Comboni Vincenzo v Shankar’s Emporium (Pte) Ltd

CourtHigh Court (Singapore)
Judgment Date20 April 2007
Docket NumberSuit No 343 of 2005
Date20 April 2007
Comboni Vincenzo and another
Shankar's Emporium (Pte) Ltd

Kan Ting Chiu J

Suit No 343 of 2005

High Court

Trusts–Constructive trusts–Remedial constructive trust–Whether remedial constructive trust should be imposed–Whether recipient acting unconscionably or displaying want of probity in receiving funds from fraudulent scheme–Nature of categories of knowledge constituting necessary unconscionability to found remedial constructive trust–Trusts–Express trusts–Constitution–Whether words “for the account of” constituting express trust where no evidence existing to show transferor of funds intending for recipient to hold money on trust–Trusts–Recipient liability–Funds from fraudulent scheme transferred into recipient's bank account–Whether recipient receiving funds knowing they were transferred in breach of trust–Whether recipient having knowledge of fraud after receipt–Whether recipient liable as constructive trustee

The first plaintiff, Vincenzo Comboni (“Mr Comboni”) was the victim of an elaborate fraud which deceived the plaintiffs into parting with substantial sums of money, which found their way into the bank account of a third party. The ultimate recipient of the funds was the defendant, Shankar's Emporium (Pte) Ltd.

A total of three remittances, containing the words “By order of Liko”, were made to the defendant. Liko, the entity referred to in the remittances, was a Nigerian company which had been purchasing goods from the defendant since 1999. The defendant had been exporting goods to customers in Nigeria for more than 20 years. As Nigeria does not have a fully-convertible currency, Nigerian importers employ indirect methods of remitting foreign currency out of Nigeria. When the defendant received the funds, it utilised these funds or parts thereof towards reducing the amounts owing by some of its Nigerian customers, including Liko.

When the plaintiffs eventually realised that they had been the victims of a fraud, they commenced this action against the defendant to recover the funds they had remitted.

The issues before the court were: (a) whether the words “For the account of Vincenzo Comboni” in the first two remittances created an express trust in favour of Mr Comboni; and (b) whether the defendant was liable to account to the plaintiffs for the three remittances on grounds of knowing receipt.

The court also had to consider whether a remedial constructive trust was established. The plaintiffs also contended that a sum of US$103,043.49 standing to Liko's account with the defendant at the time of the hearing should be returned to them.

Held, dismissing the plaintiffs' claims as pleaded but granting judgment to the plaintiffs for the sum of US$103,043.49:

(1) Mr Comboni had not intended the defendant to hold the money on trust and there was no basis for imposing an express trust on the money that the defendant received: at [40].

(2)“Conscience” or “want of probity” was the foundation of a constructive trust; the Badencategories, especially the fourth and fifth categories, should not be relied upon: at [58] to [60].

(3) Unconscionability related to the state of a person's knowledge. When there was no actual knowledge or wilful avoidance of the knowledge of a breach of trust, and the person's awareness came within the last two Baden categories, his conscience would not be called into question. He would not be deemed a constructive trustee, and any liability on his part would be founded in tort or contract for his failure to discharge his tortious or contractual obligations: at [64].

(4) The plaintiffs had not assumed any risk in making the payments; Mr Comboni had been completely taken in by the fraudsters: at [68].

(5) The sum of US$103,043.49 was money tainted by the fraud. The defendant had no knowledge of the fraud when it received this sum, and did not receive it as a constructive trustee. However, a party's state of knowledge was not static and it might change. By the end of the trial, the defendant must have known that the remittances were tainted by fraud. If it still did not know then, it must know it now in view of this decision. It could not retain the sum unless there were proper grounds which excused it from doing that: at [76], [78], [79] and [81].

Baden v Société Générale pour Favoriser le Developpement du Commerce et de L'Industrie en France SA [1993] 1 WLR 509 (refd)

Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437 (folld)

Caltong (Australia) Pty Ltd v Tong Tien See Construction Pte Ltd [2002] 2 SLR (R) 94; [2002] 3 SLR 241 (refd)

Ching Mun Fong v Liu Cho Chit [2001] 1 SLR (R) 856; [2001] 3 SLR 10 (folld)

Kelly v Solari (1841) 9 M & W 54 (refd)

Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 (refd)

Montagu's Settlement Trusts, In Re [1987] Ch 264 (refd)

Polly Peck International Plc (No 4),Re [1998] 2 BCLC 185 (refd)

Rajabali Jumabhoy v Ameerali R Jumabhoy [1998] 2 SLR (R) 434; [1998] 2 SLR 439 (refd)

Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 (refd)

Nehal Harpreet Singh SC and Kelly Fan (Drew & Napier LLC) (instructed) and Vijai Parwani (Parwani & Co) for the plaintiffs

Ang Cheng Hock, Mohammed Reza and Yew Zhong Ming (Allen & Gledhill) for the defendants.

