The plaintiff, Star Cruise Services Ltd (SCS Ltd), was a member of a conglomerate that operated casinos internationally. SCS Ltd was not the operator of floating casinos but the manager of money for the conglomerate, ie for customers of Star Cruises plc gambling on credit, SCS Ltd was the debt collector. SCS Ltd sued the defendant, Overseas Union Bank Ltd (OUB), for the payment of three cashier’s orders. OUB counterclaimed for the return of 25 cashier’s orders previously paid to SCS Ltd.

An OUB employee, Siak, had been stealing money from various customer accounts at OUB to fund her husband’s (Alan Teo’s) gambling habit. She did so by fraudulently issuing cashier’s orders (COs) in favour of SCS Ltd when no underlying money had been paid in by her husband in respect of those cashier’s orders. Alan Teo had gambled on credit offered by SCS Ltd, lost, and the money stolen from OUB had been used to pay his gambling debts.

The fraud was uncovered in December 1997 whereupon OUB refused to honour the last three COs which had been issued. When SCS Ltd brought proceedings against OUB for the payment of these 3 COs, OUB counterclaimed for the return of the funds paid out pursuant to the 25 previous (fraudulently issued) COs.

In respect of the last 3 COs, OUB argued there was no enforceable contract for SCS Ltd to sue on. This was on the basis that gaming or gambling contracts are void and unenforceable pursuant to legislation in Singapore, specifically ss 6(1), 6(2) and 6(5) of the Civil Law Act. Therefore, OUB was not obliged to make payment in respect of these 3 COs.

In respect of the 25 previous COs (issued between September 1995 and December 1997), OUB brought a claim against SCS Ltd for money had and received, arguing that OUB was entitled to restitution on the basis of:

• Lack of consent (it was beyond doubt that the OUB customers whose accounts had been debited had not consented to the transfer of funds to SCS Ltd); and
• Lack of consideration.

OUB also argued that SCS Ltd could not use change of position as a defence since they had kept the money.

Held: OUB’s arguments would be accepted and judgment would be given in OUB’s favour. OUB was not obliged to honour the last 3 COs and OUB was entitled to restitution and the return of $9.1 million in respect of the 25 previous (fraudulently issued) COs.

Governing law

The Court held that the question whether there had been consideration for the cashier’s orders was governed by Singapore law. The law of the flag was irrelevant.

Counsel for SCS Ltd had attempted to argue that as the gaming took place in international waters, the rules of municipal (national) law were subordinated to the rules of public international law. This contention was rejected by the Court. On the other side of Singapore territorial waters one finds either Indonesian or Malaysian territorial waters. Littoral (ie coastal) States have sovereign rights over territorial waters. The civil and criminal laws of the coastal State apply in its territorial waters save as exempted by the United Nations Convention on the Law of the Sea (UNCLOS).

Customary international law provides that foreign States may claim certain rights and exemptions for their vessels and subjects within the territorial waters of other States. The right of innocent passage is recognised as the predominant of such rights. The right of innocent passage is, therefore, relevant only when a foreign ship is transiting the territorial waters of a State. It has no application on the high seas. Subject to certain exceptions, a coastal State has no jurisdiction over offences committed on board a foreign ship exercising the right of innocent passage in its territorial waters.

Art 18.1 of UNCLOS, to which Singapore and Malaysia are parties, defines ‘passage’. Selvam J agreed that innocent passage signified exemption from the general jurisdiction of the coastal state while the foreign vessel was passaging in the territorial waters. However, this availed the plaintiffs nothing because they were not the owners of the ships nor the operators of the casinos in those ships. The right of innocent passage at best gave the casino operators freedom from arrest under the Singapore Common Gaming Houses Act. It also benefited the customers of the casinos because it prevented them from being prosecuted under the same Act.

Crucially, the laws applicable to the present suit belonged to the entirely different regime of private international law (ie conflict of laws). The right of innocent passage had nothing to do with the applicability of the of the coastal State’s civil laws to events and parties to civil litigation. 

Counsel for SCS Ltd referred to art 28 of UNCLOS. The Court held that art 28 had no relevance to the present case because the case was not about stopping, diverting or arresting a foreign ship passing through the Strait of Singapore or the Straits of Malacca. Nor was it about serving any court process. The plaintiffs (STS Ltd) voluntarily walked into the Singapore court and submitted to the sovereign power of Singapore, including its judicial power. Accordingly they were bound by the laws which the Singapore court administered.

In short, whilst the actual play carried on while the Star Cruise ships were in the territorial waters of one country or another was freed from the grasp of the Common Gaming Houses Act and therefore not unlawful, that did not make the contracts of gaming valid/enforceable under Singapore law (because they were made void by s 6 of the Civil Law Act).

As to the laws by which the issues relating to the COs were to be decided, there was virtually no room for argument. The plaintiffs (STS Ltd) relied on Singapore law to enforce the COs, namely the Bills of Exchange Act. Accordingly, as to whether there was consideration and whether the gaming transactions were void, these were also to be decided by the laws of Singapore. This must be right given that the COs were issued in Singapore and the action to enforce them was before a Singapore court. Having invoked Singapore law the plaintiffs had to accept the entire body of Singapore law.