Perry, Tamar and another v Esculier, Bonnet Servane Michele Thais and another [2022] SGHC(I) 10

Introduction and background

Both the Plaintiffs and Defendants were investors in funds administered by a group of companies trading under various names, each comprising as its principal denominator the word “Lexinta”. The activities of each of these companies were directed by a Spanish citizen resident in Switzerland, Bismark Badilla (“Badilla”). Whilst it will be necessary to consider the roles played by a number of these companies individually, where it is not necessary to draw any distinction between the individual Lexinta companies I shall refer to them compendiously as “Lexinta”.

The Defendants were relatively early investors, their initial investment being made in April 2014. In late 2015, they expressed a desire to realise the reported accumulated assets of their investment and it was agreed that this would be done in April 2016. Payment was not then forthcoming, but, following demands made on the Defendants’ behalf – over a period of months between August 2016 and February 2017 – sums amounting to around US$10 million were credited to the Defendants’ bank account with DBS Bank Ltd (“DBS”) in Singapore (the “Disputed Monies”).

Between April 2016 and August 2017, the Plaintiffs, or persons from whom the Plaintiffs claim to derive title, deposited in excess of US$24 million with Lexinta (the “Plaintiffs’ Fund”) and contend that instead of investing that fund as agreed, Lexinta dissipated it directly to earlier investors including the Defendants as part of a Ponzi scheme.

In March 2018, the first Plaintiff, Ms Tamar Perry (“TP”), and another person, Mr Yachel Baker (“YB”), obtained ex parte discovery orders from the Hong Kong courts against DBS for the banking records of the Lexinta group claiming to have been victims of a fraudulent Ponzi scheme. This order resulted in TP becoming aware that the Disputed Monies had been transferred into the Defendants’ DBS bank account.

The Plaintiffs assert that those transfers were the result of back-to-back transfers of some of the Plaintiffs’ Fund such that, in law, those sums belong to the Plaintiffs and not the Defendants. Accordingly, in May 2018, TP’s lawyers in Hong Kong demanded that DBS transfer the Disputed Monies to her. As a result, at some date thereafter, DBS froze the Defendants’ bank account.

It was not, however, until March 2019 that the Defendants became aware that the funds in their DBS account had been frozen and that TP had demanded that the sums involved be transferred to her. Discussions between the parties then ensued which failed to result in agreement as to the ownership of the Disputed Monies.

Faced with the conflicting claims, DBS availed itself of the Interpleader proceedings provided for by Order 17 of the Rules of Court (Cap 332, R 5, 2014 Rev Ed).

Interpleader proceedings have to be commenced by an Originating Summons and DBS did this in the Singapore High Court on 8 August 2020. This was HC/OS 1016/2019 (“OS 1016”) and it named the first Defendant in this suit, Mrs Bonnet Esculier Servane Michele Thais (“BE”), TP and YB as the first, second and third defendants respectively.

OS 1016 first came on for hearing before Dedar Singh Gill JC (as he then was) on 10 January 2020. YB renounced any claim to the Disputed Monies and therefore played no further part in the proceedings. Paragraph 2 of Gill JC’s order (HC/ORC 1066/2020, the “Order”) made pursuant to O 17 r 5(1)(b) provided:

Following certain procedural complications, at a further hearing on 17 March 2020 leave was given for the second Defendant in this suit, Mr Jacques Esculier (“JE”), to be joined as the fourth defendant in OS 1016 and for the second Plaintiff in this suit, Solid Fund Private Foundation (“SFPF”), to be joined as the fifth defendant in OS 1016.

The “Further Proceedings” were therefore commenced in the High Court on 19 March 2020 (HC/S 259/2020) naming TP as Plaintiff and BE and JE as Defendants. On 20 March 2020, the Writ of Summons and Statement of Claim were amended to include SFPF as the second Plaintiff.

On 9 June 2020, the High Court proceedings were transferred to the Singapore International Commercial Court and the suit was re-designated SIC/S 4/2020.

Once the claims in this action are resolved, OS 1016 will be restored under the liberty to apply provision so that DBS can be directed to pay the Disputed Monies to the successful party and any consequential orders can be made.

The Lexinta companies

In the Statement of Claim, five Lexinta Companies are identified:

(a) Lexinta AG (“LAG”), a Swiss company formerly registered in Zug but re-registered in Zurich on 15 September 2015;

(b) Lexinta Group Limited (“LGL”), a company registered in Hong Kong;

(c) Lexinta Limited (“LL”), a company registered in Hong Kong;

(d) Lexinta Management Limited (“LML”), a company registered in Hong Kong; and

(e) Lexinta Inc (“L Inc”), a company registered in the Seychelles.

Particular attention needs to be paid to LGL as the expression “Lexinta Group” is also used in the contemporaneous documents and by witnesses as well as counsel during the trial to refer to the group of companies as a whole (which, as stated at [1] above, I have designated “Lexinta”). The distinction between the two raises important issues in the case and it is therefore necessary to ensure that confusion between LGL, the Hong Kong company, and Lexinta, the group of companies, is avoided.

The Defendants and their dealings with Lexinta

The Defendants’ backgrounds

BE is a French national currently living in Switzerland. She qualified as a lawyer in the early 1990s. During her career she worked for the New York international law firm, Coudert Brothers LLP, and was a partner for some eight years acting on mergers and acquisitions. She then became general counsel to the Murex group, a leading global fintech company, where her main focus was on intellectual property. She retired four or five years ago.

JE is also a French national currently living in Switzerland. He has enjoyed a successful career in business. Between 2007 and 2020 he was the Chief Executive Officer (“CEO”) of WABCO Holdings Inc (“WABCO”), a US company, which is a market leader in advanced technologies for commercial vehicles. In addition, he was Chairman of the Board from 2009 until 2020. WABCO was, until it was taken over in 2020, listed on the New York Stock Exchange.

In the late 1990s, the Esculiers were based in Singapore and therefore opened bank accounts with DBS. Three are relevant to these proceedings:

(a) A multicurrency savings account in BE’s name;

(b) A foreign currency account in their joint names; and

(c) A foreign currency deposit account in their joint names.

In 2014, the Esculiers were both approaching retirement. They considered that they had not been enjoying sufficiently significant financial returns on their savings and decided to pursue more active options to grow them. In consequence, BE was introduced to Badilla in early 2014. Since her husband was fully occupied in his job, the primary dealings were between Badilla and BE.

Assessment of the Defendants’ oral evidence

Both the Defendants came to Singapore to give evidence in person, having complied with the necessary COVID protocols. Unfortunately, the night before the trial was due to start BE tested positive for COVID and was therefore unable to attend court in person, but was able to join via a video-link from her hotel whilst in isolation. Since it made no sense for JE to give evidence before BE as she was the principal witness and since, entirely understandably, both parties wished that her evidence should be given in person and not by video-link, some adjournments were necessary to make this possible. By the time that she was able to give oral evidence, JE had himself contracted the virus and the parties agreed that he should give his evidence by video-link from his hotel room, which he did.

The cross-examination of BE by Mr Chaisty QC (“Mr Chaisty”) was lengthy, robust but fair, very detailed and focused closely on the minutiae of the text of various documents which I shall have to consider in more detail below. During the course of this process, BE was courteous, patient, measured and precise. She had a good recollection of events and was clear in rejecting certain propositions put to her by Mr Chaisty. It is not surprising – both due to the nature of the cross-examination and to the fact that she was still recovering from her illness – that on occasions BE became somewhat emotional. Overall, I consider her to have been a good witness and that significant weight should be attached to her evidence.

The cross-examination of JE was shorter but of a similar nature. JE came over as a man of presence with a dominant personality. He had a less good recollection of contemporaneous events as he was not involved on a day-to-day basis and therefore relied, to a great extent, on the documents as being a record of those events. He demonstrated a clear, logical and measured business-like approach to the giving of evidence. Overall, he was an impressive witness and weight can therefore be attached to his evidence.

In the Plaintiffs’ written closing submissions, it is submitted that neither witness “approached the giving of evidence in a simple and straightforward manner which was open and clear and designed to assist the court. Each in their own way gave answers clearly designed to advance their own agenda of ensuring that no concessions were made however reasonable it would have been to do so”.

As a matter of generality, I have no hesitation in rejecting this submission. I shall deal with specific criticisms of their evidence in the appropriate place.

Introduction to Badilla and Lexinta, and the Defendants’ signing of the Asset Management Agreement

This matter is dealt with in paragraphs 22–33 of BE’s affidavit of evidence-in-chief (“AEIC”) and in paragraphs 14–16 of JE’s AEIC. It was amplified upon in cross-examination. In early 2014, BE was introduced to Badilla by two acquaintances, Mrs Lindsatom and Mr Benhamoud, both of whom were investors with Lexinta. Both expressed satisfaction with the service they had been given particularly with regard to the care and attention that they had received personally from Badilla. The Esculiers therefore met with Badilla in Spain where he explained his investment strategy. Paragraph 25 of BE’s AEIC reads as follows:

The Lexinta initial public offering (“IPO”) strategy, as explained both to the Esculiers and to TP, involved Badilla taking advantage of his contacts with financial institutions who had confidence in him so that he could support those institutions by undertaking to invest in “IPOs” at the outset. He did this when he considered that there would be an initial demand for the stock in question so that the price would rise immediately after launch. Lexinta would take advantage of this early rise by selling the holding in the open market for a profit.

As a result of viewing the webpage, BE understood that Lexinta (referred to by her as the Lexinta Group) was regulated by the Swiss Financial Market Supervisory Authority (“FINMA”). Badilla also supplied her with peripherals which described the services offered by Lexinta as well as a pricing strategy so that they could familiarise themselves with Lexinta and the nature of its business. Badilla then supplied BE with a draft Asset Management Agreement which she considered and proposed certain amendments.

Following further discussions between BE and Badilla, the final Asset Management Agreement (the “Esculier AMA”) was signed between the parties on 15 April 2014. Since a good deal turns on the form of this agreement a copy is attached as Annex 1 to this Judgment. As will be seen, it is headed “Lexinta Group” but then goes on to define Lexinta Group as “Lexinta Ltd, Lexinta Management Ltd and Lexinta Inc” when identifying the Asset Manager. Express mention is therefore made of LL, LML and L Inc but not of LAG or LGL (see [15] above). On the signature page, however, following Badilla’s signature on behalf of the “Asset Manager-Trader”, is the corporate stamp of LAG.

