Kotagaralahalli Peddappaiah Nagaraja v Moussa Salem and others [2023] SGHC 68

Case Details

• Citation: [2023] SGHC 68
• Court: General Division of the High Court of the Republic of Singapore
• Decision Date: 31 March 2023
• Coram: Vinodh Coomaraswamy J
• Case Number: Suit No 663 of 2020
• Hearing Date(s): 30 January, 9, 20 February, 20 March 2023
• Claimants / Plaintiffs: Kotagaralahalli Peddappaiah Nagaraja
• Respondent / Defendant: Moussa Salem (First Defendant); Serene Phey Sai Lin (Second Defendant); SLI Developments Pte Ltd (Third Defendant)
• Counsel for Claimants: [None recorded in extracted metadata]
• Counsel for Respondent: [None recorded in extracted metadata]
• Practice Areas: Civil Procedure; Costs; Standard or indemnity basis

Summary

The judgment in [2023] SGHC 68 constitutes a significant judicial exposition on the principles governing the assessment of costs in the aftermath of complex commercial litigation. Following the substantive dismissal of the plaintiff’s claims in [2023] SGHC 6, the court was tasked with determining the basis and quantum of costs payable by the unsuccessful plaintiff to the three defendants. The dispute originated from the plaintiff's failed attempt to assert beneficial ownership over one-third of the shares in the third defendant company, SLI Developments Pte Ltd, premised on an alleged trust deed dated 23 July 2015.

The primary doctrinal contribution of this judgment lies in its rigorous application of the "indemnity principle" and its refusal to depart from the standard basis of costs for the first defendant, notwithstanding the plaintiff's pursuit of claims that were previously characterized as "plainly and obviously unsustainable." Vinodh Coomaraswamy J provides a detailed framework for when the court should exercise its discretion to award indemnity costs, emphasizing that such an order requires a high threshold of "unreasonableness" or "exceptional circumstances" that go beyond the mere failure of a claim. The court also reinforces the status of Appendix G of the Rules of Court as a foundational guide for quantum, cautioning against ready departures from these guidelines in the absence of compelling justification.

Furthermore, the judgment addresses the intersection of contractual indemnity and the law of costs. The second defendant successfully argued for costs on an indemnity basis by invoking a specific indemnity provision within the 2015 Trust Deed. The court’s analysis here clarifies the application of the Contracts (Rights of Third Parties) Act and the limits of the "common mistake" doctrine as a vitiating factor in contractual indemnities. By distinguishing between the discretionary power of the court to award costs and the enforcement of a contractual right to indemnity, the judgment provides essential guidance for practitioners drafting and litigating indemnity clauses.

Ultimately, the court ordered the plaintiff to pay the first and third defendants' costs on the standard basis, while the second defendant was awarded costs on an indemnity basis. The judgment serves as a reminder that while the "event" of litigation determines the direction of costs, the "basis" and "quantum" remain subject to a disciplined judicial inquiry that balances the indemnity principle against the need for proportionality and the expectations of litigants as framed by the Rules of Court.

Timeline of Events

1. 23 July 2015: Execution of the 2015 Trust Deed, which formed the basis of the plaintiff's primary claim regarding the beneficial ownership of shares in the third defendant.
2. 23 July 2020: The plaintiff commences Suit No 663 of 2020 against the three defendants.
3. 18 September 2020: Procedural milestone involving the filing of initial pleadings or statements.
4. 16 November 2020: Further procedural developments in the lead-up to the striking out application.
5. 4 December 2020: The court strikes out the plaintiff's claims for conspiracy to injure, deceit, minority oppression under s 216 of the Companies Act 1967, and breach of express trust, finding them plainly and obviously unsustainable.
6. 11 December 2020: Filing of further documents or orders following the striking out decision.
7. 22 December 2020: The court orders the plaintiff to pay the first defendant’s costs of the striking out application on the standard basis.
8. 29 December 2020: Conclusion of the initial striking out phase of the litigation.
9. 15 January 2021: Commencement of the discovery and evidence phase for the remaining claim.
10. 24 March 2021: Procedural hearing or filing related to the trial preparation.
11. 17 September 2021: Further procedural milestone during the pre-trial phase.
12. 24 September 2021: Filing of affidavits or evidence for the substantive trial.
13. 8 October 2021: Final pre-trial preparations.
14. 3 May 2022 – 18 May 2022: Substantive trial of the remaining claim regarding the 2015 Trust Deed.
15. 13 July 2022: Post-trial submissions or hearings.
16. January 2023: Delivery of the substantive judgment in [2023] SGHC 6, dismissing the plaintiff's claim in its entirety.
17. 30 January, 9 February, 20 February, 20 March 2023: Hearings dedicated to the determination of costs.
18. 31 March 2023: Delivery of the costs judgment in [2023] SGHC 68.

