Tanaka Lumber Pte Ltd v Datuk Haji Mohammad Tufail bin Mahmud and another (Dato Ting Check Sii and another, third parties)

• Jurisdiction: Singapore
• Judge: Edmund Leow JC
• Judgment Date: 23 October 2015
• Neutral Citation: [2015] SGHC 276
• Court: High Court (Singapore)
• Docket Number: Suit No 783 of 2012
• Published date: 29 October 2015
• Year: 2015
• Hearing Date: 16 January 2015,06 February 2015,15 January 2015,29 January 2015,14 January 2015,29 June 2015,04 February 2015,30 January 2015,23 January 2015,22 January 2015,20 January 2015,21 January 2015,03 February 2015,27 January 2015,13 January 2015,28 January 2015,27 March 2015
• Plaintiff Counsel: Goh Phai Cheng SC (Goh Phai Cheng LLC)
• Defendant Counsel: Harry Elias SC, Andy Lem Jit Min, Sharmini Sharon Selvaratnam, Lee Hui Min and Lin Chunlong (Harry Elias Partnership LLP),Khor Wee Siong and Tay Yu Shan (Khor Thiam Beng & Partners),Ling Hoe Kieh @ Ling Chun Kai (in person)
• Subject Matter: Trusts,Trustees,Joint trustees,Breach of trust,Tort,Conspiracy
• Citation: [2015] SGHC 276

Edmund Leow JC: Introduction

Tanaka Lumber Pte Ltd (“Tanaka”) was incorporated in Singapore in February 1987. Its main business was in the wholesale trading of timber and timber-related products. Datuk Haji Mohammad Tufail bin Mahmud (“Datuk Tufail”) and Dato Ting Check Sii (“Dato Ting”) are two of its three shareholders. They enjoyed a successful business relationship in Malaysia prior to setting up Tanaka. Mr Ling Hoe Kieh (“Mr Ling”), who is resident in Singapore, is the third shareholder, and all three men are also directors of Tanaka.

Between 27 May 1992 and 26 March 1996, monies amounting to about US$8,259,549.73 (“the Transferred Sum”) were transferred from Tanaka’s HSBC current account 250-XXXXXX-XXX (“the Current Account”) to the HSBC account 260-XXXXXX-XXX held jointly by Datuk Tufail and Dato Ting (“the Joint Account”). The question to be answered in this case was whether the Transferred Sum was held on trust by Datuk Tufail and Dato Ting for the purposes of Tanaka’s investments in Malaysia.

I found the evidence adduced by both sides to be unreliable and lacking in credibility in material respects. As neither side had discharged its burden of proof, I dismissed Tanaka’s claim as well as Datuk Tufail’s counterclaim and third-party claim. The parties have since appealed my decision and I now give the grounds for my decision.

Background facts

Datuk Tufail is the brother of the former Chief Minister of Sarawak. It was undisputed that Datuk Tufail and Dato Ting first became acquainted sometime in 1974 at a timber moulding factory owned by Ding Brothers Sdn Bhd (“Ding Brothers”) in Sarawak, Malaysia. Datuk Tufail was a director of Ding Brothers and Dato Ting was a foreman of the same, holding the position of “section head”. Datuk Tufail states that as they were around the same age, they were able to relate to each other and quickly formed a friendship. Datuk Tufail also introduced Dato Ting to his younger brother, the late Datuk Mohammad Arip bin Mahmud (“Datuk Arip”) and the three of them became close friends.

Subsequently, Dato Ting left the employ of Ding Brothers, and eventually incorporated a transportation business known as Binta Corporation Sdn Bhd with Datuk Tufail and Datuk Arip. Datuk Tufail and Dato Ting began to venture into a variety of businesses from then on, from sawmilling to logging to plywood manufacturing and to property development. Their business relationship in Malaysia was extremely successful and they incorporated at least 16 companies in this period. Sometimes Datuk Arip would have shares in the companies, but oftentimes he would not. Datuk Tufail and Dato Ting’s close relationship was also evidenced by the fact that Datuk Tufail even sent Dato Ting to Harvard University for further studies.

Sanyan Sdn Bhd (“SSB”) was one of these companies incorporated in 1977 and as of February 1982, Datuk Tufail, Dato Ting and Datuk Arip were the shareholders and directors of SSB. SSB was licensed to export timber logs out of Sarawak, and sometime in 1986, Datuk Tufail, Dato Ting and Mr Ling decided to incorporate Tanaka in Singapore for the purposes of timber trading. Mr Ling is Dato Ting’s brother-in-law, a permanent resident of Singapore, with some experience in timber processing in Singapore. Mr Ling testified that he was very interested in participating in the company because of Datuk Tufail’s political connections through his brother, and because Datuk Tufail had promised to introduce various contacts in Sarawak to them which would benefit the proposed company. Tanaka was thus used to purchase timber from SSB and sell the timber onto foreign purchasers. Datuk Tufail claimed that Tanaka was set up for the purpose of limiting SSB’s tax exposure in Malaysia, and was thus a company with no real operations of its own, but Dato Ting denied this.