In relation to the identification of the various companies in Lexinta referred to in the Esculier AMA, BE said this in paragraph 33 of her AEIC:

BE was cross-examined on this paragraph on the basis that, as a lawyer, she would have focussed on the precise companies identified as being the parties to the agreement and, thus, would have been alert to the fact that LAG was not a party and, further, that any other company within Lexinta – of which the Esculiers subsequently became aware – would likewise not be a party to the agreement. When asked whether she took a “relaxed” position as to which of the Lexinta companies she and JE thought were their counterparties under the Esculier AMA, BE answered:

I accept this evidence. It was not suggested to BE that Badilla drew her attention to the activities which were to be undertaken by each individual Lexinta company, nor that there were other companies in the Lexinta group that had not been identified but which might be involved in the overall management of the Esculiers’ affairs. More specifically, there was no suggestion – nor any reason to believe – that BE’s attention had been drawn, at any time before the Esculiers asked to have the proceeds of their investment returned to them, to the fact that, although each page of the agreement carried the heading in bold capitals “LEXINTA GROUP”, there was a company within Lexinta called “Lexinta Group Limited” (ie, LGL) which was not a party to the Esculier AMA.

Section 8 of the Esculier AMA records that:

The term “BANK” is defined in Section 4 as “the bank where the ASSETS are or may be held”, over which the “ASSET MANAGER” is authorised “[g]ive all necessary or useful instructions”. Taken literally, this would appear to suggest that there would be a bank account opened at a third-party bank, such as the Hang Seng Bank (see [37] below), and that sums would be withdrawn from that account for investment purposes. It also follows that any proceeds earned would then be deposited back into that account. BE however gave evidence that this was not the parties’ understanding. When cross-examined on Section 8, BE said this:

BE thus understood that their investments were not to be ring-fenced in the sense of being held in a separate bank account but that they would be held in a Lexinta bank account with Lexinta itself creating individual sub-accounts for each client being, in effect, a record of each transaction effected on that client’s behalf.

Section 9 of the Esculier AMA provides that the agreement is valid for 12 months but neither party suggested that it was not extended by consent after the end of the first year until terminated by the Esculiers as of December 2015 (see [47] below). Section 10 contains the cancellation provisions and Section 11 designates Swiss law as the proper law of the agreement.

The investments

BE had been provided on 11 April 2014 with the necessary details for transferring money to Lexinta as follows:

It will be seen that this document contains the same heading, address and contact details as was on the Esculier AMA (compare Annex 1 below) with LL being identified as the account holder at Hang Seng Bank in Hong Kong. BE then gave instructions to Credit Suisse in Switzerland to transfer US$1,000,000 from hers and JE’s joint account to Hang Seng Bank to be invested in IPO securities. This was done on 16 April 2014. The transfer was acknowledged by a letter dated 8 May 2014 which forms Annex 2 to this Judgment. As can be seen from the letter, notwithstanding the fact that the payment had been made to LL, the subject title reads “Lexinta Group Ltd – 1 million USD transfer acc Bonnet Esculier”. It confirms that the transfer is “in accordance with our agreement”, is signed by Badilla and LAG’s name and address are in the letter’s footer, not that of LL.

BE gave evidence in relation to this receipt in her AEIC, where she stated that whilst she could not recall whether she noticed at the time the reference to LGL, had she done so she would have simply treated it “as another one of the “Lexinta” named entities used by Badilla/the Lexinta Group in its dealings with us”. Again, for the reasons already given, I accept this evidence.

A further investment of €2,000,000 from the Credit Suisse account was made to the LL account at Hang Seng Bank on 4 June 2014 and was acknowledged with a letter in similar form on 1 July 2014. On this occasion, the heading read “Lexinta Group Ltd - 2 Million EURO transfer acc 1738-697553 Bonnet Esculier”. Again, this was to be invested in IPO securities.

On 9 February 2015, BE ordered a transfer of €1,000,000 from her DBS account in Singapore to LL’s Hang Seng account. The acknowledgment letter dated 2 March 2015 was again in similar form but the heading read “Lexinta Group Ltd – 1 Million EURO transfer acc 1738-379855 Bonnet Esculier”. This was also to be invested in IPO securities.

The final investment was made on 26 February 2015 when BE transferred €1,000,000 from her DBS account in Singapore to LL’s Hang Seng account. This investment was to be invested in the “Lexinta Single Opportunity Fund”. The acknowledgment letter dated 2 March 2015 was in similar form and the heading again read “Lexinta Group Ltd – 1 Million EURO transfer acc 1738-379855 Bonnet Esculier”.

The Lexinta Single Opportunity Fund was, according to a press release on a website TraderL.com, launched on 25 January 2015 and was designed to capitalise on the volatility in oil stocks.

The Esculiers’ knowledge of Lexinta’s trading activity

BE provides details of the manner in which their investments were managed by Lexinta in paragraphs 50–55 of her AEIC, which I reproduce below, without the footnote references to the individual documents:

In cross-examination, BE gave evidence that she met with Badilla every couple of weeks or so when he would give her the receipts for the trades that had been carried out. She also amplified on the information that was provided to her prior to making the investment in the Single Opportunity Fund. There was no specific challenge to the accuracy of the trading receipts in the sense that publicly available documents would demonstrate that, on the dates in question, the market in a given share did not move as indicated in the trading receipts. The trading reports referred to in paragraph 52 of BE’s AEIC (as reproduced above) are thus consistent with a thriving business.

I therefore accept BE’s evidence at paragraph 54 of her AEIC that she and her husband were satisfied that Badilla was able “to astutely invest our funds, thereby reaping positive returns”.

It should be noted that it was not suggested in this case that, whilst they were investors in Lexinta, the Esculiers knew or had any reason to suspect that Badilla was operating anything other than a wholly legitimate and successful business. Such an allegation was made in the Hong Kong proceedings which led to OS 1016 and this suit as is explained in paragraphs 139–146 of BE’s AEIC. It was withdrawn following evidence filed by BE on OS 1016.

Withdrawal of the Esculiers’ investments

In the autumn of 2015, it was anticipated by the Esculiers that WABCO would be sold and JE was planning to stop work. So they decided that the time was right to invest their funds more conservatively and to terminate the Esculier AMA. It bears noting that the sale ultimately fell through at the last moment and JE continued work as the CEO of WABCO. However, before then, the Esculiers had already given Badilla notice that they intended to terminate the Esculier AMA at the end of December 2015, but subsequently agreed with Badilla that termination would occur at the end of the second year of investment, April 2016.

The portfolio valuations are those referred to in paragraph 53(b) of BE’s AEIC (see [43] above). The last of these valuations, as at 31 December 2015, were as follows:

(a) As regards the IPO investments made in respect of BE and JE jointly (“Joint IPO Investments”), US$8,068,333;

(b) As regards the IPO investments made in respect only of BE, €1,578,514 (“BE’s IPO Investments”); and

(c) As regards BE’s investment in the Lexinta Single Opportunity Fund (“BE’s Single Opportunity Fund Investment”), US$1,300,125.

However, these sums did not take into account commission due to Lexinta.

The Esculiers experienced difficulties in obtaining repayment of their funds, the details of which I shall have to consider below. For present purposes, it is sufficient to record that they were repaid in three tranches:

(a) In respect of the Joint IPO Investments, US$7,439,004.77 on 5 August 2016;

(b) In respect of BE’s IPO Investments, US$1,499,488 on 12 September 2016 and €164,841.26 on 28 September 2016 (the first payment was paid in US dollars rather than in Euros and the second represented the shortfall); and

(c) In respect of BE’s Single Opportunity Fund Investment, US$1,302,250.92 on 1 February 2017 (this sum included US$2,125.94 owing to a miscalculation of the prior payments above).

These sums were, however, not paid out of LL’s account at Hang Seng Bank, but from LGL’s account at DBS in Hong Kong. They were credited to BE’s DBS account in Singapore and were subsequently placed on a time deposit maturing on 31 August 2017 which was then rolled over until the account was frozen by DBS in March 2019.

The Plaintiffs and their dealings with Lexinta

The first Plaintiff’s background and the Plaintiffs’ witnesses

TP is a dual citizen, holding both Israeli and Polish passports. She is resident in both London and Tel Aviv. She is a qualified, non-practicing, lawyer who is a businesswoman focusing on the real estate and technology sectors and a private investor. She is the sole shareholder and director of an Israeli company, Solid Real Estate and Development (1993) Limited (“SRE”).

Evidence was given on behalf of the Plaintiffs both by TP and by Marc Van Campen (“Van Campen”), a Dutch citizen, who is a partner in the law firm Van Campen Liem which acts for SFPF, the second Plaintiff, a company registered in Curacao. Van Campen has been involved in the affairs of TP’s family since 2006. He gave evidence directed to the relationship between SFPF and British Guarantee National Investment Company (“BGNIC”), an investment vehicle of TP’s family.

Assessment of the first Plaintiff’s oral evidence

TP was cross-examined on her written evidence by Ms Aurill Kam (“Ms Kam”). In the Defendants’ written closing submissions, criticism was made of the manner in which TP gave her evidence saying that she was “an uncooperative witness, refusing to answer simple questions which went to the heart of her case when she sensed that she was on dangerous territory”. I consider this an over-exaggeration. In most respects I consider that TP was seeking to assist the Court so far as she was able. However, she has been involved in this and other litigation in relation to the investments made by her and her family’s investment vehicles for a number of years, and her recollection of events was not wholly clear. In these circumstances, the contemporaneous documents provide the best record of events and I accept that where there are no contemporaneous documents, the Court should proceed with caution when assessing the weight to be attached to her evidence. I shall deal with specific areas of criticism as they arise.

Introduction to and agreements with Badilla and Lexinta

The manner in which TP came to be involved with Badilla and Lexinta is explained by TP in paragraphs 7–29 of her AEIC. It is convenient to set this passage out in full:

As with BE, it can be seen that TP exercised due diligence before investing in Lexinta and was given equivalent information in early 2016 to that which was given to BE in early 2014.

