CONSEQUENCES OF STRIKING OUT A DEFENCE - NOT ALL IS LOST
In Toh Wee Ping and another v Grande Corporation Pte Ltd [2020] SGCA 48 ("TWP v Grande"), the Court of Appeal had the opportunity to opine on the consequences of having a defence struck out, and in particular, whether this meant that the plaintiff's Statement of Claim would be admitted in full.
Background. We first set out a brief summary of the key facts. Mr. Benjamin Toh ("Mr. Toh") and Ms. Goh Bee Heong ("Ms. Goh"), the appellants in this case, were the shareholders of Cubix Group Pte. Ltd. ("Cubix") (at [5] TWP v Grande). Pursuant to a joint venture agreement (the "JV Agreement"), Cubix and the respondent Grande Corporation Pte Ltd (“Grande”) together set up a joint venture company Cubix and Kosmic Pte Ltd (“C&K”) with Mr. Toh as sole director of C&K (at [7] TWP v Grande).
As part of the JV Agreement, Grande transferred to C&K monies as contributions to and/or loans for C&K's operating expenses (the "Loan Sums") (at [8] TWP v Grande).
Subsequently, Grande sued Cubix, C&K, Mr. Toh and Ms. Goh (among others) in Suit 331, alleging that in breach of the JV Agreement C&K had transferred its funding, business, clientele, projects and staff to three companies incorporated by Mr. Toh and Ms. Goh. Relying on the alleged breach of the JV Agreement, Grande claimed the return of the Loan Sums and the "Sums Received" (at [9) – [13] TWP v Grande).
In the course of Suit 331, Mr. Toh and Ms. Goh breached their discovery obligations and court orders made in Suit 331. Relying on O 24 r 16(1) of the Rules of Court, Grande then applied to strike out the appellants' defence and for judgment to be entered in Grande's favour. The High Court in that case granted Grande's striking out application, giving interlocutory judgment with damages to be assessed (at [14] and [15] TWP v Grande). This High Court judgment was not appealed against ([18] TWP v Grande).
In a separate hearing, the High Court assessed the damages that owed to Grande to be that claimed in Grande's Statement of Claim: namely, the Loans comprising S$291,288 and US$458,000; and the Sums Received comprising US$270,000 and/or US$600,000–S$700,000 (at [22] TWP v Grande).
In particular, the High Court held that since the appellants' defence had been struck out, "[the appellants] must be taken to have admitted to all the matters pleaded by the plaintiff [Grande] in the statement of claim" (at [23] TWP v Grande).
Issue and arguments on appeal. On appeal to the Court of Appeal, the issue was whether the striking out of the appellants' defence meant that they had acceded to the entirety of Grande's Statement of Claim (at [29] TWP v Grande).
The appellants disagreed with that notion, and argued that it was Grande who had to prove that the appellants' wrongful act caused its loss (at [26] TWP v Grande). On the other hand, Grande argued that the appellants had admitted to Grande's Statement of Claim and thus the appellants could not later challenge the facts and matters pleaded by Grande (at [27] TWP v Grande).
Interlocutory judgment given and damages to be assessed when defence struck out. O 24 r 16(1) states that if a party fails to comply with its discovery obligations or any court order regarding discovery made under O 24, the court can (among other things) make an order that the defence be struck out and “judgment be entered accordingly”.
The Court of Appeal held that the phrase "judgment be entered accordingly" imports all the rules dealing with a default of defence in O 19 rules 2 to 8. Given that the claim involved an unliquidated claim and an application for declaratory judgment, O 19 rr 6 and 7 would apply (at [35] – [36] TWP v Grande).
With that in mind, the Court of Appeal held that the High Court judge below was correct to enter interlocutory judgment for damages to be assessed, and consider the claims at a separate assessment hearing instead of entering final judgment (at [36] TWP v Grande).
Statement of Claim not admitted in full when defence struck out. The Court of Appeal also held (at [40] TWP v Grande) that when a defence is struck out, allegations of fact would be admitted, while points of law would not be deemed admitted. This is because “[c]onclusions of law are the proper province of the court.”
As for averments engaging both issues of fact and law, the Court of Appeal held that a court must be satisfied on an examination of the statement of claim alone that the facts therein are sufficient to sustain the pleaded cause of action or claim. It added that such averments "should be treated with caution", as only interlocutory judgments can be entered for unliquidated claims (at [40] – [43] TWP v Grande).
