Zhou Weidong v Liew Kai Lung and others

• Judge: Audrey Lim JC
• Judgment Date: 27 December 2017
• Neutral Citation: [2017] SGHC 326
• Citation: [2017] SGHC 326
• Defendant Counsel: First, third and fourth defendants in person,Lim Kim Hong (Messrs Kim & Co)
• Published date: 05 January 2018
• Hearing Date: 06 October 2017,12 October 2017,13 October 2017,16 October 2017,05 October 2017,10 October 2017,04 October 2017,03 October 2017,06 November 2017
• Plaintiff Counsel: Eugene Quah Siew Ping and Wong Teck Ming (RHTLaw Taylor Wessing LLP)
• Date: 27 December 2017
• Court: High Court (Singapore)
• Docket Number: Suit No 165 of 2014
• Subject Matter: Remedial Constructive Trusts,Misrepresentation,Fraudulent,Accessory liability,Constructive trusts,Failure of basis,Requisite Mental State,Trusts,Change of position,Restitution,Contract,Unjust enrichment,Quistclose trusts,Ministerial Receipt

Audrey Lim JC: Introduction

The plaintiff (“Zhou”) claimed against the first defendant (“Liew”) for misrepresentation, breach of fiduciary duty, and constructive and resulting trusts pertaining to four investment agreements that Zhou had entered into with the second defendant (“RCL”), of which he did not receive the agreed returns of $6,530,000. The third to fifth defendants are parties to this suit as Zhou claimed that his money for the investments was transferred to the third defendant (“SIPL”) and/or fourth defendant (“Mah”), SIPL’s director and sole shareholder, and then to the fifth defendant (“Gobind”). SIPL and Mah counterclaimed against Zhou, Liew and RCL for sums which were returned to them. Liew was made a bankrupt and was not sanctioned by the Official Assignee to defend the claim. Additionally, judgment in default of appearance was entered against RCL on the four investment agreements by Zhou for $6,530,000 and by SIPL and Mah on their counterclaim for $266,850.68.

Plaintiff’s case

Zhou’s evidence is as follows. Liew incorporated RCL to spearhead investments in China, and was its director.¹ Zhou maintained an investment portfolio with RCL, including four investments (“Four Investments”) which are the subject-matter of this suit.

On 30 June 2011, Zhou entered into an agreement with RCL (“GT Agreement”). Under this agreement, Zhou was to invest $1m through RCL to participate in a loan placement for the development of a residential project in China (“GT Investment”) by a company (“Greentown”). To induce Zhao to enter into the GT Agreement, Liew had represented that: (i) Greentown would finance the residential project through local loan placement(s); (ii) the purpose of the GT Investment was to participate in the loan placement for the development of that project; and (iii) RCL would manage the GT Investment and funds of investors invested in the loan placements.² Liew informed Zhou that his $1m contribution to the GT Investment came from Zhou’s returns on his previous investment under Liew’s care (“Blackgold Investment”) in an entity (“Blackgold”), and that it had been transferred to the account of SIPL, a money remitter.³ Around September 2012, Zhou discovered from Liew that his $1m was not used for the GT Investment.

Next, around 11 August 2011, Zhou entered into a Lending Business Investment Agreement (“LBI Agreement”) with RCL to invest RMB5.2604m (equivalent to $1m) for participating in bridging loan placement companies in China (“LBI Investment”), with RCL as the investment manager. On Brian Dong’s instructions and pursuant to the LBI Agreement, Zhou remitted US$200,000 to Mah’s account and the balance in Renminbi to the account of one Chen Jie in China.⁴ Brian was Liew’s assistant in RCL’s employ.

Lastly, on Liew’s recommendation, Zhou entered into two agreements (“1ST2 Agreement” and “2ST2 Agreement”) with RCL around 19 and 21 December 2011 respectively, to invest $2m on each occasion to participate in bridging loan placements to companies in China (“1ST2 Investment” and “2ST2 Investment”). Again, RCL was the investment manager. Liew informed Zhou that his principal of $2m each, for the 1ST2 and 2ST2 Agreements, came from Zhou’s returns on his previous investments under Liew’s care.⁵

To induce Zhou to enter into the LBI, 1ST2 and 2ST2 Agreements, Liew represented that the purpose of the LBI, 1ST2 and 2ST2 Investments was to provide bridging loans to companies in China and that Chen Jie would be the point of contact for these Investments as she had close connections with Chinese banks. Liew also represented that these Investments were protected and safe investments.⁶ First, the bridging loans would only be provided to companies in Wenzhou, China, that had good credit rating and were existing customers of banks in Wenzhou (“the Borrowing Companies”). Second, Liew would open a bank account to receive the bridging loans and would retain full control over the account. Third, the Borrowing Companies would provide securities to Liew and their management would provide personal guarantees for the bridging loans. RCL would manage these Investments and the funds of investors invested in these Investments.⁷ However, the principal investment sums (totalling $5m) and interests due under the Investments (save for approximately $430,000⁸) were not paid out to Zhou. Zhou subsequently discovered from Liew that his $5m was not applied towards the bridging loan placements pursuant to the LBI, 1ST2 and 2ST2 Investments.⁹

Zhou thus claimed against Liew for misrepresentation, breach of fiduciary duty, constructive trust and resulting trust,¹⁰ seeking the repayment of $6,530,000 for the Four Investments that did not materialise. Zhou also relied on four guarantees (“the Guarantees”) signed by Liew in which he warranted and undertook to repay the principal sums and interest accrued on the four investment agreements (“the Four Agreements”) which RCL had failed to repay Zhou. As against SIPL, Mah and Gobind, Zhou claimed for the repayment of $5,247,689.04 on the basis of dishonest assistance, knowing receipt, unjust enrichment, as well as constructive and resulting trust.¹¹ Additionally, Zhou claimed that all the defendants had conspired to defraud him by unlawful means.

