Ong Bee Chew v Ong Shu Lin

JurisdictionSingapore
JudgeVinodh Coomaraswamy J
Judgment Date29 November 2017
Neutral Citation[2017] SGHC 285
Year2017
Date29 November 2017
Published date30 August 2018
Hearing Date10 March 2016,29 November 2016,08 March 2016,16 March 2016,02 November 2016,18 March 2016,03 March 2016,01 March 2016,04 March 2016,15 March 2016,11 March 2016,02 March 2016,09 March 2016,17 March 2016
Plaintiff CounselLionel Leo, Oh Sheng Loong and Doralyn Chan (WongPartnership LLP)
Defendant CounselLeo Cheng Suan, Teh Ee-Von and Grismond Tien (Infinitus Law Corporation)
CourtHigh Court (Singapore)
Citation[2017] SGHC 285
Docket NumberSuits Nos 655 of 2011 and 179 of 2012
Vinodh Coomaraswamy J:

Hocen International Pte Ltd (“Hocen”) was in the business of selling and distributing power cables. It carried on this business from the time it was incorporated in May 2005 until it went into liquidation in October 2007. Hocen has only ever had two shareholders and two directors: Ong Bee Chew and Ong Shu Lin. The two Ongs are, respectively, the plaintiff and the defendant in the two suits now before me. It does not appear that the two Ongs are related to each other.

Hocen went into liquidation in 2007 because the defendant secured an order for it to be compulsorily wound up on the just and equitable ground. Acting by its liquidators, Hocen commenced these suits against the defendant in 2011 and 2012. In 2013, the liquidators assigned Hocen’s causes of action in these suits to the plaintiff. The plaintiff was then substituted for Hocen and progressed these suits to trial before me.

The plaintiff’s claim is that the defendant breached the statutory and fiduciary duties which he owed to Hocen by causing Hocen to make payments of about S$1.8m which were of no corporate benefit to Hocen.1 The plaintiff’s case is that these payments were part of the defendant’s scheme to procure business for Hocen by corruption. The plaintiff accordingly seeks to hold the defendant liable to pay damages or equitable compensation equivalent to the value of the payments.2

The defendant denies any breach of duty. His defence is that the payments were indeed of corporate benefit to Hocen because they led to and sustained Hocen’s substantial business selling cables.3 The defendant’s alternative defence is that, even if he did breach his duty to Hocen, the plaintiff always knew the purpose of the payments4 and is therefore obliged to contribute equally to the defendant’s liability in these suits.5

I have accepted the plaintiff’s case that the purpose of the payments was to procure business for Hocen by corruption, and that involving Hocen in this scheme was not in Hocen’s interests. But I have also accepted the defendant’s case that the plaintiff is equally culpable for this corrupt scheme and therefore equally in breach of his duty to Hocen. As a result, I have ordered the plaintiff to make a contribution of 50% to the defendant’s liability in these suits.

As will be seen (at [187]–[190] below), the net result of these suits, given the terms on which Hocen’s causes of action were assigned to the plaintiff, is that the plaintiff is no better off after judgment than he was before it. This litigation has therefore been thoroughly pointless. For that reason, as well as the parties’ equal culpability for the corrupt scheme, I have made no order as to the costs of the suits.

Both the plaintiff and the defendant have appealed against my decision in each of the two suits before me. I therefore now set out my grounds.

Background

The plaintiff is an experienced businessman. He was introduced to the defendant sometime in 2004 through a business partner by the name of Andy Heng.6 At that time, the plaintiff and Heng were running a company unrelated to this dispute which was in the business of selling and distributing power cables for use in port cranes. Heng invited the defendant to join that company to expand its business through the defendant’s business contacts in China. With the plaintiff’s support, the defendant accepted.7

Hocen is established

In 2004, the relationship between the plaintiff and Andy Heng broke down.8 As a result, the plaintiff and the defendant decided in May 2005 to set up a new company to take over the existing business.9 Hocen was that company.

The plaintiff and the defendant were each allocated a 50% shareholding in Hocen and were each appointed a director of Hocen. The defendant was appointed Hocen’s managing director.10 The parties have always been equal shareholders of Hocen and its only two directors.

It is common ground that it was the defendant who ran Hocen’s day-to-day operations, and that he did so without the plaintiff’s day-to-day involvement or supervision. The actual scope of the plaintiff’s role in Hocen is, however, disputed. I examine this issue in detail at [106]–[119] below.

