Pertamina Energy Trading Limited v Credit Suisse

• Judge: Chan Sek Keong CJ
• Judgment Date: 15 August 2006
• Neutral Citation: [2006] SGCA 27
• Citation: [2006] SGCA 27
• Court: Court of Three Judges (Singapore)
• Published date: 16 August 2006
• Defendant Counsel: K Shanmugam SC, Muthu Arusu, Edward Tiong, Ramesh Selvaraj (Allen & Gledhill)
• Subject Matter: Effect of registration,Credit facility secured by charge over company's deposit account fraudulently opened with bank in company's name by company's employee,Contractual terms,Whether chargee or chargor may challenge validity of charge inter se even where certificate of registration issued,Charges,Certificate of registration of charge issued,Bank facilitating drawdown on credit facility,Credit and Security,Banker’s set-off,Company opening deposit account with bank with knowledge of bank's right of set-off under bank's conditions for opening of account,Applicable principles,Bank failing to expressly plead defence in pleadings and failing to particularise and prove alleged detriment,Bank facilitating drawdown on credit facility and setting off sum against moneys in deposit account pursuant to charge and right of set-off,Whether bank entitled to rely on conclusive evidence clause as defence,Express terms,Whether bank acting without valid mandate,Pleadings,Contract,Civil Procedure,Company opening deposit account with bank with knowledge of conclusive evidence clause under bank's conditions for opening of account,Banking,Whether bank may modify customer's common law duties by express terms in contract with customer,Whether conclusiveness of certificate of registration of charge operating only vis-a-vis third parties,Whether bank entitled to exercise right of set-off,Whether bank put on notice of fraud or forgery,Bank seeking to rely on defence of estoppel,Whether bank may rely on defence of estoppel
• Plaintiff Counsel: C R Rajah SC (Tan Rajah & Cheah), Anjali Iyer (Anjali Iyer & Associates), Oommen Mathew, RajMohan (Haq & Selvam)

15 August 2006 Judgment reserved.

V K Rajah J (delivering the judgment of the court):

Introduction

1 A fraudulent employee causes his company substantial losses in an audacious scam. An eager bank officer fails to heed alarm bells in his zeal to facilitate and sustain a banking relationship with that company. Who should bear the losses?

2 This is an appeal against a decision dismissing the claim of Pertamina Energy Trading Limited (“the appellant”) for the return of approximately US$8m deposited under a fixed deposit contract with Credit Suisse (“the respondent”) (see Pertamina Energy Trading Limited v Credit Suisse [2006] SGHC 4 (“the GD”)). The focal point of the dispute is whether the sum claimed had been legitimately set-off against an alleged drawdown by the appellant of a credit facility in favour of a third company, Aceasia Commercial Enterprises Pte Ltd (“Aceasia”), also a private banking client of the respondent.

Dramatis personae

3 The appellant is a Hong Kong company and a wholly owned subsidiary of PT Pertamina (“Pertamina”), the Indonesian national oil company. Its operations in Singapore are in turn handled by another subsidiary company, Pertamina Energy Services Pte Ltd (“PES”). The appellant’s directors at the material time, Muchsin Bahar (“Bahar”) and Burhanuddin Hassan (“Hassan”), were both based in Jakarta, Indonesia. The senior executive officers of the appellant based in Singapore were Soekono Wahjoe (“Wahjoe”), the president of the company, and Zainul Ariefin (“Ariefin”), the vice president of finance and administration. As will become apparent shortly, Ariefin was primarily responsible for the operations of the appellant’s financial affairs and banking relationships in Singapore, while Wahjoe, quite content to rely on Ariefin’s judgment and expertise, was involved only minimally.

4 The respondent is the Singapore branch of Credit Suisse. The appellant’s liaison in Credit Suisse was Lim Chee Chien (“Lim”), a client relationship manager.

5 Aceasia was controlled by an Indonesian businessman Haji Dedy Budhiman Garna (“Dedy”), who appeared to have a close relationship with Ariefin.

6 Wahjoe and Lim testified at the trial on behalf of the appellant and respondent respectively. Ariefin and Dedy absconded long before the trial commenced.

Factual matrix

7 The train of events culminating in this appeal was set in motion when Dedy introduced Wahjoe and Ariefin to Lim sometime in late 2001. In that encounter, Wahjoe and Ariefin informed Lim that the appellant intended to open an account with the respondent. At a subsequent meeting on 19 November 2001, Ariefin and other officers of the appellant met Lim again to confirm that the appellant would open an account with the respondent in order to diversify the appellant’s investment opportunities.

8 On 17 January 2002, Bahar and Hassan signed a directors’ resolution authorising the opening of a bank account with the respondent (“the 17 January 2002 resolution”) on the following terms:

OPEN BANK ACCOUNT WITH CREDIT SUISSE, SINGAPORE BRANCH

RESOLVED:-

(a) That an Account (“The Account”) be opened in the name of the Company with Credit Suisse, Singapore Branch.

(b) That the account and such other accounts as may from time to time be established by the Company with Credit Suisse, Singapore Branch be operated by any one of the following authorized signatories signing singly:

Authorized Signatories Title Specimen Signature

Soekono Wahjoe President (signed)

Zainul Ariefin Vice President (signed)
Finance & Administration

(c) That the use of the Common Seal of the Company be approved and be affixed to the related bank documents regarding opening of the account.

