Chong Hon Kuan Ivan v Levy Maurice and Others (No 2)

• Jurisdiction: Singapore
• Judge: Woo Bih Li J
• Judgment Date: 28 September 2004
• Neutral Citation: [2004] SGHC 217
• Docket Number: Suit No 766 of 2002 (Registrar's Appeal No 163 of 2004)
• Date: 28 September 2004
• Published date: 01 October 2004
• Year: 2004
• Plaintiff Counsel: Irving Choh and Alan Thio (Rajah and Tann)
• Citation: [2004] SGHC 217
• Defendant Counsel: Prakash Mulani and Aftab A Khan (M and A Law Corporation)
• Court: High Court (Singapore)
• Subject Matter: Amendment,Directors,Whether court could decide on difficult or important point of law at stage of striking-out application,Liabilities,Application by first defendant to strike out part of Statement of Claim,Civil Procedure,Whether directors can be liable in tort for inducing breach of contract by company if conspiring to induce board as a whole to break contract takes place before board meeting,Action against directors for conspiracy to induce and inducing company to terminate employment agreement,Companies,Whether amendment to Statement of Claim should be allowed,Amendments including allegations that defendant directors acting outside scope of office,Pleadings,Striking out,Application by plaintiff for leave to amend Statement of Claim

28 September 2004

Woo Bih Li J:

Background

1 The sixth defendant, Publicis Eureka Pte Ltd (“Publicis Singapore”), is a company incorporated in Singapore. Prior to 20 December 1996, Publicis Singapore was owned by the plaintiff, Chong Hon Kuan Ivan (“Chong”), and two others, ie Chang Hong Kaye Jimmy (“Chang”) and Neo Kee Choon Thomas (“Neo”) (collectively “the Original Shareholders”). It was then known as Eureka Advertising Pte Ltd.

2 The fifth defendant, Publicis Groupe SA (“Publicis France”), was and is a public listed company incorporated in France. On or about 20 December 1996, Publicis France acquired 60% of the issued shares in the capital of Publicis Singapore from the Original Shareholders who retained 40%. Following a corporate restructuring, the shares held by Publicis France were transferred to the fourth defendant, Publicis Worldwide BV (“Publicis Netherlands”), a company incorporated in the Netherlands.

3 As part of the acquisition by Publicis France, various agreements were entered into, including employment agreements between Publicis Singapore and each of the Original Shareholders. In the case of Chong, he was employed as the managing director and chief executive officer of Publicis Singapore for five years commencing 1 January 1997, with a provision for renewal for another five years from 1 January 2002 if Chong was not guilty of any gross negligence or wilful misconduct in respect of the business of Publicis Singapore and the Publicis group.

4 The first defendant Maurice Levy (“Levy”) was at all material times the chairman and chief executive officer of Publicis France. He was also a director of Publicis Singapore from 15 January 1997 to 9 February 2002.

5 The second defendant Salomon Salto (“Salto”) was at all material times Senior Vice-President of Publicis Netherlands and a director of Publicis Singapore.

6 The third defendant Jean-Paul Morin (“Morin”) was at all material times the chairman and chief executive officer of Publicis Netherlands and the chief financial officer and/or corporate secretary of Publicis France. At all material times he was also a director of Publicis Singapore.

7 As a result of disputes arising, a board meeting of Publicis Singapore was held on 9 February 2002 in which Morin proposed a resolution to terminate Chong’s employment with Publicis Singapore and, exercising his vote and the votes of Levy and Salto, Morin voted in favour of the resolution. The resolution was carried as only Chong and Chang voted against it. Neo abstained.

8 Consequently, Chong commenced the present action against all six defendants. The claim against Levy, Salto and Morin was for conspiracy to induce and inducing Publicis Singapore to terminate his employment agreement. The claim against Publicis Singapore was for breach of his employment agreement. The action also included claims against Publicis Netherlands, Publicis France and Publicis Singapore for breaches of his employment agreement and other agreements which I need not elaborate on.

9 In these circumstances, Levy applied to strike out paras 18 and 19 of the Statement of Claim, which alleged the conspiracy and the inducement and alleged damages as a result thereof. Levy relied on the principle that:

[A] company can only act by its officers, servants or agents and if the individual defendant was acting within the scope of her employment, and therefore as the company’s alter ego, the claim of conspiracy must fail.

10 At the hearing before an assistant registrar on 14 May 2004, the assistant registrar allowed Levy’s application. However, Chong’s counsel then raised further arguments and applied for leave to amend the Statement of Claim relying on certain exceptions to the principle which Levy relied on. The assistant registrar then reversed her decision on striking out and allowed Chong to amend the Statement of Claim.