What Were the Facts of This Case?

The litigation in Suit No 663 of 2020 was a protracted dispute centered on the beneficial ownership of shares in SLI Developments Pte Ltd (the "Third Defendant"). The plaintiff, Kotagaralahalli Peddappaiah Nagaraja, alleged that he was entitled to a one-third beneficial interest in the shares of the company. His primary contention rested on a document referred to as the "2015 Trust Deed," dated 23 July 2015. This deed was purportedly executed by the second defendant, Serene Phey Sai Lin, who was an employee of Infinitus Law Corporation and a shareholder of the third defendant at the material time. The first defendant, Moussa Salem, was the individual whom the court eventually found to be the sole beneficial owner of the shares.

The plaintiff’s initial Statement of Claim was broad in scope, encompassing several distinct causes of action. These included: (a) a claim for conspiracy to injure the plaintiff; (b) a claim in deceit; (c) a claim for minority oppression under s 216 of the Companies Act 1967; and (d) a claim for breach of an express trust allegedly constituted by the 2015 Trust Deed. The plaintiff sought various reliefs, including declarations of ownership and damages for the alleged wrongs committed by the defendants.

The procedural history of the case was marked by a significant intervention on 4 December 2020. At that stage, the court struck out the claims for conspiracy, deceit, and minority oppression. The court's rationale was that these claims were "plainly and obviously unsustainable" (at [3]). Consequently, the only issue that proceeded to trial was the claim based on the 2015 Trust Deed. The first defendant was awarded costs for the striking out application on the standard basis, which were later fixed at $12,000.18 inclusive of disbursements.

The substantive trial took place over several days in May 2022. The evidence presented included the testimony of the parties and various exhibits, including the 2015 Trust Deed itself. A key witness for the first defendant was Mr. Baldock, an expert whose fees became a point of contention in the costs assessment. The plaintiff’s case underwent several evolutions during the proceedings, leading the first defendant to argue that the plaintiff had conducted the litigation in a manner that justified indemnity costs. Specifically, the first defendant pointed to the plaintiff's reliance on claims that had been struck out and the shifting nature of the plaintiff's factual assertions.

In the substantive judgment delivered in January 2023 ([2023] SGHC 6), Vinodh Coomaraswamy J dismissed the plaintiff’s remaining claim. The court found that the first defendant, Moussa Salem, was the sole beneficial owner of the shares in the third defendant. The court concluded that the 2015 Trust Deed did not have the effect the plaintiff claimed. Following this dismissal, the defendants sought their costs. The first defendant sought costs on an indemnity basis, totaling approximately $800,000, while the second defendant sought indemnity costs based on a contractual provision in the 2015 Trust Deed. The third defendant sought costs on the standard basis. The plaintiff resisted the indemnity basis for the first defendant and challenged the quantum and reasonableness of the disbursements claimed, particularly the expert fees and travel expenses.

What Were the Key Legal Issues?

The court was required to resolve several critical legal issues pertaining to the assessment of costs following the dismissal of the substantive claim. These issues involved both the basis of assessment and the specific quantum of costs and disbursements.

• The Basis of the First Defendant's Costs: Whether the first defendant was entitled to costs on the indemnity basis rather than the standard basis. This required the court to evaluate whether the plaintiff’s conduct—specifically the pursuit of "unsustainable" claims and the alleged bad faith in commencing the action—met the high threshold for indemnity costs.
• The Application of Appendix G: To what extent the court should adhere to the costs guidelines set out in Appendix G of the Rules of Court. The first defendant argued for a significant departure from these guidelines based on the complexity and value of the claim, while the plaintiff argued for strict adherence.
• The Reasonableness of Expert Fees and Disbursements: Whether the fees paid to the first defendant's expert, Mr. Baldock (£55,000), and other disbursements such as travel and accommodation expenses for witnesses, were reasonable in amount and thus recoverable from the plaintiff.
• The Second Defendant's Contractual Indemnity: Whether Clause 1 of the 2015 Trust Deed created a legally enforceable obligation for the plaintiff to indemnify the second defendant for her legal costs. This involved issues of contractual interpretation and the application of the Contracts (Rights of Third Parties) Act.
• Vitiating Factors in Contract: Whether the indemnity provision in the 2015 Trust Deed was void or voidable due to "common mistake," as alleged by the plaintiff in an attempt to avoid the indemnity obligation.

