Case Details
- Citation: [2023] SGCA(I) 2
- Title: Tamar Perry & Anor v Jacques Henri Georges Esculier & Anor
- Court: Court of Appeal of the Republic of Singapore
- Date: 2 March 2023
- Judges: Judith Prakash JCA, Steven Chong JCA and Beverley McLachlin IJ
- Lower Court: Singapore International Commercial Court (SIC)
- Lower Court Citation: Perry, Tamar and another v Esculier, Bonnet Servane Michele Thais and another [2022] SGHC(I) 10
- Appellants/Applicants: Tamar Perry; Solid Fund Private Foundation
- Respondents/Defendants: Jacques Henri Georges Esculier; Bonnet Esculier Servane Michele Thais
- Procedural Context: Civil appeal from SIC/S 4/2020 (Civil Appeal from Singapore International Commercial Court No 7 of 2022)
- Related Proceedings: Interpleader proceedings in the High Court: HC/OS 1016/2019; consent order recorded on 22 September 2022: HC/ORC 4867/2022
- Judgment Length: 27 pages, 7,039 words
- Legal Areas: Conflict of laws; choice of law; equity; property; trusts; recipient liability; proprietary liability
- Key Themes: Ponzi scheme; tracing and recovery; governing law of proprietary/equitable claims; effect of express choice of law in asset management agreements; trust concepts and their recognition under foreign law
- Core Dispute (in brief): Whether investors who transferred funds into a Ponzi scheme could recover “disputed moneys” paid to earlier investors, where the payments were made by a group company (Lexinta Group Limited) not expressly named as a party to the relevant asset management agreements
Summary
This Court of Appeal decision concerns claims arising from a Ponzi scheme administered by the Lexinta group under the control of Bismark Badilla (“Mr Badilla”). The appellants (later investors) alleged that the “disputed moneys” received by the respondents (earlier investors) were not legitimate returns but were funded by the appellants’ transfers into the scheme. The appellants sought proprietary and equitable recovery, including tracing and recovery based on trust concepts, and argued that the respondents were not bona fide recipients for value without notice.
The central difficulty was not the factual existence of the Ponzi scheme, but the governing law of the appellants’ proprietary/equitable claims. The asset management agreements (“AMAs”) contained an express choice of Swiss law. The appellants advanced alternative connecting factors: that Singapore law should apply as the lex situs of the funds, and that Hong Kong law should apply as the law of incorporation of the company that made the payments (Lexinta Group Limited, “LGL”). The Court of Appeal upheld the SIC judge’s dismissal of the appellants’ claims and confirmed that the governing law analysis was decisive.
Ultimately, the Court of Appeal agreed that Swiss law governed the relevant transaction and that Swiss law did not recognise the trust concept relied upon by the appellants. Because the appellants’ cause of action was framed in trust-based proprietary terms, the absence of trust recognition under Swiss law meant the claim could not succeed. The Court of Appeal therefore dismissed the appeal.
What Were the Facts of This Case?
The Ponzi scheme at the heart of the dispute was administered by a group of companies collectively referred to as “Lexinta”. The scheme was controlled by Mr Badilla. At least five companies were involved, but only three were expressly defined in the AMAs as part of the “Lexinta Group” and named as the “Asset Manager” and counterparty to the agreements. Two other companies—LGL and Lexinta AG—were not named in the AMAs.
The respondents were earlier investors. They invested in April 2014 under an asset management agreement (the “Esculier AMA”). The appellants invested later, entering into two AMAs on 18 April 2016 and 7 July 2016 (the “SRE AMA” and “BGNIC AMA”). The AMAs were substantially similar in terms. In substance, Mr Badilla represented to investors that the Lexinta Group would invest funds into initial public offerings prior to listing and then sell the securities after listing for profit.
By late 2015, the respondents sought to realise profits. Between August 2016 and February 2017, the respondents received payments amounting to approximately US$10 million from LGL. These payments were the “Disputed Moneys”. During the same period, the appellants deposited more than US$25 million into LGL’s DBS bank account in Hong Kong (the “LGL Account”) pursuant to the SRE AMA and BGNIC AMA. The deposits included multiple transfers by the first appellant and transfers by the British Guarantee National Investment Company (“BGNIC”), an investment vehicle of the first appellant’s family. The second appellant later acquired BGNIC’s right and interest in those transferred moneys through a sale and purchase agreement dated 25 September 2017.
After the respondents received the Disputed Moneys, the appellants discovered the flow of funds. In March 2018, through ex parte discovery orders in Hong Kong, the first appellant learned that the Disputed Moneys had been transferred to the respondents’ DBS account in Singapore. DBS froze the respondents’ account following demands by the appellants’ lawyers. Unable to agree on ownership, DBS commenced interpleader proceedings in Singapore (HC/OS 1016/2019), with the dispute later bifurcated into separate proceedings between the appellants and respondents. Those proceedings became SIC/S 4/2020 (“Suit 4”).
What Were the Key Legal Issues?
The first key issue was whether the appellants had a proprietary or equitable claim against the respondents in respect of the Disputed Moneys. The appellants’ case was that, because LGL was not an express party to the AMAs, LGL held the funds on trust for the appellants pending transfer to the “Asset Manager” under the AMAs for investment. On that basis, the appellants argued that the Disputed Moneys paid to the respondents were not the respondents’ contractual return but were misapplied funds traceable to the appellants’ transfers. They further argued that the respondents were not bona fide purchasers for value without notice under the applicable law.
