Tan Teck Kee v Ratan Kumar Rai

• Jurisdiction: Singapore
• Judge: Judith Prakash JCA
• Judgment Date: 28 September 2022
• Neutral Citation: [2022] SGCA 62
• Court: Court of Appeal (Singapore)
• Hearing Date: 04 July 2022
• Docket Number: Civil Appeal No 1 of 2022
• Plaintiff Counsel: Davinder Singh SC, Pardeep Singh Khosa, Gerald Paul Seah and Stanley Tan Jun Hao (Davinder Singh Chambers) (instructed), Sharon Chong Chin Yee, Nandakumar Renganathan, Nandhu and Lim Shu Yi (RHTLaw Asia LLP)
• Defendant Counsel: Jimmy Yim Wing Kuen SC, Chen Jie'an Jared, Lee Soong Yan Kevin, Dierdre Grace Morgan, Chloe Shobhana Ajit and Eunice Lau Guan Ting (Drew & Napier LLC)
• Subject Matter: Civil Procedure,Service,Contempt of Court,Civil contempt,Equity,Fiduciary relationships,Duties,When arising,Remedies,Account,Wilful default
• Published date: 02 October 2022

Steven Chong JCA (delivering the judgment of the court): Introduction

This appeal, which arises from the decision of the High Court Judge (“the Judge”) in Ratan Kumar Rai v Seah Hock Thiam and others [2021] SGHC 276 (the “Judgment”), raises an interesting question as to whether and when a director may owe concurrent fiduciary duties both to a third party and his principal company. Through the factual lens of this dispute, this judgment will examine a situation in which such duties may legally co-exist and how they may be reconciled.

This question of interest arises from the main matter which forms the subject of this appeal, that is, HC/S 160/2019 (“Suit 160”). In the court below, the Judge found, largely, in favour of the plaintiff, and this judgment deals with the appeal of the second defendant against that decision. There is a separate but connected application which this appeal also concerns, HC/SUM 2708/2021 (“SUM 2708”). We will first address the appeal in respect of the decision in Suit 160 before turning to deal with the appeal in relation to SUM 2708 at [105] below.

The appeal in respect of Suit 160 The parties’ dispute

The thrust of the plaintiff’s case below was relatively straightforward; to the extent there were complexities, they arose chiefly from the need for careful characterisation of the roles played by the various actors involved in the case. Essentially, the plaintiff claimed to have participated in an investment venture over which the first and second defendants had oversight and control; the third defendant was said to be the corporate vehicle of the venture. The nature of the first and second defendant’s oversight and control was argued to have given rise to fiduciary obligations, which the plaintiff sought to enforce by orders to account. The plaintiff also made allegations of wilful default with a view to obtaining more onerous orders to account on the basis of wilful default. The third defendant was absent from the trial, and the first and second defendants denied the truth of the underlying averments which formed the foundation of the plaintiff’s claim that fiduciary obligations arose.

The Judgment comprehensively set out the cases advanced by the parties below, and ably addressed the many factual issues to which those conflicting cases gave rise. As such, it is not in our view necessary to repeat them. Instead, we will provide an abridged overview of the dispute with a view to focussing on the most crucial disputes of fact which need to be resolved in this appeal. This overview will progress in four parts, chronologically.

The basic relationship between the parties

Our starting point is the basic narrative advanced by the plaintiff, Ratan Kumar Rai (“Mr Rai”). The Judgment sets out Mr Rai’s case in detail at [30]–[42]. Mr Rai claimed that around 2010 or 2011, he, the first defendant, Seah Hock Thiam (“Mr Seah”) and one Seah Chong Hwee (“Mr SCH”) began discussing the possibility of jointly investing in Cambodian real property following several trips there to examine potential sites (see the Judgment at [70]). The second defendant, Tan Teck Kee (“Mr Tan”), who was based in Cambodia in connection with various businesses owned by Mr Seah (see the Judgment at [69]), was also a party to these discussions. It needs to be noted that these four men were close friends (see the Judgment at [2] and [68]), and according to Mr Rai, it was in the context of their close friendship that they started discussing this potential joint investment (see the Judgment at [30]).

These discussions, according to Mr Rai, culminated in a meeting (the “First Meeting”) at which he, Mr Seah and Mr SCH orally agreed to pursue the joint investment to purchase some plots of Cambodian land (the “Venture”). At this juncture, the plan underlying the Venture was simply to purchase land in Cambodia and flip it for a profit when it appreciated in value. Mr Tan was also present at the First Meeting, though he did not agree to participate in the Venture as an investor as he lacked capital. However, it was not the case that he had no role in the Venture, as we will explain below.

