Bing Integrated Construction Pte Ltd v Eco Special Waste Management Pte Ltd (Chua Hui Khim (personal representative of the estate of Chua Tiong Guan, deceased) and another, third parties) and another suit

Chan Seng Onn J:

[1] In these proceedings, Eco Special Waste Management Pte Ltd (“Eco SWM”) and Eco Resource Recovery Centre Pte Ltd (“Eco RRC”), the Defendants in the consolidated main actions brought against them by the Plaintiff, Bing Integrated Construction Pte Ltd (“Bing Integrated”), instituted third party actions against the estate of the 1 Third Party, Colonel Chua Tiong Guan (“Colonel Chua”) and Chua Chin Giap, the 2 Third Party. At the hearing of the Plaintiff’s actions, the Defendants withdrew their counterclaims against Bing Integrated as well as their claims against the 2 Third Party. However, they continued their claims against the 1 Third Party. This judgment is in relation to the Defendants’ claims in Suit No 605 of 2006/X and Suit No 606 of 2006/B against the 1 Third Party.

[2] The Defendants alleged, inter alia, that Colonel Chua breached his fiduciary duties as their director by acting fraudulently against their interest and in favour of Bing Integrated and the 2 Third Party, and that Colonel Chua unlawfully conspired with them to injure or cause loss to the Defendants. The Defendants thus claimed for an indemnity from the 1 Third Party against all claims brought by Bing Integrated against them.

[3] The Defendants are subsidiary companies of ECO Industrial Environmental Engineering Pte Ltd (“ECO IEE”) and they are in the business of waste management and recycling. ECO IEE was incorporated on 30 December 1995 with 3 shareholders, namely Tan Keow Chong (“KC Tan”), Goh Seng Nam (“Goh SN”) and Colonel Chua. The three of them held one share each in ECO IEE at the time of incorporation and all three were directors, with Colonel Chua being the Managing Director.

[4] Colonel Chua was the elder brother of the 2 Third Party, who is the majority shareholder and effective owner of Bing Integrated. Eco RRC was incorporated on 28 May 1997 and Eco SWM was incorporated on 14 July 1997.

[5] The shareholdings of ECO IEE changed over time pursuant to new members of the company being added and restructuring exercises. At the material time in July 1996, the shareholders were:

At that time, Chua Kim Hua (“Chua KH”) was the Chairman of ECO IEE. KC Tan was the vice-Chairman of ECO IEE and as mentioned, Colonel Chua was the managing director. The company secretary was Liew Keng Loong. I should point out that Chua KH is not related to Colonel Chua and Chua Bing is the elder brother of Colonel Chua. However, nothing in these proceedings turned on Colonel Chua’s relationship with Chua Bing.

[6] On 9 July 1996, Colonel Chua sent out a notice to the shareholders of ECO IEE calling for an extraordinary shareholders’ meeting to be held on the next day (the “EGM notice”) for the purpose of discussing, inter alia, the issue of the “methodology in handling the factory construction”.

[8] Due to a land re-zoning development by Jurong Town Corporation (“JTC”), ECO IEE could not proceed with its initial plan to carry out both hazardous and non-hazardous waste management on the same plot of land. Thus it had to acquire another plot of land so that the hazardous and non-hazardous activity could be carried out on the respective zoned land. ECO IEE then decided to incorporate two subsidiary companies, i.e. the Defendants, to manage the different aspects of ECO IEE’s business, with Eco SWM managing the hazardous waste business and Eco RRC managing the non-hazardous waste business.

[10] On 3 November 1997, Eco SWM awarded the main contract to Bing Integrated to erect a factory at Lot 2158PT SL (2258) MK 7 at Tuas South Avenue 3. Similarly, on 19 November 1997, Eco RRC employed Bing Construction to erect a factory at Lots 2497A and 2498K (Plot Al7477) MK 7 at Tuas West Road/Tuas Avenue 20. The 3 November 1997 and 19 November 1997 contracts shall collectively be referred to as the “Main Contracts”. The Main Contracts incorporated the 1997 Edition of the Articles and Conditions of Building Contract (Measurement Contract) issued by the Singapore Institute of Architects. The architect for both of the Main Contracts was Ms Tan Meow Hwa of M/s AC Partnership (“Ms Tan”) who was subpoenaed by the Defendants to give evidence in court.

