Chong Hon Kuan Ivan v Levy Maurice and Others (No 2)

Woo Bih Li J:

[1] The sixth defendant, Publicis Eureka Pte Ltd (“Publicis Singapore”), is a company incorporated in Singapore. Prior to 20 December 1996, Publicis Singapore was owned by the plaintiff, Chong Hon Kuan Ivan (“Chong”), and two others, ie Chang Hong Kaye Jimmy (“Chang”) and Neo Kee Choon Thomas (“Neo”) (collectively “the Original Shareholders”). It was then known as Eureka Advertising Pte Ltd.

[2] The fifth defendant, Publicis Groupe SA (“Publicis France”), was and is a public listed company incorporated in France. On or about 20 December 1996, Publicis France acquired 60% of the issued shares in the capital of Publicis Singapore from the Original Shareholders who retained 40%. Following a corporate restructuring, the shares held by Publicis France were transferred to the fourth defendant, Publicis Worldwide BV (“Publicis Netherlands”), a company incorporated in the Netherlands.

[3] As part of the acquisition by Publicis France, various agreements were entered into, including employment agreements between Publicis Singapore and each of the Original Shareholders. In the case of Chong, he was employed as the managing director and chief executive officer of Publicis Singapore for five years commencing 1 January 1997, with a provision for renewal for another five years from 1 January 2002 if Chong was not guilty of any gross negligence or wilful misconduct in respect of the business of Publicis Singapore and the Publicis group.

[4] The first defendant Maurice Levy (“Levy”) was at all material times the chairman and chief executive officer of Publicis France. He was also a director of Publicis Singapore from 15 January 1997 to 9 February 2002.

[5] The second defendant Salomon Salto (“Salto”) was at all material times Senior Vice-President of Publicis Netherlands and a director of Publicis Singapore.

[6] The third defendant Jean-Paul Morin (“Morin”) was at all material times the chairman and chief executive officer of Publicis Netherlands and the chief financial officer and/or corporate secretary of Publicis France. At all material times he was also a director of Publicis Singapore.

[7] As a result of disputes arising, a board meeting of Publicis Singapore was held on 9 February 2002 in which Morin proposed a resolution to terminate Chong’s employment with Publicis Singapore and, exercising his vote and the votes of Levy and Salto, Morin voted in favour of the resolution. The resolution was carried as only Chong and Chang voted against it. Neo abstained.

[8] Consequently, Chong commenced the present action against all six defendants. The claim against Levy, Salto and Morin was for conspiracy to induce and inducing Publicis Singapore to terminate his employment agreement. The claim against Publicis Singapore was for breach of his employment agreement. The action also included claims against Publicis Netherlands, Publicis France and Publicis Singapore for breaches of his employment agreement and other agreements which I need not elaborate on.

[9] In these circumstances, Levy applied to strike out paras 18 and 19 of the Statement of Claim, which alleged the conspiracy and the inducement and alleged damages as a result thereof. Levy relied on the principle that:

[10] At the hearing before an assistant registrar on 14 May 2004, the assistant registrar allowed Levy’s application. However, Chong’s counsel then raised further arguments and applied for leave to amend the Statement of Claim relying on certain exceptions to the principle which Levy relied on. The assistant registrar then reversed her decision on striking out and allowed Chong to amend the Statement of Claim.

[11] Levy then appealed to a judge in chambers. I heard the appeal and allowed it, in that I refused to allow the amendment and struck out that part of paras 18 and 19 of the Statement of Claim in so far as they contained a claim against Levy.

[12] I now set out my reasons in writing. I will deal first with the principle raised by Levy so that the application to strike out and the proposed amendments may be better understood.

[13] Mr Prakash Mulani, counsel for Levy, cited various cases. I need refer to some of them only. The classicus locus is the case of Said v Butt [1920] 3 KB 497. The headnote thereof states:

[14] McCardie J said at 504 to 507:

[15] The principle enunciated by McCardie J (“the Principle”) appears to have two conjunctive qualifications. First, the servant must be acting bona fide and secondly, he must be acting within the scope of his authority.

[16] The next case was De Jetley Marks v Greenwood (Lord) [1936] 1 All ER 863 (“De Jetley Marks”). In this case, the plaintiff commenced action against Lord Greenwood who was the managing director of a company and other defendants who were the chairman and other directors of a company for procuring a breach of his contract with the company.

[17] Porter J said, at 872–873:

[18] Latching onto the penultimate sentence, Mr Thio, who was the counsel for Chong at the time arguments were submitted before me, argued that directors are liable for conspiracy to induce and inducement of breach of contract if the discussions of the directors culminating in the board decision took place before the board meeting where the decision was made. He also relied on the case of Schmeichel v Lane, Thatcher and Bernston (1982) 28 Sask R 311 (“Schmeichel”). I will come back to this case later.

