Standard Chartered Bank v Sin Chong Hua Electric & Trading Pte Ltd and Others

• Jurisdiction: Singapore
• Judge: Goh Joon Seng J
• Judgment Date: 03 September 1991
• Neutral Citation: [1991] SGHC 121
• Date: 03 September 1991
• Subject Matter: Letter of credit transaction,Whether negotiating bank could recover money from defendants,Fraud by seller,Bills of Exchange and Other Negotiable Instruments,Moneys paid out under letter of credit to beneficiary and disbursed to defendants,Money had and received,Tracing
• Docket Number: Suit No 3888 of 1983
• Published date: 19 September 2003
• Defendant Counsel: Tan Chin Seng and Sachithananthan Suresan (Tan Rajah & Cheah)
• Court: High Court (Singapore)
• Plaintiff Counsel: Dennis Singham (Rodyk & Davidson)

Cur Adv Vult

The plaintiffs, the Standard Chartered Bank, are duly licensed to carry on banking business in Singapore.

On 2 June 1983 the plaintiffs` Jakarta branch issued a letter of credit No 901/1923/83 in favour of Sin Chong Hua Electric & Trading Pte Ltd (`Sin Chong`) a company incorporated in Singapore and having their place of business at 22, Pasir Panjang Road #05-13, PSA Multi-Storey Complex, Singapore for US$2,200,000. The letter of credit was established for the purchase by a company in Indonesia PT Oyama from Sin Chong `of 24 complete sets Daihatsu Diesel Generating Set Model 6PSHTC-26D-650KVA/520KW complete with standard spares and accessories.`

On 3 June 1983 the plaintiffs` Jakarta branch requested its Singapore branch to confirm the letter of credit to Sin Chong. The Singapore branch duly added its own confirmation and notified Sin Chong accordingly. Sin Chong in turn was to establish a letter of credit in favour of Nichimen Corporation of Japan for the purchase from Nichimen Corporation of the 24 Daihatsu generating sets with spare parts and accessories.

On 24 June 1983 the managing director of Sin Chong, one Allan Lee alias Lee Kee Sim alias Roy Damawan, the third defendant, accompanied by one Tonnie Sugiono, presented to United Overseas Bank (`UOB`) the letter of credit and sets of documents including the bill of lading in compliance with the requirements of the letter of credit with instructions to forward them `quickly` to the plaintiffs for payment. The bill of lading described the goods shipped as `twenty four 20` containers said to contain: 24 complete sets Daihatsu diesel generating set model 6PSHTC-26D 650KVA/520KW complete with standard spares and accessories ...`. UOB did as instructed.

On 27 June 1983 the plaintiffs duly negotiated the credit and the sum of US$2,194,408.63 being US$2,200,000 less bank commission was paid into Sin Chong`s US Dollar account with UOB. Between 27 June 1983 and 28 June 1983 the proceeds were then disbursed from Sin Chong`s account by six cheques in running numbers as follows:

Cheque No and Amount Date Paid to

(1) 580201 for 27.6.83 Sunset Realty Escrow Department of

US$245,637.50 Los Angeles by way of bank draft.

(2) 508202 for 27.6.83 Fixed deposit account of Lanny

US$225,211.50 Sugiono in London

(3) 580203 for 27.6.83 Fixed deposit account of Lanny

US$200,000 Sugiono in London

(4) 580204 for 27.6.83 Fix deposit account of Roy Damawan

US$850,000 (ie the third defendant) with American

Express International Banking Corporation (`AMEX`) Singapore for US$800,000 and the balance of US$49,441.25 paid to him.

(5) 580205 for 27.6.83 To the fixed deposit account of Benny

US$659,396 Moningka (the second defendant) with

AMEX Singapore

(6) 580206 for 28.6.83 To the S$ account of Sin Chong with

US$14,000 UOB Singapore.

After these disbursements, the balance in the first defendants` account was US$163.63.

