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Grounds publishedDecided 30 Dec 2008
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High Court

George Raymond Zage III and Another v Rasif David and Others

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[2008] SGHC 244Case no. Suit 375/2006

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Grounds of decision

Official text from eLitigation

  1. [1] The first and second plaintiffs George Raymond Zage III and Kaori Kathleen Zage (“the Plaintiffs”) are husband and wife. They are citizens of the United States of America and Singapore permanent residents.

  2. [2] On or about 25 February 2006, the Plaintiffs were granted an option to purchase 35 Belmont Road (“the Property”) at a price of $11.4 million. On or about 8 March 2006, they engaged the law firm of David Rasif & Partners (“the Law Firm”) to act for them in the purchase. The Plaintiffs exercised the option on or about 10 March 2006. Completion of the sale and purchase of the Property was to take place no later than 2 June 2006. The Plaintiffs were initially represented by one David Tan of the Law Firm but from about 8 May 2006, David Rasif (“DR”) himself (who is the first defendant) said that David Tan was taking sabbatical from the Law Firm and henceforth, DR would be handling the transaction.

  3. [4] DR is a Singapore citizen and was at all material times practising as an advocate and solicitor in the Law Firm. He was a partner of the Law Firm until about 1 April 2006 and thereafter, was its sole proprietor.

  4. [5] According to the Statement of Claim (Amendment No 2), it transpired that between 31 May 2006 and 2 June 2006 (“the Relevant Period”), DR had on various occasions wrongfully withdrawn sums of money totalling $11,327,408 (“the Clients’ Money Withdrawn”) from the Law Firm’s client’s account, which account was supposed to hold money of various clients of the Law Firm. He had misappropriated the same and had absconded from Singapore.

  5. [6] The Plaintiffs commenced the present action on 15 June 2006 against seven defendants. The trial before me concerned the Plaintiffs’ claims against the fourth and fifth defendants and the sixth defendant only.

  6. [7] The fourth and fifth defendants are Ho Chi Kwong (“Ho”) and Jewels DeFred Pte Ltd (“DeFred”) respectively. Ho is a Singapore permanent resident and a director and shareholder of DeFred, a company incorporated in Singapore, which is engaged in the retail trade of precious stones and jewellery.

  7. [8] During the Relevant Period, DeFred had received two sums of money totalling $2,088,000 from DR for the purchase of precious stones and jewellery. It was not disputed that the $2,088,000 was part of the Clients’ Money Withdrawn. The Plaintiffs assumed that the entire $2,088,000 was part of the Plaintiffs’ Money although the Plaintiffs’ Money was about 94.09% of the Clients’ Money Withdrawn.

  8. [9] The sixth defendant is Lim Soon Kiang (“D6”). He is a Singapore citizen. He had received US$620,000 from DR being part of the Clients’ Money Withdrawn. The Plaintiffs also proceeded on the basis that the entire US$620,000 was part of the Plaintiffs’ Money.

  9. [10] The Plaintiffs’ claim against DeFred was that it had knowingly received the $2,088,000 and/or dishonestly assisted DR to misappropriate this sum such as to render DeFred liable as constructive trustee to the Plaintiffs for this sum. As Ho is the directing mind of DeFred, the Plaintiffs urged the court to lift the corporate veil and render Ho personally liable as well to the Plaintiffs. Mr Harry Elias, SC was the lead counsel for the Plaintiffs and Mr Hri Kumar, SC was the lead counsel for DeFred and Ho.

  10. [11] The Plaintiffs’ claim against D6 was also for knowing receipt and/or dishonest assistance in respect of US$620,000. D6 represented himself initially at the beginning of the trial but subsequently decided not to turn up as I shall elaborate later.

  11. [12] I will deal first with the claim against DeFred and Ho and then with the claim against D6. However, before I elaborate on the rest of the circumstances leading to the respective claims, I will deal briefly with the law.

  12. The Law

  13. [13] In Barnes v Addy (1874) LR 9 Ch App 244, Lord Selborne LC said (at 251-2):

  14. [14] Mr Elias and Mr Kumar accepted, as I do, that the elements of knowing receipt and dishonest assistance were as set out by the Court of Appeal in Caltong (Australia) Pty Ltd v Tong Tien See Construction Pte Ltd [2002] 3 SLR 241 (“Caltong”). In that case, Chao Hick Tin JA said at [31] and [33]:

  15. [15] There may be some overlapping between these two causes of action and hence, a person may in some circumstances be liable for both knowing receipt and dishonest assistance.

  16. [16] What then is the kind of knowledge that may render a person liable for knowing receipt?

  17. [17] There was a five-fold categorisation of knowledge by Peter Gibson J in Baden and others v Societe Generale pour Favoriser le Developpement du Commerce et de L’Industrie en France SA [1993] 1 WLR 509 but, generally, this categorisation has not been favoured in subsequent decisions.

  18. [18] In BCCI (Overseas) Ltd v Akindele (CA) [2001] Ch 437(“BCCI v Akindele”), Nourse LJ favoured a single test, ie, whether the recipient’s state of knowledge was such as to make it unconscionable for him to retain the benefit of the receipt.

  19. [19] In Rajabali Jumabhoy v Ameerali R Jumabhoy [1998] 2 SLR (“Rajabali Jumabhoy”), the Court of Appeal said at [107] to [108]:

  20. [20] At [119], the Court of Appeal in Rajabali Jumabhoy concluded that the conscience of one of the defendants was not so affected as to give rise to the imposition of a constructive trust.

  21. [21] More recently, in Comboni Vincenzo and another v Shankar’s Emporium (Pte) Ltd [2007] 2 SLR 1020, Kan Ting Chiu J referred to Rajabadi Jumabhoy and in Re Montagu’s Settlement Trusts [1987] Ch 264 and BCCI v Akindele and concluded that conscience/probity is the proper test for a constructive trust. With respect, I agree that that is the proper guide. Indeed, neither Mr Elias nor Mr Kumar really suggested otherwise although each sought to place different emphasis from the judgments in the various cases. I would, however, add the caveat from CZS No 2 that not every situation where probity is lacking necessarily gives rise to a constructive trust (see [19] above).

  22. [22] I turn now to a different aspect in the context of dishonest assistance. Mr Kumar suggested that it was not clear whether, in Singapore, the test for dishonest assistance was objective or was a combined test of “an objective standard leavened by a subjective element based upon the characteristics and knowledge of the defendant”. On the other hand, Mr Elias submitted that dishonesty was simply a question of considering what would offend the normally accepted standards of honest conduct.

  23. [23] In Caltong, the Court of Appeal referred to the four elements set out in Royal Brunei Airlines v Tan Kok Ming Philip [1995] 2 AC 378 (“Royal Brunei Airlines”) to establish dishonest assistance, see [14] above. However, Caltong did not refer to the oft-cited passages from Lord Nicholls of Birkenhead in Royal Brunei Airlines elaborating on dishonesty. Lord Nicholls said at 105 to 107:

  24. [24] As can be seen, Lord Nicholls stressed twice the objective standard and also reiterated that the standard of what constitutes honest conduct is not subjective. Therefore, his reference to the “personal attributes of the third party such as his experience and intelligence and the reason why he acted as he did” was not intended to refer to a subjective standard. In other words, while such attributes (which could be described as subjective elements as Lord Millett did in Twinsectra Ltd v Yardley and others [2002] 2 All ER 377 ) (“Twinsectra”) would be taken into account, the third party (who would usually be the defendant when litigation ensues) would not escape liability “simply because he sees nothing wrong in [his] behaviour”. To reiterate from Lord Nicholls, “Honesty is not an optional scale, with higher or lower values according to the moral standards of each individual”.

  25. [25] I now come to the House of Lords decision in Twinsectra. After considering Royal Brunei Airlines, the majority of the House of Lords adopted an approach which appeared different although supposedly following Royal Brunei Airlines. In Held (2), it is stated:

  26. [26] In Malaysian International Trading Corp Sdn Bhd v Interamerica Asia Pte Ltd & Ors [2002] 4 SLR 537, the High Court referred to the concept of dishonest assistance as set out in Royal Brunei Airlines but adopted the combined tests in Twinsectra of an objective standard “leavened by a subjective element based upon the characteristics and knowledge of the defendant”. This meant that for a person to be liable as an accessory to a breach of trust, he must also have been aware that he was acting dishonestly by the ordinary standards of reasonable and honest people.

