Australia and New Zealand Banking Group Ltd v Ding Pei Chai and Others

• Jurisdiction: Singapore
• Judge: Belinda Ang Saw Ean J
• Judgment Date: 30 June 2004
• Neutral Citation: [2004] SGHC 140
• Date: 30 June 2004
• Subject Matter: Nature of interpleader proceedings,Civil Procedure,Interpleader,Exercise of power of court under O 17 r 8 Rules of Court (Cap 322, R 5, 1997 Rev Ed)
• Docket Number: Originating Summons No 902 of 2002
• Published date: 05 July 2004
• Defendant Counsel: J Balachandran and S Selvam (Ramdas and Wong)
• Court: High Court (Singapore)
• Plaintiff Counsel: Carrie Ho Nyuk Tsien (JC Ho and Kang LLC)

30 June 2004

Belinda Ang Saw Ean J:

1 Gracedale Technology Limited (“Gracedale”), a British Virgin Islands company, is the account holder of an Asian Currency Unit deposit account no 468488 (“ACU account”) placed with the Australia and New Zealand Banking Group Limited, Singapore branch (“ANZ Bank”). ANZ Bank sought interpleader relief after it received from the claimants, conflicting instructions in relation to the operation of the ACU account. The first claimant is Ding Pei Chai (“Ding”). The second claimant is Phua Swee Khiang (“Phua”) and the third claimant is Cheng Wai Yong (“Cheng”). Lee Wan Hoi (“Lee”) is Cheng’s husband.

2 On 2 August 2002, the Deputy Registrar framed the interpleader issue as follows:

[W]hich of the first to third claimants has the authority to act for, and on behalf of, [Gracedale] in operating the [ACU] account.

He further directed that the interpleader issue be tried with Ding and Phua in the position of plaintiffs, and Cheng in the position of defendant. Ding and Phua are not plaintiffs in the technical sense of the word, but are in the position of plaintiffs as they are the claimants who are required to make out their case against the other claimant, Cheng.

3 It is desirable to mention that an interpleader issue directed under O 17 of the Rules of Court (Cap 322, R 5 1997 Rev Ed), is a means for the court to decide the claims as between the persons present at the proceedings in order that the person interpleading may get the relief to which he is entitled (see De La Rue v Hernu, Peron & Stockwell, Limited [1936] 2 KB 164 at 173). Seen in this light, the single question for determination from the point of view of ANZ Bank is: who is lawfully authorised to give instructions to the bank on behalf of Gracedale? In answering this single question, I have to consider whether or not Lee agreed to cede control of Gracedale and the ACU account to Ding and Phua. If the answer is yes, then there is the question of whether or not the issuing of additional bearer shares and the resolution dated 1 May 2002, contravened the articles of association of Gracedale or the laws of the British Virgin Islands or both. If the answer is no, it follows that the original mandate to ANZ Bank continues to apply.

Background facts

4 Prior to the events of 7 March 2002, Lee, Ding and Phua were business associates and friends. In 1993 and 1994, all three collaborated to invest in and develop some properties in Melbourne, Australia. Seaa Enterprises Pty Limited is the trustee company (“trustee company”) for both Seaa Enterprises Pty Limited Trust (“SEPLT”) and Seaa Properties Trust (“SPT”). SEPLT held the properties at 167–173 Collins Street and SPT held the property at 180 Flinders Lane. Nearby was Lush Lane, which the trustee company acquired in 1998 on behalf of the two trusts. I shall hereon refer to all the properties collectively as “the Melbourne properties”.

5 The unitholders of SEPLT and SPT are companies incorporated in the British Virgin Islands. They are Jade Tower Limited (representing Lee’s interests) which holds 60% of the units issued in the respective trusts, Winlong Holdings Limited (representing Ding’s interests) which holds 20% of the units and Hsuante Investment Limited (representing Phua’s interests) which holds the balance 20% of the units.

6 The Melbourne properties were sold for A$15m. After the sale was completed in September 2000, Lee transferred A$8.4m from the sale proceeds, to accounts under his control outside Australia. From this A$8.4m, a sum of approximately A$5.25m was eventually paid as return of equity to Lee, Ding and Phua in the proportion of 60:20:20 respectively. Although there is disagreement as to whether or not that transfer was with the approval of Ding and Phua, I am not required to make findings of fact on this peripheral point to resolve the interpleader issue.

7 Lee is the chairman and managing director of the trustee company. He was involved in the day-to-day management of the trustee company whilst Ding and Phua were passive investors. The collaboration was not as problem free as the investors would have liked it to be. According to Lee, at the time he agreed to set up the ACU account in December 2000, his relationship with Ding and Phua was still “very good”. It appeared that their hitherto amicable relationship began to deteriorate to its present state as a result of friction that developed between Lee on one side, and Ding and Phua on the other. The reasons for the end of the relationship that are material to the interpleader proceedings are evident from the events narrated below.