[13] The particulars of the Defendants’ pleadings were as follows:

[15] In their statement of claim against the 1 Third Party, the Defendants further alleged that throughout the course of the Main Contracts, up till his termination as a director of both ECO IEE and the Defendants, Colonel Chua was solely in charge of determining when and how much payment was made by the Defendants to Bing Integrated and that he had made excessive and unauthorised payments to Bing Integrated, in contravention of the terms of the Main Contracts. In the main hearing, I noted that the complaint was not that Bing Integrated was paid excessively or overpaid for the construction of the factory plants, but that payments to Bing Integrated were allegedly made before the architect’s interim certificates were issued. In fact, Mr Gabriel accepted that Bing Integrated “did the job” and “is to be paid”. For greater clarity, I shall refer to this head of claim as the “early payment claim” instead.

[16] On the other hand, in his defence, Colonel Chua averred that:

[18] Subsequently, on 8 October 2004, Colonel Chua was removed from his office as the managing director of ECO IEE. He passed away before filing an AEIC for the trial. KC Tan is currently the managing director of ECO IEE.

[19] Before I consider the evidence, I note that the relevant events happened more than 10 years from the commencement of these proceedings. In this regard, the recent Court of Appeal decision of Ng Chee Chuan v Ng Ai Tee (administratrix of the estate of Yap Yoon Moi, deceased) [2009] 2 SLR(R) 918 (“Ng Chee Chuan”) is instructive. Chao JA compared the relative evidentiary value of contemporaneous documents with oral testimony and stated as follows:

[20] Ng Chee Chuan was relied upon by the Defendants in their closing submission to emphasise the importance of the minutes of the 10 July 1996 meeting, and that this document, together with the EGM notice and the 6 June 1997 LOA, “must be given full weight”.

[21] The relevant portion of the EGM notice sent by Colonel Chua to the shareholders of ECO IEE stated as follows:

[24] Another document heavily relied upon by both the Defendants and the 1 Third Party was the minutes of the 10 July 1996 meeting of ECO IEE, the material part of which provided that:

[30] When cross-examined on the issue of percentage, Goh SN testified that this was not discussed during the meeting. Accordingly to Goh SN, the market percentage at that time was 3 to 5 %. More interestingly, KC Tan was referred to Goh SN’s evidence on this point and his response was:

[31] KC Tan’s AEIC at [15] merely stated that:

[35] The other documentary evidence referred to during trial was the 6 June 1997 LOA (see above at [9]) which allegedly showed that the position taken by the shareholders in the 10 July 1996 meeting was carried out by Colonel Chua for the start of the construction projects. KC Tan’s AEIC stated that:

[36] However, during cross-examination, Mr Tan referred to another document, the 15 April 1997 LOA (see above at [9]). The 15 April 1997 LOA was purportedly awarded by AC Partnership on ECO IEE’s behalf to Bing Integrated to construct the temporary shed on a measurement basis. Clause 2 of the 15 April 1997 LOA provided that:

[37] KC Tan was asked whether the 6 June 1997 LOA or the 15 April 1997 LOA was the operative or “real” contract for the construction of the temporary shed. He understandably said that the 6 June 1997 LOA was the one that he relied upon and that it was the “real” contract.

[39] On the other hand, the 2 Third Party had admitted during the main trial that he drafted the progress payment claim by inflating the sum by 3%, which was the then-existing GST rate, so that he could obtain more banking facilities:

[46] Accordingly, the Defendants’ claim that Colonel Chua had breached his fiduciary duties by entering into the Main Contracts on a measurement basis on behalf of the Defendants is dismissed. This brings me to the claim that Colonel Chua should have asked for tenders or quotations for the Main Contracts in order to obtain the best price instead of awarding them to Bing Integrated and thereby preferring the interest of the 2 Third Party. By failing to obtain a best price, Colonel Chua was in breach of his fiduciary duties: see Ng Eng Ghee and others v Mamata Kapildev Dave and others (Horizon Partners Pte Ltd, intervener) and another appeal [2009] 3 SLR(R) 109 at [155].

