BZW-Pacific Union Pte Ltd v Citibank NA

• Judge: Amarjeet Singh JC
• Judgment Date: 13 June 1997
• Neutral Citation: [1997] SGHC 164
• Defendant Counsel: Tan Cheng Han and Kareen Loi (Drew & Napier)
• Subject Matter: Whether bona fide purchaser for valuable consideration had equitable title to shares,Whether defendants entitled to return of shares,Financial and Securities Markets,Bona fide purchaser without notice,Whether purchaser had competing equity with defendants' right to shares,Shares stolen from defendants
• Published date: 19 September 2003
• Court: High Court (Singapore)
• Plaintiff Counsel: Low Chai Chong (Rodyk & Davidson)

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...