Case Summaries

Esben Finance Ltd and others v Wong Hou-Lianq Neil (Case Summary)

Decision of the Singapore International Commercial Court (delivered by Henry Bernard Eder IJ):

Outcome: The Singapore International Commercial Court dismisses the plaintiffs’ claims in unjust enrichment, dishonest assistance, knowing receipt and unlawful means conspiracy .

Background facts

1 Wong Kie Nai (“WKN”), Wong Kie Chie (“WKC”), and Wong Kie Yik (“WKY”) were the sons of the founder of the WTK Group of companies. The plaintiffs’ case was that WKN had handled the day to day management of a number of companies, including the plaintiffs, until his death in March 2013. According to the plaintiffs, following WKN’s death, WKY and WKC discovered that 50 separate payments had been made from the plaintiffs’ various bank accounts to the defendant on the instructions of WKN between January 2001 and November 2012 (“the 50 Payments”). These payments amounted in total to US$20,278,565.41 and S$4,473,100.52. Notably, 25 of the 50 telegraphic transfer forms authorising the 50 Payments bore WKY’s initials or signature, either on its own or together with WKN’s signature.

2 The plaintiffs asserted that WKY and WKC were unaware of the 50 Payments to the defendant, that the defendant did not provide any consideration to the plaintiffs for those payments, that the plaintiffs did not receive any benefit from the defendant for those payments, and that the payments had not been in the plaintiffs’ interests. On 20 November 2017, the plaintiffs commenced the present suit, bringing claims in (a) unjust enrichment; (b) dishonest assistance; (c) knowing receipt; and (d) unlawful means conspiracy.

3 The defendant admitted that he had received all 50 payments, but denied any wrongdoing either on his part or on the part of WKN, who was his father. He thus denied any liability to the plaintiffs. Further, the defendant’s case was that both WKY and WKC had actual knowledge, or ought to have known of most, if not all, of the 50 Payments when they were made. The defendant’s position was that the claims were time-barred and/or barred by the doctrine of laches and/or the doctrine of acquiescence. Alternatively, the defendant’s case was that the plaintiffs failed to satisfy the legal burden of proof, particularly as, on the plaintiffs’ own case, all of its witnesses had absolutely no involvement in the plaintiffs’ business prior to March 2013, and that they therefore had no knowledge as to the purpose of the 50 Payments. The defendant also claimed that the 50 Payments comprised of:

  1. 36 payments made on behalf of the WTK Group for goods and/or services which were provided by companies controlled by the defendant and his mother (“the 36 payments”);
  2. three payments were directors’ fees and/or shareholder dividends for the defendant’s directorships and shareholding within the WTK Group or in the alternative were gifts made by WKN (“the three payments”); and
  3. 11 payments which were gifts from WKN to the defendant, the defendant’s mother, or his sister (“the 11 payments”).

4 The defendant did not give evidence at trial despite there being no suggestion that the defendant was unfit or otherwise unable to attend the trial and give evidence. It was undisputed that his non-attendance was the result of his own deliberate decision. The plaintiffs therefore argued that the court should draw the adverse inference that the defendant had been lying about the reasons for his receipt of the payments and that the 50 Payments were not made for the reasons asserted by the defendant. The plaintiffs also contended that, with regard to the 36 payments, even if the defendant could make out on his case that such payments were made to him for the reasons he asserted, these would not afford him a defence because such defence is premised on an arrangement that involved illegal acts under Malaysian law, which the court would not recognise.

 

The Court’s decision

Time-bar: in determining whether the plaintiffs’ claims were time-barred or if the limitation period had been postponed by virtue of s 29(1) of the Limitation Act (Cap 163, 1996 Rev Ed) and on the assumption that there had been a relevant fraud, the primary question was whether WKY could with reasonable diligence have discovered the fraud (at [108] and [110]). This was ultimately a factual issue to be determined in the light of Singapore law and not any rights or obligations WKY or WKC might have had under BVI law or Liberian law (at [115]). On the assumption that the 50 Payments were made fraudulently, the plaintiffs had not discharged the burden on them to show that WKY could not with reasonable diligence have discovered the alleged fraud prior to March 2011. Even after March 2011, when WKN went to Australia, WKY did not avail himself of the opportunity of looking at the plaintiffs’ records even though he claimed he was keen to know about the plaintiffs’ business. The evidence also showed that WKY was involved to some extent at least in the business operations of the relevant companies and could with reasonable diligence have accessed the plaintiffs’ bank statements and other documents, and, if he had done so, discovered the 50 Payments to the defendant (at [123]). In the absence of any clear authority to the contrary, the plaintiffs’ submission that the time-bar defence must fail if and to the extent that WKY was not put on inquiry of a possible fraud prior to April 2013 was not accepted (at [126]). In any event, WKN’s conduct would have been sufficient to put WKY on inquiry and arouse at least some suspicion on the part of WKY to satisfy any precondition that might exist for the purposes of s 29 of the Limitation Act (at [127]). As such, all of the plaintiffs’ claims were time-barred apart from the claim in respect of Payment No 50 (at [128]).

