Siow Soon Kim and Others v Lim Eng Beng alias Lim Jia Le

• Judge: Chao Hick Tin JA
• Judgment Date: 30 January 2004
• Neutral Citation: [2004] SGCA 4
• Citation: [2004] SGCA 4
• Court: Court of Appeal (Singapore)
• Published date: 04 February 2004
• Plaintiff Counsel: Harbajan Singh and Ronald Lee (Daisy Yeo and Co)
• Defendant Counsel: A Rajandran (A Rajandran Joseph and Nayar)
• Subject Matter: Contract,Illegality and public policy,Contract to commit civil wrong,Whether placing of partnership moneys in separate bank account for tax evasion purposes tainted those moneys with illegality,Evidence,Documentary evidence,Proof of contents,Whether expert evidence based on document reproducing data from CD-ROM not admitted in evidence was admissible,Partnership,Partners inter se,Shares in partnership,Whether former partner in partnership entitled to appropriate share in partnership assets

30 January 2004

Chao Hick Tin JA (delivering the judgment of the court):

1 This was an action by the plaintiff-respondent to claim for an appropriate share in the assets of a partnership following his withdrawal from it. The High Court ruled in favour of the respondent, including making an order for the taking of accounts to determine his rightful share. We heard the appellants’ appeal against the High Court’s decision and dismissed it. We now give our reasons.

The background

2 The relationship between the parties began in 1985. In that year, the respondent and the first appellant (or “SSK” as may be appropriate) formed a partnership called “Kim Eng Supplier” (the fifth defendant and the fifth appellant herein), to engage in the business of supplying frozen food and provisions to restaurants and other enterprises. The first appellant managed the business, including the making of purchases as well as maintenance of its accounts. As for the respondent, he was essentially a field man, taking charge of delivery of goods to customers.

3 Besides the first and fifth appellants, there were five other defendants to the action, who were also the appellants in the appeal. The second defendant (“the second appellant”) was brought into the firm in 1991/1992 as a part-time accounts clerk and she later became a full-time employee and the de facto manager of the office. It was the respondent’s evidence that the second appellant never became a partner.

4 In 1991, the third defendant (“the third appellant”), a brother of SSK, became an equal partner with SSK and the respondent. In the same year, the fourth defendant (“the fourth appellant”), another brother of SSK, was brought into the firm by SSK as an employee.

5 The sixth defendant (“the sixth appellant”), a private limited company, was incorporated by the first to fourth appellants in September 2001, after the respondent had withdrawn from the partnership on 18 July 2001. The company operated from the same premises as the partnership and took over the business of the partnership.

6 The seventh defendant (“the seventh appellant”) was incorporated as a wholly owned subsidiary of the partnership. Its initial directors were the fourth appellant and one Wong Kok Wah. It was understood by the respondent that he was also to be made a director, but was never made one.

The pleadings

7 By the action, the respondent claimed for his just entitlement of the partnership assets upon his withdrawal from it. He averred that besides himself, there were only two other partners, namely, the first and the third appellants. He alleged, inter alia, that:

(a) the first to third appellants had failed to give a proper account of the financial affairs of the partnership and account to him his due share in the assets of the partnership upon his withdrawal;

(b) moneys of the partnership were diverted from the firm and deposited into an account in the names of the first and second appellants (“the separate account”) and some of those moneys were transferred back to the firm as “loans” when, in fact, they had always belonged to the partnership, and accordingly, the alleged debt of $1,307,050.48 owing to the first appellant and others was, in fact, non-existent;

(c) the first appellant, in collaboration with the second and third appellants, had diverted moneys of the firm for their own use or misappropriated them;

(d) the first to third appellants refused to recognise that the respondent had a share in the money in the separate account and sought to dissipate those moneys for their own purposes;

(e) his requests to inspect all relevant documents pertaining to the accounts of the partnership had not been acceded to.

8 However, the respondent also pleaded that he was told by the first appellant that funds of the partnership would be set aside periodically and put into a separate bank account to be drawn out when needed. He was made to understand that this would result in savings for the partnership and for convenience this separate account would be handled by the first and second appellants.

