Zage v Ho: Knowing Receipt, Breach of Trust, and Solicitor Misappropriation
George Raymond Zage III and Kaori Kathleen Zage sued Ho Chi Kwong and Jewels DeFred Pte Ltd in the Court of Appeal of Singapore, alleging knowing receipt and dishonest assistance in a breach of trust by David Rasif, a solicitor who misappropriated their funds. The Zages had entrusted funds to Rasif's law firm, David Rasif & Partners, for a property purchase. Rasif then used $2,088,000 of those funds to purchase jewellery from DeFred. The Court of Appeal allowed the appeal in part, finding DeFred liable for $270,000, the amount of the cash cheque, as trustee due to knowing receipt, but dismissed the claims for the remaining amount.
1. Case Overview
1.1 Court
Court of Appeal1.2 Outcome
Appeal allowed in part.
1.3 Case Type
Civil
1.4 Judgment Type
Written Judgment
1.5 Jurisdiction
Singapore
1.6 Description
The Court of Appeal held DeFred liable for $270,000 in knowing receipt of funds misappropriated by a solicitor from client account.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| George Raymond Zage III | Appellant | Individual | Appeal allowed in part | Partial | |
| Kaori Kathleen Zage | Appellant | Individual | Appeal allowed in part | Partial | |
| Ho Chi Kwong | Respondent | Individual | Not personally liable | Neutral | |
| Jewels DeFred Pte Ltd | Respondent | Corporation | Liable as trustee | Lost |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Chan Sek Keong | Chief Justice | No |
| Andrew Phang Boon Leong | Justice of the Court of Appeal | No |
| V K Rajah | Justice of the Court of Appeal | Yes |
4. Counsels
4. Facts
- Rasif, a solicitor, misappropriated $2,088,000 from his client's account.
- Rasif used the misappropriated funds to purchase jewellery from DeFred.
- The Zages entrusted funds to Rasif's law firm for a property purchase.
- Rasif made an initial payment via telegraphic transfer that was $200,000 more than the agreed price.
- Rasif paid $270,000 with a cash cheque drawn on his firm's client's account.
- Ho read and understood the words “CLIENT’S ACCOUNTS” on the Cash Cheque.
5. Formal Citations
- George Raymond Zage III and another v Ho Chi Kwong and another, Civil Appeal No 3 of 2009, [2010] SGCA 4
6. Timeline
| Date | Event |
|---|---|
| Zages handed a cheque for $10,658,240 to Rasif. | |
| Rasif first visited the DeFred showroom. | |
| Rasif agreed to buy 12 items for $1,618,000. | |
| Photocopies of certificates attesting to various high grade loose diamonds were received by the second respondent by facsimile. | |
| Rasif transferred $1,818,000 to DeFred's UOB account. | |
| Rasif selected 14 more pieces of set jewellery. | |
| Thomas, Lynn and Maeco delivered 20 out of the 26 pieces purchased by Rasif. | |
| Rasif made payment with a cash cheque for $270,000. | |
| Thomas and Lynn delivered the remaining six diamonds to Rasif. | |
| Thomas and Lynn refunded Rasif $37,650 in cash. | |
| Rasif acknowledged receipt by signing upon a delivery order. | |
| Urgent delivery requested by Rasif. | |
| Rasif due to leave for Bangkok. | |
| Final delivery at Rasif’s residence. | |
| Judgment reserved. | |
| Decision Date |
7. Legal Issues
- Knowing Receipt
- Outcome: The Court of Appeal found DeFred liable for $270,000 as trustee due to knowing receipt.
- Category: Substantive
- Sub-Issues:
- Unconscionability
- Constructive Notice
- Breach of Fiduciary Duty
- Dishonest Assistance
- Outcome: The Court of Appeal did not find DeFred liable for dishonest assistance.
- Category: Substantive
- Sub-Issues:
- Breach of Trust
- Assistance
- Dishonesty
- Breach of Trust
- Outcome: Rasif was found to have breached his fiduciary duty by misappropriating client funds.
