Judgment

[Please note that this case has not been edited in accordance with the current Singapore Law Reports house style.]

                                                                                                                                                               Judgment reserved.

Warren LH Khoo J:

1           By this action, the plaintiffs claim, in gist, declarations that the defendants are trustees for the plaintiffs in respect of and are accountable for profits made or to be made from a contract (Contract 220) for the construction of a part of a mass rapid transit system in Taipei, and an account of such profits.

2           The plaintiffs are a company constituted in 1982 by five Singapore construction companies for the purpose of going into a joint venture with two Belgian companies to undertake contracts with the Mass Rapid Transit Corp (MRTC) of Singapore. The local companies did not have such experience, and it was no doubt the policy of the government to encourage such joint ventures so that the local companies could acquire such experience.

3           The shares in the plaintiffs are owned by the five Singapore companies. The five directors of the plaintiffs, who each controls one of the five companies, also hold shares in the plaintiffs in their personal names. Mr Tan, no doubt venerated for his age (he was born in 1924) and position in the local building industry, was made the chairman of the plaintiffs, as well as being a director.

4           Mr Ng Cheng Huat was the secretary and general manager of the plaintiffs. Mr Yan Kum Seng was their senior manager. He was subordinate to Mr Ng. Neither Mr Ng nor Mr Yan was a director or shareholder. However, Mr Ng has, since December 1992, held 8.2% of the shares in the plaintiffs.

5           The second defendant, Evergreat, is one of the constituent companies of the plaintiffs. It is controlled by Mr Tan. He owns 50% of the shares in Evergreat; his daughter and son-in-law are the registered holders of the remainder. All three are directors of Evergreat, but there is no doubt that Mr Tan’s is the controlling hand.

6           The company which was the vehicle for the joint venture between the plaintiffs and the two Belgian companies is called Sinbelco Construction Pte Ltd. It was incorporated in June 1983. The plaintiffs own 50% of the shares in Sinbelco, and  the two Belgian entities, Compagnie Francois d’Enterprises (CFE) and SA Franki, own the remaining 50% equally between themselves. The plaintiffs and Sinbelco share offices at Bukit Merah Central. Mr Tan was chairman of Sinbelco as well as chairman of the plaintiffs until he was removed as a director of the plaintiffs on 15 November 1991 as a result of the events that gave rise to the disputes in this suit.

Background

7           The authorities in Taipei, the Department of Rapid Transit Systems (Dorts), were building a mass rapid transit system for the Taipei metropolitan area. Like Singapore’s MRTC, Dorts were looking for the injection of foreign expertise and experience. In early 1991, Kung Sing Engineering Corp (Kung Sing), a Taiwanese construction company who were interested in tendering for the Dorts’ contracts, requested a Malaysian national, Mr Seok Chow Chin (Mr Seok), to look for foreign contractors with the relevant experience to collaborate with them for that purpose. Mr Seok enlisted the help of Mr Leong Siem Chong. Mr Leong met Mr Chin Foo Yun, a director of the plaintiffs, at the Tanah Merah Country Club in Singapore one day and told him about the Taiwanese projects. Mr Chin suggested that Mr Leong contact Mr Ng about this matter.

Meeting of 19 April at plaintiffs’ office

8           Mr Leong initially contacted Mr Ng by telephone and subsequently met him on 19 April 1991 at the plaintiffs’ office. Mr Leong brought Mr Seok along and the three of them discussed the details of Contract 220. This contract was for the construction of a station and two line sections. It was worth about NT$3bn, equivalent then to about S$194.58m. This is the contract that eventually gave rise to the disputes in this suit

9           Mr Ng was informed of the qualifications required by Dorts for Contract 220. Firstly, the foreign contractor or a shareholder of the foreign contractor must have an ‘open cut’ experience in a single mass rapid transit project to the value of NT$1bn (S$64.861m) or more. Secondly, that foreign contractor or its shareholder must have done at least one civil engineering or building contract to the value of NT$2bn (S$129.72m) or more.

10       At that meeting, the common assumption of all those involved was that the plaintiffs were not qualified to collaborate with Kung Sing in the plaintiffs’ own name. The ground for this assumption was that although the plaintiffs had the relevant experience in ‘open cut’ work and in civil engineering, they had not done contracts to the values required. However, Mr Ng told Mr Leong and Mr Seok that Sinbelco (with the experience of the Belgian partners) would be able to meet the requirements. He suggested that Sinbelco’s name be used for the purpose. The important matter of the remuneration of the Singapore participating contractor was discussed, and it was agreed that it should be 1% of the contract sum.