When TP first decided to invest through Lexinta, she signed an Asset Management Agreement between SRE and “Lexinta Group” dated 18 April 2016 (the “SRE AMA”). This forms Annex 3 to this judgment. As can be seen, it is in similar form to the Esculier AMA with the “Lexinta Group” defined as including LL, LML and L Inc, but not LGL or LAG. In Section 9, the SRE AMA is expressed to be valid for 90 days rather than a full year in the case of the Esculier AMA. BGNIC also entered a similar AMA on 7 July 2016 (the “BGNIC AMA”).

TP did subsequently enter a further AMA with Lexinta, but this was not until 30 June 2017, which was after the events which gave rise to this action and both parties agreed that it was of no relevance. The only extant agreements were the SRE AMA and the BGNIC AMA referred to above.

As appears from paragraph 13 of TP’s AEIC, she states that she made an initial investment of US$1,000,000 in the IPO program in April 2016, transferring the funds not to LL at the Hang Seng Bank, as had been the case with the Esculiers, but to the account held by LGL with DBS in Hong Kong. It is this distinction that underlies the basis of the Plaintiffs’ claim in this suit.

In paragraph 42 of her AEIC, TP then states that the following sums were transferred by her or for her benefit to the LGL account:

The date of 6 September 2016 for the transfer of US$3,620,750 appears to be incorrect and should read 9 September 2016. Paragraph 34 of TP’s AEIC indicates that these sums in this transfer were remitted by JL Securities (“JL”) “for [her] personal benefit and for the credit of my personal account … with Lexinta”. It is this particular transfer that forms the basis of TP’s claim in this action (the “JL Transfer”). There is a dispute between the parties as to whether these sums were remitted for her personal benefit and, hence, whether she had standing to act as a plaintiff in this regard. This is an issue which I shall return to at [186] below.

In paragraphs 7, 8 and 10 of his AEIC, Van Campen states that BGNIC remitted the following sums to the LGL account:

(a) 11 July 2016: US$3 million;

(b) 5 August 2016: US$7 million; and

(c) 1 February 2017: US$8 million.

Van Campen goes on in paragraphs 13–21 of his AEIC to explain his understanding that certain assets of BGNIC, including its right and interest in the sums transferred to the LGL account referred to above, were acquired by SFPF by virtue of a sale and purchase agreement dated 25 September 2017 (the “BGNIC SPA”). Whilst a number of uncertainties surrounding this transaction were raised during the cross-examination of Van Campen, the Defendants do not dispute that the BGNIC SPA was executed and that, subsequently, on 17 November 2017, the sum of US$23,207,566 was paid by SFPF to BGNIC. This was the sum referred to in clause 2.1 of the BGNIC SPA. There is thus no need to consider this transaction any further.

During her oral evidence TP laid great emphasis on the fact that all the above sums were transferred to LGL and was careful to use the expression “Lexinta Group Limited” as is illustrated from the following extract :

As indicated by Ms Kam, the emphatic reference to LGL was not made in TP’s AEIC, where she was content to refer to Lexinta, which she defined as being “the business trading as Lexinta Group, as it was represented to me”. Indeed, TP further stated in paragraph 15 (see [54] above), that she did not know anything specific about Lexinta Group’s internal structure, or the legal entities involved.

In giving her oral evidence in the way she did, I consider that TP was overemphasising the importance of the corporate identity of LGL, well knowing by the time she went into the witness box of the importance to her case of the fact that LGL was not a company referred to as being one of the companies defined as being part of the Lexinta Group in the SRE or BGNIC AMAs. TP does not suggest that this distinction was drawn to her attention by Badilla or by the advisors she consulted when entering the SRE AMA or at any time during the course of her relationship with Lexinta. She also does not suggest that she herself was aware of the distinction at the relevant time.

I prefer her evidence given in paragraph 15 of her AEIC that “she did not know anything specific about Lexinta Group’s internal structure, or the legal entities involved” (see [54] above). Like the Esculiers, TP proceeded, in my judgment, on the basis that LGL was just another company within the Lexinta group of companies, all of which were acting pursuant to and subject to the terms of the asset management agreement which she had signed to regulate her dealings with that group of companies.

In paragraph 41 of her AEIC, TP draws attention to the fact that when the JL Transfer was made (and indeed, when all the other transfers referred to in [58]–[60] above were made) there was no AMA in existence between her (TP, as an individual) and Lexinta. In her AEIC, TP does not refer to the SRE AMA, but in cross-examination, she accepted that she had signed the SRE AMA and that her understanding was that all these payments were paid pursuant to the SRE AMA. On the facts, this is, I believe, an inevitable conclusion. People do not transfer money to investment houses for investment purposes without some form of asset management agreement being signed to regulate their relationship. In my judgment, TP was working on the basis that the SRE AMA was regulating her relationship with Lexinta notwithstanding the fact that the transfers were actually being made either by her personally or by JL to LGL. She did not contend that either Badilla or Lexinta did anything to suggest the contrary.

Withdrawal of the Plaintiffs’ investments

TP explained in cross-examination that the initial arrangement she had with Badilla was that she should have a distribution of initial profits straightaway and that she received some US$3 million between October 2016 and March 2017. This, she said, gave her comfort that the investment was a real investment.

In October 2017, TP sought to realise a further US$5 million and completed a “Transfer of Funds Request Form” on 20 October 2017 which was acknowledged by letter dated 20 November 2017 from LGL indicating that payment would be made on or before 21 December 2017. No such payment was made.

In December 2017, TP learned that an action had been commenced in Hong Kong on 10 November 2017 by 14 investors and that they had obtained a freezing order against Badilla and Lexinta over some US$24 million. TP then instructed lawyers in Hong Kong to make enquiries on her behalf, which revealed that the LGL trading account with DBS had a zero cash balance and zero assets.

Subsequently, by way of a third-party discovery order made in TP’s favour against DBS, TP became aware of the transfers to BE’s DBS account in Singapore from LGL’s DBS account in Hong Kong (as set out in [47]–[50] above). These can be contrasted with the payments in to the LGL DBS account by the Plaintiffs (contrast [47]–[50] with [58]–[62] above):

(a) Payment in by BGNIC: US$7,000,000 on 5 August 2016;

(b) Payment out to BE: US$7,439,004.77 also on 5 August 2016;

(c) Payment in by JL: US$3,620,750 on 9 September 2016;

(d) Payment out to BE: US$1,499,488.00 on 12 September 2016 plus €164,841.26 on 28 September 2016;

(e) Payment in by BGNIC: US$8 million on 1 February 2017; and

(f) Payment out to BE: US$1,302,250.92 also on 1 February 2017.

It is these back-to-back transfers, “robbing Peter to pay Paul”, as Mr Chaisty put it – which form the foundation of the Plaintiffs’ claim in this action.

The pleadings

The pleadings are extensive. The following is a summary of the parties’ cases necessary to identify the issues which now remain to be adjudicated upon.

The Statement of Claim

The Statement of Claim (“SOC”) has been amended three times, the last amendment being directed during the trial, on 17 March 2022. I should also highlight that several references are made in the SOC to a personal asset management agreement between TP and Lexinta, coined the “TP AMA” and dated 30 June 2017. However, the Plaintiffs have since accepted that the TP AMA is of no relevance to the events and transfers (see [71] above) with which this suit is concerned. Thus, those references may be ignored, and focus may be applied to the following assertions, on which the Plaintiffs’ case is built:

(a) That at all material times Badilla was operating a Ponzi scheme.

(b) That the Defendants’ investments were not genuine and that any returns on their alleged investments were fake.

(c) That the Disputed Monies did not represent assets held pursuant to the Esculier AMA by Lexinta companies other than LGL, but rather, were assets transferred to LGL by the Plaintiffs.

(d) That the payments out to the Defendants by LGL did not discharge any obligation of those Lexinta companies to return assets pursuant to the Esculier AMA since LGL had no contract with the Esculiers and had received no assets from them.

(e) That the monies transferred to LGL by the Plaintiffs which were paid out to the Defendants were to be held by LGL as custodian or nominee to be transferred to the Asset Manager to be held under the terms of the relevant AMA.

(f) That LGL’s obligations to the Plaintiffs were governed by Hong Kong law and not by Swiss Law.

(g) That the fact that any obligations arising under the SRE or BGNIC AMAs are governed by Swiss law is irrelevant as no funds were ever transferred from LGL to the Asset Managers.

(h) That, accordingly, those monies were held by LGL on trust for the Plaintiffs.

(i) That LGL had therefore acted in breach of its fiduciary duty and/or in breach of trust by making the transfers to the Defendants as part of the Ponzi scheme.

(j) That, in consequence, the Plaintiffs as beneficial owners were entitled to trace the monies (or alternatively, the alleged profits made) as the Defendants had given no relevant consideration for receipt thereof regardless of whether the Defendants had knowledge sufficient to put them on notice of the Plaintiffs claim to the monies.

The Defence and Counterclaim

By their Re-Amended Defence dated 23 March 2022, the Defendants pleaded as follows:

(a) The Plaintiffs are put to proof of the contention that there was a Ponzi scheme.

(b) Paragraphs 36(b), (c) and (d) of the SOC are denied (see [74(b)], [74(c)] and [74(d)] above).

(c) That LGL formed part of Lexinta and, together with the other members of the group, served the needs of the investors. Further, to the extent that LGL received funds, such receipt was “for and on behalf of (or reasonably regarded as being for and on behalf of) Lexinta Group”.

(d) That the payment of the Disputed Monies from the LGL account to the Esculiers was in discharge of the obligations of Lexinta under the Esculier AMA.

(e) Paragraph 37(a) of the SOC is denied (see [74(e)] above).

(f) That the JL Transfer was not made for the benefit of the Plaintiffs.

(g) That all obligations between Lexinta and the Plaintiffs; between Lexinta and the Defendants; and between the Plaintiffs and the Defendants, are governed by Swiss law.