8 Ding was one of the initial directors of the trustee company. Phua nominated his sister as director. On 7 March 2002, Lee and Cheng passed a resolution removing the entire board of directors and appointing themselves directors of the trustee company. I gather from Cheng’s evidence that this dispute is not yet resolved. Ding and Phua had earlier opposed the extraordinary general meeting convened by Lee and Cheng. One of the grounds of opposition was that the appointment of Cheng was contrary to the relevant Unitholders Agreement, which prescribes that each unitholder is allowed to nominate only one director to the board. In short, Jade Tower Limited could nominate either Lee or Cheng, not both.

9 On 7 March 2002, Ding and Phua decided to remove Cheng as a director of Gracedale and withdraw Lee and Cheng as authorised signatories of the ACU account. On 1 May 2002, a resolution was passed to ratify and adopt their decision of 7 March 2002. At this meeting of members, Soh Yoke Moi (Ding’s wife) retired as director of Gracedale and Ding and Choo Cheng Tong Wilfred (“Choo”) were appointed directors. On 4 June 2002, Ding and Phua handed to ANZ Bank a copy of the May resolution with instructions to observe the change of signatories on its record to Ding and Phua, as stated in the May resolution. ANZ Bank was also given instructions to remit A$820,000 to M/s Mei Leong Lam & Co, a firm of solicitors in Hong Kong and another A$150,000 to Choo. Upon learning from ANZ Bank of the May resolution and transfers, Cheng countermanded those instructions and, at the same time, advised ANZ Bank of her majority shareholding in the company. It was after this point that ANZ Bank took out interpleader proceedings. The interpleader proceedings came on for trial on 16 February 2004 and lasted for five days.

The dispute

10 The plaintiffs’ case is that Lee had agreed to relinquish to Ding and Phua, control of Gracedale and the ACU account. For Ding and Phua to have control, Lee agreed to the issue of additional bearer shares to Ding and Phua. As such, they had authority to act for and on behalf of Gracedale in operating the ACU account. Moreover, they also had authority to pay A$820,000 out of the moneys in the ACU account as Lee previously had agreed to this payment.

11 Cheng’s case, supported by evidence from Lee, is that she and her husband never agreed to cede control of Gracedale and the ACU account to Ding and Phua. The purported issue of additional shares without her knowledge was unlawful. Lee too had no knowledge of the issue of additional shares. The joint signatories of the ACU account remained the same. Prior to the events with which this case is concerned, the authorised signatories on the bank’s record were two signatories, one person from each group. For Group A, the signatories were Cheng or Lee. Group B signatories were Soh Yoke Mui or Phua.

The evidence

Ding’s evidence

12 Ding is a professional engineer. He is also the group managing director of DKLS Industries, a public company listed on the main board of the Kuala Lumpur Stock Exchange. He estimates the group’s annual turnover to be in the region of RM500m. Ding also sits on the board of several companies in various countries. He travels frequently on business and most of the time, communicates with Lee and Phua over the telephone.

13 Ding testified to the circumstances leading to Lee’s consent to Ding and Phua taking over control of Gracedale and the ACU account. As far as Ding and Phua were concerned, Lee’s transfer of A$8.4m was not authorised by the board of the trustee company. Even after capital repayment of A$5.25m, there were still moneys under Lee’s control despite their complaints and efforts over two months to persuade Lee to remit the moneys to the trustee company. Lee cited potential tax liabilities and ongoing litigation in Australia as reasons for keeping the funds outside Australia.

14 Faced with Lee’s resistance and as an alternative to getting Lee to return part of the balance of the sale proceeds, if not all of the moneys under his control, Ding and Phua proposed to Lee to set aside and transfer A$1.8m to the joint custody of the three of them. This was agreed to on 8 December 2000 as can be seen from the statement entitled “Estimates of the outstanding amount arising from the sales of Collins and Flinders”. The amount of A$1.8m was transferred in January 2001 to the ACU account. It was set aside as a provision to meet and satisfy three identified potential claims: a call on a letter of guarantee/indemnity dated 8 July 1999 signed by Phua in relation to shares in Atech Holdings Limited (“Atech”), capital gains and related taxes, and other miscellaneous expenses like foreign exchange losses and legal costs.

15 As agreed on 8 December 2000, Lee was to make available to Ding and Phua, the accounts of SEPLT and SPT with a view to determining any free funds that might be available for distribution, as soon as possible, to the respective unitholders. On 29 December 2000, Ding and Phua wrote to Lee envisaging receipt of the accounts by 12 January 2001.

16 Between January and April 2001, there were numerous conference calls involving Ding, Phua and Lee, including meetings in Kuala Lumpur or Singapore, to try to settle the accounts of SEPLT and SPT. Ding and Phua were repeatedly told by Lee that the final...