11       It is in dispute whether Contract 206A (which required previous viaduct experience among other things) was discussed at this meeting in addition to Contract 220. I do not think anything turns on it. Mr Seok’s evidence is that he had authority only to discuss this Contract 220. It is also disputed whether Mr Ng was speaking on behalf of Sinbelco or the plaintiffs, although it must be pointed  out that the minutes of the meeting clearly shows Mr Ng as representing the plaintiffs. It is the plaintiffs’ case, disputed by the defendants, that Sinbelco was merely to be used as a front and that the real beneficiary of any resulting contract was to be the plaintiffs. In any event, the meeting concluded by Mr Ng telling all present that the proposal would have to be approved by the board of directors of the plaintiffs as well as Sinbelco.

12       Dorts were experiencing difficulties finding foreign contractors who met their requirements for Contract 220. On 22 April, Mr Tien, the vice general manager of Kung Sing, faxed a letter to Mr Ng telling him that the requirements had been revised. In gist, the foreign contractor must have done at least one single civil engineering or building contract worth at least NT$1.2bn, instead of NT$2bn previously required, and the contract value for any one open cut contract was reduced from NT$1bn to only NT$700m.

13       It was the common assumption among all those involved that even with the revision, the plaintiffs still did not qualify.

14       On 25 April, Mr Ng called Mr Tan and briefed him on the details of the meeting of 19 April. On 29 April, there was a board meeting of the plaintiffs. All the directors except Mr Lim Kong Ong were present. The Taiwan project was discussed. The minutes of that meeting read as follows:.

1.1     Mr Ng informed the members that Mr Leong who was introduced by Mr Chin FY has approached Sinbelco/Hytech recently whether we are interested to take part in the pre-qualification for the Taiwan MRT Project.

1.2    A copy of the minutes of meeting between Hytech Builders Pte Ltd and Mr Leong held on 19 April 1991 was circulated to the members for information.

1.3     The members agreed to ask Sinbelco/Hytech to participate in this pre-qualification under ‘technical collaboration’ approach. Hytech has to seek the consensus from CFE/FRANKI should we intend to ask Sinbelco to be pre-qualified.

1.4     The members also agreed to engage Mr Leong of Tat Seng Construction Pte Ltd as a professional consultant by paying them a fee of 15% of the 1% received.

1.5    Mr Ng was asked to proceed with the negotiation with M/s Kung Sing Engineering Corp. Mr Tan EL was appointed to be the project director representing Hytech in view of the fact that he is more familiar with the Taiwan market. Mr Tan EL was further authorized representing Hytech to enter into the technical collaboration agreement and/or any further agreement if necessary with M/s Kung Sing Engineering Corp and any other party if required. Mr Tan EL agreed to this appointment and promised to report back to the board members on its progress.

15       Mr Tan disputes the accuracy of these minutes, particularly the part relating to his appointment as the project director. These minutes, prepared by Mr Ng, were circulated at a tense board meeting on 24 August 1991 and Mr Tan, along with other directors, signified his approval of them by signing them. Mr Tan says that he was under pressure because of the confrontational atmosphere of the meeting and had not read them carefully.

16       Some time in May, Mr Seok came to Singapore with Dr DS Chung, who was the general manager of Kung Sing, and a Mr Tsai, to take the matter further. On 9 May, the three of them and Mr Ng went to see Mr Tan at Evergreat’s office. Mr Leong and Mr Tan’s daughter Mr Tan Ping Yee were present also.

17       The witnesses’ accounts of the meeting vary slightly in detail, but what is clear is that Contract 206A as well as Contract 220 was discussed. For Contract 220, the assumption was to proceed in the format that had been discussed, ie to use  Sinbelco’s name as the contracting party with Kung Sing, although no consent had yet been obtained from the Belgian partners of the plaintiffs. As for Contract 206A, it was thought that Sinbelco could not meet the viaduct requirement, and some other company should be invited to join. It was agreed that Hock Lian Seng Engineering Pte Ltd should be approached, because they had done such work for the MRTC. Mr Tan knew the managing director of Hock Lian Seng, Mr Chua Leong Hai, and got in touch with him by phone. He succeeded in persuading Mr Chua to let Hock Lian Seng come in as a participating contractor in respect of Contract 206A.

18       The next day, 10 May, Mr Seok and Mr Ng went to the offices of Allen & Gledhill. Mr Ng instructed the solicitor, Mr Andre Yeap, to draw up the technical cooperation agreement and related documents. Mr Seok’s evidence, supported by Mr Andre Yeap’s and which I accept, is that these were for Contract 220.