How Did the Court Analyse the Issues?

The court’s analysis began with the fundamental principle that costs follow the event, as established in Comfort Management Pte Ltd v OGSP Engineering Pte Ltd and another [2022] 5 SLR 525. The "event" in this case was the dismissal of the plaintiff's claim in its entirety. However, the court emphasized that the "basis" of costs (standard vs. indemnity) and the "quantum" are distinct inquiries.

The First Defendant: Standard vs. Indemnity Basis

The first defendant argued for indemnity costs on four grounds: (a) the plaintiff’s claims were hopeless and unsustainable; (b) the plaintiff acted in bad faith; (c) the plaintiff’s case was constantly evolving; and (d) the plaintiff’s conduct during the litigation was unreasonable. The court rejected these arguments. Regarding the "unsustainable" claims, the court noted that these had already been struck out in December 2020, and the first defendant had already received a costs order on the standard basis for that stage. The court held that it would be "wrong in principle" to revisit that order or to use those struck-out claims to justify indemnity costs for the subsequent trial phase (at [28]).

On the issue of bad faith, the court applied the "indemnity principle" from Then Khek Koon and another v Arjun Permanand Samtani and another and other suits [2014] 1 SLR 245. The court found that while the plaintiff's claim was ultimately unsuccessful, it did not reach the level of "unreasonableness" or "reprehensibility" required for indemnity costs. The court observed:

"Defeating litigants’ expectations as to costs too readily is also likely to have a chilling effect on the constitutional right of access to the courts" (at [49]).

The court further noted that the first defendant had not applied for security for costs or sought to strike out the remaining claim, which suggested that even the first defendant did not view the trial phase as inherently hopeless at the outset.

Quantum and Appendix G

The first defendant sought costs of $800,000, significantly exceeding the Appendix G guidelines. The court reiterated that Appendix G is a "guide" but one that should be followed unless there is a "good reason" to depart from it. The court analyzed the complexity of the case and the amount in dispute (approximately $120,000 to $255,000 depending on the valuation of the shares). The court found that the case was not so complex as to justify a 300% departure from the guidelines. The court fixed the first defendant's costs at $245,000.30, which included $140,957 for the trial and $47,551 for pre-trial work, plus disbursements.

Disbursements and Expert Fees

A major point of contention was the fee for the first defendant's expert, Mr. Baldock. The court applied the test of whether the disbursement was "reasonable in amount" under O 59 r 27. The first defendant claimed £55,000 for Mr. Baldock. The court scrutinized the lack of detailed evidence regarding the expert's hourly rate or the specific hours worked. Relying on Mero Asia Pacific Pte Ltd v Takenaka Corp [2002] 2 SLR(R) 1083, the court held that the burden was on the first defendant to prove reasonableness. Due to the lack of evidence, the court reduced the recoverable expert fees to $80,000. Similarly, the court reduced claims for travel and accommodation for D1 and his witnesses, noting that while D1 was entitled to travel to attend his own trial, the plaintiff should not have to bear the cost of "business class airfares and five-star hotel accommodation" (at [110]).

The Second Defendant: Contractual Indemnity

The second defendant’s claim for indemnity costs rested on Clause 1 of the 2015 Trust Deed. The court found that this clause obliged the plaintiff to indemnify the second defendant against all costs and expenses incurred in connection with the deed. The court applied CLAAS Medical Centre Pte Ltd v Ng Boon Ching [2010] 2 SLR 386, holding that such a contractual right to indemnity generally entitles the party to costs on the indemnity basis. The plaintiff’s attempt to argue "common mistake" to vitiate the deed was rejected. The court cited Chwee Kin Keong and others v Digilandmall.com Pte Ltd [2005] 1 SLR(R) 502, noting that the mistake must be "sufficiently important or fundamental" and that no such mistake existed here. The second defendant was awarded $60,867 in costs and disbursements on the indemnity basis.