[19] In O’Brien v Dawson (1942) 66 CLR 18, the plaintiff commenced an action against a company and two of its directors Doyle and Dawson for conspiracy to injure him as a result of the company breaking certain contracts with him. Dawson also had an employment with the plaintiff which Dawson terminated. The jury returned a verdict for the plaintiff but the verdict was set aside by the Supreme Court of New South Wales (see O’Brien v Dawson (1941) 41 SR (NSW) 295). The plaintiff’s appeal to the High Court of Australia was dismissed without prejudice to his bringing any action other than one based upon combination or conspiracy of the defendants to injure him.

[20] Jordan CJ of the Supreme Court of New South Wales said at 307–308:

[21] Starke J of the High Court of Australia said at 32 to 33:

[22] The next case was Katz v Tannenbaum (1982) 13 ACWS (2d) 103 (“Katz”). This was a decision of the Ontario High Court of Justice regarding a striking out application. Reid J said at [6]:

[23] Mr Mulani submitted that De Jetley Marks was cited in Katz without endorsing Porter J’s possible distinction but, on the other hand, I noted that Katz also did not disapprove of that possible distinction.

[24] Desimone v Herrmann Group Limited (1991) 27 ACWS (3d) 192 (“Desimone”), followed Katz. Desimone itself was followed in Kuhn v American Credit Indemnity Co (1992) 33 ACWS (3d) 37 (“Kuhn”).

[25] In Welsh Development Agency v Export Finance Co Ltd [1992] BCLC 148, some doubt was expressed over the reasoning in Said v Butt by Dillon LJ but he accepted that Said v Butt had stood the test of time. After referring to Said v Butt and some other textbooks and cases including O’Brien v Dawson, Dillon LJ said at 173:

[26] Subsequently, in Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 328 (“Idoport”), the Supreme Court of New South Wales endorsed the principle that a director is not liable in tort for a company’s breach of contract if the director was acting within the scope of his authority. After referring to O’Brien v Dawson, Einstein J said at [22] and [27] to [29]:

[27] As I mentioned at [18] above, Mr Thio brought my attention to Schmeichel, a decision of the Saskatchewan Court of Queen’s Bench. In that case, one of the defendants applied to strike out a claim of conspiracy against him. Kindred J said at [8] and [9]:

[28] Kindred J continued at [10]:

[29] Mr Thio therefore submitted that in Singapore, directors may be liable for conspiracy or inducement for steps taken before the board meeting. He also submitted that, in any event, I should not decide on this point in an application to strike out, relying on Pacific Internet Ltd v Catcha.com Pte Ltd [2000] 3 SLR 26 (“Pacific Internet”). The second holding as reported in the (unedited) headnote of the SLR (Reissue) of that case stated:

[30] In response, Mr Mulani argued that directors do not conduct a company’s business only at board meetings and if their pre-board meeting discussions can render them liable, then they may as well be liable for discussions at board meetings.

[31] As for Kindred J’s judgment, Mr Mulani submitted that the case of Einhorn v Westmount Investments Ltd (1970) 11 DLR (3rd) 509 (“Einhorn”) which Kindred J had relied on was one in which the pleadings mentioned mala fides and fraud. He submitted that Kindred J then made a jump to adopt the possible distinction mentioned by Porter J in De Jetley Marks when Porter J did not say that such a distinction was an exception. No other case had adopted the possible distinction as an exception to the principle in Said v Butt and there was no logic in the possible distinction. Mr Mulani submitted that I could and should decide the point as to whether the possible distinction applied in Singapore.

[32] Mr Thio also had another argument which was that since the amended para 18 had pleaded that the individual defendants had acted with the sole or predominant intention of injuring Chong, this was a plea of malice which took Levy out of the bona fide qualification mentioned in Said v Butt.

[33] However, Mr Mulani submitted that if this argument were correct, then every plea of conspiracy of that sort would amount to malice. He submitted that there must be an allegation of fraud.

[34] Mr Thio also contended that since the amended pleadings alleged that the individual directors had acted outside of their office, the claim against Levy should not be struck out. In response, Mr Mulani submitted that the amended pleadings did not show how the individual defendants had acted outside the scope of their office.

[35] I now come to the original para 18 of the Statement of Claim and the amended para 18. Paragraph 19 of the Statement of Claim merely pleaded the consequence of para 18 and was not amended.

[36] The original para 18 of the Statement of Claim stated:

[37] The amended para 18 read:

[38] The material differences in the amended para 18 were as follows:

(a) Paragraph 18 referred to the sole or predominant intention of Levy, Salto and Morin to injure Chong.

(b) Paragraph 18(1) alleged that there was an agreement among these three individual defendants which was outside the scope of their office or employment with Publicis Singapore. This agreement was on or before 4 February 2002, ie prior to the adjourned board meeting on 9 February 2002.

(c) Paragraph 18(5) alleged that prior to the board meeting on 8 February 2002 and the adjourned meeting on 9 February 2002, two or more of the individual defendants further conspired and agreed to procure the termination of Chong’s contract. In particular, Morin informed Chong that Publicis Netherlands had a settlement proposal and if Chong did not accept this proposal, he would be dismissed. The conveyance of this proposal to Chong was outside the scope of the office of the individual defendants.