19       Mr Ng was going to Nigeria on business for the plaintiffs. He left word with Mr Andre Yeap that the drafts when ready should be sent to Mr Yan Kum Seng, Mr Tan Kim Seng (another director of the plaintiffs) and Mr Tan for their comments before sending them to the Taiwanese side.

20       Mr Yeap prepared the documents for Contract 220 in the names of Kung Sing and Sinbelco and on 13 May sent the drafts to Sinbelco marked for the attention of Mr Yan. Mr Yan, writing under the letterhead of the plaintiffs, acknowledged receipt of the drafts and raised certain queries.

21       On 15 May, Mr Tien of Kung Sing came with the news that the closing date for tenders for Contract 206A was earlier than had been expected, and there was need to finalize the documents urgently. Priority was to be given to this contract. So the next day, he, Mr Tan and others went to see Mr Andre Yeap. Mr Tan instructed Mr Andre Yeap to draft the documents in the name of Kung Sing, the plaintiffs and Hock Lian Seng. This was duly done, and the documents, consisting of a technical collaboration agreement and a deed, were executed on 17 May. Mr Tan signed for the plaintiffs.

22       Unfortunately, Dorts rejected the technical cooperation agreement, according to Mr Seok for the following reasons: (1) Dorts would allow only one foreign participant, (2) the plaintiffs did not meet the requirements of Dorts. Hock Lian Seng alone could satisfy all the requirements of Dorts. On 20 May, on Mr Ng’s instructions, Mr Andre Yeap redrafted the technical collaboration agreement with the inclusion, on the Singapore side, of only Hock Lian Seng’s name. However, the previous position of the three parties, ie Kung Sing, the plaintiffs and Hock Lian Seng, was to be preserved, and this was done in the form of a supplemental deed to be signed by the three parties. The fresh technical collaboration agreement and supplemental deed were signed on 20 May after some initial difficulty in getting Mr Lim Peng Kiat to attend. He was not very happy about Hock Lian Seng being the sole signatory of the technical collaboration agreement and carrying sole responsibility up front.

23       I should mention at this point that the deed provided for the payment by Kung Sing to Hock Lian Seng and the plaintiffs of 1.25% of the successful tender price, the 1.25% amounting to an estimated S$1.5m. The payment was to be made as follows: 40% within 14 days of the award of the contract by Dorts, 20% within 3 months thereafter, and the remaining 40% in four instalments at three-monthly intervals thereafter.

24       Mr Andre Yeap had asked Mr Tan how the amount was to be shared as between Hock Lian Seng and the plaintiffs. Mr Tan told him that he would leave it to Mr Ng to speak to Mr Lim Peng Kiat, the boss of Hock Lian Seng, as Mr Ng knew him well and had been instrumental in getting Hock Lian Seng to come in. So the point was left open in the deed and supplemental deed.

Contract 220: Events of 21 May

25       On 20 May, Contract 220 was also discussed. The closing date for this contract was 23 May, and Kung Sing was pressing for the documentation to be concluded. Mr Ng was still away. On the next day, the meeting continued at Allen & Gledhill.

26       As Mr Tan tells it, he was working under great pressure that day. First, he had been unable to get the Belgian partners to agree to the use of Sinbelco’s name. Secondly, Hock Lian Seng were rather unhappy over the fact that they had been the sole signatory in relation to Contract 206A, and they were reluctant to join in Contract 220, and even threatened to pull out of 206A as well. Mr Tan tried to get Antara Koh Pte Ltd, whose experience with MRT work would qualify them for Contract 220, to come in, but the shortage of time made it impossible for Antara Koh to come back with the necessary documents to send to Taiwan. In all these troubles, Mr Tan tried to enlist the help of his fellow director Mr Tan Kim Seng, but the latter turned him down, telling him to forget about Contract 220 since he could not get the consent of the Belgian partners. Mr Tan says that it was under these circumstances that he decided to use his own company Evergreat as the contracting party.

27       According to Mr Andre Yeap, at one stage, Mr Tan instructed him to use the plaintiffs’ name in place of Sinbelco in the technical collaboration agreement, and to draft a deed with the plaintiffs and Hock Lian Seng as the contracting parties with Kung Sing. However, again according to Mr Andre Yeap, Mr Tan retracted this idea as he thought it would be difficult to get the necessary certification from the MRTC or the Construction Industry Development Board (CIDB) showing the plaintiffs’ experience to meet Dorts’ requirements. Mr Andre Yeap kept an attendance note to this effect. Mr Tan, however, denied all of this. He said that Evergreat’s name was included to replace Sinbelco, not to replace the plaintiffs’. He said that without the approval of the plaintiffs’ board, he could not have included the plaintiffs’ name. I have no doubt in my mind that Mr Tan’s recollection on this point is quite faulty.

