Seagate Technology (S) Pte Ltd and Another v Heng Eng Li and Another

• Jurisdiction: Singapore
• Judge: Goh Phai Cheng JC
• Judgment Date: 03 January 1994
• Neutral Citation: [1994] SGHC 2
• Docket Number: Suit No 2378 of 1988
• Date: 03 January 1994
• Year: 1994
• Published date: 19 September 2003
• Plaintiff Counsel: Low Chai Chong and Geoffrey Mah Jin Tee (Rodyk & Davidson)
• Citation: [1994] SGHC 2
• Defendant Counsel: Michael Khoo and Josephine Low (Michael Khoo & BB Ong)
• Court: High Court (Singapore)
• Subject Matter: Second defendant not a party to fraud but had received and parted with proceeds of fraud,Conspiracy,Whether restitutionary remedy available,Whether first and second defendants conspired to cheat the first plaintiffs,Standard of proof,Defence of change in position,Whether unjust to allow the plaintiffs recovery of the moneys from the second defendant,Money had and received,Restitution,Tort,Elements of conspiracy

Cur Adv Vult

The first plaintiffs are a company incorporated in Singapore and they carry on the business of the manufacture and repair of computer and data processing equipment and accessories, except computer peripheral equipment.

The first defendant, Heng Eng Li, also known as Jocelyn Heng, was a planner employed by the first plaintiffs, and her job entailed collating information on the usage requirements of materials, raising purchase requisitions and scheduling the delivery of these materials to the first plaintiffs` production plants in Singapore and Thailand according to their needs.

The second defendant is the sole proprietor of Gold Circle Enterprise (`GCE`), one of the vendors that supplied the first plaintiffs with materials required by the first plaintiffs to carry on their business. Since 1983, the second defendant had been supplying the first plaintiffs with static control products (anti-static polythene bags, bubble packs and rolls) and clean room products (cotton swabs).

On 21 November 1988, the first plaintiffs commenced this action against the first and second defendants claiming the sum of $1,984,740 which they alleged was the loss and damage suffered by them as a result of the fraudulent acts of the first and second defendants. Alternatively, the first plaintiffs claimed the said sum as money had and received by the second defendant for the use of the first plaintiffs.

On 27 January 1989, the first plaintiffs obtained judgment in default against the first defendant for their claim of $1,984,740 but the judgment was partially satisfied as only $942,940.93 was recovered by the police and paid over to the first plaintiffs.

This action was heard from 23 to 25 August 1993 and on 7 October 1993. At the conclusion of the trial, the parties were given time to file written submissions. The second defendant filed his submissions on 15 November 1993 and the first plaintiffs filed their submissions on 13 December 1993. Before the court could deliver judgment, the first plaintiffs applied for and obtained an order of court on 30 December 1993 to add the second plaintiffs as a party to this action.

Paragraph 1 of the re-amended statement of claim states that the second plaintiffs are a corporation incorporated in the Cayman Islands and they have a branch office registered in Singapore, and that, by an agreement and plan of reconstruction dated 25 September 1989, the first plaintiffs sold, and the second plaintiffs purchased and took over as a going concern, the entire business of the first plaintiffs, comprising all the assets, rights and liabilities of the first plaintiffs. In his re-amended defence, the second defendant pleaded that -

(a) he does not have any knowledge of the matters pleaded in para 1 of the re-amended statement of claim by the plaintiffs save that the first plaintiffs was wound up and liquidated on 27 September 1989 pursuant to a members` voluntary winding-up and the sum of $708,212,000 representing surplus assets was returned to the contributories, Seagate Technology Inc, on the same day;

(b) after being wound up, the first plaintiffs could have continued the present action only on the instructions of the liquidators, but no such instructions had been given as the plaintiffs` solicitors knew of the winding-up only on 23 December 1993;

(c) further and in the alternative, the first plaintiffs have been dissolved and have duly ceased to exist, and their purported causes of action, if any, against the second defendant have accordingly ceased;

(d) even if there had been a valid assignment of all the first plaintiffs` assets, rights and liabilities to the second plaintiffs, which is not admitted, the assignment did not include the first plaintiffs` purported causes of action, if any, against the second defendants; and

(e) further and in the alternative, no express notice in writing of the purported assignment had been given to the second defendant.

