Northstar Marine Pte Ltd and another v Solvators Inc Pte Ltd and others

Philip Pillai JC:

[2] The first plaintiff entered into a funding agreement with the first defendant on 8 August 2008 (the “Funding Agreement”). Under the Funding Agreement, the first defendant would provide funding to the first plaintiff upon the successful completion of its due diligence investigations. As a pre-condition to the commencement of due diligence, the first plaintiff was required to pledge liquid collateral of US$2 million (“Liquid Collateral”) to the first defendant and deposit the amount into a Credit Suisse bank account opened in the first plaintiff’s name (the “Credit Suisse Singapore bank account”).

[3] Cl 1.2(d) of the Funding Agreement provided that both parties would have the right to terminate the agreement and funding program at any time prior to the expiration of the due diligence process by providing written notice specifying in reasonable detail the reason(s) for its termination; if the receiver of the funds elected not to rectify the deficiency(ies), or failed to do so within the cure period, the agreement and the funding program would be cancelled without penalty to either party, whereupon the Liquid Collateral and all applicable interest earned thereon should be released, returned and/or paid over to the first plaintiff. This should be done within seven business days of the date of the receiver’s notification that it has elected not to rectify the deficiency(ies), or upon expiration of the cure period, whichever is applicable.

[4] Other relevant terms of the Funding Agreement included:

[5] The details relating to the Liquid Collateral were set out in Appendix A of the Funding Agreement which provided:

[6] Following the opening of the first plaintiff’s Credit Suisse Singapore bank account, the second plaintiff on behalf of the first plaintiff, and the second defendant on behalf of the first defendant, signed various documents pledging the Liquid Collateral to the first defendant.

[7] The due diligence process commenced sometime in December 2008 continued until 3 March 2009, where by way of letter written by the second defendant on behalf of the first defendant, the first defendant gave notice of its intention to terminate the Funding Agreement to the first plaintiff in the following terms:

[8] By letter of 5 March 2009, the second plaintiff on behalf of the first plaintiff replied, inter alia, as follows:

[9] After the termination of the Funding Agreement, the first defendant did not proceed to release the Liquid Collateral to the first plaintiff and there laid the origin of this action.

[10] The second plaintiff discovered sometime in August 2009 that the first defendant had used the Liquid Collateral as security to Credit Suisse Singapore in respect of the utilisation of a US$27 million credit facility, and sometime in September 2009, Credit Suisse Singapore declared an event of default and had applied the Liquid Collateral towards payment of US$3,562,294.23 owing by the first defendant to the bank. The first plaintiff, through its solicitor, wrote a letter dated 7 September 2009 to the first defendant, demanding the return of the Liquid Collateral on the basis of alleged misrepresentations by the first defendant, or alternatively, the first plaintiff’s letter of 5 March 2009.

[11] The only issue before me in this appeal is whether summary judgment should be granted or whether there were triable issues raised by the first defendant such that leave to defend ought to be granted as determined by the AR.

[12] The pivotal issue turns on whether there are triable issues on whether (as the first plaintiff avers) the Funding Agreement had been terminated or (as the first defendant avers) that termination had been subsequently rescinded. The first defendant’s case was that the first plaintiff’s letter of 5 March 2009 could not be seen as an election not to exercise the cure period as the letter ought to be viewed in the context of the parties’ conduct at the material time. It was submitted that despite the purported termination of the Funding Agreement by this letter, the first plaintiff had by conduct, subsequent to the letter, expressed a desire to continue with the due diligence process under the Funding Agreement by working on the business plan. The first defendant relied on extensive contemporaneous telephone conversations and email correspondence in order to run its defence that the second plaintiff had rescinded the termination of the Funding Agreement in light of his subsequent conduct.

[13] In the cold light of the Funding Agreement, the critical written ultimatum issued by the first defendant, and the prompt written election in response, I found no merit in these extensive factual submissions. The Funding Agreement appeared on its face to be a standard document prepared by the first defendant. In cl 10.3 it carefully excluded oral understandings, representations or agreements between the parties which had not been set forth in the agreement or in other written agreements signed by the parties in connection herewith prior to and contemporaneous with its execution. Furthermore, cl 10.5 provided that there was not to be, subsequently, any waiver or “amend[ment], except in writing executed by RECIPIENT and a duly authorised officer of SOLVATORS’. It was beyond debate that there had been no such subsequent written amendment or waiver on the terms prescribed by cl 10.5 that would have supported the first defendant’s submission.

[14] The second plaintiff’s subsequent conduct in working on a business plan despite having elected in writing to terminate the Funding Agreement does not necessarily denote that the prior written definitive termination was rescinded. According to the Funding Agreement, in the event the second plaintiff was able – after the termination of the Funding Agreement – to develop a business plan acceptable to the first defendant, it would have been open to the parties either to agree in writing to revive the terminated Funding Agreement as provided or, indeed, to enter a fresh funding agreement.

[15] The first defendant further submitted that cl 1.2(d) of the Funding Agreement had not been properly triggered by the first plaintiff’s notice of termination in the letter dated 5 March 2009 because the Funding Agreement could not be terminated without cause. This submission was again, in my view, unmeritorious. The cure period was for the benefit of the recipient if it elected to use it. When the recipient replied to the terminating party, in response to an express notice to a cure period or immediate termination, he would be entitled to elect termination in lieu of cure. The termination was issued by the first defendant in its letter dated 3 March 2009 in clear and unambiguous terms, requiring the first plaintiff to elect either for the cure period or termination of the Funding Agreement and release of the pledge. This was followed by the first plaintiff’s equally clear and unequivocal letter of election of termination and request for the release of the Liquid Collateral in its reply of 5 March 2009. Having been issued an unequivocal cure or terminate ultimatum in writing, which it followed by a prompt written reply and election to terminate, it did not then lie in the mouth of the first defendant to say that the termination had not been properly triggered by the first plaintiff’s reply of 5 March 2009.

[16] Moreover, it was evident from the email correspondence subsequent to the 5 March 2009 letter and between the second plaintiff and the second and fourth defendants that the corporate first defendant could not be said not to have been put on notice of the first plaintiff’s exercise of its right of termination and the consequential requirement to release the Liquid Collateral. Extracts of the relevant emails between the parties read as follow:

[17] In the light of the above, I allowed the appeal with summary judgment for the first plaintiff against the first defendant for the adjusted sum of US$1,469,131.32 and interest at the rate of 5.33% per annum and a stay of execution for up to US$300,000 until final determination of Suit No 791/2009N at trial.