28       The thrust of Mr Tan’s evidence, as I understand it, is that his choice of Evergreat as a party to the technical collaboration agreement with Kung Sing was dictated by the pressure of events rather than being motivated by any male fide on his part.

29       Mr Tan did manage to get the necessary documents about Evergreat’s experience in the MRTC Contracts 103 and 103A from the offices of the plaintiffs with the help of Mr Yan. He also managed to get the CIDB to give him, at short notice on the same day, a letter certifying Evergreat’s experience with these two MRTC contracts. The relevant part of the CIDB letter reads:

Evergreat Construction Co Pte Ltd is one of the leading civil and building contractors registered with the Construction Industry Development Board. The company is a joint venture partner of Sinbelco Construction Pte Ltd who had successfully completed the design and construction of the following projects for Mass Rapid Transit Corp, Singapore:

(1)    MRT Contract 103

(a) Bishan Station and tunnels to Braddell

(b) Contract sum $32,882,507

(c) Completed — 30 January 1987

(2)    MRT Contract 103A

(a) Braddell Station and tunnels to Toa Payoh

(b) Contract sum $58,078,939.00

(c) Completed — 8 June 1987

30       Mr Tien faxed these documents to his office in Taipei. In his covering letter, he added a caveat that the letter was for Kung Sing’s own reference and was not to be shown to Dorts as it could easily be seen that there were two contracts involved, meaning that only when the contract value of the two were added up would it meet the Dorts value requirements. Kung Sing came back with the confirmation that Evergreat was indeed qualified to participate in Contract 220.

31       In the meantime, Mr Seok had succeeded in persuading Hock Lian Seng to change its mind and to sign the documents for Contract 220. So, the technical collaboration agreement and the deed were each signed in the names of Kung Sing, Hock Lian Seng and Evergreat. Mr Tan signed for Evergreat. The deed provided for the payment by Kung Sing of a flat sum of S$3m. Of this, S$1.2m was to be paid within 14 days of the award of the contract by Dorts, S$600,000 within three months thereafter, and S$1.2m in four three-monthly instalments.

32       According to Mr Andre Yeap, whose evidence I accept, he advised Mr Tan that Evergreat would be holding the rights and benefits of the contract for the plaintiffs. Discussions followed as to how the benefits should be shared with Hock Lian Seng and as between Evergreat and the plaintiffs. Mr Tan told Mr Andre Yeap that he would discuss these matters with the other directors of the plaintiffs in due course.

33       On 8 June, Evergreat was informed by Kung Sing that the tender for Contract 220 was successful and that representatives of Hock Lian Seng and Evergreat had to co-sign the contract with Dorts in Taipei.

Subsequent events

34       Mr Ng had returned to Singapore from his Nigeria trip on 23 May. However, he did not ask Mr Tan about the progress made in the Dorts contracts during his absence. Mr Tan himself had gone to Taipei on 22 May; he returned to Singapore on 24 May and left for the United States on 26 May. He did not return to Singapore until 11 June.

35       Under the deed for both Contracts 206A and 220, Kung Sing was required to furnish to the Singapore parties a performance bond. In the case of Contract 206A, the bond was to secure the payment of the 1.25% of the contract sum which Kung Sing was required to pay the Singapore parties (estimated at S$1.5m). In addition, the obligor would undertake to provide the Singapore parties with funds up to a maximum aggregate of S$5m as the Singapore parties might require to execute complete, rectify modify or reconstruct any of the works, and to secure up to that amount any loss or damage which either of the Singapore parties might suffer as a result of any breach of obligations by Kung Sing. In the case of Contract 220, the corresponding amounts were $3m and S$10m.

36       Kung Sing were having difficulty raising the performance bonds. For Contract 220 Kung Sing proposed to deposit a sum of S$2.5m in a Singapore bank as security pending their production of the performance. Mr Tan says that he discussed the proposal with Mr Chua Leong Hai of Hock Lian Seng, and they agreed to accept it. Kung Sing paid the sum of S$2.5m for Contract 220 on 14 June 1991. It was placed with Evergreat’s solicitors Judy Loke and Mr Cheong on or about 16 June.

37       On 28 June, there was a board meeting of the plaintiffs. According to the minutes of the meeting prepared by Mr Ng, Mr Tan informed the board that Contracts 206A and 220 had been signed on behalf of the plaintiffs on 16 May and 21 May respectively. In his evidence in court, however, Mr Tan said that he did not tell the board that the contracts had been signed on behalf of the plaintiffs. He said: ‘I need not lie because so many people knew that I had signed 220 on behalf of Evergreat.’

