Seagate Technology Pte Ltd and Another v Goh Han Kim

• Jurisdiction: Singapore
• Judge: Goh Joon Seng J
• Judgment Date: 14 November 1994
• Neutral Citation: [1994] SGCA 128
• Date: 14 November 1994
• Subject Matter: Standard of proof,Tort,Conspiracy,Whether company had legal capacity to continue action despite advanced stage of winding up proceedings,Defence of change of position,Money had and received,Whether respondent and employee had agreement to defraud,Winding up,s 308 Companies Act (Cap 50, 1990 Ed),Whether direct recipient was a mere agent,Requirement of bona fides,Whether respondent party to any agreement or arrangement to cheat appellants,Companies,Conspiracy to defraud appellants,Whether defence available to the respondent,Restitution,When a company is deemed finally dissolved,Whether mere payment out by recipient is a good defence
• Docket Number: Civil Appeal No 13 of 1994
• Published date: 19 September 2003
• Defendant Counsel: Michael Khoo, Cheah Kok Lin and Josephine Low (Michael Khoo & BB Ong)
• Court: Court of Appeal (Singapore)
• Plaintiff Counsel: Govindarajalu Asokan and Low Chai Chong (Rodyk & Davidson)

Cur Adv Vult

The facts

The first appellants are a company incorporated in Singapore and at the material time carried on the business of manufacturing and repairing computer and data processing equipment and accessories. They employed one Jocelyn Heng Eng Li (Heng) as a planner, and her duties entailed, inter alia, the collation of information on the usage requirements of materials, raising purchase requisitions and scheduling delivery of the materials required to the first appellants` production plants in Singapore and Thailand accordingly. The second appellants are a corporation incorporated in the Cayman Islands with a branch office registered in Singapore and own all the shares of the first appellant company. The respondent is the sole proprietor of a business called Gold Circle Enterprise (Gold Circle) and was one of the suppliers of materials to the first appellants for their business. Since 1983, Gold Circle had been supplying the first appellants with static control products (anti-static polythene bags, bubble packs and rolls) and clean room products (cotton swabs).

The respondent became acquainted with Heng through his dealings with the first appellants as a supplier. He met with her once or twice a week to take orders from her. In late 1986, Heng contacted the respondent and in tears, told him that her uncle in the United States of America was in financial difficulties and asked him as a personal favour to help her uncle clear his business stocks. The respondent was aware that that was a personal request on her part and not one made in her capacity as the planner for the first appellants. Heng said that her uncle dealt in two products known as Alpha Texwipe (AT) and Lint Free Swabs (LFS) and had stocks of these products, and that the first appellants used these products as well. Up to that time, the respondent had not supplied these products to the first appellants and did not even know what they looked like. Heng requested the respondent to purchase these products from her uncle and then sell them to the first appellants. She could arrange for these materials to be shipped from the United States to Singapore. She agreed to give him a commission of $3 per packet sold. Upon receiving payment from the first appellants, the respondent would make payment to her after deducting what was due to him as commission. She told him that this arrangement was necessary as her uncle did not have any company in Singapore.

After considering the request, the respondent agreed to the venture which he thought was genuine. As the respondent had not at that time supplied the materials in question to the first appellants before, he approached the first appellants` staff in charge and obtained approval for Gold Circle to supply the materials to the first appellants.

There were in fact two schemes which were devised by Heng. The first scheme was carried out on 12 occasions and was implemented in this way. At that time, a company known as Utopia Aire Pte Ltd supplied LFS to the first appellants. When a particular supply came in, Heng would raise a request form to the storekeeper to transfer the supply of LFS to the shipping department. She would tell him that these materials were meant for use in the first appellants` Bangkok plant. Once they had been transferred to the shipping department (which was located in the same premises), Heng would tell the person in charge in that department not to ship them to Bangkok and give instructions to return them to the supplier. The shipping department would not know who the actual supplier was. Heng would then contact one Tan Cheng Oon (Tan), Gold Circle`s delivery contractor, to go to the shipping department to collect the LFS. The LFS would be brought back to a warehouse in Jurong owned by one Lim Choon Huat (Lim) of Weng Moh Warehousing and Transportation, whose services the respondent had used since 1980. The LFS were then repacked and subsequently redelivered to the first appellants` store with the Gold Circle delivery order. The orders to repack came from Heng, and Lim did not question her instructions to repack the LFS or to alter the delivery order by adding in the LFS. He did check with the respondent as regards the LFS but the respondent told him that as long as there was a matching purchase order it was in order.