As such, even though the appellants here had had their defence struck out, they could still challenge Grande’s arguments that it had suffered damage (if the pleaded facts were unclear) and could also challenge its arguments on the quantum of damages (at [47] TWP v Grande).
Averments deemed admitted in Grande's Statement of Claim. The Court of Appeal then went on to examine Grande’s Statement of Claim.
It is worth looking at the Court of Appeal's analysis of certain paragraphs in the Statement of Claim in order to glean some insights into how to distinguish between the three categories of (1) allegations of fact; (2) points of law; and (3) averments engaging both issues of fact and law.
Basic facts. Firstly, concerning the basic facts of the claim, the Court of Appeal identified four factual averments stated in paragraph 16 of the Statement of Claim: (a) Grande transferred sums of money to C&K as contributions / loans for the latter's operations; (b) these sums of money were repayable on demand; (c) they were transferred between certain dates; and (d) the total amounts loaned were S$291,288 and US$458,000. The Court of Appeal held that these facts were deemed admitted and could not be challenged by the appellants ([51] and [52] TWP v Grande).
Claim in fraudulent misrepresentation. Secondly, regarding the claim of fraudulent misrepresentation against the appellants, the Court of Appeal held that "it was plain from the facts pleaded in the SOC [at paragraphs 21 and 23] that the requisite elements for a claim in misrepresentation had been made out" (at [57] TWP v Grande). Thus, in respect of the misrepresentation claim, the appellants were jointly and severally liable for the Loans (at [58] TWP v Grande).
Claim in breach of contract. Regarding the claim in breach of contract, Grande argued that Cubix's corporate veil should be lifted and the appellants should be found liable for Cubix's breach of contract, even though it was Cubix and not the appellants who was party to the contract. The Court of Appeal considered this averment to be a question of mixed fact and law, and that the appellants could not be deemed to have admitted to the piercing of Cubix's corporate veil with the consequences that follow (at [61] TWP v Grande).
Claim in breach of fiduciary duties. As for the claim that the appellants breached their fiduciary duties towards Grande, the Court of Appeal also found that this was a question of mixed fact and law (at [65] TWP v Grande). The court could not simply accept the English case law cited by Grande in support of its position, and had to first consider the facts and all relevant authorities before coming to a conclusion as a matter of Singapore law (at [66] TWP v Grande).
Claim for Sums Received. Finally, with respect to Grande's claim for the Sums Received, the Court of Appeal found that Grande would be entitled to the Sums Received if it could show that the appellants had breached their fiduciary duties. Thus, it considered the claim for the Sums Received to be "plainly a conclusion of legal consequence" (at [68] TWP v Grande) – in other words, it was a point of law which could not be deemed to have been admitted by the appellants.
Examining the pleadings, the Court of Appeal found that there was no factual basis for Grande's claim for the Sums Received ([69] TWP v Grande). For a start, Grande had not pleaded the source of the Sums Received, and the email correspondence referred to by Grande did not shed light on this issue (at [70] and [71] TWP v Grande). Furthermore, the Court of Appeal was informed by Grande's counsel that the claims for the Loans and the Sums Received were alternative claims. Since the Court of Appeal had already allowed Grande's claim for the loans on the basis of fraudulent misrepresentation, it held that allowing Grande's claim for the Sums Received would amount to double recovery (at [72] and [73] TWP v Grande).
Significance of decision. The decision by the Court of Appeal in TWP v Grande shows that not all is lost for the defendant whose defence has been struck out, as it all turns on what is being pleaded in the statement of claim.
Firstly, if the claim is an unliquidated claim, then interlocutory judgment will be given in favour of the plaintiff. But the court will not give final judgment and will consider the claims only at a separate assessment hearing.
Secondly, the striking out of a defence does not means that the plaintiff would be granted everything that it seeks in its Statement of Claim. Rather, the defendant will still be able to challenge (certain) issues of law and issues of mixed law and facts.
TWP v Grande is also a reminder of the importance of complying with their discovery obligations and with court orders concerning discovery: if a defendant fails to comply with such obligations and court orders, the court can give judgment in favour of the plaintiff and the defendant’s ability to defend the claim will be severely hampered as a result.
Tags: Pleadings; Breach of discovery obligations; Striking out pleadings; Allegations of fact and law; Admission
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