George Raymond Zage III and another v Ho Chi Kwong and another

JurisdictionSingapore
JudgeChan Sek Keong CJ
Judgment Date10 February 2010
Neutral Citation[2010] SGCA 4
Plaintiff CounselHarry Elias SC, Doris Chia, Shanti Jaganathan and Toh Wei Yi (Harry Elias Partnership)
Docket NumberCivil Appeal No 3 of 2009
Date10 February 2010
Hearing Date07 July 2009
Subject MatterTrusts,Equity
Published date11 February 2010
Citation[2010] SGCA 4
Defendant CounselHri Kumar Nair SC, Gary Low and Wilson Wong (Drew & Napier LLC)
CourtCourt of Appeal (Singapore)
Year2010
V K Rajah JA (delivering the judgment of the court): Introduction

This is an appeal against the decision of the trial judge (the “Judge”) who dismissed the claim by the appellants, George Raymond Zage III and his wife, Kaori Kathleen Zage, against the respondents, Ho Chi Kwong (“Ho”) and Jewels DeFred Pte Ltd (“DeFred”), the fourth and fifth defendants in Suit No 375 of 2006 (see George Raymond Zage III v Rasif David [2009] 2 SLR(R) 479 (“the Judgment”)). The claim below concerned the sum of $2,088,000 that the respondents received as payment from David Rasif (“Rasif”), a solicitor, for various pieces of jewellery and precious stones in 2006 (see the table at Annex A for the complete list of items purchased). Rasif subsequently absconded with all of these items. The appellants allege that the respondents are liable to them as constructive trustees as they had received the $2,088,000 knowing it was proceeds from a breach of trust and/or that they had dishonestly assisted Rasif in misappropriating this sum.

Background

Rasif was the sole proprietor of a law firm he founded, David Rasif & Partners (“DRP”). The appellants were purchasers of a property who engaged DRP to act for them in the transaction. To complete the purchase of the property they handed a cheque for the sum of $10,658,240 to Rasif on 23 May 2006. He, in turn, immediately deposited this cheque into the clients’ account of DRP. Between 31 May 2006 and 2 June 2006, Rasif wrongfully withdrew $11,237,408 from the DRP clients’ account, 94.09% of which was the appellants’ money. Rasif inter alia employed this misappropriated sum to make two payments of $1,818,000 and $270,000 to the respondents in exchange for very substantial purchases of precious stones and jewellery. The first respondent, Ho, is a director and shareholder of the second respondent, DeFred, a retail jewellery shop located at the lobby of the Hyatt Hotel, Singapore.

Rasif first visited the DeFred showroom on the evening of 30 May 2006 along with another man. Two of the sales personnel, Lynn Lim Mui Ling (“Lynn”) and Chng Ching Gek (“Maeco”) knew Rasif by reputation as he had acted for their hairdresser in a previous matter. Lynn introduced Rasif to the DeFred sales assistant manager, Thomas Tan Hian (“Thomas”), who eventually took over the reins of the transaction. Rasif told Thomas he was interested in investing in diamonds of at least two carats and of a high colour grade – D, E or F, preferably a brilliant cut and accompanied by Gemological Institute of America (“GIA”) certificates. Thomas showed Rasif various jewellery pieces with diamonds from the DeFred safe as well as photocopies of certificates of loose diamonds. As Rasif was leaving, Thomas suggested that he could source for more stones and then make a presentation to Rasif the next day at his office or home. Rasif agreed. Later, Thomas and Lynn briefed Ho on Rasif’s visit. Ho then immediately contacted, amongst other suppliers, AA Rachminov Diamonds (Asia) Ltd in Hong Kong.

On 31 May 2006, photocopies of certificates attesting to various high grade loose diamonds were received by the second respondent by facsimile. Thomas and Lynn then proceeded to Rasif’s Carpenter Street office to make a presentation of the various certificates and loose stones. After the presentation, Rasif agreed to buy 12 items (Annex A, items 1–12) and negotiated a price of $1,618,000 for all 12 items. These 12 items included five pieces of set jewellery he had seen the previous evening, as well as six diamonds and a 16.26ct sapphire that were acquired on the basis of certificates alone. He requested for urgent delivery by 2 June 2006 as he was due to leave for Bangkok. Thomas agreed but informed Rasif that delivery would be made only upon receipt of payment. He gave Rasif the details of DeFred’s UOB bank account. After returning to the DeFred showroom, Thomas briefed Ho on what had transpired.

On 1 June 2006, Rasif called Thomas informing him that $1,818,000 had been transferred to the DeFred UOB account, ie, $200,000 more than the agreed price. Rasif explained that he transferred the $200,000 so that he could select some set jewellery pieces as gifts. Additional pieces were then identified by Thomas and Ho for sale to Rasif. That afternoon, Rasif arrived at the DeFred showroom with a telegraphic transfer slip from Malayan Banking Berhad (the “Maybank TT Slip”) that evidenced the transfer of money. The Maybank TT Slip had the words “DAVID RASIF & PARTNERS”, its address, account number and further below, the words “DAVID RASIF & PARTNERS – CLIENT’S ACCOUNTS” in a slightly smaller font but stamped in prominent blue ink. Thomas and Lynn have testified that Rasif showed them the Maybank TT Slip from a distance of about a metre, and that they could not examine the slip in detail. Rasif then selected 14 more pieces of set jewellery (Annex A, items 14–27). A new ‘package price’ of $1,780,350 was agreed upon for all 26 pieces. As such, there was an excess of $37,650 from the sum of $1,818,000 paid. Rasif requested for partial delivery that evening.

