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Judgment
[Please note that this case has not been edited in accordance with the current Singapore Law Reports house style.]
Judgment reserved.
LP Thean JA (delivering the judgment of the court):
1 This appeal arises from the decision of Lai Kew Chai J on an originating summons taken out by the Sumitomo Bank Ltd for interpleader reliefs in the face of competing claims to 19 separate and discrete deposits with the Asian Currency Unit (ACU) of the Singapore branch of the bank.
Facts
2 The relevant facts that gave rise to the proceedings below have been fully set out in the judgment of the learned judge, reported in [1993] 1 SLR 735. For our purpose, we need only to rehearse them briefly as follows. The respondents (Pertamina), an Indonesian state enterprise, were created on 15 September 1971 by Law No 8 of 1971 of the Republic of Indonesia. They undertook major economic development projects at the direction of the Government of the Republic of Indonesia. One such undertaking was the gigantic development of a huge industrial complex for steel-making and related industries, which encompassed the redevelopment of the existing steel-making plant, in Cilegon, northwest of Java, Indonesia. On 31 August 1970, a company, PT Krakatau Steel (PTKS) was incorporated and its task was to build the infrastructure, comprising the harbour, water and power supply and a railway line to connect the harbour to the steel mill. PTKS was also responsible for the development of the steel plant. However, Pertamina were financially responsible for the infrastructure facilities. In fact, Pertamina virtually took over effective management and control of the construction of the infrastructure facilities in Cilegon as from about June 1973. In many cases, they contracted for the building of the infrastructure facilities. These facilities may be broadly described as follows: (i) a new power generation equipment which was to provide the vast quantity of electricity required for the new electric arc furnaces to produce the steel; (ii) an improved water supply system to provide water for the steel mills; and (iii) a new harbour and a new railway link for the import of raw materials required for the steel-making process and for the
Kartika Ratna Thahir v PT Pertambangan Minyak dan Gas
Bumi Negara (Pertamina)
[1994] 3 SLR 257; [1994] SGCA 105
Suit No: CA 204/1992 Decision Date: 25 Aug 1994
Court: Court of Appeal
Coram: Karthigesu JA, L P Thean JA, Yong Pung How CJ
Counsel: Bernard Eder QC, Michael Hwang and Francis Xavier (Allen & Gledhill) for the appellant, David Hunt QC, Wong Meng Meng and Alvin Yeo (Wong Meng Meng & Pnrs) for the respondents
export of finished products. It was in relation to these facilities that two German contractors, Siemens AG (Siemens) and Klockner Industrie Analagen GmbH (Klockner), entered into the picture. Siemens contracted to provide the power generation equipment and Klockner and its related companies contracted to build and equip the water supply system.
3 Gen Haji Achmad Thahir (Gen Thahir) was employed by Pertamina and at the material time was the general assistant to the then president director of Pertamina, Gen Ibnu Sutowo (Gen Sutowo). Gen Thahir was appointed to the office with effect from 14 October 1968 and at all material times his total salary was about US$9,000 a year. He held that position until 23 July 1976 when he died. At the date of his death, there stood as having been deposited with the Singapore branch of the Sumitomo Bank Ltd (the bank) 17 separate and discrete ACU deposits denominated in deutschemarks, in the names of “Mr HA Thahir and/or Mrs KR Thahir”, amounting in aggregate to DM53,972,374.12. As at 23 July 1973, the maturity dates of these deposits ranged between a few days and over four months. In addition, there were two other separate and discrete ACU deposits, one time deposit maturing on 18 August 1976 and the other payable on demand, which were denominated in US dollars in the sums of US$593,249.31 and US$608,959.42 respectively; both these deposits were also in their joint names. Mrs KR Thahir is Mrs Kartika Ratna Thahir, the appellant in this appeal (the appellant).
4 The first deposit in the series was made on 25 May 1973, and, thereafter, by the end of May 1974, ten other deposits were made, all of them in the name of Gen Thahir. Subsequently, in early June 1974, Gen Thahir visited the Singapore branch of the bank and opened a joint fixed deposit account in the names of Gen Thahir and the appellant. The account was opened with a sum of DM2,273,478.46 which was deposited on 10 June 1974. By the end of 1975, the Singapore branch of the bank had a total of 19 deposits, all of which, with the exception of one, was in the sole name of Gen Thahir. Sometime in the later part of 1975, Gen Thahir visited the Singapore branch accompanied by the appellant. On this visit, Gen Thahir requested the bank to transfer all the deposits in his sole name to a joint fixed deposit account in the names of Gen Thahir and/or the appellant, and the transfer was effected by the bank on 19 January 1976. As we have related, about six months later, on 23 July 1976, he died.
5 Three days after the death of Gen Thahir, a claim was made at the Jakarta office of the bank by two sons of Gen Thahir by his earlier marriage that all the ACU deposits belonged to the estate of the deceased and the bank was requested to freeze the ACU deposits until such time as the respective interests in the estate had been determined. The Singapore branch of the bank was duly informed of this demand. On 27 July 1976, the appellant personally called at the Singapore branch of the bank and demanded payment of four sums, namely, DM3,287,591.13, DM2,364,187.60, DM2,659,204.26 and US$608,959.42 and further demanded that the balance of the ACU deposits be transferred to her sole name. On the same day, one of the children of Gen Thahir by his earlier marriage, Mr Ibrahim Thahir, called at the Singapore branch of the bank and directed the bank not to pay out any money to the appellant from the ACU deposits until the respective beneficial interests of the appellant and the estate of Gen Thahir were determined. On the following day, Mr Ibrahim Thahir called at the bank again and he was accompanied by Mr Abubakar Thahir and Mr Faruk Thahir, two other sons of Gen Thahir by his earlier marriage. They repeated the earlier demands.
6 Faced with these competing claims, the bank took out the originating summons seeking interpleader reliefs and named the appellant the first defendant and M/s Abubakar Thahir, Ibrahim Thahir and Faruk Thahir collectively as the second defendants. Later, by an order of court made on 4 February 1977, M/s Abubakar Thahir and Ibrahim Thahir were appointed to represent the estate of Gen Thahir for the purpose of those proceedings. About three months later, Pertamina came into the picture; on 6 May 1977, they gave notice to the bank claiming to be entitled to the ACU deposits on the ground that they were wrongfully acquired by Gen Thahir by way of bribes while being employed by Pertamina and the acquisition was contrary to his duty as an employee of Pertamina. In response, the bank applied to the High Court for Pertamina to be joined as a defendant, and by an order made on 24 June 1977, Pertamina was added as a defendant in those proceedings. By a subsequent order made on 12 March 1980, (i) Pertamina was ordered to be the plaintiffs; (ii) the appellant, the first defendant; and (iii) M/s Abubakar Thahir and Ibrahim Thahir representing the estate of the Gen Thahir, the second defendants, on a trial of an issue which we shall state in a moment.
