Kumagai-Zenecon Construction Pte Ltd and Another v Low Hua Kin

JurisdictionSingapore
CourtHigh Court (Singapore)
JudgeG P Selvam J
Plaintiff CounselAnthony Lee and Lye Kah Cheong (Bih Li & Lee)
Subject MatterDirectors,Restitution,Fiduciary's liability to make restitution for breach of fiduciary duty,Fiduciary duty,Fiduciary duties,Breach,Companies,When fiduciary may escape liability,Restitutio in integrum,Whether breach approximate cause of loss
Date30 November 1999
Defendant CounselAlvin Yeo and Lawrence Tan (Wong Partnership)
Published date19 September 2003
Docket NumberOriginating Summons No 62 of 1996

: Introduction

The defendant, Low Hua Kin @ Loo Wah Kim, has two reported cases to his name: Re Kumagai-Zenecon Construction Pte Ltd; Kumagai Gumi Co Ltd v Kumagai-Zenecon Construction Pte Ltd & Ors [1994] 3 SLR 552 (Warren LH Khoo J) and Kumagai Gumi Co Ltd v Zenecon Pte Ltd & Ors [1995] 2 SLR 297 (Court of Appeal). The latter was an appeal from the former

The facts of the case read like a scaled-down version of a Greek tragedy. It has the essentials: the passion, the hubris, the hamartia and the nemesis. It is a complicated saga with several dimensions. Warren LH Khoo J heard it for more than three weeks and decided against Low. Low appealed to the Court of appeal. The present case is a sequel to decision of the Court of Appeal and deals with one of the several aspects.

The decision of Warren Khoo J was in OP 9/92. It was an oppression petition under s 216 of the Companies Act (Cap 50). Low was one of seven defendants. Kumagai Gumi Co Ltd (`Kumagi-J`) a well-known Japanese construction company was the petitioner. Kumagai-J asked for the dissolution of two Singapore companies: Kumagai-Zencon Construction Pte Ltd and Kumagai Investment Pte Ltd (`Kumagai Investment`) which when incorporated was called Kumagai Property Development Pte Ltd. Warren LH Khoo J ordered both companies to be wound up. The judge further ordered Low to pay $2,982,517.17 to Kumagai Investment. On appeal the Court of Appeal upheld the winding-up orders but set aside the monetary award on the ground that it was not supported by evidence.

The Court of Appeal, nonetheless, advised the liquidators to investigate the alleged loss and then take out a misfeasance summons under s 341 of the Companies Act or proceed against Low as they thought fit. In the event, the liquidators took out the summons before me (OS 62/96). Both companies, Kumagai Zencon and Kumagai Investments, are the plaintiffs before me. It is apt now to tease out the essential facts.

The passion

In 1972 Low was a lecturer in the University of Singapore. Later, with the consent of his employers, he became a consultant to Kumagai-J. Obviously Low must have impressed Kumagai immeasurably for in 1976 he became Kumagai-J`s fulltime employee as an adviser. This gave him opportunity to acquire an appetite for the power and pelf of the corporate world. So in 1979 his wife and one Low Woon Hock procured the incorporation of a company called Zenecon Pte Ltd (`Zenecon`). Its purpose was to do business with Kumagai-J. Kumagai-J awarded at least two contracts to Zenecon.

In 1983, Kumagai-J and Low entered into a joint venture agreement. Pursuant to that, a joint venture company was formed, namely, Kumagai-Zenecon Construction Pte Ltd (`the JV company`). The principal object of the JV company, as one would expect, was to carry on the business of building and general construction, civil and structural engineers, and construction and management of public works. Zenecon held a majority of the shares in the joint venture company, that is 51% of 3 million shares of $1 each. Kumagai-J held the rest. The reason why Zenecon held a majority interest, apparently, was that it entitled the JV company to be classified as `local`. On that basis it would enjoy preferential treatment and receive financial assistance from Singapore government and statutory bodies. As it is usual in joint venture companies, there was a shareholders` agreement stipulating the rights and obligations of the parties. Kumagai-J was to provide technical expertise and working capital. Low and Zenecon assumed responsibility for management of the joint venture. Zenecon was to cease undertaking construction projects of its own other than those already in hand. Low was appointed the managing director of the JV company. He had three other directors on his side. Kumagai-J too had an equal number of directors. The arrangement was such that Low was in the saddle as regards the day-to-day affairs of the JV company

The hubris

One year later, Low came up with the idea of forming another company to market the housing development projects undertaken by the JV company. Kumagai-J agreed. In the result, Kumagai Property Marketing Pte Ltd was formed. For the moment I shall call it the marketing company. The original subscribers of the marketing company were Low`s wife, Teo Yit Bee (`Teo`), and one Low Woon Hock, who was also a shareholder in Zenecon. Later the JV company was allotted 9,000 shares. Low`s brother-in-law Lim Thye San was, with the approval of Kumagai-J, allotted 1,000 shares. Later, however, Low acquired the 1,000 shares from his brother-in-law. All the officers of the marketing company came from Low`s camp. He was the executive supremo of the marketing company.

In the result, therefore, Low was in virtual control of three companies - that is to say Zenecon, the JV company and marketing company. His appetite was not satiated with this position. He wanted more terrain under his control. So he made a bid for control of two other Singapore companies: Guthrie GTS Ltd (`Guthrie`) and Pac Can Investments Holdings Ltd (`Pac Can`). In June and July the marketing company, which was under Low`s effective control, acquired some 12.57% of the shares of Guthrie. At about the same time Low personally acquired 7.9% shares...

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