  27. [27] However, in Bansal Hermant Govindprasad and another v Central Bank of India [2003] 2 SLR 33 (“Bansal”), the Court of Appeal said (at [30]) that the decision in Royal Brunei Airlines clarified that in determining accessory liability, the pre-requisite of dishonesty was to be judged objectively. A passage from Lord Nicholls’ judgment which I cited above was also cited with approval by the Court of Appeal (at [34] in Bansal), referring to p 74 and 75 of the report of Royal Brunei Airlines in the Weekly Law Reports.

  28. [28] Finally, I come to the Privy Council decision in Barlow Clowes International Ltd (in liquidation) and others v Eurotrust International Ltd and others [2006] 1 All ER 377 (“Barlow Clowes”). In that case, the Privy Council explained Twinsectra as being no different from the principles stated in Royal Brunei Airlines and stressed that the standard of dishonesty is objective and it was not necessary to establish liability for a defendant to think or believe that he was acting dishonestly. Thus, Lord Hoffmann said:

  29. [29] Mr Kumar submitted that Barlow Clowes has todate not been approved in Singapore. However, I note that Barlow Clowes adopted the principles of dishonesty stated in Royal Brunei Airlines which had in turn been endorsed by the Court of Appeal in Bansal.

  30. [30] In my view, the test is an objective one and while the personal attributes and experience of a defendant should be considered, it matters not whether he himself thought that what he was doing would ordinarily be considered as dishonest. I should mention that Mr Elias also relied on three other cases involving the liability of a beneficiary or payee of a cheque payment. I will elaborate on those cases later.

  31. DR’s purchases from DeFred

  32. [31] Mr Elias submitted that the conduct of staff from DeFred in respect of DR’s purchases demonstrated a lack of probity and constituted dishonesty within the definition thereof in Royal Brunei Airlines. I will now elaborate on what transpired.

  33. 30 May 2006 (Tuesday)

  34. [32] On 30 May 2006 at about 6 or 7pm, DR and another man walked into DeFred’s showroom at the lobby of the Hyatt Hotel at Scotts Road.

  35. [33] Lynn Lim Mui Ling (“Lynn”) who was a sales executive of DeFred since April 2005 recognised DR who had previously represented her hairstylist Sherman in a legal case and had approached Lynn to be a witness in that case. Sherman was also the hairstylist of Lynn’s colleague Chng Ching Gek (“Maeco”) who had also met DR when he handled Sherman’s case.

  36. [34] Maeco and Lynn greeted DR. Lynn asked him if he was David Rasif and reminded him that she had met him when he was acting for Sherman. That caused DR to say that he remembered Lynn.

  37. [35] DR informed Lynn he was interested in investing in diamonds above two carats. Lynn then introduced DR to Tan Hian, Thomas (“Thomas”), DeFred’s sales assistant manager.

  38. [36] Neither Lynn nor Thomas was introduced to the other man who accompanied DR. They only recalled that DR had said that the other man was his friend and a diamond expert.

  39. [37] After DR was introduced to Thomas, it was Thomas who mainly attended to him with assistance from Lynn and Maeco. DR said he was buying diamonds for investment and repeated that he wanted something more than two carats, of a high colour grade of D, E or F and preferably of a brilliant cut. DR did not specifically mention the kind of clarity he wanted in the diamonds. He also wanted the diamonds to come with certification from the Gemological Institute of America (“GIA”). According to Thomas, GIA is the world’s leading authority on diamond grading and gem identification.

  40. [38] To Thomas, DR appeared to be quite knowledgeable about diamonds. According to [22] of Thomas’ affidavit of evidence-in-chief (“AEIC”), Thomas took a few choice pieces of diamonds from the showroom safe to show DR. He also showed DR certificates of loose diamonds (see [23] of his AEIC). In oral testimony, it transpired that Thomas did not show any loose diamonds but jewellery with diamonds that day (as well as other jewellery) and the certificates he had referred to were copies. According to Thomas, it was normal procedure to show customers copies of certificates as DeFred did not keep many large stones in the showroom. If a customer was interested in a stone, then it would be sourced from the supplier. Thomas also said that large expensive diamonds were often sold based on an examination of the certificates alone. If a customer agreed to buy the same, payment would be requested so that DeFred would then pay the supplier. Should the diamond not match the description in the certificate (when it was delivered to the customer), the purchase price would be refunded. Therefore, the fact that DR was prepared to examine the copies of the certificates he was shown was not unusual to Thomas.

  41. [39] DR showed great interest during Thomas’ presentation. He was relaxed. At one point, he was even singing and dancing along to the music being played in the showroom. As Thomas went to retrieve various items to show DR, and/or certificates, Lynn engaged in small talk with him. DR told her that he has three daughters all studying in the Convent of the Holy Infant Jesus in Toa Payoh where they lived and that DR used to own a pub. DR also said that apart from looking for diamonds, precious stones and jewellery for investment purposes, he was also looking for jewellery for his wife.

  42. [40] Thomas described DR as very friendly and enthusiastic, jovial and easy to talk to. Lynn was very impressed with DR. She thought that he was a capable and successful lawyer who owned his own law firm and was a loving husband and doting father. Lynn found DR to be easy to talk to and witty. Maeco found him charming and witty.

  43. [41] DR kept asking Thomas to show him more diamonds and jewellery. DR would discuss some pieces with his friend quietly.

  44. [42] At about 8pm, when the shop was about to close, DR said he was still interested in looking at more diamonds and jewellery. Thomas said that with more time, he could source for better quality pieces and would even do a presentation to DR at his office or home. DR was happy with the suggestion and said he would call the next day.

  45. [43] Ho had not met DR or his friend on 30 May 2006 but Thomas briefed him about DR’s interest in looking for good quality stones. They looked through their suppliers’ stock listings and made calls to suppliers to source for more diamonds and jewellery.

  46. 31 May 2006 (Wednesday)

  47. [44] By 31 May 2006, DeFred had compiled seven or eight certificates of choice diamonds which had been faxed by overseas suppliers. They were for high grade diamonds, the largest being 10.89 carats and the second largest 10.7 carats. Thomas also chose two stones – a ruby and a yellow diamond and a duplicate certificate for a sapphire which a supplier already had in stock in Singapore.

  48. [45] Later that morning, DR called Thomas and requested him to make another presentation at the Law Firm at 43 Carpenter Street at 2.30pm. Thomas agreed and asked Lynn to join him.

  49. [46] When Thomas and Lynn arrived at the office of the Law Firm, they were impressed. The office occupied an entire floor of the building. They were led into a large conference room and later DR’s own room which had an attached guest room with a sofa set. Thomas noticed a lot of files and thought that DR had a flourishing business.

  50. [47] Thomas recalled that he made the presentation in DR’s room. DR was not interested in the ruby (which was heat-treated) but expressed interest in the yellow diamond and the sapphire (of which Thomas had a certificate only). DR was also interested in the 10.89 and 10.7 carat diamonds (of which Thomas also only had certificates). DR bargained on prices and repeatedly said he would not buy if he did not get a good price. At one point, DR also took out a copy of a Rapaport diamond report to demonstrate that he was a serious buyer with in-depth knowledge. Such a report is available only on subscription and, according to Thomas, is the primary source of diamond price information. Usually only serious buyers or major retailers of diamonds would have access to such reports. DeFred itself obtained copies of such reports from its suppliers.

  51. [48] Eventually, DR selected 12 items of diamonds and jewellery and made photocopies of the certificates of diamonds he was interested in. Some of the items he selected had been shown to him the day before at the showroom.

  52. [49] I set out below a table prepared by Thomas showing the diamonds and jewellery which DR selected that day (on 31 May 2006) as well as on the next day (1 June 2006) and the basis of selection, for example, whether based on an examination of the item itself or certificate or both.