7 On 30 June 1981, it was agreed by all the parties concerned that the two ACU deposits in US dollars would remain in US dollars and the 17 ACU deposits denominated in deutschemarks would be converted into one single US dollar deposit. As at 27 March 1992, the total amount of the ACU deposits, including interest, was US$81,757,260.74.
The issue below
8 The parties came to an agreement as to the terms of the issue to be tried, and for the purpose of this appeal, it is only necessary to set out the first issue, as amended by an order of court made on 2 December 1988. We shall call this “the amended first issue”, which is as follows:
law of the Republic of Singapore as the governing law and/or under the law of Indonesia as the law of the place having most connection with the rights, obligations and duties of the persons hereinafter referred to on one or more of the grounds following:
(a) belong to the plaintiffs absolutely;
(b) are held subject to a trust in favour of the plaintiffs and not otherwise; (c) as being moneys held and received for the plaintiffs’ use;
(d) being the proceeds of crime or otherwise obtained unlawfully and/or in breach of contract by the said HA Thahir, should not be disposed of otherwise than to the plaintiffs;
(e) that the first defendant, having assisted the said HA Thahir in his dishonest and fraudulent design and/or having participated therein, is in any event liable to the plaintiffs as a constructive trustee thereto.
Decision below
9 The issue was tried before Lai Kew Chai J and he delivered a reserved judgment on 3 December 1992. The learned judge on the evidence before him found that the moneys in the bank came from Siemens, as to DM15m, and Klockner, as to DM35m, approximately; that Pertamina had paid Siemens and Klockner, inter alia, sums of money in respect of the Krakatau Steel project and the infrastructure facilities in the amounts which were set out in an annexure to his judgment, annexure B, and that there were linkages between those payments and Gen Thahir’s ACU deposits denominated in deutschemarks; that all the 17 ACU deposits denominated in deutschemarks were bribes which Siemens and Klockner had paid to Gen Thahir. With respect to the two ACU deposits denominated in US dollars, the learned judge found that Pertamina had failed to discharge their legal and evidential burden of proof, and, accordingly, they had no claim to these two sums. The learned judge held that Pertamina’s claims at law and in equity are governed by the law of Singapore. The claim at common law is for money had and received and such claim arises in the place of receipt which, in this case, is Singapore. That claim lies against the person bribed and it also lies against a volunteer who is the recipient of the money. As for the claim in equity, he found that Gen Thahir held the bribes and all interest earned in the bank as constructive trustee for Pertamina and that the appellant was hand in glove with Gen Thahir in his dishonest schemes to receive the bribes and she participated in and/or was privy to the receipt of the bribes, and accordingly, by reason of her own complicity and conduct, she also became a constructive trustee when she became a joint account holder and when the legal title thereto vested in her solely upon the death of Gen Thahir. The learned judge went further and held that under Indonesian law, Gen Thahir was in breach of his contractual obligation to Pertamina and his death was no bar to a claim in contract, and, further, that Gen Thahir’s receipt of the bribes and his violation of the Indonesian law and regulations also constituted an act of tort against Pertamina, and the Indonesian court would have the power to order, and would have ordered, the payment to Pertamina of the bribes as a proper remedy for his tort. Under Indonesian law, Gen Thahir was a mandatory of Pertamina and, as such, the Indonesian court would have ordered Gen Thahir, as a mandatory, to pay the bribes over to Pertamina and would have declared that Pertamina had a proprietary claim to the bribes. As regards Pertamina’s claim against the appellant, the learned judge found that under Indonesian law the transfer of the ACU deposits to the joint names of Gen Thahir and/or the appellant was null and void, and as such the appellant had never obtained, and never could have obtained, any legal title to any of the 17 ACU deposits.
The appeal
10 Against his decision, this appeal has been brought by the appellant; there was no appeal by the representatives of the estate of Gen Thahir. Following the appeal, Pertamina filed a respondent’s notice, which is in the nature of a cross-appeal against the learned judge’s decision on the two ACU deposits denominated in US dollars on which the learned judge held that Pertamina had no claim.
Issues on appeal
12 We now turn to consider this appeal. From the respective cases filed by the parties, the issues before us are as follows:
(i) whether, in order to succeed on the amended first issue, it is essential that Pertamina have a proprietary claim to the ACU deposits;
(ii) whether the 17 ACU deposits denominated in deutschemarks were bribes which Siemens and Klockner had paid Gen Thahir, and if so, whether the appellant was privy to the receipt of those bribes; (iii) whether, as a matter of conflict of laws, Pertamina’s claim is governed by Singapore law or Indonesian law or both; and
(iv) whether, under the relevant law governing the claim, Pertamina have a proprietary claim to the ACU deposits and interests.
First issue: whether there must be a proprietary claim
13 This issue turns on the nature of the proceedings instituted below. The proceedings were an interpleader taken out by the bank faced with adverse claims to the moneys held by them, and the court was asked to investigate the real interests of the competing claimants to the moneys in question. The Supreme Court Practice 1993 in para 17/1/1 at p 272 describes interpleader proceedings thus:
Interpleader is a proceeding by which a person, from whom two or more persons claim the same property or debt, and who does not himself claim the property or dispute the debt, can protect himself from legal proceedings by calling upon the two claimants to interplead — that is to say, claim against one another — so that the title to the property or debt may be decided. [Emphasis added.]
14 The essential question is, therefore, which of the claimants is entitled to the moneys. Counsel for the appellant argued that, in order to succeed, Pertamina must show that they have a proprietary claim to the ACU deposits. Pertamina, on the other hand, disputed this and posited a single essential issue: whether Pertamina were “entitled to” the deutschemark deposits, under either Singapore or Indonesian law, on any of the grounds stated in the amended first issue. As we see it, the appellant and Pertamina are competing claimants to the ACU deposits. As the amended first issue recognizes, the essence of it is “entitlement” to the moneys. Hence, even if what Pertamina maintain is the essential issue, their “entitlement” to the deposits must still be founded on some title or proprietary interest they have in the deposits. It is not enough for Pertamina to show that they have a personal claim against Gen Thahir and/or the appellant for recovery of the bribes. They must show that, on one or more of the grounds stated in the amended first issue, they have some title or proprietary interest in the deposit. Counsel for the appellant is therefore right when he contended that Pertamina must establish a proprietary claim in order to succeed on the amended first issue.
15 In Tay Yoke Swee v United Overseas Bank & Ors, this court held that a party’s claim adverse to the claim of another party to a fund, in respect of which an interpleader relief is sought, must be one relating specifically to the fund and must be a proprietary claim to the fund and not a personal claim against the other party for an unliquidated amount or for an account. In holding that the interpleader relief was not available to the applicant, who took out the interpleader summons, this court concluded thus, at p 225:
In our opinion, on the material before us, the second and third respondents have no claim on the remaining one-third surplus; that surplus belongs to the appellant. They may have a claim against the appellant in contract and for an account; that is a personal claim and has yet to be determined. Such a claim is not adverse to the appellant’s claim to the fund.
