OOPA Pte Ltd v Bui Sy Phong

• Jurisdiction: Singapore
• Judge: Philip Jeyaretnam JC
• Judgment Date: 16 June 2021
• Court: High Court (Singapore)
• Docket Number: Suit No 885 of 2019

OOPA Pte Ltd

and

Bui Sy Phong

[2021] SGHC 142

Philip Jeyaretnam JC

Suit No 885 of 2019

General Division of the High Court

Companies — Directors — Duties — Director of company acting as director of company's subsidiary at same time — Whether director's actions constituted breach of fiduciary duty to parent company or breach of fiduciary duty to subsidiary company — Whether parent company was proper party to bring claim for breach of fiduciary duty

Companies — Directors — Duties — Director of company transferring business opportunity into separate corporate structure — Whether director breached his fiduciary duty to company

Companies — Directors — Liabilities — Breach of fiduciary duty by director of company — Whether director acted honestly or reasonably — Whether relief from liability should be granted — Section 391(1) Companies Act (Cap 50, 2006 Rev Ed)

Equity — Fiduciary relationships — Duties — Director of company transferring business opportunity into separate corporate structure — Whether director breached his fiduciary duty to company

Equity — Remedies — Breach of fiduciary duty by director of company — Whether equitable allowance should be granted

Trusts — Constructive trusts — Director of company incorporating separate company to handle business opportunity — Whether constructive trust should be declared over director's shares in separate company in favour of company

Trusts — Express trusts — Certainties — Director of company incorporating separate company to handle business opportunity — Whether director held shares in separate company on express trust for company

Held, allowing the claim:

(1) The claim as framed was properly brought by OOPA. A single individual could owe fiduciary duties under different relationships or to different principals. The same act or omission could possibly constitute a breach of fiduciary duty to more than one principal. That there might have been a breach of duty to another principal did not negate or limit the first principal's rights against the defaulting fiduciary: at [28] and [29].

(2) Bui had breached his fiduciary duties to OOPA. Bui's e-mails showed that he fully believed that the CSB was an active and successful business, however new and nascent, and that he fully understood that the CSB could only be transferred to Telio with the approval of the OOPA board. In moving the CSB into Telio, denying OOPA's ownership of Telio and causing Telio to enter into arrangements with the accelerator program that OOPA did not know of, Bui had usurped a maturing business opportunity pursued by OOPA: at [43] and [54].

(3) In any event, Bui held his shares in Telio on an express trust in favour of OOPA. It was the common intention of everyone involved that Bui was incorporating Telio on behalf of OOPA and for the purpose of the CSB. The three certainties for the creation of an express trust were also established: at [57] to [60].

(4) Bui had not acted honestly or reasonably. The contemporaneous documents showed that he in fact knew that the CSB did not belong to him. The question of exercising a discretion to relieve him of liability under s 391(1) of the Companies Act did not arise: at [66] and [72].

(5) Had the court not found that an express trust existed in the present case, it would have declared a constructive trust over the shares on Telio held by Bui, in favour of OOPA. These shares represented the gain Bui obtained from his breach of fiduciary duty: at [74] and [76].

(6) Bui was not granted an equitable allowance, as he had not acted honestly or reasonably: at [77].

Case(s) referred to

Canadian Aero Services Ltd v O'Malley (1973) 40 DLR (3d) 371 (refd)

CMS Dolphin Ltd v Simonet [2001] 2 BCLC 704 (refd)

Guy Neale v Nine Squares Pty Ltd [2015] 1 SLR 1097 (refd)

Mona Computer Systems (S) Pte Ltd v Singaravelu Murugan [2014] 1 SLR 847 (refd)

Tokuhon (Pte) Ltd v Seow Kang Hong [2003] 4 SLR(R) 414; [2003] 4 SLR 414 (refd)

Facts

The defendant (“Bui”) was a director of the plaintiff (“OOPA”). Bui was also a director of OOPA's subsidiary, OnOnPay Vietnam Mobile Services JSC (“OnOnPay”), which was a company incorporated and operating in Vietnam.

Following issues with OnOnPay's initially intended line of business, OnOnPay began to undertake a procurement and supply business for small retailers. This new business was internally referred to as the “Central Supply Business” (“CSB”). Bui discussed and sought funding for the CSB with the other shareholders and directors of OOPA, as well as with other external potential investors. In the midst of this discussion, Bui implemented a corporate structure separate from OOPA and OnOnPay to carry on the CSB. This structure consisted of a Singapore holding company, Telio Pte Ltd (“Telio”), which wholly owned a Vietnamese subsidiary, Telio Vietnam Co Ltd. Thereafter, Bui, on behalf of Telio, signed a term sheet and a convertible note agreement with an accelerator program for start-ups, without informing the other directors of OOPA.

