Tort Law

• Citation: (2018) 19 SAL Ann Rev 756
• Publication year: 2018
• Published date: 01 December 2018
• Date: 01 December 2018

Conspiracy

26.1 There are two categories of conspiracy: (a) involving the use of unlawful means and proof of intention on the part of the defendant to injure the plaintiff; and (b) where there is an absence of unlawful means, but the defendant had a predominant, illegitimate purpose to harm the plaintiff. Both causes of action were pursued in Trans Asian Shipping Services Pte Ltd v Pua Teck Ann1 and DyStar Global Holdings (Singapore) Pte Ltd v Kiri Industries Ltd.2 It is also not uncommon for a conspiracy claim to be initiated together with other economic torts as in Leiman Ricardo v Noble Resources Ltd.3 Another important legal issue under the tort of conspiracy concerns the principle in Said v Butt,4 relating to directors' personal liabilities for the company's breaches of contract.

26.2 In Trans Asian Shipping Services Pte Ltd v Pua Teck Ann, the plaintiff company, which provided shipping and logistics services, was a judgment creditor of a company of which the defendants were the shareholders and directors. It alleged that the defendants had conspired to cause loss to the plaintiff when they breached their fiduciary duties and dissipated the company assets, thereby depriving the plaintiff of the satisfaction of the judgment. After the company had ceased trading in 2011, it sold its fixed assets to a third party and made payments to the first defendant in discharge of the loans he had made to the company.

26.3 The plaintiff's suit was based on both unlawful means and lawful means conspiracy. According to the District Court, the act of the

defendants was one of undue preference in making the payments to the first defendant. This was characterised by the plaintiff as a breach of fiduciary duties. The claims in conspiracy were dismissed by the District Court on the following grounds:

(a) The fiduciary duty was not owed by the defendants to the plaintiff but to the company.

(b) Based on Quah Kay Tee v Ong & Co Pte Ltd,5 allowing the conspiracy claim would

… defeat the very object of the liquidation regime which would permit the plaintiff recovery only pari passu along with other unsecured creditors upon liquidation of the company.

(c) On the basis that there was no unlawful means, the predominant intention of the defendants in making the payments to the third parties was to benefit the first defendant and not to cause harm to the plaintiff. Hence, the case did not fall under lawful means conspiracy.

(d) Even if the alleged undue preference constituted unlawful means, there was no loss to the plaintiff as the payments could be set aside on the application of the liquidator.

(e) There was an absence of overt acts on the part of the second defendant contributing to the alleged conspiracy.

26.4 The most significant development for conspiracy (and inducement) to breach a contract concerns the principle in the English case of Said v Butt6 that where a director acts bona fide within his scope of authority, he is immune from personal liability for procuring the company's breach of contract. The Australian High Court in O'Brien v Dawson7 and the Newfoundland Court of Appeal in Imperial Oil Ltd v C & G Holdings Ltd8 have approved the principle. Singapore courts in Chong Hon Kuan Ivan v Levy Maurice,9 Nagase Singapore Pte Ltd v Ching Kai Huat,10 Ng Joo Soon v Dovechem Holdings Pte Ltd11 and M+W Singapore Pte Ltd v Leow Tet Sin12 have also followed the principle. Yet, the precise scope and the basis of the principle remain to be clarified.

26.5 The Court of Appeal in PT Sandipala Arthaputra v STMicroelectronics Asia Pacific Pte Ltd13 (“PT Sandipala”) has now clarified that the principle in Said v Butt should exempt the personal tortious liability of directors for contractual breaches of their company (whether based on the tort of inducing breach of contract or unlawful means conspiracy) if their acts, in their capacity as directors, are not in themselves in breach of any personal legal duty owed to the company.14 There were two reasons given by the court:

(a) When a director acts in the exercise of his functions as a director within the scope of authority, he acts in the capacity of the company and not on his own.

(b) There was a good policy reason to ensure that directors would not be unduly deterred by the fear of personal liability when they act in the company's interests.