16 Accordingly, in this case, if the claim of Pertamina is only a personal claim against Gen Thahir and the appellant, as opposed to a proprietary claim to the deposits, such claim does not confer on Pertamina any entitlement, interest or title in the moneys such as to enable them to succeed in the interpleader proceedings. In our judgment, in order to succeed, Pertamina must show that they have a proprietary claim to the moneys under the system of law that governs the claim.
Second issue: whether deposits were proceeds of bribes
Gen Thahir in return for the payments made to them by Pertamina. Pertamina sought to prove that they had from time to time made payments to Siemens and Klockner pursuant to their contracts or PTKS’s contracts with them for materials supplied and work done in relation to the Krakatau steel mill and the infrastructures in Cilegon industrial complex and these payments were those as set out in annexure B; that Klockner had paid to Gen Thahir bribes at the rate of 13% of each payment made by Pertamina, and similarly Siemens had paid bribes to him but at the rate of 5% of each of Pertamina’s payment; that Gen Thahir had opened his ACU account with the Singapore branch of the bank and placed to the credit of his account 19 deposits — 17 denominated in deutschemarks and two denominated in US dollars; and that 11 out of the 19 ACU deposits matched the instalments paid by Pertamina to the German contractors in the sense that each of these deposits represented a precise or substantially precise percentage of the relevant instalment and was paid to the ACU account of Gen Thahir soon after the payment of the instalment to the contractors. In respect of the eight unmatched deposits, this was divided into the six unmatched deutschemark deposits and the two US dollar deposits; the latter two deposits are not relevant and will not be dealt with here, as it has been held by the learned judge that Pertamina had no claim to them. Voluminous documentary and viva voce evidence was adduced by Pertamina. In particular, there was the evidence given by one Mr Nur Usman, who was treasurer of the foreign currency department of Pertamina responsible for payments to foreign contractors, including Siemens and Klockner, and also the evidence of several officers in the accounts department of Pertamina. Having considered their evidence and the documents produced with regard to payments made to Siemens and Klockner, the learned judge said, at p 778:
… Having considered their oral evidence, I am satisfied that in truth and in fact Pertamina had paid Siemens and Klockner sums of money in respect of the Krakatau steel project and the infrastructure facilities.
18 The learned judge proceeded further and dealt with the evidence relating specifically to the 11 instalments paid to the German contractors as set out in annexure B, and examined the documents produced evidencing such payments: see pp 778–780 of his judgment. He then came to the following conclusion, at p 780:
In the circumstances, my finding is that Pertamina, by the oral evidence of Mr Nur Usman and the other officers whom I have named, have proved their payments to Siemens and Klockner which are set out in annexure B. Further, the evidence of Mr Balasubramaniam and Mr Muthu Palaniappan proved Pertamina’s payment through BNP. In the course of the trial, I have also allowed and admitted evidence pursuant to s 32 of the Evidence Act (Cap 97). These evidence independently satisfied me that Pertamina had made payments to Siemens and Klockner as they allege and as set out in annexure B.
19 The learned judge next turned to “another source of evidence led by Pertamina to prove their payments to Siemens and Klockner”: that was the evidence of one Mr Ronald Grund, an accountant who had worked in the audit department of Arthur Yong & Co, the accountants of Pertamina. Grund was engaged by Pertamina to examine all the relevant accounting and other records of Pertamina and see if there was any relationship between Pertamina’s payments to the contractors and Gen Thahir’s ACU deposits. He collected and collated all the accounting and other records and documents of Pertamina showing payments made to the contractors and related these payments to the ACU deposits, and it was his evidence that there were linkages between the 11 matched ACU deposits with the instalment payments made to the contractors. The learned judge accepted his evidence. He said at p 781:
It was Mr Grund who first discovered the linkages between Pertamina’s payments and Gen Thahir’s ACU deposits. By a sophisticated computerized programme, he was able to pair off Pertamina’s payments and the ACU deposits. The percentages of 13% for the Klockner matches, 5% for the Siemens matches, and the 10% for match 11 were established by his investigative efforts. His entire methodology and the validity of his findings were confirmed by a piece of evidence which emerged in the early stages of this trial. I refer to the lack of any documentary evidence bearing on Pertamina’s payments so far as the 10% match 11 is concerned. As has been noted earlier, documents which emerged from discovery during the trial confirmed that Pertamina had paid Siemens for the power station and the airport projects in Batam Island, Indonesia. Having reviewed his evidence, I was satisfied that his evidence proved two important issues of fact in this case. First, his evidence as a whole proved that Pertamina had paid Siemens and Klockner the sums set out in annexure B. Secondly, his evidence also proved the linkages between Pertamina’s payments and Gen Thahir’s DM ACU deposits.
20 In addition to all this evidence, there was the appellant’s own affidavit affirmed on 1 February 1980 and filed in the proceedings below, in which she made no attempt to deny receipt by her husband of “the moneys in the said deposits”. Her position was that Pertamina were aware of it and that there was nothing surreptitious about her husband’s activities. She said, inter alia, the following:
he received and held the moneys in the said deposits. There was never any suggestion that any part of these moneys belonged to or was intended for the benefit of [Pertamina] or that he must account therefor to [Pertamina]. It is quite wrong, therefore, to suggest that my late husband received or held any funds ‘in secret’.
21 Lastly, there was also the evidence of Gen Moerdani, Minister of Defence and Security of the Republic of Indonesia. He was instructed by the President of Indonesia to recover the bribes taken by Gen Thahir. Accordingly, he established contact with the appellant and had several meetings with her in Geneva, Switzerland. In summary, his testimony was to the effect that the appellant had told him, at a meeting in Geneva sometime before 19 or 20 September 1977, that the moneys at the Singapore branch of the bank came from the Krakatau Steel project. She further told him that the account at the bank was ‘some sort of collecting point’ for moneys that had been paid by Pertamina to Klockner and Siemens. She specifically mentioned that DM15m and DM35m came from Siemens and Klockner respectively and that payments were made on every occasion when Pertamina made a payment to its contractors and that it amounted to 21% at a particular time. The appellant also told Gen Moerdani that this account would be divided into three equal parts: the first to Gen Sutowo, the second to Mr Junus Rani and the third to Gen Thahir. She further disclosed that there were two other accounts at the Singapore branches of the Chase Manhattan Bank and the Hong Kong Bank but the amounts in these accounts were relatively small and that they were to cover daily expenses. They amounted to US$1.2m. Gen Moerdani was severely cross-examined by counsel for the appellant and, at the end of the day, his testimony was accepted by the learned judge who said, at p 775:
At the end of the day, I was left in no doubt that he was clearly and unquestionably undergirded by the armour of truth. I have no hesitation in accepting his evidence as the whole truth. I therefore find as a fact that Mrs Kartika Thahir did admit to Gen Moerdani that the moneys in Sumitomo Bank came from Siemens, as to DM15m, and Klockner, as to DM35m.