(h) Paragraphs 37(b), (c) and (d) of the SOC (set out [74(f)], [74(g)] and [74(h)] above) are denied, and it is asserted that Swiss law does not recognise “the institution of a common law trust or equitable proprietary rights over bank account balances”.

(i) That all the Plaintiffs’ assets held by Lexinta were held pursuant to the AMAs and not on a common law trust.

(j) It is denied that under Swiss law the Plaintiffs could assert any claim for breach of trust or fiduciary duty or are entitled to the relief sought.

(k) If the substantive law is Hong Kong law, the Defendants assert that they had no notice or knowledge of the existence of a trust, or of any breach of trust or fiduciary duty and deny the existence of the same or the right to trace.

(l) If the substantive law is Hong Kong law and there has been a breach of trust/fiduciary duty, the Defendants received payment of the Disputed Monies for valuable consideration and without notice.

(m) By the Counterclaim the Defendants seek an award of damages under the cross-undertakings given by the Plaintiffs in orders made in OS 1016 on 10 January 2020 and 17 March 2020, HC/ORC 1066/2020 (the Order referenced at [9] above) and HC/ORC 1975/2020.

The Reply and Defence to Counterclaim

The Reply and Defence to Counterclaim, the second amendment to which is dated 29 March 2022, was also the subject of a further substantial amendment during the trial. It is a lengthy document which repeats and amplifies upon pleas made in the SOC. The following matters should be noted:

(a) That, even if LL, LML, L Inc or LAG acted as asset managers under the Esculier AMA, they were not entitled to act by and did not purport to act by LGL.

(b) That, all transfers of the Disputed Monies to BE were from the LGL account not from LL or other Lexinta entities. These did not represent funds held for the Defendants.

(c) That the Disputed Monies represented sums due to TP from the Catolac Trust and were, on her instructions, transferred directly to LGL by JL acting in its capacity as asset manager for the Catolac Trust.

(d) The Defendants are put to proof that they believed in good faith that the returns allegedly received had been achieved as a result of the operation of the Esqulier AMA and that it is improbable that the assets were genuinely and profitably invested.

(e) The contention that Hong Kong law governs the relationship between the Plaintiffs and LGL is repeated on the basis that since LGL was not a party to the SRE or BGNIC AMAs, Swiss law was nor expressly applicable and was not the law having the closest connection to the dispute between the parties.

(f) The Defendants are put to proof of the contentions as to matters of Swiss law. No positive case to the contrary is pleaded.

(g) The contention that the Defendants received payment of the Disputed Monies for valuable consideration is denied save that no admission is made as to whether the Defendants acted in good faith or without notice.

(h) The Plaintiffs accept that the Defendants were not an accomplice of Badilla and Lexinta and that they were defrauded by them.

(i) It is denied that the Defendants are entitled to relief under the Counterclaim.

It is necessary to amplify a little on [76(g)] above. It appears from the pleadings that a distinction is being drawn between consideration on the one hand and notice on the other. As to the latter, the pleading merely puts the Defendants to proof, it raises no positive case that they had either actual or constructive notice or that they lacked good faith. The AEIC’s sworn by BE and JE therefore dealt with the allegation on this basis. They did not deal in detail with any specific matters raised by the Plaintiffs because there were none.

During the oral opening by Mr Chaisty, it became apparent that his clients accepted that prior to the Esculiers’ request for the return of their investment, they had no reason to believe that the investments made on their behalf by Lexinta were anything other than genuine and successful investments. Their case was that the dealings the Esculiers had with Badilla between October 2015 (when the return of the proceeds of the investment was first requested) and February 2017 (when the final sums due were transferred) were such as to furnish them with actual notice or, alternatively, were such that a reasonable person in the position of the Esculiers would have had concerns sufficient to make inquiries such as to constitute constructive notice.

Ms Kam contended that such an approach amounted to the raising of a positive case which should have been pleaded and that a mere non-admission did not entitle Mr Chaisty to cross-examine the Esculiers on that positive case. Following submissions, amendments were proposed both to the Statement of Claim and the Reply raising a substantive positive case of actual or constructive notice (the amendments appear chiefly in the Reply), for which leave was given by consent.

The issues

The issues that arise for decision can best be considered in the following order:

(a) Was Badilla operating a Ponzi scheme when the Esculiers were repaid? If so, when did the scheme commence?

(b) What is the status of LGL:

(i) With regard to the Esculiers’ dealings under the Esculier AMA?

(ii) With regard to the Plaintiffs’ dealings under the SRE AMA or the BGNIC AMA?

(c) What law governs the relationships between the parties and Lexinta and between each other. Swiss law or Hong Kong law?

(d) If Swiss law applies, can a relationship of trust exist between LGL and the Plaintiffs and, if so, what are the consequences?

(e) If Hong Kong law applies, does a relationship of trust exist between LGL and the Plaintiffs and, if so, what are the consequences?

(f) Was the JL Transfer was made for the benefit of TP?

(g) If the Plaintiffs’ action fails, what damages are the Defendants entitled to under the cross-undertakings (see [75(m)] above).

Issue 1: The Ponzi Scheme

The Plaintiffs’ claim is that a Ponzi scheme was being conducted by Badilla from before the time when the Esculiers first invested in April 2014 and that, accordingly, none of the money transferred to Lexinta by the Esculiers was ever invested notwithstanding the documentation that was provided by Badilla purporting to demonstrate that individual investments that were made.

I am satisfied that such as scheme was in operation by 2016 as it is clear that the sums paid by the Plaintiffs to LGL were never invested but were paid directly out, inter alia, to the Esculiers. However, I have greater difficulty in reaching a conclusion as to when this activity started. It is accepted that the onus of proving a starting date lies on the Plaintiffs.

It was not until November 2017 that it was first publicly suggested that Badilla might be running a Ponzi scheme, when two articles appeared in Swiss publications. Investigations had, however, first been commenced by the Swiss Public Prosecutor’s Office following a complaint made by a Mordechai Fishman on 31 August 2017. Details of the investigations are contained in a “Petition for an Investigation Order” dated 25 April 2018 which records that Badilla had been arrested by the Swiss police on 23 April 2018. This document states that:

On 26 April 2018, an order was made in the Zurich District Court that Badilla should be taken into investigative custody pending trial. Paragraph 3.2 of the order records that the period of custody should not last longer than the expected penal loss of freedom had he been tried and convicted. He apparently remained in detention without trial until recently. It was suggested that his release was due to the fact that although no trial had taken place, the time he had served in detention was equivalent to that which he would have been sentenced to had he been tried and convicted. I have, however, no evidence to support this suggestion and nothing turns on it.

Paragraph 4.3 of the order records that Badilla had admitted that “he had deceived these investors from the year 2015 on the use of monies”.

It thus appears that the Swiss authorities had uncovered no information which supported a conclusion that Badilla had been conducting a Ponzi scheme earlier than 2015 and the Plaintiffs have adduced no evidence in support of such a conclusion. Mr Chaisty submitted that there was nothing to suggest that the scheme was ever genuine as there was no independent evidence of any investment and that the supporting documents supplied to BE were internally created fictitious documents. Against this, however, I have to take into account the fact that Badilla had been running the Lexinta investment business for a number of years and had received favourable press coverage, that the investigations that BE made prior to investing satisfied her that Lexinta was regulated by the Swiss financial authorities and that the supporting documents did reflect what had indeed occurred in the financial markets on the dates in question.

Taking all these matters into account I am unable to conclude that the Lexinta business was a sham from the outset and am unable to place any date on when the Ponzi scheme began, earlier than the conclusion reached by the Swiss authorities as being “at the latest from the year 2015”. The important point to my mind is that it is not suggested that the Esculiers had any reason to believe that their money had not been invested and the recorded profits made until sometime after they sought return of those sums.

Issue 2: The status of LGL

Resolution of this question lies at the heart of this dispute. The Plaintiffs’ case is encapsulated in paragraphs 19 and 20 of their written closing:

Underlying this submission is the contention that, since LGL was not a party to any of the AMAs, it did not hold the sums transferred to it under the terms of those AMAs but was an independent third party to whom the sums had been transferred to hold the same on trust for transfer to one of the parties to the AMAs.

The Defendants’ position was succinctly summarised by Ms Kam when, in her closing oral submissions, she said:

I have considered the references to LGL in the course of the parties’ dealings with Lexinta in paragraphs [26]–[35] (in respect of the Defendants) and [54]–[67] (in respect of the Plaintiffs) above. So far as concerns the Defendants, reference to LGL first occurred somewhat tangentially in the receipt for the first payment to LL. Thereafter, the name occurred from time to time but without comment from Badilla. When it came to the payments out, BE gave evidence in paragraph 86 of her AEIC as follows:

She was cross-examined on this at length, but the substance of her evidence was not shaken. She was aware that the money was coming from a DBS account, not from the Hang Seng Bank account, but her attention was not drawn by Badilla to the fact that this account was in the name of LGL rather than LL nor to the fact that LGL was not a party to the AMA and she did not spot the distinction.

Her answers in cross-examination can be summed up in the following extract:

So far as the Defendants are concerned, I am satisfied that at all times both the Esculiers and Badilla were working on the basis that, notwithstanding the express definition in the Esculier AMA of the Lexinta Group as being LL, LML and L Inc, the agreement covered all their dealings with Lexinta no matter which company within Lexinta actually performed any given act. This properly reflects the course of dealings between them and is a necessary implication to give business efficacy to their dealings.

In the case of the Plaintiffs, the SRE AMA signed on 18 April 2016 again defined LL, LML and L Inc as being the “Lexinta Group” but on the next day the first transfer of US$1,000,000 was made on Badilla’s instructions to LGL, without any indication by Badilla that this transfer was outwith the terms of the AMA. It was not something that TP noticed or was alerted to by her advisers either at this time or later. As indicated in [66] above I prefer her evidence given in paragraph 15 of her AEIC that “she did not know anything specific about Lexinta Group’s internal structure, or the legal entities involved”.

Van Campen gave similar evidence. In paragraph 6 of his AEIC he deposes to the fact that BGNIC entered the BGNIC AMA on 7 July 2016 and states, “I note that LGL is not on the face of it a company within the definition of Asset Manager in the BGNIC AMA”.