When the audit team of the first appellants slackened in their checks, Heng put a simpler scheme into action, one that did not involve any physical goods but merely book entries. As Gold Circle was now an approved supplier of AT and LFS, Heng would raise a purchasing requisition which included Gold Circle as a supplier of the items. A purchasing requisition was a form used by the first appellants to identify three months` requirements for materials that would be running out of stock. She would then raise the requiVsition requirement by a certain percentage. For instance, if the actual requirement was 1,000 packets, the purchasing requisition would be raised to 2,000. Utopia Aire Pte Ltd would supply the 1,000 packets which was the actual requirement for the first appellants, while Gold Circle would purportedly supply the other 1,000 packets which was falsely generated by Heng but with no goods being delivered. When Tan from Gold Circle delivered other supplies to the first appellants` premises, the standard procedure was that the first appellants` store keeper would sign four copies of the documents. The first appellants` store keeper would keep one copy and the rest would be returned to the supplier. This one copy would be passed on to Heng who kept it and would not forward it immediately to the finance department as she was expected to. When Tan next delivered Gold Circle`s materials to the first appellants again (generally a day or two later), Heng would place that copy of Gold Circle`s delivery order in an envelope with a `post-it` note attached indicating the quantity of LFS to be added in that delivery order. The delivery contractor would bring back the envelope to Gold Circle`s store in Jurong to Lim, who was in charge of issuing stocks and delivery orders, and he would duly type the amount of LFS on that delivery order as well as on the copies returned earlier (all of them bearing the same serial numbers). When Tan made the next trip with Gold Circle`s supplies, he would hand the delivery order with the additional item typed in to Heng who would then forward it to the finance department. As the copy of the altered delivery order supplied for invoicing matched the altered copy handed to the finance department by Heng, the finance department would pay accordingly. The respondent stated that he knew Lim since 1980 and initially he prepared his own delivery orders and handed them over to him. Later, he trusted Lim to prepare them on his behalf by handing him a book of delivery orders. Tan, who had collected the LFS initially for the first scheme and later the envelope with the note to amend the delivery orders had done so at Heng`s request and did so unquestioningly as she was a senior officer of the company.

To evade further detection by the audit team, since there were no physical goods involved, Heng would key into the store`s computer system the amount of LFS `received` from Gold Circle and would at the same time release that amount to Bangkok, indicating that the LFS had been shipped to Bangkok, thus avoiding a discrepancy should a physical count be made.

On 7 November 1988, one Goh Yong Chew, the first appellants` director of materials control, carried out an audit on LFS and realized that delivery orders had been altered to give the false impression that Gold Circle had delivered various quantities of LFS. He also discovered that the quantity of LFS purportedly shipped to Bangkok was exaggerated. The first appellants` senior management was informed, as was their director of security, one Letchamanan Thambiah (Thambiah). On 17 November 1988, Thambiah and two employees of the first appellants, Alan Leong (Leong) and Stanley Aloysius (Aloysius), interviewed first Heng and then the respondent, and statements were recorded from both of them. In the respondent`s statement, he admitted that four delivery orders contained `fictitious` items.

Subsequently, on 21 November 1988, the first appellants commenced this action against Heng and the respondent claiming $1,984,740 for conspiracy to defraud and/or as moneys had and received. The respondent resisted the claim and counterclaimed $366,864.71 being the price of goods supplied by him to the first appellants between August and November 1988. On 3 December 1988, Heng was convicted in a district court of five counts of cheating the first appellants of a total sum of $1,984,740 and attempting to cheat the first appellants of a sum of $347,300. She was sentenced to a total of three years` imprisonment. On 27 January 1989, the first appellants obtained judgment in default against Heng but this judgment was only partially satisfied since only $942,940.93 was recovered by the police and paid over to the first appellants. The action against the respondent for the balance sum of $1,041,799.07 continued to trial.

Before the case came to trial, the first appellants` holding company, Seagate Technology Inc, also recovered US$259,876.82 from their insurers under a policy protecting them against loss resulting from the dishonesty of an employee. This payment, made on 30 July 1992, was in return for a partial release executed in favour of the insurers to the extent of the payment. However, by an agreement dated 13 January 1993, the insurers and Seagate Technology Inc agreed that the payment made previously should be in full and final settlement of the latter`s claim against the former. The terms of the agreement released both the insurers and Seagate Technology Inc of all rights to subrogation and/or indemnity that either party then had or may in future have had against one another.

The action against the...