Merrill Lynch Pierce, Fenner & Smith Inc v Prem Ranchand Harjani and another

• Jurisdiction: Singapore
• Judge: Andrew Ang J
• Judgment Date: 26 August 2010
• Neutral Citation: [2010] SGHC 249
• Court: High Court (Singapore)
• Docket Number: Suit No 773 of 2008
• Year: 2010
• Published date: 31 August 2010
• Hearing Date: 11 February 2010,20 April 2010,17 February 2010,10 February 2010,09 February 2010,08 February 2010,07 May 2010,12 February 2010,19 April 2010
• Plaintiff Counsel: Hri Kumar SC, Wong Wilson and Low James (Drew & Napier LLC)
• Defendant Counsel: Tan Denis and George John (Toh Tan LLP),N Sreenivasan and Choo Collin (Straits Law Practice LLC)
• Subject Matter: Tort,Contract
• Citation: [2010] SGHC 249

Andrew Ang J: Introduction

The plaintiff is a company incorporated in the United States of America which set up a Corporate Investor Account (Delaware Account) numbered 1EY-07021 (“the Account”) for the second defendant pursuant to an application by the latter for the same. As the plaintiff does not have a place of business in Singapore, the Account was serviced on its behalf by private wealth managers in the Singapore branch of Merrill Lynch International Bank Limited (Merchant Bank) (“MLIB”), an affiliated company under the Merrill Lynch Group.

The first defendant, Prem Ranchand Harjani, wholly owns the second defendant, Renaissance Capital Management Investment Pte Ltd, and had sole authority to give instructions in respect of the Account on behalf of the second defendant. The first defendant wanted to acquire a substantial number of shares in an Indonesian company, PT Triwira Insanlestari (“PTTI”) listed on the Jakarta Stock Exchange, on behalf of the second defendant and therefore contacted the plaintiff. On 23 June 2008, the first defendant instructed the plaintiff to purchase approximately 120 million shares in PTTI (“the PTTI Shares”) on behalf of the second defendant. There were no moneys in the Account with the plaintiff to pay for such purchase. According to the market rules, the PTTI Shares had to be paid for three days after the purchase, ie, 26 June 2008 (“the Settlement Date”). The plaintiff’s case against the first defendant was that by a series of false representations, the first defendant induced the plaintiff to purchase the PTTI Shares on the second defendant’s behalf in the belief that the plaintiff would be put in funds before the Settlement Date.

The first defendant assured the plaintiff’s representatives that the funds would be transferred into the Account to pay for the PTTI Shares before the Settlement Date, but no moneys came in by that date. The purchase price was debited against the Account which fell into deficit. The first defendant thereafter made several further false statements in response to the plaintiff’s requests for payment of the outstanding amounts.

On account of the defendants’ failure to pay for the PTTI Shares, on 2 July 2008, the plaintiff informed the first defendant of its intention to liquidate the PTTI Shares. The shares, however, proved difficult to sell and the plaintiff only managed to completely liquidate the shares sometime in November 2009, leaving US$9,437,687.18 outstanding (“the Outstanding Sum”) as at 1 January 2010, after taking into account part payment.

The plaintiff commenced an action against both defendants. Against the second defendant, the plaintiff is seeking recovery of the Outstanding Sum in contract. The plaintiff is also claiming against the first defendant damages for the tort of deceit and against both defendants for conspiracy by unlawful means.

At the close of the plaintiff’s case, the defendants elected to submit that they had no case to answer. The parties asked to be given time to tender written submissions, but the second defendant eventually decided against tendering any. I therefore have only the written submissions of the plaintiff and the first defendant.

It is undisputed that there was an agreement between the plaintiff and the second defendant whereby the plaintiff agreed to purchase the PTTI Shares on the second defendant’s instructions. In the second defendant’s defence and counterclaim filed on 29 September 2009, the second defendant admitted that: on 23 June 2009, the first defendant placed the order for the PTTI Shares with the plaintiff on the second defendant’s behalf; the plaintiff purchased the PTTI Shares; and the plaintiff has not received full payment for the PTTI Shares. In the circumstances, the second defendant’s failure to make full payment for the PTTI Shares is undisputed.

In this regard, it is the unchallenged evidence of Jeremy Roy (“JR”), a client service associate, and Christopher Majeski (“CM”), the Head of Compliance at MLIB that on or around the Settlement Date, the plaintiff instructed its custodian bank, the Hong Kong and Shanghai Banking Corporation (Jakarta), to pay for the PTTI Shares on its behalf to settle the trade involving the PTTI Shares. The undisputed evidence is that the purchase price for the PTTI Shares is IDR132,587,475,000. As the Account was a USD account, the purchase price was converted to USD, and the amount of US$14,318,301.84 was payable by the second defendant.

