Goh Kim Hai Edward v Pacific Can Investment Holdings Ltd

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 23 March 1996
• Neutral Citation: [1996] SGHC 49
• Date: 23 March 1996
• Subject Matter: Fiduciary duties,Whether falling within ambit of s 168 of Companies Act,Directors,Ratification,Companies,s 168(1)(a) Companies Act (Cap 50, 1990 Ed),Defence,Heads of damages,Damages,Employee's misconduct not known at time of actual dismissal,Duty of disclosure,Whether defendants could rely on defence where material facts had been known to defendant at time defence was filed,Powers,Loss of use of company car and chauffeur,Unfair dismissal,Whether misconduct could still be relied on in subsequent claim against former employer,Duties,Employment Law,Ratification by conduct,Compensation for loss of employment,Evidence of ratification,Whether authority of one director could be inferred from general expectation and understanding of the board as a whole,Pleadings,Defence to allegation,Failure to raise issue as to validity of transaction in pleadings,Failure to expressly plead breach of fiduciary duty,Life insurance and personal accident insurance,Loss of entitlement to insurance,Civil Procedure,Implied authority,Method of measuring loss where policies were not continued by plaintiff after dismissal,Whether failure to provide material information at time board was considering renewal of employee's contract amounted to breach of duty,Whether amounting to ratification of transaction,Contract
• Docket Number: Suit No 1128 of 1992
• Published date: 19 September 2003
• Defendant Counsel: K Shanmugam and Andrew Ho (Allen & Gledhill)
• Court: High Court (Singapore)
• Plaintiff Counsel: Philip Jeyaretnam and Christopher Chong (Helen Yeo & Pnrs)

Judgment:

JUDITH PRAKASH J

Cur Adv Vult

The action

This is an action for damages for wrongful dismissal. Up to 5 May 1992, the plaintiff was chairman of the Board of Directors of the defendants, Pacific Can Investments Holdings Ltd (hereinafter sometimes `the company`), and was also employed as their group managing director. He was removed as a director of the company by a resolution passed by the majority of shareholders attending an extraordinary general meeting of the company on 5 May 1992 and, two days later, the company by letter purported to retroactively terminate his employment with effect from that earlier date.

At the time of his dismissal, the plaintiff was nearing the end of his first contract of employment with the company. That contract, dated 13 October 1989 but which had taken effect from 2 June 1989, was for a period of three years, renewable by agreement for subsequent terms of two years each thereafter. It is the plaintiff`s stand that the contract was duly renewed for a second term of two years commencing from 2 June 1992 by a letter dated 30 January 1992 from the company to the plaintiff accepted and returned by the plaintiff on 31 January 1992.

By cl 5 of the contract, either party thereto was entitled to terminate the plaintiff`s employment by giving six months` notice in writing to the other. Clause 5 further stipulated that the party so terminating should pay to the other party by way of compensation for termination an amount equal to the total emoluments to which the plaintiff would have been entitled for the unexpired period of the contract, such amount being based on the plaintiff`s monthly salary at the time of the service of the notice to terminate.

The writ herein was filed on 12 June 1992, very shortly after the termination of the plaintiff`s employment. In the action, the plaintiff, alleging that his contract of employment was valid up till 2 June 1994, claims that he has been wrongfully dismissed and by virtue of cl 5 is therefore entitled to all the salary which he would have earned for the period 5 May 1992 to 1 June 1994, ie $455,727.96. He also claims salary of $71,539.77 in lieu of leave not taken as at the date of dismissal. In the alternative, the plaintiff claims damages for wrongful dismissal.

The claim has been strenuously resisted by the company from the inception of the action. The grounds on which it contends that the claim is not sustainable, however, shifted considerably in the 28 months that it took for the action to come to trial. First, in the O 14 proceedings, four defences were raised: an assertion that cl 5 of the contract was illegal by virtue of s 168 of the Companies Act (Cap 50, 1990 Ed) (the Act); an alleged attempt to obtain a secret commission; an alleged dumping of a defective computer system on the company; and an allegation that the renewal took place under the mistake that the other directors did not realize that the plaintiff was to be removed as a director of Associated Management Services Pte Ltd (AMS), a company which was a substantial shareholder in the defendant company.

When the defence was filed on 13 May 1993, the allegation concerning the computer system had been dropped. A new defence was, however, added. It was that the plaintiff had ordered the company`s accounts for the year 1989 to be drawn up in a manner contrary to acceptable accounting practice. A year later, on 26 May 1994, the company inserted a new paragraph in the defence and in this paragraph it raised the allegation that the renewal letter had been issued withoutauthority. Three months later, the defendants withdrew the allegation of improper accounting.

