High Court · Decided 2 December 2011

Ang Tin Gee v Pang Teck Guan

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[2011] SGHC 259Case no. Suit No 697 of 2010

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Belinda Ang Saw Ean J:
INTRODUCTION
[1] This is a partnership action brought by the plaintiff in respect of alleged breaches by the defendant in discharging his duties as a business partner from 1996 to 2006. The plaintiff is Ang Tin Gee (also known as Julie Ang). The defendant is Pang Teck Guan (also known as Andy Pang).
[2] The plaintiff’s various complaints were primarily about: (a) the conduct of the defendant as the working partner who controlled and managed the day-to-day affairs of the business carried on in the registered name and style of Japco TC International Enterprise (“Japco”), and (b) the office consumables business carried on through the entity known as Office Consumables Supplies (“OCS”), a sole proprietorship registered in the defendant’s name. By seeking to determine the true scope of the partnership businesses in this action, the plaintiff is in effect asserting that the full scope of the businesses as controlled and managed by the defendant as her partner had been concealed from her. In other words, a breach of fiduciary duty by the defendant had occurred. As such, the defendant is liable to, inter alia, account for actual profits derived from the businesses undertaken respectively by Japco and OCS. This relief will entail, inter alia, an account of the benefits and/or gains which the defendant derived from the use of Japco’s resources, funds and bank facilities to finance the business operations of OCS, including payment of OCS’s operating expenses.
[3] The defendant disputes the plaintiff’s claims. The defences raised and relied upon by the defendant were primarily (a) to deny the partnership inter se, or (b) to maintain that OCS was his separate business and was never part of Japco’s business.
[4] The question that lies at the heart of the present case is the defendant’s duty to account for, inter alia, Japco’s moneys and OCS’s sales receipts and his obligation to give a proper, complete and accurate account of all his dealings and acts in respect of Japco’s moneys and OCS’s sales receipts. The burden is on the defendant to show that at the relevant times, (a) there was no loss to Japco arising from the use of Japco’s moneys for OCS’s operating expenses, and (b) the profits of OCS had been earned wholly or partly by means other than the use of Japco’s resources, moneys and banking facilities.
BACKGROUND OF THE DISPUTE
The parties
[5] The plaintiff and her husband, Tan Chor Koon (“Chor Koon”), were introduced to the defendant by his then fiancée (now wife), Dorothy Lee Soon Min (“Dorothy”). At the material time, the plaintiff was working in Siemens and Dorothy was with a travel agency. The plaintiff came to know Dorothy through the business dealings of their respective employers, and they soon became friends. At some point in the relationship, Dorothy introduced the defendant to the plaintiff and Chor Koon. She and Dorothy had in fact discussed the possibility of setting up a travel business together with the plaintiff investing the funds and Dorothy running the business, but this did not materialise, and Dorothy therefore introduced the plaintiff to the defendant instead to further explore the plaintiff’s interest in going into business.
[6] According to the plaintiff, the defendant and Dorothy represented to her that the defendant had considerable experience in the import and export trading business of consumer electrical appliances. Indeed, the defendant gave evidence that he had worked for United Overseas Bank (“UOB”) for about four to five years as a front desk clerk and had picked up some knowledge and know-how of trade operations and international trade finance. He also gave evidence that he had worked for about two years as a junior executive in a trading company which traded in electrical goods. On the defendant’s part, he saw the plaintiff as having funds to invest in a business. He himself had only been working for six to seven years then and did not have any funds to start a business.
The parties’ business relationship
[7] Pursuant to their discussions, the defendant prepared and handed to the plaintiff a three-page business proposal about going into a partnership business trading in consumer electrical appliances overseas. Later, the defendant submitted an amended three-page business proposal and a further three pages, making it a six-page document. There was some dispute over the sequence of the documentation provided to the plaintiff. Nothing turns of this. Eventually, the parties signed a six-page document on 3 August 1996 (the “Partnership Agreement”).
[8] The parties strenuously dispute the terms of the partnership. The plaintiff takes the position that the partnership was entered into on the basis that they would be equal partners. As such, the parties were to contribute equally to the capital and on an equal basis share the profits and bear all losses sustained by the partnership. To the plaintiff, the parties entered into an oral partnership agreement on or about 20 July 1996 (ie, before the parties signed the Partnership Agreement) on the basis that they would be equal partners. The date 20 July 1996 is significant in that it was the same day the parties applied to register the partnership business. The partnership was registered on 25 July 1996 under the trade name and style of Japco TG International Enterprise. The name “Japco” is a combination and play on the parties’ names. The letter “J” is for “Julie”. The second letter “a” is for “Andy”. The first two letters “Ja” are the initials of “Julia Ang”. The second and third letters “ap” are the initials of “Andy Pang”. Finally, the letters “TG” are the initials of the parties’ Chinese names, “Tin Gee” and “Teck Guan”. According to the plaintiff, there were several discussions after the Partnership Agreement was signed on 3 August 1996, and the discussions culminated in the plaintiff accepting the defendant’s proposal that his salary be revised to $3,362 with the defendant taking a profit share of 50%.
[9] In contrast, the defendant challenges the existence of a partnership inter se. The defendant denies the oral agreement on or about 20 July 1996 and maintains that the Partnership Agreement constitutes the entire agreement between the parties. He also denies any supervening oral agreement as described. As I will explain below at [49-66], I find these factual disputes immaterial in any case since they do not affect the construction of the Partnership Agreement and the real issues to be resolved.
Japco’s bank facilities
[10] About a week after the signing the Partnership Agreement, the parties received a letter of offer dated 10 August 1996 from UOB for the sum of $950,000 for Japco.
[11] The parties signed in acceptance of UOB’s offer on 13 August 1996. The banking facilities were and are secured by (1) an open mortgage over the plaintiff’s property at 44 Sunrise Terrace Sunrise Villa, Singapore and (2) fresh joint and several guarantees by the plaintiff and defendant in favour of UOB for $950,000 (“the Guarantee”).
[12] Under this Letter of Offer, UOB granted not only trade facilities but also two overdraft facilities: (a) Account No 101-365-513-3 with an overdraft facility of $100,000 (“UOB Account No 1”); and (b) Account No 101-365-514-1 with an overdraft facility of $200,000 (“UOB Account No 2”). These two accounts will be collectively referred to as “the UOB accounts”). In May 1998, the limit of the banking facilities was revised by UOB. For present purpose, I need only mention UOB Account No 2 where the available overdraft facility was increased from $200,000 to $250,000.
Japco’s business in consumer electrical goods and the Seychelles Debt