38       In his affidavit of evidence-in-chief, he said:

I informed the board that I had signed the deeds and technical collaboration agreements. I did not specify the details. I was under the impression that the board was aware that the deed and technical collaboration agreement for Contract 220 had been signed by me on behalf of Evergreat and not the plaintiffs because every one of us knew that the plaintiffs were not a qualified party and CFE had also not given their consent for Sinbelco to take part in the Taiwan projects. I thought that the other directors had been informed by Mr Ng and Mr Yan Kum Seng. I reported that there were no bonds from Kung Sing yet and thus there were no further progress since the signing of the technical collaboration agreement and deed. I was referring to Contract 206A. Mr Tan Kim Seng had already told me on 21 May to forget about Contract 220.

39       It seems clear, as Mr Tan himself says, he did not tell the board that Evergreat’s name had been used for Contract 220. He gave precious little information about the contract. It is also clear that he did not tell the board about the very recent receipt of the $2.5m cash from Kung Sing which he clearly knew about.

40       Between 23 July and 5 August, Mr Ng had several telephone conversations with Mr Lim Peng Kiat of Hock Lian Seng, who hinted to him that payments for both contracts had been received. On 10 August, Mr Ng telephoned Mr Tien of Kung Sing in Taiwan. He was told that Hock Lian Seng had been paid a sum of $520,685 and Evergreat had been paid $1m for Contract 220. Mr Ng was quite shocked and told the other directors of the plaintiffs about this. They decided to call a board meeting to confront Mr Tan. This was duly held on 24 August.

41       At this meeting Mr Tan admitted for the first time that he had got Contract 220 to be signed in the name of Evergreat instead of the plaintiffs. He also admitted that Evergreat had received $1m under the contract. However, he refused to give further details. The board then decided to refer the matter to solicitors.

42       Mr Tan was subsequently removed as a director of the plaintiffs at a board meeting on 19 October.

The key issue

43       The core issue in this case is whether Mr Tan, having procured Contract 220 for his company Evergreat is accountable to the plaintiffs for the benefits of the contract.

44       In essence, the plaintiffs’ case is that Mr Tan diverted a business opportunity to his own company without the consent and approval of the plaintiffs, and should be held to account.

Mr Tan’s defences

45       Mr Tan’s defence is that, firstly, the information about Contract 220 was that of Sinbelco and not the plaintiffs. The defendants contend that when Mr Leong referred the matter to Mr Chin, it was meant for him as a friend and not as a director of the plaintiffs. They point out that when the parties met on 19 April 1991, it was obvious straightaway that the plaintiffs did not qualify as they did not meet the requirements of Dorts. That was the reason why Mr Ng mentioned Sinbelco. In addition, Mr Seok gave evidence that he had been told by Mr Ng at that first meeting that Mr Ng was the general manager of Sinbelco and Mr Seok was satisfied that Mr Ng had the authority to discuss the proposal with Mr Seok. Mr Seok relayed the information to Kung Sing, who then prepared powers of attorney authorizing Mr Tien to deal with Sinbelco. The draft agreement dated 10 May which Mr Ng handed to Mr Andre Yeap described Mr Ng as the acting project manager of Sinbelco and show Mr Ng as the person to sign for Sinbelco. The defendants therefore contend that the information about the Dorts contracts was received by Mr Ng for Sinbelco. The defendants also submit that it was clear that at the board meeting of 29 April, it was decided by the plaintiffs that Sinbelco was to be the contracting party. So whatever the initial position might be, the effect of this decision is that the plaintiffs had renounced the plaintiffs’ right to the information, if there had ever been such right.

46       The plaintiffs’ evidence was as follows: Mr Chin said that when he referred MrLeong to Mr Ng, it was with a view to the plaintiffs being interested in the business, and he introduced Mr Leong to Mr Ng as the plaintiffs’ general manager. This is confirmed by Mr Ng. Mr Leong’s evidence is that he had known Mr Chin from the time he, Mr Leong, was an engineer in the Housing Development Board and Mr Chin was a contractor. He knew that Mr Chin’s firm was a member of the plaintiffs and that the plaintiffs were involved as a party in an MRTC project. That was the reason why he asked Mr Chin if Mr Chin would be interested.

