Case Details
- Citation: [2019] SGHCR 01
- Case Title: StreetSine Singapore Pte Ltd v Singapore Institute of Surveyors and Valuers & 26 Ors
- Court: High Court (Registrar)
- Suit Number: Suit No 1207 of 2016
- Summons Numbers: Summons Nos 2968 and 2970 of 2018
- Date of Judgment: 28 December 2018
- Judge: Zeslene Mao AR
- Plaintiff/Applicant: StreetSine Singapore Pte Ltd
- Defendants/Respondents: Singapore Institute of Surveyors and Valuers (1st Defendant) and 26 others
- Applications: Security for costs under s 388(1) of the Companies Act
- Security Sought:
- 23rd Defendant: costs up to and including filing of affidavits of evidence-in-chief in the sum of $70,000
- 1st to 22nd Defendants: costs up to completion of discovery in the sum of $386,750
- Legal Area(s): Civil Procedure; Costs; Security for Costs
- Statutes Referenced: Companies Act (Cap 50, 2006 Rev Ed) (including s 388(1))
- Cases Cited: [2008] SGHC 230; [2011] SGHC 11; [2011] SGHC 228; [2013] SGHCR 10; [2014] SGHC 219; [2017] SGHC 15; [2019] SGHCR 01
- Judgment Length: 48 pages; 14,778 words
Summary
This High Court (Registrar) decision concerns two applications for security for costs brought by the defendants in a civil suit commenced by StreetSine Singapore Pte Ltd. The defendants relied on s 388(1) of the Companies Act, arguing that there was credible evidence that the plaintiff corporation would be unable to pay the defendants’ costs if the defendants succeeded. The applications were made at an intermediate stage of the proceedings, after the defendants had filed their applications for security and before the matter proceeded further into evidence and discovery.
The court accepted that the statutory threshold under s 388(1) is not satisfied by mere suspicion or general assertions; it requires “credible testimony” that there is reason to believe the plaintiff will be unable to pay. On the evidence, the defendants pointed to the plaintiff’s financial statements, including operating losses, negative net assets, and an auditor’s “material uncertainty related to going concern” disclosure. The plaintiff countered with liquidity evidence, an explanation of its accounting treatment (particularly “billings in advance”), and evidence of funding arrangements at the group level to support litigation costs.
Ultimately, the court’s decision turned on whether the defendants had established the required evidential basis for the belief that the plaintiff would be unable to pay costs. The court assessed the competing financial evidence and the relevance of accounting classifications to real liquidity, and then determined the appropriate security (or whether security should be ordered) in the circumstances of the case.
What Were the Facts of This Case?
StreetSine Singapore Pte Ltd (“StreetSine”) is a private company incorporated in Singapore. It operates as an information technology business that integrates big data sets with mobile applications to provide property information and transaction tools to the real estate market. StreetSine is wholly owned by StreetSine Technology Group Pte Ltd (“STG”), and the majority of STG’s shares are held by SPH Interactive Pte Ltd. The plaintiff’s business model is subscription-based: customers pay upfront for access to services over a 12-month membership period.
The defendants are led by the Singapore Institute of Surveyors and Valuers (“SISV”), a national body representing professionals in the real estate and construction industry. The remaining defendants (2nd to 22nd) are individual members or employees of SISV. The 23rd defendant is a property consultancy firm that provides valuation advisory services. The plaintiff’s suit was commenced on 10 November 2016, initially targeting SISV on allegations that SISV had engaged in a conspiracy with the predominant purpose of injuring StreetSine’s business.
On 16 October 2017, the court granted leave for additional defendants (2nd to 27th) to be added. StreetSine’s case, as summarised in the judgment extract, was that the defendants’ wrongful acts and breaches prevented StreetSine from marketing its valuation products to banks, financial institutions, or the public in any meaningful manner within Singapore or overseas. The suit thus involved allegations of wrongdoing with commercial consequences for StreetSine’s ability to operate and market its products.
