Ong Bee Chew v Ong Shu Lin [2017] SGHC 285

Hocen International Pte Ltd (“Hocen”) was in the business of selling and distributing power cables. It carried on this business from the time it was incorporated in May 2005 until it went into liquidation in October 2007. Hocen has only ever had two shareholders and two directors: Ong Bee Chew and Ong Shu Lin. The two Ongs are, respectively, the plaintiff and the defendant in the two suits now before me. It does not appear that the two Ongs are related to each other.

Hocen went into liquidation in 2007 because the defendant secured an order for it to be compulsorily wound up on the just and equitable ground. Acting by its liquidators, Hocen commenced these suits against the defendant in 2011 and 2012. In 2013, the liquidators assigned Hocen’s causes of action in these suits to the plaintiff. The plaintiff was then substituted for Hocen and progressed these suits to trial before me.

The plaintiff’s claim is that the defendant breached the statutory and fiduciary duties which he owed to Hocen by causing Hocen to make payments of about S$1.8m which were of no corporate benefit to Hocen. The plaintiff’s case is that these payments were part of the defendant’s scheme to procure business for Hocen by corruption. The plaintiff accordingly seeks to hold the defendant liable to pay damages or equitable compensation equivalent to the value of the payments.

The defendant denies any breach of duty. His defence is that the payments were indeed of corporate benefit to Hocen because they led to and sustained Hocen’s substantial business selling cables. The defendant’s alternative defence is that, even if he did breach his duty to Hocen, the plaintiff always knew the purpose of the payments and is therefore obliged to contribute equally to the defendant’s liability in these suits.

I have accepted the plaintiff’s case that the purpose of the payments was to procure business for Hocen by corruption, and that involving Hocen in this scheme was not in Hocen’s interests. But I have also accepted the defendant’s case that the plaintiff is equally culpable for this corrupt scheme and therefore equally in breach of his duty to Hocen. As a result, I have ordered the plaintiff to make a contribution of 50% to the defendant’s liability in these suits.

Both the plaintiff and the defendant have appealed against my decision in each of the two suits before me. I therefore now set out my grounds.

Background

The plaintiff is an experienced businessman. He was introduced to the defendant sometime in 2004 through a business partner by the name of Andy Heng. At that time, the plaintiff and Heng were running a company unrelated to this dispute which was in the business of selling and distributing power cables for use in port cranes. Heng invited the defendant to join that company to expand its business through the defendant’s business contacts in China. With the plaintiff’s support, the defendant accepted.

Hocen is established

In 2004, the relationship between the plaintiff and Andy Heng broke down. As a result, the plaintiff and the defendant decided in May 2005 to set up a new company to take over the existing business. Hocen was that company.

The plaintiff and the defendant were each allocated a 50% shareholding in Hocen and were each appointed a director of Hocen. The defendant was appointed Hocen’s managing director. The parties have always been equal shareholders of Hocen and its only two directors.

It is common ground that it was the defendant who ran Hocen’s day-to-day operations, and that he did so without the plaintiff’s day-to-day involvement or supervision. The actual scope of the plaintiff’s role in Hocen is, however, disputed. I examine this issue in detail at [106]–[119] below.

Hocen’s cable business was, on the surface, very simple. It bought cables from an Australian company called Olex Pty Ltd (“Olex”) and sold the cables at a profit to a Chinese company known as Shanghai Zhenhua Port Machinery Co Ltd (“ZPMC”). ZPMC manufactures cranes for Chinese container ports and has need for significant quantities of cables. One of ZPMC’s major customers is Yantian International Container Terminals (“YICT”).

Three of Hocen’s employees gave evidence at trial in these suits. They are Davin Chan, an administrative manager; Raymond Goh Lnai Mun, a sales manager; and Loh Siew Choong, also a sales manager. All three were employed by Hocen from August 2005, shortly after it was incorporated, until it went into liquidation in October 2007.

Hocen engages Crossbridge

Soon after Hocen commenced operations, it engaged the services of a Hong Kong company called Crossbridge International Pte Ltd (“Crossbridge”). It is common ground that it was the defendant who introduced Crossbridge to Hocen.

Crossbridge is owned by one Tsui Wai Mun and one Yu Kit Ching. Yu’s brother-in-law, Daniel Cheng, was also an officer of Crossbridge. He was at the same time an equipment manager with YICT. Cheng’s role in Hocen’s arrangement with Crossbridge is a matter of dispute in this case.

The Crossbridge payments

Between September 2005 and October 2006, the defendant caused Hocen to issue a total of ten cash cheques and to make eight bank remittances to Crossbridge. I will refer to these transactions collectively as the Payments. The total amount debited from Hocen’s account by way of the ten cheques was S$855,225 and US$52,700. The total amount debited from Hocen’s account by way of the eight remittances was US$567,200.

The defendant drew each cash cheque on Hocen’s account with the United Overseas Bank Ltd (“UOB”) and personally cashed the cheque over the counter at a UOB branch. He then physically delivered the cash to a representative of Crossbridge: either Daniel Cheng, Tsui Wai Mun or Yu Kit Ching. It is the defendant’s evidence that he delivered the cash drawn against the last two cheques to Crossbridge for onward payment to a third party who had supplied materials to Crossbridge. But there is no suggestion that the last two cash cheques are any different in kind from the first eight. I therefore treat the claim on all ten cash cheques as standing or falling together.

There is no independent evidence whatsoever to show that the defendant actually delivered all of the S$855,225 and US$52,700 in cash to Crossbridge, as he claims. The plaintiff has his suspicions about this and suggests that the defendant pocketed some of the money for himself. But the evidence which the plaintiff puts forward to support this suggestion is entirely circumstantial and extremely slight. In any event, the claim against the defendant is based on a lack of corporate benefit rather than on misappropriation for personal benefit. The plaintiff therefore does not need to prove that his suspicions are true in order to succeed. I assume for present purposes, therefore, that the defendant handed over all of the cash to Crossbridge, retaining none for himself.

The Crossbridge contracts

Between March 2006 and January 2007, Hocen entered into four written contracts with Crossbridge. I shall call them the “Crossbridge Contracts”. The terms of the four contracts are identical to each other in all material respects.

The purpose of the Crossbridge Contracts was apparently to formalise an existing arrangement between Hocen and Crossbridge. The contracts ostensibly obliged Crossbridge to provide quality assurance and progress monitoring services (collectively, “the Services”) when cables sourced from Hocen were installed in cranes manufactured by ZPMC.

Hocen goes into liquidation

The relationship between the plaintiff and the defendant began to deteriorate in the middle of 2006. As a result, Hocen’s operations and business became deadlocked. This led the defendant to apply in August 2007 for Hocen to be wound up by the court on, amongst others, the just and equitable ground. The court made the winding up order in October 2007 and appointed three accountants as Hocen’s liquidators.

It is important to point out that Hocen, though now in liquidation, is far from insolvent. After paying all of its creditors and defraying the liquidation expenses, there is in fact a substantial surplus which remains to be distributed equally to Hocen’s only two shareholders: the plaintiff and the defendant.

After taking office in October 2007, the liquidators duly reviewed Hocen’s affairs and records. In the course of the review, they interviewed both the plaintiff and the defendant. In September 2009, they submitted a confidential report of their findings to the Commercial Affairs Department (“CAD”). The CAD considered the liquidators’ report and took the position that it disclosed no criminal offence. The CAD decided not to investigate any further.

