AK Business Solutions Pte Ltd v Hau Yew Ching and others

JurisdictionSingapore
JudgeLiu Zeming
Judgment Date29 July 2022
Neutral Citation[2022] SGDC 165
CourtDistrict Court (Singapore)
Docket NumberDistrict Court Suit No. 2258 of 2017, Assessment of Damages No. 216 of 2020
Published date03 August 2022
Year2022
Hearing Date05 May 2021,08 July 2021,27 October 2021,24 November 2021
Plaintiff CounselSingh Ranjit (Francis Khoo & Lim)
Defendant CounselEdison Tam Chyi Eu (Emerald Law),4th defendant in person and absent
Subject MatterDamages,Assessment
Citation[2022] SGDC 165
Deputy Registrar Liu Zeming:

To be, or not to be, that is the question. But sometimes, that is only half the question. Litigants and lawyers focused on establishing a breach of contract or breach of duty sometimes forget that establishing liability is only half the battle – the true relief lies in the remedy. A plaintiff who fails to consider the appropriate remedy for the breach in question risks wasting time and costs barking up the wrong tree. This was one such unfortunate case.

In this case, the Plaintiff sought and was awarded both an account of profits as well as damages as remedy for its claim for breach of fiduciary duties and ancillary liabilities. The Plaintiff appeared not to have appreciated that for such a claim, damages and an account of profits are alternative and inconsistent remedies. The Plaintiff did not elect and obtained interlocutory judgment for both. How should damages be assessed in such a situation?

The assessment of damages hearing took place before me. After considering parties’ submissions, I awarded the Plaintiff damages in the sum of $33,811.35. However, I made it clear to parties that the damages assessed did not include any amount(s) for the Plaintiff’s claim for diversion of business from the Plaintiff to the 4th Defendant. Insofar as that claim was concerned, the Plaintiff was granted remedy in the form of an account of profits, and the amount was to be determined through a taking of accounts. I arrived at this decision with some reluctance and difficulty. These are the ground of my decision.

Background Facts The Parties

The Plaintiff is a company in the business of selling photocopying machines as well as other office products.1

The 1st Defendant, Hau Yew Ching, was employed by the Plaintiff as a sales manager between 2 January 2014 to around 7 May 2016. It was the Plaintiff’s case that the 1st Defendant was at all material times a de facto director of the Plaintiff.2

The 2nd Defendant, Sim Thia Meng, was also a sales manager employed by the Plaintiff. The Plaintiff alleged that the 2nd Defendant was also a de facto director of the Plaintiff.3

The 3rd Defendant, Sim Mui Eng, was a shareholder of the Plaintiff. The 2nd and 3rd Defendants are siblings.4

The 4th Defendant is a Singapore company incorporated in September 2014. The Plaintiff alleged that the 4th Defendant was incorporated by or at the instigation of the 1st and 2nd Defendants while they were de facto directors of the Plaintiff, with the intention of using the 4th Defendant to compete with the Plaintiff.5

The 5th Defendant, Sim Beng Choo Irene, is the sole director of the 4th Defendant.6

The Plaintiff’s Claims

The Plaintiff’s primary claim was that the 1st Defendant, as an employee and de facto director of the Plaintiff, had breached his contractual and fiduciary duties to the Plaintiff by incorporating the 4th Defendant to compete with the Plaintiff.7 Further, the Plaintiff also claimed that the 1st Defendant made various unauthorised and/or improper payments from the Plaintiff’s bank accounts, either to the 3rd Defendant,8 to third parties9 or to the 4th Defendant.10 Substantially similar allegations were made against the 2nd Defendant.11

As against the 3rd, 4th and 5th Defendants, the Plaintiff claimed that they dishonestly assisted the 1st and 2nd Defendants’ breaches of fiduciary duties12 and were liable to account to the Plaintiff as constructive trustee on the grounds of dishonest assistance.13 For the 3rd Defendant, the Plaintiff additionally claimed that she was liable for knowingly received the Plaintiff’s monies which were unauthorised.14

Proceedings Against and Settlement with the 2nd and 3rd Defendants

Prior to the commencement of the trial on liabilities, the Plaintiff entered into a settlement agreement with the 2nd and 3rd Defendants. Accordingly, on 2 November 2016, a Notice of Discontinuance was filed by the Plaintiff, discontinuing the action against the 2nd and 3rd Defendants.

The precise terms of the settlement between the Plaintiff and the 2nd and 3rd Defendants were not disclosed. However, the Plaintiff confirmed during the assessment of damages proceedings that it had received payments of $35,000 from each of the 2nd and 3rd Defendants (i.e. a total of $70,000) in settlement of the Plaintiff’s claims against them.15

Trial and Interlocutory Judgments

The Plaintiff’s remaining claims against the 1st, 4th and 5th Defendants then proceeded to trial.

