Diamond Centre Pte Ltd and Another v R Esmerian, Inc and Another and Another Appeal

• Jurisdiction: Singapore
• Judge: Karthigesu JA
• Judgment Date: 26 September 1996
• Neutral Citation: [1996] SGCA 55
• Plaintiff Counsel: Low Chai Chong (Rodyk & Davidson),Harry Elias, Salem Ibrahim and Amarjit Singh (Harry Elias & Partners)
• Date: 26 September 1996
• Year: 1996
• Subject Matter: s 2(1) Factors Act 1889 [UK],Whether adequate identification of subject matter of alleged constructive trust,Whether defence established,Defence of purchase in good faith from a mercantile agent in possession with the consent of owners,Purchase by defendants from consignee,Conversion,Jewellery on consignment misappropriated by consignee,Choice of law,Conflict of Laws,Part of jewellery allegedly received by defendants,Trusts,Consignee selling jewellery in Singapore in breach of consignment agreement,Lex situs,Jewellery consigned to consignee in Switzerland under Swiss law,Tort,Constructive trusts,Whether Swiss law or Singapore law governed sale in Singapore
• Docket Number: Civil Appeals Nos 20 and 25 of 1996
• Citation: [1996] SGCA 55
• Court: Court of Appeal (Singapore)
• Published date: 19 September 2003

Cur Adv Vult

This is an appeal and cross-appeal from the decision of Goh Joon Seng J in Suits No 279 of 1991 and 1704 of 1992. The actions were consolidated. In Suit No 279 of 1991, R Esmerian, Inc (RE Inc) claimed against Ghassan Fakhreddin (Fakhreddin), Diamond Centre Pte Ltd (Diamond Centre) and Zhang Qing Ying @ Peter Teo (Teo) for conversion. RE Inc sought, inter alia, the return of certain pieces of jewellery, damages, a declaration that they are the rightful owners of the jewellery and a declaration that Teo and Diamond Centre were constructive trustees of other pieces of jewellery allegedly received by them. In Suit No 1704 of 1992, Corvina Securities Inc (Corvina) claimed against Teo, also for conversion. Corvina sought, inter alia, the return of certain pieces of jewellery and damages. The facts of the case are set out below.

The parties

RE Inc is a company incorporated in the State of New York with a reputation for fine jewellery. Its chief operating officer is Ralph Oliver Esmerian (Esmerian). Corvina is a company incorporated in Panama. Its sole shareholder is Emmanuel Guillaume (Guillaume).

Wolfers Trading AG (Wolfers) is an old Swiss company dealing in jewellery. At the relevant time, it had just been recently acquired and was controlled by the Descamps brothers, one of whom is Patrick Descamps.

Fakhreddin is an Iraqi national. At the time of the trial, he was serving a sentence of imprisonment in Switzerland for offences arising out of jewellery entrusted to him on consignment, including those claimed by the plaintiffs in these two actions. He was named as a defendant, but was not served with the writ. Although described as having the aliases Elias Samir Edouard or Samir Edouard, it appeared that this was a name he used on a fake passport. It was mentioned below that Samir Edouard is actually a respected person in Dubai.

Diamond Centre is a company incorporated in Singapore dealing with jewellery. Teo is a director of Diamond Centre. According to the records in the Registry of Companies and Businesses, he is a minority shareholder in Diamond Centre. However, he claims to be entitled to 50% of its profits. Teo and Diamond Centre will be collectively referred to as the defendants and RE Inc and Corvina as the plaintiffs.

The plaintiffs` evidence

The consignment

Sometime towards the middle of 1989, the Descamps brothers approached Guillaume in Paris. The Descamps brothers informed Guillaume that a royal marriage was about to take place in the United Arab Emirates (UAE). The Descamps brothers were looking for jewellery to sell in connection with this wedding and asked Guillaume to source for high quality jewellery. Guillaume approached Esmerian in New York and conveyed to him what the Descamps brothers had told him. Guillaume requested for a consignment of jewellery in the name of Corvina. It was understood that Corvina would, in turn, consign the jewellery to Wolfers after a mark-up. Esmerian was familiar with Wolfers as his family had dealings with Wolfers stretching over three generations. Esmerian and Guillaume selected jewellery that they thought would be suitable.

The first consignment to Corvina was handed over on 7 and 8 September 1989. The jewellery were consigned on RE Inc`s standard terms of consignment in a memorandum. This stated, inter alia:

The merchandise described on the other side is received ... upon the express condition that all such merchandise shall remain the property of R Esmerian, Inc and shall be returned on demand ... . Consignee acquires no right or authority to sell, pledge, hypothecate or otherwise dispose of the merchandise, or any part thereof ... . A sale of all or any portion of the merchandise shall occur only if and when consignee shall have received from R Esmerian, Inc a separate invoice covering specific merchandise on the memorandum ... .

Guillaume took delivery of this consignment and proceeded to Geneva. There, at Geneva Airport, on behalf of Corvina, he consigned the jewellery to Patrick Descamps, who was representing Wolfers. Wolfers in turn consigned the jewellery to Fakhreddin. Fakhreddin selected the jewellery in the presence of Guillaume, Patrick Descamps and one Horriyat.