  53. S/N

  54. Item

  55. Date seen/ location

  56. Date selected/ location

  57. Basis of selection

  58. Date delivered/ location

  59. 1

  60. Fancy Yellow Diamond 10.89 ct (Item 22: 3AB 881 to 885)

  61. [31] May 2006 during presentation at DR’s office

  62. [31] May 2006 at DR’s office

  63. Certificate (copy)

  64. [2] June 2006 at Trellis Tower

  65. 2

  66. Fancy Yellow Diamond 10.70 ct (Item 23: 3AB 886 to 890)

  67. [31] May 2006 during presentation at DR’s office

  68. [31] May 2006 at DR’s office

  69. Certificate (copy)

  70. [2] June 2006 at Trellis Tower

  71. 3

  72. Fancy Yellow Diamond 3.63 ct (Item 24: 3AB 891 to 896)

  73. [31] May 2006 during presentation at DR’s office

  74. [31] May 2006 at DR’s office

  75. Certificate and physical stock

  76. [2] June 2006 at Trellis Tower

  77. 4

  78. Round Brilliant Diamond 5.05 ct (Item 25: 3AB 897 to 901)

  79. [31] May 2006 during presentation at DR’s office

  80. [31] May 2006 at DR’s office

  81. Certificate (copy)

  82. [2] June 2006 at Trellis Tower

  83. 5

  84. Round Brilliant Diamond 3.50 ct (Item 26: 3AB 902 to 906)

  85. [31] May 2006 during presentation at DR’s office

  86. [31] May 2006 at DR’s office

  87. Certificate (copy)

  88. [2] June 2006 at Trellis Tower

  89. 6

  90. Round Brilliant Diamond 2.12 ct (Item 27: 3AB 907 to 911)

  91. [31] May 2006 during presentation at DR’s office

  92. [31] May 2006 at DR’s office

  93. Certificate (copy)

  94. [2] June 2006 at Trellis Tower

  95. 7

  96. Blue Sapphire 16.26 ct (Item 3: 3AB 678 to 682)

  97. [30] May 2006 at DeFred’s showroom

  98. [31] May 2006 during presentation at DR’s office

  99. [31] May 2006 at DR’s office

  100. Certificate (copy)

  101. [1] June 2006 at Mandarin Hotel coffee lounge

  102. 8

  103. Fancy Yellow Diamond Ring 5.17 ct (Item 1: 3AB 643 to 661)

  104. [30] May 2006 at DeFred’s showroom

  105. [31] May 2006 at DR’s office

  106. Certificate and physical stock

  107. [1] June 2006 at Mandarin Hotel coffee lounge

  108. 9

  109. Oval Diamond Ring 5.02 ct (Item 2: 3AB 662 to 667)

  110. [30] May 2006 at DeFred’s showroom

  111. [31] May 2006 at DR’s office

  112. Certificate and physical stock

  113. [1] June 2006 at Mandarin Hotel coffee lounge

  114. 10

  115. Diamond & Emerald Ring (EDR7214) (Item 5: 3AB 689 to 693)

  116. [30] May 2006 at DeFred’s showroom

  117. [31] May 2006 at DR’s office

  118. Physical stock

  119. [1] June 2006 at Mandarin Hotel coffee lounge

  120. 11

  121. Diamond Earrings (DE206/036) (Item 6: 3AB 694 to 724)

  122. [30] May 2006 at DeFred’s showroom

  123. [31] May 2006 at DR’s office

  124. Physical stock

  125. [1] June 2006 at Mandarin Hotel coffee lounge

  126. 12

  127. Pearl Earrings (SSPDE205/001) (Item 7: 3AB 725 to 732)

  128. [30] May 2006 at DeFred’s showroom

  129. [31] May 2006 at DR’s office

  130. Physical stock

  131. [1] June 2006 at Mandarin Hotel coffee lounge

  132. 13

  133. Blue Sapphire 25.16 ct (Item 4: 3AB 683 to 688)

  134. [1] June 2006 at Mandarin Hotel coffee lounge

  135. [1] June 2006 at Mandarin Hotel coffee lounge

  136. Physical stock and certificate

  137. [1] June 2006 at Mandarin Hotel coffee lounge

  138. 14

  139. Diamond Ring (DR206/019) (Item 8: 3AB 733 to 748)

  140. [1] June 2006 at DeFred’s showroom

  141. [1] June 2006 at DeFred’s showroom

  142. Physical stock

  143. [1] June 2006 at Mandarin Hotel coffee lounge

  144. 15

  145. Diamond Pendant (DP205/068) (Item 9: 3AB 749 to 757)

  146. [1] June 2006 at DeFred’s showroom

  147. [1] June 2006 at DeFred’s showroom

  148. Physical stock

  149. [1] June 2006 at Mandarin Hotel coffee lounge

  150. 16

  151. Diamond Earrings (DE204/075) (Item 10: 3AB 758 to 771)

  152. [1] June 2006 at DeFred’s showroom

  153. [1] June 2006 at DeFred’s showroom

  154. Physical stock

  155. [1] June 2006 at Mandarin Hotel coffee lounge

  156. 17

  157. Diamond Earrings (DE204/100) (Item 11: 3AB 772 to 786)

  158. [1] June 2006 at DeFred’s showroom

  159. [1] June 2006 at DeFred’s showroom

  160. Physical stock

  161. [1] June 2006 at Mandarin Hotel coffee lounge

  162. 18

  163. Diamond Earrings (DE206/042) (Item 12: 3AB 787 to 800)

  164. [1] June 2006 at DeFred’s showroom

  165. [1] June 2006 at DeFred’s showroom

  166. Physical stock

  167. [1] June 2006 at Mandarin Hotel coffee lounge

  168. 19

  169. Diamond Earrings (DE206/043) (Item 13: 3AB 801 to 816)

  170. [1] June 2006 at DeFred’s showroom

  171. [1] June 2006 at DeFred’s showroom

  172. Physical stock

  173. [1] June 2006 at Mandarin Hotel coffee lounge

  174. 20

  175. Diamond Ruby & Pink Sapphire Ring (RDR203/001) (Item 14: 3AB 817 to 820)

  176. [1] June 2006 at DeFred’s showroom

  177. [1] June 2006 at DeFred’s showroom

  178. Physical stock

  179. [1] June 2006 at Mandarin Hotel coffee lounge

  180. 21

  181. Diamond Sapphire Ring (FDR206/037) (Item 15: 3AB 821 to 831)

  182. [1] June 2006 at DeFred’s showroom

  183. [1] June 2006 at DeFred’s showroom

  184. Physical stock

  185. [1] June 2006 at Mandarin Hotel coffee lounge

  186. 22

  187. Diamond Earrings (DE205/064) (Item 16: 3AB 832 to 849)

  188. [1] June 2006 at DeFred’s showroom

  189. [1] June 2006 at DeFred’s showroom

  190. [2] Certificates and Physical stock

  191. [1] June 2006 at Mandarin Hotel coffee lounge

  192. 23

  193. Diamond Earrings (DE8300) (Item 17: 3AB 850 to 854)

  194. [1] June 2006 at DeFred’s showroom

  195. [1] June 2006 at DeFred’s showroom

  196. Physical stock

  197. [1] June 2006 at Mandarin Hotel coffee lounge

  198. 24

  199. Diamond Bracelet (DBG204/007) (Item 18: 3AB 855 to 862)

  200. [1] June 2006 at DeFred’s showroom

  201. [1] June 2006 at DeFred’s showroom

  202. Physical stock

  203. [1] June 2006 at Mandarin Hotel coffee lounge

  204. 25

  205. Pearl Diamond Earrings (SSPDE205/009) (Item 19: 3AB 863 to 871)

  206. [1] June 2006 at DeFred’s showroom

  207. [1] June 2006 at DeFred’s showroom

  208. Physical stock

  209. [1] June 2006 at Mandarin Hotel coffee lounge

  210. 26

  211. Pearl Diamond Earrings (BSSPE9572) (Item 20: 3AB 872 to 873)

  212. [1] June 2006 at DeFred’s showroom

  213. [1] June 2006 at DeFred’s showroom

  214. Physical stock

  215. [1] June 2006 at Mandarin Hotel coffee lounge

  216. 27

  217. Pearl Diamond Brooch SSPDB0205/005 (Item 21: 3AB 874 to 880)

  218. [1] June 2006 at DeFred’s showroom

  219. [1] June 2006 at DeFred’s showroom

  220. Physical stock

  221. [1] June 2006 at Mandarin Hotel coffee lounge

  222. [50] Thomas offered to sell the 12 items (ie, items 1 to 12 in the table) for a package price of $1,618,000, saying that that was the lowest price.