The plaintiff was dissatisfied with the CAD’s decision. He instructed his lawyers to obtain a copy of the liquidators’ report. Thus, in October 2010, the plaintiff applied under ss 315 and 284 of the Companies Act (Cap 50, 2006 Rev Ed) (“the Act”) for the liquidators to disclose the outcome of their review insofar as it related to Crossbridge. In April 2011, the High Court ordered the disclosure.

The essence of the liquidators’ findings in their report was that the Payments did not appear to have conferred any corporate benefit on Hocen. In particular, the liquidators found a lack of documentary evidence that Crossbridge had actually provided any of the Services. The liquidators were also unable to verify that the defendant had indeed delivered the cash withdrawn from Hocen’s account to Crossbridge, as he claimed.

Hocen sues the defendant

In September 2011, with funding from the plaintiff, the liquidators commenced the first of the two suits now before me. Hocen was named as the plaintiff in the suit. This first suit alleges that the defendant breached his duties to Hocen by paying away the cash drawn on the ten cash cheques for no corporate benefit.

In March 2012, the liquidators commenced the second of the two suits now before me. This second suit alleges that the defendant breached his duties to Hocen by causing it to make the eight bank remittances to Crossbridge for no corporate benefit.

In due course, the defendant filed counterclaims in both suits, pleading that the plaintiff was liable to contribute towards any sums which the defendant may be found to be liable to pay Hocen.

In May 2012, the liquidators applied for an order that the defendant account for the cash which he had withdrawn against the cash cheques. In January 2013, the court ordered the defendant to furnish the account. As required by the order, the defendant filed an affidavit in March 2013 which stated essentially that he had handed all of the cash to different representatives of Crossbridge on various occasions (see [17] above).

In April 2013, the liquidators agreed to permit the plaintiff to take over the carriage of these suits. In November 2013, with the High Court’s sanction, the liquidators caused Hocen to assign to the plaintiff its causes of action against the defendant. The plaintiff was then substituted for Hocen as the plaintiff in both suits. I examine the terms of the assignment more closely at [188]–[189] below.

The plaintiff adopted the liquidators’ case against the defendant in both suits. The suits were never formally consolidated but were ordered to be tried together with evidence in one being evidence in the other. Both suits were ultimately tried before me.

Before turning to the parties’ cases, I make this general observation. The parties’ business relationship began on the basis that the plaintiff would bring to the table his capital and access to financing while the defendant would bring to the table the business opportunity to sell cables in China and his personal relationships with Chinese buyers. In short order, and supercharged by corruption, Hocen’s business proved lucrative beyond either party’s expectations (see [89] below). Each party then suspected the other of trying to take over the entire corrupt business for himself. The resulting deadlock led to the defendant’s application to wind up Hocen in 2007. It also led the plaintiff to fund the liquidators to pursue the defendant in these suits, and eventually to take over as the plaintiff in both suits. The parties’ business relationship has obviously ended in acrimony. I accept the defendant’s submission that the plaintiff has brought these suits against him as part of a vendetta arising from the defendant’s decision to kill the goose that laid the golden egg by winding up Hocen in 2007.

Parties’ cases

The plaintiff’s pleaded case is that the defendant breached his duties to Hocen by effecting payments to Crossbridge which did not confer any corporate benefit on Hocen. The plaintiff submits that Hocen derived no corporate benefit from the Payments for two reasons: (a) because Crossbridge did not, in fact, provide any of the Services to Hocen; and (b) because the defendant caused Hocen to make the Payments pursuant to a scheme to engage and fund Crossbridge to procure business for Hocen from ZPMC by corruption. The plaintiff also claims that he was not complicit in the defendant’s breaches of duty because the plaintiff had little knowledge about Hocen’s dealings with Crossbridge and trusted the defendant in that regard.

The defendant, on the other hand, claims that he did not breach his duties to Hocen. He argues that Hocen derived three corporate benefits from the Payments: (a) Crossbridge did, in fact, provide the Services; (b) Crossbridge entertained individuals from ZPMC and bought them gifts to induce them not to make complaints about cables supplied by Hocen; and (c) Crossbridge also entertained individuals from YICT and bought gifts for them. The defendant also claims that, despite appearances, the Payments were paid without corrupt intent and not pursuant to a scheme to procure business for Hocen by corruption. In the alternative, the defendant argues that if he did breach his duties to Hocen, the plaintiff is equally culpable. The plaintiff knew that Hocen was making the Payments to Crossbridge and knew the purpose of the Payments. Accordingly, the defendant seeks a 50% contribution from the plaintiff in respect of any sum for which he is found liable in these suits.

Issues

There are three broad issues to be decided:

(a) Did the defendant breach his duties as a director to Hocen?

(b) Did the plaintiff breach his duties as a director to Hocen?

(c) Can the defendant rely on the doctrine of ex turpi causa non oritur actio so as to defeat the claim?

I address these three issues in turn.

Issue 1: The defendant’s breach of duty

It is common ground that the Services, if performed, would have constituted a corporate benefit to Hocen. To decide whether the defendant breached his duty to Hocen, therefore, I must first decide whether Crossbridge performed the Services. If I find that Crossbridge did not, I then have to decide the true purpose of the Payments and whether that purpose conferred a corporate benefit on Hocen. Finally, in the light of my findings on these two issues, I must decide whether the defendant breached his duties to Hocen.

Did Crossbridge perform the Services?

The ostensible purpose of the Crossbridge Contracts was to place Crossbridge under a contractual obligation to perform the Services. In broad terms, Crossbridge’s ostensible role was to ensure that ZPMC complied with Hocen’s specifications in carrying out its cable installation works. The actual scope of the Services is set out with precision in cl 2 of the Crossbridge Contracts. They include:

(a) nominating a full-time English and Chinese speaking project manager in Shanghai to perform the Services (cl 2.1);

(b) establishing a detailed “Tests and Inspection Schedule” for the entire manufacturing and assembly period, which will indicate the number and type of personnel Crossbridge shall require for each week (cl 2.2);

(c) obtaining all drawings pertaining to the electrical cable installation works that are necessary to perform the inspection (cl 2.3);

(d) sending a list of the certificates/inspection or test records to Hocen, and doing so bi-weekly (cl 2.4);

(e) notifying Hocen of any discrepancies between ZPMC’s and Crossbridge’s interpretation of the pass/fail criteria of the cable installation works (cl 2.5); and

(f) holding a monthly work progress review meeting with ZPMC and reporting to Hocen any possible delays in installation works (cl 2.6).

Plaintiff’s submissions

The plaintiff advances three principal reasons in support of his case that Crossbridge did not perform the Services.

First, he submits that there is no documentary evidence that Crossbridge ever performed any of the Services:

(a) The liquidators did not find any correspondence between Hocen and ZPMC showing that Crossbridge had performed the Services. While there was some correspondence between Hocen, ZPMC and Olex on damaged cables in China, that correspondence contained no mention of Crossbridge’s role in inspecting or testing these cables.