On 28 June 2018, the defendants filed their respective applications for security for costs. At that time, the applications were not supported by expert opinion. Instead, the defendants relied on StreetSine’s financial statements, particularly the financial statements for the year ended 31 August 2017 (“2017 Financial Statements”). The defendants’ case for security rested on the plaintiff’s financial position and the risk that, if the defendants were successful, StreetSine would not be able to satisfy an adverse costs order.
What Were the Key Legal Issues?
The central legal issue was whether the defendants satisfied the statutory requirement in s 388(1) of the Companies Act. That provision empowers the court, where a corporation is a plaintiff, to require “sufficient security” for the defendant’s costs and to stay proceedings until security is given, if it appears by “credible testimony” that there is reason to believe the corporation will be unable to pay the defendant’s costs if successful in its defence.
Accordingly, the court had to determine (i) what constituted “credible testimony” in this context and (ii) whether the evidence before the court—principally the plaintiff’s financial statements and auditor’s going concern disclosure, together with the plaintiff’s rebuttal evidence—established the requisite “reason to believe” inability to pay costs. The issue was not whether the plaintiff had financial difficulties in an abstract sense, but whether the evidence supported a belief about inability to pay costs if the defendants won.
A further practical issue concerned the quantum and timing of security. The 23rd defendant sought security up to and including the filing of affidavits of evidence-in-chief ($70,000), while the 1st to 22nd defendants sought security up to completion of discovery ($386,750). The court therefore also had to consider whether, if security was ordered, it should be limited to particular stages of the proceedings and whether the amounts sought were proportionate to the procedural stage and anticipated costs.
How Did the Court Analyse the Issues?
The court began by setting out the statutory framework. Section 388(1) of the Companies Act is designed to protect defendants from the risk that they may incur substantial costs in defending a claim brought by a corporate plaintiff that later proves unable to meet an adverse costs order. However, the provision is not automatic. The court must be satisfied that there is credible evidence supporting the belief that the plaintiff will be unable to pay costs if successful in the defence.
On the defendants’ side, the court noted that the defendants relied heavily on the 2017 Financial Statements. They highlighted that StreetSine had made losses over multiple years, including a net loss of $41,538 in 2017 and a net loss of $1,227,675 in 2015. They also pointed to negative total assets and negative current assets over the years 2014 to 2017, including a negative total asset position of $1,354,238 and a negative current asset position of $2,402,275 as at 31 August 2017. In addition, the auditor’s report contained a “material uncertainty related to going concern” disclosure, drawing attention to the excess of liabilities over assets and current liabilities over current assets, and stating that these conditions indicated a material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern.
These matters, taken together, formed the defendants’ evidential basis for arguing that StreetSine was in financial distress and therefore likely to be unable to pay costs. The defendants also relied on the broader context of funding for the litigation, including loan agreements entered into between STG and its shareholders to provide funding for the legal costs anticipated in connection with the action. The defendants’ position was that such funding arrangements were themselves indicative of financial strain and a risk that the plaintiff would not have sufficient resources to meet an adverse costs order.
StreetSine opposed the applications. Its response was multi-layered. First, it argued that the defendants could not show “reason to believe” that StreetSine would be unable to pay costs if successful in defence, given that StreetSine had liquidity. Second, it challenged the defendants’ reliance on accounting balance sheet metrics, particularly the negative asset position and negative current asset position, by explaining the nature of its subscription business model. The plaintiff emphasised that it received subscription fees upfront for 12-month access, and that, as a matter of accounting treatment, those upfront receipts were recorded as liabilities (because the revenue was not yet earned). The plaintiff argued that these “billings in advance” were not liabilities that would necessarily require cash outflow in the way ordinary current liabilities do, and that the defendants misunderstood the economic substance of the balance sheet.
Third, StreetSine provided evidence that it had positive operating cash flow in 2016 and 2017 and that it could adjust discretionary investments to free up cash if needed for litigation. Fourth, it relied on evidence of cash at a later date than the 2017 Financial Statements, including redacted bank account statements dated 30 June 2018 showing cash and cash equivalents of $1,696,951.85, which was significantly higher than the $924,511 reflected in the 2017 Financial Statements. This was intended to demonstrate that the plaintiff’s liquidity position at the time of the security applications was not as dire as the defendants suggested.