22 It was argued before us on behalf of the appellant that Gen Moerdani’s evidence was untrue and/or unreliable and/or irrelevant. But, no basis for any such assertion was put forward. On the evidence before him, the learned judge was justified in accepting his evidence.
23 In conclusion, the learned judge found that all the 17 ACU deutschemark deposits were bribes which Siemens and Klockner had paid Gen Thahir. He said, at p 781:
In view of the overwhelming evidence, I find that in truth and in fact all 17 ACU deposits denominated in deutschemarks were bribes which Siemens and Klockner had paid Gen Thahir. I would summarize my reasons as follows. I rely on the admissions of Mrs Kartika Thahir which she made to Gen Moerdani. Secondly, there is no evidence that Gen Thahir or Mrs Kartika Thahir had any fortune anywhere near the sums we are looking at. Gen Thahir’s tax returns do not begin to explain any legitimate source or sources of the ACU DM deposits. Thirdly, the 11 matched deposits, their percentages in relation to Pertamina’s payments and the dates of their initial deposits in most part following such payments are all telltale indications of bribes. Fourthly, I refer to Gen Thahir’s and Mrs Kartika Thahir’s misrepresentations to Mr Hotta and Mr Yamaura of the Sumitomo Bank. I am convinced that Gen Thahir had struck his dishonest deals with the German contractors and to the knowledge of Mrs Kartika Thahir; they were making banking arrangements to deposit the bribes in a shroud of secrecy. Fifthly, I turn to the six unmatched deposits in deutschemarks. I place great reliance on Mrs Kartika Thahir’s admissions. She confessed to Gen Moerdani that the DM50m in the bank came from Siemens (as to DM15m) and Klockner (as to DM35m). Quite apart from her admissions, and some of the foregoing reasons, it is not unlikely in this case, as Mr Grund had explained, that there could be a number of reasons why these six deposits were unmatched.
annexure B, and that at the date of Gen Thahir’s death, the aggregate amount of these 17 deposits was DM53,972,374.12. Taking a common sense approach, any reasonable and sensible tribunal would look to the appellant or those representing the estate of Gen Thahir for an explanation for, or information of, the source or sources of such enormous wealth which came to Gen Thahir in such a short space of time. No explanation or information whatsoever was forthcoming, either from the appellant or anyone on her behalf or on behalf of Gen Thahir.
26 For the reasons we have discussed, we are in entire agreement with the learned judge’s finding that all the 17 ACU deposits denominated in deutschemarks were bribes which Siemens and Klockner had paid Gen Thahir. On the evidence before the learned judge, we do not see how he could have arrived at any other conclusion. 27 The next question is whether the appellant was privy to Gen Thahir’s receipt of the bribes. The learned judge found that she “was hand in glove with Gen Thahir in his dishonest schemes to receive the bribes and that she participated in and/or was privy to the receipt by Gen Thahir of the bribes which funded the 17 ACU deposits denominated in deutschemarks.” This finding was challenged before us and it was submitted on behalf of the appellant that the learned judge was wrong to infer her knowledge and participation in her husband’s schemes to receive the bribes. We are unable to agree. There was ample evidence available for such an inference to be drawn. There was the evidence that the appellant actively participated with Gen Thahir in opening the accounts and negotiating the precise terms with Mr Shozo Hotta, chairman of the Sumitomo Bank Ltd. The appellant’s own affidavit, affirmed on 1 February 1980 (to which we have referred), is particularly telling as to her knowledge of her husband’s activities. In addition, there were her admissions made to Gen Moerdani in their discussions. In the face of all this evidence she had not come forward to give any evidence to the contrary.
Third issue: which is the governing law?
28 This is a conflict of laws issue and the question is which of the two systems of law, Singapore law or Indonesian law, governs the determination of the claim of Pertamina. Before the learned judge and also before us, parties have in their arguments dealt with the claim as follows: (i) claim at common law and (ii) claim in equity. The learned judge has considered this issue on that basis. As a matter of convenience, we shall also consider this issue along that line, first with reference to the claim at common law, and secondly the claim in equity, though it seems to us unnecessary to categorize common law claims and equitable claims in an issue involving conflict of laws for the purpose of determining the relevant substantive law applicable.
29 On this issue, the arguments before the learned judge, as well as before us, centred around the following rule stated in Dicey & Morris on The Conflict of Laws (12th Ed, 1993), at p 1471:
Rule 201
(1) The obligation to restore the benefit of an enrichment obtained at another person’s expense is governed by the proper law of the obligation.
(2) The proper law of the obligation is (semble) determined as follows:
(a) If the obligation arises in connection with a contract, its proper law is the proper law of the contract;
(b) If it arises in connection with a transaction concerning an immovable (land), its proper law is the law of the country where the immovable is situated (lex situs);
(c) If it arises in any other circumstances, its proper law is the law of the country where the enrichment occurs.
30 With reference to this rule, the learned judge said as follows, at p 785:
I shall now set out what in my view is a proper reading of r 203 of Dicey and Morris. Whilst the obligation to restore an unjust benefit may or may not arise in connection with a contract, the receipt of bribes, in all circumstances, will always fall under sub-r 2(c). The primary concern of parties in such a case is always to obtain recovery of moneys in the place of receipt or the place of enrichment. Its law should logically be the proper law of the obligation. I am aware that the Dicey and Morris explanation of sub-r 2(c) of the rule refers to the situation where benefit is conferred upon another person with whom no prior contract exits. In the authors’ contemplations were circumstances where moneys were wrongly credited due to a mistake of fact: eg Chase Manhattan.
appellant relied on the following commentary on r 201(2)(c) in Dicey & Morris at p 1476:
Where money is paid to, or a benefit is conferred upon, another person with whom no prior contract exists, and it is alleged that the money is recoverable, eg because of a mistake of fact, the enrichment is likely to be most closely connected with the law of the country in which it accrued. Thus, if A who is resident in England owes money to B, but by mistake pays it to X who is resident in France, X’s enrichment and therefore A’s claim for its restitution are likely to be most closely connected with French law. In this case, the proper law of the obligation is that of the country in which the immediate benefit was received. If the payment had been made at the Paris branch of an English bank to be credited to the account of X at the London office of the same bank, it is arguable that the proper law of the obligation is English law, ie that, in this case, the law of the country in which the immediate benefit was received is less closely connected with the obligation than the law of the country in which the ultimate enrichment occurred.
32 He submitted therefore that r 201(2)(c) only applied when there was no prior contract. This, in our opinion, is too restricted a reading of the commentary and it detracts from the “all other circumstances” role of r 201(2)(c). The above commentary should be read in the context of restitution for moneys paid under a mistake of fact.