9 As for the sixth appellant, when it was first incorporated it had a paid up capital of only $4. This was later raised to $1m. The respondent alleged that this money must have come from the partnership assets.

10 The defence of the appellants was one of denial of the allegations. At the conclusion of the plaintiff’s case (now the respondent’s), the defendants submitted that there was no case to answer and thus did not adduce any evidence.

Respondent’s evidence

11 In his testimony, the respondent told a tale of how he and the first appellant started the partnership on a very modest basis with hardly any capital. They went through some very trying times. It was only in 1989 or 1990 that they acquired premises at Textile Centre for the business. Thereafter things got better and the second appellant was brought in on a part-time basis to attend to documentation and accounts. The first appellant was then involved in a relationship with the second appellant, who later worked full-time for the firm and took charge of all its financial and administrative matters. At all relevant times, to use the words of the trial judge, the first appellant was the “brain” of the firm and the respondent the “work-horse”, attending to all activities outside the office or store.

12 The respondent said that because he was a field man, being invariably out of the office, he would often pre-sign cheques in blank for the needs of the firm.

13 Also around that period, the respondent agreed to the firm engaging the fourth appellant as an employee and taking in the third appellant (who would bring into the partnership $45,000 as capital) as an equal partner but who would not play an active role in the business of the partnership. The respondent said that he would not know whether, in fact, the third appellant injected $45,000 into the partnership, as the affairs and finance of the partnership were very much in the hands of the first appellant whom he trusted. He also believed that the third appellant was paid a monthly allowance of $1,000. It did not occur to him then that the bringing into the firm of the second to fourth appellants would pose a threat to his own position in the firm.

14 In 1992/1993 the first appellant suggested to the respondent that moneys from cash sales be kept aside in a separate bank account. This was to be the savings of the partnership which could also be used to purchase goods at a cheaper price if payments were to be made in cash. The respondent assumed that this new account would be opened in their joint names. However, when he was later told by the first appellant that the new account was opened in the joint names of the first and second appellants, he did not make an issue of it as he had faith in the first appellant.

15 From discoveries made pursuant to an Anton Piller order, the respondent came to know that the first appellant did not, in fact, open just one new account, but two new accounts, with the Standard Chartered Bank (“SCB”). One was in the first appellant’s own name and the other in the name of the second appellant (“the two new accounts”). From the documents discovered, it would seem that from 1995, some $6m was paid into the two new accounts, of which $1.4m was paid into the account in the second appellant’s name.

16 The respondent averred that all the annual accounts of the partnership were prepared by the second appellant on the instructions of the first appellant. He signed the documents, relying on the approval of the first appellant. He said that much later, after the “new account” had been opened, he noticed an item “loans” in the accounts of the partnership. Upon his inquiry, he was told that this referred to the moneys taken from the new account maintained at SCB and used to pay in cash for the business of the partnership. It was further explained to him that the funds so taken from the new account were termed “loans” so that the firm need not pay tax on them.

17 The respondent further deposed that from the year 2000, a number of events occurred which caused him to be concerned about the good faith of the first appellant. The most significant event occurred in July that year when an employee of the firm asked the respondent to repay money to the partnership on account of the partnership settling the respondent’s income tax liability which gave rise to an overpaid situation. Normally the respondent’s tax returns would be prepared by the second appellant and his tax liability would be met from the partnership. Because the request for a refund was unusual, he asked his wife to clarify with the staff. His sister, Lim Eng Luan, an accounts clerk, followed his wife to the office and from that meeting, she gathered that the partnership was a very profitable concern. The respondent’s sister mentioned this to him but he denied having made a lot of money. His sister explained to him what she discovered. He then realised how ignorant he was of the affairs of the firm.

18 Another incident was in mid-2001. Upon being requested by an employee to sign a few blank cheques, he asked that the names of the recipients of those cheques be inserted. When the first appellant learnt of this, he became upset and even told the respondent that the moneys in the new account at SCB did not belong to...