Chew Kong Huat and Others v Ricwil (Singapore) Pte Ltd

JurisdictionSingapore
JudgeChao Hick Tin JA
Judgment Date30 December 1999
Neutral Citation[1999] SGCA 90
Docket NumberCivil Appeal No 32 of 1999
Date30 December 1999
Year1999
Published date19 September 2003
Plaintiff CounselJimmy Yim SC, Randolph Khoo and Rama S Tiwari (Drew & Napier)
Citation[1999] SGCA 90
Defendant CounselLeslie Chew, Lionel Tay and Ng Hweelon (Khattar Wong & Partners)
CourtCourt of Appeal (Singapore)
Subject MatterLoss of ownership of machinery,Principles preventing double recovery,Tort,Assessment,Principles to be borne in mind when assessing damages,Whether director breaches fiduciary duties,Directors,Whether elements made out,Conspiracy,Cumulative remedies,Elements of tort,Breach of fiduciary duties,Diverting benefit of contracts to director's own company,s 157(1) Companies Act (Cap 50),Companies,Conspiracy by unlawful means,Damages

(delivering the judgment of the court): Introduction

At all material times, the first appellant, Mr Chew Kong Huat (`Mr Chew`) was the managing director, and his wife, the second appellant, Ms Aw Mui Kee (`Ms Aw`) a director of the respondent company, Ricwil (Singapore) Pte Ltd (`Ricwil`).
The third appellant, Sintalow Hardware Pte Ltd (`Sintalow`) and the fourth appellant, Thermosel Engineering Pte Ltd (`Thermosel`) are companies owned and controlled by them. In the proceedings below, the trial judge found that Mr Chew and Ms Aw acted in breach of their fiduciary duties to Ricwil and granted various reliefs to Ricwil. The appellants now appeal against certain of those reliefs.

Background facts

A Malaysian company by the name of Ricwil (Malaysia) Sdn Bhd (`Ricwil Malaysia`) is a manufacturer of pre-insulated pipes. `Ricwil` is a brand name of a method of pre-insulation originating from the United States. Between 1986 and 1990, Sintalow was a supplier of various types of pipes for the purposes of air-conditioning, drainage and plumbing, and was the sole agent or distributor for Ricwil Malaysia`s products in Singapore.

Towards the end of 1990, Ricwil Malaysia and Mr Chew decided to enter into a joint venture and develop their joint business in Singapore.
A joint venture agreement between Ricwil Malaysia and Mr Chew to set up a joint venture company to make pre-insulated pipes was signed in July 1990. Ricwil is the joint venture vehicle set up pursuant to their joint venture agreement in 1990. Ricwil deals in the installation of insulated water pipes for air conditioning systems and the sale of related products. The issued capital of Ricwil was $60,002 divided into 60,002 shares of $1 each. Mr Chew held 20,000 of those shares but Ms Aw did not hold any shares. The remaining shares were held by four other persons. These four shareholders, Mr Chew and Ms Aw were directors of Ricwil. Mr Chew was also the managing director and Ms Aw was the director in charge of the accounts of Ricwil. The company started operations soon after its incorporation.

Apart from their directorships in Ricwil, Mr Chew and Ms Aw were also directors of their own companies, Sintalow and Thermosel.
Mr Chew and Ms Aw each held 250,000 shares of $1 each in the capital of Sintalow. None of the shareholders of Ricwil other than Mr Chew had any shares in the capital of Sintalow. As for Thermosel, it was set up only in 1995 to do business in air conditioning duct fabrication and had a paid up capital of only $2 made up of two shares of $1 each which were held, one each, by Mr Chew and Ms Aw. Again, Mr Chew was the managing director of Sintalow and Thermosel and Ms Aw was in charge of the accounts of these two companies. Ricwil, Sintalow and Thermosel occupied the same premises at No 8 Fan Yoong Road, until mid-June 1996 when Ricwil moved out of the premises. According to the appellants, Ricwil obtained its supply of carrier or bare steel pipes from Sintalow for its manufacture of pre-insulated pipes during this period. The trial judge below found that Mr Chew and Ms Aw managed the three companies, Ricwil, Sintalow and Thermosel, as though they were all companies in a group, and anyone dealing with them and the staff of any one of those companies would not be concerned to know which of the companies he was dealing with. Not surprisingly, disputes soon arose between, on the one hand, Mr Chew and Ms Aw and, on the other, the other shareholders of Ricwil. These disputes, which surfaced sometime in 1994 or 1995, came to a head in 1996. At a meeting of the board of directors of Ricwil held on 15 January 1996, Mr Chew and Ms Aw gave notice of their resignations as the managing director and director of Ricwil with effect three months from that date. But, effectively as from that date, one Mr Stanley Wong Syn Loy, a director of Ricwil, who was also at that time the general manager of Sintalow, took over the management of Ricwil and resigned as the general manager of Sintalow. Thenceforth, Mr Chew ceased to be involved in the day-to-day management of Ricwil and he eventually resigned as the managing director on 15 April 1996, but he remained a director. Ms Aw resigned as a director of Ricwil on 12 June 1996. In mid-June 1996 or thereabouts, Ricwil moved out of No 8 Fan Yoong Road and was relocated elsewhere.