33 It is important to set out the following passage in Dicey & Morris which states the scope of r 201(2)(a): Although the obligation to restore an unjust benefit does not arise from a contract, it may, and very frequently does, arise in connection with a contract. This is the case where a party seeks to recover money paid pursuant to an ineffective contract, eg by reason of a total failure of consideration or as a repayment of money paid under an illegal contract or where he claims a quantum meruit for work done or services rendered under a contract which turned out to be void. In all these and similar cases, it is submitted that the existence and the scope of the obligation to restore the benefit are governed by the law which governs the contract, or by what would have been the governing law of the contract, if it had been validly concluded. [Emphasis added.]
34 It is clearly not possible to say that recovery of bribes falls within the category of recovery of money paid pursuant to an ineffective contract or that it constitutes a similar case.
35 In this case, Pertamina’s claim at common law is for money had and received. With regard to the basis of this claim, it is instructive to refer to T Mahesan s/o Thambiah v Malaysia Government Officers’ Co-operative Housing Society Ltd, in which the Privy Council held that where an agent has been bribed, the principal has, as against the briber and the agent bribed, two distinct remedies: (i) he may recover the bribes as money had and received, and (ii) he may recover damages for fraud, under which he can recover the amount of actual loss sustained in consequence of his entering into the transaction in respect of which the bribe was given. Lord Diplock in delivering the judgment of the Board explained the basis of such claim at p 380:
By the early years of the 19th century it had become an established principle of equity that an agent who received any secret advantage for himself from the other party to a transaction in which the agent was acting for his principal was bound to account for it to his principal: Fawcett v Whitehouse (1829) 1 Russ & M 132. The remedy was equitable, obtainable in the Court of Chancery, and there appears to be no reported case at common law for the recovery of a bribe by a principal from his agent before the Judicature Act 1875. …
This right of the principal to recover the amount of the bribe from the agent does not depend upon his having incurred any loss as a result of his agent’s conduct: Reading v A-G [1949] 2 KB 232; [1951] AC 507. But the giving of the bribe was treated in equity as constructive fraud on the part of the giver and where it was given in connection with a contract between the principal and the briber, the principal was entitled to rescission of the contract. [Emphasis added.]
36 Later, after referring to the case of Bagnall v Carlton and Mayor, Alderman and Burgesses of the Borough of Salford v Lever, he said, at p 381:
The liability of the briber to the principal for damages for the loss sustained by him in consequence of entering into the contract in respect of which the bribe was given is a rational development from his former right in equity to rescission of the contract. The cause of action against the briber was stated by Lord Esher MR and Lopes LJ [in Salford Corp v Lever] to be fraud, and, since the agent was necessarily party to the bribery, it follows that the tort was a joint tort of briber and agent, for which either or both could be sued. [Emphasis added.]
equity it is unconscionable for him to retain the bribe and he is obliged to hand it over to the principal. We agree with the trial judge that, in this case, the obligation to restore the bribes does not arise in connection with the contract and that it falls within r 201(2)(c). Accordingly, in our judgment, it is governed by Singapore law. 38 We find support for our view in the case of Re Jogia (a bankrupt), ex p Trustee of the Property of the Bankrupt v D Pennelier & Co Ltd. There, an action for money had and received was brought by the trustee in bankruptcy to recover, inter alia, moneys paid out by the bankrupt’s agent to the defendant (a French company) after the date of the receiving order. The main question was whether leave to serve the writ out of jurisdiction under O 11 of the English RSC should be granted. The arguments before the court raised, inter alia, the question whether such a claim fell within what is now the English RSC O 11 r 1(1)(d) on the basis that the quasi-contractual obligation of the French company to restore the payments to the trustee fell to be treated as “made” in England and therefore governed by English law. Sir Nicolas Browne-Wilkinson V-C did not regard such obligation as made or arising in England, notwithstanding the fact that payment in that case was made pursuant to a contract between the bankrupt and the French company. He held that r 201(2)(c) in Dicey & Morris was “sound in principle” and applied it. He said, at p 495:
As at present advised, I am of the view that quasi-contractual obligations of this kind arise from the receipt of the money. I find it difficult to see how such obligation can be said to be ‘made’ or ‘arise’ in any place other than that of the receipt. As to the proper law, Dicey & Morris, The Conflict of Laws (10th Ed, 1980), p 921, expresses the view that, save in cases where the obligation to repay arises in connection with a contract or an immoveable, the proper law of the quasi-contract is the law of the country where the enrichment occurs. This accords with the American Restatement and seems to me to be sound in principle. 39 Both counsel for the appellant and Pertamina addressed this court on two additional cases reported since the decision of Lai Kew Chai J. The first is Hongkong and Shanghai Banking Corp Ltd v United Overseas Bank Ltd. There, U, an employee of the plaintiffs in their branch in Manila, transferred moneys belonging to the plaintiffs from their branch in Manila to New York and finally to Singapore. U then collected a substantial part of the funds by means of separate demand drafts, one of which was for the sum of US$200,000. The draft for US$200,000 was used to establish an ACU account with the defendants. The plaintiffs sought a declaration that they were entitled to the moneys in the ACU account with the defendants. One of the issues raised was: what law governed the plaintiffs’ claim to the money? Michael Hwang JC in determining this question applied r 201 (2)(c) of Dicey & Morris on The Conflict of Laws and held that the law of the obligation to restore the benefit of an enrichment is the law of the country where the ultimate enrichment occurred, and, in that case, the ultimate enrichment occurred in Singapore. Accordingly, the law of Singapore was held to be the governing law. Rule 201(2)(a), however, was not considered notwithstanding the existence of a contract of employment between U and the plaintiffs, which presumably was governed by the law of the Philippines, and consequently the distinction between paras (a) and (c) of r 201(2) was not argued. In the circumstances, the learned judicial commissioner was bound to apply Singapore law. For that reason, this case is not of much assistance here. 40 It is the second case, Arab Monetary Fund v Hashim (No 9), which is of importance, and the facts there bore some similarity with those in the case at hand. It arose out of a single payment of US$1.8m made by a company, BSS, to a Swiss bank account in Switzerland. The plaintiffs alleged that the payment was a bribe paid to their president, Hashim, as their agent in connection with the building of their offices in Abu Dhabi. The building contract for the offices was made between the plaintiffs and a company, BSME. Both BSS and BSME were part of the Bernard Sunley group of companies. The plaintiffs claimed the amount or damages from BSS and BSME, as payers, and from Hashim, as payee. There was no shortage of foreign (ie non-English) connections in the case. First, the contract of employment between the plaintiffs and their agent, Hashim, was governed by the law of Abu Dhabi and was performed in Abu Dhabi where the plaintiffs and Hashim, for the period of his employment, were resident. Secondly, the building contract for the construction of the offices in Abu Dhabi was governed by the law of Abu Dhabi. Thirdly, payments were made by the plaintiffs to BSME, a Lebanese company registered in Abu Dhabi, for the purposes of the building contract and administered locally in the Gulf from Dubai. Fourthly, although the agreement between Hashim and the Bernard Sunley group to pay the bribe was made in London, it resulted in the US dollar payment being made by BSS in London to a Swiss bank account for Hashim; in other words, the place of receipt of the fund was Switzerland.