(b) The liquidators found none of the documents which Crossbridge was contractually obliged to generate and furnish to Hocen under the Crossbridge Contracts. Clause 2.3 of the Crossbridge Contracts required Crossbridge to prepare a list of certificates or test records every fortnight. Clause 2.4 required Crossbridge to establish a detailed test and inspection schedule. None of these documents were found amongst Hocen’s records.

(c) The liquidators found none of the documents which Crossbridge was likely to have generated and furnished to Hocen if it had in fact performed the Services. Clause 2.6 of the Crossbridge Contracts required Crossbridge to hold monthly work progress review meetings with ZPMC. The liquidators found no reports, updates or minutes of these meetings amongst Hocen’s records.

Second, the plaintiff submits that the documentary evidence which the defendant has produced to show that Crossbridge performed the Services is flimsy. This evidence comprises a fax dated 19 September 2007 from one Huang Xing Fei, allegedly an employee of ZPMC. The plaintiff points out that this fax is of doubtful provenance because the liquidators did not find it amongst Hocen’s records. Further, the plaintiff objects to the admissibility of the fax on the basis that it is hearsay evidence: Huang did not testify at trial. Finally, even if one puts aside these points, the fax merely states that Hocen “previously engaged subcontractors at ZPMC ChangXing Base site”. It does not identify Crossbridge as one of these subcontractors.

Third, the plaintiff submits that the defendant’s oral evidence should not be believed because it is inconsistent and constantly evolving. The plaintiff suggests that the defendant does not himself believe that Crossbridge ever performed any of the Services. The thrust of the defendant’s evidence, as presented in his affidavit of evidence-in-chief (“AEIC”), is that Hocen engaged Crossbridge to procure business from ZPMC, not to perform the Services for Hocen. It was only under cross-examination that the defendant attempted to support a case based on ZPMC’s actually performing the Services by alleging – for the first time – that he had personally witnessed Crossbridge inspecting the installation of Olex cables at the ZPMC site. Unsurprisingly, the plaintiff submits that the defendant’s oral evidence is an afterthought and should not be believed. In any event, even if the defendant’s claim to have visited the ZPMC site “a couple of times” is true, this does not address Crossbridge’s failure to prepare and furnish documentation to Hocen as stipulated in the Crossbridge Contracts. It is also unbelievable, says the plaintiff, for the defendant to claim that this documentation was unnecessary or that he could not obtain it as he was shorthanded. The defendant’s own position is that Crossbridge was engaged to inspect Olex cables and ensure that ZPMC properly installed the cables to protect Hocen against possible claims by ZPMC. On this hypothesis, it is likely that the defendant would have ensured that Hocen was actually protected by insisting that Crossbridge prepare and furnish the stipulated documentation, for Hocen to have available in case ZPMC ever made a claim against Hocen arising from the installation work. The complete absence of any of the stipulated documentation amongst Hocen’s records means that it is more likely that Crossbridge never performed any of the Services.

Defendant’s submissions

The defendant, in turn, has four principal submissions. First, he submits that the lack of documentation does not mean that Crossbridge did not perform the Services. He claims that counterparts in China do not place much emphasis on ensuring that documentation is complete and up to date. He did nevertheless satisfy himself, by visiting the ZPMC site, that Crossbridge had performed the Services. The reason that both he and the plaintiff did not ask Crossbridge for any reports is because they were satisfied that everything was running smoothly.

Second, the defendant argues that the fax dated 19 September 2007 from Huang Xing Fei (see [42] above) is credible proof that Crossbridge was one of the subcontractors whom Hocen engaged to inspect the installation of the cables which Hocen supplied to ZPMC. The defendant submits that the liquidators saw an email between the defendant and Huang in which the defendant had asked Huang to confirm the presence of Hocen’s subcontractors at ZPMC’s site. Little weight should therefore be given to the fact that Hocen’s liquidators did not find the fax, which contained words to similar effect, in Hocen’s records.

Third, the defendant relies on a photograph said to be of one Joe Liang at the ZPMC site as evidence that Crossbridge did indeed monitor the installation of cables at the ZPMC site. Liang is the person who signed the Crossbridge Contracts on behalf of Crossbridge, and he was at the ZPMC site as a “site manager” for Crossbridge. The photograph shows a person said to be Liang stripping cables in the presence of a ZPMC worker. According to the defendant, at the time the photograph was taken, ZPMC had complained that water had seeped into a cable which had been installed. Olex required the cable to be stripped and tested, which was what Liang was doing.

Fourth, the defendant contends that there are at least two individuals who can give independent evidence about Crossbridge’s work at the ZPMC site. The first is Loh Siew Choong, a former employee of Hocen. Loh used to visit the site frequently from 2005 to 2007. The defendant called Loh as a witness. Loh’s evidence is that he saw Daniel Cheng and his staff at the ZPMC site and that they acknowledged each other. The second person is one Zhang Yixiao, a former employee of ZPMC. Zhang filed an affidavit on the defendant’s behalf opposing the liquidators’ application in May 2012 for the defendant to account for the Payments (see [30] above). The defendant now relies on the fact that in that affidavit, Zhang stated that he had heard about Crossbridge from a colleague in ZPMC. The liquidators in May 2008 corresponded with Zhang over Hocen’s debt to ZPMC. The defendant points out that, at that juncture, neither the liquidators nor the plaintiff expressed any doubt to Zhang about the existence of Crossbridge or that it had performed the Services.

Analysis and decision

In my judgment, the plaintiff has proved, on the balance of probabilities, that Crossbridge did not perform the Services. I come to this conclusion for the following reasons.

First, it there is no documentary evidence that Crossbridge performed the Services. One of the liquidators gave evidence at trial that the liquidators did not find any documentation in Hocen’s records to suggest that Crossbridge had actually performed the Services. The liquidator’s evidence was not challenged. The liquidator is an officer of the court. Neither party has suggested that he has acted without impartiality or independence, whether in giving evidence at trial or in his investigation of Hocen’s affairs. I accept his evidence. It is important also to note that the defendant does not suggest that Crossbridge did, in fact, generate and furnish to Hocen the documentation which it was obliged to generate under the Crossbridge Contracts or that it was likely to generate in the course of performing the Services, but that the documentation is, for whatever reason, no longer amongst Hocen’s documents or otherwise unavailable.

Second, I am not persuaded by the defendant’s explanation for the lack of documentation. His answer that Hocen was “very shorthanded” and that “the Chinese … are not so good [at] paperwork at that point of time” is not credible. It is understandable that a small company like Crossbridge may, for various reasons, fail to document thoroughly the services which it performs for a customer. But the complete lack of even the simplest form of direct or even indirect documentation in this case strongly suggests that Crossbridge never performed any of the Services at all. At the very least, as the plaintiff argues, the fact that Crossbridge failed to generate the documentation which the Crossbridge Contracts expressly obliged it to generate as part of the Services necessarily means that Crossbridge did not perform the Services in full. Furthermore, one would think that Hocen would consider it important to generate and retain some sort of documentation, however incomplete or indirect, to protect itself against claims by ZPMC. That was, after all, Hocen’s ostensible purpose in engaging Crossbridge to provide the Services.

Third, I agree with the plaintiff that Huang Xing Fei’s fax is inadmissible hearsay. Huang did not testify at trial to prove the fax and to be cross-examined on its contents. Even then, it is not clear that his direct evidence would have addressed the hearsay objection. There is no evidence that the contents of Huang’s fax – tendered to prove that Crossbridge in fact performed the Services – was within Huang’s personal knowledge.