[13] From both parties’ versions of the story, the plaintiff had a full time job and that her role in the partnership was to fund the business whereas the defendant would run it. To the plaintiff, the defendant had something to bring to the partnership: he would contribute his “expertise” and “experience” to the partnership. From his business proposal, the plaintiff was given the impression that he had the necessary customer base and supplier base and was thus confident to put down on paper his estimate of a sales turnover of $250,000 for September to December 1996, and of $1 million for 1997. During cross-examination of the defendant, it transpired that the defendant’s experience and knowledge was limited. He had no supplier base and no customer base for consumer electrical appliances. His estimates of the sales turnover were completely without bases and hence the figures were misleading in a grossly exaggerated way. It was not surprising that Japco’s business in consumer electrical appliances was not successful at the best of times.
[14] Japco carried on its business in consumer electrical appliances from about September 1996 to about September 2000 when OCS started operations.
[15] Sometime in September 1997, Japco’s business faced a major setback in the form of a customer, YL Electrics/Home Electronics from the Seychelles (“YL Electronics”), defaulting in payment in the sum of $146,462.95 (the “Seychelles Debt”). According to the defendant, Stephen Pillay (“Stephen”) from YL Electronics was an existing customer at the time and there had been previous successful transactions with him. However, in this particular transaction, Stephen wanted to order more goods but on credit. As the value of the goods was high, the defendant sought the plaintiff’s consent and she then sent Chor Koon to have a meeting with the defendant and Stephen in Singapore. In addition to the meeting, the defendant also travelled to Seychelles with Chor Koon to inspect Stephen’s assembly plant and wholesale centre. Unfortunately, YL Electronics eventually defaulted in payment of one of the two shipments made, and the total sum defaulted on was $146,462.95.
[16] According to the plaintiff, she only found out when the defendant informed her about the default sometime in late 1997. The plaintiff expressed her concern that this was a big sum of money, and the defendant assured her that he would pursue YL Electronics for the repayment of the debt. When his efforts failed, Japco took legal action against YL Electronics in Seychelles.
[17] The plaintiff, the defendant and Dorothy went to the Seychelles to attend court with regard to the Seychelles Debt, eventually obtaining judgment in the sum of $146,462.95. The plaintiff alleges that she has since then not seen the judgment sum despite chasing the defendant about it. However, she had no reason at that point in time to suspect that the defendant was not being honest with her.
[18] The parties’ positions are consistent insofar as they both see the Seychelles Debt as a source of Japco’s financial woes. According to the plaintiff, she enquired at regular intervals about the financial health of Japco and on a few occasions asked for Japco’s financial statement. The defendant always assured her that Japco’s business was doing well and that the total loss came only from the Seychelles Debt, and that he would chase YL Electronics for the judgment debt. According to the defendant, the Seychelles Debt was the turning point of the business in consumer electrical appliances. Following that experience, the plaintiff was not willing to sell on credit terms to overseas customers. It became clear to the defendant that Japco’s business in consumer electrical appliances which involved trading overseas was not sustainable and that was why he made the proposal in [20] below to switch to trading in office consumables for the domestic market.
[19] The defendant also claims that due to the setback in business caused by the Seychelles Debt, he did not receive his full salary since January 1999 despite having to work even harder, and furthermore he was not paid the agreed AWS, share of profits and his unutilised leave. These are the sources of the first head of his counterclaim set out at [45] below.
Office Consumable Supplies
[20] Sometime in late 1999 or early 2000, the defendant verbally proposed to the plaintiff that Japco should go into the sale of office consumable products in the domestic market. The plaintiff agreed.
[21] According to the plaintiff, OCS was formed in March 2000 pursuant to the defendant’s representations to her that, in order to gain an advantage in the domestic market for office consumable products, it was necessary to form a new entity to be Japco’s “selling arm” ie, Japco would buy the office consumable products and the new entity would sell them (“the business model”). It is unclear from the plaintiff’s evidence what the rationale for the proposed business model was. However, one purpose of interposing the new entity was to ensure that the identity of the suppliers to Japco would not be apparent to customers and competitors. Furthermore, the interposing of the new entity in the retail side of the business was to be an “internal arrangement” between Japco and the new entity.
[23] On the other hand, the defendant claims that there is “absolutely no basis” for the plaintiff to claim any legal interest in OCS. According to the defendant, he built the OCS business completely by himself and, even though OCS could have bypassed Japco completely in its business, he had chosen in his goodwill to help Japco receive a steady income through OCS, in order to clear Japco’s overdrafts in its two UOB accounts after the Seychelles Debt. Not only did he help Japco through OCS out of his goodwill, he had even overpaid the sum of $130,080.19 to Japco – this is the second head of the defendant’s counterclaim as specified below at [45]. The defendant further alleges – somewhat inconsistently to my mind – that the only reason why the plaintiff did not include her name as a partner of OCS was simply because she wished to avoid liability. The defendant has also taken the position that he was free to set up OCS as his own since he was a mere employee of Japco.
[24] The provenance of OCS is one of the main disputes between the parties. According to the plaintiff, it was only after she decided in April 2006 to close Japco that the plaintiff made an ACRA search on OCS on 7 June 2006, and it was then that she found out that OCS was not registered in the name of the defendant’s wife but in the defendant’s own name as sole proprietor.
Japco’s business in office consumable products
[25] OCS was registered on 3 March 2000 and commenced operations in September 2000, and it was the significant buyer of office consumables from Japco. The defendant saw himself as the “OMO” (acronym for one-man operator) of Japco. Furthermore, the defendant who was paid by Japco ran the whole show – that is to say, the office consumables businesses of both Japco and OCS. There is no dispute that at all times, OCS operated from the same premises as Japco, wherever those premises happened to be at the moment as Japco moved premises a few times.
[27] Finally, it is common ground that Japco’s Balance Sheet and Profit & Loss Statement for each financial year were prepared by the defendant and that he would give them to the plaintiff for her tax returns.
End of the business relationship
[29] As expected, the plaintiff and the defendant have diametrically opposing accounts of how the business relationship broke down.
The plaintiff’s version
[30] As stated, the defendant controlled and managed the day-to-day affairs of Japco. The defendant said in his Closing Submissions that after OCS was incorporated, the plaintiff and Chor Koon, ceased to be actively involved in the business of Japco. The plaintiff gave evidence that she had difficulty in assessing Japco’s true financial status due to the high volume of transactions and purchases, invoices and other business related documents, so she had to rely on the defendant to update her on the business. According to the plaintiff, she made numerous requests through the years for the defendant to disclose and render accounts of the business operations of Japco and OCS, but the defendant had failed to do so.
