Yeo Geok Seng v Public Prosecutor

• Jurisdiction: Singapore
• Judgment Date: 10 November 1999
• Date: 10 November 1999
• Docket Number: Magistrate's Appeal No 135 of 1999
• Court: High Court (Singapore)

Yeo Geok Seng

Plaintiff

and

Public Prosecutor

Defendant

[1999] SGHC 295

Yong Pung How CJ

Magistrate's Appeal No 135 of 1999

High Court

Companies–Directors–Duty to declare conflict–Whether multiple directorships created conflicts of duties or interests–Section 156 (5) Companies Act (Cap 50, 1994 Rev Ed)–Companies–Directors–Duty to declare interest–Non-declaration of interests in contracts–Whether interests existed–Whether director had knowledge of relevant facts–Sections 156 (1) and 156 (2) Companies Act (Cap 50, 1994 Rev Ed)–Criminal Procedure and Sentencing–Sentencing–Appeals–Whether sentence manifestly excessive–Section 156 (10) Companies Act (Cap 50, 1994 Rev Ed)

The appellant (“Yeo”) was the managing director of a company (“MFED”), director of another company (“XMS”), and director, manager and 50% shareholder of yet another company (“Triple Star”).

MFED was awarded a building contract (“the TWCC contract”). On behalf of MFED, Yeo then contracted with XMS to award the TWCC contract to XMS, with a provision that consultation fees were payable to MFED by XMS. Yeo did not declare any interest in this contract to the directors of XMS.

In addition, there was a building materials supplies agreement between XMS and Triple Star (“the supplies agreement”). However, no documentary evidence of this agreement existed and Yeo also did not declare to the directors of XMS any interest in this agreement.

Yeo was charged under ss 156 (5) and 156 (1) of the Companies Act (Cap 50, 1994 Rev Ed) (“the Act”) for failing to declare his interests in the two contracts. He was convicted and fined $5,000 on each charge. On appeal, Yeo contended that he did not have any personal interest in the contracts and that the sentence was manifestly excessive.

Held, dismissing the appeal:

(1) The wording of s 156 (5) was clear and wide enough to impose a duty of disclosure on a director who held a directorship in another company, even if he did not have a personal interest, as long as there was a potential conflict of duty arising from his office as a director in both companies. In such cases of multiple directorships, the question was whether, by virtue of being a director of two or more companies, a conflict of duty might potentially arise. If so, the director was required to declare the conflict under s 156 (5). In this case, there was a conflict of duty or interest as Yeo was managing director of MFED and director of XMS, and he was obliged to declare it. In respect of the contract between MFED and XMS, Yeo owed a duty to MFED to secure the highest possible commission from XMS; as director of XMS, the converse applied. Furthermore, there would also be a conflict if a dispute arose between the two companies in relation to the contract. Such conflict of duty imposed on Yeo the duty of disclosure under s 156 (5): at [14] and [15].

(2) In respect of the charge under s 156 (1), Yeo, as Triple Star's director, manager and 50% shareholder, had an interest in the supplies agreement and was obliged to declare it. Furthermore, the exception in s 156 (2) did not apply as his shareholding, even if it was not a controlling interest, was substantial enough to influence the decision of Triple Star and thus constituted a material interest: at [21] to [23].

(3) In respect of the charge under s 156 (1), the Prosecution had discharged its burden of proving that Yeo had knowledge of the supplies agreement between Triple Star and XMS at the relevant time. The trial judge was aware that Yeo's knowledge was a necessary ingredient, and found on the facts that he had the requisite knowledge. Firstly, as director and manager of Triple Star at the relevant time, it was reasonable to infer that Yeo was aware of the supplies agreement. Secondly, it could also be reasonably inferred from the correspondence between XMS and Yeo regarding the TWCC contract that Yeo had a keen personal interest in the project and knew that XMS was obtaining materials from Triple Star: at [26].

(4) Yeo's sentence was not manifestly excessive. Any breach of s 156 was a serious offence and the maximum fine of $5,000 was imposed in most cases unless there were mitigating factors, of which none existed in his case: at [31].

[Observation: It was recognised that a wide interpretation of the provisions of s 156 of the Act would mean that even an innocent failure to disclose with no proven loss to the relevant company could bring about the conviction of the director involved. This was a harsh reality but the fact remained that directors were under an onerous duty by virtue of their positions as fiduciaries entrusted with the responsibilities of managing their companies' businesses and making corporate decisions for the benefit of their companies. If a person undertook such duties and responsibilities as a company director, he should also be responsible for familiarising himself with the various rules of disclosure and other statutory duties under the Act. Section 156 exists for the benefit and protection of the company so that its directors may make informed decisions in the light of declarations of interest by individual directors. A wide interpretation of s 156 was thus necessary to give effect to its purpose: at [32] and [34].]

Berlei Hestia (NZ) Ltd v Fernyhough [1980] 2 NZLR 150 (distd)

Boardman v Phipps [1965] Ch 992; [1966] 3 All ER 721 (distd)

Castlereagh Motels Ltd v Davies-Roe (1966) 67 SR (NSW) 279 (refd)

Gray v New Augarita Porcupine Mines Ltd [1952] 3 DLR 1 (distd)

London and Mashonaland Exploration Co Ltd v New Mashonaland Exploration Co Ltd [1891] WN 165 (distd)

Oh Laye Koh v PP (1995) 1 CLAS 142 (refd)

State of South Australia v Marcus Clark (1996) 14 ACLC 1019 (distd)

Companies Act (Cap 50,1994 Rev Ed)ss 156 (1), 156 (2), 156 (5), 156 (10) (consd);s 156

Criminal Procedure Code (Cap 68, 1985 Rev Ed)s 196 (2) (a)

Companies Act1936 (NSW)s 129

Companies Act1961 (NSW)s 123

Ang Sin Teck (Raja Loo & Chandra) for the appellant

Thomas Koshy and Tan Jen Tse (Deputy Public Prosecutor) for the respondent.

Yong Pung How CJ

1 This was an appeal from the decision of the District...