On 8 July 1983 the third and the fourth defendant (who is the wife of the third defendant) called at AMEX Singapore and instructed them to include the fourth defendant as a joint depositor of the US$800,000.

On 9 July 1983 the fourth defendant instructed AMEX Singapore to remit the money to AMEX Hong Kong. On 11 July 1983 the sum of US$802,616.11 was remitted to AMEX Hong Kong. On the same day the third defendant instructed AMEX Hong Kong to issue a draft drawn on AMEX New York payable to the third and or the fourth defendant.

Meanwhile, on the arrival of the goods in Jakarta, the containers were found to contain fire bricks and not diesel generating sets. John Wong Yan Wing (PW1), an officer in the employ of the plaintiffs, on being informed of the fraud tried unsuccessfully to contact the third defendant. He went down to the first defendants` premises on 7 July 1983 and was informed that the third defendant was not in Singapore. On 8 July 1983 a report was lodged with the Commercial Crime Division, Criminal Investigation Department, Republic of Singapore Police (`Singapore police`). At the request of the Singapore police, AMEX Singapore advised AMEX New York not to honour the draft in favour of the third and fourth defendants. The Singapore police also requested AMEX Singapore to hold the sum of US$659,396.00 in the fixed deposit account of the second defendant thus preventing the second defendant from withdrawing the funds before maturity, something he tried to do on 11 July 1983. The second defendant is a relative of the third defendant.

On 10 August 1983 the plaintiffs commenced these proceedings against the first defendants for money had and received on grounds of fraudulent misrepresentation and for a declaration that the payments to second, third and fourth defendants `ought to be rescinded and set aside on the basis that these payments represent moneys belonging to the plaintiffs.`

Judgment was entered against the first defendants in default of appearance on 28 September 1983. The third defendant was served with the writ of summons by substituted service. No appearance has been entered by him.

The defence of the second and fourth defendants is that they were bona fide purchasers/recipients for value without notice of the plaintiffs` rights, if any.

When the suit was called for hearing before me on 12 August 1991 none of the defendants was in court. The second defendant however appeared by his counsel.

After hearing the evidence given on behalf of the plaintiffs on the factual background given above, I have no doubt that the whole transaction was a scheme to defraud the plaintiffs and/or PT Oyama of Indonesia, the buyers of the 24 Daihatsu diesel generating sets from the first defendants who were to purchase them from Nichimen Corporation of Japan. From evidence given by PW2, ASP Bala, the first defendants did not establish any letter of credit in favour of Nichimen Corporation, no purchase orders were placed by the first defendants with Nichimen Corporation. Twenty four empty containers were bought in Singapore by the third defendant`s brother, one Ricky Lee. The containers on arrival at Jakarta port were found to contain bricks. The proceeds were disbursed to the second, third and fourth defendants and Lanny Sugiono on the day the plaintiffs negotiated the credit.

However the second defendant alleges in his defence that in May 1983 he paid to the third defendant 639,614,120 rupiahs for the purchase from the third defendant of a house in Santa Monica, California, USA which purchase became abortive on or about 27 June 1983 and the payment to him of US$659,396 on that day was the refund. The deal fell through simply because the third defendant did not go to the United States to finalise the transaction. The defence is implausible. The second defendant also failed to appear at the trial to give evidence in support of his defence. I therefore reject the second defendant`s defence that he was a bona fide purchaser for value in respect of the sum of US$659,396 paid to him by the first defendant without notice of the plaintiffs` rights.

The fourth defendant alleges that the first defendants and the third defendant owed her US$1,323,000 and the amount of US$802,616.11 was paid to her towards settlement of the said debt. The fourth defendant did not appear at the hearing either in person or by counsel.

In her affidavit filed in these proceedings on 28 September 1983 she deposed that she and her mother, one Ratna Sumarny, had advanced to the first defendants moneys equivalent to US$800,000. Mr Jamshid Medora (PW6), a chartered accountant with the firm of Medora & Chow, testified that from the account books of the first defendants made available to him, he could not ascertain that the fourth defendant...