47       Mr Ng’s evidence is that when Mr Leong first approached him in early April, he was approached as a representative of the plaintiffs. This is confirmed by the faxes which Mr Ng sent to Mr Leong dated 4, 6 and 8 April under the plaintiffs’ name setting out the experience of the plaintiffs in MRTC Contracts 103 and 103A. At the meeting of 9 April with Mr Seok and Mr Leong, he knew that the plaintiffs could not meet the Dorts requirements. Mr Seok and Mr Leong had assured him that all that was needed was just a name that had the experience that would satisfy the Taiwanese requirements. Mr Ng proposed the use of the Sinbelco’s name only as a front to satisfy the Taiwanese side, but it was the intention that the real benefits of any contract would go to the plaintiffs, although of course Sinbelco’s consent to the use of its name would be needed. This is the reason why para 5 of the minutes of that meeting, contains the words ‘using Sinbelco’s past job reference for the pre-qualification purpose only’.

48       It was Mr Ng’s evidence that the contracts would be a plum job for the plaintiffs, with great rewards but with not much burden on the plaintiffs’ part.

49       Mr Ng confirmed the correctness of the minutes of the board meeting of 29 April. The directors of the plaintiffs (other than Mr Tan) who attended that meeting, ie Mr Chua Thuan Koon, Mr Chin Foo Yun and Mr Tan Kim Seng, all confirm the substantial correctness of those minutes. Mr Tan Kim Seng, in particular, also confirm that it was his understanding of the board meeting of 29 April that the plaintiffs would merely use the name of Sinbelco, but that the plaintiffs remained interested in the project. All these directors also confirm that Mr Tan was appointed the project director and he was authorized to enter into any contracts with Kung Sing on behalf of the plaintiffs. The explanation for him being appointed the project director was that he had a Taiwanese background and of all the directors he was the most familiar with the Taiwan market.

50       In resolving this issue of fact, I take into consideration the following factors. In the first place, Mr Ng’s position in Sinbelco was not that of anyone in a management position. He was certainly not the general manager of Sinbelco as Mr Seok mistakenly assumed. Mr Ng said, and I accept, that he was acting in the position of Sinbelco’s project manager when the substantive incumbent Mr Rabau was away from Singapore. On the other hand, Mr Ng was clearly the general manager of the plaintiffs and was in charge of the day to day business of the plaintiffs. MrNg’s position as the general manager of the plaintiffs was much more prominent than his position as the acting project manager of Sinbelco. When Mr Seok saw him on 19 April, he gave Mr Seok a name card showing him as the general manager of the plaintiffs. The meeting took place at the offices of the plaintiffs, and the plaintiffs’ name, not that of Sinbelco, was on the door.

51       I accept the plaintiffs’ witnesses’ evidence that both at the meeting of 19 April between Mr Ng, Mr Seok and Mr Leong, and at the board meeting of the plaintiffs on 29 April, the intention was simply to use, with the consent of the plaintiffs’ Belgian partners, the name of Sinbelco for any contracts to be entered into, but that the plaintiffs were to have the benefits of any resulting contracts with Taiwanese parties, or a share of them. I accept Mr Ng’s evidence that at the board meeting he told the board that the plaintiffs were not qualified but that since it was a good business opportunity, they should use Sinbelco’s name to quality. I also accept that the board agreed to Mr Ng’s proposal. The question of any sharing of the 1% benefits as between the plaintiffs and Sinbelco apparently was not discussed, but this does not detract from the fact that the board’s intention was to have a substantial share, if not the whole of it.

52       Secondly, I accept the plaintiffs’ witnesses’ evidence that the minutes of the 29 April board meeting records are substantially correct. I have heard Mr Tan’s criticism of the minutes. He said that they, and the minutes of the 28 June meeting, were only circulated at the meeting of 24 August, when difficulties had already arisen between Mr Tan and his fellow directors, and the minutes were not a reliable record of the proceedings. He said that he signed the minutes without having read them carefully. I hesitate to accept Mr Tan’s evidence on this point. He is a seasoned man of business, and I am sure he knew what he was signing. He probably did not see at that time any difficulty in accepting the minutes as correct as he no doubt thought he had valid explanations for what he did on the 21 May in putting his company’s name forward as the contracting party.

53       I am of the view, therefore, that the business opportunity in the form of possible contracts with Kung Sing came to Mr Ng as the representative of the  plaintiffs, and not to him as a representative of Sinbelco. It was the intention throughout that Sinbelco was to be used as a name for the purpose of meeting the Taiwanese requirements, but the plaintiffs were to be the ultimate beneficiary. Sinbelco was to be a means to an end, and not an end in itself. There was never any intention on the part of the plaintiffs to relinquish their interest in these possible contracts, in particular Contract 220. I have no doubt at all that Mr Tan knew this. I reject altogether the suggestion that the plaintiffs in adopting the proposal to use Sinbelco’s name thereby renounced their interest in respect of this business opportunity.

