CIMB Bank Bhd v Dresdner Kleinwort Ltd

• Jurisdiction: Singapore
• Court: Court of Three Judges (Singapore)
• Judge: Chao Hick Tin JA
• Judgment Date: 08 August 2008
• Neutral Citation: [2008] SGCA 36
• Citation: [2008] SGCA 36
• Plaintiff Counsel: Alvin Yeo SC, Nish Shetty, Tan Hsiang Yue and Aw Wen Ni (Wong Partnership LLP)
• Date: 08 August 2008
• Published date: 19 August 2008
• Defendant Counsel: Hri Kumar SC, Tan Siu Lin and Bhavish Advani (Drew & Napier LLC)
• Docket Number: Civil Appeal No 35 of 2008
• Subject Matter: Contract,Choice of jurisdiction,Restitution,Whether choice of law clause in non-existent contract should apply to purchaser's claim to recover payment,Choice of law,Relevant factors at stage one of Spiliada test,Whether third-party action should be tried together with main action,Effect of fraud on existence of contact,Whether third-party action integral and inseparable part of main action,Common ground that no contract between parties under which payment could have been made by purchaser to seller,Whether choice of law clause in void or non-existent contract should apply to consequential restitutionary claim,Conflict of Laws,Distinguishing between contracts parties intended to enter into but subsequently became ineffective or void due to contractual failure, and void contracts where there was no meeting of the minds to enter into that particular contract

8 August 2008

Chao Hick Tin JA (delivering the grounds of decision of the court):

1 This was an appeal by the defendant appellant, CIMB Bank Berhad (“CIMB”), against a decision of the High Court refusing its application for a permanent stay of an action (“the present action”) instituted by the plaintiff respondent, Dresdner Kleinwort Limited (“Dresdner”), for the recovery of US$8,199,869.50 (“the Funds”) in relation to the purported sale and purchase of eight promissory notes (“the Notes”), on the ground of forum non conveniens. Instead, the High Court granted Dresdner’s application that the action be temporarily stayed, pending the outcome of certain foreign proceedings in Germany where Dresdner is being sued by other parties also in connection with the Notes. We heard the appeal and, not being persuaded that the High Court judge (“the Judge”) was wrong in the exercise of his discretion or had misapplied the relevant principles, dismissed it. We now give our reasons.

Background

2 Dresdner is a foreign company with a registered office in England offering banking services, including the discounting of promissory notes. Its London branch (“Dresdner London”) was the office that dealt with the purported transaction involving the Notes. CIMB is a Malaysian bank with branches in various places, including London and Singapore.

3 On 6 May 2002, pursuant to a written agreement, Dresdner sought to purchase from CIMB the Notes,[note: 1] which had a nominal value of US$10m, for the amount of the Funds. The Notes, with a maturity date of 3 February 2004, were issued on 1 February 2002 by Innaria Sdn Bhd, Kota Kinabalu, Sabah, Malaysia (“Innaria”) to the order of V V Enterprise, Luyang, Sabah, Malaysia (“V V Enterprise”), and payable at Maybank Bhd, Kota Kinabalu, Sabah, Malaysia. The Notes bore signatures that appeared to be those of two directors of Innaria, namely, Lye Kok Keng alias Harry (“Lye”) and Mohamed Zulfikar bin Muzaffar (“Zulfikar”). The Notes on their face also bore the guarantee of the Public Works Department of Sabah, Malaysia, with the alleged signatures of John Baptist Badai (“Badai”) and Lontou Ujum (“Ujum”) against the signed stamp of a “Commissioner for Oaths”. The Notes were accompanied by a confirmation letter from Innaria stating that the Notes “relate to the financing of the import and installation of pipes under contract number JKR.JLN (S) 600 – 1/5/6 Klt.16/144”.[note: 2]As with the Notes, this confirmation letter bore the signatures of Lye and Zulfikar of Innaria and those of Badai and Ujum of the Public Works Department of Sabah. The agreement between CIMB and Dresdner was signed on behalf of CIMB by one George Chau, the sales officer of the Inanam branch of CIMB (“CIMB Inanam”).[note: 3]

4 Subsequently, on 5 June 2002, payment for the transaction was effected by Dresdner, through its correspondent bank, the Bank of New York, to the Singapore branch of CIMB (“CIMB Singapore”) by SWIFT. In the SWIFT communication there was an express instruction that the Funds be credited to CIMB Inanam as the beneficial customer. The next day, CIMB Singapore transferred the Funds over to Hongkong and Shanghai Banking Corporation, Hong Kong (“HSBC Hong Kong”) in favour of New Speed Technologies Ltd, pursuant to what appeared to be instructions issued by George Chau and Ahmad Bin HJ Khamis of CIMB Inanam for the attention of Paul Ma, the assistant general manager of CIMB Singapore.[note: 4] That notification stated that CIMB Inanam had received such instructions from V V Enterprise. Before the Funds were remitted to Hong Kong, the general manager of CIMB Singapore, Raja Sulong Razak (“Razak”), confirmed with CIMB Inanam that the transfer should proceed.[note: 5] Upon payment, Dresdner London obtained the Notes from the London branch of CIMB (“CIMB London”) and endorsed them over to DF Deutsche Forfait AG (“DF”). It also warranted to DF as to the legal existence of the Notes and the avals contained therein. Subsequently, DF resold the Notes to Siemens Financial Services GmbH (“SFS”) and similarly assigned the warranty over to SFS.

