Samwoh Asphalt Premix Pte Ltd v Lim Soon Ying and Another

• Jurisdiction: Singapore
• Judge: Tan May Tee
• Judgment Date: 06 March 2009
• Neutral Citation: [2009] SGDC 80
• Published date: 10 September 2009
• Court: District Court (Singapore)
• Plaintiff Counsel: George Lim Teong Jin and Jinny Tan (Wee Tay & Lim)
• Defendant Counsel: Edmond Pereira and Looi Teck Kheong (Edmond Pereira & Partners),Suchitra Ragupathy (Rodyk & Davidson LLP)

6 March 2009

District Judge Tan May Tee:

Introduction

1 The Plaintiffs were seeking to establish in this suit taken out against their former employee, the 1^st Defendant, that they had entrusted him with much but he had betrayed them for which they now demanded reparation. The employee, on the other hand, denied that he was given much and so disputed what was required of him. The task fell to the Court to determine the extent of what was given and what was required.

The proceedings – an overview

2 The Plaintiffs, as their name suggests, are a company dealing with the manufacture and sale of asphalt premix. They had in the course of diversification, also expanded into civil engineering works. The 1^st Defendant was instrumental in this expansion. The 1^st Defendant was employed by the Plaintiffs as their site supervisor from 6 June 1997. When he resigned on 1 March 2004, he was holding the post of Contracts Manager, a position which the Plaintiffs claim was just a step lower than that of company director. After his resignation, the Plaintiffs accused the 1^st Defendant of having breached his fiduciary duties. They claimed that he had acted in conflict of interests when he awarded various subcontracts to the 2^nd Defendants which are a company related to him with his wife being one of the 2^nd Defendants’ directors and his brother a director as well as a shareholder of the company. The Plaintiffs claimed that he had given the 2^nd Defendants preferential treatment in that he had awarded contracts to them which were overpriced and that he had wrongfully approved and certified payments to the 2^nd Defendants on various occasions and caused the Plaintiffs to make overpayments to them.

3 As against the 2^nd Defendants, the Plaintiffs claimed that they had dishonestly assisted the 1^st Defendant in committing the breaches of his duty to them. Alternatively, they had conspired with the 1^st Defendant to defraud and injure the Plaintiffs thereby causing them loss. The Plaintiffs also claimed various sums owed to them by the 2^nd Defendants arising from having to supply workers and materials to the 2^nd Defendants.

4 Both Defendants vigorously denied the Plaintiffs’ claims. Additionally, the 2^nd Defendants counterclaimed for the balance unpaid price of the works carried out by them pursuant to the contracts awarded by the Plaintiffs.

5 To prove their former employee’s wrongdoing, the Plaintiffs called a total of 6 witnesses, including a computer forensic expert. In the prosecution of their case, they tendered to Court voluminous documents comprised in 6 bundles with 3 agreed bundles entered into the record of close to 1,000 pages and many loose exhibits besides. The Defendants were not outdone. Up to the conclusion of the trial, the 1^st Defendant had brought 4 bundles of documents whilst the 2^nd Defendants had 2, the total running over 1000 pages. The examination of the witnesses was lengthy and protracted, occupying some 27 days in total over a period of 2 years.

6 After the Defendants had closed their respective cases, the Court adjourned for parties to file and exchange their closing submissions. In the interim the High Court delivered judgment in Nagase Singapore Pte Ltd v Ching Kai Huat & Ors [2007] SGHC 61, a case which was heavily relied on by the 1^st Defendant to challenge the Plaintiffs’ claim that he owed any duty of a fiduciary nature. The High Court in Nagase had held inter alia that an employee in middle management with the authority to negotiate contracts and to authorise payment of invoices did not owe fiduciary obligations to his employer. Counsel for the 1^st Defendant submitted that Nagase was on all fours with the case at hand and I was bound to follow it by reason of stare decisis rather than the English authorities relied on by the Plaintiffs. Since the Plaintiffs’ cause of action against both Defendants was premised on breaches of the alleged fiduciary obligation on the part of the 1^st Defendant, I invited further submissions from parties on the scope and extent of the fiduciary duty, if any, owed by an employee in the position of the 1^st Defendant. With the assistance of counsel, the Court examined various authorities defining the fiduciary obligation and its applicability to employees in a managerial role such as the 1^st Defendant.

7 At the end of my deliberations, I found from the evidence adduced at the trial that the 1^st Defendant in this case had, at the material time and on the basis of the role he played in the Plaintiffs’ organisation and the duties performed by him, assumed fiduciary obligations to the Plaintiffs which he had breached. This finding is now the subject of appeal by the 1^st Defendant in DCA 38/2008.

