BZW-Pacific Union Pte Ltd v Citibank NA

• Jurisdiction: Singapore
• Judge: Amarjeet Singh JC
• Judgment Date: 13 June 1997
• Neutral Citation: [1997] SGHC 164
• Docket Number: Suit No 263 of 1996
• Date: 13 June 1997
• Published date: 19 September 2003
• Year: 1997
• Plaintiff Counsel: Low Chai Chong (Rodyk & Davidson)
• Citation: [1997] SGHC 164
• Defendant Counsel: Tan Cheng Han and Kareen Loi (Drew & Napier)
• Court: High Court (Singapore)
• Subject Matter: Bona fide purchaser without notice,Whether defendants entitled to return of shares,Shares stolen from defendants,Whether bona fide purchaser for valuable consideration had equitable title to shares,Financial and Securities Markets,Whether purchaser had competing equity with defendants' right to shares

Judgment:

1.AMARJEET SINGH JC

Introduction

Cur Adv Vult

The plaintiffs are stockbrokers and members of the Stock Exchange of Singapore (SES).

2.The plaintiffs have a remisier one Ms Diana Foo, DW1, who serviced a new client one Nicholas Cheang Ying Choy (Cheang) in the sale and delivery by him of 49,000 Metroplex shares and 85,000 Malaysian Airlines (MAS) shares collectively referred to as the `said shares`. Cheang was paid by the plaintiffs who thereafter learnt that the said shares had been stolen.

3.The defendants are bankers carrying on business in Singapore. The said shares referred to and others had been stolen from them whilst in their custody.

4. Undisputed Facts

A subtantial number of facts were undisputed as follows: (a). On 22 February 1995, Cheang applied to open a securities trading account with the plaintiffs through Ms Diana Foo. The application was duly approved and the account`s trading limit was set at $80,000. Prior to opening the account, Cheang informed Diana Foo, that he was recommended by Suzie Mok, a client of Diana Foo.

(b). Next day, on 23 February 1995, Cheang instructed Diana Foo to sell 49,000 Metroplex shares which were accordingly sold. The sale of the shares by Diana Foo and delivery of the share certificates to the plaintiffs were effected the same day.

(c). On 23 and 24 February 1995, the plaintiffs made out two cheques paying Cheang $60,145.70.

(d). Between 27 February 1995 and 2 March 1995, Cheang delivered 85,000 MAS shares to the plaintiffs and instructed Diana Foo to sell the said shares which she sold. The sale proceeds amounting to $386,653.51 were paid to Cheang by five cheques dated between 27 February 1995 to 8 March 1995. The last cheque dated 8 March 1995 was cleared on 9 March 1995 at 3.10pm.

(e). The said shares had in fact been stolen from the defendants, by their employee, Jeannie Toh Cheqee Yong (Jeannie Toh) and one See Wei Chong (Wei Chong), sometime between October 1994 and January 1995.

(f). The said shares were kept by the defendants in a Chubb safe which could only be opened by a key and a combination code.

(g). DW1, Robert Breeden (Breeden), the vice-president of the defendants` risk management team had a key to that safe. He kept this key in one of the drawers of his desk in his office whenever he was not in.

(h). Unknown to Breeden, Jeannie Toh had a duplicate of the key to Breeden`s office. DW2, Tan Siew Eng (Siew Eng) vice-president of the plaintiffs` private bank risk team was aware of this. Siew Eng requested Jeannie Toh to reduplicate her key to facilitate her own entry into Breeden`s office during Breeden`s absence.

(i). Whenever Siew Eng was required to open the Chubb safe, Siew Eng would get someone to go with her to Breedon`s office to get the key of the safe from his drawer.

(j). Jeannie Toh had been given the combination code which is required to open the safe together with the key. She though was not given the key. But she knew that the key to the safe was kept in one of the drawers in Breedon`s office.

(k). The defendants had a procedure whereby they kept records of shares in their custody for their corporate customers in the form of a lodgment book where information such as the number of shares and the share certificates numbers and names of the owners of the shares were usually recorded.

