Tongbao (Singapore) Shipping Pte Ltd and another v Woon Swee Huat and others

• Jurisdiction: Singapore
• Judge: Audrey Lim JC
• Judgment Date: 23 July 2018
• Neutral Citation: [2018] SGHC 165
• Court: High Court (Singapore)
• Hearing Date: 16 November 2017,21 November 2017,15 November 2017,14 August 2017,29 August 2017,08 November 2017,01 December 2017,16 August 2017,04 August 2017,02 August 2017,28 November 2017,05 December 2017,04 September 2017,21 February 2018,07 August 2017,19 February 2018,07 December 2017,23 November 2017,31 July 2017,10 August 2017,17 August 2017,09 July 2018,24 November 2017,30 November 2017,08 August 2017,15 August 2017,20 February 2018,13 November 2017,18 August 2017,22 August 2017,14 November 2017,29 November 2017,11 August 2017,21 August 2017,04 June 2018,12 December 2017,09 November 2017,03 August 2017,28 August 2017,22 November 2017,04 December 2017,23 August 2017
• Docket Number: Suit No 1294 of 2014
• Plaintiff Counsel: Foo Maw Shen, Ng Hui Min and Loh Chiu Kuan (Dentons Rodyk & Davidson LLP)
• Defendant Counsel: Winston Kwek and Max Lim (Rajah & Tann Singapore LLP),Francis Goh, Low Chun Yee and Joyce Ng (Eversheds Harry Elias LLP),Mark Yeo (Engelin Teh Practice LLC)
• Subject Matter: Equity,Fiduciary relationships,Duties,Breach,Remedies,Equitable Compensation,Principles in assessing
• Published date: 02 November 2019

Audrey Lim JC: Introduction

The first plaintiff (“TBS”) and the first defendant (“Woon”) entered into a joint venture (“JV”) to construct a 45-metre anchor handling tug (“Vessel”) on a 60-40 costs-sharing basis. The Vessel was built by the second defendant (“UWM”). The second plaintiff (“TBM”) subsequently acquired TBS’s 60% interest in the Vessel. The plaintiffs claimed that Woon breached his JV duties and that UWM assisted Woon in his breach, and claimed that there is no seaworthy Vessel despite TBS having expended more than US$5 million in the JV. They also claimed that the third defendant (“Thia”) had breached his duties as TBS’s director in failing to safeguard TBS’s interest in the JV. Woon and UWM in turn claimed that TBS had failed to take delivery of the Vessel despite it being ready.

The entities and relationships between the parties

TBS was incorporated in 2003 with Yu Kebing (“Yu”), Thia and Low Chye Hin (“Low”) as its directors and shareholders (and Yu being the majority shareholder). Alan Thia (Thia’s son) (“Alan”), was TBS’s general manager since its incorporation and also its director from 1 November 2010 to 15 November 2015. Thia and Low sold their shares in TBS around 21 October 2009 and resigned as directors around 6 November 2009, and Yu continues to be the majority shareholder of TBS. Yang Feng (“Yang”) was appointed and remains a director from 1 November 2010. TBM was incorporated on 1 October 2009 with Yu, Thia and Low as its directors and shareholders. It was formed to transfer the value of the Vessel over to it when Yu bought over Thia and Low’s shares in TBS as the share buy-out did not include the value of the Vessel.¹ The Vessel was transferred from TBS to TBM around 9 December 2009.

UWM, incorporated on 30 October 2007, is in the business of ship building and management. Woon and Thia were the initial directors (with Woon appointed as managing director)² and shareholders. On 5 November 2007, Low, Zikif Effendy (“Zikif”) and Lie Tjit Kui (“Lie”) joined UWM as shareholders, and Zikif and Lie were made directors of UWM. Woon and Thia resigned as UWM’s directors around 4 February 2014 and 18 March 2013 respectively.

Plaintiffs’ case

I set out the plaintiffs’ case as narrated by Yu. Yu incorporated Shanghai Tongbao Shipping Co Ltd in China, which main business was chartering tug boats for towage, and Yang was its manager.³ Yu, Thia and Low then incorporated TBS in order for Yu to obtain a foothold in the Singapore market.⁴ Yu was TBS’s managing director.⁵

Around July 2007, Thia suggested to Yu and Low that the Vessel be constructed in Indonesia. Thia informed Yu that Woon, who was in the vessel construction business, could construct the Vessel on a joint venture with TBS as follows.⁶ The Vessel would be constructed at Woon’s shipyard in Batam and TBS would procure the bank loan to fund the construction costs. The construction costs would be shared between TBS and Woon on a 60-40 basis and would be made through TBS; Woon would pay his 40% contribution to TBS and TBS would pay for the Vessel construction costs. Any profit or loss would be shared between TBS and Woon on a 60-40 basis. Finally, the construction would take about two years, at an estimated cost of US$5 million. As Yu did not know Woon, he asked Thia if Woon was trustworthy, and Thia vouched for Woon’s trustworthiness. Hence, Yu agreed for TBS to enter the JV.

In July 2007, Yu, Thia and Low visited Woon’s shipyard in Batam (“the Batam trip”) and Woon informed Yu that the Vessel would be constructed at his shipyard. The JV between TBS and Woon was then proceeded with on the terms that Thia had conveyed to Yu (see [5] above), and Yu left Thia to liaise with Woon. Low (for TBS) and Woon (for UWM) subsequently signed a Shipbuilding Contract dated 9 November 2007 for UWM (the builder) to build the Vessel for TBS (the owner). On 7 December 2007, TBS obtained a term loan facility from DBS Bank (“DBS”) of US$4 million for the Vessel construction (“the Loan Facility”). As Yu was based overseas, he left the daily operations and financial matters to Thia, who was assisted by Alan.