OOPA commenced an action against Bui for breach of trust and of fiduciary duties. The issues that were to be determined were: (a) whether OOPA was the proper plaintiff; (b) whether Bui had breached his fiduciary duty to OOPA in respect of the CSB; (c) whether Bui held his shares in Telio on an express trust in favour of OOPA; (d) whether Bui should be excused from any breach of fiduciary duty, under s 391(1) of the Companies Act (Cap 50, 2006 Rev Ed); (e) whether a constructive trust should be declared over Bui's shares in Telio in favour of OOPA; and (f) whether Bui should be granted an equitable allowance.

Legislation referred to

Companies Act (Cap 50, 2006 Rev Ed) s 391(1)

Koh Choon Guan Daniel (Eldan Law LLP) (instructed), Richard Yeoh Kar Hoe, Koong Len ShengandTan Kee Ming Glen (David Lim & Partners LLP) for the plaintiff;

Thio Shen Yi SC, Niklas Wong See Keat, Nguyen Vu LanandUma Jitendra Sharma (TSMP Law Corporation) for the defendant.

16 June 2021

Judgment reserved.

Philip Jeyaretnam JC:

Introduction

1 What fiduciary obligations does the director of a holding company owe that company in respect of the business undertaken by its subsidiary? That question, or variants of it, underpinned the defence in this matter. The defence contended, among other things, that the separate legal personality of the two companies meant that the proper plaintiff was the subsidiary and not the holding company.

2 This case therefore requires a close consideration of the interplay of equity and company law in the context of corporate groups.

Facts

The parties

3 The defendant, Mr Bui Sy Phong (“Bui”), is a self-described serial entrepreneur. He is from Vietnam. Bui had an idea for a start-up venture initially involving top-up tools for Vietnamese mobile subscribers to top up mobile airtime and subsequently an e-wallet application for small retailers in Vietnam. He secured investors, including a venture capital fund, Captii Ventures Pte Ltd (“Captii”), as lead investor. Though Bui and the intended business were Vietnamese, the plaintiff company, OOPA Pte Ltd (“OOPA”), was set up in Singapore for the purpose of holding the Vietnamese operating company, OnOnPay Vietnam Mobile Services JSC (“OnOnPay”).

4 Bui holds 72.09% of the plaintiff. However, it is common ground that upon dilution of Bui's stake in OOPA pursuant to certain agreements, Bui's shareholding in OOPA would be 40.15%.

5 OOPA owns the whole of OnOnPay beneficially: 60% directly and 40% indirectly; 38% via Bui and 2% via OnOnPay's Operation and Finance Manager, Ms Nguyen Thi Van (“Van”). Bui and Van assigned the shares in their names to OOPA by a deed of assignment dated 9 August 2017.

6 At the material time, the directors of OOPA were:

(a) the defendant, Bui;

(b) Ng Sai Kit (“Ng”), representing Captii;

(c) Kenneth Tan Wei Chin, representing another investor, Gobi MAVCAP ASEAN Investment Management Ltd;

(d) Liu Tact Yew (“Liu”); and

(e) Helmie Anis Ashiblie.

7 Bui was also a director of OnOnPay. None of the other directors of OOPA were also directors of OnOnPay.

8 One more individual should be mentioned, namely, Low Zhen Hui (“Low”), who was from Captii and assisted Ng in relation to OOPA.

Background to the dispute

9 Neither the top-up business nor the e-wallet business were successful. A number of options for a potential exit were considered in the second half of 2018. Nonetheless, at around the same time, OnOnPay began to undertake a procurement and supply business for small retailers, described as “mom and pop shops” in Vietnam. Known internally as the “Central Supply Business” (“CSB”), it certainly appeared viable, and Bui sought funding for it, both from the existing shareholders of OOPA as well as externally, from potential investors. Parties discussed, among other options, setting up a new entity to be incorporated in Singapore to hold a new Vietnamese operating company for the new business. A name, Telio, was coined for this purpose. Its shareholding would comprise three parts. One part would mirror the capital structure of the original Singapore company – in corporate parlance, its “cap table”, “cap” being an abbreviation of “capitalisation”. A second part would be for the founding team (ie, Bui and perhaps other key employees). A third part would be for new investors. The proportions of these parts as well as the valuation to be ascribed to the new company were still being discussed, with Bui seeking a larger shareholding.

10 A new Singapore holding company, Telio Pte Ltd (“Telio”), was incorporated by Bui as its sole shareholder. A new operating company, wholly owned by Telio, was then incorporated in Vietnam, namely Telio Vietnam Co Ltd (“Telio VN”). Telio was incorporated on 21 January 2019, while Telio VN was incorporated a week later on 28 January 2019.

11 Soon after, Bui applied for Telio to enter an...