Zim Integrated Shipping Services Ltd v Dafni Igal

• Judgment Date: 11 January 2010
• Date: 11 January 2010
• Docket Number: Suit No 755 of 2007
• Court: High Court (Singapore)

Zim Integrated Shipping Services Ltd and others

Plaintiff

and

Dafni Igal and others

Defendant

[2010] SGHC 8

Lai Siu Chiu J

Suit No 755 of 2007

High Court

Companies–Directors–Duties–Whether director in breach of fiduciary duty in failing to disclose certain rebates and waivers–Whether director in breach of fiduciary duty by accepting outside employment–Whether director in breach of fiduciary duty by planning to purchase another company

Companies–Incorporation of companies–Lifting corporate veil–Whether corporate veil should be lifted where company made wrongful declarations or statements

Evidence–Admissibility of evidence–Exception to hearsay–Whether evidence was made in ordinary course of business–Section 32 (b) Evidence Act (Cap 97, 1997 Rev Ed)

Tort–Inducement of breach of contract–Test to determine whether there was inducement to breach contract–Whether there was inducement to breach contract by employing another company's director

Tort–Inducement of breach of statutory duty–Test to determine whether there was inducement to breach statutory duty–Whether plaintiff could proceed on tort of breaching statutory duty imposed under s 157 (2) Companies Act (Cap 50, 2006 Rev Ed)

Tort–Passing off–Whether there was goodwill in plaintiff's name–Whether there was misrepresentation to relevant sector of public–Whether misrepresentation resulted in actual or probable damage

The plaintiffs, Zim Integrated Shipping Services Ltd ( Zim ), Gold Star Line Ltd ( GSL ), Seth Shipping Ltd ( Seth ) and Star Shipping Agencies (Singapore) Pte Ltd ( Star Shipping Agencies ) were companies in the shipping industry. GSL and Seth were ultimately owned by Zim. Star Shipping Agencies was a joint venture between Zim and other partners. Dafni Igal ( Captain Dafni ) was appointed as a director of GSL under an Employment Contract (which contained an Arbitration Clause) and was subsequently appointed as the President of Zim for Asia region and a director of Star Shipping Agencies. Pursuant to the Arbitration Clause, all proceedings between Zim and Captain Dafni pertaining to his employment contract were stayed in favour of arbitration in Israel.

Starship Agencies Sdn Bhd ( Starship Agencies ), the fourth defendant, acted as Star Shipping Agencies' sub-agent for all the shipping services of Seth Shipping Corporation and was GSL's shipping agent in Malaysia. Both Ng Koo Kay Benedict ( Ng ) and Rajathurai Suppiah ( Suppiah ), the second and third defendants respectively, were the directors and shareholders of Starship Agencies. Starship Agencies was managed by Johnny Lim at the material time until he passed away in late 2005.

In 1999, GSL started a service that called at Port Klang, Malaysia, which was operated by Westport Malaysia Sdn Bhd ( Westports ). Starship Agencies allegedly failed to disclose and/or account for the Outbound Rebates, Transhipment Rebates and Charge Waivers (together, the Rebates and Waivers ) that it had received from Westports. Captain Dafni was also alleged to be in breach of his fiduciary duties in failing to disclose or to ensure the Rebates and Waivers were paid to the plaintiffs. Starship Agencies also sourced for operators to provide trucking and depot services for containers onboard the vessels of GSL or Star Shipping Agencies at Port Klang, but the plaintiffs alleged that it did not secure the most competitive rates in this respect. The plaintiffs alleged that they managed to negotiate substantially lower rates after they terminated Starship Agencies' services in 2006.

Starship Carriers Agencies Pte Ltd ( Starship Carriers ), the fifth defendant, was in the business of exporting used vehicles from Singapore. Ng and Suppiah were its directors and shareholders. The plaintiffs were not in the business of providing used-car freight forwarding services, but Star Shipping Agencies had a subsidiary ( Zim Logistics ) which provided used-car freight forwarding services. The plaintiffs alleged that Starship Carriers had passed off its business as that originating from the plaintiffs.

Starship Carriers transferred US$80,000 to Maxwin International Development Ltd ( Maxwin ), a Hong Kong company in which Captain Dafni held 60% of the shares. The plaintiffs alleged that this US$80,000 was transferred under Ng's instructions to procure Captain Dafni to breach his Employment Contract.

