Friis and Another v Casetech Trading Pte Ltd and Others

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 14 July 2000
• Neutral Citation: [2000] SGCA 35
• Plaintiff Counsel: Philip Lam (Foo, Liew & Philip Lam),Harish Kumar and Joanna Tan (Engelin Teh & Partners)
• Date: 14 July 2000
• Year: 2000
• Subject Matter: Whether defendant a party to oral agreement,Whether plaintiffs entitled to an account of profits,Whether fiduciary relationship exists between parties,Whether funds from overdraft facilities held on trust for guarantor,Constructive trusts,Whether interest should run from date of writ or accrual of loss,Provision of bank guarantee to procure overdraft facilities,Whether damages sufficient,Discharge,Commercial financing arrangement,Whether restitutionary damages appropriate,Contractual terms,General rule and exception,Whether plaintiff has right to account of share of profits,Limitation of Actions,Trusts,s 6(1) Limitation Act (Cap 163, 1996 Rev Ed),Plaintiffs' unwarranted and unexplained delay,Remedies for breach of contract,Interest,Remedies,claims for interest,When time begins to run,Whether claim time-barred,Contract,Breach of contract
• Docket Number: Civil Appeal Nos 203 and 204 of 1999
• Citation: [2000] SGCA 35
• Court: Court of Appeal (Singapore)
• Published date: 19 September 2003

(delivering the judgment of the court): The parties

Povl Friis (`Friis`) is a Danish businessman residing in Kuala Lumpur. He was the first plaintiff in the action below. The second plaintiff, Combined Overseas Transport Sdn Bhd (`Combined`), is a company owned and controlled by him. The defendants in the action were Casetech Trading Pte Ltd (`Casetech`), Stephen Wiffen (`Wiffen`), his wife, Stevany Wiffen (`Mrs Wiffen`) and Lars Arne Kent Linden (`Linden`). The Wiffens reside in Singapore and are directors of Casetech, which is in the business of dealing in cranes and construction related equipment. Linden is a Swedish businessman, who used to reside in Kuala Lumpur and was a former director of Casetech.

The facts

The relevant facts giving rise to the dispute have been sufficiently set out in the judgment below, which we respectfully adopt. Briefly they were as follows. Friis first met Linden sometime in 1989 at the Danish club in Kuala Lumpur, and thereafter socially from time to time. Arising from their conversations on these occasions, Friis learnt that Linden was in the business of supplying construction related equipment and had businesses in Malaysia and Singapore. On one such occasion, Linden mentioned that he had a business partner in Singapore and he had some cash flow difficulties as a result of a project having gone wrong. Friis intimated that he might be able to offer some financial assistance. However, nothing developed from that conversation, until Linden wrote to Friis on 6 July 1990 outlining a proposal to Friis and inviting him to take up a 33% share in Casetech, in return for which Friis would provide financial assistance by arranging for the opening of letters of credit up to a maximum limit of $1m to finance Casetech`s operations, and also provide security for a bank overdraft to Casetech up to a limit of $100,000. In that letter, Linden said that he was one of two partners of Casetech and would welcome Friis as an equal partner. Linden proposed that he, his partner and Friis should meet on 11 or 12 July 1990 for further discussions.

Soon after this, Friis met Linden and Wiffen at the Lake Club in Kuala Lumpur. He learnt from them that Casetech bought cranes and construction related equipment for re-sale by way of `back-to-back` trade, and that it would only purchase equipment from a seller when there was already a purchaser at hand. They told him that this trade had been financed by way of letters of credit arranged by a company called Cawthorne Trading Pte Ltd. Casetech`s business was managed mainly by Wiffen in Singapore. Linden and Wiffen owned Casetech and had an equal share of its profits after giving Cawthorne their share. After a discussion on Friis` proposed involvement, the parties came to the following broad agreement (`the 1990 oral agreement`):

(1) Friis would help Casetech finance its trade on a case-by-case basis by procuring and obtaining letters of credit to be opened by the branch of Citibank at Kuala Lumpur;

(2) In return, Friis would be entitled to one third of the profits of the trade;

(3) The transactions financed by Friis would be back-to-back trades only, and not the purchase of stocks or anything that would put the funds at risk;

(4) Friis would be regularly provided with a full account of all sales and purchases of equipment made by Casetech that were financed by him; and

(5) Friis would be reimbursed all expenses incurred by him in financing the trades.

Linden also proposed at the meeting that Friis should take up one-third of the shares in Casetech as well as a directorship in that company, but no agreement was reached in this respect at the time. Later, Wiffen sent him a Form 45, which is a form of consent to act as a director, for him to sign, but Friis said that he eventually decided against this proposal.

Pursuant to the 1990 oral agreement, the parties from August 1990 undertook a series of transactions financed by Friis in the following manner. Linden would request Friis to procure a letter of credit to be established and Friis would instruct his bank, Citibank at Kuala Lumpur, to open the letter of credit. On a few occasions, Friis obtained bank drafts to pay for the equipment. These transactions were profitable and Wiffen submitted monthly reports to him.