At the commencement of the trial on 11 June 2018, the trial judge entered interlocutory judgment against the 4th Defendant (“11 June IJ”) since the 4th Defendant “was not represented by Counsel as required by the Rules of Court and was not contesting the claim”.16 Interlocutory judgment against the 4th Defendant was entered in the following terms:

Interlocutory Judgment is entered against the Fourth Defendant for the Plaintiff with: damages to be assessed for: knowingly assisting the 1st and 2nd Defendants in diverting contracts to the 4th Defendant; and knowingly assisting the 1st and 2nd Defendants in breach of their fiduciary obligations. a declaration that the 4th Defendant be liable to account to the Plaintiff as constructive trustee on the grounds of dishonest assistance in breach of fiduciary obligations by the 1st and 2nd Defendants.

Interest and costs to be reserved to the registrar assessing damages.

At the conclusion of the trial, the trial judge found that the [1st Defendant] had acted with the [2nd Defendant] to set up the [4th Defendant] and together with the [5th Defendant], they had used the [4th Defendant] to operate in competition with the Plaintiff and to profit from this arrangements”.17 It was further held that: The 1st Defendant was in breach of his duties owed to the Plaintiff as an employee as well as a de facto director as he had acted against the interest of the Plaintiff.18 The amounts the [4th Defendant] received for services rendered were for the same business activities that the Plaintiff had engaged in.19 The 5th Defendant had dishonestly assisted the [1st and 2nd Defendants] in breaching their duties to the Plaintiff and that the Plaintiff were entitled to claim against the [5th Defendant] for the profits made by the [4th Defendant] for the business activities that the company had engaged in that were in competition with the Plaintiff.20

Having made these findings, on 7 September 2018, interlocutory judgment was entered against the 1st, 3rd and 5th Defendants (“7 Sep IJ”) in the following terms: Interlocutory Judgment is entered against the First Defendant for the Plaintiff with: damages to be assessed for: the breaches of his contractual duty as well as fiduciary duties, for all unauthorised payments made to the Third Defendant; and for competing with the Plaintiff in its business activities. an account be taken of: all the secret profits made by the First Defendant and the payment of all secret profit to the Plaintiff upon taking of the account; all the profits made by the Fourth Defendant as a result of the diversion of the business to the Fourth Defendant.

Interest and costs to be reserved to the registrar assessing damages.

Interlocutory Judgment is entered against the Fifth Defendant for the Plaintiff with: damages to be assessed for: knowingly assisting the First and Second Defendants in diverting contracts to the Fourth Defendant; knowingly assisting the First and Second Defendants in breach of their fiduciary obligations. [sic] an account be taken of: all the secret payment made by the First Defendant to the Fifth Defendant and the payment of all secret payment to the Plaintiff upon the taking of the account; all the profits made by the Fourth Defendant as a result of the diversion of the business to the Fourth Defendant.

Interest and costs to be reserved to the registrar assessing damages.

(emphasis added)

In summary, interlocutory judgment was entered for damages to be assessed: against the 1st Defendant, for: the breaches of his contractual duty as well as fiduciary duties, all unauthorised payments made to the 3rd Defendant; and competing with the Plaintiff in its business activities. against the 4th and 5th Defendants, for: knowingly assisting the 1st and 2nd Defendants in diverting contracts to the 4th Defendant; knowingly assisting the 1st and 2nd Defendants in breach of their fiduciary obligations.

In addition to damages, interlocutory judgment was entered for an account to be taken: against the 1st Defendant, of all the secret profits made by the 1st Defendant and the payment of all secret profit to the Plaintiff upon taking of the account; all the profits made by the 4th Defendant as a result of the diversion of the business to the 4th Defendant; against the 5th Defendant, of all the secret payment made by the 1st Defendant to the 5th Defendant and the payment of all secret payment to the Plaintiff upon the taking of the account; all the profits made by the 4th Defendant as a result of the diversion of the business to the 4th Defendant.

In addition, the Plaintiff also obtained judgment for a declaration that the 4th Defendant be liable to account to the Plaintiff as constructive trustee "on the grounds of dishonest assistance in breach of fiduciary obligations by the 1st and 2nd Defendants”.21

The Assessment of Damages Hearing

After interlocutory judgments were entered, the Plaintiff sought directions for an assessment of damages, and that was the hearing which eventually took place before me.

Although the 7 Sep IJ ordered that an account be taken and the 11 June IJ granted a declaration that the 4th Defendant be liable to account to the Plaintiff, the Plaintiff did not...

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