  223. [51] Thomas and DR discussed how payment could be effected. Thomas said the funds could be transferred electronically to DeFred’s bank account and he provided DR with the particulars thereof. In the meantime, DR asked when the items could be delivered to him as he was leaving with his family for a three-week holiday in Bangkok. DR therefore wanted the items to be delivered to him on 2 June 2006 between 2 to 4pm. Thomas informed him that the items would be released upon receipt of payment and DR said he would transfer the funds in the morning of 1 June 2006, ie, the next day.

  224. [53] Thomas briefly informed Ho of what had transpired during the second presentation (on 31 May 2006) when Thomas returned to the office.

  225. 1 June 2006 (Thursday)

  226. [54] On 1 June 2006, DR contacted Thomas while Thomas was on his way to his office at about 10am. DR told Thomas that he had transferred $1,818,000 to DeFred’s account. This was $200,000 more than the $1,618,000 discussed the day before as DR said he wanted to come down to the showroom in the afternoon to select some jewellery pieces as gifts.

  227. [55] Thomas informed Ho accordingly and Ho went to the branch where DeFred’s account was maintained to inquire if the funds had been credited. The bank manager informed Ho that the funds had not been received yet but would monitor the account and keep Ho informed.

  228. [56] In the meantime, when Thomas reached his office, he instructed Lynn to select jewellery pieces for DR’s consideration that would amount to at least $200,000 since DR was prepared to spend an additional $200,000.

  229. [57] At about 12.30pm, DR arrived at the showroom. He asked Thomas whether DeFred had received the funds and held up a telegraphic transfer slip (“the TT slip”) and said words to suggest that the funds had already been transferred earlier that day. However, DR did not hand the TT slip to Thomas or Lynn. In any event, Thomas informed DR that he had not received confirmation from Ho that the funds had been received and he would call DR as soon as such confirmation was received.

  230. [58] In the meantime, DR continued to select other items and eventually chose another 14 pieces (which are set out in the table mentioned above). Again, there was negotiation on the prices and eventually, Thomas and DR agreed to $1,780,350 for all the 26 items selected, ie, the 12 selected on 31 May 2006 at DR’s office (although some had been seen the day before in the showroom on 30 May 2006) and the 14 selected on 1 June 2006 (during DR’s second visit to the showroom). This meant that DR was entitled to a refund of $37,650 if the $1,818,000 transfer from him was confirmed.

  231. [59] DR then asked if delivery of some of the items he had selected could be made the same night. Thomas agreed provided there was confirmation that the $1,818,000 was received. No time for delivery was arranged since that confirmation had not yet been received then. DR told Thomas to call him when the funds had been credited into DeFred’s account.

  232. [60] After DR left, Thomas was busy taking delivery of some stones from suppliers and checking and packing some items to be delivered that night, in anticipation that there would be confirmation that the funds had been received. Thomas asked Maeco to prepare a delivery order dated 1 June 2006 (“the 1st DO”) for the items that would be delivered that night. Thomas also asked Maeco to include a pearl necklace JDP67 worth about $40,000 as he was hoping to persuade DR to purchase the same so that there would be no need to refund DR the $37,650.

  233. [61] In the meantime, Ho had managed to source a blue sapphire from a supplier. He considered it to be a rare stone because of its vivid blue colour and it was an untreated stone. Ho then instructed Thomas to ask DR if he would be interested in buying the blue sapphire. Ho suggested the price to be at least $270,000 as the supplier had indicated that the price (to DeFred) would be about $210,000.

  234. [62] At about 2.30pm of 1 June 2006, Ho informed Thomas that the expected funds from DR had been credited into DeFred’s account (as Ho had received the confirmation from the bank manager). Thomas then informed DR accordingly and that he could make delivery of the items which were available for delivery.

  235. [63] Thomas also told DR about the vivid blue sapphire which was of 25.16 carats. Thomas suggested a price of $290,000 as a buffer to allow for some bargaining by DR. DR asked him how he was to pay for it if he was interested in it and Thomas suggested that DR could issue a cash cheque if DR wanted to take delivery of the blue sapphire before leaving for his trip to Bangkok. Thomas suggested a cash cheque as he believed it could be encashed almost immediately. DR then arranged to meet Thomas at a coffee lounge on the second floor of the Mandarin Hotel at Orchard Road at about 7.30pm.

  236. Night of 1 June 2006 (Thursday)

  237. [64] Thomas arrived at the designated venue with Lynn and Maeco at about 7.45pm. They had brought 20 of the 26 items purchased and the vivid blue sapphire and the pearl necklace JDP67.

  238. [65] DR did not want the pearl necklace JDP67. This item was therefore deleted from the 1st DO as it had been included therein. Some minor corrections were also made to the 1st DO.

  239. [66] Thomas also showed DR the vivid blue sapphire. DR asked if it was a good investment and Thomas said it was because of its vivid blue colour and it was an untreated sapphire. DR said he trusted Thomas but wanted a lower price. They finally agreed at $270,000 for the blue sapphire. Again, Thomas told DR that if he wanted to take delivery of the vivid blue sapphire that night, he could make payment by way of a cash cheque. Thomas said he was comfortable in making such a suggestion because six of the 26 items earlier purchased by DR had not yet been delivered to DR and they were worth more than the price of the vivid blue sapphire.

  240. [67] DR then issued a cash cheque for $270,000 (“the Cash Cheque”) and handed it to Thomas. Thomas said he did not notice anything unusual about the Cash Cheque and kept it in a pocket of his jacket. However, neither Lynn nor Maeco saw what was written on the Cash Cheque.

  241. [68] After DR checked the 20 items and the blue sapphire, he signed on the last page of the 1st DO to acknowledge receipt of the items. He then asked when he could receive the remaining six items. Thomas said they would be delivered by 3pm the next day.

  242. [69] Thomas returned to his office at about 9pm. Ho had already left for the day and the Cash Cheque was kept in the showroom safe.

  243. 2 June 2006 (Friday)

  244. [70] Thomas had informed Ho about the Cash Cheque. On 2 June 2006, Ho arranged for Thomas to hand the Cash Cheque to him as he drove through the driveway of Hyatt Hotel and he (Ho) then brought it to the relevant bank (“Maybank”) and encashed it.

  245. [71] At about 3pm that day, Thomas called DR to inform him that the remaining six items were ready for delivery. DR requested that Thomas meet him at his residence at Trellis Towers, Toa Payoh, to deliver the same.

  246. [72] At about 4pm, Thomas and Lynn arrived at Trellis Towers. They saw DR at the driveway with the boot of his car opened. DR said he was waiting for his sister-in-law to come down. DR suggested that they hand over the remaining items then and Thomas suggested that this be done inside the car. DR agreed. He and Thomas got into the rear seat while Lynn got into the front passenger seat. The six remaining items were delivered by Thomas to DR and DR signed a list of these six items (“the 2nd DO”) to acknowledge receipt of the same. Cash of $37,650 was also returned to him there. DR was also given two tax invoices no 83080 and 83081 for the 26 items and for the vivid blue sapphire respectively. A pair of diamond cufflinks was also handed to DR as a gift for his patronage. DR continued to be friendly and said that he would visit the showroom again when he returned from Bangkok. Lynn and Thomas then left. They did not see DR again.

