EG Tan & Co (Pte) v Lim & Tan (Pte) and Another

• Jurisdiction: Singapore
• Judge: Chua F A J
• Judgment Date: 26 November 1986
• Neutral Citation: [1986] SGHC 44
• Date: 26 November 1986
• Subject Matter: Conversion,Detinue,Whether bona fide purchaser for value without notice,Estoppel,Proprietary estoppel,Shares obtained by fraud,Elements of estoppel,Equity,Sale of shares,Tort
• Docket Number: Suit No 2860 of 1981
• Published date: 19 September 2003
• Defendant Counsel: Denis Tan (Chor Pee & Co)
• Court: High Court (Singapore)
• Plaintiff Counsel: Ng Kian Fong (Ng Kian Fong & Co)

The plaintiffs have wholly discontinued this action against the first defendants.

The claim of the plaintiffs against the second defendant is the return or delivery of share certificate No 89407 for 1,000 Pan Malaysia Cement Works Bhd registered in the name of Chee Kheng Tong together with the relative transfer attached thereto. Damages for detention and/or conversion of the said share certificate No 89407.

The plaintiffs were at all material times stock and share brokers and a member of the Stock Exchange of Singapore (the SES) and so were the first defendants.

The plaintiffs were in possession of share certificate No 89407 which had been bought by the plaintiffs` clients Lee Ah Bee. On or about 19 March 1981 one Khoo Chee Keong came to the plaintiffs` office, fraudulently misrepresented himself as having authority to collect the shares for Lee Ah Bee, and collected two share certificates of Pan Malaysia Cement Works of 1000 each together with the duly executed transfer forms, for which Khoo Chee Keong tendered a cheque for $28,308. One of the share certificates collected by Khoo Chee Keong was certificate No 89407 (Ex P 1).

The cheque given by Khoo to the plaintiffs was dishonoured on 21 March 1981. The plaintiffs then made a police report and informed the SES of the fraud and the report of the fraud was circularised by the SES to all its members.

Khoo was arrested and charged for cheating. He pleaded guilty and was sentenced to 12 months` imprisonment on 6 June 1981. Police investigations revealed that Khoo had sold the 1000 shares to the first defendants and the other 1000 shares to the second defendant. The first defendants have returned the 1000 shares to the plaintiffs. The second defendant did not return the 1000 shares requested by the plaintiffs. The plaintiffs gave a replacement certificate to Lee Ah Bee from their stock.

The second defendant says that he had known Khoo for about one year prior to March 1981. Sometime in March 1981, Khoo called at his office and said that he needed money urgently to settle some gambling debts. Khoo said that he had 1,000 Pan Malaysia Cement shares which he would like to sell to the second defendant at market price which at that time was about $14.10 or so and the price was rising.

The second defendant agreed to buy the shares and they arranged to meet outside the Lido Theatre which was just across the road from the second defendant`s bank, the Chase Manhattan Bank. He went to the bank and got some cash. He met Khoo and handed over $14,200 cash to Khoo who handed the share certificate ExP 1 with the transfer form attached to him.

Two weeks later he was called up by the police and was told that Khoo had fraudulently obtained the shares from a sharebroker firm. He gave a statement to the police and was told to keep the share certificate pending the outcome of the criminal case against Khoo.

Subsequently he learned that Khoo was convicted and sentenced. No long after that he received a letter from the plaintiffs` solicitors dated 13 June 1981 demanding the return of the shares to the plaintiffs.

The second defendant then sought legal advice. Subsequently in September 1981 he was advised by his solicitors to have the shares registered in his name. He then contacted by telephone Alfred Lim Eng Teck a remiser with GK Goh Securities and told him how he came to buy the 1,000 shares and about the legal advice he was given. Lim agreed that that was a good move. Eventually he handed the share certificate exh P1 and the transfer form to Lim for registration after signing the transfer form. Subsequently he was told by GK Goh Securities that the shares could not be registered in his name. His solicitors then took up the matter of registration with the Registrar of Pan Malaysia Cement Works.

The second defendant denies that the plaintiffs were entitled to the return of the share certificate exh P 1 for the following reasons:

(a) The plaintiffs as stock and sharebrokers, have negligently allowed Khoo to obtain possession of the share certificate;

(b) The second defendant is a bona fidepurchaser for value of the said shares and had no notice that Khoo had obtained the share certificate fraudulently.

The second defendant submits that in the premises the plaintiffs are estopped by their own negligence from demanding the return of the share certificate and because the second defendant is the lawful owner of the shares.

Was the second defendant a purchaser for value, in good faith and without notice of the fraud?

The second defendant has given evidence of his relationship with Khoo and that he knew of the following facts about Khoo - he was then a commodities broker; he was gainfully employed in a respectable position; he seemed to be quite well he was a devout Christian and went to church regularly and took part in church activities. He became friendly with Khoo and they met often and had poker sessions with Khoo and two or three others friends.

Counsel for the second defendant asks, in those circumstances, why should the second defendant be put on notice when Khoo, a friend, wanted to sell his shares to him.

However well the second defendant knew Khoo he should have been wary and inquired how Khoo had acquired the shares.

Evidence was adduced by the plaintiffs of what the second defendant told the remiser Alfred Lim. Lim said that he knew the second defendant and...