[47] In a document dated 10 February 1999 (the “10 February 1999 letter”), the manner in which the Main Contracts were awarded to Bing Integrated was described in the following manner:

[49] Mr Gabriel objected to the admissibility of this document on the ground that it was hearsay and that the document was not signed by Colonel Chua and hence the identity of the author was uncertain. However, at the trial stage, Mr Gabriel indicated that he did not question the authenticity of the 10 February 1999 letter. Section 32(b) of the Evidence Act (Cap 97, 1997 Rev Ed) provides that:

[50] I am of the view that the letter was one made in the “ordinary course of business”. Since it is not challenged that the document (although not signed) was in existence as far back as 1999 well before this litigation commenced and no specific allegation is made that it is a document fabricated recently for the purpose of bringing false evidence before the court, I accept on its face that it was a statement made by the deceased Colonel Chua. Had there been a clear challenge that it is not an authentic document, then evidence could well be adduced on how the document was discovered and whether the intended recipients of the letter had in fact received the letter and if so, then when had they seen the letter. Having accepted that it was not a statement made by some unknown person but by Colonel Chua, who was unfortunately no longer present to testify in court, it is strictly speaking still a hearsay document unless it can come within one of the hearsay exceptions such as s 32(b) of the Evidence Act. On a plain reading of s 32(b), it is not necessary that the written statement of the deceased Colonel Chua be signed. The 10 February 1999 letter is thus admissible and I overruled Mr Gabriel’s objection.

[51] During cross-examination, KC Tan was asked whether [1] of the 10 February 1999 letter described how the Plaintiff became appointed as the Main Contractor and how his own plumbing company and Goh SN’s company came to be appointed sub-contractors of the same project:

[52] KC Tan then denied that the financial difficulties faced by ECO IEE as stated in the 10 February 1999 letter was true. Nonetheless, KC Tan had to concede that the shareholders of ECO IEE obtained their individual sub-contracts because of their specialised expertise:

[53] Similarly, Goh SN’s own company was awarded a subcontract for Bing Construction in respect of the Main Contract for works on the sewerage system. Although he similarly tried to say that his quotation for the subcontract must have been the lowest price, he was unable to prove that a few companies were invited to quote for the job or that a tender was indeed called:

[54] The Defendants’ claim against the 1 Third Party rested upon the absence of tenders or quotations for the projects. Yet, the undeniable fact is that KC Tan and Goh SN were awarded subcontracts based on their own expertise. They could not prove that these subcontracts were secured by them following a tender exercise or an invitation to quote. The assertion that their own price quotes “must have been the lowest” appeared rather hollow and self-serving. Goh SN had admitted that he did not know whether there had been any quotation called for in respect of his sewage subcontract works.

[55] On the evidence, the shareholders of ECO IEE had clearly decided to capitalise on their individual expertise to administer the projects in order to kick start their investment in the waste management and recovery business. As a consequence, they also benefitted themselves as shareholders by having the subcontracts awarded to themselves in their respective areas of expertise. The reliance on the principle in Bristol and West Building Society v Mothew [1998] 1 Ch 1 that a fiduciary may not act for his own benefit or the benefit of a third person without the informed consent of the principal was therefore unmerited. It was clearly their intention to construct the factory plants without inviting quotations or tenders which would be a relatively longer process. It was only for specialist subcontract works where the shareholders of ECO IEE themselves had no expertise that tenders were called. KC Tan himself acknowledged that tenders were called for such specialist subcontracts. In my judgment, KC Tan was aware that tender exercises were carried out only in respect of specialist subcontracts in which the shareholders had no expertise in. For subcontract works which the shareholders had expertise in, no tenders or quotations would have been necessary since they would be getting the subcontracts and benefitting themselves. This view accords with the evidence of Ms Tan that the subcontract works secured by the shareholders’ own companies started even before the contracts were signed. Accordingly, the Defendants’ claim that the Colonel Chua had breached his fiduciary duties in failing to obtain the best possible price by calling for tenders or quotations is without merit.