Cheong Soh Chin and others v Eng Chiet Shoong and others

• Jurisdiction: Singapore
• Judge: Vinodh Coomaraswamy J
• Judgment Date: 28 September 2018
• Neutral Citation: [2018] SGHC 131
• Court: High Court (Singapore)
• Docket Number: Suit No 322 of 2012
• Published date: 09 April 2019
• Year: 2018
• Hearing Date: 04 July 2017,29 June 2017,04 September 2017,27 June 2017,06 July 2017,30 October 2017,07 July 2017,05 July 2017,28 June 2017,30 June 2017,11 July 2017
• Plaintiff Counsel: Philip Jeyaretnam SC, Foo Maw Shen, Chu Hua Yi, Ooi Huey Hien and Jasmine Yong (Dentons Rodyk & Davidson LLP)
• Defendant Counsel: Koh Swee Yen, Jared Chen, Ho Wei Jie, Jill Ann Koh Ying, Lim Yangyu and Goh Mu Quan (WongPartnership LLP)
• Subject Matter: Equity,Fiduciary relationships,When arising,Duties,Remedies,Account,Account on wilful default basis,Account of profits,Common account
• Citation: [2018] SGHC 131

Vinodh Coomaraswamy J: Introduction

This decision represents the latest instalment in the six-year long saga of a fallout between erstwhile friends and business partners. The essence of the case is this. The plaintiffs are very wealthy individuals. The defendants are experienced asset managers. The plaintiffs and defendants were family friends who agreed to embark on a venture together to grow the plaintiffs’ wealth for mutual profit. The plaintiffs provided the capital and the defendants provided the financial expertise.

The parties’ relationship soured. In April 2012, the plaintiffs brought this action to compel the defendants to account for their dealings with the plaintiffs’ assets and to return those assets. The defendants brought a counterclaim for management fees and related expenses incurred in managing and administering the plaintiffs’ investments.

At the liability phase of this action, I allowed the plaintiffs’ claim and dismissed the bulk of the defendants’ counterclaim. The defendants appealed my judgment, but only to their counterclaim for management fees and related expenses.

The Court of Appeal dismissed the bulk of the defendants’ appeal. The Court of Appeal did, however, award the defendants A$2m on a quantum meruit for a particular project known as Project Plaza. The Court of Appeal left undisturbed the remainder of my findings dismissing the defendants’ counterclaim.

The parties now appear before me in the second phase of this action, the purpose of which is for the defendants to render the account which was ordered in the liability phase.

The accounting phase of this dispute comprises two judgments. This is because I had to deal with a preliminary issue. The preliminary issue was whether the defendants are precluded from asserting in the accounting phase that there was an overarching agreement for the plaintiffs to pay the costs and expenses incurred by the defendants in managing and administering the plaintiffs’ investments. I took the view that the defendants were precluded from arguing that issue again. I gave oral judgment accordingly before the evidential hearings in the accounting phase began. The defendants have appealed against that decision. The grounds of my decision on that preliminary issue is the subject matter of Cheong Soh Chin and others v Eng Chiet Shoong and others [2018] SGHC 130 (“Cheong Soh Chin (Res Judicata)”).

After receiving evidence in the accounting phase, I reserved judgment on the merits of the account. This judgment now deals with those merits, ie the taking of the account on the wilful default basis which the defendants were ordered to render in the liability phase. The plaintiffs assert that the account, properly taken on the wilful default basis, establishes that the defendants must pay the plaintiffs a sum of just over US$12m (excluding interest).¹ The plaintiffs arrive at that figure by falsifying certain disbursements made by the defendants as being unauthorised use of trust monies and surcharging the account for monies that they say should be credited to the corpus of the trust. Additionally, the plaintiffs also claim that certain monies received by the defendants as trustees were secret commissions which properly belong to the plaintiffs.

After hearing parties’ submissions, I now hold substantially in favour of the plaintiffs.

Background facts

The facts have been set out in detail in the first instance and appellate judgments in the liability phase: Cheong Soh Chin and others v Eng Chiet Shoong and others [2015] SGHC 173 (“Cheong Soh Chin (HC)”) and Eng Chiet Shoong and others v Cheong Soh Chin and others and another appeal [2016] 4 SLR 728. The facts have also been summarised in Cheong Soh Chin (Res Judicata). I will not repeat the facts in detail or in brief.

Consistently with those judgments, I use “the Wees” to refer to the plaintiffs and “the Engs” to refer to the defendants. Where it is necessary to identify a party individually, I use “WBK” to mean the second plaintiff, “WBT” to mean the third plaintiff”, “ECS” to mean the first defendant, “SL” to mean the second defendant, and “CSP” to mean the third defendant.