[31] The plaintiff remained concerned that despite the defendant’s promises that Japco’s overdrafts in the two UOB accounts would be reduced from OCS’s sales revenues, the defendant was still unable to reduce the overdrafts. She continued to ask the defendant about Japco’s and OCS’s financial situation and he kept representing, as above at [18] that Japco’s total loss was only about $150,000 (ie, the bulk of it came from the Seychelles Debt).
[32] Sometime in early March 2006, ie, about six years after the registration of OCS, she finally indicated to the defendant that she want to close Japco, and asked the defendant for a full list of debtors, stocks, assets and creditors, on the basis that they were going to end the business relationship.
[33] The defendant therefore prepared a business spreadsheet as at 30 March 2006 for the plaintiff’s information (“the 30 March 2006 Statement”). The plaintiff was shocked to see from the 30 March 2006 Statement that the cumulative losses incurred by Japco stood at $241,425.57 and not about $150,000 as the defendant had always represented (see [31] above). She demanded an explanation and a full and complete account of the alleged loss, which she avers that the defendant has to date not provided. She also asked for a plan to recover the alleged loss of $241,425.57.
[34] The defendant then proposed an expansion plan. The plan was to move Japco and OCS into a prime location at Chinatown and employ more sales staff while keeping the existing office premises as a warehouse. The plaintiff exhibited the defendant’s expansion plan in her Affidavit of Evidence-in-Chief, and the exhibit itself was not disputed by the defendant. The defendant estimated that the expansion would require about $80,000 and asked the plaintiff to inject that sum so that the expansion would increase sales turnover with higher profit margins to help recover the loss of $241,425.57.
[35] Being suspicious, the plaintiff decided to check Japco’s account with the Inland Revenue Authority of Singapore (“IRAS”) and discovered that the defendant had different accounts of what he had submitted to IRAS and what he had submitted to her. Based on figures declared by the defendant to IRAS in Form P, the total loss incurred by Japco from Year of Assessment (“YA”) 1997 to YA 2007 was $209,551.00. However, a comparison of Profit and Loss Statements and Balance Sheets submitted to IRAS and in the 30 March 2006 Statement were different in the line items for YA 1997, 1998, 2002 and 2003. The plaintiff also exhibited these figures in her Affidavit of Evidence-in-Chief.
[36] On or about 7 April 2006, the plaintiff decided enough was enough and told the defendant that she wanted to discontinue the businesses of Japco and OCS. The defendant told her that he would therefore dissolve the partnership business within three months, and that he would reduce the overdraft in UOB Account No 1 to zero within the next three months from the sales receipts of OCS, and thereafter reduce the overdraft in UOB Account No 2.
[37] As late as July 2006, the plaintiff still did not see progress in dissolving Japco and OCS. She had two other meetings with the defendant with regards to dissolving the businesses, on or about 25 June 2006 and 2 September 2006. A summary prepared by the defendant of these discussions was produced in evidence. This summary factors OCS into the plan to dissolve Japco, specifically, that the dissolution plan included the transfer of an account balance of $12,600.10 per the 30 March 2006 Statement from OCS to Japco. The plaintiff relies, inter alia, upon this in her submissions that the defendant himself clearly acknowledged that OCS was part of Japco.
[38] Despite factoring OCS into the plan to dissolve Japco, the defendant did not dissolve OCS together with Japco but merely changed its address.
[39] On 8 April 2006, Dorothy registered a sole proprietorship firm called D’Imaging Solutions & Services (“DSS”). The plaintiff alleged that the defendant and Dorothy set up DSS in respond to Japco’s exit from the business with OCS as the buying arm for office consumable goods and DSS as the selling arm.
The defendant’s version
[40] According to the defendant, although the purchases by OCS “kept Japco afloat”, by the first quarter of 2006 he had expressed his intention to leave Japco because there were frequent matrimonial disputes between the plaintiff and Chor Koon. He explained that since Chor Koon was also involved in the running of the partnership business, their disputes made it very difficult for him to continue with the business. It was in this context that he shared with the plaintiff his expansion plan for OCS referred to by the plaintiff at [34] above. His intention was to continue trading with Japco even after he left Japco.
[41] According to the defendant, their relationship only broke down because of a break-in. On 30 March 2006, the plaintiff called him and informed him that Chor Koon was furious and wanted her to produce a set of the partnership accounts. Since she sounded desperate, he “agreed to help her as best [he] could”. That was how he prepared the 30 March 2006 Statement and he therefore alleges that it was “a very rough estimate and…not based on the full set of documents and accounts”. He even claimed that it was on the plaintiff’s instructions that he should state the overdraft in UOB Account No 2 as $250,000 when it was not. Eventually, “things came to a head” when the plaintiff and Chor Koon broke into Japco’s premises on 7 April 2006 and seized all the business documents between that date and 9 April 2006. The defendant attributed the breakdown of the business and the relationship to the plaintiff’s “break-in” on 7 April 2006, even going so far as to say that this suit “might not have commenced if not for the break-in.” He discovered later that documents taken pertained not only to Japco but to OCS as well.
[42] The defendant next met the plaintiff on the morning of 9 April 2006, where he informed the plaintiff that he would have to lodge a police report if she did not restore the office to its original condition or if he was not able to gain access to the office. Less than thirty minutes later, the plaintiff called again and requested for another meeting. By then he had already returned home and informed her that it was not necessary to meet again. But the plaintiff breached the security of his apartment and came up to his unit where she screamed and banged on his door, leading to his making a police report (the “9 April Police Report”) and the arrival of the police.
[43] On 10 April 2006 upon returning to the office at about 10am, he found that it had been ransacked and he therefore made a second police report (the “10 April Police Report”). According to the defendant, had there been no break-in, the business relationship with the plaintiff would have continued.
COMMENCEMENT OF THIS ACTION
[44] The plaintiff commenced this action against the defendant on 23 March 2008. Although not precisely spelled out, it was evident from the plaintiff’s arguments and remedies prayed for that the causes of action were negligence and breach of fiduciary duty. She is claiming:
A declaration that the defendant has acted negligently and/or breached his duties to the plaintiff;
(b) An account of the benefits and/or profits derived or made by the defendant by reasons of the defendant’s breach of duties;
(c) An order for payment, from the defendant to the plaintiff, of all sums found due upon the taking of such an account;
(d) An order that the defendant indemnifies the plaintiff for all sums contributed by the plaintiff to Japco;
(e) An order that the defendant indemnifies the plaintiff for all sums which the plaintiff may be liable to pay UOB in connection with either of their two accounts;
(f) Further or in the alternative to prayers (b), (d) and (e), damages to be assessed;