Charter Shipping Agencies (S) Pte Ltd ( Charter Shipping ), the sixth defendant, provided ship-management services. Ng was a shareholder and director of the company, while Suppiah used to be a shareholder and become a director with effect from 15 June 2005. Charter Shipping employed Captain Dafni as a consultant between 2003 and 2006 and paid his CPF contributions and income tax while he was its employee. While employed by Charter Shipping, Captain Dafni obtained permanent residence and, later, Singapore citizenship. The plaintiffs alleged that Captain Dafni was in breach of his Employment Contract and/or fiduciary duties owed to them in accepting the appointment and/or a salary from Charter Shipping.

The plaintiffs also alleged that Captain Dafni, Benedict and Suppiah planned to purchase: (a) a company called International Freight Logistics LLC ( IFL ) on or around 15 March 2005; and (b) a vessel known as MV Pancon Diamond ( the Vessel ) on or around 17 June 2005, to compete with their business.

Held, dismissing the plaintiffs' claims:

(1) To make out a claim for the tort of inducing a breach of contract, the plaintiff had to show that the procurer acted with the requisite knowledge of the existence of the contract (although knowledge of the precise terms is unnecessary) and intended to interfere with the plaintiff's contractual rights, with such intention to be objectively ascertained: at [18].

(2) To succeed under the tort of inducing a breach of statutory duty, the plaintiff had to show that the provision in question gave rise to a civil remedy. Here, s 157 (2) of the Companies Act (Cap 50, 2006 Rev Ed) ( Companies Act ) entitled the company to bring an action against the director for any profit made by him or damage suffered by the company as a result of any breach of that section. The plaintiffs could therefore proceed based on the tort of inducing a breach of statutory duty: at [27].

(3) The plaintiffs failed in their claim that Captain Dafni was in breach of his fiduciary duties by not disclosing the Rebates and Waivers to Zim and/or GSL. The plaintiffs did not call the makers of the documents that they sought to rely on and could not rely on s 32 (b) of the Evidence Act (Cap 97, 1997 Rev Ed) ( EA ) as there was no evidence that they were written in the ordinary course of business. Even if the documents were admissible, it did not assist the plaintiffs' case. In addition, Captain Dafni had informed Zim and GSL about the new rates which he had agreed to with Westports in 2001: at [37], [38], [42] and [44].

(4) The plaintiffs failed in their claim for the Waivers and Rebates. There was no evidence that the credit notes purportedly evidencing the Transhipment Rebates and Charge Waivers were made in the ordinary course of business. Even if these credit notes were made in the ordinary course of business, no weight would have been accorded to them as they were unsigned and there was no indication of who the maker of those credit notes was. With respect to the Outbound Rebates, there was no evidence that the documents purportedly evidencing the same were prepared in the ordinary course of business. Lee, the witness which produced the documents at trial, did not have any personal knowledge about the rebates: at [46], [47] and [49].

(5) The plaintiffs failed in their claim that the depot and trucking charges were inflated. There was no evidence on what the prevailing rates were between 2002 and 2005 or that the rates Zim obtained thereafter were substantially lower. Further, the contracts for trucking and depot services appeared to be approved by Zim before Starship Agencies could accept them: at [52] to [54].

(6) The plaintiffs failed in their claim for passing off. There was no evidence of any goodwill associated with the Star Shipping name. Any goodwill that could be associated with the Star Shipping name would not be in the used car freight forwarding business as Star Shipping Agencies did not carry on such a business. Even if there was goodwill associated with the Star Shipping name, the plaintiffs did not show how Starship Agencies had made a misrepresentation to the relevant sector of the public or how such misrepresentation resulted in actual or probable damage to Star Shipping Agencies' goodwill: at [61] to [63].

(7) The plaintiffs failed in their claim that Captain Dafni was in breach of his fiduciary duties by accepting employment from Charter Shipping or that Ng and Suppiah had induced Captain Dafni to breach the Employment Contract. Captain Dafni had informed Mr Strammer (Zim Shipping's vice-president based in Israel) about his employment by Charter Shipping and Mr Strammer had consented to the same. Further, Captain Dafni waived the $15,000 monthly salary from Charter Shipping. The fact that Captain Dafni wanted to obtain Singapore citizenship did not appear to be a secret. It was not possible for Captain Dafni to be employed by Star Shipping Agencies in order to obtain his Singapore citizenship. Charter Shipping's business was also not in competition with that of the plaintiffs. As for Ng and Suppiah, assuming Captain Dafni was in breach of the Employment Contract, there was no evidence that they were aware of the same. Ng honestly thought that Captain Dafni had obtained the requisite approval from his employer and was not in breach of any employment agreement. Suppiah became a director of Charter Shipping only in 2005: at [69], [70] and [73].

(8) There was no evidence that the US$80,000 transferred to Maxwin caused Captain Dafni to be in breach of the Employment Contract...