Mona Computer Systems (S) Pte Ltd v Singaravelu Murugan

JurisdictionSingapore
CourtCourt of Three Judges (Singapore)
Judgment Date27 November 2013
Date27 November 2013
Docket NumberCivil Appeal No 142 of 2012

[2013] SGCA 63

Court of Appeal

Sundaresh Menon CJ

,

Chao Hick Tin JA

and

Quentin Loh J

Civil Appeal No 142 of 2012

Mona Computer Systems (S) Pte Ltd
Plaintiff
and
Singaravelu Murugan
Defendant

R Kalamohan and Shanthi Elavarasi d/o RKalamohan (Kalamohan & Co) for theappellant

Cheong Yuen Hee and Cheong Aik Chye (A C Cheong & Co) for the respondent.

Boardman v Phipps [1967] 2 AC 46, HL (refd)

Bray v Ford [1896] AC 44 (refd)

Bristol and West Building Society v Mothew [1998] Ch 1 (refd)

Estate Realties Ltd v Wignall [1992] 2 NZLR 615 (refd)

Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6 (refd)

Guinness plc v Saunders [1990] 2 AC 663 (refd)

Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 443 (refd)

Jumabhoy Rafiq v Scotts Investments (Singapore) Pte Ltd [2005] 1 SLR (R) 45; [2005] 1 SLR 45 (refd)

Mona Computer Systems (S) Pte Ltd v Chandran Meenakumari [2011] 1 SLR 310 (refd)

Murad v Al-Saraj [2005] EWCA Civ 959 (refd)

O'Sullivan v Management Agency and Music Ltd [1985] QB 428 (refd)

Paul A Davies (Aust) Pty Ltd v Davies [1983] 8 ACLR 1 (refd)

Phipps v Boardman [1964] 1 WLR 993, Ch (refd)

Phipps v Boardman [1965] Ch 992, CA (refd)

Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 (refd)

Warman International Ltd v Dwyer (1995) 182 CLR 544 (refd)

Damages—Assessment—Account of profits

Equity—Remedies—Account—Fiduciary diverting contracts from principal to rival company—Whether account of profits should be fashioned such that principal did not enjoy windfall

Equity—Remedies—Account—Fiduciary diverting contracts from principal to rival company—Whether fiduciary entitled to equitable allowance

The appellant (‘the Appellant’) was a family-run company in the business of providing software engineers on contract to third party clients. The respondent (‘the Respondent’) was an employee of the Appellant. The Respondent was found liable for breach of fiduciary duties in diverting contracts from the Appellant to his own rival company known as MN Computer Systems (S) Pte Ltd (‘MN’). The trial judge found him ‘liable to account for any profits he personally made from [the diverted contracts] ’. At hearing for assessment of damages, the assistant registrar (‘AR’) fashioned the account to include the Respondent's share of the net profit which MN made from the diverted contracts, and the commissions due from MN to the Respondent in respect of those contracts. She, however, excluded from the account the director's fees and salary which MN paid to the Respondent. The Respondent appealed against the AR's order pertaining to the commissions. The High Court judge (‘the Judge’) reversed the AR's order and allowed the Respondent to retain the commissions due to him from MN, reasoning that the Appellant ought not to enjoy a windfall because it would have had to pay the Respondent the same amount of commission had the Respondent not breached his fiduciary duties and procured the contracts for the Appellant. The Judge also ordered that the Respondent account to the Appellant for the director's fees paid to him by MN, despite the fact that neither party had appealed against this part of the AR's decision. The Appellant appealed to the Court of Appeal against the Judge's decision permitting the Respondent to retain his commissions.

Held, allowing the appeal:

(1) The remedy of account was a gains-based remedy grounded in the principle that a fiduciary should not be allowed to retain any profit derived from his breach of duty, regardless of whether the conduct caused any loss to the principal or whether the principal enjoyed a windfall as a result of the account: at [13] , [16] and [17] .

(2) The Judge erred when he reasoned that the accounting of profits should not result in the Appellant enjoying a windfall. The commissions which the Respondent received from MN were derived from the profits which MN earned from the diverted contracts, and therefore fell squarely within the profits to be accounted to the Appellant: at [18] .

(3) The court's power to grant an equitable allowance for the work and skill invested in generating illegitimate profits, should be exercised sparingly in order not to encourage fiduciaries to act in breach of their duties: at [23] .

(4) The present situation was a classic case of a fiduciary reaping profits from deliberately placing himself in a position of conflict. These were not circumstances that warranted an exercise of the court's discretion to grant the fiduciary an equitable allowance: at [27] .

(5) As the Appellant did not appeal to the High Court against the AR's order allowing the Respondent to retain his director's fees, the Judge's variation of that part of the order was irregular. The AR's order in respect of the retention of director's fees was accordingly restored: at [30] .

Chao Hick Tin JA

(delivering the grounds of decision of the court):

1 This appeal concerned an assessment of account of profits for breach of fiduciary duty on the part of the respondent (‘the Respondent’). The Respondent was an officer of Mona Computer Systems (S) Pte Ltd, the appellant (‘the Appellant’) in this appeal. The Appellant appealed against the order of the High Court which had excluded from the account of profits the commissions which the Respondent had obtained from his newly-incorporated company, MN Computer Systems (S) Pte Ltd (‘MN’), a company whose line of business was in direct competition with that of the Appellant. The High Court order also permitted the Respondent to retain the director's fees which he obtained from MN. After hearing oral submissions we allowed the appeal, and ordered the Respondent to account to the Appellant the full amount of the commissions which he obtained from MN but permitted him to retain the director's fees from MN. Costs, here and below, which we fixed at $20,000 were awarded in favour of the Appellant. We now give our reasons for the substantive decision.

