Lim Seng Choon David v Global Maritime Holdings Ltd

JurisdictionSingapore
CourtHigh Court (Singapore)
JudgeChoo Han Teck J
Judgment Date01 February 2018
Date01 February 2018
Docket NumberHC/Suits Nos 1236 and 239 of 2015

[2018] SGHC 25

High Court

Choo Han Teck J

HC/Suits Nos 1236 and 239 of 2015

Lim Seng Choon David
and
Global Maritime Holdings Ltd and another and another suit

Twang Kern Zern and Lam Jianhao Mark (Central Chambers Law Corporation) for the plaintiff and defendant-in-counterclaim;

Audrey Chiang Ju Hua and Nerissa Tan Yin Shi (Dentons Rodyk & Davidson LLP) for the first and second defendants and plaintiff-in-counterclaim.

Legislation referred to

Civil Law Act (Cap 43, 1999 Rev Ed) s 12

Companies Act (Cap 50, 2006 Rev Ed) s 157(1)

Companies — Directors — Claiming for personal expenses, unauthorised trips abroad, unauthorised purchases and causing company to enter into contracts and make payments to parties related to director — Whether there was breach of duty owed as director — Section 157(1) Companies Act (Cap 50, 2006 Rev Ed).

Contract — Contractual terms — Parties negotiated retirement terms at meeting — Whether requirements of oral agreement had been met

Facts

The defendants were in the business of providing marine, offshore and engineering consultancy services. The second defendant in Suit No 1236 of 2015 was a wholly-owned subsidiary of the first defendant in the same suit. The plaintiff in both suits was an employee of the first defendant and a director of the second defendant.

The plaintiff's claim in Suit No 239 of 2015 was struck out and only the counterclaim remained (“the Counterclaim”). The two suits were consolidated.

On 24 November 2014, the plaintiff met with Mr Gary Anthony Hogg, a director of both defendants. The plaintiff was asked to retire early. According to the plaintiff, he made an oral agreement with the defendants, who were represented by Mr Hogg at that meeting. Under the oral agreement, the plaintiff agreed to terminate his employment immediately and waive the requirement of one month's calendar notice. In return, the second defendant allegedly agreed to pay the plaintiff an aggregate sum for all of the plaintiff's unutilised holiday leave entitlement and “earned leaves” accumulated as well as the bonus accrued from the second defendant for the year 2013. The plaintiff would also transfer his shares in Global Maritime Group AS to an assignee identified by the defendants in consideration of payment for such shares calculated based on an open market value. According to the plaintiff, he had previously loaned the second defendant a sum of S$500,000 and the second defendant agreed that the outstanding balance would be returned to the plaintiff under the oral agreement. Lastly, the plaintiff claimed that the second defendant also agreed to pay him six months' salary in consideration of the plaintiff agreeing to a six months' non-competition period.

The defendants denied the oral agreement and contended that the negotiations between the plaintiff and Mr Hogg were subject to contract. They relied on correspondence between the plaintiff and Mr Hogg as well as a draft “Separation Agreement” and “Share Purchase Agreement” that were later circulated to the plaintiff to show that no binding agreement was arrived at during the meeting.

In the Counterclaim, the second defendant alleged that the plaintiff was in breach of duties that he owed as a director. These included making unnecessary trips abroad, obtaining reimbursement for these trips wrongfully, making claims for personal expenses, causing the second defendant to make unnecessary payments to third parties and causing the second defendant to enter into lease agreements for properties owned by the plaintiff's wife and himself and/or the plaintiff's son and daughter-in-law.

Held, dismissing the claim in Suit 1236/2015 and allowing the counterclaim in Suit 239/2015:

(1) To establish an oral agreement, there had to be clear evidence that all parties to the alleged agreement intended to create legal obligations by their exchange of words and conduct. But that was none in the present case. Thus, what transpired on the morning of 24 November 2014 were mere negotiations between the plaintiff and Mr Hogg in relation to the plaintiff's immediate retirement: at [6].

(2) It was important to show that the terms orally agreed to were consistent with contemporaneous documents. This did not mean that the oral agreement had to be evidenced by a written form of the terms. But contemporaneous documents showing that some agreement was reached could support the plaintiff's claim. In this case, the correspondence between the parties, and the draft Separation Agreement suggested that the parties were still at the stage of negotiations. Moreover, the parties themselves did not seem to believe that an agreement was entered into at the meeting on the morning of 24 November 2014. There was therefore no oral agreement between the parties: at [7] and [9].

(3) In any case, an oral agreement had to also contain terms that were clear enough to be enforced. But the terms, alleged by the plaintiff, were neither certain nor clear: at [10].

(4) The duty of a director to act honestly and in the company's best interests was both under common law and in s 157(1) of the Companies Act. The question was whether the director acted bona fide in the interests of the company in the performance of the functions attaching to the office of director. The plaintiff could not have believed that his various acts were in the interests of the company and was therefore liable for breach of his duties as a director of the second defendant: at [14].

(5) There was no explanation from the plaintiff as to how his visits to Hong Kong and China were in the interests of the company given that the Chinese clients were managed by the China office and he had conducted a visit without informing the Chinese office. A bulk of the overseas expenses claimed by the plaintiff were also not supported by documents or receipts. The claims that were supported by receipts and documents had been for accommodation and food and beverage expenses on non-working days and in any case unconnected to the second defendant's business. These were made in breach of his duty as a director to act honestly: at [16] to [18].

(6) The purchase of gold products from Hong Kong for himself and his son in recognition of their long service with the second defendant could not be in the second defendant's best interest just because the plaintiff himself authorised them or had discussed the idea with his superior. The plaintiff was unable to give any explanation as to how his and his son's receipt of the gold products were in the firm's best interests. This was especially since no one before or after the plaintiff or his son who served for the same amount of time received similar gold products. The plaintiff's commissioning of the gold products and his claim for the related expenses were in bad faith and in breach of his duty as a director: at [20].

(7) The claims by the plaintiff for his own personal expenses were not shown to be in the second defendant's best interests. The transaction which resulted in the same lease at a higher rental was also not in the firm's best interests. They were made in bad faith and in breach of his duty as a director: at [21] and [23].

(8) The plaintiff's authorisation of cheques without first satisfying himself that the third parties were entitled to the amounts claimed and that the arrangements were beneficial to the second defendant was a clear breach of his duty to act in the company's best interests: at [24].

(9) The plaintiff's act of issuing cheques to his wife for cleaning services of properties belonging to him and his wife, and which were leased to the company, were in breach of his duty to act in the firm's best interests as he failed to verify that there was a contract or that the services were carried out. The issuance of cheques to his wife for the purchase of used furniture and appliances from her were also in breach of the plaintiff's duty to avoid conflicts of interests: at [25] and [30].

(10) The tenancy agreements between the second defendant and the plaintiff's wife were in breach of his duty to avoid conflict of interests. The property which two of the tenancy agreements were in relation to was owned by the plaintiff and his wife while the second property which the last tenancy agreement pertained to was owned by his son, who was also an employee of the second defendant, and his wife, the plaintiff's daughter-in-law. The law required the plaintiff, who was in a position of conflict, to seek a release from the second defendant by providing full disclosure of his and/or...

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