  247. Submissions for the Plaintiffs

  248. [73] Mr Elias submitted that the entire circumstances surrounding the sale, purchase and delivery of the items to DR and the documentation or, the lack thereof, demonstrated that DeFred staff had wilfully and recklessly failed to make inquiries as honest and reasonable persons would have. He also submitted that DR was prepared to spend large sums of money indiscriminately and hastily and DeFred’s staff had knowingly and willingly assisted DR in his breach of trust in misusing part of the Plaintiffs’ Money.

  249. [74] Mr Elias also submitted that Ho should be personally liable as he was and is the directing mind and will of DeFred and because of the role he played in the entire transaction. I will deal with the question of Ho’s personal liability later.

  250. [75] I will now summarise the litany of allegations against DeFred as found in the very lengthy submissions of Mr Elias.

  251. The personal attributes of DR

  252. [76] Mr Elias stressed that DR was a first time walk-in customer of DeFred who was barely known to DeFred’s staff. Yet, over four days, DR bought items totalling $2.088 million and the two payments of $1,818,000 and $270,000 were actually made on the one and same day, ie, 1 June 2006.

  253. [77] He submitted that the facts that a “total stranger” would buy so much in just a few days, especially for DeFred whose annual turnover for the past ten years was in the region of $3 million to $4 million ought to have raised questions in the minds of DeFred’s staff.

  254. [78] DR’s earlier attitude was not the usual behaviour of a reasonable and serious customer. Instead, he was singing and dancing on the first day, ie, 30 May 2006.

  255. [79] Furthermore, DR was only one of the partners (before he became a sole proprietor) in a small law firm. He was not particularly well known as a lawyer and the case in which he represented Sherman was only an assault case and did not have the stature and reputation of a customer who would walk in and spend about $2 million.

  256. [80] The office of the Law Firm was in fact a modest one located in a small building in Carpenter Street. According to the second plaintiff, it was an unimpressive office. DR had also informed Thomas and Lynn that he was staying in a condominium in Toa Payoh which was not a prime residential area and DR’s car was an inexpensive Japanese make instead of an expensive luxury car of a European make.

  257. [81] DeFred’s staff ought to have known that DR was not in the same league as some of their other customers like the royalty they claimed to have served.

  258. DR’s lack of experience in loose stones and jewellery

  259. [82] Mr Elias emphasized that because DR did not explicitly mention the kind of clarity he wanted for his intended investment in diamonds, this was an obvious indicator of his inexperience and DeFred’s staff must have realised this from the outset. DR also did not examine the items he was shown with a loupe.

  260. [83] Secondly, there was no evidence that DR had shopped around other wholesalers and retailers before making such large purchases. On this point, Mr Elias relied on the evidence of Itzhak Davidov (“Davidov”), the Plaintiffs’ expert, who said that one would be more likely to get a better discount from a wholesaler rather than a retailer.

  261. [84] Thirdly, Mr Elias suggested that it was “most unusual and commercially illogical” for an experienced investor to make such large purchases from a retailer located in an expensive shopping district in Singapore. Yet, Davidov also said that at times, customers come to an expensive area to see more jewellery and more diamonds and it was not necessary for the price to be very high (NE 28 June 2007 p 93 to 94).

  262. [85] Fourthly, Mr Elias submitted that DR’s reference to a Rapaport report should have shown that DR was an inexperienced investor rather than the other way round. A Rapaport report is issued on a weekly basis, has different editions for round white diamonds but is not applicable for coloured diamonds. When DR flashed the Rapaport report on 31 May 2006, neither Thomas nor Lynn took the trouble to check whether it was the latest edition on the one for round white diamonds which DR was interested in. Furthermore, a Rapaport report would be applicable to only three out of the total of 27 items purchased. More importantly, there are important comments in a standard Rapaport report stating that the price list in such a report represents high cash asking prices. The list does not give the last price for any diamond in a particular category but it does give the first price from which many in the trade begin negotiations. It is not uncommon for interdealer transactions to trade in the 20 percent to 35 percent discount range. The discounts vary greatly and are influenced by various factors such as the stone’s quality, market, liquidity and the terms of sale. In Davidov’s evidence, a wholesaler will always get a discount on Rapaport.

  263. [86] Yet, DR paid prices for three white round diamonds higher than that listed in the Rapaport report relevant at the material time:

  264. [87] Mr Elias stressed that the fact that DR was prepared to pay more than Rapaport must have demonstrated to Thomas that DR was not the experienced investor he portrayed himself to be and Thomas was taking advantage of the situation to help DR convert money into loose stones or jewellery in the shortest time possible.

  265. [88] Fifthly, DR had deviated from his initial intention to invest in round brilliant diamonds by also selecting sapphires and set jewellery (see the table prepared by Thomas).Only three of the 27 items purchased were in conformity with his initial specifications and these three amounted to $540,000 only, about 25% of the total purchase price of more than $2 million. According to the evidence of Davidov, it would raise a big question mark to him if a customer was looking for large diamonds and ended up seeing other stones and jewellery.

  266. [89] Sixthly, the presentation at the office of the Law Firm was really a paper presentation based on certificates as only two stones, a 3.63 carat yellow diamond and a ruby were brought along. It was submitted that Thomas did not bring along other items which DR had expressed interest in in the showroom the day before because Thomas had already gauged, seen and understood that DR’s motive was to buy quickly with minimum evaluation of the items.

  267. [90] Seventhly, the fact that Thomas had brought two more items, ie, the vivid blue sapphire and the pearl necklace JDP67 on the night of 1 June 2006 to show DR, which DR had not seen before, illustrated that Thomas was trying to sell anything to DR because he knew that DR was not the investor he claimed to be.

  268. Manner of selection by DR

  269. [91] Mr Elias submitted that Davidov’s evidence was that experienced retail purchasers would purchase solely on certificates only if the stone was less than three carats. Furthermore, the certificates should be internationally recognised.

  270. [92] Yet, DR had bought a cornflower blue sapphire of 16.26 carats and a fancy yellow diamond ring of 5.17 carats (items 7 and 8 of the table) which were not supported by certificates which are internationally recognised.

  271. [93] A certificate of the cornflower blue sapphire (AB 678) was first shown to DR on 30 May 2006 at the showroom. However, it was a certificate issued by GRS GemResearch Swisslab (“GRS”). Davidov’s evidence was that for precious stones (other than diamonds), the most internationally acceptable certificate was one issued by Gubelin, not GRS. He had never even heard of GRS and his inquiries with retailers in the trade revealed likewise.

  272. [94] As for the fancy yellow diamond ring, the physical ring was examined on 30 May 2006 at the showroom. It was supported by a certificate issued by Nan Yang Gemological Institute (“NYGI”) which was a local certificate only. Davidov also criticised the NYGI certificate as it referred to the weight of the diamond as “Approx. 5.17 cts”. To him, an international certificate would not give an approximate weight even though the diamond was already mounted on the ring. The NYGI certificate was therefore not particularly valuable to Davidov.

  273. [95] Accordingly, Mr Elias submitted that because DR was prepared to accept certificates from GRS and NYGI, Thomas must have known that DR was in a hurry to spend large amounts of money indiscriminately and Thomas should have queried DR’s behaviour.

  274. [96] Mr Elias also submitted that a serious investor would not buy loose stones by looking only at certificates and, in the present case, some of the certificates presented to DR (before he agreed to buy) were not originals. Yet, he bought many stones based on copies of certificates alone. Furthermore, DR had agreed on 31 May 2006 to buy five items (see items 8 to 12 of the Table) based on his memory alone as he had seen them the day before and not again on 31 May 2006.

  275. [97] Mr Elias submitted that the manner in which DR went about in the showroom to select items on 1 June 2006 was haphazard and random.

  276. Venues of delivery – out of the norm

  277. [98] Mr Elias criticised the venues of the deliveries. The first venue was in full public view in a coffee lounge at the Mandarin Hotel. There was no security to safeguard the delivery of approximately $1 million worth of items.

  278. [99] Secondly, the lighting at the coffee lounge was far from ideal for a proper examination of the items because of its dim lighting.