Around mid-2009, Yu became increasingly concerned about the completion of the Vessel and he sent Yang to Singapore to find out the status of the Vessel construction. In early 2010, Yu discovered from Yang that Thia and Woon were directors and shareholders of UWM. Yu also discovered that the Vessel was not constructed at Woon’s shipyard at PT TKBI (“TKBI”), but at a shipyard at PT CFB (“CFB”), and that the Vessel was moved to TKBI in late 2009. Yu’s testimony in this regard is confirmed by Yang.⁷

In 2010 or 2011, Yu and Yang met with Woon, Thia, and Low, during which Yu enquired on the status of the Vessel construction. Woon stated that he would expedite its construction and asked for payment for additional expenses for the construction which Yu did not agree to.⁸ Yu further discovered, in late 2012 or early 2013, that Alan was involved in UWM. On 20 May 2013, Yu requested Woon and Thia to provide a full and proper account to TBS of the Vessel construction costs. Woon’s son, Simon, replied on 28 May 2013 to state that the accounts were handled by Thia and Alan.⁹ Subsequent correspondences ensued between TBS and UWM with a meeting held on 30 September 2013 to resolve the outstanding issues in which Yang, Woon, Ivan (Woon’s other son) and Simon, among others, were present.

Dissatisfied with the state of affairs, the plaintiffs commenced this action in December 2014. TBS claimed that Woon had breached his duties under the JV to be responsible for construction of the Vessel and had breached his duties as a fiduciary: (a) to properly account to TBS for all costs incurred in the Vessel construction; (b) to exercise due care and skill in the construction and in management and control of the construction costs; (c) to keep clear and separate accounts for the Vessel construction costs and not to commingle this account with accounts of other vessels built by Woon or UWM; (d) by placing himself in a position of conflict; and (e) to act honestly and in good faith. By interposing UWM as a vehicle for the funds flow for payments made for the Vessel construction, Woon, through UWM, derived benefits without TBS’s consent. Hence, UWM was liable for such benefits it received pursuant to Woon’s breach of duties. Further and alternatively, UWM acted dishonestly in assisting Woon in his breach of duties.

TBS’s claimed against Thia for breach of fiduciary duties as TBS’s director. Thia had represented to Yu that Woon was trustworthy and had failed to inform TBS’s board of directors that Woon had breached his duties and did not safeguard TBS’s interest. Yang was called as a witness for the plaintiffs, and I will refer to his evidence, where relevant, in my findings.

First defendant’s case

Woon’s evidence is as follows. Around May to July 2007, Thia approached Woon to partner TBS to build the Vessel for sale. Throughout the negotiations of the JV terms, Woon communicated only with Thia, who represented TBS. Under the JV, TBS was responsible for all finance and accounting matters, and procurement for the Vessel construction. However, the construction cost was never agreed on and the Shipbuilding Contract was prepared for the purposes of obtaining financing for the Vessel. It was also agreed that the Vessel would be constructed at CFB.

Also in 2007, Woon suggested to Thia that they incorporate a company (UWM) to construct and sell vessels¹⁰ with Woon, Thia, Zikif and Lie as shareholders. Lie was the owner of CFB in Batam (together with other shareholders)¹¹ which had leased the land from Zikif. Woon would supervise the construction of vessels, Lie would supply labour for the construction and Thia would be in charge of the daily business and commercial operations of UWM including its finance and accounts. Thia and Alan also handled the accounts and finance and procurement relating to the Vessel for UWM. Woon’s 40% stake in the JV was contributed by Comfort Shipping Pte Ltd (“Comfort Shipping”) and Sea Glory Shipping Pte Ltd (“Sea Glory”) in equal shares. Andrew Lee (“Andrew”) was Woon’s business partner in Sea Glory. Hence, Woon’s real interest in the JV was only 10%.¹²

After the Vessel was launched in December 2009, CFB ceased operations, and Thia agreed with Woon to move the Vessel to TKBI to be completed. Further construction costs were incurred thereafter but TBS did not pay its 60% contribution. When the Vessel was completed in January 2015, TBS did not take delivery of it. Woon thus incurred additional construction costs and expenses to preserve and maintain the Vessel and claimed that the delay in Vessel completion was due to matters beyond his or TKBI’s control.

Woon thus counterclaimed against TBS for breach of its duties under the JV, including failing to account for all the costs and expenses incurred in the Vessel construction and to discharge its responsibility for procurement for the construction. This included TBS’s failure to further contribute its 60% share as well as expenses to maintain the Vessel totalling $188,690.64 and continuing at $6,100 per month.

Second defendant’s case

UWM’s case is essentially aligned with Woon’s. As TBS did not take delivery of the Vessel, UWM “rescinded” the Shipbuilding Contract on 16 July 2015,¹³ and claimed the outstanding construction costs and expenses to maintain and preserve the Vessel. Ivan, Simon and Lie were called as witnesses. I will set out briefly Ivan’s evidence and refer to UWM’s other evidence, where relevant, in my findings.

Ivan assisted Woon to manage TKBI and was a director of Lian Yi Shipbuilding and Construction Pte Ltd (“Lian Yi”), an entity related to TKBI. Woon was in charge of the Vessel construction,¹⁴ and Thia was responsible for UWM’s daily operations including finance and procurement for the Vessel construction. Alan assisted Thia with the...