He does not state in his AEIC that he noted this at the time because he was not involved then, but he accepted in cross-examination that at all times since he became involved, he assumed that all sums that were remitted were to be managed under the BGNIC AMA. The last part of that cross-examination reads as follows:

My conclusion, therefore, in relation to the Plaintiffs’ dealings with Lexinta are the same. TP, SRE and BGNIC on the one hand and Lexinta, through Badilla, on the other were working on the basis that, notwithstanding the express definition in the AMAs of the Lexinta Group as being LL, LML and L Inc, the agreement covered all their dealings with Lexinta no matter which company within Lexinta actually performed any given act. This properly reflects the course of dealings in relation to the Plaintiffs’ investments and is a necessary implication to give business efficacy to their dealings.

Accordingly, at all material times the three AMAs extended by implication to include LGL as a party thereto. The Plaintiffs’ case is founded upon the assertion that LGL was not a party to the AMAs and, therefore, there was no contractual relationship between the parties and LGL. It was entrusted the sums on terms that it would transfer them to the relevant Asset Manager and obtained no entitlement to the sums so received. Hence, it held the sums on either or both of a resulting or constructive trust for the benefit of the beneficial owners – the Plaintiffs. It formed no part of their case that, if there was a contractual relationship, any separate obligation of trust arose.

In my judgment the sums transferred to LGL were held by them pursuant the terms of the AMAs and were not held by them on trust for TP or BGNIC. The Plaintiffs’ action therefore must fail. However, since this matter may go on appeal, I shall deal with the other issues on the basis that the parties’ dealing with LGL were not governed by the AMAs.

Issue 3: Swiss law or Hong Kong law?

There is no dispute that so far as the Esculier, SRE and BGNIC AMAs are concerned, there is an express choice of Swiss law. The question to be decided is which law applies to determine whether or not the pleaded cause of action for breach of trust is a viable plea. I shall refer to it as the “putative trust”.

The parties were agreed that the starting point was that Singapore law applied to determine what the proper law was. The principles are well established. In the absence of any binding or express choice of law clause, the applicable law falls to be assessed by reference to the three-stage process set out by the Court of Appeal in The Republic of Philippines v Mahler Foundation [2014] 1 SLR 1389 at [81]:

On the assumption that there was no contractual relationship between the parties and LGL, there was no express choice of law to govern the relationship between them, so the three-stage test must be applied. As to the first, the parties are agreed that the characterisation of the relevant issue is that this is a proprietary claim to the Disputed Monies. This broad characterisation follows from the Court of Appeal’s earlier decision in Perry, Tamar and another v Esculier, Jacques Henri Georges and another and another matter [2022] 1 SLR 107, where the Plaintiffs were denied leave to amend their SOC to include alternative claims which were not proprietary. Simply put, personal actions do not fall within interpleader proceedings authorised in OS 1016. That said, regarding the issue simply as a proprietary claim to the Disputed Monies in this way is a somewhat reductive characterisation of the relevant issue, as I shall explain. Indeed, such over reduction is what led, in my view, Mr Chaisty to take the position he did at the second stage of the three-stage analysis.

In approaching the second stage in his oral closing submissions, Mr Chaisty, somewhat surprisingly, submitted that since this was a proprietary claim, the relevant connecting factor was that the property in question (ie, the Disputed Monies) was located in Singapore so that Singapore law should apply. In essence, he was asking for the lex situs to be applied. This was neither pleaded nor raised in opening, and I reject it on that basis. However, even if I were to consider it substantively, this submission, in my judgment, represents a too narrow and mechanistic approach to the second stage of the three-stage analysis.

Mr Chaisty relies heavily on Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1996] 1 WLR 387 (“Macmillan”), where Staughton LJ suggested that as a “general rule, which is subject to exceptions”, issues as to rights of property are to be determined by the law of the place where the property is (at 399F). Where land is concerned, this is sound. In respect of chattels, the learned Lord Justice offers this reasoning (400A):

Here we are not concerned with chattels. The Disputed Monies constitute intangible property. The distinction between chattels and intangible property is not one which can be glossed over: see Dicey, Morris and Collins on the Conflict of Laws (Lord Collins of Mapesbury gen ed) (Sweet & Maxwell, 15th Ed, 2012) (“Dicey”) at para 22–010. I therefore cannot take Macmillan as authority for the proposition Mr Chaisty advances, much less one carrying the force he suggested it should.

Second, as stated at [74(h)] above, the “proprietary right” which the Plaintiffs assert over the Disputed Monies is by way of a trust which was created when such monies were transferred to the bank account of LGL. This proprietary right is alleged to flow into the Defendants’ DBS account because they received the money without giving valuable consideration and with notice (see [74(j)]). Hence the Defendants were not bona fide purchasers for value without notice, and as such, cannot assert better title. This being the case, the proprietary right on which the Plaintiffs rely is equitable, not legal, and one which their written submissions suggest may be asserted either by virtue of a resulting or constructive trust.

Dicey states that there “seems to be no clear English or Commonwealth authority on the choice of law rules relating to constructive and resulting trusts” (at para 29–076). The learned authors recognise that there is both judicial and academic support for the application of the lex situs, “on the basis that rights in property are ultimately at stake” (at para 29–081) (also see Adeline Chong, “The Common Law Choice of Law Rules for Resulting and Constructive Trusts” (2005) 54(4) ICLQ 855 at 871–883, which is cited by Dicey), yet also highlight that the lex situs need not apply, as was the case in Lightning v Lightning Electrical Contractors Ltd (23 April 1998, Court of Appeal) (England and Wales). Indeed, here, Millett LJ criticised the blanket application of such a rule. He observed:

In any event, it is clear from the Court of Appeal’s decision in Rickshaw Investments Ltd and another v Nicolai Baron von Uexkull [2007] 1 SLR(R) 377 at [74]–[81], which generally affirmed the seminal work of Yeo Tiong Min, Choice of Law for Equitable Doctrines (OUP, 2004), that characterising claims in equity is not always wholly straightforward. Instead, it is necessary for the court to examine closely the nature and origins of the equitable obligation concerned in the context of its factual matrix (at [76]).

This leads to the final point on the second stage of the three-stage analysis. Even if I assume, as I have for the purposes of Issue 3 and onwards (see [100] above), that the parties’ dealings with LGL were not governed by the AMAs, the Plaintiffs’ transfers of the Disputed Monies still need to be understood in its proper context. There is no dispute that the monies are located in Singapore, but the relevant connecting factor is not merely that. It is also the underlying relationship and transfers of funds which led to the putative resulting or constructive trust, as well as the allegation of breach of that trust by LGL which placed the Disputed Monies in the Defendants’ DBS account (see [74(i)] above). I therefore consider that the correct law to be applied is that which is most closely connected to the putative trust (see Dicey at 29R–001 and 29–075).

The Plaintiffs assert that it has no meaningful connection with Switzerland. LGL was a Hong Kong Company, the sums involved were paid into Hong Kong bank accounts for investment in IPOs predominantly in Asia and the sums paid out were from a Hong Kong bank account to a Singapore bank account. The Plaintiffs comprise TP, a dual Israeli and Polish citizen resident in London and Tel Aviv, and SFPF, a Curacao company. The Defendants are French citizens at the outset resident in Belgium and subsequently in Switzerland.

The Defendants placed heavy reliance on the decision of the Court of Appeal in Rappo, Tania v Accent Delight International Ltd [2017] 2 SLR 265 (“Rappo”) in support of the proposition that when seeking to determine the applicable law to claims in equity regard should be had to the foundational sources from which the equitable right had arisen – in this case the AMAs. It was also contended that there were countervailing factors which pointed to Switzerland rather than Hong Kong. In Rappo, the claim was for breach of fiduciary duties, fraudulent misrepresentation and deceit arising out of some dealings in artworks. The dispute related in particular to some artwork in Singapore and there was a dispute as to whether the applicable law was the law of Switzerland or Singapore.

When considering the appropriate fora, the court said this:

In [76] the Court went on to say:

In this case, the Defendants say that the putative trust arises out of the contractual arrangements between the Plaintiffs and Lexinta and the part played by LGL in furtherance of those arrangements which is alleged to give rise to the existence and breach of trust. The purpose for which the sums were transferred to LGL was so that Lexinta could carry out its obligations under the AMA. It would be unreal, they submit, to divorce the putative trust from the underlying contracts so that Swiss law should apply.

In addition, they point to the fact that all the Plaintiffs’ dealings were with Badilla who was based in Switzerland, that the holding company, LAG, was based in Switzerland, that TP visited Lexinta’s offices in Switzerland and that their understanding was that their dealings with Lexinta would be subject to Swiss law.

In their written closing the Plaintiffs contended that Rappo was not on point and of no relevance. I do not agree. I consider that there is a close analogy between the underlying matrix of facts in this case and those in Rappo and that the observations of the Court of Appeal set out above are directly applicable to this case. I do not say that the fact that the putative trust arises out of the contractual arrangements between the Plaintiffs and Lexinta is decisive of the matter, but it is a significant factor. Further, I consider that the quality of the other factors relied upon by the Defendants outweighs those relied upon by the Plaintiffs.

Accordingly, had it been necessary for me to decide what was the applicable law of the putative trust, I would have held that it was the law of Switzerland.

Issue 4: The Position under Swiss law

For this court, Swiss law is a question of fact. The Defendants pleaded their position on Swiss law in their Defence (see [75(g)]–[75(j)] above). In the Reply, the Plaintiffs put them to proof but did not raise a substantive case to the contrary.

The Defendants adduced an expert report dated 8 November 2021 (the “First Report”) from Dr Felix Joseph Dasser (“Dr Dasser”). Dr Dasser is qualified to practice law before the Swiss Bar and is a partner at Homburger AG, a law firm based in Zurich. He is also an adjunct Professor of Law at the University of Zurich for private law, private international law including international procedural law, and comparative private law.

The Plaintiffs did not adduce any evidence on Swiss law. When the matter was discussed at a CMC on 8 December 2021, counsel for the Plaintiffs confirmed that his clients did not propose to adduce evidence on Swiss law but nonetheless expressed a desire to cross-examine Dr Dasser on the basis that his report had been founded on some assumptions of fact which the Plaintiffs did not accept. The Plaintiffs were therefore directed to draft questions to be considered by Dr Dasser, with a view to being able to dispense with such cross-examination as is allowable in circumstances where the opposing party is not raising a positive case (the “Questions”).

