Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd

• Jurisdiction: Singapore
• Judge: Belinda Ang Saw Ean J
• Judgment Date: 31 August 2009
• Neutral Citation: [2009] SGHC 197
• Citation: [2009] SGHC 197
• Date: 31 August 2009
• Published date: 05 October 2009
• Plaintiff Counsel: Steven Chong SC, Rebecca Chew, Sim Kwan Kiat and Nigel Pereira (Rajah & Tann LLP),Alvin Yeo SC, Monica Chong, Sannie Sng, Tan Hsiang Yue, Deborah Liew and Sung Jingyin (Wong Partnership)
• Docket Number: Suits Nos 774 and 763 of 2004
• Defendant Counsel: Davinder Singh SC, Hri Kumar SC, Yarni Loi, Kabir Singh, Shivani Retnam and Alecia Quah (Drew & Napier LLC)
• Court: High Court (Singapore)
• Year: 2009

31 August 2009 Judgment reserved.

Belinda Ang Saw Ean J:

Introduction

1 Chia Teck Leng (“Chia”) was an inveterate gambler who unremittingly resorted to cheating and forgery in order to fuel and sustain his gambling addiction. For more than four years, whilst employed as the Finance Manager of Asia Pacific Breweries (Singapore) Pte Ltd (“APBS”), he deceived the Singapore branch offices of five international banks, by using his employer’s name to obtain substantial credit and loan facilities purportedly made to APBS which he misappropriated. His fraud was audaciously conducted from his employer’s premises during working hours. Chia was not called to give evidence. However, he was obviously able to commit and sustain this fraud for more than four years through a combination of confidence, interpersonal skills, guile and quick wittedness; and finally above all, by creating a façade of normalcy through his orchestration of honouring intermittent payments to the banks until he was found out after his arrest on 2 September 2003 by the Commercial Affairs Department. The use which Chia made of his employer’s name in order to borrow with ease from the banks was just as much a fraud on APBS as it was on the banks. Chia hoodwinked his employer and others with whom he worked. In doing so, he misappropriated S$53m from APBS. Chia was eventually convicted of cheating and forgery and sentenced to 42 years imprisonment.

2 Civil proceedings were duly brought against APBS by four international banks for the frauds Chia practised on them. The four banks, as victims of Chia’s fraud, had understood that they were dealing with Chia as an employee of APBS. The plaintiff in Suit No. 774 of 2004 (“Suit 774”) is Skandinaviska Enskilda Banken AB (Publ) (“SEB”). The plaintiff in Suit No. 775 of 2004 (“Suit 775”) is Mizuho Corporation Bank Ltd (“Mizuho”). The plaintiff in Suit No. 763 of 2004 (“Suit 763”) is Bayerische Hypo-Und Vereinsbank Aktiengesellschaft (“HVB”). The plaintiff in Suit No. 781 of 2004 (“Suit 781”) is Sumitomo Mitsui Banking Corporation (“Sumitomo”). Chia was also sued by the banks. He did not defend the actions.

3 The four actions were listed for trial at the same tranche. The trial lasted over 47 days. The first tranche of the trial spanned from 1 October 2007 to 30 November 2007. The second tranche of four days started on 7 January 2008. On the seventh day of the trial, the two Japanese banks retreated by abandoning their actions with the following consequences: (a) Mizuho discontinued Suit 775 upon terms as ordered by this court; and (b) Suit 781 commenced by Sumitomo was dismissed with costs. The trial continued in respect of Suit 774 and Suit 763.

4 The claims in Suit 774 and Suit 763 are for the repayment of the loans misappropriated by Chia on the footing that (a) he had actual or ostensible authority to enter into the various credit and loan facilities on behalf of APBS, and as such, APBS was contractually liable to repay the outstanding loans and interest (“the agency issue” in the contract claim); (b) damages on the basis that APBS as Chia’s employer was vicariously liable for his fraud (“the vicarious liability issue” in the tort claim); and (c) damages in tort for negligence against APBS (“the negligence claim”). Claims (a) and (b) are common to both banks. Claim (c) is made by HVB alone. Separately, SEB has an alternative claim against APBS in restitution (“the restitution claim”). APBS has denied liability in respect of all the claims. It has also brought a counterclaim in restitution, for knowing receipt and dishonest assistance against SEB.

5 This judgment is my decision on Suit 774 and Suit 763. Although the two actions are separate and each action arose from different factual matrices, and that different considerations apply to each separate case, there are important common legal questions that affect them all. In addition, some of the legal issues also overlap. For case management considerations, direction was given that evidence adduced at the trial in one action may be used in the other action where the evidence adduced in one action is relevant to the pleaded case in the other action. Obviously, evidence adduced in the one action that is to be used in the other is subject to the usual evidential rules on admissibility and hearsay; and the weight of the evidence must necessarily be circumscribed by the opportunity available to the opponent to test the evidence by cross-examination. Again for case management considerations, SEB began its case first and gave evidence. HVB followed thereafter. APBS opened its case and concurrently led evidence for both actions. In this judgment, any differences between the banks are distinguished and dealt with separately.