Facts

Parties to the dispute

2 The Appellant was a company incorporated in Singapore by the Respondent's late brother-in-law, one Chandran Dharani (‘Dharani’). Its business was the provision of software engineers on contract to third party clients. Its clients included the Housing Development Board (‘HDB’) and the Central Provident Fund Board (‘CPF’). After Dharani's death, his wife, one Issac Rathi (‘Rathi’), took over as the majority shareholder and managing director of the Appellant.

3 The Respondent was the husband of Dharani's sister, one Chandran Meena Kumari (‘CM’). CM was also a director of the Appellant and was a co-defendant in the originating suit. The Appellant's claim against CM was dismissed with costs.

Background to the dispute

4 The Respondent was employed by the Appellant as its Computer Systems Manager on 2 September 2000. He was its sole full-time employee and Dharani's right-hand man. After Dharani's death in November 2006, the Respondent continued to work for the Appellant until his resignation on 20 February 2009. On 22 November 2007, the Respondent incorporated MN which conducted the same business as the Appellant. The Respondent admitted that he secured certain contracts (‘the diverted contracts’) for MN while still under the Appellant's employment.

5 On 26 March 2009, the Appellant commenced Suit No 265 of 2009 (‘the Suit) against the Respondent and CM alleging breach of fiduciary duties on their part in incorporating MN and diverting contracts for the supply of software engineers to MN. The Suit also involved a claim and counterclaim concerning the Respondent's alleged entitlement to commissions from the Appellant from June 2006 onwards until his resignation (see Mona Computer Systems (S) Pte Ltd v Chandran Meenakumari[2011] 1 SLR 310 (‘Ang J's GD’) at [23] - [24]). Right from the pleadings stage, the Respondent admitted to incorporating MN while he was still employed by the Appellants and diverting contracts to MN. His defence was that Rathi had consented to what he was doing.

6 The trial judge, Belinda Ang Saw Ean J (‘Ang J’), found the Respondent liable for breach of fiduciary duties in diverting business opportunities from the Appellant to MN. For this, she found the Respondent ‘liable to account for any profits he personally made from [the diverted contracts] ’ (see Ang J's GD at [22]). CM was absolved of liability. Ang J dealt with the claim and counterclaim relating to the commissions paid to or due to the Respondent from the Appellant. However, she...

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7 cases
  • Nordic International Ltd v Morten Innhaug
    • Singapore
    • High Court (Singapore)
    • 4 Enero 2017
    ...(folld) Long Say Ting Daniel v Merukh Nunik Elizabeth [2013] 1 SLR 1428 (folld) Mona Computer Systems (S) Pte Ltd v Singaravelu Murugan [2014] 1 SLR 847 (folld) Morten Innhaug v Sinwa SS (HK) Co Ltd [2011] SGHC 20 (refd) Regal (Hastings) Ltd v GulliverELR [1967] 2 AC 134 (folld) Sinwa SS (H......
  • Innovative Corp Pte Ltd v Ow Chun Ming and another
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    • High Court (Singapore)
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    ...BCLC 460 (distd) Kinsela v Russell Kinsela Pty Ltd (1986) 4 NSWLR 722 (refd) Mona Computer Systems (S) Pte Ltd v Singaravelu Murugan [2014] 1 SLR 847 (refd) Personal Automation Mart Pte Ltd v Tan Swe Sang [2000] SGHC 55 (refd) Peso Silver Mines Ltd v Cropper [1966] SCR 673 (distd) Raffles T......
  • Beyonics Technology Ltd and another v Goh Chan Peng and others
    • Singapore
    • High Court (Singapore)
    • 28 Junio 2016
    ...them to the principal and disgorge the profits: Snell’s Equity at para 7-054 and Mona Computer Systems (S) Pte Ltd v Singaravelu Murugan [2014] 1 SLR 847 at [15]. The net quantum of US$200,000 received by Mr Goh under the Second Wyser Agreement is undisputed, and Wyser International dishone......
  • MCH International Pte Ltd and others v YG Group Pte Ltd and others and other suits
    • Singapore
    • High Court (Singapore)
    • 27 Febrero 2019
    ...court is entitled to order an account of profit in respect of any such sum (see Mona Computer Systems (S) Pte Ltd v Singaravelu Murugan [2014] 1 SLR 847 at [13] to [18]). In the present case, Mr Wong made a secret profit of US$300,000 through the Secret Commission Agreement in breach of the......
  • Request a trial to view additional results
2 books & journal articles
  • Case Note
    • Singapore
    • Singapore Academy of Law Journal Nbr. 2014, December 2014
    • 1 Diciembre 2014
    ...and the Principal's Loss”(1994) 110 LQR 328 at 332. The Court of Appeal in Mona Computer Systems (S) Pte Ltd v Singaravelu Murugan[2014] 1 SLR 847 at [13] affirmed that an account of profits, in contradistinction to equitable compensation, “is unrelated to whether the fiduciary's conduct ha......
  • Restitution
    • Singapore
    • Singapore Academy of Law Annual Review Nbr. 2013, December 2013
    • 1 Diciembre 2013
    ...Counter-restitution (equitable allowance)? 22.54 The Court of Appeal in Mona Computer Systems (S) Pte Ltd v Singaravelu Murugan[2014] 1 SLR 847 had occasion to deal with the vexed issue of equitable allowance where a fiduciary has been found liable to account for profits to the principal. T......

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