Even if the fax were admissible, it would carry little evidential weight. Although it refers to “subcontractors”, there is no mention that Crossbridge was one of the subcontractors. Even if I were to assume that Huang was referring to Crossbridge, the statement that Hocen “engaged” Crossbridge to provide quality assurance services is merely evidence that Hocen entered into the Crossbridge Contracts. That is an undisputed and indisputable fact. The point in dispute is whether Crossbridge actually performed the Services. That is not a fact which Huang’s statement asserts. Even if I were to read Huang’s statement as confirming that Crossbridge actually did perform the Services, the statement does not assert – and therefore cannot prove – that Crossbridge performed the Services in accordance with the Crossbridge Contracts so as to have earned the Payments.

Fourth, I attach little weight to the photograph allegedly showing Joe Liang stripping cables on site. There is no independent evidence that the person in the photograph is in fact Joe Liang. There is also nothing in the photograph to suggest that it was taken at the ZPMC site. And even if it was, it would at best be evidence that on one specific occasion, one representative of Crossbridge was on site to remedy one specific issue with the cables. It hardly supports the claim that Crossbridge performed the Services in accordance with the Crossbridge Contracts so as to have earned the Payments.

Fifth, I do not accept the defendant’s evidence that he “personally witnessed” Crossbridge inspecting the installation of cables at the ZPMC site. The defendant did not make this allegation at any time when the liquidators interviewed him. Nor did he make this allegation in any of his affidavits in this litigation. During cross-examination, the defendant claimed that “Crossbridge has a few letters to Hocen saying that I have been to the site to accept the work done”. But no letter of this nature has been adduced in evidence. I therefore accept the plaintiff’s submission that this aspect of the defendant’s evidence is not credible and is a mere afterthought. In any event, the defendant’s evidence is merely that he was at the site “a couple of times” or “a few times” because he had a “busy schedule”. Taking the defendant at his word, then, he is hardly in a position to testify generally that Crossbridge performed the Services in accordance with the Crossbridge Contracts so as to have earned the Payments.

Finally, Loh Siew Choong’s and Zhang Yixiao’s evidence, in my view, does not assist the defendant’s case at all. Loh’s evidence is that he told the liquidators that he ran into Daniel Cheng once at ZPMC’s canteen on ChangXing Island. Although Loh recalls being told that Cheng was “from Crossbridge”, he did not know that Cheng also worked for YICT. Accordingly, the fact that Cheng was spotted on the island by someone other than the defendant hardly corroborates the defendant’s oral evidence that Crossbridge performed the Services: Cheng could have been there not for Crossbridge but for YICT. And even if he had been there for Crossbridge, that in itself says nothing about whether Crossbridge performed the Services in accordance with the Crossbridge Contracts so as to have earned the Payments. Loh’s ignorance about Crossbridge’s operations is underscored by his evidence that he knew nothing about the people associated with Crossbridge, including Joe Liang.

As regards Zhang, his evidence does not show that Crossbridge performed the Services. While he claims to have heard of Crossbridge, he also says that he “did not have direct contact and/or communication with Crossbridge”. He therefore has no personal knowledge about Crossbridge’s activities. Importantly, Zhang does not assert that Crossbridge was Hocen’s subcontractor or that it was engaged in performing services for Hocen in connection with Hocen’s business with ZPMC. Accordingly, I give his evidence no weight.

Burden of proof

I close with an observation on the burden of proof. The observation is necessitated by the defendant’s submission that the plaintiff has failed to discharge his burden of proving his case on this point because he has adduced no evidence that Crossbridge did not perform the Services. The suggestion is that the plaintiff is attempting to shirk the legal burden of proving his case by relying on an absence of evidence that Crossbridge performed the Services. I do not accept that suggestion. Instead, I find that the plaintiff has produced evidence which is not inherently incredible – for example, in the form of the liquidator’s evidence that no documentation was found in Hocen’s records suggesting that Crossbridge had performed the Services – which suffices to raise an inference that Crossbridge did not in fact perform the Services. The evidential burden of rebutting that allegation thus falls properly upon the defendant. For the reasons I have given, the defendant has failed to produce weighty or even credible evidence to the contrary. The distinction between the legal and evidential burdens of proof are well-established and are explained fully in the Court of Appeal’s decision in Britestone Pte Ltd v Smith & Associates [2007] 4 SLR(R) 855 at [57]–[60]. The plaintiff has correctly cited that case on this point. I need not repeat the applicable principles here.

For the reasons above, I find that Crossbridge did not perform the Services. Accordingly, compensating Crossbridge for the Services cannot have been the defendant’s true purpose in causing Hocen to make the Payments.

What was the true purpose of the Payments?

I turn now to examine the defendant’s true purpose for causing Hocen to make the Payments to Crossbridge. As will be seen, there is a substantial degree of common ground between the parties on this issue. Their differences are in the final analysis inconsequential and do not change the fact that, in my judgment, the defendant caused Hocen to make the Payments pursuant to a scheme to engage and fund Crossbridge to procure business for Hocen from ZPMC by corruption. I begin with the plaintiff’s submissions.

Plaintiff’s submissions

The plaintiff’s submissions on the true purpose of the Payments may be understood in three parts. First, the plaintiff contends that on the defendant’s own evidence, Crossbridge’s main purpose was to procure business for Hocen from ZPMC: see [43] above. According to the defendant, Crossbridge was the “middleman between Hocen and ZPMC”, and its role was to help Hocen “break into the Chinese market”. The defendant also told the liquidators that Crossbridge was appointed to “help in the marketing of [Hocen’s] products”. In both instances, the defendant made minimal reference to performing the Services being Crossbridge’s role. This in turn meant that the Services, including providing inspection reports and certifications, were “meaningless”, in the defendant’s own words.

Second, the plaintiff argues that the Payments were intended specifically for Crossbridge to pay on as bribes. Again, the plaintiff relies to a large degree on the defendant’s own evidence for this contention. The defendant said in his affidavit filed to oppose the liquidators’ application for an account in May 2012 (see [30] above) that because Hocen’s directors were not prepared themselves to pay any “bribes or kick-backs”, he and the plaintiff appointed Crossbridge as a “middle man” to do so. During cross-examination, the defendant admitted that Crossbridge was paid by Hocen to “entertain the ZPMC people at site” and to “buy them gifts” such as “mobile phones”. Crossbridge did this, in the defendant’s own words, “to make the site people happy” as and when they had complaints about Hocen’s cables. Accordingly, says the plaintiff, the Payments were used to fund corrupt inducements to the recipients, and were therefore bribes.

Third, the plaintiff advances the further contention that Crossbridge was bribing Daniel Cheng to use his influence in YICT to cause YICT to specify Olex cables in YICT’s orders of cranes from ZPMC, and that this was one of the ways in which Crossbridge procured business for Hocen from ZPMC. The defendant himself describes Cheng as being both a representative of Crossbridge and an equipment manager at YICT. The defendant implicitly accepted in cross-examination that Cheng used his position and influence in YICT to cause YICT to specify Olex cables for the cranes which YICT was ordering from ZPMC. The defendant also gave evidence that Cheng was able, in one instance, to convince YICT as the end user to accept defective cables supplied by Hocen. The plaintiff also points out that the defendant omitted any mention of Cheng when the liquidators interviewed the defendant. The plaintiff argues that that this omission was deliberate, in order to conceal the defendant’s knowledge that part at least of the Payments were being channelled through Cheng as bribes to YICT.

