Oversea-Chinese Banking Corp Ltd v Frankel Motor Pte Ltd and Others

Kan Ting Chiu J:

[1] The appellant, Ho Yik Fuh, is the second defendant in this action. The plaintiff, Oversea-Chinese Banking Corporation Limited, had entered judgment against him in default of appearance after effecting service on him by substituted service. The plaintiff had obtained an order of court on 21 December 2007 to effect service of the writ on the appellant by posting it at the appellant’s last known address at 35 Simei Street 4 #10-03 Modena Singapore 529869 (“the Simei address”). Service under the order of court was effected on 8 January 2008 and default judgment was entered on 17 January 2008.

[2] The plaintiff had sued the first defendant, Frankel Motor Pte Ltd (“Frankel Motor”), a customer of the plaintiff to which the plaintiff had granted banking facilities. The plaintiff also sued three directors of the company, including the appellant, who had stood guarantee for Frankel Motor.

[3] The appellant’s application stated that the grounds of the application are set out in the affidavit filed in support of the application. In that affidavit, he deposed:

[4] From his affidavit, it can be seen that the appellant was relying on two grounds to set aside the judgment namely:

(i) he was not residing at the Simei address since November 2007, and had changed the address in his NRIC in early December 2007 to 69A Frankel Avenue, and

(ii) he does not remember signing any guarantee because no one explained or told him that any personal guarantee was required from the directors of Frankel Motor.

[5] The appellant’s application was first heard by an assistant registrar, and was dismissed and he appealed against that decision. In the course of the appeal before me, his counsel raised further grounds in support of the application not pleaded in the application or the affidavit filed in support, which I disregarded.

[6] The appellant’s Simei address had been inserted in the loan documents between the plaintiff and Frankel Motor. From the outset, when the plaintiff issued its letter of offer to Frankel Motor on 22 April 2005, the appellant was named as one of the required guarantors and his address was stated as the Simei address. When the appellant executed the guarantee on 25 April 2005, the same address was used in the document.

[7] When the plaintiff applied for the writ to be served by substituted service at the Simei address, it was on the basis that it was the address of the appellant last known to the plaintiff. In support of the plaintiff’s application, an affidavit by the plaintiff’s solicitors’ clerk was filed on 19 December 2007 in which he deposed that he went to the Simei address on 13 and 17 December 2007 to serve the writ on the defendant but was informed by the defendant’s wife on each occasion that he was not in.

[8] Before making the application, the plaintiff’s solicitors had made a search on the Simei address which showed that the appellant was one of the two owners of the property and that property was owner-occupied. The solicitors apparently took heed to comply with the guidelines for such applications laid down in the Singapore Civil Procedure 2007 (Sweet & Maxwell Asia 2007) at 62/5/5:

[9] The appellant’s case is that he was not residing at the Simei address when the attempts at service were made and when substituted service was effected there. He acknowledges that he continued to own the property up to and after the plaintiff entered judgment against him, and he does not dispute the evidence of the service clerk who attempted to serve the writ on 13 and 17 December 2007 at the Simei address that on each occasion he was informed by the appellant’s wife that he was not in.

[10] Although the appellant registered the change of his address with the National Registration Office in early December 2007, he did not inform the plaintiff of the change. As his address registered with the National Registration Office is not accessible to the plaintiff or its solicitors, the Simei address was the last address of the appellant known to the plaintiff, and it cannot be criticised for attempting service and applying for substituted service at that address.

[11] When the plaintiff effected service of the writ by substituted service, it was done under the authority of the court. The Singapore Court Practice 2006 (Lexis Nexis 2006) state at 62/5/1:

While it is not clear in this passage whether an application should be made to set aside the order for substituted service as well as the judgment entered, there is authority that the defendant should apply to set aside the order for substituted service.

[12] In Watt v Barnett (ibid), Jessel MR indicated that the order for substituted service should be set aside when he held at p 366 that:

[13] The Singapore Court Practice 2006 also referred to the decision of the Malaysian Supreme Court in Development & Commercial Bank Bhd v Aspatra Corp Sdn Bhd & Anor [1995] 3 MLJ 472 which held that other than in exceptional circumstances, the validity of an order for substituted service may only be challenged by proceedings instituted for that purpose, and not collaterally in related proceedings.