[emphasis added]

9 On 15 February 2002, the appellant transferred US$9m to the respondent. Its receipt was confirmed by a statement issued on 18 February 2002 that was duly sent to the appellant’s office in Singapore. At around the same time, the respondent received various documents dated 18 February 2002, which had been signed by Wahjoe and Ariefin. These documents included:

(a) “Company Mandate”;

(b) “Account Opening Conditions”;

(c) specimen signature card;

(d) order relating to the retention of correspondence by the bank;

(e) “Risk Disclosure Statement”;

(f) “Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding”;

(g) the 17 January 2002 resolution;

(h) the appellant’s memorandum and articles of association (“M&AA”) and certificate of incorporation; and

(i) copies of the passports of Bahar, Hassan, Wahjoe and Ariefin.

10 Clauses 2 and 3 of the Company Mandate provided:

[I]t was resolved:

…

2 The Bank be authorised to honour any instructions relating to any activity acceptable to the Bank from time to time provided such instructions are signed by

SOEKONO WAHJOE SINGLY

ZAINUL ARIEFIN SINGLY

(being an “authorised signatory” or “authorised signatories” of the Company for all the purposes of this mandate.

3 The Bank be authorised and instructed at its absolute discretion to accept any instructions which it believes to be genuine from authorised agents of the Company whether given orally by telephone facsimile telegraph or cable and the Company agrees to bear the damages or any other losses resulting from reliance by the Bank upon any false forged or otherwise legally deficient instructions from the Company or from a third party purporting to act on its behalf and the Company agrees to bear any damages or other losses due to transmission by post telegraph, telephone, telex or any other mode of communication and resulting from losses, delays, misunderstanding mutilations or duplications except in the case of wilful or gross negligence on the part of the Bank …

Clause 6 of the Company Mandate conferred on the respondent the right of set-off of money standing to the credit of the appellant against its outstanding liabilities.

11 Clause 1.2 of the Account Opening Conditions provided that the appellant authorised the respondent, at the respondent’s absolute discretion and until the respondent received from the appellant notice in writing to the contrary, to honour and comply with written instructions from either Wahjoe or Ariefin. Clause 1.3(b) of the same document obliged the appellant to examine all statements, slips, notes and other documents issued by the respondent setting out transactions on the appellant’s account and to notify the respondent within 14 days of the issue of such statements if there were any discrepancies; failing which, the respondent was entitled to treat as conclusive evidence all the matters contained in the statements (see [67]–[71] below). Clause 17.1 of the Account Opening Conditions also conferred on the respondent a contractual right of set-off.

12 The appellant also requested that statements of its account be kept on a “retained mail” basis by the customer services department of the respondent. This arrangement meant that the statements of account would not be sent to the appellant. The respondent would retain the statements for the appellant’s inspection if and when required.

13 Shortly thereafter Ariefin orally requested that Lim effect the urgent drawdown of money from a credit facility of US$10m to be established in the appellant’s favour. Lim was off-handedly told that this money was to be remitted to Aceasia as the appellant owed money to Aceasia for oil contracts and oil tankers, which had already been delivered. In order to establish the credit facility, the respondent required a charge over the appellant’s deposit. It also sought the following additional documentation from the appellant:

(a) the countersigned copy of the facility letter;

(b) Account Opening Conditions;

(c) Company Mandate;

(d) a certified true copy of a current M&AA;

(e) a specimen signature card;

(f) Risk Disclosure Statement;

(g) a certificate of incorporation;

(h) a charge on cash amounts (“the charge”) to be executed as security for the appellant’s obligations and liabilities to the bank; and

(i) a board of directors’ resolution accepting the credit facility.

14 Wahjoe and Ariefin jointly signed the Account Opening Conditions, the Risk Disclosure Statement, the charge, the credit facility letters (there were two), and a resolution dated 18 February 2002 purporting to accept the offer of credit (“the 18 February 2002 resolution”). Ariefin singly signed the Company Mandate. These documents, together with a drawdown request letter dated 26 February 2003 (“the drawdown letter”), also singly signed by Ariefin, were handed over to Lim.

15 The respondent’s credit risk management department (“CRMD”), upon scrutinising these documents, rejected the application for the drawdown as neither Wahjoe nor Ariefin had the mandate to sign the charge, the credit facility letters, and the 18 February 2002 resolution. The CRMD also noted that the charge was not affixed with the company seal and that the Company Mandate ought to have been signed by the directors of the appellant, not by Ariefin. Such discrepancies were itemised by the CRMD in an email that was internally circulated to, inter alia, Lim. No concerns were raised in relation to the validity of the Account Opening Conditions, which Wahjoe and Ariefin were authorised to sign pursuant to the 17 January 2002 resolution.

16 In order to facilitate the drawdown, the respondent drafted a resolution to ratify the discrepant documents (“the ratification resolution”), but continued to insist that the company seal be affixed to the charge.

17 It is a matter of some controversy whether Lim handed the ratification resolution directly to Dedy or whether he handed a copy to Ariefin for him to procure the signatures of the appellant’s directors. At any rate, an undated copy of the ratification resolution purportedly bearing the signatures of Hassan and Bahar was faxed to Lim. Both the appellant and the respondent now accept that Ariefin forged the signatures on this ratification resolution.

18 On 1 March 2002, the appellant appointed a...