What Was the Outcome?

The court's final orders reflected a nuanced approach to the different positions of the three defendants. The plaintiff was ordered to pay the costs of all three defendants, but the basis and quantum varied.

For the First Defendant, the court ordered costs on the standard basis. The court fixed the quantum of these costs at $245,000.30. This figure was derived from an assessment of pre-trial work ($47,551), trial work ($140,957), and various other procedural stages, adjusted for reasonableness and the guidelines in Appendix G. The court specifically reduced the recoverable disbursements for the expert witness, Mr. Baldock, from the claimed £55,000 to $80,000, and also reduced the claims for travel and accommodation expenses.

For the Second Defendant, the court ordered costs on the indemnity basis, pursuant to the contractual indemnity in the 2015 Trust Deed. The court fixed the quantum at $60,867. This included $41,990 for costs and $18,877 for disbursements. The court found that the second defendant was entitled to this higher basis of assessment because the plaintiff had contractually agreed to indemnify her for costs "incurred by her in connection with" the deed.

For the Third Defendant, the court ordered costs on the standard basis. These costs were fixed at $16,547, comprising $13,252 for costs and $3,295 for disbursements.

The operative paragraph of the judgment regarding the first defendant's costs states:

"The plaintiff shall pay to the first defendant the costs of and incidental to this action on the standard basis, such costs fixed at $245,000.30 (inclusive of disbursements)" (at [163]).

The court also clarified that the costs awarded were "fixed" by the court rather than being left for formal taxation, in the interest of finality and saving the parties further expense. The total costs and disbursements awarded across all three defendants amounted to approximately $322,414.30.

Why Does This Case Matter?

This judgment is of significant importance to Singaporean practitioners for several reasons, particularly in the areas of civil procedure and the strategic management of litigation costs. First, it reinforces the high threshold required to obtain an order for indemnity costs. The court’s refusal to grant indemnity costs to the first defendant, despite the plaintiff’s claims being partially struck out as "unsustainable," sends a clear signal that the mere weakness of a case is insufficient. Practitioners must demonstrate "exceptional circumstances" or "reprehensible conduct" to move the court from the standard basis. This protects the "constitutional right of access to the courts" and prevents the threat of indemnity costs from being used as a tactical bludgeon to discourage legitimate, albeit difficult, claims.

Second, the judgment provides a masterclass in the application of Appendix G. Vinodh Coomaraswamy J’s analysis shows that while the guidelines are not a "straitjacket," they are the primary reference point for the court’s discretion. The court’s willingness to scrutinize and reduce the first defendant’s claim from $800,000 to approximately $245,000 demonstrates that practitioners cannot expect the court to simply rubber-stamp high fee arrangements between solicitors and clients when assessing party-and-party costs. The emphasis on proportionality relative to the value of the claim is a critical takeaway.

Third, the case highlights the potency of contractual indemnity clauses. The second defendant’s success in obtaining indemnity costs based on the 2015 Trust Deed—even though she was a third party to the deed’s primary obligations—illustrates the importance of careful drafting. The court’s application of the Contracts (Rights of Third Parties) Act in this context confirms that such clauses can provide a robust shield for individuals caught up in litigation involving trust structures or corporate disputes. For transactional lawyers, this underscores the need to include broad and clearly worded indemnity provisions to protect clients from the costs of future litigation.

Fourth, the court’s treatment of expert fees and disbursements serves as a cautionary tale. The reduction of Mr. Baldock’s fees from £55,000 to $80,000 due to a lack of evidence regarding reasonableness emphasizes that disbursements are not automatically recoverable. Practitioners must be prepared to justify the hourly rates and the necessity of the work performed by experts. The court’s refusal to allow "business class airfares and five-star hotel accommodation" as recoverable disbursements further reinforces the principle that party-and-party costs are intended to be a "fair indemnity," not a full reimbursement of all expenses incurred.

