Belinda Ang Saw Ean JADGangadhara Brhmendra Srikanth Maroju v Epoch Minerals Pte Ltd

• Jurisdiction: Singapore
• Judge: Belinda Ang Saw Ean JAD,Woo Bih Li JAD,Quentin Loh JAD
• Judgment Date: 12 October 2022
• Docket Number: Civil Appeal No 8 of 2022
• Court: High Court Appellate Division (Singapore)

Gangadhara Brhmendra Srikanth Maroju

and

Epoch Minerals Pte Ltd

[2022] SGHC(A) 35

Belinda Ang Saw Ean JAD, Woo Bih Li JAD and Quentin Loh JAD

Civil Appeal No 8 of 2022

Appellate Division of the High Court

Restitution — Failure of consideration — Total failure of consideration — Respondent arranging for US$100,000 to be paid to appellant — Purported financing transaction not coming through — Whether respondent was estopped from recovering US$100,000 as result of reassurances provided to appellant after purported financing transaction fell through that sum was nevertheless appellant's to keep

Tort — Conspiracy — Unlawful means — Appellant introducing respondent to purported investor — Respondent arranging for payment of US$500,000 as “margin money” and US$100,000 as due diligence fee for purported financing transaction — Purported financing transaction not coming through — Whether there had been fraud in connection with “margin money” and due diligence fee — Whether appellant had acted in combination with other defendants to defraud respondent or had simply acted as conduit of communication and were not involved in whatever scheme other defendants had in mind

Trusts — Accessory liability — “Margin money” transferred to third parties without respondent's notice or consent and for purposes unconnected with purported financing — Whether appellant dishonestly assisted in breach of trust in connection with transfer of “margin money”

Held, dismissing the appeal:

(1) An appellate court's power of review with respect to findings of fact made in the course of trial was limited especially where oral evidence was concerned, but the appellate court could and should overturn any such finding if it could be established that the trial judge's assessment was plainly wrong or against the weight of the evidence: at [36].

(2) The Judge's findings that fraud had been committed on EMPL in relation to the margin money and due diligence fee and that AKS held the margin money on trust were correctly made: at [31].

(a) In connection with the margin money, it was not in dispute that the actual purpose to which the margin money had been deployed was simply inconsistent with the purpose which EMPL believed it was putting up the margin money for. The margin money had been put up as a “deposit” for the purported financing transaction and Mr Sharma could never have known, from the representations which Mr Maroju accepted he had made to Mr Sharma, that the margin money might eventually come to be transferred to third parties, whatever purpose for which such a transfer was to be made. Further, there was nothing on the face of the Clear Point Contract and the SLO Contract which suggested that Clear Point and/or SLO were RAM's “funding principal” or that the entity to be ultimately funded under those contracts was EMPL. There was also no suggestion that EMPL was to be a party to any funding arrangement involving Clear Point and/or SLO: at [31].

(b) On the available evidence, there was also no justification for AKS to charge any such due diligence fee in connection with the financing transaction. Assuming for the sake of argument that the Clear Point Contract and the SLO Contract were indeed contracts with RAM's “funding principal”, it was not stipulated in those contracts that a “due diligence” exercise had to be performed nor that EMPL was to be the subject of such an exercise. There was also no evidence that RAM's “funding principals” (whoever they were) had requested for a due diligence to be performed, and neither was any such due diligence report prepared: at [32].

(3) On the evidence, the margin money was not meant to be freely at AKS's disposal as it had been put up specifically as a deposit for the financing transaction, and the Term Sheet also stated that the margin money was to be used to set off the eventual repayments due from EMPL. The evidence of exclusivity of purpose for a Quistclose trust to arise was also satisfied: at [33].

(4) To consider if there was any merit in Mr Maroju's contention that he had simply assisted as a conduit of communication and was not involved in whatever scheme the other defendants might have had in mind, it was important to first determine what Mr Maroju actually knew about the purported financing transaction, because it was in the light of that knowledge that Mr Maroju's actions could be assessed: at [37].