The Questions were filed on 22 December 2021 and resulted in a second expert report from Dr Dasser dated 27 January 2022 (the “Additional Report”) in which he responded to each question in turn. Having considered the Additional Report, the Plaintiffs maintained their desire to cross-examine Dr Dasser. This was done, with the approval of the Swiss authorities, by video-link on 18 March 2022.

Dr Dasser gave his evidence with authority and with clarity. He was a good witness in that he opined on matters that were within his areas of expertise, but declined to answer questions which fell outside those areas. More specifically, he had had significant past experience in Swiss law relating to Ponzi schemes, having been involved in the Bernie Madoff litigation for some ten years.

Rather than include long extracts from the First Report in this judgment, the whole report forms Annex 4 hereto. As can be seen he was asked to address four questions:

Dr Dasser then set out his understanding of the facts in paragraph 8 which appears to me to be an accurate précis of the facts as pleaded, and which was not the subject of any direct challenge in the course of cross-examination. Much of the focus of the cross-examination was on Item (13) of paragraph 8, which reads: “According to the Defendants, they neither knew about nor had reason to know about nor were accomplices of the Lexinta Ponzi Scheme”. I shall return to the factual aspect of this dispute when I consider the position under Hong Kong law from [136] below.

The other important points of Dr Dasser’s First Report are:

(a) In paragraphs 9 to 16 of the First Report, Dr Dasser makes some preliminary comments on Swiss law. He draws attention to the fact that none of the causes of action under the Swiss Code of Obligations form the basis of the Plaintiffs’ claim (see paragraph 12). In paragraph 16, he deals with the high standard of proof required, which is well above the common law basis of balance of probabilities.

(b) In paragraphs 17 to 22, he gives reasons for concluding that the validity of the Esculier AMA cannot be questioned and that, under Swiss law, an investor in a Ponzi scheme cannot question the validity of the payment to another investor unless there is proven bad faith on the part of the other investor.

(c) In paragraphs 23 to 29, he considers the impact under Swiss law of the fact that the payments to the Esculiers came from the LGL bank account and concludes that even if LGL was not bound by the Esculier AMA, payment by LGL would “liberate the debtor of his obligation”. In paragraphs 30 to 40 he explains that the concept of beneficial ownership is not acknowledged under Swiss law.

(d) Finally, in paragraph 41, he answers the questions reproduced in [124] above, as follows:

I turn then to Dr Dasser’s Additional Report (which is included as Annex 5). Here he deals with the eight questions posed by the Plaintiffs, but the substance of the questions as well as his responses can be identified from paragraph 4 of the report, which reads:

In paragraphs 19 and 20, Dr Dasser reiterates his opinion that Swiss law does not recognise property rights in amounts in bank accounts because Swiss substantive law does not recognise the concept of a trust. The only rights are contractual rights.

Dr Dasser was cross-examined on both his reports on two aspects in particular. First, Mr Chaisty sought to distinguish the Oschward case (see paragraph 19 of the First Report) on the basis that there was a difference in law between a loan agreement as in Oschward and an investment agreement as in this case. The Plaintiffs had led no evidence to suggest that this was the case and Dr Dasser opined that any distinction did not matter for the purposes of his report. I accept that evidence.

Secondly, Mr Chaisty sought to investigate the degree of knowledge of or involvement in a Ponzi scheme that a third party would have to have in order to prove the requisite bad faith or connivance (see paragraph 21 of the First Report and paragraph 4 of the Additional Report).

When dealing with the Oschward judgment, the following exchanges occurred:

The cross-examination then turned to the question of constructive knowledge as opposed to actual knowledge and Dr Dasser explained that he was not an expert in Swiss criminal law and that, having not had any notice of this question, he was not in a position to answer it.

Ms Kam objected to this line of questioning on the basis that bad faith as that term was understood under Swiss law had not been pleaded but I allowed the cross-examination to proceed de bene esse with the matter to be discussed in closing submissions.

In the Plaintiffs’ written closing submissions Dr Dasser is criticised for his inability to say how far constructive as opposed to actual knowledge might affect the position. I do not accept that this is a valid criticism. If the Plaintiffs wished to raise a positive case that as a matter of Swiss law, constructive knowledge rather than actual complicity in a Ponzi scheme affected the Esculiers’ liability in this case, this should have been pleaded and supported by evidence from a Swiss lawyer. If they wished to assert that under Swiss law the Esculiers had either sufficient actual knowledge or that the facts supported a conclusion of constructive knowledge again this should have been pleaded. The onus on this aspect would have been on the Plaintiffs. No challenge was made to Dr Dasser’s evidence on the high burden of proof in Swiss proceedings (see paragraph 16 of his First Report at Annex 4) and the Plaintiffs have made no attempt to discharge this burden. The furthest they go is to place the burden on the Defendants to demonstrate good faith for the purposes of the defence of bona fide receipt for value without notice under Hong Kong law (which I consider from [136]–[185] below) which is very far from the same thing. The onus is different as is the burden of proof.

Taking all these matters into account, Dr Dasser’s evidence satisfies me that had LGL not been bound by the terms of the AMAs and had merely been entrusted with the sums invested by the Plaintiffs, the Plaintiffs would have had no cause of action under Swiss law against the Esculiers.

Issue 5: The Position under Hong Kong law

In order to approach this issue, it is necessary to assume, first, that the relationship between the Plaintiffs and LGL was not governed by the AMAs and, secondly, that the law governing that relationship was the law of Hong Kong. The parties accepted that the law of Hong Kong was the same as Singapore.

In these circumstances, there is scope for the existence of a relationship of trust. The Plaintiffs contended that since the sums of money had been paid to LGL for one purpose and one purpose alone – to hold them for onward transmission to one of the parties to the AMA’s for investment under the terms of the AMAs – then the Plaintiffs retained a proprietary interest unless and until that transfer took place. LGL had misappropriated the sums by transferring them (inter alia) to the Esculiers. In these circumstances an obligation of trust arose and LGL acted in breach of trust. The Plaintiffs therefore remained beneficial owners and were entitled to trace part of the money paid into the hands of the Esculiers. Their case was that the trust was either a constructive trust or a resulting trust, or, possibly, a Quistclose trust (as founded in Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567).

The Defendants’ response to this was, understandably, somewhat circular as they contended that since the Plaintiffs expected LGL to facilitate the investment of the Fund pursuant to the AMAs, it must follow that any relationship between them would be governed by Swiss law. They did not contend, as I understood it, that if this was not the case, the circumstances were such that no obligation of trust would exist under Hong Kong law.

To my mind, therefore, on the assumption that Hong Kong law applies and there was no contractual relationship between LGL and the Plaintiffs, it follows that the relationship between them was one of trust and it matters not what its precise nature was.

On the basis that there was such a trust the Defendants raise the defence that, since they had no knowledge or notice of the trust arrangement, they received payment “in good faith, for valuable consideration and without notice of any purported claim (s) of the Plaintiffs”. It is common ground that the onus of proof on this defence lies on the Defendants.

There are four aspects of this defence are set out in MKC Associates Co Ltd v Kabushiki Kaisha Honjin (“MKC”) [2017] SGHC 317 at [294]:

Point (c) does not arise in this case as it is not disputed that the Esculiers have obtained the legal interest in the Disputed Monies. The other three do need to be considered.

Good Faith

The requirement of good faith and its relationship to the aspect of notice was considered in Midland Bank Trust Co v Green [1981] AC 513 at 528 where Lord Wilberforce said this:

Whilst the requirement of good faith is closely related to the question of notice, it remains a separate consideration based on the equitable regard to conscience. However, in many cases (see, for example, Armstrong DLW GmbH v Winnington Networks Ltd [2013] Ch 156 at [121] and MKC at [296]), the same considerations will apply to reaching a conclusion on good faith and notice. In this case, the Plaintiffs did not assert that if the Defendants discharged the burden with regard to notice, both actual and constructive, any separate factors arose for consideration on good faith. The two stand or fall together. I will therefore consider them together from [153]–[184] below.

Consideration

The Defendants’ assertion is that the payments were received in mutual discharge of the parties’ respective obligations under the Esculier AMA. Even if the relationship between the Plaintiffs and LGL was governed by Hong Kong law, it was not disputed that the relationship between the Esculiers and Lexinta was governed by Swiss law and, thus, regard had to be had to Swiss law to determine whether, if LGL was not a party to the contract, nonetheless the payment by it of the sums due under the AMA was a valid discharge of any obligations whether real or fictitious of those companies within Lexinta which were parties to the AMA.

On the assumptions that are being made, I cannot accept this. If Hong Kong law applies and an obligation of trust arises to which the Defendants pleads a defence of bona fide purchaser, it must be Hong Kong law that is applied to determine whether or not this defence succeeds.

The Plaintiffs contend that Hong Kong law should be applied to assess the question of consideration and raise two points. First, they contend that there were no obligations under the AMA because it was a sham. Secondly, they say that since LGL was not a party to the contract, it owed no obligations to the Esculiers and therefore acted as an unauthorised intervenor. I was referred to a passage in Charles Mitchell, Paul Mitchell and Stephen Watterson, Goff & Jones: The Law of Unjust Enrichment (Sweet & Maxwell, 9th Ed, 2016) at para 5–73:

In response, as to the first point, the Defendants assert that even under Hong Kong law, an investor who successfully exits a Ponzi scheme with apparent profits is a purchaser for value. They rely on the observations of Lord Sumption in Fairfield Sentry Ltd (in Liquidation) v Migany and others and other cases [2014] UKPC 9 at [3]:

They also rely on the statement by Lord Briggs in In the Matter of Stanford International Bank Ltd (in liquidation) [2019] UKPC 45 at [69]:

On the second point, they contend that LGL was not an unauthorised intervenor acting voluntarily. It was acting under the direction of Badilla for Lexinta. They invited me to test the matter by asking the question: if Lexinta had remained in funds, could the Esculiers, having been paid by LGL, have demanded payment again from one of the actual contracting parties?

