Hock Tong Bee Pte Ltd v Quek Hock Tiong and another

• Jurisdiction: Singapore
• Judge: Lynette Yap
• Judgment Date: 21 May 2020
• Neutral Citation: [2020] SGDC 81
• Court: District Court (Singapore)
• Docket Number: District Court Suit No 2197 of 2018, District Court Appeal No 10 of 2020
• Published date: 19 June 2020
• Year: 2020
• Hearing Date: 13 March 2020,28 February 2020,07 January 2020,02 September 2019,08 January 2020
• Plaintiff Counsel: Ronald Wong Jian Jie (M/s Covenant Chambers LLC)
• Defendant Counsel: Tan Wen Cheng Adrian (M/s August Law Corporation)
• Subject Matter: Tort,Conversion
• Citation: [2020] SGDC 81

District Judge Lynette Yap: Introduction

The plaintiff is in the business of selling wines. From 2011 to 2013, one Luciana Lim (“Luciana”), who was then a relationship manager under the employment of the plaintiff, dishonestly converted to her own use a total of 14,698 bottles of the plaintiff’s wines. Luciana was convicted by the District Court for criminal breach of trust as a servant under section 408 of the Penal Code (Cap. 224).

Luciana sold 300 bottles of the misappropriated wines to the defendants on the false pretext that they had been purchased by her on staff discount. It was not in dispute that the defendants made payment for these wines directly to Luciana by cheque or bank transfer¹ and invoices and receipts bearing the plaintiff’s business name had not been issued to the defendants for the purchase of these wines². After Luciana surrendered herself to the police, the police exercised powers of seizure under section 35 of the Criminal Procedure Code and the defendants surrendered 20 bottles of the wines to the police.

The plaintiff brought this claim against the defendants in the tort of conversion for the remaining 280 bottles of the misappropriated wines. The plaintiff relied on Luciana’s admission of her modus operandi as well as contemporaneous records of her notebook, sales confirmation orders and communications with the plaintiff, to show that the defendants had purchased and received all 300 bottles of the misappropriated wines.

The defendants admitted purchasing 110 bottles of misappropriated wines from Luciana (including the 20 bottles surrendered to the police) but claimed that they had only received some of these bottles of wine from Luciana³.

Issues to be determined

This was a bifurcated trial and the issue before the court was that of liability only. At the commencement of the trial, the defendants’ counsel confirmed that the defendants were no longer proceeding with their counterclaim⁴. He further confirmed the defence was based on section 21(1) of the Sale of Goods Act, in that “the owner of the goods is by his conduct precluded from denying the seller’s authority to sell”. Both counsels confirmed that the agreed issues for the court’s determination in the trial were: whether the plaintiff had created the impression that Luciana had more authority than she possessed; and which were the wines received by the defendants.

My decision

Having considered the evidence before the court and the submissions of the parties, I found for the plaintiff and ordered that interlocutory judgment be entered against the defendants, with damages to be assessed. The defendants have appealed against my decision and I now set out the full grounds of my decision.

The nemo dat quod non habet principle

It was not in dispute that the 300 bottles of wine in question belonged to the plaintiff, and that Luciana had misappropriated them and had no title to them. A buyer cannot acquire better title than the seller based on the nemo dat quod non habet principle that no one can give what he does not have. This principle is stated in s 21(1) of the Sale of Goods Act (Cap 393):

Subject to this Act, where goods are sold by a person who is not their owner, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.

In an action for conversion, there need not be any knowledge on the part of the person sued that the goods belong to someone else. In Caterpillar Far East Lt v CEL Tractors Pte Ltd [1995] 1 SLR (R) 605 at [4], the Court of Appeal found that, on the basis of the nemo dat principle, the defendant had not acquired any title to the goods, and the defendant was liable for conversion although it had paid for goods converted from the plaintiff by the plaintiff’s employees. This was despite the finding of the High Court below that on the facts, the defendant had purchased the goods in good faith and without notice of any defect in the title of the goods. The Court of Appeal held at [28] and [31] that the exception to the nemo dat principle of a bona fide purchaser for value without notice is not applicable in Singapore.

The High Court also held in BZW-Pacific Union Pte Ltd v Citibank NA [1997] 2 SLR (R) 280 at [13] to [15] that on the basis of the nemo dat principle, even bona fide purchasers for value without notice of theft do not obtain good title to the property unless the person who sold the property had apparent (i.e. implied or ostensible) authority to deal with the property, the true owner thereby being estopped from asserting his claim.

The bona fide purchasers argument

The defendants pleaded in their Defence that they were bona fide purchasers for value without notice⁵. Applying the principles above, the defendants could not receive good title even if they were bona fide purchasers for value without notice. In any event, while the defendants had initially canvassed that they were bona fide purchasers for value without notice, they abandoned this defence in their closing submissions. Under the circumstances, it is unnecessary to examine in detail the defendants’ factual assertions in this respect.

The issue of apparent authority

At the beginning of the trial, the question of whether the plaintiff had created the impression that Luciana had more authority than she possessed was listed as an issue for the court to determine. However, the defendants eventually failed to make any submissions on this issue in their closing submissions. In any event, in the course of the trial, the defendants admitted that they believed they were buying the wines from Luciana directly and not from the plaintiff⁶.

Was the plaintiff estopped from pursuing the claim

The defendants’ main contention in their closing submissions was that the plaintiff had breached its duty to verify that the orders placed and/or the invoices generated by Luciana were accurate, and that the plaintiff was therefore estopped from pursuing the claim against the defendants⁷.

The defendants did not cite any authorities to support this contention. On the contrary, it is settled law that neglect of what would be prudent conduct on the part of the owner to prevent loss is not sufficient to constitute estoppel. In EG Tan & Co (Pte) v Lim & Tan (Pte) and another [1985-1986] SLR(R) 1081, at [32], the High Court cited the House of Lords decision in Farquharson Brothers & Co v C King & Co [1902] A. C. 325 at 335-336, where Lord Macnaghten stated that “the right of the true owner is not prejudiced or affected by his carelessness in losing the chattel, however gross it may have been.”

The High Court also stated in BZW-Pacific Union Pte Ltd v Citibank NA [1997] 2 SLR (R) 280 at [13], that “negligence in dealing with one’s own property did not give rise to an estoppel and that consequently the doctrine of estoppel by conduct in the circumstances was inapplicable”.

It was also observed by Chan Seng Onn J in Cavenagh Investment Pte Ltd v Kaushik Rajiv [2013] SGHC 45 at [38] that “(the defendant’s) reliance on the defence of contributory negligence presupposes that the plaintiff owes him a duty of care, which I am generally doubtful of given the many common law pronouncements that property owners owe no general duty to look after their own property.”

Under the circumstances, it is clear that the law does not support the defendants’ argument for estoppel and it is unnecessary to examine the defendants’ allegations in this respect.

As the defendants have not established any exception to the nemo dat rule, they are liable for conversion for...