41 The plaintiffs argued that the claims should be governed by English law. The claim arose directly or indirectly out of a corrupt agreement between the contractors and the plaintiffs’ agents and the agreement was made in England. This and other factors led to the conclusion that English law should govern the claims. The defendants, on the other hand, contended to the effect that the law of Abu Dhabi governed all the claims. Hashim was employed in Abu Dhabi and their relationship was governed by the law of Abu Dhabi. The building was built in Abu Dhabi and the building contract was governed by the law of Abu Dhabi. Evans J, after having referred to these rival contentions, then considered r 201(2) of Dicey & Morris on The Conflict of Laws and held that the law of Abu Dhabi governed the claims.
temporary staging post for the money and was never its journey’s end” and, from there, the money was disbursed to many international destinations. He said, at pp 565–566:
… the ‘place of enrichment’ described in sub-r 2(c) makes obvious sense when the defendant to a restitutionary claim has received a sum of money in a foreign country where either he is resident or for some other reason he receives the benefit of the enrichment there. But Dr Hashim had no connection with Switzerland apart from his interest in the JOJ bank account, and the money paid into that account was dispersed to a number of other jurisdictions, presumably on his instructions and for his enjoyment there. Switzerland was at best a temporary staging post for the money and never its journey’s end. A substantial part of it was used to purchase the English property which Dr Hashim intended to [buy] and has since made his home. None, or no significant amount, went to Abu Dhabi.
43 Nor was it possible for Evans J to hold that English law should govern the claims as contended by the plaintiffs, as England was not the place of receipt, nor English law the proper law of contract. He dealt with the plaintiffs’ contention in these terms, at p 566:
Their primary submission, however, is that their claims are founded upon the unlawful transactions between Dr Hashim and Mr Fryer representing the Bernard Sunley group, and that these consisted mainly of an agreement made in England and a payment from London to Switzerland in US dollars (though the dirham was the currency of account) which was deliberately and understandably kept outside Abu Dhabi and entirely separate from the AMF headquarters building contract. They submit that if sub-r 2(a) makes it necessary to focus attention on any contract, then it is the agreement to pay the bribe which lies at the heart of the wrongdoing and which gives them their rights to alternative remedies, restitutionary and in tort (the wrongdoing itself is not waived; see the United Australia case). If regard should be had more generally to factors pointing to the proper law of their right to recover the amount of the bribe from any of the defendants, then the relevant factors point to English law, or to the law of Switzerland, rather than to Abu Dhabi or UAE law.
44 He then said, at p 566:
In my judgment, however, the analysis of the legal basis for the restitutionary claims which emerges from Mahesan and the earlier authorities makes it clear, if not inevitable, that these claims are governed by the law of Abu Dhabi. Dr Hashim is sought to be held liable to account to the plaintiffs for a payment made to him as their agent, a benefit improperly received while acting as such. Their relationship with him, if subject to any municipal law, is clearly governed by the law of Abu Dhabi. Similarly, their restitutionary claim against BSS and BSME is to recover in part what was paid under the building contract. This too was governed by Abu Dhabi law. Both claims are to enforce obligations which arose in connection with a contract which was governed by that law, and if it is necessary to allocate them to one or other of sub-r 2 (a) and (c) of Dicey’s r 203, I am clear that they are both within sub-r 2(a).
45 It seems to us that, in the circumstances and by reason of the multiple connections with Abu Dhabi, Evans J was impelled to hold that the law of Abu Dhabi governed the claims, and this can be seen from the wider basis on which he held that the law of Abu Dhabi governed the claims. He continued, at p 566:
I prefer, however, to base this conclusion on wider grounds. It seems to me that, in such cases, the proper law of the restitutionary obligation which the plaintiffs assert is the law of Abu Dhabi. The building transaction was centred there, Dr Hashim was based there and his duties were owed to the plaintiffs whose headquarters were there. The bribe agreement and the bribe payment were ancillary to the building contract and to Dr Hashim’s employment. If the plaintiffs had contended that the law of Abu Dhabi governed these claims, I doubt whether the contrary suggestion of English law, if it had come from the defendants, would have appeared seriously arguable.
46 Clearly, on the facts, the case at hand is distinguishable from Arab Monetary Fund v Hashim. In this case, Gen Thahir had arranged for the bribes to be paid to his ACU accounts in the Singapore branch of the bank and the branch here was certainly not “a temporary staging post”. Over a period of about one year since the first ACU deposit was placed with the bank here in May 1973, more than ten deposits, each in substantial amount, were paid to the credit of his ACU account with the bank, and over the next two years, further sums were deposited in the ACU account. At the date of his death, the total amount of his ACU deposits in deutschmarks came to an enormous sum of DM53,972,374.12. In addition, there were two other deposits denominated in US dollars. There was evidence that he had deposited funds — whether they be bribes or otherwise — with other banks in Singapore. Gen Thahir might not be resident here at any material time. But he certainly had been actively using Singapore as the collection centre for the bribes. We have no hesitation in saying that Arab Monetary Fund v Hashim does not detract from our conclusion that in this case Singapore law governs the claim of Pertamina.
proceeds of the fraudulent share selling schemes were channelled through various countries, Geneva, Gibraltar, Panama and back through Geneva from which some were invested in a company, DLH, in London. The plaintiffs, on discovering the fraud, brought an action against DLH to recover the money which the latter had received, alleging that DLH received it with knowledge that it represented the proceeds of fraud. One of the arguments raised by counsel for DLH was that the plaintiffs’ claim depended on the continuing subsistence of his equitable title to the money and this could not be established where the money had passed through the hands of recipients in civil law jurisdictions which did not recognize the concept of equitable ownership. Millett J rejected this argument and said at p 736:
In my judgment, it is misconceived. For technical reasons, the plaintiffs’ claim is brought in equity, where it is of a kind generally described as a case of ‘knowing receipt’. This is the counterpart in equity of the common law action for money had and received. Both can be classified as receipt-based restitutionary claims. The law governing such claims is the law of the country where the defendant received the money: see Dicey and Morris, The Conflict of Laws (11th Ed, 1987), r 203(2)(c), and Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1979] 3 All ER 1025, [1981] Ch 105. Whatever money or property DLH received was received by it in England and, accordingly, the plaintiffs’ claim falls to be governed by English law, including principles of equity.
48 We now turn to Pertamina’s claim in equity. It was submitted on their behalf that Gen Thahir was a constructive trustee of the 17 ACU deposits denominated in deutschmarks and that they were entitled in equity to trace such deposits into the appellant’s hands, as she was not a bone fide purchaser for value without notice. In addition, the appellant herself also became a constructive trustee of the deposits by her involvement or participation in the receipt of the bribes by Gen Thahir and her knowingly receiving the transfer of the funds to an account in the joint names of Gen Thahir and herself. This claim in equity to recover bribes does not arise in connection with any contract whatsoever. It therefore falls squarely within r 201(2)(c) and is governed by Singapore law. We entirely agree.