Judgment reserved.

Kan Ting Chiu J

1 In this case, there is an intriguing account of fraudsters deceiving their unsuspecting victim into parting with substantial sums of money, which find their way into the bank account of a third party.

2 The fraudsters' victim is the first plaintiff, Vincenzo Comboni (“Mr Comboni”). Mr Comboni, a retired banker, a licensed financial trustee in Switzerland, and a practising solicitor in Italy, is in his seventies. Mr Comboni is a director of the second plaintiff, GB & Associates Inc (“GB”).

3 The recipient of the funds, Shankar's Emporium (Pte) Ltd, is a company incorporated in Singapore.

The plaintiffs' case

The investment management agreement and the three remittances

4 Mr Comboni's troubles began when his son forwarded to him an unsolicited email from one Frank Nsugbe (“Nsugbe”). Nsugbe claimed that his father who was murdered in Zimbabwe had left US$20m (“the funds”) with a security firm in South Africa, and he was looking for assistance investing the funds.

5 Mr Comboni offered his professional services. He replied to Nsugbe's email and through Nsugbe, he came into contact with Charles Khumalo (“Khumalo”) who was purported to be a lawyer. Mr Comboni had received from Khumalo a letter dated 18 December 2003 on paper printed with the letter head “A.C Khumalo & Associates (Solicitors and Fund Managers)” together with a draft investment agreement. The words “A.C. Khumalo & Associates” were stamped next to Khumalo's signature in the letter.

6 In January 2004, Mr Comboni travelled to Johannesburg to meet Nsugbe and Khumalo, and to execute the investment agreement. During this meeting he obtained another letter from Khumalo which attested to Nsugbe's entitlement to the funds. Interestingly, this letter which was dated 24 January 2004 was printed with the letter head “C. Khumalo & Associates (Solicitors and Fund Managers)” without the precedent “A” of the letter of 18 December 2003. This second letter also bore a stamp next to Khumalo's signature which read “Charles Khumalo and Associates”.

7 Mr Comboni did not take notice of these discrepancies, and proceeded to sign, in the name of GB, an investment management agreement with Nsugbe, on terms that were evidently favourable to GB.

The three remittances

The first remittance

8 After the investment management agreement was signed in January 2004, Mr Comboni and GB did not receive the funds that were to be invested. Eventually, in April 2004, Mr Comboni received a telephone call from a person identifying himself as Allen Davis (“Davis”) who purported to represent an entity in Canada known as the Foreign Payment & Credit Centre (“FPCC”). Davis claimed to be able to assist in expediting the transfer of the funds.

9 On 16 April 2004, Mr Comboni received a fax from FPCC which gave him instructions to verify the transfer of the funds via the Deutsche Bank, New York, to his account number. He complied with the instructions and was told that US$18,720,000 would be transferred from the Deutsche Bank, but he did not receive the funds.

10 Instead, Mr Comboni received by fax a memo dated 19 April 2004 under the letterhead of a “RBC Group” with an address in Toronto. The fax bore a transmission imprint “Royal Bank of Canada”, and Mr Comboni treated it to be a memo from the bank. The memo stated that the remittance of US$18,720,000 was held up pending the payment of insurance bond fees of US$125,080 to an entity described as the “American British Insurance Corporation”, and the US$18,720,000 would be paid out after the insurance bond was provided.

11 On the same day, Mr Comboni received a fax from FPCC which advised that the payment for the insurance bond was to be paid to:

bank nationale de paris, new york

uid chip no:0768

swift code:bnpasgsg

credit a/c no:200195286-003-39 of

bank nationale de paris singapore

beneficiary: shankar's emporium pte ltd

a.c no: 50-000160-00791

by order of : liko

and the funds would be released thereafter.

12 That was the first time Mr Comboni became aware of the defendant, and he was assured, after he went into the defendant's website and learnt that it was a Singapore incorporated company, because of Singapore's reputation as a corrupt-free and transparent country. Being so assured, Mr Comboni arranged for the payment of the insurance bond.

13 However, after he had made the arrangements, he received another fax from FPCC on 21 April 2004 requesting the payment to be made to the defendant's account with the DBS Bank in Singapore thus:

bank of new york, new york

swift code: irvtus3n

favouring: dbs bank, singapore


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