In his pleadings, Mr Rai labelled the oral agreement reached at the First Meeting in respect of the Venture as the “Oral Understanding” (see the Judgment at [32]). The existence and content of this Oral Understanding lay at the heart of the dispute in the court below. On Mr Rai’s case, the parties to the Oral Understanding – namely, Mr Rai, Mr Seah and Mr SCH – agreed that Mr Seah would act as the “custodian” of the investment funds for the Venture (see the Judgment at [33]). As “custodian”, he was said to have undertaken directly to the other investors in the Venture, the obligation to oversee the funds, monitor expenses, sales receipts, and distribute profits made from the Venture, amongst other things (the list of obligations pleaded by Mr Rai is set out in the Judgment at [86] and [88]). Mr Seah, however, did not have to perform these tasks alone. On Mr Rai’s case, he and Mr SCH agreed that Mr Seah could engage Mr Tan to “assist” him in the performance of such duties. In exchange, Mr Seah and Mr Tan would be entitled to share in 10% of the profits as their management fee.

However, regardless of what these four men allegedly agreed on, it was not in dispute that they could only give effect to this Oral Understanding via a Cambodian company. This was because Cambodian law precluded foreigners from owning land in Cambodia. Only citizens or companies incorporated in Cambodia with at least 51% of their shares held by a Cambodian national were allowed to do so. “Everyone” was aware of this restriction, even before the First Meeting (see the Judgment at [71]). Therefore, to get around this restriction, Mr Rai claimed that, shortly after the First Meeting, he, Mr Seah and Mr SCH met with one Oknha Rithy Sear (“Mr Rithy”) (the “Second Meeting”) to discuss his potential involvement. Mr Rithy was a Cambodian businessman whom they had met through a mutual friend during their visits to Cambodia to view the plots of land, the purchase of which they were considering.

At the Second Meeting, they discussed the Venture, and, on Mr Rai’s case, Mr Rithy agreed to join them not only as an investor, but also as one of the individuals (alongside Mr Seah and Mr Tan) liable to render “true and full” accounts to the other investors, and who was also entitled to share in the 10% management fee mentioned above. Their plan, Mr Rai claimed, was to make the acquisitions using a Cambodian company in which Mr Rithy was to hold the bare majority of shares (ie, 51%), and Mr Tan was to hold the balance. The Cambodian company ultimately used for this plan was the third defendant in Suit 160, Worldbridgeland (Cambodia) Co Ltd (“WBL”). Upon incorporation, Mr Rithy and Mr Tan were WBL’s only two directors, and they remained so throughout the period with which Suit 160 was concerned. Mr Rithy and Mr Tan held, respectively, 51% and 49% of WBL’s shares, and these represented around US$5,000 in capitalisation.

Whilst we are on WBL, it is useful to highlight that a point of some inferential significance is its incorporation date of 25 May 2011, prior to the First Meeting. Since the company existed at this time, an important question which arises in connection with the First Meeting – given that its participants were aware of the land-ownership restrictions imposed by Cambodian law – is whether WBL was specifically identified as the corporate vehicle for the Venture at that meeting. Mr Rai’s evidence was that WBL did not come into the picture until after the Oral Understanding was concluded. He claimed that no company in particular had been identified at the time of the Oral Understanding, and that it was only thereafter that Mr Tan said that WBL would be the company used to make the land purchases. If true, this might lend support to Mr Rai’s claim that the Venture was informally driven by the close relationship between the participants; indeed, to the extent that they were not even concerned about the particular vehicle to be used. However, there is no written evidence of the fact of the First Meeting, much less its contents. So, the answer to this question remains, ultimately, an inferential one to which we will return at [50] below.

There was no dispute that the plots of Cambodian land ultimately purchased were acquired in the name of WBL with the funds of Mr Rai and other investors. However, Mr Seah and Mr Tan wholly denied the existence of the Oral Understanding or anything equivalent to such an oral agreement. They asserted, to the contrary, that the Oral Understanding – as well as the First and Second Meetings – were complete fabrications by Mr Rai. They instead relied on the fact that WBL was incorporated on 25 May 2011 and averred that it had been established by Mr Tan and Mr Rithy as a real estate investment company. In this connection, in fulfilment of its commercial purpose, they claimed that WBL was the actual entity which identified the opportunities to invest in Plots A and B, and had solicited the investors’ contributions to finance these acquisitions (see the Judgment at [31]). Therefore, Mr Seah and Mr Tan pleaded that all investors (including Mr Rai) only had a contractual relationship with WBL, against which their causes of action lay. No cause of action, they claimed, could lie against them personally because there was simply no Oral Understanding.

It is evident from the above that the case put forth by Mr Seah and Mr Tan was fundamentally opposed to that of Mr Rai. Therefore, the primary issue which needed to be decided in order to resolve the dispute, was whose account ought to be believed. That is, was the investment initiated pursuant to the Oral Understanding which placed Mr Seah and Mr Tan personally at the helm of the Venture; or, was it initiated by WBL? The answer would ultimately depend on the...