On or around 9 and 10 July 2008, the defendants made part payment of US$2m for the PTTI Shares. The liquidation of the PTTI shares by the plaintiff was eventually completed on or around 18 November 2009 (ie, after more than a year) for only US$2,225,106.98. As of 1 January 2010, the Outstanding Sum was US$9,437,687.18. In the circumstances, the second defendant is plainly in breach of its obligation to pay the Outstanding Sum and is liable to the plaintiff for the same.

Indeed, ultimately, to argue that the second defendant is not liable to pay for the PTTI Shares would be tantamount to saying that the second defendant is able to instruct the plaintiff to purchase the PTTI Shares and then claim that it does not have to pay for the same. This defies logic and is completely absurd. In fact, the second defendant itself clearly recognises this.

At the close of the trial, the second defendant’s solicitors indicated that the second defendant would not be putting in submissions if it had no sensible submissions to put in. By a letter dated 3 May 2010 from the second defendant’s solicitors, the second defendant informed that it would not be making any submissions. The obvious conclusion is that the second defendant knows the plaintiff has made out a case against it and the second defendant can say nothing in response.

The claim against the second defendant

In any event, the second defendant has admitted its liability for the purchase price. The second defendant had previously applied for a stay of proceedings (“the Stay Application”) in the present action in favour of arbitration. The stay was denied by the assistant registrar. On appeal, Lee Seiu Kin J agreed with the assistant registrar and affirmed the decision (Merrill Lynch Pierce, Fenner & Smith Inc v Prem Ramchand Harjani [2009] 4 SLR(R) 16 (“the Stay GD”). Lee J’s decision was subsequently affirmed by the Court of Appeal. In the Stay GD, Lee J held that the first defendant and the second defendant had admitted, numerous times, that the second defendant was liable to the plaintiff for the purchase of the PTTI Shares in the amount of the purchase price. It is trite law that the doctrine of issue estoppel obviates the need to re-litigate issues that have already been decided in interlocutory applications: Alliance Management SA v Pendleton Lane P [2008] 4 SLR(R) 1 at [21]–[24].

In any event, based on the evidence before me, I am satisfied that there was sufficient evidence that the second defendant had admitted its debt. The following, in particular, are worthy of mention: Prior to the placing of the order for the PTTI Shares, at around 11.40am on 23 June 2008 (“the 11.40 Conversation”), the first defendant, on behalf of the second defendant, stated that he would pay for the PTTI Shares; After the order for the PTTI Shares was placed, at around 12.30pm on 23 June 2008 (“the 12.30 Conversation”), the first defendant stated that he was aware of the price of the PTTI Shares and he would be transferring the requisite funds to the Account. Further similar assurances were given later that day, at 1.59pm and 6.07pm; At around 11.07am on 24 June 2008, the first defendant informed the plaintiff that he would be remitting “14 million something” that day; At or around 25 June 2008, the first defendant faxed a copy of a remittance form to the plaintiff to prove that he had already arranged for funds to pay for the PTTI Shares; After 25 June 2008, the first defendant continued to acknowledge the second defendant’s liability and promised that the second defendant would pay for the PTTI Shares through various e-mails and telephone calls. Notably, on 3 July 2008 – during a conference call with representatives of the plaintiff, Nikhil Advani (“Advani”), Christopher Yeo (“Yeo”) and Amit Gupta (“Gupta”) – the first defendant confirmed that he would transfer US$14m into the Account to settle the payment. During this conversation, Advani carefully summarised the sequence of events leading to the purchase of the PTTI Shares and what happened thereafter. The first defendant agreed with the summary which made it clear that he had promised to transfer funds to pay for the PTTI Shares; and On 9 and 10 July 2008, the second defendant made part payment of US$50,000 and US$1.95m respectively for the PTTI Shares.

As stated in Cytec Industries Pte Ltd v APP Chemicals International (Mau) Ltd [2009] 4 SLR(R) 769 at [38], admissions and acknowledgments of an outstanding debt are sufficient to make out a prima facie case against a defendant, which will result in summary judgment being granted unless the defendant raises a positive case. The above is sufficient evidence of the admission and acknowledgment of the debt owed by the second defendant to the plaintiff. The part payment of the purchase price is further evidence of the admission and acknowledgment of the outstanding debt. On the totality of the evidence before me, therefore, I am satisfied that the plaintiff has established a prima facie case that the purchase price (less the part payment) is owed to the plaintiff by the second defendant. I therefore grant the plaintiff judgment against the second defendant.

The claim against the first defendant for the tort of deceit

The development of the law relating to the tort of deceit was succinctly summarised by LP Thean JA, delivering the judgment of the Court of Appeal, in Panatron Pte Ltd v Lee Cheow Lee [2001] 2 SLR(R)...