Finally, the judgment clarifies the "indemnity principle" in the context of prior procedural orders. By holding that it is "wrong in principle" to use previously struck-out claims to justify indemnity costs for a later trial phase, the court ensures that costs orders remain tied to the specific conduct and issues of each stage of the litigation. This prevents the "stacking" of costs penalties and provides greater certainty for litigants as they navigate the different phases of a lawsuit.

Practice Pointers

• Plead Contractual Indemnities Early: If a client has a contractual right to indemnity, ensure this is pleaded and raised early in the costs submissions. As seen with the second defendant, a valid contractual provision can override the court’s general discretion to award costs on the standard basis.
• Document Disbursement Reasonableness: When claiming significant disbursements, especially for expert witnesses, maintain detailed records of hourly rates, time spent, and the specific nature of the work. The court will not assume reasonableness in the absence of evidence.
• Appendix G is the Default: Always benchmark costs claims against Appendix G. If seeking a departure, be prepared to provide "good reasons" based on complexity, the amount in dispute, or the importance of the issues. A 300% departure is unlikely to be granted without extraordinary justification.
• Avoid "Luxury" Disbursements: Advise clients that while they may choose business class travel or premium accommodation, these costs are unlikely to be fully recoverable on a standard basis. The court applies a test of what is "reasonable" for the losing party to pay.
• Separate Procedural Stages: Recognize that costs for different stages of litigation (e.g., striking out vs. trial) are often treated independently. A standard basis order at the striking out stage generally sets the tone for that portion of the costs, and it is difficult to "upgrade" those costs to an indemnity basis later.
• Beware the "Chilling Effect" Argument: When resisting an application for indemnity costs, rely on the court’s concern regarding the "chilling effect" on the right of access to justice. This is a powerful policy argument against penalizing a party for merely losing a case.
• Finality via Fixed Costs: Where possible, invite the court to "fix" costs rather than sending them for taxation. This saves time and further legal fees, providing immediate finality for the client.

Subsequent Treatment

As a relatively recent judgment from March 2023, the specific subsequent treatment of [2023] SGHC 68 in later cases is not yet extensively documented in the extracted metadata. However, the judgment itself follows the established doctrinal lineage of the "indemnity principle" from Then Khek Koon v Arjun Permanand Samtani [2014] 1 SLR 245 and the principles of costs following the event in Comfort Management v OGSP Engineering [2022] 5 SLR 525. It is expected to be cited in future Singapore High Court decisions as a primary authority on the application of Appendix G and the limits of indemnity costs in cases involving partially struck-out claims.

Legislation Referenced

• Companies Act 1967 (2020 Rev Ed), s 216
• Legal Profession Act 1996 (2020 Rev Ed)
• Contracts (Rights of Third Parties) Act (Cap 322, 2014 Rev Ed), s 2(1)(b), s 2(2)
• Rules of Court, O 59 r 3, O 59 r 27

Cases Cited

• Applied / Followed:
  • Kotagaralahalli Peddappaiah Nagaraja v Moussa Salem and others [2023] SGHC 6
  • Comfort Management Pte Ltd v OGSP Engineering Pte Ltd and another [2022] 5 SLR 525
  • Then Khek Koon and another v Arjun Permanand Samtani and another and other suits [2014] 1 SLR 245
  • CLAAS Medical Centre Pte Ltd v Ng Boon Ching [2010] 2 SLR 386
  • Mero Asia Pacific Pte Ltd v Takenaka Corp [2002] 2 SLR(R) 1083
• Considered / Referred to:
  • Law Society of Singapore v Syn Kok Kay [2023] SGHC 7
  • Maryani Sadeli v Arjun Permanand Samtani and another and other appeals [2015] 1 SLR 496
  • Telemedia Pacific Group Ltd v Credit Agricole (Suisse) SA (Yeh Mao-Yuen, third party) [2015] 4 SLR 1019
  • Alrich Development Pte Ltd v Rafiq Jumabhoy [1995] 2 SLR(R) 340
  • TQ v TR and another appeal [2009] 2 SLR(R) 961
  • Chwee Kin Keong and others v Digilandmall.com Pte Ltd [2005] 1 SLR(R) 502
  • Abani Trading Pte Ltd v BNP Paribas and another appeal [2014] 3 SLR 909
  • Meretz Investments NV and another v ACP Ltd and others [2007] EWHC 2635

Source Documents

• Original Judgment PDF (eLitigation)
• Case Summary on eLitigation