Defence that plaintiffs not qualified

54       In answer to the plaintiffs’ pleaded case that Mr Tan wrongfully diverted the business to Evergreat, the defendants pleaded that the plaintiffs were not qualified for Contract 220 and was at no time considered or intended to be a contracting party in respect of that contract.

55       It was not clear to what extent, if at all, the defendants relied on this line of defence, or the contents of it. In defence counsel’s cross-examination of Mr Ng, he sought to get an admission from Mr Ng that it would have been difficult to get documentary evidence from the authorities to show that the plaintiffs qualified. However, as stated earlier, when Mr Tan was cross-examined about the contents of Mr Andre Yeap’s attendance note to the effect that Mr Tan had considered the plaintiffs’ name but had dismissed it because it would be difficult to get such documentary evidence, Mr Tan denied that any such discussion took place at all. In the defence counsel’s closing submission, there was also no reference at all to this line of defence. There was a certain change of tack when a new line of defence was put forward, ie that the information about the Dorts project belonged to Sinbelco, and alternatively that if it had ever belonged to the plaintiffs, the plaintiffs had renounced their interest in it.

56       The defence that the plaintiffs did not qualify could not have been pursued very far. It would be difficult for the defence to explain why Mr Tan could not have used the same device for the plaintiffs to get in as he used to get Evergreat included. For one thing, the CIDB letter which Mr Tan had been able to obtain for Evergreat spoke of Evergreat being a joint venture partner of Sinbelco who had successfully completed Contracts 103 and 103A. That statement would apply to all the other constituent companies of the plaintiffs, since the contracts had been awarded to them jointly. To demonstrate this, Mr Ng succeeded in obtaining a letter from the CIDB dated 15 January 1992 to the effect that the plaintiffs had undertaken the two contracts in collaboration with their partners in Sinbelco, the plaintiffs owing 50% of Sinbelco.

57       Secondly, as counsel for the plaintiffs submitted, it is irrelevant whether the plaintiffs might not have succeeded in getting the contract. The law is entirely against the defendants on this point. In Keech v Sandford, as stated in the headnote, the lease of a market was given to a trustee for the benefit of an infant. Before the expiration of the lease the trustee applied to the lessor for a renewal for the benefit of the infant. The lessor refused to renew for the infant for various reasons, but granted a renewal to the trustee for himself. It was held that the trustee must assign the lease to the infant and account for the profits.

58       In Industrial Development Consultants Ltd v Cooley, the plaintiffs were interested in obtaining contracts from a third party. The third party did not want to deal with a firm and refused to award the contracts to the plaintiffs. The third party subsequently approached the defendant, who was the managing director of the plaintiffs, and invited him to be their project manager for the contracts. Instead of disclosing this offer to the plaintiffs, the defendant resigned from the plaintiffs and accepted the appointment. Roskill J held that the defendant was liable to account to the plaintiffs for the profits that he had made. Following the example in Keech v Sandford1 the learned judge held that the plaintiffs were entitled to such profits even though the plaintiffs would not have been able to get the contracts themselves.

59       In the instant case, I have found that the business opportunity in the form of Contract 220 had come initially to the plaintiffs. Mr Tan was entrusted with or took upon himself the task of realizing it for the plaintiffs. He was a director of the plaintiffs, and occupied the pre-eminent position of chairman. He clearly stood in a fiduciary position vis-à-vis the plaintiffs. A director is not permitted to divert a business opportunity intended for the company to himself. The fact that the company might not be in a position to take advantage of that opportunity does not make it any the less a diversion if the director takes that opportunity for himself. So, accepting without deciding that the plaintiffs were not qualified for Contract220, Mr Tan has nevertheless to account to the plaintiffs for the profits made or to be made from the contract. The law simply does not allow him or his company Evergreat to keep them.

Exonerative provisions of s 391

60       Counsel for the defendants submit that if Mr Tan is found to have breached his fiduciary duty, he should nevertheless be exonerated under the provisions of Section 391 of the Companies Act (Cap 50, 1994 Ed), which reads as follows:

(1)    If in any proceedings for negligence, default, breach of duty or breach of trust against a person to whom this section applies it appears to the court before which the proceedings are taken that he is or may be liable in respect thereof but that he acted honestly and reasonably and that having regard to all the circumstances of the case including those connected with his appointment, he ought fairly to be excused for the negligence, default, breach of duty or breach of trust, the court may relieve him either wholly or partly from his liability on such terms as the court thinks fit.

