Higgins, Danial Patrick v Mulacek, Philippe Emanuel and others and another suit

• Judge: Edmund Leow JC
• Judgment Date: 26 September 2016
• Neutral Citation: [2016] SGHC 205
• Citation: [2016] SGHC 205
• Defendant Counsel: Salem Ibrahim, Kulvinder Kaur, and Jeriel Lam (Salem Ibrahim LLC)
• Published date: 12 October 2016
• Hearing Date: 15 March 2016,23 March 2016,30 March 2016,16 March 2016,29 March 2016,22 March 2016,19 July 2016,31 March 2016,24 August 2016,17 March 2016,18 July 2016,21 July 2016,18 March 2016,20 July 2016,24 March 2016
• Plaintiff Counsel: Peter Low, Raj Mannar, and Elaine Low (Peter Low LLC)
• Docket Number: Suit No 244 of 2013 and Suit No 733 of 2014
• Court: High Court (Singapore)
• Date: 26 September 2016
• Subject Matter: Contractual terms,Contract,Companies,Directors,Duties

Edmund Leow JC: Introduction

These two suits concern the purchase and management of a Gulfstream III Corporate Jet (“the Aircraft”). The Aircraft was purchased by AirLNG Ltd (“AirLNG”), a company registered in Labuan, Malaysia, at a price of US$2m in March 2011.¹ Mr Danial Higgins (“Mr Higgins”) acted for AirLNG in the purchase. Shortly after the Aircraft was acquired, AirLNG entered into an Aircraft Management Services Agreement (“the AMS Agreement”) with Singapore Air Charter Pte Ltd (“SAC”), a Singapore incorporated company of which Mr Higgins was the Managing Director (“MD”). In February 2012, the AMS Agreement was terminated but Mr Higgins continued to do further work in relation to the Aircraft until May 2012, when AirLNG concluded an aircraft management contract with another company. Meanwhile. Mr Higgins continued as the MD of SAC until he resigned his position in July 2012.²

This, in a nutshell, forms the background to the suits. Most of the events which are material to this judgment took place between March 2011, when the Aircraft was purchased, and July 2012, when Mr Higgins left SAC. I will examine the facts in greater detail later but it suffices for now to sketch the broad outlines of each suit. In Suit No 244 of 2013 (“Suit 244”), Mr Danial Higgins alleges that he had entered into an oral contract with Mr Philippe Emanuel Mulacek (“Mr Mulacek”), Mr Carlo Guiseppe Civelli (“Mr Civelli”), and Pacific LNG Operations Pte Ltd (“PacLNG”) (which was beneficially owned by Mr Civelli) under which he was to be remunerated for work done in relation to the management of the Aircraft. In the alternative, and in the event the court finds that there was no such oral contract, he brings a claim in restitution, arguing that he ought to be given a reasonable sum in compensation for the work he did on behalf of the defendants. In Suit No 733 of 2014 (“Suit 733”), SAC brings a claim against Mr Higgins for breach of fiduciary duty. SAC’s case is that Mr Higgins had actively worked to undermine SAC’s interests by, among other things, procuring the termination of the AMS Agreement for his own benefit and by making secret profits which he is not entitled to keep. In response, Mr Higgins counterclaims against Mr Mulacek, Mr Civelli, SAC, as well as the remaining directors of SAC – Mr Nicholas Johnstone (“Mr Johnstone”), Mr Danny Walker (“Mr Walker”), and Mr Stefan Wood (“Mr Wood”) – for unpaid directors fees and salary for the period between April and July 2012.

After careful consideration of the evidence presented, I dismissed Suit 244 in its entirety. As for Suit 733, I allowed SAC’s claim in full and Mr Higgins’s counterclaim in part. For ease of exposition, I propose to deal with the issues in each suit in sequence, rather than to go through the matters chronologically. As will be clear in the course of my judgment, the matters in both suits are closely inter-related and proceeding in this fashion will allow a fuller picture of the relevant facts to be presented.

The facts

I begin with a more detailed recitation of the background facts. I will refer to the parties by their names instead of their designations in the suits (eg, “plaintiff”, “defendant” etc) for ease of exposition.

Mr Wood³ and Mr Johnstone⁴ were both pilots and in 2010, they decided to incorporate a company to provide, among other things, air chartering services.⁵ Mr Johnstone invited Mr Higgins, who was also a pilot and whom he first met in 2001, to join them as the MD of SAC as he had experience in the corporate aviation industry.⁶ At that time, Mr Higgins was the MD of Montreal Asset Management (“MAM”), a company involved in the shipping and oil trading business but which also provided aviation consultancy services. SAC was incorporated on 7 September 2010 and its founding directors were Mr Johnstone, Mr Wood, Mr Higgins, and Mr Higgins’s wife.⁷

Purchase of the Aircraft

On 26 November 2010, Mr Higgins attended a networking event at the Fullerton Hotel where he met Mr Mulacek, who was the Chief Executive Officer of Interoil Corporation, a company publicly listed in the United States (“US”).⁸ During that meeting, they discussed, among other things, the possibility that Mr Mulacek might purchase a pre-owned corporate jet to fulfil his business travel requirements. Three days after that meeting, on 29 November 2010, Mr Higgins wrote to Mr Mulacek to explain that a Gulfstream aircraft might suit Mr Mulacek’s needs. Mr Higgins proceeded to outline different purchasing options and explained that “we” (by which he meant SAC) might be able to assist through the provision of, among other things, air chartering services. At the end of the email, he wrote:⁹

I hope this brief outline will assist you in your decision making process. Please feel free to contact me or my Business Managing Nick Johnstone at any time on the phone numbers shown on my business card. You can get me personally on H.P. 9XXXXXXX …

We hope to be of service to InterOil in the future.

