PT Muliakeramik Indahraya TBK v Nam Huat Tiling & Panelling Co Pte Ltd

AR Teo Guan Siew:

[2] The plaintiff, a company incorporated in Indonesia, entered into various contracts with the defendant, under which the plaintiff supplied floor tiles to the defendant for use in HDB projects. The plaintiff commenced action claiming for amounts allegedly due for certain batches of tiles that were delivered to the defendant (“the material tiles”).

[3] The defendant did not deny that the material tiles were delivered, but resisted the claim on the ground that the tiles were defective in that they (a) did not comply with the contractual specifications, and/or (b) were in breach of the implied condition as to quality under s 14(2) of the Sale of Goods Act (Cap 393, 1999 Rev Ed). The defendant further counterclaimed for damages in respect of the alleged defects in the material tiles. In addition, the defendant sought recovery of payments which they made to the plaintiff for earlier batches of tiles (“the other tiles”) on the basis that the plaintiff had misrepresented that the tiles would comply with HDB standards. The final aspect of the counterclaim was to recover sums which the defendant incurred in contributing to rectification works that were allegedly necessitated by the defects in the plaintiff’s tiles.

The Court of Appeal reasoned that in these circumstances, it will serve no purpose to stay the claim of the plaintiff in the event that security is not provided. The Court of Appeal went on to rely on this in denying the defendant security for costs.

[8] In the application before me, counsel for the defendant, Mr Koh, sought to distinguish JTC v Wishing Star by submitting that in that case, the defence and the counterclaim were in fact identical, whereas his client’s counterclaim covers much more than its defence. He argued that there should be complete overlap between the defence and counterclaim before the aforesaid principle in JTC v Wishing Star is operative. In support of this argument, he relied on T Sloyan & Sons (Builders) Ltd and another v Brothers of Christian Instruction [1974] 3 All ER 715 (“T Sloyan”).

[12] Similar considerations apply in the converse situation when a plaintiff is asking for security from a counterclaiming defendant. If the counterclaim is in essence in the form of a defence and arises out of the same matter, security will generally not be ordered: see Neck v Taylor [1893] 1 QB 560.

[16] While it is possible to analogise a defendant who is counterclaiming to a plaintiff, it may be quite a different matter to try and equate the two. A defendant is not the instigator of the litigation; he is instead the party brought into the proceedings and who has to defend himself against attack. The fact that he subsequently decides to take an extra step to pursue a counterclaim does not necessarily equate him to a plaintiff who has decided to take the first step to initiate legal proceedings.

[19] In my view, the fact that the defence is entirely subsumed within the counterclaim cannot be a decisive factor against ordering security. It remains a mere factor to be taken into account in the court’s exercise of discretion. This conclusion is supported by O 23 r 1 itself, which says that security should be ordered only if it is just having regard to all the circumstances of the case. In fact, the conclusion is also supported by the decisions in JTC v Wishing Star and BJ Crabtree. In the former, the overlap of the defence and counterclaim was expressly stated by the Court of Appeal to be just one of the two critical factors that weighed heavily against ordering security. In the latter, Bingham J said:

[20] As such, even though the defence is based on the alleged defects in the material tiles which also form the ground for the counterclaim for damages, I did not regard it as fatal to the defendant’s application for security.

[22] I was wary of entering into a detailed examination of the merits of their respective cases at this stage of the proceedings, but on the materials before me, I was satisfied that the plaintiff’s claim did bear a reasonably good prospect of success.