[14] Having regard to these views, there are two avenues open to a party against whom judgment in default has been entered subsequent to substituted service to set aside the default judgment. It can:

(i) apply to set aside the order for substituted service, and proceed to have the default judgment set aside on the basis that it is an irregular judgment, or

(ii) apply to set aside the judgment on the basis that it is a regular judgment, and proceed to have it set aside on merits.

[15] In the present case, the appellant had not applied to set aside the order for substituted service, and if he had done that, the order would not be set aside because he had not made out a case for it to be set aside.

[16] The law relating to the setting aside of default judgment have been examined at and considered by the Court of Appeal in Mercurine Pte Ltd v Canberra Development Pte Ltd [2008] 4 SLR 907 (“Mercurine”).

[17] In this landmark decision, the Court reviewed the principles applied by the courts of Singapore and other jurisdictions in dealing with applications to set aside default judgments. It then set out the proper bases for setting aside such judgments.

[18] The Court concluded by laying down two bases. The first basis, set out in [60] of its judgment, is that:

This represents a reversion to the test set out by the House of Lords in Evans v Bartlam [1937] AC 473 in favour of the test set by the English Court of Appeal in Alpine Bulk Transport Co Inc v Saudi Eagle Shipping Inc; The “Saudi Eagle” [1986] 2 Lloyd’s Rep 221 which was accepted and applied in Singapore by the Court of Appeal in Abdul Gaffer v Chua Kwang Yong [1995] 1 SLR 484.

[19] The second basis, set out in [74] is that:

The ex debito justitiae rule the Court referred to is the rule in Anlaby v Praetorius (1888) 20 QBD 764 that a defendant is entitled to set aside an irregular default judgment as of right.

[20] In the present case, as the appellant had not shown that the order for substituted service was improperly obtained or that the default judgment was entered improperly, the law to be applied is the test for setting aside regular judgments, i.e. to succeed, the applicant has to present a defence on merits.

[21] Applying the first test set out in Mercurine, the question is whether the appellant can establish “a prima facie defence in the sense of showing that there are triable or arguable issues”.

[22] To recapitulate, the appellant deposed in his affidavit that:

[23] The appellant stops short of denying that he signed the guarantee. He claims that he does not remember signing any guarantee, and that does not amount to a defence. He acknowledged that a bank officer had delivered the documents for signature and he knew that the documents were for the financial facilities for Frankel Motor. He implies that when he signed the documents, he was not aware that they included a guarantee. He is therefore raising the defence of non est factum in respect of the guarantee.

[24] Has he shown a sufficient basis to raise a defence of non est factum? He is a director of Frankel Motor and was actively involved in the company’s affairs. He is sufficiently proficient in the English language to have signed his affidavit without the need for translation. The plaintiff’s offer of facilities was conditional to the appellant issuing his personal guarantee. The appellant had signed Frankel Motor’s acceptance of the offer as well as Frankel Motor’s directors’ resolution to accept the plaintiff’s offer. The guarantee the appellant signed had the words ‘personal guarantee’ printed in large capital letters at the top of the document, and it was stated in clear terms that the three guarantors were giving their irrevocable and unconditional guarantees to the plaintiff in connection with the financial facilities extended to Frankel Motor. At the end of the document, the appellant had placed his signature above the printed and typewritten words “Guarantor’s Name: Ho Yik Fuh”.

[25] The defence of non est factum is explained succinctly in Halsbury’s Laws of Singapore, Vol 7 (2005 Reissue Lexis Nexis Singapore) at [80.169], [80.170] and [80.171]:

[26] As the appellant knew that he was signing documents in connection with the financing facilities extended to Frankel Motor, and the guarantee was an integral part of the financial arrangement, it cannot be said that he had made a fundamental mistake on the character and effect of the guarantee he signed. Furthermore, in view of the prominent presence of the words “personal guarantee” and “guarantor’s name” on the guarantee executed, even if the appellant did not realise that he was signing a guarantee, his negligence and carelessness in being so oblivious about the document he was signing disentitle him from pleading non est factum.