Credit Suisse Trust Limited v Ivanishvili, Bidzina and others
Jurisdiction | Singapore |
Judge | Steven Chong JCA |
Judgment Date | 05 July 2024 |
Neutral Citation | [2024] SGCA(I) 5 |
Court | Court of Appeal (Singapore) |
Docket Number | Civil Appeal No 10 of 2023 |
Hearing Date | 10 May 2024,08 April 2024 |
Citation | [2024] SGCA(I) 5 |
Year | 2024 |
Plaintiff Counsel | Lee Eng Beng SC, Disa Sim, and Torsten Cheong (Rajah & Tann LLP) (instructed),Kenneth Lim Tao Chung, Mak Sushan Melissa, Afzal Ali, Wong Pei Ting, Gan Yun Han Rebecca, and Justin William Jeremiah (Allen & Gledhill LLP) |
Defendant Counsel | Cavinder Bull SC, Woo Shu Yan, Tan Yuan Kheng, Kelly Tseng Ai Lin, Gerald Paul Seah, and Liang Fang Ling Elizabeth (Drew & Napier LLC) |
Published date | 08 July 2024 |
The heart of this appeal concerns the proper determination of the consequences of the fraud perpetrated by a relationship manager of a bank over a period of more than a decade. However, that relationship manager was not an employee of the appellant, Credit Suisse Trust Limited (“CS Trust”). He was at all material times a senior employee of Credit Suisse AG (“CS Bank”) where the respondents’ assets were deposited (the “Trust Assets”) and over which CS Trust owed a duty to protect and safeguard. At the risk of stating the obvious, CS Bank and CS Trust are part of the Credit Suisse Group.
The ultimate analysis of the consequences of the fraud depends on the
As we explain below, an admission by CS Trust of a breach of its duty to safeguard the Trust Assets does not preclude a separate finding that it was nonetheless
The background facts have been canvassed in detail by the Judge in
The first respondent is Mr Bidzina Ivanishvili (“Mr Ivanishvili”), a wealthy French-Georgian businessman. Credit Suisse promoted their trust services to Mr Ivanishvili in 2004 who then agreed to their proposal to establish a trust over assets exceeding US$1.1bn (the “Mandalay Trust”). The Mandalay Trust had the objective of “Inheritance Planning and Asset Holding” and was to be for the benefit of Mr Ivanishvili and his family, the second to fifth respondents (collectively, the “respondents”).
The appellant, CS Trust, was appointed the trustee of the Mandalay Trust. CS Trust is a wholly owned subsidiary of Credit Suisse Trust AG (“CS Trust AG”). The Trust Assets were deposited with CS Bank, in accounts at branches in Geneva (“CS Bank (CH)”) and Singapore (“CS Bank (SG)”).
The Mandalay TrustThe settled assets of the Mandalay Trust comprised bankable assets and various artworks. The Trust Assets with which we are concerned were derived from the funds that were originally deposited in March 2005 into accounts opened by Meadowsweet Assets Limited (“Meadowsweet”) at CS Bank (CH) (the “Meadowsweet Accounts”), and accounts opened by Soothsayer Limited (“Soothsayer”) at CS Bank (SG) (the “Soothsayer Accounts”). We refer to the various accounts of the Mandalay Trust collectively as the “Trust Accounts”. Meadowsweet and Soothsayer are owned by nominee companies that are in turn ultimately owned by CS Trust.
In 2005, shortly after the establishment of the Mandalay Trust, Meadowsweet and Soothsayer entered into discretionary portfolio management agreements with CS Bank (CH) and CS Bank (SG) respectively, granting CS Bank the mandate and authorisation to manage the assets within the Trust Accounts. Clementi Limited (“Clementi”), another related company wholly owned by CS Trust, was appointed the authorised signatory of the Trust Accounts. This meant that payments could (ostensibly)
It is undisputed that Mr Ivanishvili was responsible for: (a) certain Russian investments from 2005 to 2008; (b) recommending a US$100m investment by Meadowsweet into the Georgian Cooperation Fund in 2014; and (c) directing a US$100m loan to certain third-parties in 2014: Judgment at [478]–[479].
Mr LescaudronThe fraudster, one Mr Patrice Lescaudron (“Mr Lescaudron”), was Mr Ivanishvili’s relationship manager at CS Bank from 2006 until 2015, when his fraud was discovered. Mr Lescaudron was then convicted by the Swiss courts and was found to have not only misappropriated from the Mandalay Trust, but also to have covertly transferred and manipulated the Trust Assets for the purposes of concealing and covering losses in other clients’ accounts, losses which Mr Lescaudron had also caused. Amongst other acts of subterfuge, Mr Lescaudron executed fraudulent investments orders by forging Mr Ivanishvili’s signature.
A significant (but by no means the only) aspect of Mr Lescaudron’s fraud took the form of Unauthorised Payments Away (“UPAs”), a term used internally by Credit Suisse to refer to a type of high-risk transaction. By Credit Suisse’s own internal guidelines, transactions that are UPAs include payment transactions
Credit Suisse’s internal guidelines therefore required UPAs to be reduced to a minimum and required UPAs to be swiftly addressed within ten working days by obtaining adequate documentation to support the transaction. UPAs are to be identified from “Debit Advices” from CS Bank, which record payments out of a bank account. If the Debit Advices fail to adequately describe the transaction, identify the recipient of the transaction, or state the reason and nature of the transaction, the transaction will be flagged as a possible UPA. The “Trust Manager” at Credit Suisse would then need to make inquiries with the relevant relationship manager to obtain evidence of the beneficiary’s approval of the transaction. Transactions that
Before summarising the litany of red-flags which surfaced during Mr Lescaudron’s tenure as Mr Ivanishvili’s relationship manager, it is important to highlight that Mr Lescaudron was
In November 2006, several months after Mr Lescaudron first took over as Mr Ivanishvili’s relationship manager in July 2006, six UPAs totalling US$35.412m were carried out by Mr Lescaudron. This staggering sum flowed out of the Trust Accounts within a very short timeframe, between 10 and 23 November 2006. CS Trust was evidently aware of this, as Ms Sim I-May Joni (“Ms Sim”), the Trust Manager of the Mandalay Trust, wrote to Mr Lescaudron on 5 December 2006 seeking clarification on the unauthorised transactions and requiring him to furnish supporting invoices. After being informed that the funds had
This first set of UPAs, occurring right at the inception of Mr Lescaudron’s involvement with the Mandalay Trust, was the cause of palpable alarm within CS Trust. Ms Teng prepared a report on Mr Lescaudron’s UPAs for senior members of CS Trust and CS Trust AG. Thereafter, internal communications expressed concern at the fact that the sum of US$35.412m had been paid out to third-parties, rather than to the beneficiaries of the Mandalay Trust (
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