Defendant’s submissions

The defendant does not deny that Crossbridge’s purpose was to procure business for Hocen from ZPMC. His case is that Crossbridge was engaged to perform an inseparable “package” of services. One component of that package was to perform the Services. The other component was to procure business for Hocen by marketing its Olex cables in China. Thus, having accepted that Crossbridge did not provide any reports or certifications to Hocen as it was obliged to by the Crossbridge Contracts, the defendant is eager to show that Crossbridge was nevertheless “resourceful in providing other ‘value added services’”. These other services included, among other things, “[e]ntertaining the [YICT] and ZPMC staff to maintain good relations so that they would not complain or create trouble.” Accordingly, the defendant appears not to dispute the substance of the plaintiff’s first submission on the purpose of the Payments (see [60] above) and the facts underlying the plaintiff’s second submission on the issue (see [61] above).

What the defendant does dispute is the plaintiff’s allegation that Crossbridge procured business for Hocen from ZPMC by corruption. The defendant’s central submission on this issue is that he caused Hocen to make the Payments to Crossbridge without any corrupt intent. One reason for this, he says, is that Hocen did not instruct Crossbridge to buy gifts for people at ZPMC or to entertain them; instead, Crossbridge did this of its own accord to further Hocen’s business interests. Another reason he gives is that it is common practice in China to buy gifts or host meals to build and develop a business relationship. He suggests that it is “surely legitimate” for Crossbridge to engage in this conduct, thereby implying that it is equally legitimate for Hocen to fund Crossbridge’s conduct. The defendant also submits that the plaintiff is speculating on Daniel Cheng’s role and that there is no evidence to show that Cheng was in a position to influence or cause YICT to specify Olex cables when it ordered cranes from ZPMC.

Analysis and decision

In my judgment, the plaintiff has proved on the balance of probabilities that the defendant made the Payments pursuant to a scheme to engage and fund Crossbridge to procure business for Hocen from ZPMC by corruption.

I begin by noting that I am making findings about the true nature of the Payments in the context of determining whether a director has breached his duty to the company. In that context, there is no technical definition of corruption is which is applicable. There is such a definition in the penal legislation which criminalises corruption. That definition contains the mental and physical elements which a prosecutor must prove to secure a conviction for corruption. But the broad question in this part of my analysis is whether the defendant breached his duty to Hocen as a director and not whether he is guilty of the crime of corruption. A director may breach his duties as a director by giving a corrupt payment as defined in the criminal law. But that is not the only way in which he may breach that duty. In any event, much will depend on the circumstances. Therefore, it would be inappropriate for me to suggest or to adopt a comprehensive legal definition of what corruption is for the purposes of determining whether a director is in breach of duty.

In this connection, the plaintiff refers me to Black’s Law Dictionary (10th Ed, 2014), which defines a bribe as a “reward, gift or favour given or promised with a view to pervert the judgment of or influence the action of a person in a position of trust”. I respectfully adopt that as a working definition for present purposes.

I now turn to explain why I have found that the defendant caused Hocen to make the Payments pursuant to a scheme to engage and fund Crossbridge to procure business for Hocen from ZPMC by corruption.

First, the defendant himself accepts that the Payments went towards entertaining and buying gifts for the representatives of ZPMC and YICT. He said that these “kickbacks” (to use his own word) helped to “make the site people happy” and to ensure that they did not complain about the quality of the Olex cables. The defendant sought to explain that Crossbridge’s use of the Payments in this way did not amount to corruption because no actual money was paid to ZPMC’s representatives. That is, however, a distinction without a difference. The entertainment, gifts and favours which Crossbridge extended to the representatives of ZPMC amount to corruption because they were given for the purpose of influencing the decisions which the recipients made on behalf of ZPMC.

Second, I accept that Daniel Cheng used his position and influence in YICT to cause YICT, as the end user, to specify Olex cables over rival manufacturers’ cables in its contracts with ZPMC with the expectation that ZPMC would source the Olex cables through Hocen. Although the evidence which the plaintiff has presented as the foundation for this inference is circumstantial in nature, it is nevertheless compelling in effect when viewed in the round. Much of this evidence, again, comes from the defendant’s own mouth. Its key strands are as follows:

(a) Daniel Cheng was in a position to influence YICT for Hocen’s benefit. As a representative of Crossbridge, who had been engaged and funded by Hocen to procure business, Cheng was alive to Hocen’s business interests. At the same time, he was also an equipment manager with YICT, according to the defendant. As Cheng was, in the defendant’s own words, “wearing two hats”, he was especially well-placed to pursue Hocen’s interests from within YICT, who had decisive influence on whether ZPMC would need to purchase Olex cables from Hocen.

(b) In that connection, Hocen had a strong need to exert this influence over YICT. ZPMC stated in a letter to the defendant “[t]he fact that OLEX cables are expensive, we would only agree to purchase it if the customers would strongly insist to have OLEX cables in their cranes.” What made YICT “strongly insist” on the use of Olex cables, then? The answer is Crossbridge, as the defendant explains in his submissions:

(c) In fact, Crossbridge did influence YICT through Daniel Cheng. The defendant himself has described Cheng as “the link between [YICT] and Crossbridge”. More specifically, the defendant did not deny that Cheng had a role in causing YICT to specify Olex cables in its dealings with ZPMC; in fact, he implicitly accepted that Cheng had such a role, as can be seen in the following exchange in cross-examination:

(d) ZPMC and YICT both behaved as if they had been bribed by behaving in a manner which was ostensibly against their own interests and in favour of Hocen. The defendant’s own evidence is that Crossbridge persuaded ZPMC to forgo valid legal claims against Hocen for late delivery and defective goods. One example took place in September 2007, when Crossbridge convinced ZPMC not to press Hocen for damages for defective delivery of a reeling cable. The defendant also testified that Daniel Cheng was able to persuade YICT to accept cables which had presented problems caused by twisting at their core.

(e) Finally, I accept that the defendant deliberately concealed from the liquidators the existence and role of Daniel Cheng in Hocen’s business with ZPMC in order to avoid discovery of his corrupt scheme. Despite having several opportunities to do so, the defendant did not mention Cheng’s name to the liquidators when they were questioning him about Crossbridge. He suppressed Cheng’s name even though it was on account of the “special relationship between Daniel Cheng of Crossbridge and Hocen” that ZPMC gave favourable credits to Hocen when Hocen was first established. When the defendant was later cross-examined on the misleading nature of his answers to the liquidators, he gave evasive and unconvincing answers. This is apparent from the following exchange:

I therefore reject the defendant’s submission that the plaintiff’s contentions as to Daniel Cheng’s role procuring business for Hocen by corruption at YICT are mere speculation. I am satisfied on the balance of probabilities that Cheng exercised improper influence over YICT, through bribes such as entertainment and gifts, to cause YICT to specify Olex cables in its contracts with ZPMC. And funding these inducements to YICT was at least part of the defendant’s purpose in making the Payments to Crossbridge.

