Habib Bank Limited, Singapore v The Bank of East Asia Limited & Anor

• Jurisdiction: Singapore
• Judge: Chia Wee Kiat
• Judgment Date: 18 February 2002
• Neutral Citation: [2002] SGDC 25
• Citation: [2002] SGDC 25
• Published date: 19 September 2003
• Court: District Court (Singapore)

Judgment

GROUNDS OF DECISION

There were three applications before me, one by each of the three parties to these proceedings. The Plaintiff’s application was for summary judgement against the 1^st and 2^nd Defendants for the sum of $73,000.00. The 1^st Defendant sought to strike out the Plaintiff’s claim and set aside the injunction obtained ex parte by the Plaintiff on 25 July 2001. The 2^nd Defendant took out a similar application to set aside the injunction.

2. On the first day of hearing, parties agreed to discharge the injunction and return the sum of $73,000.00 to the Plaintiff. What was left to be determined by this Court was the question of costs of the respective applications and interest.

3. Counsel urged me strenuously to award costs in favour of their respective clients. However, having regard to the circumstances of the case, I was of the view that it would be more appropriate to make no order as to costs. In my mind, it was clear that this was the fairest allocation of costs in the circumstances. I was also of the view that there should be no award of interest. Accordingly, in exercise of my discretion, I made no order as to costs and interest. I now set out my grounds of decision.

PLAINTIFF’S CASE

4. The Plaintiff and the 1^st Defendant are bankers carrying on business in Singapore. The 2^nd Defendant is a customer of the 1^st Defendant

5. On 1 July 2001, a draft for the sum of S$10 and made payable to one UPS was drawn by Habib Bank Ltd, Maldives ("Habib Maldives") on the Plaintiff. Habib Maldives is a banker carrying on business in the Republic of Maldives and maintains an account with the Plaintiff in Singapore.

6. The draft was presented for clearance on 19 July 2001 by the 1^st Defendant as collecting bank for their customer the 2^nd Defendant. It was presented to the Plaintiff in the amount of $73,000.00 to the credit of the 2^nd Defendant’s bank account with the 1^st Defendant. The Plaintiff made payment into the 2^nd Defendant’s bank account on 20 July 2001.

7. On 20 July 2001, the Plaintiff’s Internal Control Unit, in the ordinary course of checking on various accounts, discovered that Habib Maldives’ account with the Plaintiff was overdrawn. An enquiry was made and this eventually led to the discovery that the said draft had been materially altered and fraudulently presented. The name of the payee of the draft had been erased and substituted with the 2^nd Defendant’s firm’s name. The value of the draft was also erased and increased from $10.00 to $73,000.00. The date of the draft of 1 July 2001 had also been erased and replaced by 9 July 2001.

8. Immediately upon uncovering the fraud on 24 July 2001, the Plaintiff faxed a letter to the 1^st Defendant to request them to refrain from paying out any monies on the draft. That evening at about 6.00 pm, the Plaintiff’s officers Mahesh Mehta and Caroline Phua visited the 1^st Defendant’s office where they spoke with Ms Linda Lim (Lim Kim Noi) of the 1^st Defendant. They requested the 1^st Defendant to freeze the bank account of the 2^nd Defendant and to refrain from paying out any sums drawn on the draft.

9. Linda Lim said that the 1^st Defendant would require an injunction or court order to freeze the account. If such an injunction or court order was not obtained, the 1^st Defendant would be obliged to carry out the instructions of the 2^nd Defendant.

10. Accordingly, the Plaintiff instructed their solicitors to obtain the court order on an urgent basis. On the very next day, the Plaintiff’s solicitors obtained an order of court restraining the 1^st and 2^nd Defendants from removing, disposing of, dealing with or diminishing the value of the 2^nd Defendant’s account with the Plainitiff up to the value of $73,000.00. On 28 September 2001, the Plaintiff filed the present application for summary judgement against the 1^st and 2^nd Defendant.

1^st DEFENDANT’S CASE

11. The 1^st Defendant’s case is set out in the affidavits of Lim Kim Noi, Assistant Manager of the 1^st Defendant. According to Lim, the 1^st Defendant received a call from the Plaintiff on 24 July 2001 after banking hours at about 6 pm. This was followed by a visit by Caroline Phua and Mahesh Mehta to their office. Lim met up with them and was told about the alleged alterations to the draft. They wanted the 1^st Defendant to freeze the 2^nd Defendant’s account.

12. The 1^st Defendant could not accede to this request. This is because they had already credited the sum of $73,000.00 to the 2^nd Defendant’s account and were only holding the money as bankers for the 2^nd Defendant. Moreover, the 2^nd Defendant is a long-standing customer of the 1^st Defendant and has always properly maintained and operated his account.

