Red Star Marine Consultants Pte Ltd v Personal Representatives of Satwant Kaur d/o Sardara Singh, deceased

• Jurisdiction: Singapore
• Judge: Tay Yong Kwang JA,Steven Chong JA,Judith Prakash JA
• Judgment Date: 25 November 2019
• Neutral Citation: [2019] SGCA 76
• Year: 2019
• Date: 25 November 2019
• Published date: 12 December 2019
• Hearing Date: 15 October 2019,29 October 2019
• Plaintiff Counsel: Mahmood Gaznavi and Luke Anton Netto (Mahmood Gaznavi & Partners)
• Citation: [2019] SGCA 76
• Defendant Counsel: Alfred Lim, Jaime Lye and Daniel Lee (Fullerton Law Chambers LLC)
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 15 of 2019

Judith Prakash JA (delivering the judgment of the court):

It is trite that a company possesses a legal personality which is distinct from that of its directors or shareholders. It is also clear that a company, not being a natural person, is not capable of acting or having thoughts independent of its human agents. However, a company may sue or be sued in its own name, and may even be prosecuted for criminal offences. In these circumstances, the question may arise as to whether the knowledge or acts of a company’s agents should be attributed to the company. This appeal is one such case. It raises the interesting question as to whether the fraudulent acts and knowledge of a man who is more or less the sole shareholder and director of a company should be attributed to that company, where the company seeks to recover from a third party the proceeds of the fraudulent acts which the sole director and shareholder was party to.

Background facts

The appellant, Red Star Marine Consultants Pte Ltd, is a company engaged in the business of marine consultancy. Dhanvinder Singh s/o Karam Singh (“Mr Singh”) and his wife, Ms Kathelene Wilhemina Rappa (“Ms Rappa”), are the only directors and shareholders of the appellant. Mr Singh is the managing director of the appellant. The first respondent (“the Estate”) represents the estate of Satwant Kaur d/o Sardara Singh (“Ms Kaur”). Ms Kaur was employed by the appellant from 2001 to 2012 as the personal secretary of Mr Singh. The second respondent was a sister of the late Ms Kaur.

Between 2006 and 2012, Ms Kaur obtained sums totalling S$1,633,875.20 from the appellant. She took the funds by cashing cash cheques drawn on the appellant’s bank account which had been signed by Mr Singh. These cash cheques were accompanied by payment vouchers stating that the cash cheques were to pay invoices for services rendered by the appellant’s service providers (whom we shall refer to as “vendors”). Ms Kaur utilised these moneys to purchase and/or pay the premiums for a number of insurance policies on her own life. She also purchased properties with these funds. Three of these properties were registered in her sole name. The funds were also used to purchase two other properties (“the Rivervale and Bayshore properties”). One of these was put in the joint names of herself and the second respondent. The other was registered in the second respondent’s sole name.

On 29 August 2012, the appellant shifted its office from North Bridge Road to Kallang Pudding Road (“the New Office”). On or about 5 September 2012, Ms Rappa was unpacking at the New Office when she discovered incriminating documents belonging to Ms Kaur. Ms Rappa informed Mr Singh, who was not in Singapore then, of this discovery. Mr Singh told his wife not to allow Ms Kaur to enter the New Office. On 13 September 2012, Ms Kaur and the second respondent broke into the New Office, after which they changed the locks.

On 15 September 2012, Mr Singh lodged a police report alleging that Ms Kaur had misappropriated the appellant’s moneys. In the course of investigations, Ms Kaur gave a total of eight statements to the police, in which she admitted that she had taken various sums of money from the appellant. However, she alleged that this was with the consent and knowledge of Mr Singh.

Ms Kaur was eventually charged by the police in October 2014 with seven charges of criminal breach of trust by a clerk or servant under s 408 of the Penal Code (Cap 224, 2008 Rev Ed) and one charge under s 47(1)(c) punishable under s 47(6)(a) of the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (Cap 65A, 2000 Rev Ed). In January 2016 she was granted a discharge not amounting to an acquittal. Not long after, on 8 May 2016, Ms Kaur passed away from cancer. On 8 June 2016, the appellant filed the present action against the Estate, claiming for losses resulting from Ms Kaur’s alleged fraud, breach of trust, fiduciary duties and/or duty of loyalty and fidelity. The appellant joined the second respondent in the action on 29 May 2017, claiming that she had used money from Ms Kaur to acquire the Rivervale and Bayshore properties.