(5) The three e-mails sent by Mr Veerappan to Mr Maroju, which contained attachments of the Clear Point Contract, an e-mail from Mr Schaffer and also made mention of the movement of funds following confirmation from the “Escrow Attorney” showed that Mr Maroju knew about the Clear Point Contract and the SLO Contract. It was clear on the face of those e-mails that Mr Maroju knew all along about the involvement of Clear Point and SLO in the purported financing transaction, and that a sum of US$500,000 was to be transferred to the escrow agents of Clear Point and SLO. The proximity in time of those e-mails with the relevant timeline of events in the purported financing transaction was significant and they were coincident with the attempts taken by the other defendants at various stages to obtain the requisite funding for EMPL's promised financing. The unchallenged evidence of both Mr Kamil and Mr Veerappan was also that Mr Maroju knew about the Clear Point Contract and the SLO Contract, and of Clear Point's and/or SLO's role as the “funding principal” in the purported financing transaction. Mr Maroju's evidence on those e-mails were internally consistent and the Judge correctly found that Mr Maroju's explanations for these e-mails were “utterly lacking in credibility”: at [39] to [45].

(6) All the evidence, taken together, gave rise to the irresistible inference that Mr Maroju knew of the existence of the purported “funding principals” Clear Point and SLO and that Mr Maroju knew that the margin money was to be transferred to the alleged escrow agents of Clear Point and SLO purportedly in return for obtaining the required funding for the financing transaction. Yet, Mr Maroju did not seek clarification as to how this would tie in with the Singapore-based investor (later ascertained to be RAM) itself providing financing to EMPL, contrary to what he accepted he had represented to Mr Sharma. Mr Maroju also knew that the margin money from EMPL had not been retained by AKS but was being used by AKS for some other purpose that did not seem connected with EMPL's funding requirements: at [46].

(7) Given what Mr Maroju knew, it became clear that he had not been merely acting as a conduit or facilitating communications. Rather, he had been actively working to maintain a veneer of legitimacy in the financing transaction, keeping the appearances consistent with what EMPL would have understood from his representations. The Judge's conclusion that Mr Maroju was the man at the heart of the fraud was not plainly wrong in the light of the evidence. The Judge's finding that Mr Maroju was a co-conspirator with AKS and Mr Kamil to defraud EMPL of the margin money, as well as the due diligence fee and the commission, both of which had also been paid in connection with the purported financing transaction, was therefore correctly made: at [47] and [49].

(8) The Judge's finding that Mr Maroju had dishonestly assisted in AKS's breach of trust was correctly made. It could not be disputed that the transfer of the margin money had been in breach of trust and that Mr Maroju had rendered “assistance” to that breach. The only remaining question was whether Mr Maroju's assistance had been dishonest. The test for dishonesty combined an objective standard of honesty with subjective elements of the individual's personal characteristics and knowledge. Whether a person had acted dishonestly was determined by reference to what he subjectively knew or believed and the standards of ordinary decent people. The way in which Mr Maroju had acted was nothing but dishonest in the context of the representations that were made to EMPL to maintain a veneer of legitimacy in the purported financing transaction, the truth of which was inconsistent with what he had represented to Mr Sharma: at [52] and [53].

(9) The Judge's finding that the US$100,000 paid by Mr Sharma to Mr Maroju had been commission for the purported financing transaction was not against the weight of the evidence. This sum was paid to Mr Maroju just two days before payment of part of the margin money took place. The evidence showed a clear link between that payment and the purported financing transaction. Mr Maroju had not discharged his evidential burden to show that the sum had been paid by Mr Sharma for other purposes: at [54] and [55].

(10) There was no merit in Mr Maroju's argument about Mr Sharma having reassured him that the US$100,000 was his to keep. The reassurances provided by Mr Sharma had to be seen in their proper context. At the time when they were made, Mr Sharma still intended to pursue other financing opportunities through Mr Maroju, because he had not yet discovered that Mr Maroju was engaged in a conspiracy with the other defendants. Mr Sharma had also made those reassurances because he wanted Mr Maroju to help chase for the return of the margin money and due diligence fee, as Mr Maroju was EMPL's only point of contact with AKS and RAM. In any event, Mr Maroju would have been precluded from relying on the estoppel argument in the appeal because this was never part of his case below. The Judge therefore correctly found that the US$100,000 was part of the losses suffered by EMPL as a result of the fraud perpetrated on it: at [56] to [59].

[Observation: Mr Maroju's denial of fraud in relation to the margin money was founded on two grounds. First, he believed whatever had been told to him by Mr Veerappan/AKS about the financing transaction to be true, and that was also why he believed the financing transaction as not...