Patriot Pte Ltd v Lam Hong Commercial Company

• Jurisdiction: Singapore
• Judgment Date: 16 August 1979
• Date: 16 August 1979
• Docket Number: Suit No 45201 of 1975,Civil Appeal No 64 of 1978
• Court: Court of Appeal (Singapore)

Patriot Pte Ltd

Plaintiff

and

Lam Hong Commercial Co

Defendant

[1979] SGCA 12

Wee Chong Jin CJ

,

T Kulasekaram J

and

D C D'Cotta J

Civil Appeal No 64 of 1978

Court of Appeal

Contract–Illegality and public policy–Illegality under international and foreign law–False declaration to evade Indonesian custom duties–Both contracting parties actively involved in illegal scheme to evade custom duties–Breach of contract by one party in failing to pay purchase price of goods–Court's refusal to assist in perpetrating illegality

The appellant sued the respondent for the purchase price of tyres shipped from Taiwan via Singapore to Jakarta, Indonesia. The transaction had been structured in a manner to enable the parties to defraud the Indonesian government of custom dues.

The appellant opened a letter of credit for the full purchase price of the tyres through its bank in Singapore (“the Singapore bank”). The documents covering the shipment were then sent to the Singapore bank by the Taiwan seller. In the meantime, the Indonesian buyer sent a letter of credit to the Singapore bank. However, the letter of credit was for a much lesser sum than the full purchase price. The appellant signed a “Proforma Invoice” declaring this lesser sum, and the respondent under-declared the quantity and value of the tyres involved. The tyres were shipped into Indonesia on the basis of the falsely declared “Proforma Invoice”, thereby reducing the amount of customs payable.

The Indonesian custom refused entry of the tyres into Indonesia upon uncovering discrepancies between the actual goods sought to be imported and that declared on the “Proforma Invoice”. The appellant then commenced suit against the respondent for non-payment.

The High Court held in favour of the respondent, and refused to enforce the appellant's claim. The appellant appealed against the High Court's decision on two bases: (a) that there was no or insufficient evidence that the contract was illegal; and (b) that the appellant did not know of the illegality involved.

Held, dismissing the appeal:

(1) It was plain from the contract documents and from the undisputed evidence before the trial judge that the appellant was actively involved in an operation to evade Indonesian custom duties. The appellant knew that the undervaluation of the goods was necessary to evade payment of the proper Indonesian custom duties, and had lent themselves to the fulfilment of this purpose by providing the finance to enable the purchase and importation of the goods into Indonesia and by signing the “Proforma Invoice” and other essential documents in connection with shipment of the goods to Indonesia: at [7].

(2) If a party to a contract actively engaged in an illegal adventure to get goods into a country in breach of that country's revenue laws, the court would not assist the parties to the adventure by entertaining or settling any dispute between the parties arising out of the contract: at [10].

Fielding & Platt v Najjar [1969] 1 WLR 357 (distd)

Foster v Driscoll [1929] 2 KB 470 (refd)

L A J Smith and James Wan Hui Hong (Wan & Choo) for the appellant

Phua Cheng Kan (CK Phua) for the respondent.

Judgment reserved.

Wee Chong Jin CJ

(delivering the judgment of the court):

1 This is an appeal by Patriot Pte Ltd against the decision of A P Rajah J dismissing their claim against Lam Hong Commercial Co for $464,152.02 and interest. The claim arose out of the purchase of 4,000 sets of rubber tyres and tubes by an Indonesian purchaser from a Taiwan seller which were shipped on a ship proceeding from Taiwan via Singapore to Jakarta, Indonesia.

2 The facts relating to this transaction were these. Patriot Pte Ltd the appellants, opened a letter of credit in favour of the Taiwan seller for the agreed purchase price of the goods which amounted to US$228,305 through their bankers in Singapore. Two bills of lading containing the indorsements “B/L to be switch [sic] in Singapore” and “Notify Patriot (Pte) Ltd 94-A Robinson Road, Singapore” together with supporting invoices...