Rankine Bernadette Adeline v Chenet Finance Ltd

Kan Ting Chiu J:

[1] In this action, the Defendant, Chenet Finance Limited, was given conditional leave to defend the claim of the Plaintiff, Rankine Bernadette Adeline. The Defendant has appealed against my order. In the meantime, final judgment has been entered after the Defendant failed to comply with the condition imposed.

[2] The Plaintiff was a holder of 1,000,000 shares of a company Berlian Ferries Pte Ltd (“Berlian”) in May 2004. The Plaintiff discovered that those shares in Berlian (“the shares”) had purportedly been sold by her with consideration paid to her, and that the Defendant was the purchaser of the shares. As the Plaintiff had not agreed to sell the shares to the Defendant and had not received any consideration from the Defendant, she sought from Berlian copies of any transfer of shares signed by her. Berlian in turn informed the Defendant that it (Berlian) did not have the transfer forms relating to the shares. Berlian also informed the Defendant that as the Defendant’s representatives had inspected and made copies from the secretarial files of Berlian, the Defendant should reply to the Plaintiff, but the Defendant had not supplied copies of the transfer forms to the Plaintiff.

[3] When she received no satisfactory reply to her queries, the Plaintiff sued the Defendant. She asserted that the alleged transfer was a fraud and was void, that the Defendant is not the legal or beneficial owner of the shares, and claimed for the return of the shares and damages.

[4] The Defendant filed its defence to the Plaintiff’s claim. In the defence, the Defendant stated that it was the holder of 24,017,983 shares of Berlian including the 1,000,000 shares claimed by the Plaintiff. The Defendant pleaded that it was unable to give full particulars of the acquisition of the Plaintiff’s shares, and the best particulars that the Defendant could give was that “1,000,000 shares was acquired from the Plaintiff around 2005”.

[5] The Defendant pleaded further that:

[6] The Defendant resisted the Plaintiff’s application for summary judgment and filed an affidavit through its director and shareholder, Tan Yeang Tze Tobby (“Tan”). In this affidavit, it was alleged that:

I refer to this defence as the “re-structuring arrangement defence”, and will comment on this later.

[7] Tan also referred to the absence of the records of the transfer. He deposed that:

[8] In the Defendants’ Submissions, the same matter was brought up, that:

[9] After the statement of claim and defence were filed, the Plaintiff applied for summary judgment under O 14, Rules of Court (Cap 322, R5, 2006 Rev Ed). The matter went on for hearing before an Assistant Registrar who dismissed the application and gave the Defendant unconditional leave to defend the action. The Plaintiff appealed against the Assistant Registrar’s decision and the appeal came before me.

[10] The Plaintiff started its submission in the appeal with the law governing applications for summary judgment. This has been succinctly stated by Justice Judith Prakash in Associated Developments Pte Ltd v Loong Sie Kiong Gerald [2009] 4 SLR(R) 389 at [22]:

[11] Counsel submitted that the Plaintiff had established that she was the owner of 1,000,000 Berlian shares by producing a copy of the share certificate. In any event, the Defendant acknowledged that the Plaintiff held 1,000,000 shares, and the Defendant claimed ownership over them.

[12] For the purpose of the application under O 14, the Plaintiff had a prima facie case for judgment on her claim that she was the owner of the shares, and the shares were transferred to the Defendant without her consent or knowledge. Although the Defendant disputes the Plaintiff’s ignorance over the transfer, the Plaintiff had put forward a prima facie case for judgment in that she can get judgment if her case is accepted. It does not mean that she is entitled to judgment as of right; that is the very question to be decided at the hearing of her application, when her claim as well as the defence is examined.

[13] Counsel for the Plaintiff questioned the Defendant’s right to rely on the re-structuring arrangement defence. The objection was taken because the arrangement was not raised as a defence to the Plaintiff’s claim, and was not even mentioned in the defence filed.

[14] There have been several decisions on this question. In Lim Leong Huat v Chip Hup Hup Kee Construction Pte Ltd [2008] 2 SLR(R) 786 (“Lim Leong Huat”), Justice Woo Bih Li addressed the issue with admirable thoroughness in his decision delivered on 25 January 2008. He took note of the Malaysian decision in Lin Securities (Pte) Ltd v Noone & Co Sdn Bhd [1989] 1 MLJ 321 (“Lin Securities”) where it was said in p 322:

but he was not content to adopt that approach to the issue. He went on to give further thought to the matter. He explained:

[15] Woo J re-visited the question in his decision in HSBC Institutional Trust Services (Singapore) Ltd v Elchemi Assets Pte Ltd and another [2010] SGHC 67 (“HSBC v Elchemi”) delivered on 3 March 2010. In this case, the plaintiff as landlord sued the first defendant, its tenant, and the second defendant, the guarantor of the first defendant, for arrears in rent. After the defendants had filed their defence and counterclaim, the plaintiff applied for and obtained summary judgments against the defendants, and the defendants applied to set aside the judgments. Woo J dismissed their appeals. In his judgment, he noted that the second defendant had, in the affidavit filed to resist the application for summary judgment, raised fresh allegations not found in the defence. Woo J stated at [21] of his grounds of decision:

[16] Within a week after Woo J stated his view in Lim Leong Huat, Judith Prakash J delivered her grounds of decision on 30 January 2008 in United States Trading Co Pte Ltd v Ting Boon Aun and another [2008] 2 SLR(R) 981 (“United States Trading”) which touched on the same issue. In this case, the plaintiff sued the two defendants for the return of a loan, and applied for summary judgment against the second defendant after he had filed his defence, judgment in default of appearance having been entered against the first defendant. In his affidavit filed to resist the application, the second defendant raised a defence that was not pleaded in the defence he filed. An Assistant Registrar allowed the plaintiff’s application and entered judgment against the second defendant.