(g) Interest pursuant to s 24(3) of the Partnership Act (Cap 391) or alternatively interest under s 12 of the Civil Law Act (Cap 43);
(h) Costs; and
(i) Such other or further relief as this Honourable Court deems fit.
[45] The defendant has filed a counterclaim for:
The sum of $142,932 consisting of unpaid salary, AWS, 25% share of profits and pay in lieu of unutilised leave;
(b) The sum of $130,080.19 which OCS had allegedly overpaid to Japco.
[46] At the trial, the plaintiff was represented by Mr Lai Kwok Seng (“Mr Lai”). The defendant was represented by Mr Leslie Yeo (“Mr Yeo”). The plaintiff and Chor Koon both testified at the trial. The defendant called his wife, Dorothy, as his witness and they both testified in court.
DISCUSSION AND DECISION
[47] The plaintiff’s claims are, of course, premised on the existence of a partnership between the parties, and in particular that OCS and Japco were partnership businesses. The defendant makes various arguments in denial of the plaintiff’s claims: he denies that there was a partnership inter se in the first place; in the alternative he denies that OCS and Japco were partnership businesses. It is therefore logical for me to first consider whether there was any partnership inter se and, if so, what the terms of this partnership were, and in particular if OCS was part of the same partnership business. In the event that I find the defendant’s claims to be spurious, I will deal with the relief the plaintiff seeks in this action under two main heads: first, for an account; and second, for an indemnity in respect of any sums the plaintiff is liable to pay UOB in respect of the two UOB accounts (see above at [12]). I will then deal with the defendant’s counterclaim. Finally, for the sake of completeness, I will deal with the remaining arguments raised by the parties, in particular to explain my dismissal of the plaintiff’s claim in negligence.
[48] At this juncture, it is worth noting that the evidence to test the veracity of the defence that OCS’s business was independent of Japco’s business overlaps with the evidence going to the issue of the defendant’s fiduciary duty of good faith, so some repetition of the evidence in discussions here and below is unavoidable.
(1) The Partnership
(a) Was there a partnership inter se; and if so, in what shares?
[49] At first blush, the defendant’s denial that there was a partnership at all seems hardly tenable given the background facts: the idea of the plaintiff and the defendant teaming up, the choice of the business name “Japco TC”, and the formality of registration of the business name were all for the sole purpose of going into business together. However, the defendant claimed in his pleadings that he was an employee of Japco and that he would be paid a salary and commission. The implication of this plea is clear. As an employee, he would not be liable for capital contributions, bank borrowings and the losses of Japco. In his latest amendments to the Defence, the defendant deleted the word “commission” and replaced it with the word “profit-sharing”. However, he continued nevertheless to aver in the pleadings that he was an employee of Japco. According to the defendant, in the Partnership Agreement, his basic salary was $2,801 per month but this was subsequently revised to $3,362 and a share of 25% of Japco’s profits. No details of this revision were documented or adduced in oral testimony.
[50] At this stage, I should mention that this plea – that the defendant was an employee of Japco - is not borne out anywhere in his written and oral testimonies. The pleaded case is not supported by the defendant’s Affidavit of Evidence-in-Chief. Not only was there no mention in the Affidavit of Evidence-in-Chief that he was an employee of Japco, his written testimony plainly recognised the existence of a partnership inter se between the parties: the written testimony was replete with the use of the word “partnership”, a term the defendant had frequently used to identify Japco and his role as the “working partner”. To illustrate, the defendant described Japco as the “partnership business”, and as the “working partner”, he was asked by the plaintiff to prepare the accounts of the “partnership”. The defendant identified the UOB Accounts as the “2 main Singapore Dollar partnership accounts”, and the UOB bank statements were the “bank statements of the partnership”. Moreover, Japco’s accounts were referred to as the “partnership accounts”. He accepted the documents pertaining to Japco as the “documents pertaining to the partnership” or “partnership documents”, and he referred to Japco’s office as the “partnership premises” or “partnership office”.
[51] In direct contradiction to the pleaded case, the defendant’s counsel, Mr Yeo, maintains in Closing Submissions that the defendant was a “salaried partner”. This submission was inspired by the defendant’s unfounded claim made during cross-examination on 16 March 2011:
[52] In the premises and based on the overall evidence before me, the partnership inter se between the plaintiff and the defendant is indisputable, and I find that the plaintiff and the defendant were partners of Japco.
[53] Given this finding, the next issue is the defendant’s percentage share in the partnership. This is fiercely disputed between the parties. The plaintiff’s position is that she and the defendant were equal partners under the Partnership Agreement or by subsequent agreement, and were therefore to contribute equally to the capital and to share equally the partnership’s profits and losses. The defendant disagrees that his interest in the partnership was equal. In particular, the defendant relies on clause 3.0 of the Partnership Agreement, which reads:
[54] Notably, the defendant’s position on his percentage share in the partnership was inconsistent. In his Closing Submissions, Mr Yeo accepts that the Partnership Agreement spelled out a profit-sharing arrangement between the defendant and the plaintiff. However, he submits that the defendant’s share of the profits was only 10% with a cap at 25%, and that there was never any discussion between the parties on a percentage increase from 10% to 25%. From this profit-sharing arrangement, Mr Yeo in further submissions (vide his Reply of 3 May 2011) maintain that the defendant was a salaried partner. Furthermore, Mr Yeo highlights that the Partnership Agreement did not provide as to when and how this increase in percentage from 10% to 25% would occur. It also did not provide that the defendant would eventually be entitled to 50% share of the profits, noting that it was indefinitely left as a matter to be further discussed between the parties. Having made these submissions, and in apparent contradiction, Mr Yeo, without explaining the basis, filed a Counterclaim to recover as due and unpaid the defendant’s 25% profit share of Japco’s profits for the period 1996 to 2006. Mr Yeo then argues that the Partnership Agreement did not provide in percentage terms the share of the losses and the contribution of the capital which the defendant was to bear. Therefore, in developing his argument, Mr Yeo claims that the losses and the contribution of the capital were to be borne by the plaintiff. His fallback argument in the alternative is that the losses and capital contributions were to be calculated in the proportion of the defendant’s 10% profit. By his fallback argument, the defendant is inexplicably reverting to a smaller percentage thereby contradicting the higher percentage claim of 25% in the Counterclaim.
[55] Insofar as the defendant claims that he was only a salaried partner and therefore not liable for the finances and losses of the business, I have already rejected this at [50]-[52] above. I therefore will consider if any of his other positions, denying that he had an equal share in the partnership, are borne out by the evidence.
