SKANDINAVISKA ENSKILDA BANKEN AB (PUBL), SINGAPORE BRANCH V ASIA PACIFIC BREWERIES (SINGAPORE) PTE LTD

[2009] SGHC 197, High Court, Singapore, Belinda Ang Saw Ean J, 31 Aug 2009

Agency - Banking - Fraud - Loans taken by finance manager purportedly on behalf of employer - Banks seeking return of monies - Employee's actual and ostensible authority - Restitution - Unjust enrichment

A gambler, Chia, had financed his habit for four years by obtaining credit and loan facilities with the claimant banks (SEB and HVB) as well as two other banks on behalf of the defendant, his employer (APBS). He had been sentenced to imprisonment for the fraud. This was the banks' claim against APBS. The grounds for the claims were that: (a) Chia had actual or ostensible authority to enter into the various credit and loan facilities on behalf of APBS, and APBS was contractually liable to repay the outstanding loans and interest; (b) damages on the basis that APBS as Chia's employer was vicariously liable for his fraud; and (c) damages in tort for negligence against APBS (HVB only). SEB had an alternative claim against APBS in restitution. APBS denied liability in respect of all the claims and brought a counterclaim in restitution, for knowing receipt and dishonest assistance against SEB.Belinda Ang Saw Ean J dismissed most of the claims, allowing SEB's claim in part. Regarding the claims in contract, the banks themselves required board resolutions to cover their facilities and imposed the requirement as a condition precedent. It was therefore not an argument open to the banks that Chia had general authority under the position description for "Finance manager" or the Group Treasury Policy, two internal documents relied on by the banks, to enter into the facilities and bind APBS. Chia's actual authority (express or implied), if any, was impliedly subject to a condition that it was to be exercised honestly and on behalf of the principal. Acting fraudulently or in furtherance of own interests would by its very nature nullify actual authority. The banks had failed to show what exactly Chia was asked to do, and in fact did, and whether his employer acquiesced in what he did. Each specific duty relied upon by the banks to support the conclusion that Chia was authorised to bind his employer were factually and legally unsustainable. As for ostensible authority, a principal may in appropriate circumstances be bound by the fraudulent acts of his agent where there is evidence of ostensible authority. It was clear on the evidence that the banks only dealt with one senior employee of APBS, and that was Chia. On the evidence, no authorised person in APBS held out Chia as having authority to enter into and execute the SEB Facilities and HVB Facility. APBS was not estopped from denying the forgery. As to representation, the banks could and should have taken steps to verify the identity and signature of the corporate officers certifying as true the copy of the relevant minutes that recorded the resolution passed in order to safeguard the banks' own interests. The act of deceit which was the false representation was not practised in the course of Chia's employment. Accordingly, the banks' case on vicarious liability failed for the same reasons as the agency claim based on ostensible authority. The judge also dismissed HVB's claim in tort, based on an argument that a statutory requirement imposed a common law duty of care to implement and maintain an adequate and reasonable system of supervision. Even if there was such a duty of care, HVB did not fall within the limited class intended to be protected. For a prima facie duty of care to arise in relation to negligent misstatement, it was necessary to show a special relationship between the parties so as to demonstrate proximity. There was no assumption of responsibility towards HVB on the part of APSB's system of internal control and supervision of Chia. There had been no voluntary assumption of responsibility by APBS to ground a finding of sufficient proximity. SEB's claim in restitution failed as APBS was not unjustly enriched at the expense of SEB. In respect of the monies transferred to the OCBC Account to give the appearance of interest on deposit when in fact there was no such deposit, the ground of total failure of consideration was made out. However, APBS did not have a valid change of position defence in respect those monies. Accordingly, SEB was entitled to judgment in the sum of US$347,671.23 together with interest thereon.