When the trial commenced on 12 October 1994, the defendants withdrew the allegation of an attempt to secure a secret commission. Their counsel explained that they had not been able to procure the attendance at the trial of the witness necessary to prove this allegation. A few days later, I granted the defendants leave to re-amend the defence and, from 19 October 1994, the final form taken by the defence set out the company`s position as follows:

(a) that because it was never approved by the shareholders at a general meeting, cl 5 of the contract of 13 October 1989 and/or the whole agreement was unlawful under s 168(1)(a) of the Act and unenforceable as against the company;

(b) the contract had not been validly renewed by the letter of 30 January 1992 because (1) this letter was never approved and/or ratified by the company`s board of directors (the board); (2) Mr Pang Hin Long who signed the letter had not been authorized by the board to do so; and (3) the letter was sent under circumstances which called its bona fides into question;

(c) in any event, the renewal of the contract had not been approved by the shareholders at a general meeting and, accordingly, was unlawful;

(d) even if the contract was enforceable and had been validly renewed, it had been renewed by a mistake in that the plaintiff had deliberately concealed at the time of review that he was to be removed as a director of AMS when he knew the contract would not have been renewed if this fact had been disclosed;

(e) the plaintiff was justly dismissed as a director of the defendants because he had by his conduct repudiated the contract. In this regard, the defendants asserted that the plaintiff acted in breach of his fiduciary duties by procuring the issue of the renewal letter of 30 January 1992 by Pang Hin Long, knowing that Pang Hin Long was not authorized by the defendants to issue the letter. The plaintiff`s purpose in having the letter issued was to try and impose an immediate contractual obligation on the defendants to employ him for a further of two years from 2 June 1992. Detailed particulars of this allegation were given including an assertion that the plaintiff and Pang Hin Long, being old friends and colleagues had acted in concert to procure the speedy issue of the letter.

At the time of his dismissal, no justification was put forward by the company or the shareholders who voted in favour of removing the plaintiff from his post. It was clear then that the plaintiff had fallen in the course of a shareholder battle when the control of the company passed from one substantial shareholder to another. In that context, the plaintiff`s dismissal was inevitable. While at the time the plaintiff was dismissed because of corporate politics, this does not mean, however, that the company has no defence to his action. It is an accepted principle of employment law that the apparently wrongful dismissal of an employee can be justified if it is subsequently discovered that that employee had conducted himself in such a way as to make him liable to be dismissed even though the misconduct was not known at the time of the actual dismissal.

The amended defence raised issues of the plaintiff`s conduct in the course of his duties as director of the company. These were issues on which the burden of proof lay on the company. Before these issues can be considered, an outline of thehistory of the company, the circumstances of the plaintiff`s employment and the issue of the renewal letter, would be helpful.

Pre-history: events occurring prior to the defendants` incorporation

In 1970 or 1971, the plaintiff, who was then in the insurance business, met one Mr Cheah Theam Swee. Mr Cheah was then controlling a group of shipping companies which was referred to in court as the Reefer Group. He was also a director and shareholder of AMS. Between 1974 and 1979, the plaintiff held the positions of managing director of Brentnall Beard & Co (S) Pte Ltd and director of Brentnall Beard (International) Pte Ltd, two companies carrying on insurance business and which handled the insurance of ships belonging to the Reefer Group. In fact, one of the Reefer Group companies was a shareholder in Brentnall Beard & Co (S) Pte Ltd.

In about 1976, the plaintiff met Mr Pang Hin Long (Mr Pang) who was then an accountant with the Reefer Group. In 1978, Mr Pang became the financial controller of the Reefer Group and was also responsible for its general administration. He was also concurrently the company secretary for the various companies in the Reefer Group.

In 1979, Brentnall Beard & Co (Singapore) Pte Ltd changed its name to Prime International Holdings Pte Ltd (Prime). The plaintiff remained its managing director. In May 1981, Mr Pang became the company secretary of AMS which was then controlled by Mr Cheah. In March 1983, AMS took over 75% of the shares in Prime. The other 25% was owned by a company controlled by the plaintiff, EDGO Pte Ltd (EDGO). In that same month, Mr Pang left his employment with the Reefer Group and joined Prime, thus working under the plaintiff. Mr Pang remained company secretary of the Reefer Group and of AMS. In April 1983, Mr Pang became a director of AMS and in September 1984, he also became a director of Prime.

Thus, as of September 1984:

(a) Mr Cheah owned practically all the shares in AMS, which in turn, owned 75% of the shares in Prime;

(b) the plaintiff and Mr Pang were both employees of Prime and the plaintiff was Mr Pang`s superior;

(c) Mr Pang continued to perform services as company secretary to the Reefer Group and AMS while holding the positions of director of AMS and Prime.

By December 1984, Prime had control over 4,149,000 shares in a company called Van der Horst Ltd (VDH). In that month, these shares were transferred from Prime to AMS and by November 1985, AMS, having increased its shareholding in VDH to 9,530,000 shares controlled 24.985% of VDH.

In the meantime, on 27 February 1985, Mr Cheah appointed the plaintiff a director of AMS. He also transferred 121,321 shares in AMS to the plaintiff and, a few days later, AMS itself issued further shares to the plaintiff and his wife. By 4 March 1985, the plaintiff owned 40% of the issued share capital of AMS. The price of these shares was a sum of $323,521. The plaintiff admitted...