Characterisation of the parties’ relationship

The proper characterisation of the parties’ relationship is essential to understanding the duties which the Engs owe to the Wees. To this end, I summarise my findings in Cheong Soh Chin (HC).

I found that the Engs were trustees of the Wees’ monies under a presumed resulting trust (Cheong Soh Chin (HC) at [32]–[36]). This is because the Engs had been given the Wees’ monies to invest, but the Wees had no intention to make the Engs the beneficial owners of those monies. Alternatively, I was also prepared to find that the Engs became the legal owners of the property which the Wees wished to invest in through them in the Engs’ sole capacity as agents for the Wees. However, that was only an alternative finding, that I would have made, had I not already found that the Engs were presumed resulting trustees (Cheong Soh Chin (HC) at [32] and [36]). This judgment proceeds on my primary finding in Cheong Soh Chin (HC). The analysis that follows is therefore on the basis that the Engs are presumed resulting trustees.

Additionally, I also found that the Engs owed fiduciary duties to the Wees (Cheong Soh Chin (HC) at [32] and [35]). The reason for this was that they had used the Wees’ monies to make investments on the Wees’ behalf, and had managed and administered those investments. That relationship gave rise to the incidents of a fiduciary relationship, and thus the Engs properly bear fiduciary consequences for their acts and omissions.

The Engs did not appeal against my finding that the Engs were presumed resulting trustees and fiduciaries (see Cheong Soh Chin (HC) at [29]). Those findings are, therefore, unaffected by the Court of Appeal’s judgment in Eng Chiet Shoong (CA). Those findings therefore stand.

The parties’ arguments

I briefly set out the parties’ arguments here as a preliminary indication of the issues in contention. I will set out the parties’ arguments more comprehensively when I deal in turn with each issue.

The plaintiffs’ arguments

The Wees’ claim is essentially that an account on the wilful default basis shows that the Engs owe the Wees just over US$12m, excluding interest. The Wees argue that certain items in the Engs’ account should be falsified. They also argue that the Engs’ account should be surcharged with certain other items.² The Wees made distinct arguments in relation to each item to be falsified or surcharged which I will canvass in more detail below when I consider the items individually.

The Wees also allege that certain payments made by third parties to ECS constituted secret profits which he earned while a fiduciary. The Wees therefore also claim an account of profits in respect of these sums in the event that they cannot be surcharged against the Engs.³

The defendants’ arguments

The Engs separate the Wees’ claims into two categories. In the first category are the items which the Engs seek to falsify. In the second category are the surcharges.

In the first category are a number of disputed expenses which the Engs claim to be entitled to deduct from the account which they render. The Engs raise four alternative arguments on these disputed expenses: First, the Wees and Engs had an overarching agreement that the Wees would bear all expenses which the Engs incurred in managing the Wees’ investments, including all of CSP’s operating expenses (which in turn included the salaries of the CSP’s employees). ⁴ Second, even if there was no single overarching agreement, there were multiple specific agreements that the Wees would bear all expenses which the Engs incurred in managing the Wees’ investments including all of CSP’s operating expenses (which in turn included the salaries of the CSP’s employees).⁵ Third, the Wees are precluded by an estoppel by convention from disallowing these expenses.⁶ The Engs allege that the Engs and the Wees had, throughout the course of their relationship, proceeded on a common understanding or basis that the Wees would pay all expenses which the Engs incurred in managing the Wees’ investments including all of CSP’s operating expenses (which in turn included the salaries of the CSP’s employees). Alternatively, the Engs allege that even if the Wees did not proceed on that understanding or basis, the Wees at least acquiesced to the Engs’ proceeding on that understanding or basis. Fourth, the Engs incurred these costs and expenses as trustees, and are therefore entitled to be reimbursed for those costs and expenses out of the trust property.⁷

The nature of these four arguments is such that the outcome for the parties are binary. If the Engs succeed on any one of these four arguments, they can deduct all of the disputed expenses in the account and the Wees will be able to falsify none of them. Equally, if the Wees succeed on all four of these arguments, the Wees will be entitled to falsify all of the disputed expenses in account and the Engs can deduct none of them. For the purposes of these four arguments, therefore, the disputed expenses stand or fall together and can be analysed together.

In addition, however, the Engs also advance specific arguments in respect of particular disputed expenses. I examine these specific arguments in detail below.

In respect of items with which the Wees seek to surcharge the account, the Engs have mounted distinct arguments in relation to each specific item claimed. I canvass these arguments below where I address each item of surcharge in turn.

Issues

The arguments advanced by the parties raise the following issues for my decision: First, was there an overarching agreement under which the Wees agreed to bear the disputed expenses (the “overarching agreement issue”)? Second, were there multiple specific agreements...