  279. [100] As for the delivery at the second venue, which was the backseat of DR’s car in the driveway at Trellis Towers, Mr Elias criticised the evolving evidence of DeFred’s staff because, initially, they had suggested that the second venue was DR’s home or outside his home, then at a carpark and then inside DR’s car at the driveway. He submitted that the shift in such evidence was an attempt to cover up the deficiencies in the second delivery. He submitted that neither the driveway nor the backseat of DR’s car was a conducive place to examine six loose diamonds worth almost $1 million or a safe place for delivery to be effected.

  280. [101] Accordingly, Mr Elias submitted that DeFred’s staff knew that DR was not interested in examining the items at the Mandarin lounge or in his car at all and that in fact there was no proper examination by DR of the items delivered at either venue.

  281. [102] Indeed, he stressed that when DR was initially prepared to receive the second delivery while standing by the boot of his car, alarm bells should have been blaring and DeFred should have put an immediate end to the surreptitious transactions.

  282. Inadequate and improper documentation – tax invoices, delivery orders, no receipts

  283. [103] Mr Elias submitted that there was a lack of proper documentation. There was some inconsistency in that certificate numbers were stated for some but not for all of the items in the 1st DO, for example, not for the pair of diamond earrings at AB 57.

  284. [104] The 1st DO had numerous typographical errors and cancellations.

  285. [105] In the tax invoice no 83080, only nine items were individually listed while seventeen others were simply described as “17 pcs Jewellery”.

  286. [106] The price of each item, whether for the nine or the 17 items, was not listed out individually. Without such individual prices, DR would not be able to recall how much he had paid for each. Yet, DeFred prepared such an invoice because they knew that DR was prepared to spend large amounts of money indiscriminately and it would not matter to him that he would receive incomplete and inaccurate documentation.

  287. [107] Another submission from Mr Elias was that DeFred did not issue a receipt for the payments received from DR. The DOs and the tax invoices were not receipts. He submitted that Thomas could effect the sale without proper sales documentation because Thomas knew that DR did not care how much he was paying.

  288. Payment/no set-off/cash refund

  289. [108] Mr Elias submitted that it was most unusual for a purchaser to transfer an additional $200,000 over the agreed price especially when there was no prior indication from DR that he wanted to purchase more items. Furthermore, DR could have paid for additional items after he had selected them. He submitted that as DR was eager to pay an additional $200,000 before he had viewed additional items, this was a tell-tale sign that must have sounded alarm bells. It must have been obvious to DeFred that DR was on a mission to exchange cash for loose stones/jewellery in double-quick time.

  290. [109] He also submitted that when DR issued the Cash Cheque for $270000 for the vivid blue sapphire, there was actually a refund of $37,650 due to DR. It would have been a simple matter for DR to issue a cheque for the net sum of $232,350, yet, neither he nor Thomas discussed this. This was another illustration of unusual conduct on DR’s part as he was not eager to ask for payment due to him.

  291. Urgency

  292. [110] Mr Elias stressed that the entire transaction was completed over a short space of four days.

  293. [111] Secondly, DR obviously wanted to complete his purchases quickly as he was prepared to transfer the additional $200,000 to meet any future purchases. He was not even prepared to wait till he had selected the additional items to be purchased before making the additional payment.

  294. [112] Thirdly, DR was even prepared to come down during lunch time on a normal working day on 1 June 2006 to select the additional items in what Mr Elias described as a random and haphazard selection when he could have waited till the evening or ask for another presentation the next day at his office.

  295. [113] Although Mr Elias accepted that perhaps there was some urgency because DR had said that he was going to fly to Bangkok, he pointed out that Thomas himself denied there was any urgency during cross-examination even though his AEIC suggested that he acknowledged there was urgency on DR’s part.

  296. [114] Mr Elias also submitted that DeFred was eager to sell and complete the sales quickly. Their hasty contact of suppliers to source for more items for DR was a clear indication that they knew of DR’s desire to spend large sums of money indiscriminately and quickly.

  297. Motivation of DeFred in closing their eyes to the tell-tale signs

  298. [116] Mr Elias submitted that there were various reasons why DeFred had closed their eyes to tell-tale signs. First, DeFred had been making losses for the six years from 1999 to 2004. Even in their best years in 1994 to 1996, each year’s profit ranged from $261,100 to $384,594. The profit of $310,675.77 as computed by Ho, from the transaction with DR was on par with an entire year’s profit even in the good years. Therefore, although DeFred saw the tell-tale signs, they chose to assist DR in converting cash into loose stones and jewellery in view of their loss-making business.

  299. [117] Secondly, Thomas, Lynn and Maeco would be earning commissions and hence would be eager, even over-zealous, to make and complete sales to DR. They closed a blind eye to assist DR in his conversion exercise.

  300. [118] Thirdly, a number of items sold to DR were grossly overpriced. I have already mentioned the three loose diamonds (see [86] above).

  301. [120] DeFred had also sold old stock of a pair of diamond earrings and of a diamond and emerald ring (items 23 and 10 respectively of the table) and of a 3.63 carat fancy yellow diamond (item 3 of the table) at grossly inflated prices to DR.

  302. [122] DeFred knew that DR was on a path to spend large sums of money indiscriminately and as soon as possible and they chose to co-operate with DR by inflating their own prices to assist DR to convert the cash quickly.

  303. [123] Mr Elias also disagreed with the evidence for DeFred that diamond prices were on a rising trend at the time when DR’s purchases were made and he submitted that the jewellery pieces had less investment value than loose stones. Again, it was submitted that Thomas knew he could sell DR anything without regard to its investment value because DR was on a spending spree.

  304. Client’s accounts

  305. [124] I will now elaborate on the evidence in respect of the TT slip and the Cash Cheque and Mr Elias’ submissions thereon.

  306. [125] As mentioned, it was not disputed that in the morning of 1 June 2006, DR came into the showroom holding the TT slip. There were many details on the TT slip such as the name of the beneficiary, its account number and bank and the amount of $1,818,000.

  307. [126] A current account number (presumably of the Law Firm’s client’s account) was stamped on the TT slip. So was the name of the Law Firm and its address and telephone and fax numbers.

  308. [127] There was a smaller stamp on the TT slip referring to “DAVID RASIF & PARTNERS – CLIENT’S ACCOUNTS”. Thomas said he could see that the TT slip was a blue slip but nothing else. Lynn said she could see the numbers “1,818” on the TT slip as she was standing closer to DR (about a metre away). DR had pointed to the figure (on the TT slip) and said it was a nice number. Mr Elias submitted that, contrary to their denials, both Thomas and Lynn in fact saw the stamp with the name of the Law Firm (with its address and other particulars) as well as the smaller stamp with the words referring to the Law Firm’s client’s accounts. I will come back to this point later.

  309. [128] As for the Cash Cheque, the name of the Law Firm was printed on it. In addition, there was a stamp “DAVID RASIF & PARTNERS – CLIENT’S ACCOUNTS” on that cheque in slightly larger letters than the printed name of the Law Firm.

  310. [129] According to Thomas, he had only checked the sum $270,000 as written in figures on the Cash Cheque but not the same sum in words. He did not ensure that the sum in words matched the sum in figures. He had also checked that it was a cash cheque and noticed the date of the cheque which was 2 June 2006 even though the cheque was signed and handed to him on 1 June 2006 at the Mandarin lounge. He did not read the printed name of the Law Firm or the stamped reference to the Law Firm’s client’s accounts. However, even if he had noticed the reference to the Law Firm’s client’s accounts on the cheque, he would still have thought it was DR’s account.

  311. [130] Ho, who had collected the Cash Cheque from Thomas the next day to encash it, said that he looked at the cheque only when he was at the counter of Maybank to encash it. He saw the date on the cheque and the sum in figures but not in words. Like Thomas, he did not see the printed name of the Law Firm or the stamped reference to the Law Firm’s client’s accounts.

  312. [131] Ho elaborated that, in any event, he would not have been able to read “RASIF” or “CLIENT’S” or “ACCOUNTS” although he understood what “Accounts” meant if he was told what the word said. He also initially claimed that he did not know what “client” in English meant but he knew what “customer” meant. However, in response to my questions, he accepted that before this action was filed, he understood the meaning of the English words “customer” and “client”.

