Suntoso Jacob v Kong Miao Ming

• Jurisdiction: Singapore
• Judge: Sinnathuray J
• Judgment Date: 24 January 1986
• Neutral Citation: [1986] SGCA 2
• Docket Number: Civil Appeal No 45 of 1984
• Date: 24 January 1986
• Year: 1986
• Published date: 19 September 2003
• Plaintiff Counsel: Nigel Hague QC and Molly Lim (Chung & Co)
• Citation: [1986] SGCA 2
• Defendant Counsel: Lim Chor Pee and Cheah Swee Gim (Chor Pee & Co)
• Court: Court of Appeal (Singapore)
• Subject Matter: s 369 Merchant Shipping Act (Cap 172, 1970 Ed),Deception of Registrar of Ships,Shares,Transfer of shares without consideration to circumvent administrative guideline on vessel registration,Trusts,Custodian trustee,Whether court will aid perpetrator in enforcing trust created,Deception of public administration,Trustees,Companies

The appellant, an Indonesian, and the respondent, a Singaporean, are shareholders and directors of ASPA Shipyard (the company). The company was incorporated in Singapore on 14 May 1974 and has an authorized capital of $2m divided into 2m shares of $1 each, of which 200,000 shares have been issued and are fully paid. Initially, the 200,000 shares were held as to 190,000 shares by the appellant and 10,000 shares by the respondent. According to the appellant, the funds for the entire issued share capital were provided by him and the 10,000 shares were given by him to the respondent, who was essentially his assistant. Soon after its incorporation, the company purchased office premises at the International Plaza, Anson Road, including the premises where it presently carries on business, namely, unit 816-817, eighth floor, International Plaza, Anson Road, Singapore 0207, and also other properties, including shares in quoted companies and a motor vehicle. The funds for the purchase of all these properties came from the company`s capital and loans from financial institutions and from the appellant himself.

Sometime in February 1980 the appellant negotiated for the purchase of a twin-screw tug boat of 3,000 BHP known as `Hanzan Maru` in Japan. He intended the vessel to be owned by the company, and thereafter to be chartered to a company in Indonesia, which in turn would charter it to Pertamina. He instructed the respondent to obtain a loan on behalf of the company to finance partly the purchase of the vessel and was informed that the lender, a finance company, required the registration of the vessel as a Singapore ship. He therefore asked the respondent to put in process the registration of the vessel in Singapore in the name of the company. In attempting to carry out this task, the respondent met with one obstacle. At that time, under the administrative guidelines laid down by the Registrar of Ships, Singapore, certain vessels, such as the vessel acquired by the appellant, would not be accepted for registration as Singapore ships if they were foreign-owned, and where a vessel was owned by a company incorporated in Singapore, it would be considered as foreign-owned if half or more of the issued shares of the company were owned by foreigners. As the majority of the shares of the company was owned by the appellant, the vessel, if it was to be owned by the company, would be considered as foreign-owned and therefore would not be accepted for registration as a Singapore ship. The appellant was informed of this requirement by the respondent. It was then agreed between them that the appellant would transfer to the respondent 92,000 shares of the company (the said shares) which the respondent would hold on trust for the appellant. Accordingly, the said shares were transferred to the respondent who became the registered owner of more than half of the issued shares of the company. The vessel, which by then had its name changed to `Tridaya Baruna X`, was ultimately registered under the Singapore flag in the name of the company. The loan for financing partly the purchase of the vessel was obtained from Sim Lim Finance Limited on the security of the vessel and two units of office premises at the International Plaza. The vessel was then chartered to an Indonesian company known as PT Aspa Shipping which in turn chartered it to Pertamina.

In early December 1980 the respondent executed a blank transfer of the said shares and also signed a board resolution approving the said transfer, and he delivered both the documents to the appellant. By the end of May 1981 or thereabout the loan borrowed from Sim Lim Finance had been repaid in full and the appellant decided to have the said shares transferred to another nominee, Mdm Chong Mui Hong, a Singaporean. He therefore caused the blank transfer to be completed and executed by Mdm Chong; it was then dated 15 June 1981 and was submitted together with the board resolution to the secretary of the company for registration. However, the certificate relating to the said shares was still in the possession of the respondent who then refused to deliver it to the secretary to effect the registration of the transfer. The respondent maintained that he was the legal and beneficial owner of all the said shares and had never agreed to transfer them to Mdm Chong or any other person. The appellant thereupon initiated the present proceedings against the respondent joining the company as a party and claiming, inter alia, a declaration that the respondent was not entitled to the said shares and that he held them only as trustee for the appellant.

In his statement of claim the plaintiff founded his claim for the said shares on an express trust; he pleaded that he transferred the said shares to the respondent without any consideration on the express understanding that the respondent was to hold them on trust for him (the appellant) and at the latter`s request to re-transfer the said shares to him or any other party as and when called upon or directed by the appellant to do so. The respondent denied the trust in his defence and averred that the said shares were sold to him and he had paid for the same, and that the sale was to enable the company to own the vessel under the Singapore flag. No plea of illegality of or in connection with the transfer of the said shares was raised in the pleadings.

The case was heard before Lai Kew Chai J. In the course of the trial counsel for the respondent indicated to the learned judge that if it was found that the said shares were transferred to the respondent on trust for the appellant there would be a further issue whether the transfer was made to deceive the public administration of Singapore, namely: the Registrar of Ships. The appellant was then cross-examined as to the circumstances surrounding the transfer of the said shares. Evidence then emerged that the transfer was to show to the Registrar of Ships that more than 50%, of the said shares of the company were owned by a Singapore citizen. At the conclusion of the trial, the learned judge found that the respondent did not pay or provide any consideration for the said shares transferred to him; however he dismissed the claim on the ground that the appellant had practised a deception on the Registrar of Ships, Singapore, and that the court would not lend its aid to a person who founded his claim on an illegal act. The learned judge said:

The plaintiff himself admitted that the true ownership of the said Shares had to be kept away from the Registrar of Singapore Ships in order to obtain registration. I am satisfied on the evidence that the plaintiff had transferred the said Shares to the first defendant in order that the Registrar of Singapore Ships would get a false picture. Although the first defendant had alone signed the registration papers containing the false representation, it was all done with the knowledge and consent of the plaintiff. The plaintiff is therefore confronted with the principle stated a long time ago by Lord Mansfield: `No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act.` See Holman v Johnson (1775) 1 Cowper 343. A similar situation had arisen in Palaniappa Chettiar v Arunasalam Chettiar [1962] MLJ 143 . 1 have no doubt that the plaintiff had practised a deception on the Registrar of Singapore Ships. To the plaintiff, I have to say: `Let the said Shares be where they fall.`

Against that decision this appeal is now brought.

Before the learned judge the case of the appellant was presented on the basis that the said shares were transferred to the respondent without any consideration on the express understanding that the respondent was to hold them on trust for the appellant. It was disclosed in evidence, and the learned judge so found, that the purpose of the transfer of the said shares to the respondent was to deceive the Registrar of Ships into believing that more than 50% of the shares of the company were held by a Singapore citizen. In that situation obviously the court would not lend its aid to enforce the trust, and the case is...