[56] As a preliminary point, I agree with the defendant and reject the plaintiff’s argument that there was an oral supervening agreement after the Partnership Agreement was signed. I also agree with the defendant that the Guarantee furnished to UOB does not by itself necessarily establish that the partnership was in fact equal. Whether the partnership was one of equal shares must therefore be based on the terms of the Partnership Agreement and the parties’ course of dealing, to which I now turn. In construing the Partnership Agreement, the background facts as set out in [49] above are relevant. This will assist the court in determining objectively the intention of the contracting parties as expressed in the document. The court gives regard to the commercial purpose of the Partnership Agreement and the circumstances in which the agreement was made (see Ang Tin Yong v Ang Boon Chye and Another [2011] SGCA 60 (“Ang Ting Yong”) at [11])
[57] Clause 2.1 under “Terms and Conditions” in the Partnership Agreement explicitly provides:
[58] In my view, clause 2.1 is concerned with the capital contribution and the capital account of each partner. A distinction between the capital of a partnership and its assets was observed in Reed (H.M. Inspector of Taxes) v Young [1984] Tax Cases 196 at 215 as follows:
[59] Reed v Young went to the House of Lords and the sentence highlighted in emphasis above was expressly approved by Lord Oliver with whose speech the other Lordships agreed (see [1986] 1 WLR 649 at 654). The reference to “Lindley on Partnership” should now be to Lindley & Banks on Partnership (19 Ed (2010) (“Lindley”) at 573.
(a) $30,000 on or about 26 September 2000;
(b) $20,000 on or about 31 October 2000;
(c) $15,000 on or about 30 January 2001; and
(d) $20,000 on or about 6 July 2005.
[61] I digress for a moment to comment on clause 2. In this clause, the word “Capital” was improperly used to describe the partnership’s bank overdrafts. The individual partners did not borrow money on their own account to fund their capital contributions and to bring it into the partnership qua capital. In this case, bank overdrafts represented the working capital of the partnership. In particular, UOB granted not only trade finance facilities but overdraft facilities in the two UOB accounts. In May 1998, the limit of the banking facilities was revised by UOB. For present purpose, I need only mention UOB Account No 2 where the available overdraft facility was increased from $200,000 to $250,000.
[62] As mentioned at [53] above, the defendant relies on clause 3.0 of the Partnership Agreement as evidence of an unequal partnership. I reject this argument. Clause 3.0 must be read subject to the explicit provision in clause 2.1 above that the capital of $250,000 was for “equal partnership purpose” [emphasis added]. In the Partnership Agreement, the defendant agreed to provide his services on a full time basis at a total remuneration package that comprised of three components: salary, AWS and net profits of between 10-15%. It is quite clear from reference to “net profits” that if the partnership business did not make money, there would be no net profits available to pay the third component of the remuneration package. In other words, the third component is contingent on the performance of the business. Arguably, if the business made money, the defendant is entitled contractually to payment of the third component of the remuneration package even though, for instance, the partnership decides not to distribute the trading profits for business or management reasons.
[63] The plaintiff’s evidence is that the 25%-40% differential (depending on the share of profits agreed upon at the time) represented the defendant’s cash contribution to Japco’s capital so that within three years he would, at least, be able to ‘catch up’ with the plaintiff’s initial capital injection. What the plaintiff is really saying is that the intention was to capitalise the defendant’s share of declared profits amounting to 25-40% of net profits. This intention is in harmony with clause 2.1, which as I have held, is quite plain in providing that the partnership was to be equal. In contrast, the defendant’s interpretation - that it was up to him to use the profit share he received under clause 3.0 to contribute towards his share of the capital - is inconsistent with clause 2.1.
[64] Significantly, the defendant’s written declaration of his interest in the partnership reinforces the terms of the Partnership Agreement in evincing that the partnership was an equal one. In his submissions of Form P to IRAS for the tax returns of 1996 to 2007 (ie, the lifespan of Japco), the defendant consistently reported under Section B on “Partnership Allocation” that the basis for the distribution of profit and loss is 50:50. In my view, Section B is effectively the defendant’s signed declaration of the parties’ equal interest in the partnership. Again, this signed declaration is consistent with my reading of an equal partnership in clause 2.1 of the Partnership Agreement.
[65] Lastly, this pattern of reporting to IRAS is buttressed by internal correspondence between the parties themselves. In an email dated 1 April 1999, where the defendant provides the plaintiff information for her “tax return purposes”, the defendant reports to the plaintiff that the Partnership Allocation has been declared in Form P to IRAS as 50:50. The suggestion is that the parties respectively filed their own personal tax returns on the basis that their shares in Japco were 50:50. This position is supported by letters from IRAS to the plaintiff where her taxes from Year of Assessment 1997 to Year of Assessment 2006 were consistently based on 50% share in Japco’s profits.
[66] Therefore, there is compelling evidence of an express agreement in the form of the Partnership Agreement, repeatedly underscored by written declarations of equal partnership in Form P, that the plaintiff and the defendant were equal partners in Japco. I therefore find that the partners were equal partners and as such were to share equally in the profits and losses in the partnership business (see s 24(1) of Partnership Act (Cap 391, Rev Ed 1994).
[67] The only remaining question is whether it makes a difference that Japco made losses from the outset, so that the defendant could never capitalise his share of the profits (see [63] above). I do not think so. It is crucial to characterise the arrangement accurately: it is not that the defendant was entitled to only 10% of the profits for the first three years and the plaintiff entitled to 90%, but that he was always entitled to 50% of the profits (as against the plaintiff’s 50%) with the qualification that 40% of the net profits was to be capitalised as his cash contribution. Therefore, the fact that the defendant never made any capital contributions as per the premise of the Partnership Agreement, does not detract from the partnership being an equal one. However, it does affect the division of capital between the partners on a final settlement of accounts. Lindley’s commentary on s 24(1) is apposite and I gratefully adopt it (at para 17-07):
[68] In other words, in the final settlement of accounts between the partners the defendant’s nil contribution to the capital of the partnership and the plaintiff’s capital contribution of $124,041.86 would be taken into consideration.
(b) Was OCS part of the partnership business?