5 We pause here to mention that this series of transactions involving the Notes were brokered by an English company, Bon Pour Aval Limited (“BPAL”). Eventually, the Notes were dishonoured upon presentation.

6 On 9 November 2005, SFS sued Dresdner in Munich, Germany, on the warranty and on 18 August 2006 obtained a German judgment. Dresdner has filed an appeal against that decision and the determination of that appeal is now pending before the Superior Regional Court of Munich. We should hasten to add that there are further levels of appeal beyond the Superior Regional Court. The entire judicial process before the German courts is not likely to conclude before the end of 2009.[note: 6]

7 As stated earlier, the written agreement was executed on behalf of CIMB by George Chau. CIMB alleged that the agreement could not bind CIMB, and thus it was of no validity, because George Chau, acting alone, had no authority to execute the agreement. Moreover, the limit of George Chau’s authority was expressly communicated to Dresdner by way of a fax dated 21 May 2002 from Ms Andrea Francis (“Ms Francis”), a trade finance officer of CIMB London, to Ms Amanda Callaghan (“Ms Callaghan”) of Dresdner London, which stated that two authorised signatories were required for the endorsement of promissory notes that exceeded US$10,000.[note: 7] Here we should explain that earlier, on 15 May 2002, Yussof Bin Momin (“Momin”), a customer officer of CIMB Inanam, faxed a message to Ms Callaghan confirming that George Chau was authorised to sign on behalf of CIMB and that his sole signature was sufficient and legally binding on CIMB in relation to the Notes.[note: 8] On 20 May 2002, Ms Callaghan wrote to Ms Francis seeking confirmation that Momin had authority to act on behalf of CIMB and to issue the fax of 15 May 2002. On 21 May 2002, the Head of Customer Service of CIMB Inanam, Ms Linda Sia Henry Sum (“Ms Sum”), and Momin jointly faxed a message to CIMB London and copied it to Ms Callaghan, confirming that one signatory was sufficient for the transaction of the Notes and that George Chau was so authorised. Again Ms Callaghan immediately sought confirmation of this 21 May 2002 fax from Ms Francis. Later, on the same day, CIMB Inanam sent a fax to CIMB London for the attention of Ms Francis asking her to confirm to Ms Callaghan that Momin and Ms Sum were legal and authorised signatories of CIMB Inanam. This led to Ms Francis’ fax of the same day stating that George Chau’s sole signature was valid only for transactions up to US$10,000 and two signatories were required for transactions beyond that limit.[note: 9] On 23 May 2002, Ms Mastulu Nurdin (“Ms Nurdin”), the Operations Manager of CIMB London, asked CIMB’s headquarters in Kuala Lumpur, Malaysia (“CIMB KL”) to verify the transaction for security purposes.[note: 10] Of course, this latter note was not communicated to Dresdner.

8 After the Notes were dishonoured, an internal investigation was carried out by CIMB which came to the conclusion that “the Project was non-existent, the supporting documents to validate the issuance of the Notes were fictitious and the Notes were issued in furtherance of a fraud”.[note: 11]

9 In the statement of claim in the present action, Dresdner averred that the agreement with CIMB relating to the purchase and sale of the Notes was valid. This was also Dresdner’s position in the German proceedings. Further, Dresdner pleaded in the alternative that if the agreement were in fact not valid and binding, it was entitled to reclaim the money from CIMB on the ground that the money was paid under a mistake of fact and that, consequently, CIMB had been unjustly enriched. A second alternative basis of Dresdner’s claim was that the payment was made pursuant to a consideration which had totally failed.

10 We now explain why Dresdner had applied for a temporary stay of the present action. In view of the pending German proceedings, Dresdner took the position that if it could successfully resist the claim by SFS, then it, having suffered no loss, would not have to continue with its claim against CIMB. Indeed the institution of the present action in Singapore against CIMB was entirely precautionary as otherwise limitation would have set in on 6 June 2008.

11 In response to Dresdner’s application for a temporary stay, CIMB applied to have the present action permanently stayed on the ground of forum non conveniens, asserting that England was the more appropriate forum to adjudicate on the dispute between them because much of the negotiations relating to the purported sale and purchase of the Notes were conducted by staff of the London offices of the two parties. The defence of CIMB, as disclosed in its affidavits filed in support of its stay application, was that the “agreement” signed by George Chau was not valid or binding. It also alleged that it had changed its position in good faith, ie, it had, in good faith, remitted the Funds received from Dresdner to HSBC Hong Kong.

Decisions below

12 Before the assistant registrar it was decided that Dresdner’s application for a temporary stay should be heard prior to CIMB’s application. Having ruled in that manner, the assistant registrar granted Dresdner’s application and did not proceed to hear CIMB’s application. On appeal, the Judge decided that both applications should be heard together. At the hearing before the Judge, in order to ensure that Dresdner would not subsequently revive the validity of the agreement as an issue, Dresdner gave an undertaking (“the Undertaking”) that, for the purposes of this action, it would not take the position that the agreement was valid (see the Judge’s grounds of decision (“the GD”) in Dresdner Kleinwort Ltd v CIMB Bank Bhd [2008] SGHC 59 at [136]–[140]). The effect of the Undertaking was that Dresdner agreed with CIMB that George Chau had entered into the...