  313. [132] As for Lynn, she said that at the material time, she did not understand what the term “client’s accounts” meant although Maeco said the words meant an account owned by the customer. However, as mentioned above, neither Lynn nor Maeco saw what was written on the Cash Cheque which was handed by DR to Thomas.

  314. [133] Mr Elias submitted that Thomas and Ho were not telling the truth because they knew the significance of the reference to the printed name of the Law Firm and to the stamped reference to the Law Firm’s client’s accounts. Each must have read these words and understood what the term “client’s accounts” meant because each must have understood what a “client” and an “account” meant individually. Hence, they must have understood what the two words combined together meant.

  315. [134] Thomas was fluent in English and although Ho said his standard of English was poor, Mr Elias submitted that Ho had an adequate command of English. In fact, Ho had attended a gem trade laboratory course in New York for six months although he claimed that he did not understand most of the course. He claimed that he gave up after six months because he was not able to catch up with his studies there.

  316. [135] Mr Elias also submitted that Ho had engaged other law firms for other transactions before and must have been familiar with the term “client’s accounts” as he had paid money to be held on his behalf by his lawyers. Indeed, he had engaged in real property transactions in Singapore, Malaysia and Hong Kong before but Ho said he did not pay attention to what the receipts from the lawyers stated. Ho also accepted that when he gave money to his lawyers for purchase of a property, the money belonged to him and not to the lawyers who could not use that money to go and buy jewellery, cars or anything else but must hold it only for his transactions.

  317. [136] Accordingly, Mr Elias submitted that DeFred (and Ho) knew that DR was using clients’ monies in breach of trust to pay for the items he was purchasing. Despite this, they actively co-operated and assisted DR.

  318. [137] Mr Elias’ submissions went further. He submitted (at [441] of his closing submissions) that the mere fact that money was coming from a law firm’s account, let alone a law firm’s client’s account, to buy personal items for DR himself or gifts from him should have aroused suspicion.

  319. Credibility

  320. [138] On the general issue of credibility, Mr Elias submitted that Ho had given several versions as to how he had eventually agreed with one Eric of A. A. Rachminov (the supplier of the loose diamonds sold to DR) on the price of five loose diamonds and how DeFred had paid for them. Likewise, there were different versions as to who Ho had sourced the cornflower blue sapphire from and how he made payment for it. There was also different evidence from Ho and Thomas as to how they eventually came to find a copy of a certificate for this sapphire.

  321. [139] Mr Elias also submitted that initially before the trial, there was hardly any suggestion that DR had examined the items during the first delivery on 1 June 2006 but, in cross-examination, Thomas suggested a more detailed presentation and also examination of the sapphires during the first delivery. A similar criticism was made of Thomas’ evidence for the second delivery on 2 June 2006.

  322. [140] There was also an inconsistency in Ho’s evidence as to whether and how he had examined certain loose diamonds which evidence was not mentioned in Ho’s affidavit in respect of the Plaintiffs’ application for a Mareva injunction against DeFred and/or Ho.

  323. [141] Mr Elias submitted also that DeFred’s initial allegation was that DR was looking to buy items for investment but this had changed to include the selection of items for gifts.

  324. The court’s findings

  325. [142] In this section, I will include references to submissions for either side.

  326. [143] As Mr Kumar submitted, much of what Mr Elias relied on as constituting suspicious circumstances which ought to have raised red flags to DeFred was not pleaded (although raised during the trial). Although it is true that only material facts and not evidence need be pleaded, many material facts were not pleaded. Also, it was one thing to plead a fact, for example, that the first delivery took place at the Mandarin lounge. However, the Plaintiffs would also have to plead why that ought to have raised a red flag. On the other hand, much of what Mr Kumar was raising in his submissions on the state of the Plaintiffs’ pleadings, was not raised during the trial. For completeness, I will address Mr Elias’ submissions as though the reasons for suspicion were all pleaded.

  327. [144] First, it is useful to bear in mind that it is always easier to criticize with the benefit of hind-sight and to focus only from a view favourable to one side to bolster that side’s position.

  328. [145] Mr Elias reiterated many times how there were many warning signs to DeFred but Mr Kumar in turn submitted in [85] to [94] of his closing submissions how the first plaintiff himself did not suspect any dishonesty on DR’s part despite many warning signs in respect of the delay in completion of the purchase of the Property. It is unnecessary for me to set out the warning signs which could or should have led the Plaintiffs to suspect some dishonesty on DR’s part since Mr Kumar was not relying on contributory negligence on the part of the Plaintiffs but I am of the view that the point was well-made that it is easier to suggest, with the benefit of hindsight, a plethora of warning signs when something has in fact gone wrong eventually. I do not accept Mr Elias’ submissions that DeFred should have done more research on DR or, in any event, realised that he was not the well-known lawyer they said they believed him to be.

  329. [146] From Lynn’s and Maeco’s point of view, they knew DR as a lawyer from a previous case when he had acted for Sherman. I am satisfied that they and Thomas looked upon lawyers as trustworthy persons, notwithstanding previous reports of incidents of lawyers’ misconduct with clients’ money. I am also satisfied that an honest retailer would regard a lawyer as a trustworthy person. Furthermore, all three staff had a favourable impression of DR. When he appeared in the showroom on 30 May 2006, he was behaving in a charming and relaxed manner, obviously to win the confidence of DeFred’s staff (see [39 and [40]). I think it is unfair for Mr Elias to suggest that DR was behaving like a clown. As DR was attempting to win the confidence of DeFred’s staff, he was also telling stories about himself on that day (and also on 31 May 2006 again).

  330. [147] I accept that when Thomas and Lynn went to the office of the Law Firm on 31 May 2006, they were further impressed. They already knew that DR was not an employee and had his own law firm. The Law Firm was using his own name. They saw that his office occupied the entire floor of the building with the other features I have already mentioned, see [46] above. The fact that he said he was staying in Toa Payoh only meant he was not in the same league as the royalty which DeFred also serviced but that was no reason for them to be suspicious of him. Also, Thomas and Lynn saw DR’s less expensive Japanese car only on 2 June 2006 when DR had already made and paid for substantial purchases. The car was not sufficient reason for them to become suspicious of him.

  331. [148] Although there is concern generally about money-laundering, Mr Kumar submitted that, at present, it is only the financial institutions, and not retailers, who are subject to anti-money laundering and counter terrorism financing legislation. Customers of such institutions know and expect to be questioned about their background and financial status. Not so for retailers.

  332. [149] In [121] to [123] of Mr Kumar’s closing submissions, he added and I quote:

  333. Example given in Article

  334. Present Case

  335. Unknown purchaser

  336. Well-known Singapore lawyer

  337. Payment in Cash

  338. Payment via TT

  339. No bargaining

  340. Bargained strenuously

  341. Out-of-State Address

  342. Known office and home address within Singapore

  343. [150] It seems to me that so long as payment is made before delivery, most honest retailers would not bother to check on the background or standing of their customer even for very large purchases. To do so might incur expense and/or delay the completion of the transaction. More importantly, it might well cause offense if the potential customer came to learn of such an inquiry. There would be even less reason to do so if there are bona fide reasons to believe the customer to be trustworthy and I accept that DeFred’s staff did have such reasons.

  344. [151] As for the Plaintiffs, it was their evidence that they were introduced to the Law Firm by a housing agent. True, the Law Firm had then acted for them in two or three real property transactions before the transaction in question, but the point is that they used the Law Firm initially without doing any research on it or DR even though the second plaintiff thought that the Law Firm was a modest law firm located in an unimpressive office in a small building in Carpenter Street. True, the Plaintiffs thought that it was the practice in real property transactions to hand over the balance of the purchase price to their lawyers but it appeared that it never once crossed their minds whether they should do their own research on the Law Firm or DR even though they were going to buy a number of properties. Unlike the Plaintiffs, DeFred was not parting with money or goods until payment was received first. Yet, it was suggested that DeFred should have done more than what the Plaintiffs themselves did (or did not do).