61       By sub-s (3), this subsection applies to a director of a company.

62       On the face of it, this section of the Act appears to be more applicable to a case where the misfeasance has resulted in a loss to the company. It would be meaningful then to speak of exoneration, or ‘excusing’. It seems far-fetched and unreal to speak of exoneration when the result of it would be to let the offending director keep gains which should not have gone to him in the first place.

63       A paramount consideration in the exercise of the court’s discretion under s 391 is whether the person who seeks the court’s indulgence has acted honestly and in good faith. In the instant case, I am far from being satisfied that Mr Tan so acted. His conduct, if not on 21 May 1991 then subsequently, was characterized by a degree of surreptitiousness which is quite incompatible with honesty. First, there  is the failure to disclose to the board of directors of the plaintiffs at the meeting of 28 June that Contract 220 had been signed in Evergreat’s name. Any reasonable person in Mr Tan’s position, I would have thought, would have taken the first opportunity to give his co-directors a full account of the matter, and would have disclosed in no uncertain terms, that the contract had been entered into in Evergreat’s name instead of the plaintiffs’. Mr Tan’s lame and rather childish excuse is that he thought the other directors knew all about it and Mr Tan Kim Seng had told him to forget about 220.

64       Secondly, about ten days before that meeting, a sum of $2.5m had been received from Kung Sing in place of the performance bond. This sum was placed with another firm of solicitors rather than with Allen & Gledhill, the solicitors who had been acting for the plaintiffs.

65       This was a substantial amount of money. Mr Tan disclosed neither the fact of the receipt of the money nor what he had done with it. Using another firm of solicitors not previously involved would save Mr Tan the embarrassment of having to reconcile himself with the advice of Mr Andre Yeap that Evergreat would be holding the benefits of the contract for the plaintiffs. It would also help in concealing the fact that the money had been received.

66       Thirdly, there was the receipt of $1 million and another sum in respect of the two contracts. Mr Tan said nothing about it to any of his fellow directors. Mr Ng had to get information about it from third parties, from people on the other side of the joint venture.

67       When Mr Andre Yeap advised that Evergreat would hold the benefits of the contract for the plaintiffs, Mr Tan had suggested that the profits should be split between the plaintiffs, Evergreat and Hock Lian Seng, and that as between Evergreat and the plaintiffs, Evergreat should have a larger share. In his letter to the secretary of plaintiffs (which he, strangely, described as ‘your company’) dated 4 September 1991, after the confrontation at the board meeting of 24 August, he took the position that it had been agreed all along that the benefits should be shared equally among plaintiffs, Hock Lian Seng and Evergreat.

68       Even taking Mr Tan at his word, one would have expected him to disclose these payments to the plaintiffs. Instead, he tried his level best to conceal them. I do not think this is the way an honest person would have acted. It is more the way of a person whose sense of right and wrong has been dulled by self-interest. I have no doubt at all that Mr Tan is in no position to ask the court to exercise its discretion under s 391 in his favour even if that section in principle applies to the situation at hand. 

Liability of Evergreat

69       As stated above, Evergreat is a company in which Mr Tan holds a controlling share. I have no doubt that the knowledge of Mr Tan may be imputed to Evergreat. The fact that Mr Tan was able to decide on his own to enter into binding contracts for Evergreat testifies to the control he had over Evergreat. Since the benefits of and arising from Contract 220 belong beneficially to the plaintiffs, Evergreat is in the position of a constructive trustee in respect of those benefits vis-à-vis the plaintiffs, and all appropriate remedies in equity in respect of those benefits, including accounting for the profits received or receivable from the contract, are available to the plaintiffs against Evergreat.

Conclusion

70       There shall therefore be:

(a)    A declaration that the first and second defendants hold the profits of all contracts and deeds in respect of Dorts Contract 220 in trust for the plaintiffs;

(b)    An order for the taking of accounts of all such profits and the making of all necessary inquiries;

(c)    An order for the payment of all sums found due to the plaintiffs upon the taking of such accounts or the making of such inquiries.

71       Pending the taking of accounts, there might be a need to order the transfer of moneys already received by Evergreat and/or Hock Lian Seng to an appropriate account for the purpose of preservation. There might also be a need to order the furnishing of information to enable the plaintiffs to monitor the progress of the contract and their effect on the plaintiffs’ obligations thereunder. I shall hear the parties on these and any further matters for which orders might be necessary.

72       The plaintiffs shall have the costs of this action.

Plaintiffs’ claim allowed.

Reported by Tan Chuan Thye