- Category: Substantive
- Sub-Issues:
- Misappropriation of Funds
- Fiduciary Duty
8. Remedies Sought
- Constructive Trust
- Monetary Compensation
9. Cause of Actions
- Knowing Receipt
- Dishonest Assistance
- Breach of Trust
10. Practice Areas
- Commercial Litigation
- Trust Litigation
11. Industries
- Legal
- Retail
- Jewellery
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| George Raymond Zage III v Rasif David | High Court | Yes | [2009] 2 SLR(R) 479 | Singapore | The decision from which this appeal arose. |
| Barnes v Addy | Court of Appeal | Yes | (1874) LR 9 Ch App 244 | England and Wales | Sets out the two limbs of liability: recipients of money and accessories to disposal of money. |
| Bansal Hermant Govindprasad and another v Central Bank of India | Court of Appeal | Yes | [2003] 2 SLR(R) 33 | Singapore | Discusses the elements of a claim in dishonest assistance. |
| Caltong (Australia) Pty Ltd v Tong Tien See Construction Pte Ltd | Court of Appeal | Yes | [2002] 2 SLR(R) 94 | Singapore | Discusses the elements of a claim in dishonest assistance and knowing receipt. |
| Royal Brunei Airlines Sdn Bhd v Philip Tan Kok Ming | Privy Council | Yes | [1995] 2 AC 378 | United Kingdom | Defines the standard of dishonesty in dishonest assistance claims. |
| Twinsectra Ltd v Yardley | House of Lords | Yes | [2002] 2 All ER 377 | United Kingdom | Elaborates on the Royal Brunei Airlines standard of honesty. |
| Malaysian International Trading Corp Sdn Bhd v Interamerica Asia Pte Ltd and others | High Court | Yes | [2002] 2 SLR(R) 896 | Singapore | Follows the approach suggested in Twinsectra. |
| Barlow Clowes International Ltd (in liquidation v Eurotrust International Ltd | Privy Council | Yes | [2006] 1 All ER 377 | United Kingdom | Clarifies the Twinsectra decision and affirms the objective standard of honesty laid down in Royal Brunei Airlines. |
| Bank of Credit and Commerce International (Overseas) Ltd and another v Akindele | Court of Appeal | Yes | [2001] Ch 437 | England and Wales | Restates the test for knowing receipt: recipient's state of knowledge must make it unconscionable to retain the benefit. |
| Rolled Steel Products (Holdings) Ltd v British Steel Corporation | Court of Appeal | Yes | [1986] Ch 246 | England and Wales | Suggested that constructive notice was sufficient for knowing receipt. |
| Agip (Africa) Ltd v Jackson and Others | Court of Appeal | Yes | [1990] Ch 265 | England and Wales | Suggested that constructive notice was sufficient for knowing receipt. |
| Houghton and others v Fayers and another | Court of Appeal | Yes | [2000] 1 BCLC 511 | England and Wales | Suggested that constructive notice was sufficient for knowing receipt. |
| In re Montagu’s Settlement Trusts | High Court | Yes | [1987] Ch 264 | England and Wales | Maintained that only actual knowledge could justify the imposition of liability for knowing receipt. |
| Eagle Trust plc v S.B.C. Securities Ltd | High Court | Yes | [1993] 1 WLR 484 | England and Wales | Maintained that only actual knowledge could justify the imposition of liability for knowing receipt. |
| Cowan de Groot Properties Ltd v Eagle Trust plc | High Court | Yes | [1992] 4 All ER 700 | England and Wales | Maintained that only actual knowledge could justify the imposition of liability for knowing receipt. |
| Manchester Trust v Furness | Court of Appeal | Yes | [1895] 2 QB 539 | England and Wales | States that in commercial transactions possession is everything, and there is no time to investigate title. |
| Baden and others v Societe Generale pour Favoriser le Developpement du Commerce etc de l'Industrie en France SA | High Court | Yes | [1993] 1 WLR 509 | England and Wales | Categorizes knowledge in knowing receipt cases. |
| Westpac Banking Corporation v Savin | Court of Appeal | Yes | [1985] 2 NZLR 41 | New Zealand | Held that constructive notice was sufficient for recipient liability to be imposed. |