  345. [152] I accept the evidence of DeFred’s staff that not only did they think that DR was a well-known lawyer but that he had some knowledge as an investor of diamonds. The fact that he did not specifically mention the kind of clarity he was looking for is but one small piece of evidence. It was not as though DeFred’s staff believed that he did not know about the clarity of diamonds. DR had played his role well and had convinced them that he was a genuine investor. As for whether DR had initially used a loupe on 30 May 2006, this was not material to me. DR had never claimed to be an expert. Also, as the saying goes, “There are investors and there are investors”. I also do not expect DeFred’s staff to wonder or try to find out whether DR had been shopping around with wholesalers or other retailers. That was an unrealistic suggestion. DeFred’s staff would only be too happy for any prospective customer to walk-in and look around their showroom instead of wondering why he was coming to a shop in a prime shopping district. I am of the view that it was unfair to suggest that it would be suspicious for a person to shop in an expensive area. There are many reasons why people do so, for example, they may feel that they can better trust the reputation of a shop in such an area or there will be items of a wider range and/or higher quality.

  346. [153] It is neither here nor there that DR was being shown items other than diamonds although he had initially mentioned investment in diamonds. If he was not rejecting such attempts, why should the staff not try to sell him whatever they could?

  347. [154] I am of the view that by the time DR (and his friend) walked out of the showroom on 30 May 2006, he had already won the confidence of DeFred’s staff.

  348. [155] This impression was reinforced when Thomas and Lynn went to the office of the Law Firm the next day. I need not repeat their impression of the office itself but DR’s reference to a Rapaport report was clearly part of his ploy to build up his image as that of a genuine and savvy customer. True, they did not ask to see if he was referring to a current edition but I do not expect them to do so. That might have been offensive to their prospect.

  349. [156] As for the submission that DR was prepared to pay prices above Rapaport levels or to accept certificates issued by GRS or NYGI, it is my view that DR chose to do so because he felt it was worthwhile to do so and not because he was spending money indiscriminately. Interestingly, in Davidov’s report, he did not mention over-payment by DR as one of the main factors for suspicion. Neither did he mention in his report or oral evidence the fact that DR had paid prices above Rapaport for three loose diamonds as a reason for suspicion. That was a submission by Mr Elias. Also, even Mr Elias did not query why DeFred itself was paying Rapaport prices for some diamonds (before charging DR prices above Rapaport) when, apparently, Rapaport prices were indicative of asking prices only.

  350. [157] In oral evidence, Davidov focused more on what he perceived to be the high prices of the two sapphires. Yet much of his evidence was based on his view that a Gubelin certificate was the best and he had never heard of GRS. Yet, he admitted that he had not done an internet search of GRS which Mr Kumar produced and which seemed to indicate GRS to be an institution of some repute. Mr Kumar also referred to a catalogue by Sotheby’s for Hong Kong dated 10 April 2007 which contained some items for auction which were certified by GRS. So GRS was not as unknown as Davidov was saying.

  351. [158] Furthermore, as Mr Kumar submitted, Davidov’s view on the prices of the sapphires, because of the value of the certification, was not valid because in his report, he said he had assumed that the information in the certificates was true without mentioning the value of the certification. I reiterate that in Davidov’s report, he did not suggest over-payment by DR as one of the main factors for suspicion.

  352. [159] As for Davidov’s evidence that a bona fide investor would not agree to buy large stones (3 carats and above) based on certificates alone, that was not the evidence of DeFred or their expert Lim Geok Khoon (“Lim”). Furthermore, no reason was given to use three carats as the dividing line.

  353. [160] It is also important to bear in mind the experience and philosophy of DeFred’s staff as compared with someone like Davidov. Someone like Thomas was used to dealing with high profile customers and even members of royalty who would spend large amounts of money during a single visit. It was not unusual for his customers to purchase expensive diamonds based on certificates alone although the customers would usually eventually examine the diamonds when delivered.

  354. [161] Thomas’ experience was largely corroborated by the evidence of Lim. Lim had joined Je Taime Jewellery Pte Ltd in 1994 or 1995. In 1998, he joined DeFred briefly as a sales executive and left within a year to join Mondial Rare Jewels Pte Ltd (“Mondial”). Eight years later, when Mondial was acquired by The Hour Glass Limited (“Hour Glass”), he joined Hour Glass. Lim had made presentations at customers’ homes, offices or in hotels. Once, he even made a presentation at a shipyard. Where customers were tourists, he would make presentations in hotels and a sale could be made on the spot with payment by cash. Lim would also make presentations of stones with certificates or just based on certificates.

  355. [162] In any event, contrary to the picture which Mr Elias was painting, DR did not accept anything and everything which was presented to him. For example, he did not accept anything that was shown to him at the showroom on 30 May 2006 although he did express interest in some items. He did not accept the ruby which was shown to him on 31 May 2006. He did not accept everything that was shown to him at the showroom in the late morning of 1 June 2006 or the pearl necklace JDP67 shown to him at the Mandarin lounge. I do not accept that DR’s selection was haphazard or random in the sense that he was as indiscriminate as Mr Elias was suggesting. Furthermore, it was not as though he was accepting whatever price that was quoted to him. He was bargaining with Thomas.

  356. [163] The fact that DR had paid $200,000 more in his first payment was explained by DR that he wanted to buy more items. It seems to me that this overpayment put DeFred’s staff even more at ease and they must have welcomed the idea that DR was intending to buy more. The fact that DR came to the showroom during lunch time (on 1 June 2006) is neither here nor there.

  357. [164] Obviously, DeFred knew that DR was keen to make purchases but that is different from saying that they knew or might to have known that he was in a rush to convert money into loose stones or jewellery. Even if someone like Thomas or Ho had suspected that perhaps DR was not as savvy an investor as he was trying to portray, that is a far cry from saying that they knew or ought to have known that (a) he was spending money indiscriminately and (b) worse still, that he was spending his ill-gotten gains. I find that in the minds of the DeFred staff and Ho, DR was still considered a successful and respectable lawyer. If he was keen to spend what they believed to be his own money, they were more than happy to help him to do so. But there is nothing dishonest or unconscionable about that so as to sustain a cause of action.

  358. [166] The evidence about how unsafe it was to deliver items at the Mandarin lounge or in the back seat of DR’s car or the lack of suitable lighting to make a proper examination did not carry much more weight for the Plaintiffs. DR had already paid the money. It was for him to decide where he wanted to take delivery. Even the second delivery was not intended to be at the back seat of DR’s car but at his home. It was just that Thomas and Lynn happened to meet DR at his car when they arrived at Trellis Towers. I also do not think the evolving evidence, as Mr Elias put it, on the venue of the second delivery was material because it did not help DeFred to say eventually that, actually, the second delivery was in the rear seat of DR’s car, as opposed to DR’s home.

  359. [167] I accept that the Mandarin lounge and the rear seat of a car are not safe places to make such deliveries or appropriate places for a careful examination of precious stones or jewellery. DR and DeFred were taking a risk from the security point of view. However, it was not unusual for Thomas to make deliveries at venues outside the showroom where security was compromised and not all DeFred’s customers examined the items upon delivery. For example, Thomas mentioned an occasion when he delivered the items purchased by a customer to her when she drove up the driveway of Hyatt Hotel. As for Lim, he would be flexible as “the customer is king”. He had made deliveries at a poolside, golf course and on one occasion, late at night at the gate of a customer’s residence.

  360. [168] It is true that there was no discussion of the deduction of $37,500 in the Mandarin lounge but it was not as though Thomas had remembered to raise the subject and DR insisted on issuing the Cash Cheque for the full $270,000. Furthermore, as Mr Kumar submitted, the fact that there was still a refund due to DR contradicted Mr Elias’ submission that DR was making purchases indiscriminately. The poor documentation, including the absence of any receipt for DR’s payments, demonstrated poor administration on the part of DeFred but not knowledge or suspicion that DR was spending money indiscriminately and that he did not care about any documentation. If DeFred’s staff knew or suspected that, they would not have bothered to prepare any documentation at all and would have waited for DR to ask for the same. Lim also said that when he sold items based on a package price, he would not give a breakdown of individual prices per item.

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