The relationship between the parties soured sometime in 2003. It was undisputed that in mid-2003 Datuk Tufail took over the role of managing director of Sanyan Holdings Sdn Bhd and Sanyan Wood Industries Sdn Bhd (“SWI”) from Dato Ting. Datuk Tufail explained that it was because Dato Ting wished to devote more time to his political career and had decided to resign from the companies. At that material time, Dato Ting was the State Assemblyman for the State Constituency of Meradong. But Dato Ting disputed this, and claimed that he did not voluntarily resign from the companies, but in fact was forced to resign from his position as managing director. From his account, it appeared that Datuk Tufail had orchestrated the whole affair and isolated the staff from Dato Ting even after removing him from the position of managing director, and did not give him any work to perform in his new capacities, whether as deputy executive chairman or chairman of the various companies. As the relationship between the parties further deteriorated, Dato Ting commenced various lawsuits in Malaysia to seek reinstatement of his position as the managing director of the companies. The lawsuits commenced in the Malaysian courts ranged from matters disputing ownership, management and/or control of these companies, to proceedings seeking the dissolution or winding-up of the companies. These lawsuits were ultimately unsuccessful in the High Court of Sabah and Sarawak as well as the Court of Appeal in Malaysia.

Now Tanaka has commenced this present action against both Datuk Tufail and Dato Ting. Because Datuk Tufail is also the younger brother of the former Chief Minister of the State of Sarawak, Malaysia, allusions to the state of politics and corruption in Sarawak did surface during the course of the trial, but these did not concern the court. Instead, I proceeded by focussing only on the evidence that was relevant to the claims.

Parties’ claims

Tanaka claimed that Datuk Tufail and Dato Ting were trustees of the Transferred Sum for the specific purpose of investing the said sum in two Malaysian companies – SWI and Pelita Towerview Sdn Bhd (“PT”). To that end, Tanaka sought various prayers, including declarations that Datuk Tufail and Dato Ting held the Transferred Sum on trust and that they owed Tanaka fiduciary duties. Tanaka further claimed that Datuk Tufail and Dato Ting had been unjustly enriched and had breached their statutory duties as directors under the Companies Act (Cap 50, 2006 Rev Ed).

Dato Ting admitted to being a trustee of the Transferred Sum. But Datuk Tufail denied this, and went further to contend that the Transferred Sum belonged to him and Dato Ting, and/or SSB which had invoiced Tanaka for the timber logs that were bound for foreign purchasers. Datuk Tufail also pleaded in his counterclaim that Tanaka, Dato Ting and/or Mr Ling had engaged in a conspiracy against him and had acted in bad faith or unconscionably in causing Tanaka to commence this action against him.

Issues

The main issues for determination in this case were: whether Datuk Tufail and Dato Ting held the sum of about US$8.26m on trust for Tanaka to carry out investments in SWI and PT pursuant to oral agreements; whether Datuk Tufail and Dato Ting had breached their fiduciary duties owed to Tanaka; and whether Tanaka, Dato Ting and Mr Ling had committed an actionable tort of conspiracy against Datuk Tufail in commencing this action.

As a preliminary comment, it was obvious from the proceedings that while both Datuk Tufail and Dato Ting were defendants, and Mr Ling was Tanaka’s representative, Tanaka was in substance, Dato Ting’s mouthpiece. Ultimately, the dispute was between Dato Ting and Datuk Tufail.

The alleged oral agreements

Tanaka relied on two alleged oral shareholder agreements in 1993 and 1994 (“the Oral Agreements”) to plead that the monies in the Joint Account were Tanaka’s investment in SWI through Goodmatch Sdn Bhd (“Goodmatch”), and PT through Sanyan Holdings Sdn Bhd (collectively referred to as the “Malaysian Companies”). The Oral Agreements were allegedly for Dato Ting and Datuk Tufail to invest Tanaka’s money on its behalf for a period of 18 and 15 years respectively.

Tanaka’s reliance on the written directors’ resolutions

It is pertinent to note that this was not Tanaka’s original case. Tanaka’s case was originally premised on directors’ resolutions that were purportedly made in 1993 and 1994. In its statement of claim (first amendment) filed on 26 August 2013, Tanaka had pleaded that pursuant to a directors’ resolution dated 3 January 1993 (“the 1993 Directors’ Resolution”) it was resolved that Tanaka would invest RM10–RM15m in Goodmatch, a company incorporated in Malaysia to operate plywood manufacturing in Sibu, Sarawak, and that Dato Ting and Datuk Tufail would return the said investment in 18 years (ie, January 2011). The investment would be in their names due to political sensitivities between Malaysia and Singapore. It was also alleged that pursuant to the 1993 Directors’ Resolution, Goodmatch was to enter into a joint venture with two Japanese companies through SWI, which would apply for pioneer status and if successful in doing so, would enjoy tax exemption for a period of 10 to 15 years (this duration was ostensibly why the 18-year timeframe was chosen).

In addition, Tanaka asserted that pursuant to a directors’ resolution dated 15 December 1994 (“the 1994 Directors’ Resolution”), it was resolved that Tanaka would invest a sum of RM12–RM15m in PT (previously known as Towerview Sdn Bhd), for the construction of an 18-storey building in Sibu, Sarawak. But due to political sensitivities, Tanaka’s investment would once more be placed under the names of Dato Ting and Datuk Tufail for a period of 15 years commencing on January 1995 (ie, expiring on January 2010). It was also resolved that Datuk Tufail and Dato Ting would be personally liable for the repayment of the construction loan as joint guarantors and that Tanaka would not be responsible for any liabilities arising from the construction of the said...