6 For convenience, I shall refer to the plaintiffs in Suit 774 and Suit 763, collectively as “the banks” and, where necessary, individually by name. It is appropriate to state at the outset that even though many issues and arguments have been advanced, most of them are peripheral; as such, they do not need to be explored in detail, and in some instances, not at all. However, some points are, nevertheless, relevant in that they throw light upon the central issues to be resolved. In the circumstances, the approach taken in this judgment is to discuss factual issues, and to make findings upon them, that the court considers are important to resolve the central issues in the respective actions. To adopt any other approach would make this judgment unnecessarily longer and even more burdensome than it otherwise would be. The same approach is adopted in respect of the many authorities cited by the parties. It must be noted that I have taken into account the various disputes recounted in the evidence when deciding the central issues even though I have not made specific findings on each and every one of them.

The witnesses

7 Three witnesses gave factual evidence on behalf of SEB. They were Mohammad Ali Mohd @ Eddie Amin (“Amin”), Valerie Hui Yin Tan (“Valerie Tan”) and Gerard Lee Cheow Khim (“Gerard Lee”). The witnesses of facts called by HVB were Matthias Zimmermann (“Zimmermann”), Tan Hwee Koon (“Hwee Koon”), Peter Vassiliou (“Vassiliou”) and Cheah Soo Lee. The witnesses of facts called by APBS were Christopher Leong Chi How (“Christopher Leong”), Teo Hun Teck, Jimmy Tan Haw Kong (“Jimmy Tan”) and Quek Peck Leng. There were seven expert witnesses. Of the seven, David Norman Hudson (“Mr Hudson”) and Tan Boon Hoo (“Mr Tan”) gave expert evidence, on behalf of APBS, in relation to banking practice and procedure. Mr Paul James Laurence Rex (“Mr Rex”) gave expert evidence, on behalf of HVB, in relation to banking practice and procedure. Mr Terence Michael Potter (Mr Potter”) gave expert evidence, on behalf of HVB, on the system of internal controls in corporations. Mr Stephen Armstrong, on behalf of HVB, testified on the pre-employment screening that could have been done prior to hiring Chia. On the quantification issue in relation to the claim in restitution, Mr Kon Ying Tong (“Mr Kon”) gave expert evidence, on behalf of SEB, and Mr Goh Thien Pong (“Mr Goh”) gave expert evidence on behalf of APBS. I will be considering the evidence of the witnesses in this judgment in relation to the issues to be decided. Where required, I will record my impression of the witnesses, and my assessment of the evidence of the witnesses.

The undisputed facts

8 In the course of the judgment, I will deal with the facts that are strictly relevant to discuss the factual issues, and to make findings upon them. Notably, APBS does not challenge the various visit reports or call memoranda produced by SEB and HVB respectively. The reports are the bank officers’ notes of meetings with Chia. Discussions on the different credit and loan facilities that Chia orally requested from time to time were recorded and they formed the basis of the applications put up to the various departments or committees in the banks for consideration and approval. A summary of the events leading to the facilities granted by SEB and HVB respectively are set out in Appendix I to this judgment. Notably, APBS accepts the banks’ account of the different reasons given by Chia for the company requiring the credit and loan facilities. However, APBS takes issue with the reasonableness and/or plausibility of the reasons, arguing that there were “red flags” or warning signs that the banks failed to appreciate, and their misfortune was the consequences of their failure to take proper precautions. Significantly, an important feature of the case is the standard requirement of the banks that its corporate borrowers provide certified extract of the relevant minutes that recorded the board resolution approving the particular transaction and authorising execution of the contractual documentation including giving individuals signing delegated authority to sign it. This standard requirement was imposed as a “condition precedent” or “pre-condition” in the SEB facility letters and the HVB’s Agreement for an Amortising Term Loan (“the HVB loan agreement”) (see [19] - [23] below).

9 Chia’s fraudulent activities involved cheating his employer, APBS, and the banks. It is common ground that Chia provided false documents and forged certified extracts of the different board resolutions to the banks to obtain credit and loan facilities. It is not disputed that the banks relied on the forged mandates thinking that they were genuine. The series of fraud on the banks involved the creation of credit and loan facilities that were not recorded or reflected anywhere in the books and balance sheet of APBS. The bank accounts with SEB, namely the US$ Account No. 709XXXXX and S$ Account No. 709XXXXX opened in 1999 and operated solely by Chia, were in the name of APBS with Chia as sole signatory (hereafter collectively referred to as “the SEB Accounts” or individually as “the SEB US$ Account” or SEB S$ Account”). Tay Yong Kwang J in...