| Citadel General Assurance Co et al v Lloyds Bank Canada et al | Court of Appeal | Yes | (1997) 152 DLR (4th) 411 | Canada | Held that constructive notice was sufficient for recipient liability to be imposed. |
| Papamichael v National Westminster Bank plc | Commercial Court | Yes | [2003] 1 Lloyd’s Rep 341 | England and Wales | Held that actual knowledge was required for knowing receipt. |
| Criterion Properties Plc v Stratford UK Properties LLC and others | Court of Appeal | Yes | [2003] 1 WLR 2108 | England and Wales | Criticized Papamichael as being too narrow an interpretation of Akindele. |
| Criterion Properties plc v Stratford UK Properties LLC | House of Lords | Yes | [2004] 1 WLR 1846 | United Kingdom | The House of Lords did not comment on the issue when the case went on appeal. |
| Charter plc and another v City Index Ltd | Court of Appeal | Yes | [2008] 1 Ch 313 | England and Wales | Reaffirmed that liability for knowing receipt depends on the defendant having sufficient knowledge of the circumstances of the payment to make it unconscionable for him to retain the benefit. |
| Comboni Vincenzo and another v Shankar’s Emporium (Pte) Ltd | High Court | Yes | [2007] 2 SLR(R) 1020 | Singapore | Adopted Akindele in Singapore. |
| Relfo Ltd (in liquidation) v Bhimji Velji Jadva Varsani | High Court | Yes | [2008] 4 SLR(R) 657 | Singapore | Followed the position taken in Comboni Vincenzo. |
| Akai Holdings Ltd (in liquidation) v Thanakharn KasiKorn Thai Chamkat (Mahachon) | Court of Appeal | Yes | [2009] HKCU 1176 | Hong Kong | Concluded that, although the test for knowledge is as laid out in Akindele, constructive notice as a doctrine could still be relevant in determining whether the conscience of the defendant was affected. |
| MacMillian Inc v Bishopsgate Investment Trust Plc and others (No. 3) | High Court | Yes | [1995] 1 WLR 978 | England and Wales | The relevance of constructive notice in its wider meaning cannot depend on whether the transaction is “commercial”. |
| John and others v Dodwell and Company, Limited | Privy Council | Yes | [1918] AC 563 | United Kingdom | Concerns recipients of funds who clearly knew that payment was being made by an agent using funds of the principal. |
| Reckitt v Barnett, Pembroke and Slater Limited | House of Lords | Yes | [1929] AC 176 | United Kingdom | Concerns recipients of funds who clearly knew that payment was being made by an agent using funds of the principal. |
| Nelson and Others v Larholt | King's Bench Division | Yes | [1947] 1 KB 339 | England and Wales | Concerns recipients of funds who clearly knew that payment was being made by an agent using funds of the principal. |
| Feuer Leather Corpn v Frank Johnston & Sons | High Court | Yes | [1981] Com LR 251 | England and Wales | Remains the leading authority on knowing receipt in transactions involving the sale of goods. |
| Belmont Finance Corporation v Williams Furniture Ltd and others (No 2) | Court of Appeal | Yes | [1980] 1 All ER 393 | England and Wales | Example of liability in knowing receipt based on a failure to infer. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| No applicable statutes | |
15. Key Terms and Keywords
15.1 Key Terms
- Knowing Receipt
- Dishonest Assistance
- Breach of Trust
- Client's Account
- Unconscionability
- Constructive Notice
- Fiduciary Duty
- Misappropriation
- Cash Cheque
15.2 Keywords
- knowing receipt
- breach of trust
- solicitor
- misappropriation
- client account
- jewellery
- constructive trust
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Knowing Receipt | 80 |
| Trust Law | 75 |
| Dishonest assistance | 70 |
| Breach of Trust | 70 |
| Fiduciary Duties | 65 |
| Fraud and Deceit | 60 |
| Commercial Fraud | 50 |
| Civil Procedure | 30 |
| Contract Law | 20 |
| Corporate Law | 15 |
16. Subjects
- Trusts
- Equity
- Commercial Transactions
- Banking
- Legal Ethics