Third, the defendant’s argument that he had no corrupt intent in making the Payments misses the point. What matters is whether he intended the Payments to be used to influence decision-makers in a position of trust at ZPMC and YICT. And that was indeed the defendant’s intention. It is his own case that the Payments went towards entertaining ZPMC officers and buying them gifts so that they would, among other things, not pursue valid claims against Hocen for defective cables or poor installation. While he seems to deny that Daniel Cheng played a crucial role in bribing YICT officers, he does not deny that the only way YICT would insist on Olex cables was if it had been persuaded to do so, and that Crossbridge was paid to do the persuasion (see [70(b)] above).

For these reasons, I accept the plaintiff’s case that the defendant made the Payments pursuant to a scheme to engage and fund Crossbridge to procure business for Hocen from ZPMC by corruption.

Did the defendant breach his duty to Hocen?

I turn now to whether, in the light of these facts, the defendant breached his duty to Hocen as a director. In my view, he did. I begin with the applicable principles.

Applicable principles

Section 157(1) of the Act imposes upon every director of every company two distinct statutory obligations in discharging the duties of his office: (a) at all times to act honestly; and (b) at all times to use reasonable diligence. These distinct obligations are based respectively on a director’s fiduciary duty under the general law to act bona fide in the interests of the company and on his common law duty to exercise reasonable care and diligence: Hans Tjio, Pearlie Koh and Lee Pey Woan, Corporate Law (Academy Publishing 2015) (“Corporate Law”) at paras 09.020 and 09.028. The plaintiff’s pleaded case rests on both obligations. I must therefore consider whether the defendant, as a director of Hocen, failed to act bona fide in Hocen’s interests by causing Hocen to make the Payments to Crossbridge, or whether he failed to exercise reasonable care and diligence in doing so.

I begin by considering the first of these distinct obligations.

To determine civil liability for breach of the duty to act bona fide in the interests of a company, the court will assess the intention of a director on a subjective and an objective basis: Goh Chan Peng and others v Beyonics Technology Ltd and another and another appeal [2017] SGCA 40 (“Goh Chan Peng”) at [35]–[36]. At the subjective level, the court must consider whether the director acted bona fide in what he believed (and not what the court believes) to have been in the interests of the company (at [35]). At the objective level, the court has to assess whether an intelligent and honest man in the position of the director could, in the whole of the existing circumstances, have reasonably believed that acting in that way would be for the benefit of the company (at [36]). Where a director’s act is not objectively in the company’s interests, the court may draw the inference that the subjective element is also not satisfied (at [36]).

Having framed the analysis as incorporating a discrete subjective element, the Court of Appeal in Goh Chan Peng then endorses the observation in Walter Woon on Company Law (Tan Cheng Han gen ed) (Sweet & Maxwell, Revised 3rd Ed, 2009) that the courts in practice often apply a more objective test (at [36]). In this connection, I add that Goh Chan Peng may be read in two ways. First, it may be read as relying on the objective assessment of a director’s intention purely as an evidential basis upon which to draw an inference as to his subjective intention. To the extent that this is true, Goh Chan Pheng departs from the Court of Appeal’s earlier approach in Ho Kang Peng v Scintronix Corp Ltd [2014] 3 SLR 329 (“Ho Kang Peng”). That case has been regarded in a leading local text as laying down a purely objective approach to determining a civil breach of the duty to act bona fide in the interests of a company: Corporate Law at paras 09.022–09.023. The second way in which Goh Chan Pheng may read is that it lays down a substantive objective component, consonant with Ho Kang Peng. Goh Chan Pheng was not available at the time the parties made their closing submissions. In fairness to the parties, therefore, I shall read Goh Chan Pheng as being consistent with Ho Kang Peng.

Also relevant to the present case is the idea that a director who creates a sham contract and who causes the company to participate in corruption cannot be said to be acting bona fide in the interests of the company even if his subjective intent is to maximise the company’s profits. This proposition forms the ratio of Ho Kang Peng. That is a case on which the plaintiff relies heavily. The basis of the proposition appears to be twofold, according to Ho Kang Peng at [40]. First, it is not in the interests of a company to maximise profits by any means. It is in the interests of a company, which ultimately comprises its shareholders (at least, while it is solvent), “to have its directors act within their powers and for proper purposes, to obtain full disclosure from its directors, and not to be deceived by its directors”. Second, a director who causes a company to participate in corruption runs the risk of exposing the company to criminal liability, a risk which can never be justified as being in the company’s interests. The same would, of course, be true of a director who causes a company to make a payment to an intermediary, intending the intermediary to make the corrupt payments in place of the company.

I make two conceptual observations about the principle in Ho Kang Peng. First, it seems to me that for the principle in Ho Kang Peng to have any teeth, the test for determining whether a director is in breach of his duty to act bona fide in the interests of the company must necessarily incorporate a discrete objective element. That is because the principle in Ho Kang Peng, by definition, circumscribes the interests of a company and the justifiability of the risks which it may take in purely objective terms: terms which may be entirely at variance with a director’s subjective intentions. Thus, in Ho Kang Peng, the Court of Appeal accepted (at [37]) that the director in question, subjectively speaking, had the financial benefit of the company in mind and did not act to further his own interests: see also Corporate Law at para 09.022. The Court nevertheless went on to observe that, objectively speaking, the director acted against the company’s interests by causing it to participate in a corrupt scheme because his act exposed the company to potential criminal proceedings (at [40]).

By finding that the director in Ho Kang Peng had breached his duty to act bona fide in the company’s interests solely by virtue of the objective result of his actions and not his subjective intention in acting as he did, the Court of Appeal effectively exercised a supervisory jurisdiction over directors by drawing a consequentialist line in the sand. A director who crosses that line will be held to have breached his duty to the company and will be held responsible for the result or potential result of his acts without regard to his subjective intention. The consequentialism behind the rule in Ho Kang Peng is unmistakeable: directors cannot be allowed, by crossing that line, to put at risk the wider interests which all stakeholders have in the company. In that case, the director was held to have crossed the line by exposing the company to criminal liability when he acted to maximise the company’s profits by participating in a corrupt scheme.

This leads to my second observation, which is that the objective approach seems quite unexceptional in a case like Ho Kang Peng but can seem anomalous in a case like the present. The company in Ho Kang Peng was a large public listed company (see Ho Kang Peng at [41] and [70]). As such, it had widely-held shares, a broad base of diverse stakeholders and well-developed governance structures going far beyond the minimum required the Act. The director in Ho Kang Peng undermined all those underlying interests when he breached his duty. Hocen, on the other hand, is a small, closely-held private company. It has never had more than four employees. Its internal governance is no more than the bare minimum required by the Act. It has a complete coincidence of identity and interests between the directors, the shareholders and the company. That was the case throughout its life, and even now when it is in liquidation. Creditors’ interests have not intruded because it is solvent. In that sense, the plaintiff and the defendant are the company. I shall refer to such a company as a “one-man company”. I use that term to mean a company, whether solvent or insolvent, which is under the de facto ownership and control either of a single person or of a group of persons who are acting entirely in concert, all of whom I shall refer to as “director-shareholders”.