The decision below

The Judge, in Red Star Marine Consultants Pte Ltd v Personal Representatives of the Estate of Satwant Kaur d/o Sardara Singh, deceased and another [2019] SGHC 144 (“the GD”), dismissed the appellant’s claims against the Estate and the second respondent on the principal ground that the appellant had not proven on a balance of probabilities that Ms Kaur had committed fraud in the manner suggested by Mr Singh. In particular, the Judge found that Mr Singh was aware of and consented to Ms Kaur’s taking of moneys belonging to the appellant: GD at [62] and [63]. In making that finding, the Judge took into account the following facts: Ms Kaur was able to perpetrate the alleged fraud over a period of six years and her acts would have been patently obvious from the appellant’s accounts: GD at [64]–[72]. Mr Singh’s explanation of how the alleged fraud was perpetrated did not make sense: GD at [74]. Mr Singh failed to call several witnesses who would have been able to give evidence crucial to the appellant’s case. The vendors should have been called because these vendors would have been in a position to confirm Mr Singh’s explanation as to why he did not know about the fraud and/or Mr Singh’s account as to the arrangements which Ms Kaur undertook to facilitate her fraudulent conduct. The appellant’s accountant (“the accountant”) should have been called since Ms Kaur had allegedly hidden her fraud from Mr Singh by manipulating the appellant’s accounts: GD at [75]. There was no good explanation as to why the appellant had delayed so long before commencing proceedings. Mr Singh’s own evidence was that he had completed his investigations within five or six months of starting them in September 2012, but the proceedings were commenced only in 2016: GD at [76]. The Estate’s witnesses testified that Mr Singh had paid significant sums of money to Ms Kaur. At least two of those witnesses gave reliable testimony: GD at [79]–[87]

The Judge also held that the appellant’s claim against the Estate was largely time-barred in any event: [93]–[108]. The Judge also dismissed the appellant’s claim against the second respondent for knowing receipt on the ground that such a claim must be premised on the existence of a breach of trust or fiduciary duty (GD at [116]) and this had not been established as against Ms Kaur.

The parties’ submissions The appellant

The appellant’s submissions on appeal focus primarily on the conduct of Ms Kaur. It emphasises that Ms Kaur was a fiduciary of the appellant, and that she had breached her fiduciary duties by misappropriating the appellant’s moneys. The appellant submits that the evidential burden was on the Estate to explain why Ms Kaur had taken those moneys.

The appellant also submits that the Judge was wrong to criticise Mr Singh’s explanation as to how the alleged fraud was perpetrated; Ms Kaur’s modus operandi was of no significance because she had already admitted to taking the money. Further, even if the appellant knew or ought to have known of Ms Kaur’s fraud, this would absolve Ms Kaur from all wrongdoing only if the appellant had consented to Ms Kaur taking the money at the time in which she had done so. In addition, Mr Singh’s credibility should be measured against the reasons provided by Ms Kaur as to why she took the appellant’s money. The Judge was also wrong to draw an adverse inference from the appellant’s failure to call several witnesses. The appellant submits, in the alternative, that its claim should be allowed even if Mr Singh were party to the fraud, because the appellant is a separate legal entity.

The appellant further submits that its claim was not time barred because exceptions set out in ss 22(1) and 29(1) of the Limitation Act (Cap 163, 1996 Rev Ed) (“Limitation Act”) apply. As for its claim against the second respondent, the appellant submits that the second respondent was aware of Ms Kaur’s fraud and that she utilised the appellant’s money for her own benefit.

The respondents

The Estate submits that it is irrelevant whether Ms Kaur was a fiduciary of the appellant. Even if she were, there would have been no breach of fiduciary duty because the appellant, through Mr Singh, was aware of and consented to Ms Kaur’s conduct. It further submits the Judge was right to find that Mr Singh was not a credible witness.

In addition, the Estate submits that the appellant should not be allowed to argue that its claim should succeed even if Mr Singh was privy to Ms Kaur’s fraud. The appellant had all along adopted the position that Mr Singh was not so privy. It cannot be allowed to depart from its pleadings because the Estate would otherwise be irreparably prejudiced: it was deprived of the opportunity to plead and argue that the appellant was bound by the conduct and knowledge of Mr Singh.

The Estate submits that in any event, the Judge was right to find that the appellant’s claim was largely time-barred, and that the exceptions in the Limitation Act did not apply.

The second respondent submits that the appellant has not discharged its burden of establishing that its money was used by her to purchase the Rivervale and Bayshore properties. She did not know that Ms Kaur’s money was traceable to the fraud committed on the appellant. The factual circumstances were such that it was reasonable for her to believe that Ms Kaur was receiving money from the appellant on a legitimate basis. In particular, Ms Kaur did not act in a manner which betrayed that she had anything to hide.

Issues

Three issues arise from the parties’ submissions, which we will address in turn: whether Ms Kaur was privy to the fraud; whether Mr Singh was privy to the fraud; and whether, in the light of the answers to the first two...