Development Bank of Singapore Ltd v Bok Chee Seng Construction Pte Ltd

• Jurisdiction: Singapore
• Judgment Date: 12 August 2002
• Date: 12 August 2002
• Docket Number: Civil Appeal No 4 of 2001
• Court: Court of Appeal (Singapore)

Development Bank of Singapore Ltd

Plaintiff

and

Bok Chee Seng Construction Pte Ltd

Defendant

[2002] SGCA 37

Yong Pung How CJ

,

Chao Hick Tin JA

and

Tan Lee Meng J

Civil Appeal No 4 of 2001

Court of Appeal

Civil Procedure–Pleadings–Objections–Adequacy of pleadings–Whether necessary to plead questions or presumptions of law–Companies–Capacity–Indoor Management Rule–Whether the rule in Turquand's case applicable

The respondent (“BCS”) kept a bank account with the appellant (“DBS”). BCS passed resolutions authorising DBS to honour cheques signed jointly by two of its directors (“Peh” and “Phua”) and that a resolution certified as correct was, as between BCS and DBS, conclusive evidence of the resolution in question (“resolution (G)”). DBS was later notified that a resolution so certified was passed whereby cheques could be signed singly by Phua (the “new mandate”).

DBS honoured cheques drawn in accordance with the new mandate. However, Peh's solicitors later requested it to freeze the account due to disputes between Peh and Phua. Peh later obtained a declaration that the resolution effecting the new mandate was void (“the declaration”).

BCS commenced the present action to recover the amounts of the cheques honoured under the new mandate. The district judge dismissed it as DBS had a valid defence under the rule in Turquand's case. The High Court judge allowed BCS' appeal on the technical ground that DBS' pleadings were inadequate.

On DBS' appeal, the issues were (a) what the nature of the declaration was; (b) whether DBS' pleadings were adequate; and (c) whether DBS could rely on Turquand's rule and the new mandate.

Held, allowing the appeal:

(1) The declaration neither decided anything as between BCS and DBS, nor did it decide that DBS acted in breach of BCS' mandate when it honoured the cheques. It merely declared that all the resolutions as between Peh and Phua were void: at [15] and [16].

(2) DBS pleaded all the pertinent facts in its defence, and whether Turquand's rule or resolution (G) applied was a question of law and it was unnecessary for propositions or inferences of law to be expressly pleaded. Further, Turquand's rule concerned a presumption of regularity and presumptions of law need not be expressly pleaded. In this regard, the burden was on BCS to show why the presumption should not apply and the judge erred in holding that the burden was on DBS to show why it was not liable for honouring the cheques: at [19] and [29].

(3) DBS could rely on the new mandate as Turquand's rule aided third parties who relied in good faith on company documents such as board resolutions. Further, no reliance could be placed on hindsight in determining whether DBS had exercised reasonable care when honouring the cheques - it could not be expected to investigate BCS' internal management and could only act on the basis of mandates issued in accordance with the terms of the contract governing the account, and the general law: at [37] and [39].

Banner Investments Pte Ltd v Hoe Seng Metal Fabrication & Engineers (S) Pte Ltd [1996] 3 SLR (R) 244; [1997] 1 SLR 461 (distd)

County of Gloucester Bank v Rudry Merthyr Steam and House Coal Colliery Co [1895] 1 Ch 629 (refd)

Drane v Evangelou [1978] 1 WLR 455 (refd)

Duck v Tower Galvanizing Co Ltd [1901] 2 KB 314 (refd)

John G Stein & Co Ltd v O'Hanlon [1965] AC 890 (folld)

Karsales (Harrow) Ltd v Wallis [1956] 1 WLR 936 (refd)

Mahony v Liquidator of the East Holyford Mining Co Ltd (1875) LR 7 HL 869 (refd)

Royal British Bank v Turquand (1855) 5 El & Bl 248; 119 ER 474 (folld)

Vandervell's Trusts (No 2), Re [1974] Ch 269 (refd)

Yogambikai Nagarajah v Indian Overseas Bank [1996] 2 SLR (R) 774; [1997] 1 SLR 258 (refd)

Deborah Barker SC and Chan Kia Pheng (Khattar Wong & Partners) for the appellant

Tan Cheng Yew (Tan Jin Hwee, Eunice & Lim Choo Eng) for the respondent.

Chao Hick Tin JA

(delivering the grounds of judgment of the court):

1 This was an appeal brought by the Development Bank of Singapore (“DBS”), against a decision of the High Court which reversed a judgment of the District Court dismissing the claim of the plaintiffs, Bok Chee Seng Construction Pte Ltd (“BCS”), to recover a sum of $186,938.38 from DBS. We heard the appeal on 22 July 2002 and allowed it, reinstating the judgment of the District Court. We now give our reasons.

Facts

2 BCS was a private-limited company with two shareholders, Mr Peh Chee Chuan (“Peh”) and Mr Phua Ah Pok (“Phua”), who were also its directors. On 22 February 1997, BCS opened a current account (“the account”) with the Eunos Station Branch of DBS and furnished the latter with the following documents indicating how the account was to be operated:

(a) adocument of resolutions of the board of directors of BCS dated 7 January 1997, in DBS standard form, signed by Peh, its chairman, and one Ms The Mui Ngo, its secretary;

(b) acopy of the minutes of the board dated 27 January 1991 wherein it was recorded that a resolution was passed empowering the bank to honour all cheques signed on behalf of BCS by its directors, Peh and Phua, jointly.

These documents will be referred to as “the original mandate”.

3 In the resolution document of 7 January 1997, there were several resolutions of the board of BCS and two of them, resolutions (F) and (G), which were more pertinent to the action read as follows:

1. (F) That the Secretary of the Company be, and hereby is, authorised to certify to the Bank the name of the present officers of the Company and other persons authorised in terms of this resolution and offices respectively held by them, together with specimens of their signatures. In the event of the Company appointing another person/s in place of authorised person/s the Company shall notify the Bank that a Resolution has been passed to that effect, whereupon the said contents of this Resolution shall apply to such substituted signatories.

2. (G) And that a copy of any resolution of the Board if purporting to be certified as correct by the Chairman of the meeting and by the Company Secretary or another Director shall as between the Bank and the Company be conclusive evidence of the passing of the resolution so certified.

4 On or about 23 July 1997, DBS received an undated notification of a resolution of BCS, in DBS standard form for a change in authorised signatories, signed by Phua as chairman of the board of directors' meeting and one Chua Thong Jiang Andrew (“Andrew Chua”), as company secretary, rescinding the original mandate set out in the resolution of 27 January 1997, and in its place, authorised Phua to operate the account by his sole signature. At the same time DBS also received from BCS:

(a) acopy of Form 49 (under the Companies Act) dated 22 July 1997, showing that Andrew Chua had, on 22 July 1997, taken over as the company secretary of BCS in place of The Mui Ngo, who had resigned;

(b) acopy of BCS's extraction of resolution passed by the board of directors on 23 July 1997 altering the mandate to operate the account and which extract was certified by Phua and Andrew Chua to be a true copy of the resolution passed.

These documents will be referred to as “the new mandate”.

5 Thereafter, DBS honoured all cheques drawn on the account in accordance with the new mandate. Some two months later, on 3 October 1997, M/s Ng Yap & Partners (“NYP”), as solicitors for Peh, wrote a letter to DBS informing the latter that a dispute (without identifying nature) had arisen between the directors of BCS, namely, Peh and Phua, and asking DBS to freeze the account. On 6 October 1997, Ramdas & Wong, acting for BCS, asked DBS not to act as requested by Peh. On 7 October 1997 Peh wrote...