13. Lim confirmed that she told Caroline Phua and Mahesh Mehta that the 1^st Defendant would require a court order before they were prepared to freeze the 2^nd Defendant’s account. However, Lim claimed that she had also given them two other options, namely, (a) that the Plaintiff produce a Police Report on the alleged alteration; or (b) the Plaintiff provide the 1^st Defendant with an indemnity in the manner and form suggested by the 1^st Defendant. Alternatively, the 1^st Defendant would be prepared to freeze the account if they were able to contact the 2^nd Defendant and obtain his instructions on the same. Hence, according to Lim, she had in fact given the Plaintiff four alternative conditions to freeze the account of the 2^nd Defendant.

14. According to Lim, the 1^st Defendant attempted to contact the 2^nd Defendant on 25 July 2001 but without success. The 1^st Defendant informed the Plaintiff accordingly and repeated the conditions for freezing the account. They also offered to fax to the Plaintiff a draft indemnity. The Plaintiff said that they would revert after consulting their solicitors. Lim thereafter received a call from the Plaintiff’s solicitor Mr. Oon Thian Seng. Oon again requested the 1^st Defendant to freeze the 2^nd Defendant’s account. Lim informed him that they would only do so provided one of the four alternative conditions were met.

15. On the same day at about 4.20 pm, the 1^st Defendant received a letter from the Plaintiff’s solicitors giving them notice of the application for the order of court. The 1^st Defendant however was never at any time told that they would be made a party to the action or that an injunction was sought against them.

16. The 1^st Defendant maintained that they were an innocent party and ought not to have been made a party in the action. On 1 September 2001, they filed the present application to strike out the plaintiff’s claim and set aside the injunction.

2^nd DEFENDANT’S CASE

17. Mr. Hee Boon Leong, the 2^nd Defendant, is a Singapore citizen and has living in Thailand during the past 12 years. He has maintained an active account with the 1^st Defendant since about 1988.

18. On or about 9 July 2001, an acquaintance Santi Iampongpaiboon told Hee that one of his business associates, Rattana Manothai, had a customer who wanted to bank in a bank draft for Singapore Dollars and have the proceeds remitted to Bangkok for paying Rattana. Santi asked whether Hee could use his bank account in Singapore for the said purpose.

19. Hee agreed to do so. Hee also agreed to accept a commission equivalent to 3% of the value of the draft as service fee as it is a common practice in Thailand to pay a service fee for using another person’s bank account for such purpose.

20. On 13 July 2001, Santi gave Hee a bank draft drawn on Habib Maldives for S$73,000.00 and made payable to Hee’s firm, Jadestar Trading Enterprise. He told Hee that the draft had been given to Rattana by one Ike Ichiabore. On 17 July 2001, Hee forwarded the draft to the 1^st Defendant and requested it to verify with the Plaintiff whether the same was genuine and, if it was, then to act as collecting bank on his behalf. At all material time, Hee communicated with Ms Linda Lim of the 1^st Defendant.

21. On 18 July 2001, Linda Lim informed Hee that the Plaintiff had not rejected the draft and the proceeds had been credited to his account. On 24 July 2001, Hee withdrew $40,000.00 from his account and, following this, he gave Santi 3 cheques and some cash, of total value $73,000.00 less $2,190.00 being the said 3% service fee.

22. On 25 July 2001 at about 11.00 am (10.00 am Bangkok time), Linda Lim contacted Hee at his mobile phone and said that 1^st Defendant had been informed by the Plaintiff that the draft had been forged. Hee immediately contacted Santi to inform him of this and to ask for the return of the cash and the cheques. After this, Hee called Linda Lim and inquired about the alleged forgery. Linda Lim told Hee that, according to the Plaintiff, the draft had been issued for only $10.00 but this had been altered to $73,000.00.

23. Later on the same day at between 3.00 and 4.00 pm (Bangkok time), one Ms Caroline contacted Hee at his mobile phone and told him that everything would be alright if he arranged to return the $73,000.00 to the Plaintiff. A short while later, Hee received another call from the Plaintiff’s solicitor Oon Thian Seng. Oon informed him that the Plaintiff had issued a summons against him which would be heard at 5.15 pm. Oon told him to instruct a lawyer to go to the court at 5.15 pm. Oon also accused Hee of being a member of the syndicate which had tried to cheat the Plaintiff.

24. On 26 July 2001, Hee credited a sum of $30,000.00 into his account so that he would have more than $73,000.00 in it. Hee also instructed Linda Lim to return the $73,000.00 to the Plaintiff if the draft was a forged document. On 27 July 2001, Hee sent a written confirmation of his instructions to the 1^st Defendant and made a police report of the matter in Bangkok.

25. Hee maintained that he was an innocent victim of Ike’s attempt to commit a fraud. He blamed the Plaintiff for the entire crisis and attributed all the faults on the Plaintiff’s 9negligence in failing to detect the forgery. On 6...