Liew’s testimony

Liew came to know Chen Jie in 2008 or 2009. He set up RCL as its sole shareholder¹² and Chen Jie became RCL’s client. Chen Jie introduced Liew to Mah’s husband, Marino, about one or two years before Liew’s wedding in 2010. Chen Jie informed Liew that Marino was her relative (which Marino denied) and business partner, and that he handled her finances and investments. Marino was a consultant for SIPL, a vehicle to transfer monies used for investments.¹³ Liew and Chen Jie had also used SIPL to transfer monies in and out for investments introduced by RCL to Chen Jie.¹⁴ However Liew did not know Gobind.¹⁵

Liew admitted that Zhou had entered into the Four Agreements with RCL and he had to transfer $6m in total to RCL pursuant to these agreements. At the same time, Liew would enter into corresponding loan contracts with Chen Jie to lend her the amounts that investors had placed with RCL for the purposes of the investments mentioned in the Four Agreements.¹⁶ However, Zhou bypassed RCL and dealt directly with Chen Jie through SIPL, Mah or Brian (who was not RCL’s employee) and transferred the investment monies to SIPL, Mah or Chen Jie. Hence, Zhou had not performed his part of the bargain under the Four Agreements, and was therefore in breach of them.¹⁷

Mah’s, SIPL’s and Gobind’s cases

Mah and SIPL’s case is essentially related by Mah. She had agreed to assist Chen Jie, a friend, to remit monies belonging to Chen Jie’s business investors.¹⁸ On Mah’s request, Gobind agreed to assist with the remittance as he knew a money remitter.¹⁹ Mah had only met Liew once at his wedding, and Brian was the main person who liaised with Marino and who instructed Mah on the money transfers.²⁰ Mah’s role throughout was merely to help Chen Jie remit and transfer money. She had no knowledge of the Four Investments and Agreements nor the dealings between Zhou, Liew and Chen Jie.²¹ Mah claimed that the monies transferred by Zhou and Liew to SIPL and her accounts were subsequently remitted pursuant to Chen Jie’s instructions, and she did not retain the monies for her benefit nor was she paid a commission for her role.²² She had also transferred monies back to Zhou and Liew – in fact, Mah and SIPL’s case is that they had disbursed monies in excess of what they received. The excess monies form the subject of Mah and SIPL’s counterclaim.

As for Gobind, he was the owner of Silk Rose Pte Ltd, whose main business was in financing, including opening letters of credit for customers for a commission.²³ He had arranged for the monies received from Mah or SIPL to be remitted to various recipients in China based on Marino’s instructions.²⁴ Gobind had agreed to assist Mah and Marino as he had connections in China.²⁵ He did not know Zhou and was unaware of Zhou’s business relationship with Liew and RCL.

Preliminary issues

Before considering the respective parties’ claims and defences, I deal first with some preliminary issues.

Zhou and Liew’s relationship with SIPL, Mah and Marino

Despite Mah and Marino’s claim that they had only met Liew once at his wedding, I find that Chen Jie had introduced Liew to Marino before his wedding, and that he had on various occasions communicated with Marino about investments and money transfers of investment monies. Liew would not have invited Marino and Mah to his wedding if he did not already know them.²⁶ Mah had in an earlier affidavit admitted that Marino and she were “good friends” with Liew.²⁷ I also find that Zhou first came to know Mah at Liew’s wedding. I accept that Liew had informed Zhou that Mah and SIPL were involved in assisting investors and Zhou had assumed that Mah and SIPL were to help transfer investment monies.²⁸ However, there was no evidence that Zhou knew Mah or Marino well or that he had direct business dealings with them.

Brian Dong

Contrary to Liew’s assertion that Brian was Chen Jie’s employee,²⁹ I find that Brian was RCL’s employee who acted on Liew’s and RCL’s authority in dealing with RCL’s clients including Zhou. Brian had given the impression that he was Liew's assistant and that he was acting for RCL, which Liew did not object to.³⁰ Brian used RCL’s e-mail address and its logo in his e-mails.³¹ Liew claimed that he had permitted Brian to do so as Brian, in his capacity as Chen Jie’s employee, needed a proxy company to send e-mails to his own clients.³² I find this unbelievable – if that was so, Brian could have used Chen Jie’s company’s e-mail address, or his personal e-mail, which Liew knew of.³³ Brian had even drafted the Four Agreements for RCL.³⁴ Numerous correspondences (to which Liew was copied) showed that Brian was acting as RCL’s employee....