Proceedings below

On 26 November 1997, Ricwil instituted proceedings against the appellants in Suit 19/97. In this action, the company made several claims against Mr Chew and Ms Aw in relation to the affairs of Ricwil. First, it was claimed that they caused and procured Ricwil to use the letter of credit facilities of Sintalow and pay to Sintalow a commission of 10%. Secondly, it was claimed that Mr Chew and Ms Aw caused eight contracts for the sale of goods agreed to be supplied by Ricwil to its customer, Speed-Air Air-Conditioning Engineering Pte Ltd (`Speed-Air`), to be cancelled and transferred to Thermosel. Thirdly, it was claimed that Ricwil was invoiced twice for the same goods and services provided by Sintalow. It was said that the double invoicing was effected or authorised by Ms Aw who was responsible for the accounts of Ricwil. Fourthly, Ricwil claimed that Mr Chew deprived Ricwil of the ownership of the duct fabricating machinery, which had been agreed to be sold to Ricwil by Kailay (S) Pte Ltd (`Kailay`), by causing and procuring DBS Finance Ltd to sell it to Thermosel. Lastly, it was claimed that Mr Chew at the expense of Ricwil procured contracts for Sintalow to supply Nippon steel pipes to Kwang Wah Engineering Pte Ltd (`Kwang Wah`) and caused Ricwil to lose the benefit of those contracts. Alternatively, it was alleged that Mr Chew and Sintalow conspired to cause injury or damage to Ricwil. The trial judge found in favour of Ricwil on all the claims and made a series of orders against the appellants concerned.

Appeal

The appellants appeal against only the following orders:

6 The first defendant [Mr Chew] do pay the plaintiffs [Ricwil] damages to be assessed for the plaintiffs being deprived of the ownership of a duct fabricating machine system, such damages being limited to the value of the machine as at the date of the breach, namely, 29 December 1995.

7 At the election of the plaintiffs:

(a) the first defendant do pay the plaintiffs damages to be assessed in causing the plaintiffs the loss of contracts to supply Nippon steel pipes to Kwang Wah Engineering Pte Ltd for the Suntec City, Woodlands Seagate, and UIC projects, or

(b) in the alternative to sub-para (a) hereof, an account of the profits made by the third defendants [Sintalow] in respect of the contracts for the supply of Nippon steel pipes to Kwang Wah Engineering Pte Ltd for the Suntec City, Woodlands Seagate, and UIC projects.

8 The third defendants do make discovery of all documents relevant to its contracts for the supply of Nippon steel pipes to Kwang Wah Engineering Pte Ltd for the Suntec City, Woodlands Seagate and UIC projects within four weeks from the date of this order and the plaintiffs to make the election within four weeks of the said discovery.

9 The first and second defendants [Mr Chew and Ms Aw] do pay the plaintiffs damages to be assessed for causing the plaintiffs` contracts for the manufacture of ducts to be cancelled and transferred to the fourth defendants [Thermosel].

10 An account of the net profits before tax made by the fourth defendants in respect of the fourth defendants` use of the plaintiffs` duct fabricating machine system, raw materials, and labour for the fabrication of ducts and such profits to be paid to the plaintiffs.

11 The plaintiffs do recover against the first and third defendants damages to be assessed for the tort of conspiracy which will be assessed after the date of election under para 8 hereof.



These orders were made to give reliefs to Ricwil in respect of the following instances of breach of fiduciary duties as found by the trial judge: (i) the loss of the duct fabricating machinery which had been agreed to be sold by Kailay to Ricwil and which was eventually purchased by Thermosel; (ii) the cancellation of the contracts for the manufacture and supply of certain ducts by Ricwil to Speed-Air and the transfer of such contracts to Thermosel; (iii) the contracts for the supply of Nippon steel pipes to Kwang Wah; and (iv) the conspiracy to cause injury or damage to Ricwil in respect of such contracts.
Essentially, the appellants appeal against the trial judge`s findings in relation to these breaches of fiduciary duties.

Duct fabricating machinery of Kailay

The first dispute relates to the duct fabricating machinery (`the machinery`) of Kailay and arose in the following circumstances. Kailay was the subcontractor of Kailay Engineering Co (S) Pte Ltd, which in turn was a nominated sub-contractor responsible for air conditioning and mechanical ventilation works for the two phases of the Suntec City project. Kailay had been obtaining its supplies of pre-insulated pipes from Ricwil. Sometime in 1994, Kailay ran into financial difficulties and was unable to pay its debts owing to various parties involved in the Suntec City project including Ricwil. By July 1994, Kailay owed Ricwil a sum of $742,958.75. As the chances of recovering the moneys owed by Kailay were remote and for the purpose of obtaining some payment from Kailay, Mr Chew, on behalf of Ricwil, decided to purchase from Kailay the machinery for the sum of $325,000 which was to be paid by setting it off against part of the amount owed by Kailay to Ricwil. An agreement in writing was made between Kailay and Ricwil on 12 June 1995, whereby Kailay would sell and Ricwil would purchase the machinery for the sum of $325,000 and this sum would be paid by Ricwil setting it off against part of the debt owed by Kailay to Ricwil. Further, one of the terms of the agreement was that the machinery would be `free from all...

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