Quality Assurance Management Asia Pte Ltd v Zhang Qing and others
Jurisdiction | Singapore |
Judge | Vinodh Coomaraswamy JC |
Judgment Date | 03 May 2013 |
Neutral Citation | [2013] SGHC 96 |
Court | High Court (Singapore) |
Docket Number | Suit No 715 of 2010 (Registrar’s Appeal No. 391 of 2012) |
Year | 2013 |
Published date | 03 July 2013 |
Hearing Date | 16 November 2012 |
Plaintiff Counsel | See Tow Soo Ling (Colin Ng & Partners) |
Defendant Counsel | Kelvin Tan (Gabriel Law Corporation) |
Citation | [2013] SGHC 96 |
When an employee who is in a fiduciary relationship with his employer uses his employer’s business opportunities, time and revenue-generating equipment to earn a secret profit for himself, what are the principles on which the court will assess the employee’s obligation to pay equitable compensation to his employer? That is the principal question raised on this registrar’s appeal.
Procedural historyQuality Assurance Management Asia Pte Ltd (“QAM”) commenced this action on 17 September 2010 against three defendants. The first defendant is Zhang Qing (“Zhang”), their former employee and fiduciary. The second defendant is Feng Guiyu (“Feng”), Zhang’s wife. The third defendant is Pinnacle Microelectronic Pte Ltd (“Pinnacle”), the corporate vehicle by which Zhang earned his secret profits. On 25 November 2010, QAM applied for summary judgment against the defendants with damages to be assessed. When that application came up for hearing on 24 January 2011, the defendants consented to interlocutory judgment with damages to be assessed.
The discovery exercise for the assessment of damages commenced in March 2011 and concluded in December 2011. The parties exchanged affidavits of evidence in chief for the assessment in early March 2012. QAM adduced the evidence of two witnesses: (a) Benjamin Wright Brown (“Brown”), the managing director of QAM; and (b) Tan Kah Leong, a manager of Tecbiz Frisman Pte Ltd (“Tecbiz”). QAM engaged Tecbiz to provide the computer forensic and digital investigation services it needed to uncover Zhang’s wrongdoing which forms the subject-matter of these proceedings. The evidence on behalf of the defendants came from Zhang and Feng, each of whom filed an affidavit of evidence in chief on their own behalf and on behalf of Pinnacle. The defendants called no other witnesses.
The Assistant Registrar (“AR”) heard evidence in the assessment on 19 March 2012 and 20 March 2012. By her decision on 10 September 2012, she assessed the damages which the defendants were to pay to QAM at a total of $72,462.10 plus, as is usual, interest and costs. The defendants appealed to a judge in chambers against the entirety of the AR’s award of damages by way of Registrar’s Appeal No. 391 of 2012. I heard the defendants’ appeal on 16 November 2012. I dismissed the defendants’ appeal, save in one relatively minor respect.
On 14 December 2012, the defendants appealed to the Court of Appeal against my decision. I now give my reasons for my decision.
The parties The following introduction of the parties is taken from the oral grounds of decision of the AR given on 10 September 2012:1
Zhang joined QAM as a project engineer on 1 June 2002.2 QAM promoted him to the position of project manager on 1 March 2006.3 His duties as a project manager included:4
Just over 6 months later, on 17 September 2006, QAM promoted Zhang to the position of branch cum general manager. In his new position, Zhang was the second most senior operations personnel in QAM. The promotion meant that Zhang became responsible for:5
Zhang’s rapid promotion and the duties which QAM entrusted to him on each promotion make clear that QAM saw Zhang as a highly trusted and valued employee.6 Indeed, in March 2009, just 18 months before QAM was compelled to commence this action against Zhang, it presented him with its Employee of the Year Award 2008 together with a monetary award worth $8,000.7 QAM also supported Zhang’s application for permanent residence in Singapore and later, Zhang’s application to become a citizen of Singapore.8
The wrongdoing which Zhang engaged in was an especially cynical betrayal of the deep trust and confidence which QAM reposed in him.
Pinnacle Microelectronics Pte LtdPinnacle was incorporated in 2007. Initially, Feng was the sole shareholder and director. In 2009, QAM discovered Pinnacle’s existence and about its connection to Zhang through Feng.9 When confronted about this, Zhang represented falsely to QAM that Pinnacle traded in industrial supplies unrelated to QAM’s business and that there was no conflict in Feng managing the business of Pinnacle.10
Zhang maintained the charade that Pinnacle was not his alter ego in cross-examination. He insisted that Pinnacle was his wife’s company, that he merely helped her out and that he did not run Pinnacle’s business, even unofficially.11 But the truth emerged in Feng’s evidence. She confirmed in her affidavit of evidence in chief12 and in cross-examination13 that she did not participate at all in the business of Pinnacle; it was Zhang who was solely responsible for preparing all of Pinnacle’s quotations and purchase invoices and for carrying out the work of Pinnacle. Feng was nothing more than a front for Zhang from the outset. Zhang eventually conceded in his cross-examination that Pinnacle was his business.14
Zhang resignsOn 15 August 2010, Zhang resigned15 from QAM, saying that he intended to go into a business similar to QAM’s but on a smaller scale.16 QAM then noticed that Zhang had been coming to its office in the late hours of the night.17 QAM discovered that Zhang had wrongfully downloaded its confidential information into a thumb drive.18
Most significantly however, QAM discovered that Zhang had, during his employment with QAM and contrary to his representations, been operating the business of Pinnacle in direct competition with QAM.
Zhang’s wrongdoing was audacious in the extreme. While he was still employed by QAM, he conducted Pinnacle’s business from QAM’s office premises during QAM’s office hours. He secretly diverted to Pinnacle for his own benefit customers of QAM who clearly intended to deal with QAM (see [65] to [68] below). He conducted the testing work for these diverted customers using QAM’s very own testing equipment at QAM’s very own place of business.19 He corresponded with QAM’s customers on Pinnacle’s business during his working hours at QAM. He used QAM’s very own office equipment in QAM’s very own office to generate quotations, test reports and tax invoices from Pinnacle to these diverted customers.20 He gave as his contact numbers on Pinnacle’s quotations and tax invoices his direct line at QAM’s office and his mobile telephone number paid for by QAM.21 He even returned to QAM’s premises furtively on Sundays to carry out testing for these customers. He kept secret from QAM and retained for his own benefit all of the revenue and profits which he, through Pinnacle, earned by means of this diversion.
Zhang was candid in cross-examination:22
. . .
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