Lim Leong Huat v Chip Hup Hup Kee Construction Pte Ltd

• Jurisdiction: Singapore
• Judge: Andrew Ang J
• Judgment Date: 06 January 2009
• Neutral Citation: [2009] SGHC 2
• Docket Number: Suit No 779 of 2006 (Summons in Chambers No 107 of 2008)
• Date: 06 January 2009
• Published date: 27 February 2009
• Year: 2009
• Plaintiff Counsel: Khoo Boo Teck Randolph, Keow Mei-Yen and Loo Teck Lee Johnson (Drew & Napier LLC)
• Citation: [2009] SGHC 2
• Defendant Counsel: Ling Daw Hoang Philip and Hwa Hoong Luan (Wong Tan & Molly Lim LLC)
• Court: High Court (Singapore)
• Subject Matter: Director moving spirit and controlling mind of company,Application to add director as co-conspirator with company,Tort,Conspiracy,Whether company director could be liable in conspiracy with company of which he was moving spirit and controlling mind

6 January 2009

Andrew Ang J:

Introduction

1 This case considers the question whether, in law, a company director can be liable in conspiracy with the company of which he is the moving spirit and controlling mind.

2 The parties in the present proceedings are:

(a) Lim Leong Huat (“Lim”) – the plaintiff (by original action) and the first defendant (by counterclaim);

(b) Tan Siew Lim (“TSL”) – the second defendant (by counterclaim) who is also Lim’s wife;

(c) Chip Hup Hup Kee Construction Pte Ltd (“CHHKC”) – the defendant (by original action) and plaintiff (by counterclaim); and

(d) Neo Kok Eng (“Neo”) – the managing director of CHHKC.

3 Lim was the former general manager and designated executive director/projects director of CHHKC, a company in the building and construction business.

4 According to Neo, CHHKC is a wholly-owned subsidiary of Chip Hup Holdings Pte Ltd (“CH Holdings”), a company in which he beneficially owns 100% of the issued share capital, 99.11% of which are registered in his name, the remaining 0.99% being held in trust for Neo by one Tan Yong San (“Tan”), the brother of Lim’s wife. A separate action has been commenced by Neo against Tan in Suit No 241 of 2007 (“Suit 241”) for the return of the 0.99% shares.

5 For these proceedings, the relevant point to note is that Neo and Tan were the two named directors of CHHKC and CH Holdings, and that Lim has applied under Summons in Chambers No 107 of 2008 for an order to add Neo as the second defendant in the original action, to maintain the following allegations against Neo:

(a) that Neo had conspired with CHHKC, by lawful means or by unlawful means, to injure or cause loss and damage to Lim by depriving Lim of payment of moneys advanced by Lim to CHHKC; and

(b) that Neo had acted unlawfully and in bad faith to interfere with CHHKC’s payment obligations to Lim by inducing, procuring and/or otherwise causing CHHKC to refuse to make the aforesaid payments.

Parties’ submissions

The defendants’ submissions

6 Counsel for CHHKC and Neo submitted that Lim’s application to add Neo as the second defendant should be disallowed because there was no cause of action against Neo either for conspiracy or for inducing breach by CHHKC of its payment obligations. Counsel based his argument on the position taken by Tan, CHHKC’s other director, in Suit 241, that Neo:

(a) was in charge of the accounts and funds of the companies in the Chip Hup Group;

(b) controlled all the signing of cheques and the movement of funds into and out of CH Holdings and its subsidiaries; and

(c) did not account for nor give full details to Tan regarding the amount of funds and/or the reason for the movement of the funds.

As such, counsel for CHHKC and Neo contended that since any decision(s) and/or action(s) taken by CHHKC not to make payment to Lim could only have originated from Neo alone and not Tan, no question of any conspiracy between CHHKC and Neo, nor inducement by Neo vis-à-vis CHHKC, arose. This was because, at all times, the actions of CHHKC were the decisions and actions of Neo, effectively the only director and controlling mind of CHHKC.

The plaintiff’s submissions

7 Counsel for Lim relied on the decision of Judith Prakash J in Nagase Singapore Pte Ltd v Ching Kai Huat [2008] 1 SLR 80 (“Nagase”) where it was held that, in law, there can be a conspiracy between a company and its controlling director to damage a third party by unlawful means even where the director is the company’s moving spirit.

The decision of this court

8 After hearing submissions from counsel for the respective parties, I ordered that Neo be added as a defendant in the original action. I now set out the reasons for my decision.