[69] Having found that there was a partnership between the plaintiff and defendant and that it was one of equal shares, I now turn to the issue of whether OCS and Japco were partnership businesses. As I see it, the manner in which the defendant ran OCS and his failure to share the profits of OCS with the plaintiff was contrary to their arrangement that OCS and Japco were partnership businesses. If this were true, there is no doubt that the plaintiff would be entitled to an account of the defendant’s profits from OCS as a result of the breach of his fiduciary duty to the plaintiff. The defendant disagrees with the plaintiff’s assertions. His defence that OCS was a separate business was founded on the defendant’s sole proprietorship, but this fact alone is clearly not conclusive of the issue. Neither is Mr Yeo’s point that if OCS was partnership business, the plaintiff would have to but in fact had never filed any Form P in respect of OCS’s business – whilst relevant, this argument must be weighed against the totality of the evidence. In my judgment, this defence is disingenuous. It is an attempt to blur the reality of the situation that for close to six years the office consumer business conducted in OCS was a component of the partnership business with Japco providing the funding. The unassailable fact evidence that the defendant made used of Japco’s resources, funds and bank overdrafts for the business of OCS without repaying those operating expenses through OCS’s sales receipts which were retained by the defendant. The upshot of this defence, if true, is that the defendant had wrongfully misappropriated Japco’s moneys and that he would be liable to the partnership for the moneys taken. Again, even if this defence is sustainable, the only reasonable interpretation that one can put on the overall evidence is that the defendant had not been completely open with the plaintiff in the management and control of the business activities of both entities, and that the defendant’s conduct in his dealings with the plaintiff was calculated to put the plaintiff off the scent that OCS’s business operations was entirely funded for free by Japco. It therefore stands to reason that on any view of the defence the defendant would have to, inter alia, disgorge the profits of OCS that had been earned wholly or partly by the use of Japco’s funds and banking facilities.
[72] The first occasion related to the question of whether OCS paid Japco (who, as main tenant of the premises, paid the full rent to the landlord and then collected the rent in turn from sub-tenants other than OCS) for the use of its office premises. The defendant’s testimony under cross-examination once again proved himself completely lacking in credibility as a witness. He started out insisting that OCS paid Japco rental. When questioned where the evidence was that OCS had paid Japco the sums he alleged, he asserted a verbal agreement as to some sort of very loose system of payment which is why the sums he alleged did not correspond with the amounts in certain cheques. Finally, he had to concede that OCS had not paid any rental to Japco at all. In re-examination, the defendant tried to change this testimony, and his counsel was cautioned by the court that question in re-examination designed to traverse the defendant’s earlier evidence would not be wise unless the defendant was able to show convincingly that the earlier admissions were a mistake.
[73] The second occasion related to his evidence that Japco and OCS shared the telephone and fax lines, and that these telephone and fax numbers were reflected in both his and Dorothy’s name cards, OCS’s corporate calendars, as well as fax messages from OCS to its customers. In answer to Mr Lai’s questions that Japco and OCS were partnership businesses, the defendant ran into difficulties:
[74] The second point demonstrating that OCS and Japco were partnership businesses relates to the plaintiff’s intermittent capital contributions to Japco in order to finance the office consumables operations. According to the plaintiff, the defendant and his wife asked her to inject more capital as Japco’s two overdraft accounts had reached or were reaching their credit limits. It was also pointed out by the plaintiff, whose evidence was corroborated by documentary evidence, that Japco’s business with its suppliers was conducted on a cash basis as well as on short credit terms of 30 days whereas the payment term between Japco and OCS was longer (see further below at [75]). This mismatch in trading terms meant that extra capital was required by Japco to continue to buy office consumable products so that OCS could sell more to increase the sales turnover. The defendant conceded under cross-examination that Japco financed OCS’s purchases from Japco (which is separate from OCS’s operating expenses):
[75] I should clarify the reference to the invoice between Japco and OCS in the court’s question. The defendant had produced some invoices from Japco to OCS that were purportedly issued in 2006, namely on 31 January 2006, 28 February 2006, 31 March 2006, and 28 April 2006. Finally, there were several invoices dated 8 September 2006. I will refer to these collectively as “the 2006 invoices”. In these invoices, the payment term was 60 days. Mr Yeo agrees that for those years OCS was behind in the payment of the purchases from Japco, Japco had financed OCS. However, he goes on to contend that Japco did not ultimately finance OCS because OCS eventually not only paid but in fact overpaid Japco, and this is one of the defendant’s heads of counterclaim. As the basis of this head of the counterclaim, the defendant adduced a table showing the figures allegedly representing OCS’s purchases from Japco and the amount paid by OCS to Japco over the period of six years from 2000 to 2006 (hereinafter the “Defendant’s Table”). I will explain below at [132]-[136] why I reject this head of the counterclaim, but for present purposes, the point is that Japco financed OCS’s purchases of supplies from Japco out of its own pocket first and then awaited repayment from OCS.
[76] Adding to this picture is the fact that the system of repayment by which OCS repaid Japco for its purchases of supplies was an informal one. The only invoices the defendant produced were the 2006 invoices. As for the period between 2000 to 2006, the defendant’s evidence in re-examination was that Japco did not invoice OCS during that period. The context of the re-examination is important. It must be remembered that it stemmed from the defendant’s evidence that there were no invoices from 2000 to 2006 which then led to Mr Yeo questioning the defendant on how he had derived the figures in the Defendant’s Table (see above at [75]). I will be commenting on the reliability of the Defendant’s Table further below when I deal with the defendant’s counterclaim, but for present purposes, even if the 2006 invoices were genuine, they were inadequate to prove the amount of OCS’s purchases from Japco on a transaction-by-transaction basis. The point is that OCS’s alleged repayments of purchases to Japco were not on an invoice-by-invoice basis but rather by lump sum rounded figures . The reliability of the rounded figures in the Defendant’s Table is unsatisfactory, as borne out by the defendant’s evidence in re-examination:
[77] Thus far, the defendant’s evidence is that the figures representing the purchases from Japco were taken from the GST returns which OCS submitted to the revenue because no invoices were issued by Japco. The following answers from the defendant not only contradicted his earlier testimony, it also did not make sense at all. Why would the defendant bother to work backwards using the GST returns if invoices were really and readily available? This is what he said in answer to Mr Yeo’s questions:
[78] It is obvious that the defendant is an unreliable witness. I am satisfied that no invoices were issued as he originally testified. If there were invoices, he would have produced them for the trial. As stated, the 2006 invoices were not explained and they have little or no evidential weight save for the fact that the payment term of 60 days between Japco and OCS was certainly longer than what Japco’s supplier gave to it or what OCS gave to the end buyers, namely 30 days. At the end of all questions on invoicing between Japco and OCS for the latter’s purchases, the evidence showed that internally there was no proper system of invoicing between Japco and OCS, and this absence of invoicing internally is a further sign that the defendant had managed the office consumables business of both entities as partnership businesses. There was no reason why Japco would fund OCS’s purchases of supplies from Japco out of its own pocket first, and then rely only upon an informal system of payment without documentation as to which particular purchases were being set-off with each lump sum payment, if Japco and OCS were not partnership businesses.