(l). However, with respect to the stolen Metroplex and MAS shares, this procedure had not always been followed. Thus, not all the certificate numbers of these shares were captured on the lodgment book.

(m). The defendants first learnt that certain other shares were missing from their safe on 21 February 1995.

(n). By 23 February 1995, the defendants informed the SES that 7,129,254 UOB Ltd shares were lost. They also informed the SES of the certificate numbers of the UOB shares. No other shares were however mentioned. Someone from the SES then informed Siew Eng that the defendants had to write to the relevant share registrars to inform them of the loss, ie the report should not be made to the SES.

(o). On 24 February 1995, the defendants made a police report. The report made reference to missing Metroplex and MAS shares, but did not give details of the said share certificate numbers.

(p). On 25 February 1995, the solicitors for the defendants wrote to the share registrars of Metroplex and MAS respectively informing them that share certificates for 50,000 Metroplex shares and 300,000 MAS were missing. No certificate numbers were provided.

(q). On 2 March 1995, the defendants, through their solicitors, wrote to the registrars of Metroplex and MAS, enclosing statutory declarations of Breeden, which set out details of the said missing shares. The 49,000 Metroplex shares sold by Cheang through the plaintiffs were set out in the statutory declaration to the registrar of Metroplex. The said letters were sent by faxes and courier service; it is not clear if they were despatched prior to the last transaction by the plaintiffs involving 35,000 MAS shares. The defendants also requested the respective registrars to take appropriate action to forestall any dealings with the relevant shares.

(r). On 11 March 1995, the defendants` solicitors wrote to the registrar of MAS, enclosing a further statutory declaration of Breeden which declared another 200,000 MAS shares to be missing. The 85,000 MAS shares sold by Cheang through the plaintiffs were part of these 200,000 MAS shares stated in this statutory declaration.

(s). The defendants then proceeded to apply for replacement certificates for the MAS and Metroplex shares.

(t). On 29 March 1995 the defendants informed the SES of the Malaysian shares which had been stolen.

(u). The registrar of Metroplex and MAS advertised the loss of the shares on 30 and 31 March 1995 in the Malaysian newspapers only.

(v). From 31 March 1995 onwards, the plaintiffs received rejections from the secretary of clearing and computer services of SES (SCCS) in respect of the said share certificates delivered by the plaintiffs in respect of third-party buyers. As a result, the plaintiffs entered into buying-in contracts in Cheang`s name so they could make a good delivery to the third parties. This was in accordance with industry practice where the stockbroking company would effect buying-in in the client`s name, and thereafter look to the client for reimbursement.

(w). The plaintiffs however did not attempt to obtain reimbursement from Cheang.

(x). On 26 April 1995 and 19 May 1995, the Singapore Police Force seized the original share certificates from the plaintiffs.

(y). On 26 April 1995, the solicitors for the plaintiffs wrote to the registrars of MAS and Metroplex, asserting the plaintiffs` rights to the said shares and requested the respective registrars not to issue duplicate certificates.

(z). The registrar for Metroplex replied on 28 April 1995 to the effect that replacement certificates in respect of the Metroplex shares had already been issued to the defendants.

(aa). The registrar for MAS shares agreed that the replacement for the MAS share certificates would be `KIV pending police investigations`.

(bb). On 19 May 1995, the Singapore newspapers reported that seven persons have been charged in connection with the theft of share certificates from the defendants.

(cc). On 22 August 1995, Cheang pleaded guilty to, inter alia, three charges of assisting disposal of stolen properties in relation to 77,000 MAS shares. Two other charges involving the balance of 8,000 MAS shares and 49 Metroplex shares were taken into consideration. All in all, the abovementioned five charges relate to all the said shares in these proceedings.

(dd). In September 1995 plaintiffs and defendants each asserted to the CID their right to be entitled to the said shares.

5. Other evidence

There were other facts adduced at the trial through witnesses` evidence.

5.1.Two witnesses testified on behalf of the plaintiffs, namely, Diana Foo, PW1, and Koh Kee Seng, PW2, (Kee Seng) head of the plaintiffs` settlement department.

5.2.In her cross...