The two forms of the tort of conspiracy

9 The Court of Appeal in Quah Kay Tee v Ong & Co Pte Ltd [1997] 1 SLR 390 (“Quah Kay Tee”) noted (at [45]) that:

The tort of conspiracy comprises two types: conspiracy by unlawful means and conspiracy by lawful means. A conspiracy by unlawful means is constituted when two or more persons combine to commit an unlawful act with the intention of injuring or damaging the plaintiff, and the act is carried out and the intention achieved. In a conspiracy by lawful means, there need not be an unlawful act committed by the conspirators. But there is the additional requirement of proving a ‘predominant purpose’ by all the conspirators to cause injury or damage to the plaintiff, and the act is carried out and the purpose achieved. [emphasis added]

10 In Wu Yang Construction Group Ltd v Zhejiang Jinyi Group Co, Ltd [2006] 4 SLR 451 (“Wu Yang”), Andrew Phang Boon Leong J summarised the nature and rationale underlying these two forms of conspiracy and their similarities and differences (at [75]–[79]):

75 It is apposite to note that the actual principles of law relating to the tort of conspiracy are none too clear. What is clear is that there are, traditionally, two separate and distinct aspects or ways of applying the tort of conspiracy. As might have been surmised, the legal principles with respect to each aspect are somewhat different.

76 There is, first, the situation where unlawful means have been used (also known as “wrongful means conspiracy”). The relevant law in this context appears to be straightforward. In particular, there is no need for the plaintiff concerned to prove that there has been a predominant intention on the part of the defendants to injure it. It would appear that the very utilisation of unlawful means is, by its very nature, sufficient to render the defendants liable, regardless of their predominant intention. This would appear to be both logical as well as just and fair, especially if we bear in mind the fact that the central core, as it were, of the tort of conspiracy hinges on the proof that the conspiracy is somehow unlawful and that the plaintiff is entitled to succeed provided that it can prove that it has suffered damage.

77 Secondly, there is the situation where lawful means have been used (also known as “simple conspiracy” or “conspiracy to injure”). Unlike the first category referred to briefly in the preceding paragraph, this second category requires that the plaintiff prove that there has been a predominant intention on the part of the defendants to injure it (see the leading House of Lords decision of Lornho plc v Fayed [1992] 1 AC 448 (“Lornho”)). This additional element is required simply because, without it, the alleged conspiracy would be devoid of any element of unlawfulness. It is precisely because there is a predominant intention on the part of the defendants to injure the plaintiff that the plaintiff is entitled to succeed provided (again) that it (the plaintiff) can prove that it has suffered damage. It is this concerted predominant intention to injure that renders the conduct of the defendants, which would otherwise have been lawful, unlawful or illegitimate. As Lord Bridge of Harwich, who delivered the substantive judgment of the House in Lornho (with which the other law lords agreed), observed (at 465–466):

Where conspirators act with the predominant purpose of injuring the plaintiff and in fact inflict damage on him, but do nothing which would have been actionable if done by an individual acting alone, it is in the fact of their concerted action for that illegitimate purpose that the law, however anomalous it may now seem, finds a sufficient ground to condemn their action as illegal and tortious. But when the conspirators intentionally injure the plaintiff and use unlawful means to do so, it is no defence for them to show that their primary purpose was to further or protect their own interests; it is sufficient to make their action tortious that the means used were unlawful. [emphasis added]

…

79 Returning to the tort of conspiracy, it is clear that the precise category of the tort pleaded is of the utmost importance simply because there will be the additional element of a predominant purpose by the defendants to injure the plaintiff that will need to be proved if the alleged conspiracy is one by lawful means …

[emphasis in original]

11 In Nagase ([7] supra), Prakash J summarised the elements that must be satisfied to prove both forms of conspiracy at [23]:

In order for the claim of conspiracy to succeed, the elements that have to be satisfied are the following:

(a) a combination of two or more persons and an agreement between and amongst them to do certain acts;

(b) if the conspiracy involves lawful acts, then the predominant purpose of the conspirators must be to cause damage or injury to the plaintiff, but if the conspiracy involves unlawful means, then such predominant intention is not required;

(c) the acts must actually be performed in furtherance of the agreement; and

(d) damage must be suffered by the plaintiff.

12 As evident from [9]–[11] above, while a conspiracy by lawful means does not involve an unlawful act committed by the conspirators, there is the additional requirement of a “predominant purpose or intention” by all the conspirators to cause injury or damage to the plaintiff. However, both forms of conspiracy require a combination of two or more persons and more will be said about this common ingredient later in this judgment (see [29] below), after first examining Nagase.

Nagase

13 Nagase was a second judgment arising from a dispute between the parties thereto. In the action resulting in the first judgment (see Nagase Singapore Pte Ltd v Chin Kai Huat [2007] 3 SLR 265) (“the first judgment”), the plaintiff, Nagase Singapore Pte Ltd, alleged a conspiracy between the following parties to overcharge the plaintiff for warehousing services:

(a) its employees, Clement Yip and Mary Ting, (“Yip and Ting”);

(b) D Logistics, a warehousing and logistics services support company (“D Logistics”); and

(c) David Ching, the majority shareholder and director of D Logistics (“Ching”).

14 The plaintiff, who had engaged D Logistics to provide warehousing services to it from 1999, claimed...