Lo Man Heng and another v UBS AG (Yap Loo Mien, third party)

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 10 July 2014
• Neutral Citation: [2014] SGHC 134
• Court: High Court (Singapore)
• Hearing Date: 19 August 2013,13 August 2013,15 August 2013,21 October 2013,16 August 2013,14 August 2013
• Docket Number: Suit No 752 of 2010
• Plaintiff Counsel: James Ponniah and Leong Sue Lynn (Wong & Lim) and Adam Ong (Ascentsia Law Corporation)
• Defendant Counsel: Andre Maniam SC, Chua Sui Tong and Daniel Tan (WongPartnership LLP),See Tow Soo Ling, Hu Huimin and Zara Mok (Colin Ng & Partners LLP)
• Subject Matter: Banking,Branch bank,Closing account,Equity,Estoppel,Restitution,Unjust enrichment
• Published date: 15 July 2014

Judith Prakash J: Introduction

The plaintiffs used to be customers of the defendant bank. In September 2007, their accounts with the defendant were closed in circumstances which are now the subject matter of this action. The plaintiffs claim that the defendant wrongfully paid the balances in the accounts to the third party. The defendant’s position is that these payments were authorised by the plaintiffs. As a fall-back position, if I find the defendant liable to the plaintiffs, the defendant seeks to claim reimbursement from the third party.

The main issues that arise are: Did the defendant make the payments to the third party in breach of its mandate from the plaintiffs? If the payments were made in breach of mandate, are the circumstances such that the plaintiffs are nevertheless estopped from recovering from the defendant? If the defendant is liable to the plaintiffs, is the third party in turn liable to indemnify and reimburse the defendant?

Background Events leading to the action

The first plaintiff, Lo Man Heng (“Mr Lo”), is a Malaysian businessman primarily engaged in the timber industry. He lives in Sabah. The second plaintiff, Zenique Investments Ltd (“Zenique”), is a company incorporated in the British Virgin Islands (“BVI”) and it was set up by Mr Lo to collect money from timber sales effected by him.

In the course of his business, Mr Lo undertook several business ventures jointly with two other Malaysians operating in Sabah, Michael Chia Tien Foh (“Mr Chia”) and Chong Siak Nyen (“Mr Chong”). Mr Chia is married to the third party in the action, Yap Loo Mien (“Mdm Yap”). One of the business entities in which the three men were involved is a Malaysian company named Rimba Kita Sdn Bhd (“Rimba Kita”).

The defendant is a bank incorporated in Switzerland with a branch registered in Singapore. In January 2006, its Singapore branch employed Chua Hock Beng Dennis (“Dennis Chua”) as a client advisor. Dennis Chua had, in his previous employment, handled the accounts of Mr Lo and Mr Chia. He remained in contact with them. Subsequently the plaintiffs and Mr Chia opened accounts with the defendant. The details of the accounts in which the plaintiffs or Mr Lo alone had an interest are as follows: Account No 231183 in Mr Lo’s name, an account which only Mr Lo was authorised to operate; Account No 280999 in Zenique’s name, which only Mr Lo was authorised to operate; and Account No 280668 in the name of another BVI company called Blisstop Corporation Ltd (“Blisstop”), which Mr Lo and Mr Chong were both authorised to operate. For the purpose of this judgment, I will refer to the first two accounts as “the Accounts” and to the third as the “Blisstop Account”. Mr Chia also opened accounts with the defendant, some jointly with Mdm Yap, and another in the name of his own BVI company. I will refer to these collectively as “the Chia Accounts”. It is common ground that only Mr Lo was authorised to operate and give instructions to the defendant in respect of the Accounts.

In September 2007, both Mr Lo and Mr Chia were picked up by the Malaysian Anti-Corruption Commission (“the MACC”) and held in remand for a few days to assist the MACC’s investigations into possible criminal activity. They were released from custody on 16 September 2007. The next day, oral instructions were given to Dennis Chua to close the Accounts and transfer the balances therein to Mdm Yap. At about the same time, Mr Chia gave Dennis Chua instructions to close the Chia Accounts as well. It is disputed as to who gave the instructions to close the Accounts and the plaintiffs are now seeking to recover the following sums paid out from the Accounts on 17 September 2007: A$3.48 from Account No 231183; $1,080.50 from Account No 231183; US$76,821.98 from Account No 231183; and US$1,727,928.33 from Account No 280999.

The defendant’s position is that at about 8.30am on 17 September 2007, Mr Lo had a telephone conversation with Dennis Chua during which he instructed Dennis Chua to close the Accounts and to prepare bank drafts in his (ie, Mr Lo’s) favour in respect of the balances in the Accounts. At about 4.30pm the same day, there was another telephone conversation between the two men during which Mr Lo amended his instructions by stating that the balances should be paid to Mdm Yap instead of to himself. The plaintiffs deny that either conversation took place.