Finally, StreetSine relied on an expert report from a chartered accountant, Mr Premjit Dass, to support the argument that the classification of billings in advance as current liabilities was driven by timing of revenue recognition rather than by a requirement to discharge those amounts in cash. The expert opined that billings in advance should be excluded from an assessment of liquidity because the plaintiff was not required to discharge those liabilities in cash. The expert also addressed the auditor’s “material uncertainty” disclosure, arguing that such a disclosure did not necessarily mean the company was unable to continue as a going concern, and that management’s assessment and disclosure obligations under auditing and financial reporting standards did not equate to an inability to meet costs orders.
In analysing these competing submissions, the court’s approach reflects a key principle in security for costs applications: financial statements and auditor disclosures are relevant, but they must be assessed in context. The court must consider whether the evidence shows a real risk that the plaintiff cannot satisfy an adverse costs order, rather than merely showing that the plaintiff has accounting losses or negative net assets. The court therefore had to weigh the defendants’ reliance on the 2017 Financial Statements and going concern uncertainty against the plaintiff’s evidence of liquidity, the economic substance of the plaintiff’s balance sheet items, and the existence of group-level funding arrangements.
Although the extract provided is truncated, the reasoning described indicates that the court engaged with the substance-over-form argument regarding “billings in advance” and with the distinction between accounting classifications and cash availability. The court also considered whether the plaintiff’s later cash position and its ability to access funds for litigation reduced the risk of inability to pay costs. In security for costs applications, this kind of evidential balancing is critical: the court must decide whether the defendants have crossed the statutory threshold of credible testimony supporting the belief of inability to pay.
What Was the Outcome?
The court delivered its decision on the two summonses for security for costs. The practical effect of the decision is that it determines whether the plaintiff’s proceedings would be stayed unless it provided security, and if security was ordered, the amount and stage-specific scope of that security. The judgment therefore directly affects the plaintiff’s ability to continue prosecuting the claim without first securing the defendants’ costs exposure.
Given the statutory mechanism under s 388(1), the outcome also has a cost-management implication: if security is ordered, it provides the defendants with a measure of assurance that they can recover costs even if the plaintiff’s financial position deteriorates further. Conversely, if security is refused, the defendants must bear the risk of an adverse costs outcome without the protection of a security fund.
Why Does This Case Matter?
This case is significant for practitioners because it illustrates how s 388(1) of the Companies Act is applied in practice when a corporate plaintiff’s financial statements show losses and negative net assets, but the plaintiff contends that liquidity and funding arrangements mitigate the risk of inability to pay costs. The decision underscores that security for costs is not granted merely because a plaintiff is unprofitable or has negative net assets; the court must be persuaded by credible evidence that there is reason to believe the plaintiff cannot pay costs if it loses.
For litigators, the case highlights the importance of evidential strategy. Defendants typically rely on audited financial statements, auditor going concern disclosures, and negative balance sheet indicators. Plaintiffs, in turn, may rebut by demonstrating actual cash position, explaining accounting classifications that may distort liquidity analysis, and showing credible access to funds (including group funding) for litigation-related expenses. The court’s willingness to consider the economic substance of balance sheet items such as “billings in advance” is particularly relevant for subscription-based businesses and other entities whose revenue recognition practices affect the presentation of liabilities.
Finally, the case is useful as a reference point for the stage-specific quantification of security. Where security is sought for defined procedural milestones (such as discovery or affidavits of evidence-in-chief), the court’s approach informs how parties should frame the scope and amount of security to be proportionate to the litigation stage and anticipated costs.
Legislation Referenced
Cases Cited
- [2008] SGHC 230
- [2011] SGHC 11
- [2011] SGHC 228
- [2013] SGHCR 10
- [2014] SGHC 219
- [2017] SGHC 15
- [2019] SGHCR 01
Source Documents
This article analyses [2019] SGHCR 1 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.