Fourth issue: whether Pertamina’s claim is a proprietary one
49 We now turn to examine Pertamina’s claims. Both their claim at common law for money had and received and their claim in equity are premised on the fact that Gen Thahir was at all material times an agent and a fiduciary of Pertamina. It is therefore necessary at this juncture to consider his role in Pertamina, ie whether he was a fiduciary. Fiduciary relationship has been judicially defined very broadly. In Reading v R, at p 236, Asquith LJ said:
… there is a well-established class of cases in which he can so recover, whether or not he has suffered any detriment in fact. These are cases in which the servant or agent has realized a secret profit, commission or bribe in the course of his employment; and the amount recoverable is a sum equal to such profit. In most of these cases it has been assumed that the plaintiff, in order to succeed, must prove that a ‘fiduciary relation’ existed between himself and the defendant and that the defendant acted in breach of this relation. But the term ‘fiduciary relation’ in this connection is used in a very loose, or at all events a very comprehensive, sense. A consideration of the authorities suggests that for the present purpose a ‘fiduciary relation’ exists (a) whenever the plaintiff entrusts to the defendant property, including intangible property as, for instance, confidential information, and relies on the defendant to deal with such property for the benefit of the plaintiff or for purposes authorized by him, and not otherwise … and (b) whenever the plaintiff entrusts to the defendant a job to be performed, for instance, the negotiation of a contract on his behalf or for his benefit, and relies on the defendant to procure for the plaintiff the best terms available … . 50 On appeal, sub nom Reading v A-G, Lord Porter (with whom Viscount Jowitt LC agreed) expressed his agreement with what Asquith LJ said. Lord Porter said, at p 516:
In any case, I agree with Asquith LJ in thinking that the words ‘fiduciary relationship’ in this setting are used in a wide and loose sense and include, inter alia, a case where the servant gains from his employment a position of authority which enables him to obtain the sum which he receives.
51 Reverting to the case at hand, the learned judge made the following findings as to the extent of Gen Thahir’s responsibilities, at pp 768–769:
constructed for the Cilegon industrial complex. … On 17 October 1970, Gen Thahir was instructed in writing to assist Gen Sutowo in performing purchasing control under the standing operation procedure. In other words, it was his responsibility to ensure purchases of the right quantity and quality at competitive prices and their timely delivery within the budget. On 21 January 1971, Gen Thahir issued the internal directive, undoubtedly, I infer, with the approval of Gen Sutowo, that all purchase orders of Pertamina had to be approved and initialled by him personally before they were submitted to Gen Sutowo for his approval and signature. A year later, Gen Thahir was, in addition to other duties, placed at the disposal of the director of administration and finance. Four months later, he was authorized to sign cash vouchers and cash demands for all contracts which had been signed by the president director. … On 3 January 1975, Gen Thahir, was appointed by the board of directors of Pertamina to be the executive manager of the Cilegon infrastructure division of Pertamina.
53 The learned judge found that Gen Thahir was a fiduciary and that he owed to Pertamina fiduciary duties. Having regard to the far-reaching extent of Gen Thahir’s duties and responsibilities, the learned judge’s conclusion was inevitable. Indeed, it is difficult to envisage any clearer situation giving rise to a fiduciary relationship. The appellant has not even attempted to challenge the trial judge’s findings as detailed above. 54 On the authority of Mahesan,2 Pertamina have a claim against Gen Thahir for moneys had and received. In that case, Mahesan, who was in the employ of the plaintiffs, conspired with one Manickam that the latter should purchase a plot of land at a low price and sell it to the plaintiffs at a higher price, and, arising from that, Manickam bought the plot of land for RM456,000 and resold it to the plaintiffs for RM944,000. In consideration of the part he played, Mahesan received a sum of RM122,000. The Privy Council held that the plaintiffs could have a claim for money had and received against Mahesan for the bribe or, alternatively, for damages for actual loss sustained in consequence of having entered into the transaction in respect of which the bribe was paid. Reverting to the facts in the instant case, we are of the opinion that Pertamina can certainly bring an action against the estate of Gen Thahir for recovery of the bribes as money had and received. As regards the appellant, she had participated in the receipt of the bribes and knowingly assisted the transfer of the moneys that represented the bribes to the joint account. Pertamina also have a claim against her for money had and received. The next question is the nature of such claim. The claim for money had and received is not a proprietary claim; it is a personal claim.
55 We find support for this in two cases. In Islamic Republic of Iran Shipping Lines v Denby, a solicitor received a bribe in the negotiation of a dispute on behalf of his client. Legatt J held that the client was entitled to recover the bribe from the solicitor as money had and received. The learned judge made a point to distinguish that claim from a proprietary claim. This is clear from the following part of his judgment, at p 370:
Since the sum received by the defendant was a bribe, the plaintiffs are plainly entitled to recover it from him as money had and received. They seek to go further and establish that they are entitled also to proprietary remedies so that they may be in a position to claim any profits made by the defendant with the use of the money and so as to achieve priority over other creditors in the event of his insolvency.
56 The next case is Agip (Africa) Ltd v Jackson. In that case, the plaintiffs’ chief accountant fraudulently altered the name of the payee on a payment order and diverted it to the account of his shipping company, B Ltd, with Lloyds Bank plc, London. B Ltd had as its directors the first defendant, a chartered accountant in partnership with the second defendant, and the third defendant, their employee. The payment was effected by the plaintiffs’ Tunisian bank which instructed Lloyds Bank to credit the account of B Ltd and its correspondent in New York to reimburse Lloyds Bank. Thereafter, the money was transferred first to the defendants’ firm account with Lloyds Bank and subsequently to their clients’ account in the Isle of Man. From there, the moneys were disbursed to various recipients. At all material times, the defendants were acting on the instruction of their clients. The plaintiffs brought an action against them to recover the money as money had and received or alternatively on the ground that they were constructive trustees of the money and had acted in breach of trust. It was held, inter alia, that the money transferred to the defendants’ firm had been previously mixed with other moneys and the remedy of tracing at common law was not available. In the course of his judgment, Millett J said, at p 282:
The claim at common law
The plaintiffs claim to recover money paid under a mistake. The money was paid to Baker Oil but it was not mixed with other money in Baker Oil’s account and accordingly the plaintiffs claim to be able to follow it at common law into the account of Jackson & Co and to recover it from Mr Jackson and Mr Bowers, the partners of the firm. Unlike a tracing claim in equity, the common law claim for money had and received is a personal and not a proprietary claim and the cause of action is complete when the money is received. With only limited exceptions, it is no defence that the defendant has parted with the money. The claim does not depend on any impropriety or want of probity on the part of the defendants.