Hocen’s cable business was, on the surface, very simple. It bought cables from an Australian company called Olex Pty Ltd (“Olex”) and sold the cables at a profit to a Chinese company known as Shanghai Zhenhua Port Machinery Co Ltd (“ZPMC”). ZPMC manufactures cranes for Chinese container ports and has need for significant quantities of cables. One of ZPMC’s major customers is Yantian International Container Terminals (“YICT”).11

Three of Hocen’s employees gave evidence at trial in these suits. They are Davin Chan, an administrative manager; Raymond Goh Lnai Mun, a sales manager; and Loh Siew Choong, also a sales manager.12 All three were employed by Hocen from August 2005, shortly after it was incorporated, until it went into liquidation in October 2007.

Hocen engages Crossbridge

Soon after Hocen commenced operations, it engaged the services of a Hong Kong company called Crossbridge International Pte Ltd (“Crossbridge”). It is common ground that it was the defendant who introduced Crossbridge to Hocen.13

Crossbridge is owned by one Tsui Wai Mun and one Yu Kit Ching. Yu’s brother-in-law, Daniel Cheng, was also an officer of Crossbridge. He was at the same time an equipment manager with YICT.14 Cheng’s role in Hocen’s arrangement with Crossbridge is a matter of dispute in this case.

The Crossbridge payments

Between September 2005 and October 2006, the defendant caused Hocen to issue a total of ten cash cheques15 and to make eight bank remittances16 to Crossbridge. I will refer to these transactions collectively as the Payments. The total amount debited from Hocen’s account by way of the ten cheques was S$855,225 and US$52,700. The total amount debited from Hocen’s account by way of the eight remittances was US$567,200.

The defendant drew each cash cheque on Hocen’s account with the United Overseas Bank Ltd (“UOB”) and personally cashed the cheque over the counter at a UOB branch. He then physically delivered the cash to a representative of Crossbridge: either Daniel Cheng, Tsui Wai Mun or Yu Kit Ching.17 It is the defendant’s evidence that he delivered the cash drawn against the last two cheques to Crossbridge for onward payment to a third party who had supplied materials to Crossbridge.18 But there is no suggestion that the last two cash cheques are any different in kind from the first eight. I therefore treat the claim on all ten cash cheques as standing or falling together.

There is no independent evidence whatsoever to show that the defendant actually delivered all of the S$855,225 and US$52,700 in cash to Crossbridge, as he claims. The plaintiff has his suspicions about this19 and suggests that the defendant pocketed some of the money for himself. But the evidence which the plaintiff puts forward to support this suggestion is entirely circumstantial and extremely slight. In any event, the claim against the defendant is based on a lack of corporate benefit rather than on misappropriation for personal benefit. The plaintiff therefore does not need to prove that his suspicions are true in order to succeed. I assume for present purposes, therefore, that the defendant handed over all of the cash to Crossbridge, retaining none for himself.

The Crossbridge contracts

Between March 2006 and January 2007, Hocen entered into four written contracts with Crossbridge.20 I shall call them the “Crossbridge Contracts”. The terms of the four contracts are identical to each other in all material respects.

The purpose of the Crossbridge Contracts was apparently to formalise an existing arrangement between Hocen and Crossbridge. The contracts ostensibly obliged Crossbridge to provide quality assurance and progress monitoring services (collectively, “the Services”) when cables sourced from Hocen were installed in cranes manufactured by ZPMC.

Hocen goes into liquidation

The relationship between the plaintiff and the defendant began to deteriorate in the middle of 2006.21 As a result, Hocen’s operations and business became deadlocked. This led the defendant to apply in August 2007 for Hocen to be wound up by the court on, amongst others, the just and equitable ground.22 The court made the winding up order in October 2007 and appointed three accountants as Hocen’s liquidators.23

It is important to point out that Hocen, though now in liquidation, is far from insolvent. After paying all of its creditors and defraying the liquidation expenses, there is in fact a substantial surplus which remains to be distributed equally to Hocen’s only two shareholders: the plaintiff and the defendant.

After taking office in October 2007, the liquidators duly reviewed Hocen’s affairs and records. In the course of the review, they interviewed both the plaintiff and the defendant.24 In September 2009, they submitted a confidential report of their findings to the Commercial Affairs Department (“CAD”). The CAD considered the liquidators’ report and took the position that it disclosed no criminal offence. The CAD decided not to investigate any further.25

The plaintiff was dissatisfied with the CAD’s decision. He instructed his lawyers to obtain a copy of the liquidators’ report. Thus, in October 2010, the plaintiff applied under ss 315 and 284 of the Companies Act (Cap 50, 2006 Rev Ed) (“the Act”) for the liquidators to disclose the outcome of their review insofar as it related to Crossbridge.26 In April 2011, the High Court ordered the disclosure.27

The essence of the liquidators’ findings in their report was that the Payments did not appear to have conferred any corporate benefit on Hocen.28 In particular, the liquidators found a lack of documentary evidence that Crossbridge had actually provided any of the Services.29 The liquidators were also unable to...

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