Chua Kwee Chen, Lim Kah Nee and Lim Chah In (as Westlake Eating House) and Another v Koh Choon Chin

• Jurisdiction: Singapore
• Judge: Andrew Phang Boon Leong J
• Judgment Date: 16 June 2006
• Neutral Citation: [2006] SGHC 92
• Docket Number: Suits Nos 586, 587 and 588 of 2004 Originating Summons No 583 of 2004
• Date: 16 June 2006
• Year: 2006
• Published date: 20 June 2006
• Plaintiff Counsel: Tito Shane Isaac and Justin Chan Yew Loong (Tito Isaac & Co)
• Citation: [2006] SGHC 92
• Defendant Counsel: N Sreenivasan and Collin Choo Ching Yeow (Straits Law Practice LLC)
• Court: High Court (Singapore)
• Subject Matter: Pleadings,Standard of proof,Standard of proof applicable for allegations of fraud and dishonesty in civil proceedings,Whether court may consider case not pleaded,Plaintiffs alleging fraud and dishonesty on part of defendant,Proof of evidence,Plaintiffs making alternative claim for an account from defendant,Evidence,Plaintiffs failing to plead claim for account,Civil Procedure,Whether plaintiffs meeting required standard of proof

16 June 2006

Andrew Phang Boon Leong J:

Introduction

1 The consolidated proceedings in the present case represented yet another unfortunate instalment in an ongoing family saga. The earlier proceedings were in fact commenced by the defendant’s son. That case, which initially involved the present defendant as one of the defendants as well, was settled. The defendant had apparently decided to take his son’s side in those previous proceedings. In the present proceedings, the plaintiffs brought an action against the defendant. Although only three plaintiffs were expressly named (two from the Lim family and one in-law), they are in fact suing the defendant on behalf of themselves as well as on behalf of all the partners in both Westlake Eating House and the firm formerly trading as New Westlake Eating House (I will collectively refer to them as “the plaintiffs”). Indeed, barring Chua Kwee Chen, all the plaintiffs are siblings, with the defendant being the husband of their late sister. The late sister, Lim Kah Yan (“KY”), had, as controlling partner, overseen the business. She had, in turn, taken over from her father, Lim Tong Law (“TL”), who had (unfortunately) encountered medical problems not long after he had begun the business (which took the form of a partnership). Nevertheless, TL was clearly the patriarch of the family. It is significant that he got along well with the defendant who was of course his son-in-law. TL passed away in 1999. After KY passed away in October 1992, her sister, Lim Kah Nee (“KN”) took over. She has been in charge of the business ever since and is in fact one of the plaintiffs in the present action.

2 Before proceeding further, it would be apposite to set out the gist of the plaintiffs’ claims.

3 The first related to a claim for a total sum of $195,000 allegedly withdrawn by the defendant by way of seven partnership cheques and banked into a joint account held by him and his late wife, KY.

4 The second related to a claim for a total sum of $167,000. This figure was arrived at by the alleged banking of partnership funds in two alleged tranches – the first comprised $155,000, which was banked into the defendant’s late wife’s (KY’s) account, and the second comprised $100,000, which was banked into the defendant’s and KY’s joint account. Of this total of $255,000, the plaintiffs say that a total of $88,000 was legitimately paid to KY as her salary during the material period (between 1989 and 1992) – hence, the claim for the difference of $167,000.

5 The third was a claim for an estimated amount of between $2,008,006 and $2,526,430 allegedly withdrawn by the defendant for a period of over a decade from the partnership – more specifically, between 28 October 1992 and the period in and around 2003.

6 The fourth was a claim with respect to two properties – 189 Selegie Centre #05-04 and No 29 West Coast Park, Parkview Condominium #03-02 (“the Selegie property” and the “Parkview property”, respectively). In particular, the plaintiffs allege that the defendant had wrongfully and in breach of his duties as a partner failed to account to them in so far as the sales proceeds of these two properties were concerned.

7 The defendant has also brought a counterclaim for, inter alia, the recovery of sums of moneys which he and his late wife had allegedly paid on behalf of the partnership to the other partners, as well as for an inquiry as to damages or for an account of profits for alleged use, by the plaintiffs, of the trade name “Westlake” and/or alleged breach of fiduciary duties by the plaintiffs. There was also a claim with respect to another partnership, which operated as a beauty centre. The focus of the present proceedings was, however, on the plaintiffs’ claims as opposed to the defendant’s counterclaim.

The burden of proof

8 I begin with the simple, yet pivotal, proposition that the legal burden of proof lay throughout on the plaintiffs to prove the various allegations that they had levelled against the defendant.