[79] In addition to the two main points above (ie, the arrangements by which Japco purchased supplies and sold them on to OCS and the fact that Japco funded OCS in every single aspect of its operations), there is plenty of other evidence that shows that Japco and OCS operated as partnership businesses. This evidence includes the fact that the defendant was paid by Japco and he claims to supervise OCS’s business; Dorothy appears to double as the purchasing officer for Japco despite officially being only an employee of OCS, as evidenced by tax invoices from Japco’s suppliers; the plaintiff was named in correspondence with third parties as OCS’s credit controller officer; and OCS collected rental from sub-tenants using OCS invoices stamped and signed by Dorothy, when rental was due to Japco as the main tenant of the premises (see above at [72]). The Minutes of Meetings also show Japco and OCS as partnership businesses. From the Minutes of Meetings held on 26 January 2005 and 28 February 2005, 12 April 2005, 27 August 2005 and 21 November 2005, the plaintiff was updated on matters pertaining to the staff strength, recruitment of marketing executives to boost sales and profitability, and the performance of the sales executives. One point to note is that Japco had no need for sales staff as it primarily sold to OCS, and the defendant was the “OMO” of Japco. It stands to reason that the defendant would not have had discussions with the plaintiff on this particular topic of staff strength unless she had an interest in OCS’s business. There was no challenge to these Minutes compiled by the plaintiff. I suppose there is no reason to do so since the Minutes of Meeting of 21 November 2005 recorded by Dorothy also covered discussions on the sales people and their performance.
[80] The plaintiff continued to be lulled into believing that OCS and Japco were partnership businesses and evidence of this is from the defendant’s expansion plan referred by the plaintiff at [34] above. I am not persuaded by the defendant’s testimony that the expansion plan was for OCS and that he was sharing his vision for his company with the plaintiff. It is clear from the documents disclosed in court that the defendant managed the affairs of both businesses (ie, Japco’s and OCS’s) as components of the partnership business. For example, the document in the plaintiff’s bundle of documents (at vol 1, p154)(“the document in PB vol 1, p154”) prepared by the defendant portrayed the combined performance of both entities in the office consumables. The defendant admitted that the figure of $50,149.53 in the document in PB vol 1, p 154 was the combined 2005 net profit of both entities. The defendant’s incomprehensible and gibberish explanation for presenting the combined net profits in the document in PB vol 1, p 154 was nothing more than an egregious attempt at hiding his lie:
[81] Finally, I should comment on the evidence relied upon in support of the defendant’s allegation that the plaintiff consented to the setting up of OCS as his company. He referred me to OCS’s application for a micro loan of $50,000 in September 2002 and that the plaintiff stood as guarantor for that loan. The defendant attributes this to the plaintiff being “supportive” of OCS as his initiative, which is in my view hardly a convincing explanation. Moreover, not only is there no evidence that the plaintiff actually acted as guarantor as the application for a micro loan was not signed by the plaintiff, it is also not known if the micro loan was indeed granted because there is no evidence of any interest payment in any of OCS’s Profit and Loss Statements except for the financial year 2006 after the relationship broke down.
[82] In light of compelling evidence, I find that the business of OCS was not a separate and independent business as the defendant claims and wants this court to believe. Its business was clearly an integral part of the partnership’s business just like Japco’s. What is also clear is that the profits of OCS derived from the business of office consumables were received by the defendant without properly and accurately accounting for them to the plaintiff.
(2) Liability to account
(a) Based on breach of fiduciary duty
[83] It is trite law that a partnership is a relationship that gives rise to fiduciary duties. Lindley at 16-01 states that a duty of good faith is a fundamental obligation of partners. As Bacon V-C put it in Helmore v Smith (1886) 35 Ch D 436 at 444:
[84] The duty of good faith encompasses the core obligation of loyalty. A number of aspects of this core obligation of loyalty is (a) the duty not to place himself in a position where his interest would or may conflict with duties owed to his partner (“the non-conflict duty”); and (b) the duty not to make a profit from his position (“the not to profit duty”). In the case of partners, the fiduciary duty is further spelt out in the Partnership Act. Sections 28 to 30 of the Partnership Act read as follows:
[85] Recently, the Court of Appeal in Ang Tin Yong at [14] stated:
[86] From the passage quoted above, it is necessary to bear in mind the distinction between two situations where an account is sought: in a subsisting partnership, a partner is entitled to an account at any time as of right; where an account is sought after the dissolution of a partnership, however, the action as was the case here is based on a breach of fiduciary duty. The present case falls in the latter situation where the claimant seeks relief in equity such as an account of secret profits or equitable compensation. The plaintiff’s case is that the defendant had conducted himself as he did for his own benefit and she is suing him for breach of fiduciary duty, and she seeks an account of the benefits and gains which the defendant had received.
[87] There is nothing in this particular Partnership Agreement which either exclude the ordinary consequences of a fiduciary relationship between partners, or the implication of the obligations that are normally concomitant of such a fiduciary relationship. Neither could informed consent on the part of the plaintiff be raised – indeed, the defendant was right not to suggest this defence, because the element of informed consent would have been entirely inconsistent with the defence he was running.
[88] In the circumstances of this case, the defendant owed fiduciary duty to the plaintiff in the running of Japco. Given my finding above that the business of OCS was the partnership’s business, these fiduciary duties extended to the running of OCS. I now turn to examine in more detail how and where the duty of good faith was breached by the defendant both in relation to Japco in general as well as OCS in particular.
(b) Defendant’s breaches of his fiduciary duties
[89] In my judgment, the defendant has not discharged the burden which is on him to show that at the relevant times, (a) there was no loss to Japco arising from OCS’s failure to reimburse the operating expenses of OCS paid by Japco, and (b) the profits of OCS had been earned wholly or partly by means other than the use of Japco’s funds and banking facilities.
[90] It must be noted that regardless of whether OCS was partnership business or the defendant’s own business, there should rightly have been an inter-company account to record payments by Japco for OCS’s operating expenses. From this inter-company account, the defendant would be able to keep track of the amount owing to Japco for OCS’s operating expenses. Put another way, there should be recognition and accounting for OCS’s operating expenses that were paid for by Japco and remained unpaid. Ordinarily if there was recognition and accounting as described, the Balance Sheet would reflect the amount that was owed by OCS. However, in this case the Balance Sheets for the relevant financial years did not reflect the amount that was owed by OCS seeing that OCS did not repay or reimburse Japco. Equally, OCS’s Profit and Loss Statements for the relevant periods showed expenses that were funded by Japco and the absence of any balance owing to Japco in OCS’s Balance Sheets cast doubt on the reliability and accuracy of the financial statements presented by the defendant. In the circumstances, Japco is out of pocket for OCS’s operating expenses and the defendant took OCS’s profits without sharing the benefit of the business with the plaintiff. In short, the defendant had conducted himself as he did for his own benefit and gain contrary to his fiduciary duty of good faith. Therefore, the defendant should account for the benefits and gains he received. This would be for the period 2000 to 2006.
