, the parties were given an opportunity to consider this decision and to make written submissions on it, if they were so minded. Both parties did so.

I first set out in brief the salient facts of Teras. The grounds of the plaintiff’s application were that:

(a) the defendant was a foreign entity with no known assets within the jurisdiction;

(b) the defendant’s financial position was precarious; and

(c) the defendant’s counterclaim held little or no weight.

Having heard the parties’ arguments, Eder IJ gave a short ex tempore judgment. He held that the application for security was to be decided under O 110 r 45 and not O 23 of the Rules. In relation to the fact that the defendant was a foreign corporation, he said this:

The learned judge went on to conclude, first, that there was a strong likelihood that the defendant would not be able to pay any sums due but, secondly, that the issues arising on the counterclaim were in substance the same as the issues arising on a pleaded defence of set-off. He therefore declined to order security.

In a letter dated 12 July 2018 from the Defendant, it was contended that Eder IJ’s decision was distinguishable because both the parties had proceeded on the basis that security would not be ordered merely because the relevant party was a foreign entity and there was thus no argument as to how O 110 r 45 ought to be interpreted in the light of O 110 r 45(2A). As appears from the extract from the judgment cited above at [22], the case proceeded on the basis of the defendant’s impecuniosity, which was a ground for ordering security under O 110 r 45(1B)(a)(iv) of the Rules.

From the available material, it does indeed appear that there was no argument on the correct interpretation of O 110 r 45 in a transfer case. No mention was made of O 110 r 45(2) or r 45(2A). The point that was taken in this case was not, apparently, raised in Teras. In those circumstances it would, I believe, be wrong to hold that it was authority for the proposition contended for by the Plaintiff. The matter has now been fully argued before me and I must therefore decide the question.

The interrelationship of the wording of O 110 r 45 of the Rules does not make for ease of interpretation. A provision inserted for the avoidance of doubt (ie, O 110 r 45(2)) is then excluded (via O 110 r 45(2A)), rather than expressly added to the categories contained in O 110 r 45(1B). However, I am satisfied that this is the effect of the language.

The spirit underlying O 110 r 45 of the Rules as a whole is that where a case is commenced in the SICC, this will be because the case is international in nature. It is therefore likely to include foreign corporations so this fact should not be material in assessing whether to order security. The focus should be on the plaintiff’s status and/or conduct rather than its nationality. Conversely, in a transfer case, the parties would not have at the outset agreed to litigate in the SICC. The plaintiff had elected to sue the defendant in the High Court where “foreignness” is a relevant consideration in determining whether to order security against the plaintiff, and the defendant should not lose this right by virtue of transfer.

In my judgment therefore, the overall effect of the wording of O 110 r 45 of the Rules is that the fact that the plaintiff is ordinarily resident out of the jurisdiction is to be notionally added to the threshold conditions of O 110 r 45(1B). So doing does not have the effect of re-applying the entirety of O 23 r 1(1) and r 1(2) (which is not permitted under O 110 r 45(1A)) since, although similar, the threshold conditions are not the same.

The circumstances of the case

The principles to be applied in considering the exercise of discretion in cases where a foreign plaintiff is involved have been established under O 23 of the Rules. I was referred to the observations of the Singapore Court of Appeal in Jurong Town Corp v Wishing Star Ltd [2004] 2 SLR(R) 427 at [14]:

This was amplified upon by the Singapore High Court in Pacific Integrated Logistics Pte Ltd v Gorman Vernel International Freight Ltd [2007] 1 SLR(R) 1017 at [5]:

The approach under O 110 r 45 of the Rules in a transfer case should be the same because “foreignness” remains a relevant ground for ordering security.

In this case, I consider that the following factors weigh either for or against ordering security.

(a) In favour:

(i) The Plaintiff is a UK (and therefore foreign) corporation and accepts that it has no fixed assets in Singapore.

(ii) Any failure to pay would therefore necessarily result in the inconvenience, delay and expense of seeking to enforce any order. There is, of course, weight that must be attached to this.

(b) Against:

(i) It is common ground that the Plaintiff is an established company. Both parties rely on this. The Defendant relies on this as supporting its submission that an order for security would not serve to stifle the action. The Plaintiff relies on this as supporting its submission that there is no fear that it is not good for the sums that might be awarded in costs. To my mind, greater weight should be attached to the Plaintiff’s submission in this case. Even if the Defendant had to enforce in the UK, it would eventually obtain payment.

(ii) The Plaintiff has not conducted itself in a manner which is calculated to induce the belief that it might not voluntarily comply with any award. There is therefore no reason to believe that it would avoid or seek to frustrate an order for costs. I consider that weight should be attached to this. The Plaintiff has conducted this litigation properly at all times and, in particular, voluntarily provided the security so far given without admitting that it was appropriate but to save the costs of a contested application (see [10] above).

(iii) Whilst there would be delay, expense of enforcement and the inconvenience of having to instruct foreign lawyers if that turned out to be necessary, there is a bilateral enforcement regime between Singapore and the UK and the enforcement procedures in UK are tried and tested and efficient. There is substance in this which reduces, but does not remove, the weight that should be attached to the enforcement point mentioned at [(a)(ii)] above.

Taking all these matters into account I conclude that, on the facts of this case, matters are not evenly balanced. The balance lies on the side of not granting security and the fact that the Plaintiff is a foreign corporation does not serve to tip the balance in the Defendant’s favour. In the exercise of my discretion therefore, I do not think it is just to make an order for further security.

Quantum

Accordingly, it is not necessary to consider the quantum of security to be granted and I shall only say this. In assessing quantum, I do believe that it would be right to take into account the fact that the Defendant is pursuing at trial a number of defences that were considered in the summary judgment application, in relation to which I made the observation set out at [8] above. I would therefore have taken this into account in deciding what level of security, if any, over and above that already provided, would be appropriate.

Conclusion