9 Indeed, the plaintiffs’ principal allegations, based on their pleadings, were premised on an alleged breach of fiduciary duty and/or breach of trust by the defendant in his capacity as an accountant (or as the person in charge of the accounts) and/or as a partner. This alleged breach was, in turn, based on various alleged acts of fraud and/or dishonesty on the part of the defendant. Although, as we shall see, the civil standard of proof continues to apply, it was imperative that the plaintiffs adduce sufficient evidence, given the gravity of the allegations. There was in fact a sudden – and radical – shift in the plaintiffs’ case, which I shall deal with below. As it became clear that the initial basis of their allegations became less and less tenable as the hearing proceeded, the plaintiffs shifted their ground and sought to seek an account from the defendant instead. I shall have more to say about the chameleon-like nature of the plaintiffs’ case. For the present, however, I deal with the claim based on an alleged breach of fiduciary duty and/or breach of trust.

The standard of proof for fraud in civil proceedings

10 As I have mentioned in the preceding paragraph, the plaintiffs’ claim, at least in its initial incarnation, was not merely couched in the form of an alleged breach of fiduciary duty and/or breach of trust. The very pith and marrow of the plaintiffs’ case imported something rather more sinister; it was focused on an alleged fraud perpetrated by the defendant against the partnership. How else could one possibly characterise an allegation centring on the illegal siphoning of partnership funds – the bulk of the funds having allegedly been spirited off by the defendant over a period of more than a decade? Indeed, if true, this was conduct most foul, constituting dishonesty of the highest order set against the canvass of an otherwise convivial family backdrop.

11 Looked at in this light, the standard of proof, which was laid down recently by the Singapore Court of Appeal in Tang Yoke Kheng v Lek Benedict [2005] 3 SLR 263 (“Tang Yoke Kheng”), is a not inconsiderable one. From the perspective of logic, common sense and fairness, this is only to be expected. After all, an allegation of, inter alia, fraud and/or dishonesty is an extremely serious one. Any reasonable person would acknowledge that that would be the case. Indeed, as Lord Steyn put it in the House of Lords decision of Smith New Court Securities Ltd v Citibank NA [1997] AC 254, “as between the fraudster and the innocent party, moral considerations militate in favour of requiring the fraudster to bear the risk of misfortunes directly caused by his fraud” (at 280). Hence, in that case, the House held that in so far as fraudulent misrepresentation or deceit was concerned, the damages awarded against the fraudster would include all loss that flowed directly from the entry into the contract in question, regardless of whether or not such loss was foreseeable, and would include all consequential loss as well. Indeed, Lord Steyn did proceed to state thus (see ibid):

I make no apology for referring to moral considerations. The law and morality are inextricably interwoven. To a large extent the law is simply formulated and declared morality. And, as Oliver Wendell Holmes, The Common Law … observed, the very notion of deceit with its overtones of wickedness is drawn from the moral world. [emphasis added]

12 Hence, allegations of fraud and/or dishonesty ought not – indeed, could not – be made lightly, given the moral overtones as well as implications briefly mentioned in the preceding paragraph. Such allegations had to be proved. More than that, they could not be proved by mere assertion – not even, I would add, by the adducing of merely some proof. In a related vein, Mokhtar Sidin JCA, in the Malaysian Court of Appeal decision of Wu Shu Chen v Raja Zainal Abidin bin Raja Hussin [1997] 2 MLJ 487 pertinently pointed out (at 499) that “[g]rave suspicion … is no proof of fraud”.

13 Prior to the clarification of the law in Tang Yoke Kheng (which I am of course bound by), the situation with regard to the standard of proof required in situations of fraud and/or dishonesty was in fact none too clear. In general, there are of course two clear standards of proof – one obtaining in the criminal sphere, the other in the civil. They are well known even amongst many members of the public as well. The first, in the criminal sphere, requires proof beyond a reasonable doubt. The second, in the civil sphere, requires proof on a balance of probabilities. The criminal standard of proof is therefore higher – and rightly so, since an individual’s life or liberty is at stake. Hence, if the accused is able to raise merely a reasonable doubt as to his or her guilt, the Prosecution would not be treated as having discharged its burden of proof. On the other hand, in the civil sphere, the plaintiff need only demonstrate that it is more probable than not that his or her case is the correct one in order to prevail.

14 It can, perhaps, be readily seen why situations of fraud and/or dishonesty have engendered the difficulty they have. In the first place, such fraud and/or dishonesty occur (as is alleged in the present proceedings) in the civil sphere. Thus, and in accordance with what has been stated in the preceding paragraph, the standard of proof ought to be on a balance of probabilities. The conceptual as well as practical difficulty that arises is this: Fraud and/or dishonesty connote something that does not sit at all well in the context of civil proceedings per se. Indeed, fraud and/or dishonesty are often associated with criminal proceedings. However, given the fact that the allegations of fraud and/or dishonesty have, as in the present proceedings, arisen in the civil sphere, the criminal standard of proof beyond a reasonable doubt is inappropriate. In truth, the situation of fraud and/or dishonesty alleged in the civil sphere...