course of his career, Reid, in breach of the fiduciary duties which he owed as a servant of the Crown, accepted bribes as an inducement to him to exploit his official position by obstructing the prosecution of certain criminals. He was eventually prosecuted and ordered to pay the Crown the sum of HK$12.4m, equivalent to NZ$2.5m, being the value of assets then controlled by Reid which could only have been derived from bribes. Reid had three freehold properties in New Zealand. It was not challenged that the Attorney General of Hong Kong had established an arguable case that each of the three properties was acquired with moneys received by Reid as bribes. Before the Privy Council, the appeal proceeded on the assumption that the three New Zealand properties were purchased with bribes received by Reid. The Privy Council held that the three properties, so far as they represented bribes accepted by Reid, were held in trust for the Crown. Lord Templeman, delivering judgment of the Board, gave a detailed analysis of the remedy available against a fiduciary who accepted bribes, and it is helpful to refer in extenso to the following passage of his judgment, at pp 1146–1147:
When a bribe is offered and accepted in money or in kind, the money or property constituting the bribe belongs in law to the recipient. Money paid to the false fiduciary belongs to him. The legal estate in freehold property conveyed to the false fiduciary by way of bribe vests in him. Equity, however, which acts in personam insists that it is unconscionable for a fiduciary to obtain and retain a benefit in breach of duty. The provider of a bribe cannot recover it because he committed a criminal offence when he paid the bribe. The false fiduciary who received the bribe in breach of duty must pay and account for the bribe to the person to whom that duty was owed. … As soon as the bribe was received it should have been paid or transferred instanter to the person who suffered from the breach of duty. Equity considers as done that which ought to have been done. As soon as the bribe was received, whether in cash or in kind, the false fiduciary held the bribe on a constructive trust for the person injured. Two objections have been raised to this analysis. First it is said that if the fiduciary is in equity a debtor to the person injured, he cannot also be a trustee of the bribe. But there is no reason why equity should not provide two remedies, so long as they do not result in double recovery. If the property representing the bribe exceeds the original bribe in value, the fiduciary cannot retain the benefit of the increase in value which he obtained solely as a result of his breach of duty. Secondly, it is said that if the false fiduciary holds property representing the bribe in trust for the person injured, and if the false fiduciary is or becomes insolvent, the unsecured creditors of the false fiduciary will be deprived of their right to share in the proceeds of that property. But the unsecured creditors cannot be in a better position than their debtor. The authorities show that property acquired by a trustee innocently but in breach of trust and the property from time to time representing the same belong in equity to the cestui que trust and not to the trustee personally whether he is solvent or insolvent. Property acquired by a trustee as a result of a criminal breach of trust and the property from time to time representing the same must also belong in equity to his cestui que trust and not to the trustee whether he is solvent or insolvent.
When a bribe is accepted by a fiduciary in breach of his duty then he holds that bribe in trust for the person to whom the duty was owed. If the property representing the bribe decreases in value the fiduciary must pay the difference between that value and the initial amount of the bribe because he should not have accepted the bribe or incurred the risk of loss. If the property increases in value, the fiduciary is not entitled to any surplus in excess of the initial value of the bribe because he is not allowed by any means to make a profit out of a breach of duty. [Emphasis added.]
58 As the learned judge has held, and we agree, all the 17 ACU deposits denominated in deutschemarks were bribes which Gen Thahir had received from the German contractors. On the clear authority of this case, he held all these 17 ACU deposits on a constructive trust for Pertamina. The appellant by reason of her complicity and involvement in the transfer of the deposits to the account in the joint names of Gen Thahir and herself also became a constructive trustee, and when she became the sole owner of the deposits she continued to hold them on a constructive trust for Pertamina. The learned judge held, at p 811:
Mrs Kartika Thahir. I would finally refer to another way of imposing a constructive trust on Mrs Kartika Thahir. By reason of her own complicity and conduct in the manner and to the extent as found by this court, she became a constructive trustee when she became a joint account holder and when legal title in the deposits, or more accurately in the choses in action, vested solely in her upon the death of Gen Thahir. I would ground the imposition of a constructive trust on her on the basis of a series of decisions which adopted and extended the second limb of the principle of the well-known case of Barnes v Addy in which Lord Selborne held that a person who is not a fiduciary and who has not received trust property may nonetheless be fixed with liability for his unlawful gains or profits as a constructive trustee because of his assistance with sufficient knowledge in a fiduciary’s breach of duty.
disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees.
60 This pronouncement is extremely apt in this case. The learned judge found, and we agree with him, that the appellant knowingly assisted Gen Thahir in his dishonest and fraudulent design to receive the bribes represented by the deposits, and, in addition, she also received the trust property, ie the deposits, when she became the sole legal owner thereof on the death of her husband. Accordingly, at all material times, she held the deposits on trust for Pertamina.
61 We now turn to the question of knowledge and consent of Pertamina to the moneys received by Gen Thahir and represented by the ACU deposits. The appellant said that it was a fundamental part of her case that in order to succeed Pertamina must establish that these moneys or commissions paid to Gen Thahir were received “secretly without the knowledge or consent of the principal”, ie Pertamina. The appellant complained that this was not dealt with by the learned judge at any stage in his judgment. True it is that the learned judge in his judgment alluded very briefly to this point, and said that such defences as “consent and common criminality” had not been proved and therefore failed. However, implicit in this short statement must be the learned judge’s decision that the defence of consent raised by the appellant had not been established.
62 It seems to us that the appellant’s arguments on this point are wholly untenable. The legal burden of proving that the 17 ACU deposits represented the bribes paid to Gen Thahir by the German contractors, and the appellant’s involvement and complicity in the receipt of these bribes, rests with Pertamina. If the appellant maintains that these were commissions paid to Gen Thahir with the knowledge or consent of Pertamina, surely the burden of proving knowledge or consent lies with her. Gen Thahir was at all material times a fiduciary of Pertamina, and, as a fiduciary, he received these huge sums of money from the German contractors of Pertamina, and these sums had been proved to have linkages to the payments made by Pertamina to the contractors. In these circumstances, the burden is on the appellant to show that these sums were received by Gen Thahir with the knowledge or consent of Pertamina. Not a shred of evidence had been adduced by the appellant to show that Pertamina had knowledge of or had given consent to the receipt by Gen Thahir of these sums. This defence as raised by the appellant fails.
63 What we have decided is sufficient to dispose of the appeal, and it is not necessary for us to go further to consider also whether under Indonesian law, as found by the learned judge, Pertamina also has a proprietary claim to the ACU deposits.
64 In the result, the appeal is dismissed with costs. This appeal merits the issue of a certificate of two solicitors pursuant to O 59 r 19. Accordingly, we so order. There will be the usual consequential order for payment to Pertamina or their solicitors of the deposit in court as security for costs.
Appeal dismissed.
Reported by Yee Kwok Hon