8 Although I found that the 1^st Defendant had acted in breach of his fiduciary duty in his preferential treatment of the 2^nd Defendants, the Plaintiffs did not succeed in a substantial part of their claim for damages. This was due to defects in pleading and inadequacy of proof of the specific breaches alleged. In the result, the Plaintiffs got judgment for $44,026.26 out of the sum they originally quantified as their loss, being $217,007.72. I also found that the Plaintiffs had failed in their claim against the 2^nd Defendants with respect to their allegations of dishonest assistance and conspiracy to defraud and injure the Plaintiffs in their business. These findings against the Plaintiffs are now being challenged in DCA 39/2008.

9 As a corollary of my findings against the Plaintiffs and also on account of their admissions to several of the claims made by the 2^nd Defendants, judgment was given to the 2^nd Defendants on their counterclaim amounting to $89,492.32.

10 After my judgment was delivered, I was informed that the Defendants had made a joint offer to settle at the initial stages of the trial. A further hearing was convened for parties to submit on the validity and applicability of the offer to settle. I decided after due consideration that the offer to settle made jointly by the Defendants should be disregarded and ruled accordingly. I then proceeded to order costs in the usual manner and on the standard basis following the event of the judgment. In respect of the Plaintiffs’ claim against the 1^st Defendant which was partially successful, I awarded the Plaintiffs two-thirds of their costs; in respect of the Plaintiffs’ claim against the 2^nd Defendants, I awarded the 2^nd Defendants their full costs of defending that claim. Additionally, the 2^nd Defendants having succeeded in their counterclaim was awarded three-quarters of their costs in the counterclaim against the Plaintiffs. The appeals filed by the parties in DCA 47/2008, 49/2008 and 50/2008 are all against the costs orders.

11 For good order, I will in these Grounds deal firstly with each of the parties’ claims and defences, setting out the basis of my findings before dealing with the legal arguments in relation to costs.

(a) Part 1 will deal with the Plaintiffs’ claim against the 1^st Defendant. This runs from paragraphs 12 to 125.

(b) Part 2 deals with the Plaintiffs’ claim against the 2^nd Defendants. This runs from paragraphs 126 to 144.

(c) Part 3 deals with the 2^nd Defendants’ Counterclaim, from paragraphs 145 to 152.

(d) Part 4 deals with the issues arising from the offer to settle and costs orders made.

Part 1 - The Plaintiffs’ claim against the 1^st Defendant

12 It is a trite principle that the findings of the Court must be in tandem with the pleadings filed by the parties. In their Amended Statement of Claim, the Plaintiffs had pleaded their case as follows:

‘2. The 1^st Defendant was employed by the Plaintiff company as a Supervisor from 6 June 1997. Subsequently on 1 April 2000, he was promoted to Contracts Manager until his resignation from the Plaintiffs’ employment on 31 March 2004.

3. The 2^nd Defendant company was incorporated in late 1997. The Plaintiff company was not aware that the 1^st Defendant’s brother, Lim Soon Hock, has been a director, secretary and shareholder of the 2^nd Defendant company since the company’s incorporation or that the 1^st Defendant’s wife, Wong Fong Lin, had also been a director of the 2^nd Defendant company since June 2003 until after the 1^st Defendant submitted his resignation.

4. As the Contracts Manager, the 1^st Defendant was inter alia, responsible for calling for quotations and/or tenders, evaluating, negotiating and awarding contracts to the Plaintiffs’ various sub-contractors. The 1^st Defendant was also responsible for checking the claims for work done submitted by the various sub-contractors to make sure that the claims were for rates agreed between the parties.

5. In the circumstances, the 1^st Defendant acted as an agent of the Plaintiffs and in his capacity as its Contracts Manager, he owed the following fiduciary duties to the Plaintiffs:

(a) a duty to act in good faith and in the interest of the Plaintiffs;

(b) a duty not to act so as to place himself in a position in which his personal interests did or might conflict with the interests of the Plaintiffs.

6. In breach of his fiduciary duty and/or in breach of trust, the 1^st Defendant committed the following acts and the Plaintiffs have suffered loss and damage.

Particulars of Breaches

(i) Throughout the 1^st Defendant’s employment with the Plaintiffs, he did not disclose to the Plaintiffs that his brother and wife were directors of the 2^nd Defendants, and that his brother was a shareholder of the 2^nd Defendants.

(ii) The 1^st Defendant placed himself in a position of conflict when he, purportedly acting for and on behalf of the Plaintiffs, entered into several contracts with the 2^nd Defendants.

(iii) The 1^st Defendant, as Contracts Manager, gave preferential treatment to the 2^nd Defendants by awarding various contracts to them. In particular, for the painting of road kerbs at Tuas View Phase 2, the 1^st Defendant did not attempt to obtain any quotation from the 2^nd Defendants before allowing the 2ⁿ...