26.6 The Said v Butt principle affects legal liability and is not the basis for a defence. Therefore, the plaintiff has the burden to prove that the defendant-directors were in breach of their personal legal duties to the company. The requirement of the director acting bona fide under the Said v Butt principle refers to the director acting bona fide in the discharge of his office as director of the company and not with regard to the third party (claimant). Hence, even if it is shown that a director acted with the predominant purpose to injure the third party (claimant), he may nevertheless be protected by the principle. On the facts, the directors of PT Sandipala were not personally liable in conspiracy under the Said v Butt principle as they were not in breach of their personal legal duties to PT Sandipala.

26.7 Another question raised by the Court of Appeal for further debate was whether the principle in Said v Butt15 to exempt the personal liability of directors should likewise be extended to the commission of torts by the company. Extending the principle to torts generally would alleviate the concerns of directors who may otherwise have to bear personal liability for company torts. One reason for not extending the principle to torts, however, is the doctrine of privity of contract,16 which differentiates the contractual relationship between the company and third party from that found in situations involving company torts

generally. Where a contract is entered into between the company and the third party, the latter would typically look to the company for recourse in the event of a breach; in the ordinary situation involving company torts, however, the third party and the company may well be strangers prior to the alleged tort.

26.8 This recent interpretation of the Said v Butt principle in PT Sandipala above was applied in the subsequent case of Turf Club Auto Emporium Pte Ltd v Yeo Boong Hua.17 This case arose from disputes between parties to a joint venture between the respondents (plaintiffs) and the SAA Group (comprising five individuals, including the defendant-appellants) (“SAA”) to develop and operate a site. It was envisaged that the successful bidder for the lease of the site by the Singapore Land Authority would grant a subtenancy to the joint venture companies. The disputes led to two legal actions, whereupon a consent order was entered into by the respondents and the appellants (which included Tan CB and Tan Senior) in relation to the investigations into the financial affairs of the joint venture companies and the submission of a report by the KPMG entities that were engaged to supervise the bidding exercise. Under the consent order, SAA was obliged to grant subtenancies to the joint venture companies.18

26.9 One of the appellants, Tan CB, was in breach of his fiduciary duties to act in the best interests of SAA. Hence, Tan CB was not protected by the Said v Butt principle and was liable under both the tort of conspiracy by unlawful means and the tort of inducing breach of contract. Tan CB subjectively knew that SAA would be in breach of a consent order (which is an order of the court). Further, the consent order was the culmination of years of litigation between multiple parties to arrive at a settlement.

26.10 The Court of Appeal agreed with the High Court's findings. First, Tan CB had combined with other persons to injure the respondents. Second, he intended to cause injury to the respondents. Tan CB subjectively intended and knew that by deciding that SAA would not grant the subtenancies to the JV Companies in breach of the consent order, this would cause the respondents to either (a) overbid for the joint venture companies' share held by SAA; or (b) be deprived of the opportunity to participate in the development and operation of the site and be unable to obtain fair value for their shares in the joint venture companies. The breach of the consent order constituted a breach of contract and amounted to “unlawful means”. Further, Tan CB

was liable for the tort of inducing breach of contract by procuring the breach of the consent order by SAA.

26.11 Although Tan Senior had formally relinquished his position as shareholder and director of SAA and/or JV Companies, he remained involved in substance and was liable for both the tort of conspiracy with Tan CB and the tort of inducement of breach of contract in relation to the breach of the consent order by SAA. Koh KM was liable under the tort of conspiracy based on his non-disclosure of the 2007 head lease to the respondents and/or KPMG entities (which constituted a breach of the consent order) as the “means” by which he “actively” participated in the conspiracy to injure the respondents.

26.12 The following cases are mentioned briefly for completeness. In DyStar Global Holdings (Singapore) Pte Ltd v Kiri Industries Ltd,19 the claim in unlawful means conspiracy, which relied on breaches of an agreement, failed as there were no breaches or any combination of parties to commit the alleged breaches. Further, with respect to the lawful means conspiracy claim, there was no evidence of any predominant purpose by the alleged conspirators to injure the claimant.20 In another case, Yuanta Asset Management International Ltd v Telemedia Pacific Group Ltd,21 the claim in unlawful means conspiracy failed due to the insufficiency of pleadings. Finally, there was no underlying breach of confidence amounting to unlawful means according to the High Court in International Financial Services (S) Pte Ltd v Old Mutual International Isle of Man Ltd...