I accept the submissions of the Defendants. It is an unfortunate fact of a Ponzi scheme that there are many innocent parties some of whom will have “escaped” with their investments and notional profits because they exited before the scheme was exposed. Others will be unlucky because they were still invested when the scheme collapsed.

However, the fact that an investment agreement may turn out to be a sham and the profits fictitious does not, in law, mean that there is no consideration for the payment out of monies apparently owing. Further, on the facts of this case, I am satisfied, that even if LGL was not a party to the AMA, it was not acting as an unauthorised intervenor.

Notice

The applicable principles are succinctly stated in MKC at [285]:

Actual notice is a straight question of fact. Constructive notice is a value judgment based on the available facts and guidance was given in the judgment of Lord Clarke in Papadimitriou v Credit Agricole Corporation and Investment Bank (“Credit Agricole”) [2015] 1 WLR 4265 at [12]–[20]:

In the present case, therefore, three questions arise:

(a) Was it probable that either of the Esculiers had actual knowledge that Badilla was operating a Ponzi scheme?

(b) Was it probable that a reasonable person with the attributes of the Esculiers would have appreciated on the facts available to them that Badilla was operating a Ponzi scheme?

(c) Were the facts known to the Esculiers such as would give a reasonable person in the position of the Esculiers serious cause to question the propriety of the repayments to be made and then to make proper inquiries?

In answering those questions, it should be borne in mind that, since the onus is on the Defendants, it is for them to prove the negative, so that if there is doubt whether they have done this, the benefit of that doubt must be given to the Plaintiffs.

The starting point is to have regard to the relationship between Badilla and the Esculiers when they first asked for the return of the proceeds of their investment in October 2015. The evidence of both the Esculiers and TP demonstrates that Badilla was able to easily generate confidence in his ability as an investment manager and to create and maintain an atmosphere of trust. He did this both by his personality and by the detail which he supplied to his investors to support the investments which he asserted had been made on his clients’ behalf, regardless of whether this was true or false. Both parties had taken steps to satisfy themselves that Badilla was the right man to be entrusted with their investments before signing the AMAs and depositing funds with Lexinta. The Plaintiffs do not suggest that the Esculiers had any reason to be dissatisfied with Lexinta’s conduct prior to seeking the release of their funds in October 2015, nor had they any reason to suspect that the profits that it was said that they had made were anything other than genuinely generated.

When the Esculiers met with Badilla to tell him that they wished to terminate the AMA at the end of the financial year (December 2015), which they were entitled to do under Section 9 of the Esculier AMA (see Annex 1), Badilla requested that termination should be in April 2016 at the end of the second year of the agreement so that he could obtain all the commission due to him. Whilst that was not in fact a requirement of the agreement, the Esculiers claim that they agreed out of fairness to Badilla.

Their relationship is summed up in the following passage of Mr Chaisty’s cross-examination of BE:

The parties then met on 4 January and sometime in early February 2016 and, possibly, once more before April. However, it was not suggested to BE in cross-examination that prior to April there was any indication by Badilla that there might be problems or delays in making payment in April. However, on 16 April 2016 payment was not made. The starting point for considering whether or not the requisite knowledge can be ascribed to the Esculiers is therefore 16 April 2016.

The first period of delay was from 16 April until 5 August 2016 when US$7,439,004.77 in respect of the Joint IPO Investments was repaid. Both the Esculiers were cross-examined at length on the various documents that passed between the parties in this period.

Mr Chaisty made two preliminary observations in relation to this evidence. First, he contended that the detail in the correspondence and the nature of the meetings and phone calls between BE and Badilla had not been properly addressed in her AEIC, and that this was an attempt on her part to conceal the “high degree of concern and anxiety” she had at the time. It is correct to say that her AEIC did not go into the detail that was subsequently the subject of the cross-examination, but it has to be remembered that at the time she swore her AEIC, the case that the Defendants had to meet was not the detailed positive case that arose out of the amendments to the pleadings during the course of trial. At the time of the AEIC, the Defendants had merely been put to proof of the absence of notice. I consider that the level of detail contained in the AEIC was adequate to address this burden and that no criticism can be made for not going into further detail.

Secondly, Mr Chaisty drew my attention to some observations of Leggatt J (as he then was) in Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm) at [15]–[22] which conclude at [22] as follows:

This is a helpful analysis of the manner in which a judge should assess oral evidence based upon contemporaneous documents, especially in seeking to gauge the personality, motivations and working practices of a witness. This is particularly so when the issue resides in determining the state of mind of the witness at a given time as opposed to their recollection of events.

However, it is essential to bear in mind that one should resist the temptation to focus too much on the precise wording of a document – particularly e-mails but equally, to a lesser extent, on more formal correspondence – in seeking to determine what the purpose underlying the communication was and, thus, what the thinking was of the writer or the influence that the writer was seeking to have on the recipient. This approach may be appropriate when considering the wording of a contract or a deed but is less helpful when dealing with everyday communications.

In this case, the cross-examination of the Esculiers did focus to a significant extent on certain words and phrases in each piece of correspondence in seeking to ascertain the Esculiers’ state of mind when either writing or receiving it. I did not find this to be a realistic exercise best calculated to assist me in forming a view as to what the real state of mind was of the Esculiers at any given time.

The interchanges between the Esculiers and Badilla in the period up to 5 August 2016 in summary were as follows:

(a) To begin with, BE contacted Badilla to be told that an audit was taking place and he was unable to say how long this would take. This passage of cross-examination concluded:

(b) JE then e-mailed Badilla on 16 May 2016 asking for a clear schedule for the return of the funds and received a reply on the same day. There then followed an exchange of e-mails until 30 May 2016 in which Badilla explains the requirements of the audits and the Esculiers express their increasing frustration. The last e-mail from Badilla on 30 May reads as follows:

(c) Nothing happened, so on 23 June 2016 BE informed Badilla that lawyers were being instructed. This was not done immediately and on 11 July 2016 Badilla e-mailed BE with what appeared to be a remittance advice to BE in the sum of US$7,439,000.77 but no proceeds were received by BE’s bank.

(d) On 21 July 2016, Swiss lawyers, Bar and Karrer (“B&K”), instructed by the Esculiers wrote to LAG demanding either payment of all sums due or a detailed written explanation together with all supporting documents including bank statements. It reserved the right to bring proceedings against LAG.

(e) Although the letter was written to LAG, Badilla replied on LGL’s notepaper (but with the same Lexinta Group heading as before). The letter reads as follows:

(f) It can be seen that Badilla asserted (wrongly) for the first time that LGL was a party to the AMA and, also for the first time, sought to draw a distinction between the sums owing to the Esculiers under the three investments made by them (see [43] above). He indicated that the sum due in relation to the first investment, US$7,439,000.77, would be paid by 15 August 2016.

(g) Around this time, B&K did some searches into Badilla and Lexinta. They did not find anything of concern, particularly, there were no debt issues. BE also found out that Badilla was doing a road show with clients and contacted other investors for reassurance that they had been repaid when requested. BE’s evidence is that she understood that these other investors had been repaid, and that she found this reassuring.

(h) B&K responded on 29 July 2016 repeating and amplifying upon its demand for a written detailed account by 3 August 2016, drawing attention to the fact that the AMA was signed by LAG with an address in Zug and contesting the contention that notice of termination had not been given for the latter two investments. For the avoidance of doubt, notice of termination was confirmed.

(i) On 3 August 2016 Badilla responded, again from LGL, indicating that US$7,439,000.77 would be remitted on 5 August and that the termination process would be initiated for the other two accounts.

(j) US$7,439,000.77 was then transferred on 5 August 2016.

It is appropriate to take stock of the position at this point when the bulk of the sums due were paid. Both BE and JE were cross-examined on all that occurred during this period. In closing submissions, Mr Chaisty submitted that by the time they gave evidence, they were well aware of the issues in the case and fully grasped the points raise on their defence. “They were resolute in their determination to keep to the script of denying at any stage despite the delays, excuses and correspondence, even the smallest hint of any suspicion at any time”. In consequence, I was invited to conclude that neither Defendant had approached the giving of evidence in a simple and straightforward manner which was open, clear and designed to assist the court and, further, that recourse to the documents demonstrated that they had real concerns and doubts as to where their money was.

It is important to bear in mind that the relevant question to be posed in relation to notice is whether one person had notice (be it actual or constructive) that another has a claim, specifically, to beneficial ownership of the sums in question. Any suspicion or concerns that the Esculiers had must have been such as to cause them to question the propriety of the repayments on the basis that the money might belong to someone else. It is insufficient if they had different concerns. It is thus necessary to be clear, where the witness is being asked about suspicions and concerns, precisely what it was that those suspicions and concerns were directed to.

Dealing first with JE’s evidence. In the main, he left matters to his wife but acted directly with Badilla when requested. He said that in the course of his business he had a standard process with regard to debt collection. First, he would try to find out the reason why the sums were not paid, then, second, build up pressure on the appropriate person to bring them up to speed on the urgency of doing whatever was necessary and, third, if necessary, he would instruct a lawyer. We can see that this was the process adopted here.

So far as concerns Badilla’s comments about the necessity of an audit, JE said that there was substance and a certain credibility to this claim, having regard to his experience in dealing with banks. Further, JE also testified that his experience had shown him that matters such as audits pan out “more in terms of weeks and months rather than days”, explaining the Esculiers’ tolerance of Badilla’s delays.

He also gave evidence of his experience that people who owe money always find tactics to postpone things and that this was what he considered Badilla was doing.

It was not directly suggested to JE that as at 5 August 2016 he had serious cause for concern as to the origin of the money being remitted to them, but I consider it is clear from his evidence that he did not. To him, as a businessman, whilst Badilla’s conduct was regrettable and frustrating, it was nothing out of the ordinary.

BE was aware of her husband’s approach to solving issues by applying pressure and understood that this was what he was seeking to do once she had asked him to become involved. She also had had experience with the delays inherent in dealing with banks. She plainly found Badilla’s conduct frustrating, even childish, but did not consider that he was lying about the need for an audit which made sense to her.