That afternoon, Ho was informed by a bank manager at UOB that the sum of $1,818,000 had been credited into DeFred’s UOB bank account. Ho then authorised Thomas to inform Rasif that delivery of the selected items would be made that evening. Thomas also offered for sale a 25.16ct sapphire (Annex A, item 13) during his telephone conversation with Rasif. Thomas suggested that Rasif could issue a cash cheque for this item if he wanted to take delivery before leaving for Bangkok. As Rasif appeared interested to purchase this item, Thomas agreed to show it to Rasif when he delivered the purchased items at the lobby of the Mandarin Hotel at Orchard Road.

Later in the evening, Thomas, Lynn and Maeco delivered 20 out of the 26 pieces purchased by Rasif (Annex A, items 7–27) when they met at the lobby of the Mandarin Hotel. They also brought along the 25.16ct sapphire (Annex A, item 13) and a pearl necklace worth about $40,000 which they attempted to sell to Rasif to cover the excess of $37,650. Rasif was interested in the 25.16ct sapphire but not the pearl necklace. He negotiated with the DeFred staff and eventually agreed on a price of $270,000. Rasif made payment with a cash cheque, also from the same bank, Malayan Banking Berhad, for $270,000 (“the Cash Cheque”) (see Annex B) and took delivery of the 20 items and the 25.16ct sapphire. The Cash Cheque contained the words “DAVID RASIF & PARTNERS” and below it the words “DAVID RASIF & PARTNERS – CLIENT’S ACCOUNTS”. Thomas later placed the Cash Cheque in the DeFred safe. The next morning, Thomas retrieved the Cash Cheque from the safe and handed it over to Ho. Ho then personally encashed it at the main Maybank branch at Maybank Tower. Immediately after that, Ho authorised Thomas to make the remaining delivery of the outstanding items. Thomas then arranged with Rasif for a convenient time to make this final delivery at Rasif’s residence.

On 2 June 2006, Thomas and Lynn delivered the remaining six diamonds (Annex A, items 1–6) to Rasif at his residence at Trellis Towers, Toa Payoh. There, they met Rasif at the driveway of his apartment block, loading the boot of his car. They then made delivery of the remaining six pieces of jewellery to Rasif in the backseat of his car. Thomas testified that he brought Rasif through each supporting certificate and Rasif examined each piece with a loupe, a small magnifying glass used by jewellers.

Thomas and Lynn refunded Rasif $37,650 in cash and Rasif acknowledged receipt by signing upon a delivery order dated 2 June 2006. Unlike the first delivery order, there was no letterhead on it.

Ho never met Rasif personally. He claimed to be abroad during much of period of the transaction and to have been actively involved in a property deal in Johor Bahru, Malaysia. Nonetheless, he was clearly active behind the scenes in sourcing for stones from suppliers, as well as conveying instructions to Thomas over the course of the transaction. Moreover, Ho was the one who took delivery of the loose stones and the only person who made payments to the suppliers. We note that Ho was not cross-examined on whether he had previously handled transactions of such a substantial value.

The decision below

The Judge dismissed the appellants’ claim. He found that the respondents had neither acted dishonestly nor received the money with knowledge of Rasif’s breach of trust. The DeFred staff, like any ordinary retailer, viewed lawyers as trustworthy persons, and Rasif had impressed the DeFred staff that he was a reputable and knowledgeable lawyer, with some grasp about the value of diamonds. He had not been indiscriminate in his purchases and had actually bargained with the sales staff. It was unrealistic to expect the DeFred staff to ascertain whether Rasif had been shopping around with wholesalers before he approached DeFred. There was no reason for them to verify Rasif’s background since he made payment before delivery. Doing so might actually have caused offence to Rasif and put off a potential customer. Further, such a practice could increase the costs and time required for completion of the transaction. Even if the DeFred staff knew or suspected that Rasif was not as savvy an investor as he sought to make himself out to be, this did not mean that they knew or ought to have known that (a) he was spending money indiscriminately and/or (b) he was spending ill-gotten gains.

The Judge rejected the appellants’ submissions based on three cases involving the improper drawing of cheques (collectively termed as the “Agency Cheque Cases”): John and others v Dodwell and Company, Limited [1918] AC 563 (“John v Dodwell”); Reckitt v Barnett, Pembroke and Slater Limited [1929] AC 176 (“Reckitt v Barnett”); and Nelson and Others v Larholt [1947] 1 KB 339 (“Nelson v Larholt”)(at [178] to [196] of the Judgment) . He distinguished ...

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