[39] It was not disputed that I had the jurisdiction to rule on a question of law under O 14 r 12 of the Rules of Court (Cap 322, R 5, 2004 Rev Ed) even if neither party had hitherto asked for such a ruling. I was of the view that Pacific Internet was not authority for a general proposition that a court should not decide on a point of law which was difficult or important at the stage of a striking-out application. Whether such a decision should be made depended on the circumstances. In Johannes Budisutrisno Kotjo v Ng Wei Teck Michael [2001] 4 SLR 232, Pacific Internet was also raised to persuade the court to allow an appeal against the striking out of a claim. Choo Han Teck JC, as he then was, was not persuaded that he should defer his decision on a question of law although it is true that he considered the answer to the question before him to be clear.

[40] Furthermore, although Said v Butt and O’Brien v Dawson were cases where a trial had been undertaken, the Principle has been applied in other cases to an application to strike out a claim before a trial such as in Katz, Desimone and Kuhn or to refuse an amendment of a statement of claim as in Idoport.

[41] Mr Thio was not arguing that the Principle should not apply in Singapore. He was arguing that the Principle was subject to the distinction adopted by Kindred J in Schmeichel. I was of the view that it was not necessary for me to await a trial before giving a ruling thereon.

[42] As regards the distinction adopted by Kindred J, I agreed with Mr Mulani that Porter J in De Jetley Marks did not say that there was such a distinction but merely mentioned it as a possibility. Indeed, Porter J had said that the possible distinction was a difficult one and he had preferred not to express any final opinion on it. I was also of the view that in Einhorn, Maguire JA was not actually endorsing the distinction and had mentioned it only as a possible qualification too. Furthermore, in Einhorn, mala fides and fraud were specifically pleaded although not in all the paragraphs of the Statement of Claim.

[43] In any event, I accepted Mr Mulani’s argument that the business of a company is not conducted by directors at board meetings only. There may be, and often are, discussions between or among directors outside of board meetings. For many companies, a formal board meeting is not necessary and a decision of directors may be made by a circulating resolution. I saw no reason why there should be a different legal consequence depending on whether directors’ discussions or agreements were entered into or made before or at a board meeting. Such a distinction is artificial. In my view, the question should simply be whether what was done by the directors was outside the scope of their office, leaving aside for the time being the other qualification in Said v Butt, ie that the servant must have acted bona fide.

[44] As for the allegation that the three individual defendants had acted outside the scope of their office, it will be recalled that the original para 18 did not even allege that the acts of the three individual defendants were outside the scope of the office of director. That was probably why Levy’s application was not supported by an affidavit and relied on the ground only that there was no cause of action against him. When the amendments were proposed to stave off a striking out, the burden was on Chong’s counsel to persuade the court why the amendments should be allowed.

[45] The new allegations that certain conduct was outside the scope of the office of the individual defendants were mainly bare allegations. As for the alleged reference by Morin to a proposal by Publicis Netherlands to Chong in the context of resolving a dispute between Chong and Publicis Singapore, this was not, without more, outside the scope of office of a director of Publicis Singapore.

[46] I was also of the view that I need not await a trial to decide whether it was sufficient for Chong to plead that the individual defendants had acted with the sole or predominant intention of injuring him in respect of the bona fide qualification. The allegation of a sole or predominant intention to injure is a standard requirement in any allegation raising the tort of conspiracy to injure where the tortious act is not done by illegal means. It was my view that if such an allegation were sufficient to deprive a defendant director from the protection of the Principle, then the Principle would become emasculated. I should add that while I was writing my grounds of decision, I noticed that in Idoport, Einstein J also cited a judgment of the Newfoundland Court of Appeal in Imperial Oil Ltd v C&G Ltd (1989) 62 DLR (4th) 261 where Marshall JA said at 266:

[47] Imperial Oil Ltd v C&G Ltd was a case in which the matter went to trial. So the Principle might not have been considered in the context of a striking out. Although the passage cited from Marshall JA could be construed to mean that a director is liable for a company’s contractual breach if his predominant intention was to injure the plaintiff, I am still of the view that that should not be and is not the position in Singapore for the reason I have stated.

[48] There must be something more alleged against the individual defendants and in particular Levy. Nothing more was alleged. In the circumstances, it is not necessary for me to say whether only fraud would take a servant out of the bona fide qualification. I would only note that in Katz, Reid J did not think that the word “malicious” amounted to an allegation of mala fides or lack of bona fides and in Idoport, Einstein J found the words “bona fide” quite difficult if they were meant to add something to an unlawful act.

[49] Einstein J also mentioned (at [56]) that the Principle could give rise to a question as to whether it should be read as:

As I have said, the Principle appears to have two conjunctive qualifications. As Mr Mulani did not argue that the requirements were disjunctive, the arguments and my decision were on that basis.