Patrick Descamps had consulted Guillaume on the terms of the consignment memorandum between Wolfers and Fakhreddin. Guillaume was not present when the agreement was signed. The memorandum was signed when part of the consignment was handed to Fakhreddin by Patrick Descamps. Youssel Alain Edery (Edery), who gave evidence for the plaintiffs, was present when Fakhreddin signed the memorandum on 22 September 1989 and took delivery of the items. Edery was a partner of Fakhreddin.

By art 1 of Wolfers` memorandum, which was in French, the jewellery were handed to Fakhreddin to enable him to do a special presentation to his customers in the UAE. They might not leave the UAE for any destination except Geneva. By art 2, the jewellery were entrusted to Fakhreddin for 15 days only and had to be returned to Geneva unless an extension was obtained from Wolfers. By art 7, any item sold was to be paid for immediately and any item not paid for and not returned remained the property of Wolfers. By art 10, it was agreed that the Wolfers memorandum was to be interpreted according to Swiss law and both parties agreed to submit to the jurisdiction of the Swiss courts.

Guillaume handed the rest of the jewellery in the first consignment to Fakhreddin on 27 September 1989. On this occasion, Guillaume also delivered to Fakhreddin a second consignment of jewellery. Except for a 30.31 carat sapphire ring (the Wolfers sapphire ring) which was Wolfers`, these belonged to another jeweller, Horovitz & Totah. The items in the second consignment do not form part of the subject matter of these proceedings, though the Wolfers sapphire ring was part of the evidence. A third consignment consisting of two items was delivered by Guillaume, for Wolfers, to Fakhreddin on 7 October 1989. These are also not the subject matter of the proceedings.

Guillaume then returned to New York. He obtained a second consignment of jewellery from Esmerian on 25 October 1989. These were subject to a memorandum between RE Inc and Corvina, which was similar to the first one. This consignment, together with a pair of pear-shaped emerald and diamond earrings from Rima Investors Corporation (Rima) (the earrings will be referred to as `the Rima emerald earrings`), was handed over to Fakhreddin on behalf of Wolfers by Guillaume on 27 October 1989.

The failure by Fakhreddin to return the jewels

Fakhreddin was supposed to return the consignments by 11 November 1989. He failed to do so or to pay for the goods. Between 11 November 1989 and 5 December 1989, Guillaume kept in constant touch with Patrick Descamps. According to Guillaume, Patrick Descamps told him that Wolfers had finally told Fakhreddin (via a telex exhibited in evidence) that he must return all the jewels by 5 December 1989 and pay for whatever was not returned. Patrick Decamps faxed to Guillaume a file of correspondence between Wolfers and Fakhreddin.

Following that telex, Guillaume and Patrick Descamps met Fakhreddin at Geneva Airport on 5 December 1989. Fakhreddin returned some of the jewels. They then proceeded to the premises of Horovitz & Totah. There, they were joined by Totah of Horovitz & Totah, and one Ador who was Paul Descamps` lawyer. Ador was there to represent Wolfers.

Fakhreddin was asked why he had not returned the jewels. Fakhreddin said that they were in the hands of some sheikhs in the UAE. Fakhreddin listed the names of these sheikhs. Guillaume later called up the private secretary to one of the sheikhs mentioned and was told that Fakhreddin had never shown the sheikh the jewels. Fakhreddin signed an undertaking to return the remaining jewels by 19 December 1989 and to procure a letter of credit for the jewels by way of security. The jewellery were not returned by 19 December 1989 and no letter of credit was opened.

In 1990, Guillaume went to Dubai on three occasions to attempt to recover the jewellery. On his first trip in January 1990, Fakhreddin returned a few items. The second trip was fruitless. On the third trip, Fakhreddin returned a few more items of little value.

What Fakhreddin had been doing in the mean time

Evidence relating to this was given by Edery. Edery had known Fakhreddin for some ten years. They had started a clothing company in 1983, which was wound up in 1986. Edery lost touch with Fakhreddin until 1988, when Fakhreddin invited Edery to join him in the jewellery business, which Edery did in 1989. They started off with a couple of consignments from a jeweller named de Becker.

In the same year, Edery contacted a jeweller by the name of Alexandre Reza (Reza). Reza initially let them have some jewellery on consignment but insisted that they be accompanied by his employee, one Fournet. Edery and Fakhreddin signed for these consignments jointly. After two consignments, Reza agreed that Fournet need not accompany them. However, Reza insisted that he arrange for the insurance himself.

Edery`s agreement with Fakhreddin was that each party could still do their own private business. In September 1989, Edery accompanied Fakhreddin to Geneva, where Fakhreddin signed a consignment agreement and took delivery of some jewels. Edery was asked to go along to help Fakhreddin read the French agreement. They met Patrick Descamps at Geneva Airport, where the transactions took place. Edery explained the contract to Fakhreddin before Fakhreddin signed it. Edery left for Paris after this.

It was Fakhreddin`s idea to come to Singapore. They brought along the Reza consignments as they could not be sold in Dubai. They arrived in Singapore on 14 January 1990 together with a friend, Zurita, who was a boxing promoter. In Singapore, they met one Dr Tay of the Hour Glass, a company selling expensive watches. Fakhreddin had left some carpets there and he wanted...