The background

On 3 December 1988, the first defendant was convicted by a district court on five counts of cheating the first plaintiffs into believing that they had purchased lint-free swabs and Alpha texwipes from GCE and, thereby, dishonestly induced the first plaintiffs into paying GCE various sums of money. She pleaded guilty to the five charges. Twenty-eight other similar charges were taken into consideration by the district court for the purpose of passing sentence. On 5 December 1988, the first defendant was sentenced to a total of three years` imprisonment. In the statement of facts which was read out to the court and was admitted by the first defendant, para 15 thereof states that, between February 1987 and November 1988, the first defendant had cheated the first plaintiffs a total amount of $1,984,740 on 28 invoices and attempted to cheat the first plaintiffs of $347,300 on five other invoices.

On 8 August 1991, the second plaintiffs returned to the first defendant the sums of $5,704.66 and $400 representing her arrears of salary.

The holding company of the first plaintiffs, Seagate Technology Inc (`Seagate`), had a policy of insurance issued by the Insurance Company of North America (`the insurers`) in the United States, protecting them against losses suffered by Seagate as a result of the dishonesty of any employee. Seagate made a claim under the policy in respect of the loss caused by the first defendant. On 30 July 1992, the insurers made a partial payment of US$259,876.82 to Seagate in return for a partial release executed by Seagate in favour of the insurers to the extent of its payment. However, by an agreement dated 13 January 1993, the insurers and Seagate agreed that `the payment made previously by [the insurers] to Seagate in the sum of US$259,876.82 shall represent a final, full and complete satisfaction of Seagate`s claim against [the insurers]`. Under the terms of the said agreement, both the insurers and Seagate also released each other, inter alia, of `all rights to subrogation and/or indemnity that either party now has or may in future claim to have against each other, which arise out of, or relate to, the losses forming the basis of Seagate`s claim against [the insurers]`.

The plaintiffs` case

The plaintiffs` case, as pleaded in their re-amended statement of claim, is as follows:

(4) The first and second defendants entered into certain arrangements by which fictitious additional items were included into the invoices tendered by the second defendant to the first plaintiffs, thereby inducing the first plaintiffs to pay higher sums on the second defendant`s invoices.

Particulars

The plaintiffs will rely on the particulars pleaded in para 8 herein.

(5) Further or in the alternative, in respect of invoices set out hereunder, the first and second defendants arranged for goods to be removed from the first plaintiffs` store and redelivered to the first plaintiffs under invoices made out by the second defendant`s firm [GCE].

(6) The payments to the second defendant made in respect of the fictitious items were then divided between the first and second defendants.

(7) As a consequence of the acts of the first and second defendants, the first plaintiffs have suffered loss and damage.

(8) Further and in the alternative, the first plaintiffs claim the sum of $1,984,740 being money payable by the first and second defendants to the first plaintiffs for money had and received by the first and second defendants for the use of the first plaintiffs.

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The defence

In his re-amended defence the second defendant, inter alia, denied that:

(a) he had conspired or arranged with the first defendant to defraud or injure the first plaintiffs as alleged in paras 4, 5, 6 and 7 of the re-amended statement of claim or at all;

(b) he did any of the overt acts alleged in paras 4, 5, and 6 of the re-amended statement of claim in pursuance of any conspiracy or at all; and

(c) he had entered into arrangements with the first defendant or with anyone at all for goods to be removed or caused to be removed from the first plaintiffs` store and redelivered to the first plaintiffs under invoices made out by GCE.

The second defendant also pleaded that if the first plaintiffs had suffered any loss and damage, they were the result of the first defendant`s fraud, if any, on the first plaintiffs who were the first defendant`s employer and, alternatively, that the loss and damage were caused by the default and sole negligence of the first plaintiffs, the particulars of which are:

(a) failing to keep a proper account of the items ordered by and supplied to them;

(b) failing, as employers of the first defendant, to monitor the manner in which the first defendant as their employee exercised her authority whilst acting in the course of her employment; and

(c) failing, as her employers, to discover the breach of duty by the first defendant.

The second defendant further pleaded that, by reason of Seagate`s settlement with the insurers, the first plaintiffs are not entitled to recover the sum of $1,984,740 or, alternatively, the plaintiffs` entitlement to damages should be reduced by the sum received by Seagate from the insurers and the sums paid by the second plaintiffs to the first defendant as her arrears of salary.

The second defendant`s counterclaim

The second defendant has a counterclaim against the first plaintiffs for $366,864.71 being the value of goods supplied by him to the first plaintiffs between the month of August 1988 and 26 November 1988 for which the second defendant has not been paid. The first plaintiffs` defence to the counterclaim is that they are entitled to a set-off for the amount due to the second defendant.

The issues

On the basis of the pleadings, the issues before the court are:

(a) Did the first and second defendants enter into an arrangement to induce the first plaintiffs to pay higher sums on the second defendant`s invoices?

(b) Did...