11 Levy then appealed to a judge in chambers. I heard the appeal and allowed it, in that I refused to allow the amendment and struck out that part of paras 18 and 19 of the Statement of Claim in so far as they contained a claim against Levy.

12 I now set out my reasons in writing. I will deal first with the principle raised by Levy so that the application to strike out and the proposed amendments may be better understood.

The various cases and arguments

13 Mr Prakash Mulani, counsel for Levy, cited various cases. I need refer to some of them only. The classicus locus is the case of Said v Butt [1920] 3 KB 497. The headnote thereof states:

The plaintiff desired to be present at the first performance of a play at a theatre. He knew that, in consequence of his having made certain serious and unfounded charges against some members of the theatre staff, an application for a ticket in his own name would be refused. He therefore obtained a ticket through the agency of a friend who bought the ticket at the theatre without disclosing that it was for the plaintiff. By order of the defendant, the managing director of the theatre, the plaintiff was refused admission to the theatre on the night in question. The plaintiff claimed damages from the defendant for maliciously procuring the proprietors of the theatre to break a contract for the admission of the plaintiff to the theatre, alleged to have been made by them with the plaintiff by the sale of the ticket:-

Held, that the non-disclosure of the fact that the ticket was bought for the plaintiff prevented the sale of the ticket from constituting a contract as alleged, the identity of the plaintiff being in the circumstances a material element in the formation of the contract; and that the action therefore failed.

Semble, a servant who, acting bona fide within the scope of his authority, procures the breach of a contract between his employer and a third person, is not liable to an action of tort at the suit of that third person.

14 McCardie J said at 504 to 507:

... It is well to point out that Sir Alfred Butt possessed the widest power as the chairman and sole managing director of the Palace Theatre, Ld. He clearly acted within those powers when he directed that the plaintiff should be refused admission on December 23. I am satisfied, also, that he meant to act and did act bona fide for the protection of the interests of his company. If, therefore, the plaintiff, assuming that a contract existed between the company and himself, can sue the defendant for wrongfully procuring a breach of that contract, the gravest and widest consequences must ensue. This is the more apparent when it is remembered that it is not necessary to prove actual malice against a defendant in order to establish a cause of action against him for knowingly procuring the breach of a third person’s contract with the plaintiff, whereby the plaintiff suffers pecuniary damage: see Pratt v British Medical Association, citing South Wales Miners’ Federation v Glamorgan Coal Co.

If the plaintiff is right in his contention, it seems to follow that whenever either a managing director or a board of directors, or a manager or other official of a company, causes or procures a breach by that company of its contract with a third person, each director or official will be liable to an action for damages, upon the principle of Lumley v Gye, as for a tortious act. So, too, with the manager or other agent of a private firm, who does the like thing. This far-reaching result of the principle here suggested by the plaintiff is emphasized, when it is remembered that in an ordinary action for breach of contract the plaintiff recovers his pecuniary loss only; whereas in an action for wrongfully procuring a breach of contract the damages against the wrongdoer are at large, and may vastly exceed the sum recoverable in a mere claim for breach of contract against the contractor: see Pratt v British Medical Association and Exchange Telegraph Co v Gregory.

Mr Disturnal for the plaintiff argued with great vigour that though the results may be remarkable, yet the principle asserted by the plaintiff is sound. He points out the breadth of the language employed in the well-known cases on the subject from Lumley v Gye to the present time. I agree that the language is wide in its scope. The proposition is stated with unrestricted diction: that a person who without just cause knowingly procures a man to commit a breach of his contract with another, whereby the latter suffers pecuniary damage, is liable to an action for tort. But I conceive that none of the judges was thinking of such a case as the present. I have searched in vain for any decision which indicates that a servant is liable in tort for procuring a breach of his master’s contract with another. If such a cause of action existed, I imagine that it would have been successfully asserted ere this. The explanation of the breadth of the language used in the decisions probably lies in the fact that in every one of the sets of circumstances before the Court the person who procured the breach of contract was in fact a stranger, that is a third person, who stood wholly outside the area of the bargain made between the two contracting parties. If he is in the position of a stranger, he will be prima facie liable, even though he may act honestly, or without malice, or in the best interests of himself; or even if he acts as an altruist, seeking only the good of another: see the decisions cited in Pratt’s Case and the Glamorgan Coal Case.

But the servant who causes a breach of his master’s contract with a third person seems to stand in a wholly different position. He is not a stranger. He is the alter ego of his master. His acts are in law the acts of his employer. In such a case it is the master himself, by his agent, breaking the contract he has made, and in my view an action against the agent under the Lumley v Gye principle must therefore fail, just as it would fail if brought against the master himself for wrongfully procuring a breach of his own contract. This, I think, is the true...