Sumitomo Bank Ltd v Kartika Ratna Thahir and Others and another matter

• Judgment Date: 03 December 1992
• Date: 03 December 1992
• Docket Number: Originating Summons No 308 of 1976
• Court: High Court (Singapore)

Sumitomo Bank Ltd

Plaintiff

and

Thahir Kartika Ratna and others and another matter

Defendant

[1992] SGHC 301

Lai Kew Chai J

Originating Summons No 308 of 1976

High Court

Conflict of Laws–Choice of law–Equity–Proceeds of bribe deposited in Singapore bank in joint names of bribed agent and wife–Whether lex fori applied in exercise of court's equitable jurisdiction–Restitution–Whether claim to recover proceeds of bribes against employee is in connection with contract of employment–Whether law of contract or law of place of ultimate enrichment applied–Equity–Fiduciary relationships–Remedies–Whether fiduciary employee held bribes on constructive trust for employer–Whether non-fiduciary assisting fiduciary's breach of duty held proceeds of bribes on constructive trust–Evidence–Proof of evidence–Standard of proof–Higher standard of proof required in fraud case–Whether circumstantial evidence may be used to infer fraud–Restitution–Money had and received–Proceeds of bribe–Employee accepted bribe from employer's contractors–Proceeds of bribe deposited in Singapore bank–Deposits in joint names of employee and wife–Employer since been reimbursed expenses incurred in project–Whether claim for money had and received lay against employee and volunteer receiving from employee–Tracing–Common law–Equity–Whether shown that funds deposited in Singapore bank were traceable proceeds of bribes–Trusts–Constructive trusts–Whether fiduciary holds bribes on constructive trust for principal–Whether third party knowingly participating in breach of fiduciary duty holds property on constructive trust for principal

The plaintiff Pertamina was an Indonesian state enterprise. Its principal business was the exploration, processing and marketing of oil and natural gas. In 1970, at the direction of the Indonesian Government, Pertamina undertook to construct infrastructure facilities for the steel works called Krakatau Steel at Cilegon in West Java. The facility was eventually owned and operated by another entity, PTKS, but Pertamina remained financially responsible for the project and took over effective management control of it in or about June 1973. One General Thahir held various influential offices in Pertamina. From sometime in 1972, he was authorised to sign vouchers and cash demands for all contracts signed by the president director. At no time did General Thahir's salary exceed US$9,000 per annum.

In 1973 and 1974, Pertamina and PTKS entered into several contracts for the construction of the facilities. Among the contractors were two German firms: Klockner Industrie Analagen GMBH (“Klockner”) and Siemens AG (“Siemens”). Pertamina alleged that the two German contractors paid General Thahir bribes to ensure better contractual terms and preferential treatment where payments were concerned. It further alleged that General Thahir deposited the proceeds into 19 interest-bearing Asian Currency Unit (“ACU”) accounts at Sumitomo Bank (“Sumitomo”) in Singapore in the name of “Mr HA Thahir and/or Mrs KR Thahir”.

Following General Thahir's death, three different parties claimed to be entitled to the proceeds of the 19 ACU deposits and Sumitomo applied for interpleader relief under O 17 r 1 (1) (a) of The Rules of the Supreme Court 1970. The first party was Mrs Kartika Thahir (“Mrs KR Thahir”), who claimed to be General Thahir's lawful widow and beneficially entitled to the 19 ACU accounts; the second was General Thahir's estate, represented by sons of an earlier marriage; and the third was Pertamina, who claimed the deposits on the ground that the moneys were bribes received by General Thahir whilst in its employ from contractors of or who were paid by Pertamina for projects of which Pertamina was in charge. The court ordered Pertamina to be the plaintiff in these proceedings with Mrs KR Thahir and the sons of the deceased, representing his estate as the first and second defendants respectively. All three parties agreed to the terms of the issues between them, which were approved by the High Court. The issues before the court were whether Pertamina was entitled to the moneys in the ACU accounts and whether such entitlement arose either under Singapore law as the governing law and/or under Indonesian law as the law of the place having the most connection with the rights, obligations and duties of the persons referred to. The crucial question of law was whether Lister & Co v Stubbs (1890) 45 Ch D 1 - which established that there was no proprietary or “tracing” claim against a bribed agent where the bribe was in the form of money - was good law in Singapore.

Held, allowing the plaintiff's claim in part:

(1) Allegations of a fraudulent or criminal nature have to be proved to a standard which was higher than the standard in a non-fraud case. However it was not the law of evidence that every step in the allegation of fraud had to be proved by calling live and admissible evidence nor was it the law that fraud could not be inferred in the appropriate case. Inferences of this serious nature should not be lightly made. The circumstantial evidence must be so compelling and convincing that bearing in mind the high standard of proof, one was nevertheless satisfied that an inference of fraud was justified. On the evidence, there were linkages between the payments made by Pertamina to Klockner and Siemens in respect of the project and 17 of the deposits made by General Thahir in Singapore: at [88], [102] and [103].

(2) The forum would apply its own rules in deciding whether it would exercise its equitable jurisdiction. It would apply its own law to determine the kind of equitable obligations that arose from the unconscionability of the defendant's acts: at [171] and [172].

(3) At common law, the cause of action for money had and received arose in the place of receipt. In this case, it was where the money was deposited. Thus the claim for money had and received was wholly governed by Singapore law. Under Singapore law, a claim for money had and received lay against the person bribed even if the bribe could not be traced directly to the plaintiff or shown to be the plaintiff's money. It also lay against a volunteer to whom the immediate recipient had paid the money: at [140], [141], [186] and [187].

(4) Lister & Co v Stubbs (1890) 45 Ch D 1 was wrong and its undesirable and unjust consequences should not be imported and perpetuated as part of Singapore law. It was inconsistent with the case law which preceded it. It was hard to accept that a fiduciary who accepted illicit bribes was not declared as a constructive trustee and was only liable to account whereas an honest fiduciary, whose intervention and activities had resulted in a benefit to the cestui que trust, was one in equity. When a Singapore court exercised its equitable jurisdiction, it must reflect the mores and sense of justice of the society which it served. The authority of Lister v Stubbs was so extensively undermined and questioned that it should be confined to its special facts. General Thahir and Mrs KR Thahir - taking under General Thahir's title - were both constructive trustees: at [241] to [243].

(5) A fiduciary relationship must exist before a constructive trust was imposed and it mattered not that such a relationship was not mentioned in terms. A person who was not a fiduciary and who had not received trust property may nonetheless be fixed with liability for his unlawful gains or profits as a constructive trustee because of his assistance with sufficient knowledge in a fiduciary's breach of duty. Mrs KR Thahir alternatively held the deposits on constructive trust on this basis: at [242] and [244].

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