In a one-man company, it may be said that the consequentialism of the objective approach loses a measure of force, at least so long as it is solvent. There is no true separation between ownership and control. As a consequence, there is no principal-agent problem for the law on directors’ duties to target and address. In other words, there is in reality and in substance no abstract third party known as the “company” who has a diverging interest which the law must be astute to protect. Instead, the shareholders, the directors and the company are, ex hypothesi, voluntarily assuming all of the risks which they choose to take on in order to maximise the company’s profits. There is a strong argument for saying that, in those circumstances, company law should not intervene to prescribe a consequentialist line beyond which a director’s act will be a breach of the director’s duty regardless of his subjective intention. If the director’s act exposes the company to risk, and the risk eventuates, the consequences that follow are within the province of the general law, both criminal and civil and both at the corporate and the individual level. If the risk does not eventuate, however, it could be said that company law has no basis to intervene and hold the director to be in breach of duty merely in exposing the company to that risk. Hence, the consequentialist approach, if it is to apply to a solvent one-man company such as Hocen, must be justified on grounds other than addressing the tensions inherent in the principal-agent problem. And there are at least two grounds.

First, the law on directors’ duties serves not only to vindicate the shareholders’ private interest in having their capital applied in accordance with their agreement and for proper corporate purposes in order to maximise returns but also to vindicate a public interest in holding directors to minimum standards of commercial morality in directing a company’s affairs. No doubt that minimum standard must set a very low baseline in order to avoid unnecessary interference with the central role of the enterprise and of risk-taking in wealth creation. But not causing the company to participate in a scheme to procure business by corruption is not too much for company law to ask of a director. Because this interest is a public interest, it will subsist and can be vindicated at the suit of the company even in a one-man company, and even if the company is solvent. Of course, as a practical reality, this public interest will not be vindicated unless control of the company’s right to bring action changes, either through share transfers, through a successful application under s 216A of the Act or, as here, through the imposition of external administration such as the appointment of liquidators. But recognising that practical reality does not undermine the conceptual basis of the court’s supervisory jurisdiction.

Second, it is preferable for company law to take a single approach to all companies, whether large or small and whether widely or closely held. Just as all directors are subject to the same fiduciary, common law and statutory duties regardless of the size and nature of their companies, so too all directors must be subject to the same objective approach regardless. Making an exception to the objective approach for companies like Hocen would have to rest upon difficult distinctions of fact around the constitution and composition of a given company. These distinctions would have either have to be fixed a priori by drawing bright lines, which are always essentially arbitrary, or would have to be resolved after the fact by judge-made law on a case by case basis. Either approach runs the risk of introducing uncertainty and possible incoherence into the law.

The upshot is that there is good reason for the part-subjective and part-objective approach to breach of duty in Ho Kang Peng to prevail even in the case of a solvent one-man company like Hocen.

Analysis and decision

I turn now to apply these principles to the facts of the present case.

I begin by finding that, in causing Hocen to make the Payments, the defendant’s subjective intent was to confer an economic benefit on Hocen and not on himself. In a very broad sense, of course, it is true that the defendant’s ultimate objective in making the Payments was to derive a personal economic benefit by way of the fees he would earn as a director of Hocen and the dividends he would receive as a shareholder of Hocen. But, on the assumption I have set out at [18] above, his intention at all times was that those benefits should not accrue to him directly but only indirectly through the medium of the company. That would mean that he intended those benefits be equally available to all stakeholders in accordance with Hocen’s corporate constitution and the Act. And indeed both the plaintiff and the defendant did earn substantial director’s fees and dividends from Hocen so long as its business with ZPMC continued. There is therefore no reason for me to doubt that, as a question of fact, the defendant subjectively intended the Payments to result in an economic benefit for Hocen rather than for himself.

The next point I make is that, in a purely factual sense, the Payments indeed resulted in a significant economic benefit for Hocen. The defendant engaged and paid Crossbridge to procure business for Hocen from ZPMC. The defendant told the liquidators in clear terms that “the tie up with Crossbridge brought us more sales because of their connection (guanxi) as they have high level contacts with ZPMC”. The effectiveness of Crossbridge is borne out by the figures. Hocen achieved the remarkable feat of booking almost S$23.7m in revenue and earning over S$4.7m in profit in just two and a half years of operations, achieving a profit margin of just under 20%. Further, it managed to do all of this with no sales staff at all in China and only three sales staff in Singapore. Virtually 100% of this business came from just one customer: ZPMC.

However, I agree with the plaintiff that, on the authority of Ho Kang Peng, the defendant breached his duty to act bona fide in the interests of Hocen when he secured this economic benefit for Hocen through corruption. Now, it is true that in this case, unlike Ho Kang Peng, the defendant did not deceive the company in securing the benefit. For reasons I will come to, I find that the plaintiff knew and understood how Hocen intended to and managed to attract this staggering volume of extraordinarily profitable business from ZPMC in such a short time. The sham Crossbridge Contracts and the Payments were therefore tacitly but unanimously approved by both organs of the company: the shareholders and the directors. In that sense also, the defendant did not act dishonestly, at least not as against the plaintiff or Hocen. Nevertheless, a number of factors lead me to conclude that the court’s supervisory jurisdiction over directors is engaged in this case so as to render the defendant’s conduct a breach of his duty to Hocen.

The first factor is my finding that the defendant made the Payments pursuant to a scheme to engage and fund Crossbridge to procure business for Hocen from ZPMC by corruption. In the words of the Court of Appeal in Ho Kang Peng (at [40]), the defendant by making the Payments created an “unjustified risk of subjecting [Hocen] to criminal liability”. That risk is objectively contrary to Hocen’s interests. The defendant personally created that risk by initiating and making the Payments.

The second factor is my finding that the Crossbridge Contracts were sham contracts. As I have found (see [48]–[56] above), Crossbridge did not perform the Services for Hocen as stipulated in the Crossbridge Contracts. Crossbridge’s true role was to procure business for Hocen from ZPMC by corruption. But the truth is nowhere reflected in any agreement between Hocen and Crossbridge, and certainly not in the Crossbridge Contracts. I find that Hocen and Crossbridge intended the Crossbridge Contracts from the very outset to be nothing more than a plausible legal pretext for the corrupt scheme. They entered into the contracts with absolutely no intention whatsoever that Crossbridge should ever perform the stipulated Services. The result is that the Crossbridge Contracts were a sham. They were not unlike the sham consulting agreement which the director in Ho Kang Peng executed on behalf of his company as a plausible legal pretext for the corruption in that case. That was one reason the Court of Appeal found that the director had breached his duty to act honestly under s 157 of the Act: Ho Kang Peng at [41]. Similarly, the fact that the Crossbridge Contracts were a sham taints indelibly the defendant’s conduct in causing Hocen to make the Payments, ostensibly pursuant to those contracts.

A third factor is that the defendant deliberately structured the corrupt scheme to create a defence of plausible deniability. He needed this defence not as against the plaintiff, who for reasons I will explain knew the truth from the outset, but as against external parties such as Hocen’s auditor, a liquidator who might take over control of the company and criminal investigators such as the CAD who might investigate the Payments. The defendant’s own evidence is that he interposed Crossbridge in Hocen’s dealings with ZPMC because he wanted an intermediary to do what he euphemistically calls the “leg work” and what I would call the dirty work:

This indicates, at the very least, that the defendant interposed Crossbridge specifically to remove Hocen by one step from future gratifications to ZPMC. Further, the defendant made the majority of the Payments in cash delivered directly to Crossbridge. That was no doubt to make it harder for anyone with an interest to trace the flow of funds and the purpose of the Payments. All of this was a deliberate attempt to engage plausible deniability and to misdirect investigation of the Payments by external parties.

