Teo Yong Seng and Others v Lim Bweng Tuck and Others

• Jurisdiction: Singapore
• Judge: Warren Khoo L H J
• Judgment Date: 09 March 1998
• Neutral Citation: [1998] SGHC 70
• Published date: 21 February 2013
• Court: High Court (Singapore)
• Plaintiff Counsel: Spencer Gwee
• Defendant Counsel: Khush Chopra

Judgment:

Oral Judgment

The question in this suit is whether the plaintiffs entered into the share buy-out agreement by reason of the defendants' threats to report the plaintiffs' wrongdoings to the policy. (When I say defendants, I refer, in the case of the third and fourth defendants, to their representatives).

There were basically three sets of people at the meeting of 26 June 1987. It is good to put ourselves in the shoes of these different sets of people as they went to that meeting. First, there was John Sam. He was head of a firm of auditors. The company was only one of many of his clients. He had been doing the company's annual audits since its incorporation in 1983. He had worked much more closely with the plaintiffs than with the defendants. In fact, he had met the defendants only once a year, and hardly got to know them. In 1987, there had been unhappiness over the company's performance over the last five years of its existence. He was asked by all the directors (i.e. the plaintiffs and defendants) to conduct a study about the apparent discrepancy between the company's profits and its sales turnover, to try to find an answer why the profit margin in certain bad years was better than in good years. This would involve a great deal of work. He decided to concentrate on the plywood side of the business, as a pilot study perhaps. He had spent 5 days on that, and he had found a few invoices which appeared to be unusual. They were invoices purportedly issued by firms in Johore Bahru, but they did not bear the usual business registration numbers, lorry numbers and so on. He concluded that to conduct a proper study as he had been instructed to do, it would take a long time and it would be costly. He wanted to tell the directors and to get their further instructions. So he called the meeting in question.

The second set of people were the defendants. They, like the plaintiffs, were directors of the company, but they took no part in the management of the company. They were contractors. They were all busy running their own business or businesses. The investment in the company was not a very big amount - $50,000 each. It had not given them any big returns; they had only been getting directors fees. They had become curious why they had made so little money, but they had done no more than asking John Sam to do a study. They were then asked to attend the meeting.

Then there was the third set of people, the plaintiffs. They were the ones who had had the control and management of the company. They had been taking and pocketing money from the company. They had been doing it, all three of them, almost from the start. They had taken a lot of money from the company, which they had been entrusted to manage. It can be assumed that the fear of being discovered must have been present from the moment they decided to take money. Any thief, unless he is totally insane, or totally dumb, which the plaintiffs were not, would entertain such a fear. It can also be assumed that the plaintiffs would also have been conscious of the consequences of their wrongdoings. Being prosecuted and being sent to jail would be the first thing that anyone in their position would have been aware of as a consequence of being discovered. From the moment the matter of studying the accounts was raised and decided upon, the plaintiffs would have had every reason to believe, or expect, that their wrongdoings would be discovered sooner or later. More than anybody else they had the reason, every reason, to consider how the damage could be contained. They had weeks to think about the problem. In fact, they had had years to think about it as they had been taking money from the company all this while.

Unlike the defendants, they, as the working directors of the company, probably had regular, if not daily contact with each other. They must have discussed and worked out a strategy. The plaintiffs' evidence that they did not is hardly credible. I am fortified in this belief by the rather evasive way in which the plaintiffs answered questions about what they had discussed before coming to the meeting.

It is also incredible, as suggested by their counsel, that all they intended to do, if found out, was to offer to put the money back and hope for the best. This is quite naive, as after such a betrayal there was no reason for them to expect that the company -essentially a partnership between a few individuals - could just carry on as before.

The most efficient way to control the damage was to part company, to buy out the defendants. It had the singular virtue of stopping any further studies by John Sam. It appears to me that this is what they had...