After a while, the parties found that applying for letters of credit and bank drafts was cumbersome, and in early 1991 a variation was made to the financing arrangement. Friis had an account with Den Danske Bank, Singapore (`DDB`) and he obtained from them a bank guarantee for $950,000 to secure the facilities granted to Casetech by Deutsche Bank, Singapore (`DB`). The DB facilities included an overdraft account and facilities for letters of credit. Casetech used the DB facilities to finance its crane trading operations. In June 1992, Casetech obtained similar facilities from the Singapore branch of The Hong Kong and Shanghai Banking Corporation Ltd (`HSBC`) in place of DB. This was also secured by a DDB`s guarantee for $1m procured by Friis. These foregoing facilities will be collectively referred to as `the overdraft facilities`. These arrangements made in 1991 and 1992 were, in effect, a variation of the 1990 oral agreement. Instead of procuring a letter of credit to be opened on a case by case basis, Friis procured a banker`s guarantee to secure the overdraft facilities to finance the back-to-back trades of construction related equipment. There was no other change to the terms of the 1990 oral agreement.

The arrangement appeared to work smoothly until sometime in late October or early November 1992, when Linden called Friis and informed him that something was amiss in Casetech`s accounts. However, Linden assured him that he would sort it out. Later, on 30 December 1992, DDB informed Friis that HSBC had called on the guarantee and in consequence DDB had deducted a sum of $1m from his account with them to effect the payment.

Wiffen and Linden then arranged a meeting with Friis in Kuala Lumpur on 31 December 1992 to discuss the matter. This was held at the office of the auditors Ernst & Young. They discussed how Friis was to be repaid the $1m. Wiffen and Linden agreed that Casetech would sell whatever equipment they had and direct the proceeds of sale towards repayment to Friis (`the December 1992 agreement`). With this in mind, a list detailing Casetech`s assets was drawn up, which primarily consisted of the equipment available for sale and their estimated selling prices. It was found that the total of the estimated sale proceeds of the equipment was close to what was needed to repay Friis. Wiffen and Linden then apportioned the responsibility between themselves for the sale of the individual equipment. All the designated items of equipment were to be sold by 31 March 1993. It was also agreed that rental proceeds from those items of the equipment then rented out would also be applied towards the repayment to Friis. All proceeds received from sales and all rentals would be paid into a new account in which Friis would be the sole signatory.

Unfortunately, only a total sum of $97,390.30 was paid into that account in March and April 1993 and thus received by Friis. In fact, before any money was received, he was asked by Wiffen in January 1993 to pay out a sum of $27,103.22, being the freight due on one item of the equipment in order to secure its release. Friis paid this sum and thus only received a net sum of $70,287.08 pursuant to the December 1992 agreement, leaving a balance of $929,712.92 unpaid.

Friis did not take any action until some years later. He considered that the antagonism that had developed between Linden and Wiffen, over the events leading to and after the December 1992 agreement, would prevent any possibility of recovery. However, in early 1998, Linden came forward with information that the DDB`s guarantee was called on as a result of a misuse of the overdraft facilities. That prompted him to take action against all the parties concerned.

Friis brought the present action on 7 July 1998 and he joined his company, Combined, as the second plaintiff. We shall hereafter refer to Friis and Combined, where appropriate, as the plaintiffs. In the action the plaintiffs claimed against Casetech, Wiffen, Mrs Wiffen and Linden, inter alia, the balance sum of $929,712.92 as damages for breach of contract on the ground that they were contractually bound to use the overdraft facilities only for the back-to-back trade as agreed, but that they had instead used the facilities for other types of trades resulting in the loss. Alternatively, the plaintiffs claimed that the defendants, save for Mrs Wiffen, held the overdraft facilities on trust and had acted in breach of trust in the use of the facilities. Mrs Wiffen was sought to be made liable as an accessory to the breach of trust, on the ground that she knowingly assisted the three defendants in the breach. Accordingly, the plaintiffs sought an account from the defendants of the use of the overdraft facilities and all profits made from their use. Only Casetech, Wiffen and Mrs Wiffen resisted the claim; Linden, however, did not enter an appearance and defend the claim, although the writ was served on him. Eventually, judgment in default was entered against him.

The decision below

Dealing first with the claim against Mrs Wiffen, the trial judge found that there was no evidence that she was involved in any contract with the plaintiffs. Friis did not allege that she had participated in any of the discussions he had with Wiffen and Linden. Mrs Wiffen`s evidence was that she was not involved in any of the dealings between Wiffen and Friis, and that she was merely an employee of Casetech during part of the relevant period. Accordingly, the learned judge dismissed the claim of $929,712.92 against her.

Turning to the claim against Casetech the learned judge found that Wiffen`s evidence was only a bare denial and none of the...