Mr Lo testified that after being released from MACC custody, it was only in late October 2007 that he called Dennis Chua to find out the credit balances in the Accounts. It was then that he discovered that all the moneys in the Account had been paid out to Mdm Yap. Mr Lo informed Dennis Chua that he had not given the instructions for any payment to be made to Mdm Yap and that he would come down to Singapore as soon as possible to sort out the matter. Consequently, Mr Lo travelled to Singapore on 3 November 2007 and met with Dennis Chua at the Shangri-La Hotel the next day.

There are two versions of what took place at the Shangri-La Hotel meeting on 4 November 2007. Mr Lo’s version is that during the meeting Dennis Chua told him that Mr Chia had instructed him over the telephone to make the payments from the Accounts to Mdm Yap. These instructions were given on the morning and afternoon of 17 September 2007. When asked why he had accepted Mr Chia’s instructions when Mr Chia had no authority to operate any of the Accounts, Dennis Chua’s explanation was that he had been told by Mr Chia that the MACC was investigating Mr Lo and Mr Chia and therefore the moneys in the Accounts had to be safeguarded.

According to Mr Lo, he told Dennis Chua that Mr Chia had misled the defendant into making unauthorised payments and he should have checked with Mr Lo before making those payments. However, he accepted Dennis Chua’s explanation that he had been acting to protect Mr Lo’s interests. This was because at that time Mr Lo was unaware of what Dennis Chua had really been up to. Mr Lo then informed Dennis Chua that he would meet Mr Chia and request the latter to refund the moneys from the Accounts and, in the case of Blisstop Account, to pay them to himself and Mr Chong. He gave Dennis Chua this assurance because at that time there were still joint ventures between himself and Mr Chia and he was confident that Mr Chia would be keen to settle the matter due to the MACC investigations.

At the meeting, Dennis Chua also asked Mr Lo to sign two sets of written instructions. These instructions were to close the Accounts to avoid further charges from being incurred and for the last known account balances to be provided to Mr Lo. Mr Lo signed the forms and they were backdated to 17 September 2007, the date on which verbal instructions had been provided by Mr Chia.

Dennis Chua gave a very different account of the meeting. He said it lasted for about an hour and was on Mr Lo’s investments and personal life. It was cordial and Dennis Chua took the opportunity to obtain a written confirmation of Mr Lo’s verbal instructions to close the Accounts given on 17 September 2007. He prepared the two sets of written instructions that Mr Lo signed. The backdating to 17 September 2007 was done by one of Dennis Chua’s assistants since that was the day on which Mr Lo had given his verbal instructions to close the Accounts.

After the Shangri-La meeting, Mr Lo returned to Sabah. He asserted that he then asked Mr Chia and asked him about the closure of the Accounts and the payment of the moneys to Mdm Yap. Mr Chia admitted closing the Accounts and effecting the payments. He reassured Mr Lo that the moneys would be repaid in due course. However, repayment was repeatedly delayed and Mr Lo never received it.

In 2010, Mr Lo instructed Singapore solicitors to pursue the claim against the defendant. This action was started on 30 September 2010. Mr Lo explained in his affidavit and under cross-examination that he did not take action sooner as he was facing both criminal and civil proceedings in Malaysia and wanted to focus on those proceedings first. It should be noted, however, that the Malaysian criminal proceedings against Mr Lo continued until August 2012 when the prosecution’s appeal against Mr Lo’s acquittal was dismissed. As for the civil proceedings, these referred to a claim brought by Mr Chia against Mr Lo alleging that the latter had breached the terms of an agreement reached in November 2008. The proceedings were started in 2009 but subsequently, after a defence and counterclaim were filed, Mr Chia withdrew the action.

The defendant’s documentation

During the discovery process, the plaintiffs were able to obtain the disclosure of many of the defendant’s standard internal banking documentation. The documents included Payment Instruction Forms, Payment Instruction Amendments, cheques issued by the defendant and internal e-mail correspondence passing between the defendant’s employees.

With respect to the Accounts, the following documents were disclosed: Six Payment Instruction Forms dated 17 September 2007 (“Payment Forms”), in respect of a phone call made at 8.30am and four of which instructed that the sums of A$3.48, $1,080.50, US$76,821.98 and US$1,727,928.33 were to be paid from the Accounts to Mr Lo by way of bank drafts; and Six Payment Instruction Amendments prepared by Ms Chan Foong San, an employee of the defendant, all of which changed the beneficiary of the payments from Mr Lo to Mdm Yap purportedly because of a 4.30pm phone made by Mr Lo the same day.

The significance of the Payment Forms is that although all six forms related to the Accounts and Blisstop’s Account, four of them recorded that the person who gave oral instructions to the defendant was Mr Chia. Mr Lo’s name as being that of the instructing party appeared in only two forms. In evidence, Dennis Chua confirmed that he was the person who had taken the phone calls which he...