BE was cross-examined at length over the various words and phrases in each of the documents to seek to identify the degree of concern which she had prior to the payment on 5 August 2016. The following is an example:

It is clear from this interchange that BE’s concerns did not relate to where her money was coming from but to the fact that there were unacceptable delays in having her money remitted to her. It was not put to her that she had concerns at this time that she was going to be paid with someone else’s money. It was at this time that she checked that there were no debt issues, which is consistent with a concern about the viability of the business and its ability to pay not about the source of the funds.

She was then cross-examined on the fact that the funds were to be remitted from the DBS account in Hong Kong rather than the Hang Seng Bank account. Although this is a long passage, the kernel of her evidence can be seen from the following extract:

Both BE and JE’s evidence was the subject of the criticisms outlined above. Having seen and heard both of them in the witness box and considered the contemporaneous documents, I am unable to accept the validity of those criticisms. I accept the logic of the approach adopted by the Esculiers as a means to put pressure on Badilla and a review of the documents in this context supports the evidence given. I accept that the Esculiers were frustrated and towards the end somewhat concerned as to what was going on. However, I also accept that they took appropriate steps, both through B&K and by the searches done by BE, to satisfy themselves that there was no underlying problem with Badilla’s business. Their conclusion that his reluctance to pay was in part due to audit difficulties and in part due to the fact that Badilla was focusing on other matters is not unreasonable.

I can now return to the three questions set out in [155] above. It follows from my findings that the answer to both questions 1 and 2 is “No”. The Defendants did not have actual knowledge by 5 August 2016 that Badilla was operating a Ponzi scheme and I do not consider that a reasonable person in the position of the Esculiers would have appreciated on the facts available to them that Badilla was operating a Ponzi scheme. There was nothing other than the delay in making the repayment to alert them to that possibility. The length of that delay coupled with the reasons given for it would not, in my judgment, have alerted the notional reasonable person to have any greater concerns than did the Esculiers.

Question 3 requires me to ask whether the facts known to the Esculiers were such as would give a reasonable person in the position of the Esculiers serious cause to question the propriety of the repayments to be made and then to make proper inquiries.

There must be serious concerns not about the ability to pay but about the proprietary of the monies being repaid. The Esculiers did not have such concerns and I do not believe that the notional reasonable person would have has any greater concerns on the facts of this case. Like the Esculiers, the facts might have caused them to make enquiries similar to those made by the Esculiers but this would not have revealed the existence of the Ponzi scheme. The Plaintiffs did not identify any other enquiries which the reasonable person should have made which would have revealed the true position. This is not surprising as no such information came to light until over a year later. The answer to question 3 is therefore, also “no”.

As at 5 August 2016, therefore, the Defendants would have made out the defence of lack of notice.

I can deal with the other two repayments briefly. The second repayment was made just over a month later on 13 September 2016 (see [71(d)] above), and it also comprised the payment of €164,841.26 on 28 September 2016 to make up the exchange rate deficit. The third was made on 1 February 2017. Throughout this period, the Esculiers maintained pressure on Badilla and Badilla continued to prevaricate. BE gave evidence, which I accept, that once they had been repaid the majority of their investments in August 2016, they were reassured that the other outstanding payments would be made. I also accept her evidence that by December 2016, she was tired of the whole situation.

The position as I see it is that once the first substantial payment had been made, the Esculiers were satisfied that as long as they maintained pressure on Badilla he would pay up in due course. The Plaintiffs do not suggest that anything else occurred in this period that should have alerted the Esculiers or the notional reasonable person that Badilla was operating a Ponzi scheme or given them serious cause for concern that this might be the case. Their mind-set and hence the mind-set of the notional reasonable person would thus not have changed.

Conclusion on Issue 5

I therefore conclude that had it been necessary for the Defendants to establish the defence of “bona fide purchaser for value without notice”, they would have done so.

Issue 6: The JL Transfer

By June 2016, the relationship between TP and Badilla was such that she asked him to become a trustee of a family trust, the Catolac Family Trust (the “Catolac Trust”). She recounts the history of the Catolac Trust and the manner in which it had dealings through JL in paragraphs 30 to 35 of her AEIC:

The Defendants contend that this evidence is insufficient to demonstrate that the JL payments were made for the benefit of TP rather than the Catolac Trust. In their closing submissions the Defendants give five reasons why I should not accept TP’s evidence, which mainly revolve around the fact that there is no corroborating evidence, as well as the fact that some possibly inconsistent statements were made in earlier proceedings in Hong Kong.

In cross-examination which runs from pages 77 to 127 of the transcript for 14 March 2022, TP was repeatedly presented with documents which it was contended brought into question her evidence that the distribution from the Catolac Trust via JL was for her benefit. It does appear that from time to time there was a measure of confusion as to whether the investments were made for the benefit of the Catolac Trust, a still subsisting trust, or whether they represented distributions on sums due to TP from the Catolac Trust following which the Catolac Trust ceased to exist.

I do not propose to extend this already overlong judgment by considering the whole of that cross-examination. It is sufficient to cite the end of it:

This passage is indeed a repetition of the position she maintained throughout the cross-examination. True it is that TP did not produce any documents to support the assertion that the Catolac Trust had been wound up but neither did the Defendants. Equally, it is true that the Plaintiffs did not adduce evidence from anyone else in support, but it appears that the best person to assist in this would have been Badilla.

Overall, the totality of the evidence does satisfy me, on the balance of probabilities, that the sums transferred by JL to the LGL account in Hong Kong did represent moneys in the Catolac Trust which were due to TP.

Issue 7: The counterclaim

By their counterclaim the Defendants seek, if successful in the action, an award of damages under the cross-undertaking given by the Plaintiffs to BE by virtue of the Orders made in OS 1016 in paragraph 4 of the Order dated 10 January 2020 and to JE in paragraph 3(a) of the Order dated 17 March 2020.

Strictly speaking, since the Orders were made in OS 1016, any award under the cross-undertakings should be a matter for the judge in that summons when it is restored following judgment in this action. However, both parties invited me to decide it in this action as that would avoid the necessity for the judge in OS 1016 to be re-acquainted with the details of the litigation and for a further hearing to be appointed to resolve the matter.

This is a sensible pragmatic course and, in the circumstances, I am prepared to accede to their invitation.

The Esculiers were denied access to the Disputed Monies held in the Esculiers’ DBS account in Singapore when it was frozen on 15 March 2019. The Defendants thus seek an award for losses caused since that date. The Plaintiffs dispute this contending that any award should only relate to losses, if any, arising after the dates of the Orders, a year later. The plain wording of the undertaking favours the Defendants. The material portion provides that should the Court “find that the denial of access to the [Defendants of the Disputed Monies] has caused loss …”. The relevant date is thus the date from which access is denied, not the dates of the Orders.

Kitchin LJ (as he then was) gave guidance as to the principles and approach applicable in assessing damages under a cross-undertaking in AstraZeneca AB v KRKA dd Novo Mesto [2015] EWCA Civ 484 at [12]–[15]. They can be summarised as follows in so far as applicable to the facts of this case:

(a) The approach is compensatory not punitive but the principle of “liberal assessment” should apply.

(b) The fact that certainty or precision is not possible does not mean that a principled approach cannot be attempted.

(c) If the assessment involves estimating what might have happened in the future the court must make an estimate of the chances of that thing happening and adjust the award by reference to those chances.

(d) The court should not be over eager in scrutinising the evidence or too ready to subject any proposed methodology to minute criticism.

BE gave evidence that had the Disputed Monies not been frozen they would have been invested in a Swiss retirement fund and have achieved a significantly higher rate of interest than was achieved by the rates that have been applied during this period by DBS. In this connection, the Defendants tendered information regarding such a fund which generated 6.26% over the three years to September 2021 against a benchmark of 6.96%. Adopting a pragmatic approach, it is suggested that it that it would be fair for an award to be made at the pre-judgment interest rate of 5.33%.

In cross-examination BE accepted that from the time the Disputed Monies were received in the DBS account they were put on a time deposit. She said that at that time she was busy and could not attend to reinvestment, particularly as interest rates were pretty high, but that she intended to do so, conservatively, when the opportunity arose. She considered that she would have done this when the market conditions changed and interest rates dropped.

I accept that the Esculiers would not have left the money on deposit for an extended period particularly when interest rates were dropping and the suggestion of investing in a conservative retirement fund is plausible. The return suggested rate of return of around 6.0% seems reasonable although there should be a discount to cater for the chance that they would not have made such an investment or that they would have made it at a date somewhat later then the date on which they lost control of the Disputed Monies.

There are some similarities between the fact that the monies were unavailable to them and the position which would have applied had the money been owed to them by the Plaintiffs and only been paid after judgment in their favour when the 5.33% rate might have been applied.

Taking all these factors into account, I have concluded that the Plaintiffs should pay the Defendants damages at the rate of 4% on the disputed sums from 15 March 2019, but with credit being given for all sums actually accrued by way of interest on the account in the meantime.

Conclusion

The action fails. Whilst one has sympathy for any party who loses money as a result of a Ponzi scheme, in the circumstances of this case the law does not entitle the Plaintiffs to recover from the Defendants, earlier investors, who had the good fortune to be repaid before the scheme collapsed.

OS 1016 should therefore be restored for an appropriate order to be made giving effect to this judgment so that the Defendants are no longer denied access to the Disputed Monies.

Annexures

Annex 1: The Esculier AMA

This document may be accessed as an attachment to the PDF copy of this judgment, labelled “Annex 1—The Esculier AMA”.

Annex 2: 8 May 2014 Letter from Badilla

This document may be accessed as an attachment to the PDF copy of this judgment, labelled “Annex 2—8 May 2014 Letter from Badilla to SE”.

Annex 3: The SRE AMA

This document may be accessed as an attachment to the PDF copy of this judgment, labelled “Annex 3—The SRE AMA”.

Annex 4: The First Report of Dr Dasser

This document may be accessed as an attachment to the PDF copy of this judgment, labelled “Annex 4—The First Report of Dr Dasser”.

Annex 5: The Additional Report of Dr Dasser

This document may be accessed as an attachment to the PDF copy of this judgment, labelled “Annex 5—The Additional Report of Dr Dasser”.