[17] In the appeal against the Assistant Registrar’s decision, counsel for the second defendant argued that the judgment should be set aside. That did not find favour with Prakash J who took care to explain:

[18] From these three decisions, the position appears to be that a fresh defence that is not pleaded cannot be relied on unless the defence is amended, or in exceptional cases where the court finds that there are good reasons to allow that to be done.

[19] These cases have been noted and discussed in Singapore Court Practice 2009 (LexisNexis 2009) at 14/3/2A:

[20] The latest decision on the question is the decision of the Court of Appeal in Poh Soon Kiat v Desert Palace Inc (trading as Caesars Palace) [2010] 1 SLR 1129 delivered on 28 April 2009. In this case, the appellant, against whom summary judgment had been entered, applied to the Court of Appeal to amend his defence as a prelude to his appeal.

[21] The Court of Appeal did not deal with the application to amend, and explained in its judgment:

[22] The quoted statements are from a passage:

which did not have the advantage of considering the reasoning in the decisions of Woo J and Prakash J and their views on the statement of law laid down in Lin Securities.

[23] There is a possibility that the Court of Appeal would have dealt with the issue differently if its attention was drawn to Lim Leong Huat, United States Trading and the Singapore Court Practice 2009. We have to wait till the question goes before the Court again to have an answer. In the mean time, it can only be said that there is room for greater clarity and certainty on this issue.

[24] I did not exclude the unpleaded defence from the appeal as counsel for the Plaintiff was prepared to deal with it.

[25] Counsel for the Plaintiff had pointed out that this defence was not only absent from the pleaded defence, but was not consistent with it. In the defence filed on 4 December 2009, the Defendant pleaded:

[26] In Tan’s affidavit filed six weeks later on 18 January 2010, clear references were made to the re-structuring arrangement and the transfer of the 1,000,000 shares (see [7] supra).

[27] Obvious questions arise from this. One question is why was the re-structuring arrangement not mentioned in the defence pleaded? The Defendant stated that “(t)he Defendant is unable to give full particulars of the acquisition of the shares as many of the documents of the Defendant has [sic] been wrongfully withheld ...” That only means that the Defendant was unable to produce documentary evidence of the re-structuring arrangement; it cannot mean that the Defendant cannot remember that it had acquired the shares through a re-structuring arrangement. The pleaded defence made no reference to any re-structuring arrangement, and only stated that the 1,000,000 shares were acquired from the plaintiff around 2005.

[28] A second question is why was no documentary evidence produced? The Defendant had stated that it did not have access to the corporate secretariat documents. It did not say that its non-secretarial records, eg, its account books, external correspondence and internal records were also in the possession of its corporate secretaries; such records would not be kept by the corporate secretaries whose duties do not extend to the management and custody of such records. It is unlikely that matters as important as the injection of $2 million by the Defendant into Berlian and the re-restructuring arrangement were not referred to in the account books, external correspondence and internal records of the Defendant. In any event, if the Defendant had injected $2 million into Berlian, evidence of the payment would be obtainable from its bank.

[29] Tan’s account of the re-structuring arrangement and the transfer of the Plaintiff’s 1,000,000 shares should be read carefully. He had deposed that:

The reference to the “Defendant” and the “Plaintiff” in the second and third sentences are clearly reversed, and these two sentences can only be meaningful if they are taken to mean that the shares were transferred from the Plaintiff back to the Defendant, and the Plaintiff had not objected to that. This is in fact the position taken in the Defendant’s submissions in the appeal at para 41(d) and (e) that:

The mistake and carelessness in the narration of the re-structuring arrangement and the movement of the shares raise further questions over the veracity of the defence.

[30] Besides the defence that the Defendant acquired the Plaintiff’s shares in 2005, the other defence is the defence of estoppel pleaded in para 8 of the defence (see [5] supra). Although it was pleaded that “the Plaintiff is estopped from denying the transfer of the shares to the Defendant”, the Defendant really meant that on the facts, the Plaintiff cannot deny that she had transferred the shares to the Defendant, and “estopped” was not used in the strict sense of the Plaintiff having made a representation which the Defendant had relied on to its detriment. This point was alluded to by the Plaintiff’s submissions, and the Defendant did not respond to it.

[31] In the appeal the Plaintiff did not ask for summary judgment to be entered against the Defendant. Instead it was submitted that:

[32] The submission accorded with my findings on the issues. The defences raised by the Defendant were indeed questionable, but I was not minded to reject them and to enter final judgment. The Defendant should be given the opportunity to produce direct or corroborative documentary evidence to support its defences, but appropriate conditions should be imposed before the Defendant is allowed to proceed further with those defences.

[33] As the primary claim was for the return of the 1,000,000 shares, a condition that the shares be placed into the custody of stakeholders pending the disposal of the trial would be a suitable condition, but the Defendant stated that the shares are not in its possession. In these circumstances, an order that the Defendant is to furnish security at the value of the shares was discussed with counsel. However, there was no satisfactory evidence on the value of the shares. Counsel for the Plaintiff proposed that the par value of $1 be used, while counsel for the Defendant countered with a suggestion of 10¢ a share. In the absence of any reliable evidence, I adopted a value of 20¢ a share, and gave the Defendant leave to defend on the provision of security in the sum of $200,000. The quantum of the security could be set on a more informed basis. If the professional evidence on the value of the shares is now or shall become available, the parties may consider seeking the leave of the Court of Appeal to admit that evidence for the appeal.