(i) Absence of proper and full accounts
[91] In this section of the judgment, I set out how the evidence shows that there are serious discrepancies in Japco’s accounts, thereby pointing to the defendant’s failure to disclose and give proper and full accounts to the plaintiff, which constitutes a breach of his fiduciary duty of good faith.
[92] At all material times, Japco’s accounts and tax returns were prepared by the defendant. For the purposes of filing Form P of Japco and the plaintiff’s personal income tax, the practice was that the defendant prepared and submitted to the IRAS the Profit and Loss Statement and Balance Sheet of Japco. The defendant did not give any impression, and I accept that the plaintiff would not have known that the partnership’s accounts – Profit and Loss Statements and Balance Sheets from 2000 to 2006 – were not an accurate reflection of the true state of affairs of the partnership’s businesses. The defendant’s argument that the plaintiff had approved them and never raised issues with the Profit and Loss Statements previously is immaterial and inappropriate.
[93] I refer to a related line entry for sales in Japco’s Profit and Loss Statements. Again the sales figures are different when compared to other documents disclosed. The defendant produced the Defendant’s Table (see above at [75]) to show that over a period of six years, OCS had bought and paid to Japco a significant amount of money for office consumable products. Produced below is an extract of purchases and payments from the Defendant’s Table:
[94] To test the veracity of the information in the Defendant’s Table above, it is necessary to compile the sales and purchases of Japco and OCS respectively based on their Profit & Loss Statements for the period 2000 to 2006. This compilation is in Schedule 1 of this judgment. It must be pointed out that as OCS commenced operations in September 2000, the comparable sales of Japco to OCS are assumed to be the same as OCS’s purchases for the year 2000. As for 2006, OCS’s purchases were stated in the Defendant’s Table as up to 31 December 2006. However, OCS’s 2006 Statement of Revenue & Expenses is up to 7 April 2006 when the relationship had notionally ended.
[95] I now compare Japco’s sales in the Profit & Loss Statements as set out in Schedule 1 with the Defendant’s Table. OCS’s purchases (in the Defendant’s Table) in total should equal to Japco’s total sales but they are not. The difference between Japco’s total sales and OCS’s total purchases from Japco for the period September 2000 to 7 April 2006 is $166,045.26 ($5,204,739.07 minus $5,038,693.81). In addition, OCS’s total purchases based on its Profit & Loss Statements for the period September 2000 to 2005 and Statement of Revenue & Expenses from 1 January 2006 to 7 April 2006 as set out in Schedule 1 do not equal to the above purchases in the Defendant’s Table and the difference is $197,479.48 ($4,841,214.33 minus $5,038,693.81).
[96] Again there are differences elsewhere when comparing Japco’s sales figures as shown in the Profit & Loss Statements with OCS’s purchases in the Profit & Loss Statements for the same corresponding periods (see generally Schedule 1). In total, the difference is $363,524.74 ($5,204,739.07 minus $4,841,214.33). The discrepancies here are also not explained and they can only point to the defendant’s failure to disclose and give proper and full accounts to the plaintiff, and I so hold. Accordingly, the defendant’s breach of fiduciary duty of good faith is made out.
[97] The defendant relies on the Defendant’s Table to show that OCS had paid to Japco a total of $5,205,860 made up of OCS’s purchases amounting to $5,038,693.81 and rental amounting to $37,086 with the balance of $130,080.19 being overpayment by the defendant. I have already noted that the rental payment had not been proven at the trial (see [72] above). This therefore brings the total payment down to $5,168,774. In cross-examination of the defendant, Mr Lai was able to demonstrate through a sample of payments in 2006 that some of these cheques had nothing to do with payment of OCS’s purchases from Japco. Furthermore, with the discrepancies highlighted above, it is not possible to reconcile OCS’s purchases from Japco and what the defendant claimed to have paid in the Defendant’s Table. This problem is compounded by the absence of sales invoices from Japco to OCS, as explained above at [75]-[78], so that lump sum payments in round figures cannot be matched to specific purchases.
(ii) Expenses and profits of OCS
[98] Having found in the previous section that the defendant breached the fiduciary duty of good faith in relation to Japco in general, I now turn to the evidence that he breached his fiduciary duties in relation to OCS specifically.
[99] To set the scene for discussion, it is helpful to begin with some material background facts. First, the plaintiff explained that she remained concerned that despite the defendant’s promises that Japco’s overdrafts in the two UOB Accounts would be reduced from OCS’s sales revenues, the defendant was still unable to reduce the overdrafts and despite her further capital injections into Japco. Second, at subsequent meetings between the parties, the plaintiff repeated her concerns that the overdrafts were still not reduced and that some Minutes of Meetings recorded the defendant’s response to the plaintiff’s concerns. Dorothy’s record of the Minutes of Meeting held on 21 November 2005 between the plaintiff and the defendant stated:
[100] The 31 March 2005 Minutes of Minutes, also recorded by Dorothy, was on the expansion plan. It stated:
[102] As revealed by the evidence, the defendant had not been completely open with the plaintiff. In any case, for there to be a breach of duty of good faith, it is not necessary to establish that the defendant acted in a clandestine manner in order to obtain a benefit or profit for himself at the expense of the partnership. The liability arises from the mere fact of a profit having in the circumstances been made, as was in the present case. The High Court of Australia in Chan v Zacharia (1984) 154 CLR 178 at 198 stated:
[105] OCS’s Profit and Loss Statements included a line entry for rentals. By this entry, the defendant gave the impression that OCS had paid rental and other operating expenses in its Profit and Loss Statements for 2000 to 2006 (see Schedule 2 of this Judgment) without recognition and accounting that the expenses had been paid for by Japco, the intention is probably to reduce OCS’s taxable profit.

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Ang Tin Gee v Pang Teck Guan

Laws this judgment relies on

Grounds of decision

INTRODUCTION

BACKGROUND OF THE DISPUTE

The parties

The parties’ business relationship

Japco’s bank facilities

Japco’s business in consumer electrical goods and the Seychelles Debt

Office Consumable Supplies

Japco’s business in office consumable products

End of the business relationship

The plaintiff’s version

The defendant’s version

COMMENCEMENT OF THIS ACTION

DISCUSSION AND DECISION

(1) The Partnership

(a) Was there a partnership inter se; and if so, in what shares?

(b) Was OCS part of the partnership business?

(2) Liability to account

(a) Based on breach of fiduciary duty

(b) Defendant’s breaches of his fiduciary duties

(i) Absence of proper and full accounts

(ii) Expenses and profits of OCS