The second key issue was conflict of laws: which system of law governed the appellants’ trust-based and proprietary/equitable claims. The appellants contended for Singapore law as the lex situs of the funds, or alternatively Hong Kong law as the law of the place of incorporation of LGL. The respondents contended that Swiss law applied because the AMAs contained an express choice of Swiss law, and the alleged trust was said to be founded on those Swiss-governed agreements.
A third issue, closely linked to the governing law question, was whether the chosen law recognised the trust concept relied upon by the appellants. If the governing law did not recognise trusts, the appellants’ pleaded proprietary/equitable mechanism would fail at the threshold, regardless of whether the factual narrative of a Ponzi scheme and the flow of funds was persuasive.
How Did the Court Analyse the Issues?
The Court of Appeal began by framing the dispute in the context of Ponzi schemes. It accepted that the “essence” of a Ponzi scheme is the circulation of money among investors, with later investors often losing and earlier investors sometimes benefiting depending on timing. The Court noted that the respondents had exited at a fortuitous time and realised profits. The payments to the respondents were funded by the appellants’ transfers into the scheme, which is typical of Ponzi schemes. However, the legal consequences of that factual reality depended on the governing law of the transaction and the legal characterisation of the appellants’ claims.
On the factual findings, the SIC judge had found that a Ponzi scheme was operating at the latest from 2015, though the precise start date could not be fixed. The Court of Appeal did not treat the inability to pinpoint the scheme’s inception as decisive. Instead, it focused on the legal architecture: the appellants’ claim was built on the proposition that LGL, not being a party to the AMAs, held the Disputed Moneys on trust for the appellants until transfer to the “Asset Manager” under the AMAs.
The Court of Appeal endorsed the SIC judge’s approach that the governing law analysis was determinative. Competing candidates were advanced: Swiss law (expressly chosen in the AMAs), Singapore law (lex situs), and Hong Kong law (incorporation of LGL). The Court agreed with the respondents that Swiss law was the applicable law because the foundational source of the alleged trust was the AMAs themselves. In other words, the appellants’ equitable/proprietary claim was not independent of the contractual framework; it was anchored to the rights and obligations created by the AMAs and the parties’ characterisation of LGL’s role in relation to those agreements.
Once Swiss law was identified as governing, the Court of Appeal addressed the trust recognition issue. The SIC judge had found that Swiss law did not recognise the concept of a trust. The Court of Appeal accepted that this meant the appellants had no cause of action against the respondents under Swiss law on the trust-based theory pleaded. This was not merely a technical deficiency; it went to the substance of the appellants’ legal mechanism for recovery. If the law governing the claim does not recognise trusts, the appellants could not rely on trust principles to establish proprietary liability or recipient liability in the manner required for their case.
The Court of Appeal also dealt with the appellants’ alternative arguments. The appellants had argued, among other things, that even if Swiss law applied, the respondents had notice and were therefore not bona fide recipients for value without notice. However, the Court’s reasoning indicates that such arguments could not salvage the claim once the trust-based foundation failed under the governing law. Similarly, arguments about the start date of the Ponzi scheme and about tracing were not decisive because the legal characterisation of the claim depended on the governing law and the availability of the trust concept under that law.
In addition, the Court of Appeal confirmed that the SIC judge’s approach to the contractual extension point (whether the AMAs extended by implication to include LGL) was not the decisive route to dismissal. Even if LGL were not treated as a party to the AMAs, the governing law conclusion and the absence of trust recognition under Swiss law were sufficient to dispose of the appellants’ claim. The Court therefore treated the conflict of laws issue as the key pivot.
What Was the Outcome?
The Court of Appeal dismissed the appeal in its entirety. The practical effect was that the appellants’ claims for recovery of the Disputed Moneys against the respondents failed, and the respondents’ counterclaim for damages arising from the freezing of the respondents’ DBS account remained in place.
Accordingly, the Court’s decision reinforced that in cross-border disputes involving proprietary and equitable claims, the governing law analysis can be outcome-determinative—particularly where the pleaded cause of action depends on concepts (such as trusts) that may not be recognised under the governing system of law.
Why Does This Case Matter?
This case is significant for practitioners because it illustrates how conflict of laws principles can control the availability of proprietary remedies in disputes arising from fraud and Ponzi schemes. Even where the factual narrative strongly suggests misappropriation and a classic Ponzi flow of funds, the claimant’s legal theory must be capable of being recognised under the governing law. The Court’s emphasis on the foundational source of the alleged trust—anchored in the AMAs—demonstrates that courts will look beyond the identity of the payor and focus on the legal characterisation of the claim.
From a drafting and risk-management perspective, the decision highlights the importance of express choice-of-law clauses in investment agreements. Where an agreement contains an express choice of law, that choice may be treated as governing not only contractual obligations but also the legal framework underpinning related proprietary/equitable claims, depending on how the claim is pleaded and characterised. Parties seeking to recover funds should therefore carefully consider whether their pleaded proprietary mechanism is compatible with the chosen governing law.
For law students and litigators, the case also serves as a reminder that trust-based claims are not universally available in all legal systems. Where the governing law does not recognise trusts, claimants may need to reframe their causes of action using concepts recognised under that law, or pursue alternative legal bases that do not depend on trust recognition. The decision therefore has practical implications for litigation strategy in cross-border asset recovery, especially in cases involving complex corporate structures and multiple jurisdictions.
Legislation Referenced
- Not specified in the provided judgment extract.
Cases Cited
- Not specified in the provided judgment extract.
Source Documents
This article analyses [2023] SGCAI 2 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.