Yours truly

Danial Higgins

M.D. Singapore Air Charter

Over the next two months (December 2010 and January 2011), Mr Higgins wrote several emails to Mr Mulacek in which he detailed the specifications and prices of various Gulfstream aircraft which were available for sale. All of these emails (save for one, in which he simply signed off as Dan Higgins) were sent from Mr Higgins’s email account with SAC and he consistently identified himself as the MD of SAC. Mr Johnstone was also copied in the correspondence.¹⁰ Further discussions then took place between Mr Higgins, Mr Civelli (who was an investor in InterOil) and Mr Mulacek. Following these discussions, it was decided that the Aircraft was to be purchased from OK Consultants, an aircraft dealer based in California, and that it would be beneficially held in the name of a company which would be specifically incorporated for this purpose.¹¹

On 8 March 2011, AirLNG was incorporated in Labuan, as Malaysia had a double-taxation agreement with Papua New Guinea (“PNG”).¹² AirLNG’s two founding directors were Mr Civelli and one Mr Henry Edmond Aldorf (“Mr Aldorf”).¹³ Shortly after, Mr Jack Kendall (“Mr Kendall”) of OK Consultants Ltd sent a draft Letter of Intent (“LOI”) to Mr Higgins. After an exchange of correspondence, the LOI was amended by Mr Higgins and it was eventually signed on 23 March 2011. The emails received by Mr Higgins during this period, unlike that in the previous two months, were all addressed to his MAM email account instead of his SAC email account.¹⁴

On 26 April 2011, Mr Aldorf granted Mr Higgins a power of attorney to act on behalf of AirLNG and PacLNG in the purchase of the Aircraft.¹⁵ In preparation for the sale, approximately US$2.3m had been deposited in an escrow account by Mr Civelli.¹⁶ On 17 May 2011, Mr Higgins, on behalf of AirLNG, and Mr Jack Kendall, on behalf of OK Consultants, gave detailed instructions on how the money in the escrow account was to be disbursed. On the completion date of 18 May 2011, a sum of $1.35m, representing the purchase price of the plane, was to be transferred to an account specified by OK Consultants (the undisputed evidence was that the Aircraft was owned by the Saudi Royal Family and OK Consultants only acted as their brokers in the sale¹⁷). Thereafter, a series of payments were to be made to “[r]eimburse expenses” and they were as follows:¹⁸ $15,000 was to be transferred to SAC. $316,500 was to be transferred to MAM. $316,500 was to be transferred to OK Consultants. $1,690 was to be retained as escrow fees $4,400 was to be transferred to Mr Higgins for “payment for pre-buy inspection instructions”. $2,325 was to be transferred to OK Consultants.

I pause to note that the escrow documents referred to above (“the Escrow documents”) were not disclosed during the general discovery process but were only disclosed following a keenly contested application for specific discovery taken out during the course of the trial. The circumstances under which the documents came to light is vital to Suit 733 and I will return to it later (see [101] below). It suffices to note for now that under the purchase and sale agreement for the Aircraft, the purchase price of the Aircraft was expressed to be US2m and beneficial title passed to AirLNG.¹⁹ It was explained that OK Consultants remained the legal owners of the Aircraft as the United States Federal Aviation Authority (“FAA”) required all aircraft on its register be registered either in the name of a US citizen or a US registered entity.²⁰

AMS Agreement

On 25 April 2011, shortly before the purchase of the Aircraft was finalised, the AMS Agreement was concluded between SAC and AirLNG. SAC was responsible for the use, management, operation, and maintenance of the Aircraft for AirLNG’s exclusive use. In return, AirLNG was to pay SAC a sum of US$25,000 a month in addition to paying each “Primary Flight Crew member” (ie, the pilots) $11,875 a month.²¹

For the first few months, matters ran smoothly and the Aircraft was used by Mr Civelli, Mr Mulacek, and Mr Aldorf on a regular basis. During this time, Mr Johnstone and Mr Walker – who joined SAC in April 2011 and received the title of “Manager, Flight Operations” – served as the primary pilots.²² In the main, the Aircraft was used to ferry employees and potential investors to Papua New Guinea (“PNG”), where both Mr Civelli (through PacLNG, which he owned²³) and InterOil had substantial business interests. ²⁴ Mr Higgins served as the primary point of contact between SAC and would arrange for the charters with Mr Walker covering for him in his absence.²⁵

Sometime in August 2011, Mr Mulacek proposed that SAC assist him with the running of an aircraft management company in Papua New Guinea – National Air Services (“NAS”). The correspondence reveals that the directors of SAC discussed the NAS proposal actively²⁶ and it featured on the agenda of their...