Unjust enrichment: it was undisputed that WKN caused the plaintiffs to make the payments to the defendant personally. The main questions were (a) whether the payments were bona fide in the plaintiffs’ interests and/or (b) whether the other directors/shareholders consented to them (at [137]). The legal burden was on the plaintiffs to show that the payments were not bona fide in the interests of the plaintiffs, and, as they had done so on a prima facie standard, the evidential burden shifted to the defendant to provide a satisfactory explanation as to why they were not “unjust”, in particular, why it would be wrong to conclude that they were not in the plaintiffs’ interests or otherwise illegitimate (at [140] and [141]).

  1. There was insufficient evidence to support the defendant’s case that the 11 payments were gifts by WKN derived from monies which WKN was entitled to receive as directors’ fees or dividends (at [148]). The fact WKY signed eight of the TT forms did not assist the defendant in discharging the evidential burden on him as the court was unable to reach a conclusion as to whether or not, when he signed the forms, they were blank, or if WKY was in fact aware of the payments to the defendant (at [149]). It was appropriate to draw an adverse inference that the 11 payments were not made as gifts from monies which WKN was entitled to receive by way of directors’ fees or as shareholder dividends (at [150]). But for the time-bar, the plaintiffs would have been entitled to recover these payments from the defendant (at [151]).
  2. On the three payments, to the extent the defendant pleaded they might have been gifts, this had not been established (at [153]). On the defendant’s case that the three payments comprised his entitlement to directors’ fees and/or shareholder dividends, the defendant had not satisfied the evidential burden on him to explain satisfactorily the legitimacy of these payments, and, in the absence of the time-bar, the plaintiffs would have been entitled to recover these payments (at [160], [166] and [171]).
  3. In respect of the 36 payments, there was ample cogent evidence in support of the defendant’s case, which was compelling and outweighed any adverse inference that might be drawn against the defendant (at [179], [186] and [192]). Even in the absence of the time-bar, the plaintiffs would not be entitled to recover these payments subject only to the issue of illegality (at [180], [187] and [193]).

Dishonest assistance: The legal and evidential burden of proof in respect of this cause of action lay on the plaintiffs (at [196]). WKN owed fiduciary duties to the plaintiffs but the evidence did not show that the 50 Payments were not in the plaintiffs’ interests, that the defendant assisted WKN’s breach of his fiduciary duties, still less that such assistance was dishonest (at [197]).

Knowing receipt: the legal and evidential burden of proving the elements of knowing receipt rested on the plaintiffs. They had not established even a prima facie case against the defendant for knowing receipt, and, even in the absence of the time-bar, the claims would have been rejected (at [203]).

Conspiracy to injure by unlawful means: the legal and evidential burden of proving the elements of an unlawful means conspiracy rested on the plaintiffs. They had not established even a prima facie case against the defendant, and, even in the absence of the time-bar, the claims would have been rejected (at [205]).

10 Illegality: the illegality issue was relevant only to one payment, ie, Payment No 50 (or, if not for the time-bar, to the 36 payments). The plaintiffs’ case was that if the court accepted that the 36 payments had been made pursuant to a split fee arrangement between WKN and the defendant and/or the defendant’s companies, that was illegal and/or involved illegal acts and/or a conspiracy to evade taxes under Malaysian law, and the defendant could not rely on such an arrangement as a defence (at [207] and [208]). The evidence showed that the defendant and his mother both fully understood all along the implications of the arrangement, which was intended to deliberately evade tax in Malaysia, an unlawful act (at [214] and [217]). However, while the plaintiffs relied on principles they referred to as the Foster v Driscoll principle, the Ralli Bros principle, and the principle that a man cannot rely on or profit from his own doing, these did not assist the plaintiffs in the present case (at [233], [236], [238] and [239]).

11 The plaintiffs’ claims were therefore dismissed in full.

This summary is provided to assist in the understanding of the Court’s grounds of decision. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s grounds of decision.