All of this also points to the defendant having breached his duty to exercise reasonable care and diligence rather than complying with it. It is apposite to note here that the Court of Appeal’s analysis in Ho Kang Peng found that the director’s act in causing the company to enter into a sham contract as a pretext for making corrupt payments was a breach not only of his fiduciary duty, but also of his duty to exercise reasonable diligence and to exercise reasonable care and skill: see Ho Kang Peng at [40], [42] and [44].

Accordingly, the plaintiff has succeeded in proving his pleaded case. The defendant is in breach of duty to Hocen. That suffices to dispose of the defendant’s primary case in defence.

Issue 2: The plaintiff’s breach of duty

I turn now to consider the defendant’s alternative case in defence. That case is that the plaintiff knew and approved of the defendant’s scheme to engage and fund Crossbridge to procure business for Hocen from ZPMC by corruption and is therefore liable to make a contribution of 50% to the defendant in respect of his liability. I begin with the defendant’s submissions.

Knowledge of Hocen’s transactions with Crossbridge

Defendant’s submissions

The defendant’s case on the plaintiff’s knowledge of Hocen’s transactions with Crossbridge is this: the plaintiff knew the true purpose of involving Crossbridge in the parties’ planned business even before Hocen was incorporated. After Hocen was incorporated, the plaintiff was an equal participant in all of Hocen’s major decisions, particularly those involving Hocen’s business and finances. The plaintiff approved all 18 of the Payments and countersigned the relevant cheques or remittance instructions together with the defendant. He did so with knowledge of Crossbridge’s role and the purpose of the payments. The defendant relies on three broad strands of evidence to show that the plaintiff had the necessary knowledge.

First, the defendant relies on his evidence that the plaintiff accompanied the defendant when the defendant went to UOB on two occasions to withdraw cash from Hocen’s account against a cash cheque in order to make a cash payment to Crossbridge. The first occasion took place at a UOB branch at MacPherson Road. The plaintiff accepts that he visited this branch with the defendant. The date on the cheque is 23 September 2005, which means that they must have visited the MacPherson branch at or around that time. The second occasion took place at a UOB branch at Shenton Way. The date on the cheque is 30 November 2005. The plaintiff has accepted that this was Hocen’s “2nd payment” to Crossbridge, and that he was at the bank with the defendant when the defendant withdrew the cash against this cheque. It is not disputed that these two cash cheques went towards the first two Payments to Crossbridge. The defendant argues that the plaintiff’s knowledge of these two cash cheques corroborates the defendant’s case that the plaintiff “had known about Crossbridge from the beginning, and agreed to the engagement of Crossbridge and its payment arrangement” [emphasis in original].

Second, the defendant points to the fact that the plaintiff knew that Hocen’s auditor had asked Hocen to confirm that the amounts that Hocen was paying to Crossbridge were genuinely for cable installation services. The auditor’s request was communicated to Hocen by a letter dated 28 July 2006 which was addressed to the plaintiff and the defendant. The defendant initially prepared a draft response stating that Crossbridge’s “value-added services … enables us to win projects”. This draft response was never sent. Hocen’s actual response to the auditor, sent on 20 September 2006, deleted any mention of Crossbridge enabling Hocen to win projects. The defendant says that it was the plaintiff who refused to approve the letter until those words were deleted and the he did so because he was worried that those words could be read as an implicit admission that Hocen was involved in corruption.

Third, the defendant points out that the plaintiff was a co-signatory of each of the cash cheques and of each of the telegraphic transfer application forms for the Payments. The defendant’s point is that the plaintiff knew the purpose of these transactions. The defendant relies on the plaintiff’s own evidence that he is a careful businessman who approved each Payment only after sighting the relevant underlying documentation, after being satisfied of the purpose of the payment and after ascertaining that the sum to be paid was in fact due and payable. The defendant highlights two payments totalling over S$520,000 which were made within three weeks in December 2006. The plaintiff’s evidence is that he did not believe this to be a large sum and did not ask why it had to be paid. The defendant asks me to reject this evidence, pointing to the plaintiff’s own evidence about the care he takes in approving payments.

Plaintiff’s submissions

The plaintiff’s central submission in response to the defendant’s alternative case in defence is that the defendant has failed to discharge his burden of proof. The plaintiff argues that this defence cannot succeed unless the defendant can prove that the plaintiff knew that Crossbridge’s true role was to be to procure business for Hocen from ZPMC by corruption and that the plaintiff agreed to that role in 2004, even before Hocen was incorporated. The plaintiff relies on three principal arguments to submit that the defendant has failed to discharge his burden of proof on the balance of probabilities, and that the defendant’s claim for contribution must necessarily fail.

First, the plaintiff submits that I should reject the defendant’s self-serving oral evidence that the plaintiff knew of Crossbridge’s true role. That evidence consists only of the defendant’s bare assertion that “[the plaintiff] and I decided to appoint Crossbridge as Hocen’s agent”. Further, the defendant has given inconsistent accounts of when he and the plaintiff purportedly decided to appoint Crossbridge. Finally, the defendant failed to lead any evidence from any of the officers from Crossbridge to show that the plaintiff was complicit in the defendant’s true arrangement with Crossbridge.

Second, the plaintiff submits that the defendant told him that Crossbridge’s role was only as a subcontractor and not to procure business. The plaintiff refers to the latter role as that of an “agent”. As a result, says the plaintiff, his understanding of Crossbridge’s true role all along was that it was a subcontractor and not an agent. He says that the defendant himself maintained the position that Crossbridge was a subcontractor before this litigation was commenced. Thus, for example, the defendant told Hocen’s auditor that Crossbridge was a subcontractor. He also told the accountant appointed by the plaintiff to investigate Hocen before it was wound up that Crossbridge was a subcontractor. As a result, relying on the defendant’s statements, the plaintiff has also taken the position consistently that Crossbridge was a subcontractor and not an agent. He took this position in his affidavits opposing Hocen’s winding up in 2007, in his answers to Hocen’s liquidators, and in his evidence in this trial. That is what the plaintiff believed when he approved and co-signed Hocen’s payments to Crossbridge.

Third, the plaintiff argues that he did not know and could not reasonably have known that Crossbridge was procuring business for Hocen from ZPMC by corruption at the time the defendant was making the Payments. It was the defendant and not he who ran Hocen. The plaintiff also did not deal with Crossbridge. Hocen’s employees had either no knowledge or only limited knowledge of Crossbridge. They did not testify that the plaintiff knew that Crossbridge was procuring business for Hocen from ZPMC at all, let alone by corruption. Finally, the final form of Hocen’s formal response dated 20 September 2006 to Hocen’s auditor’s letter dated 28 July 2006 (see [100] above) does not show, as the defendant submits, that the plaintiff knew that Crossbridge was procuring business for Hocen from ZPMC by corruption.

Analysis and decision

I find that the plaintiff was complicit in the scheme to engage and fund Crossbridge to procure business for Hocen from ZPMC by corruption. The objective evidence, albeit largely circumstantial, is compelling. When coupled with the defendant’s oral evidence, which I accept, it suffices to discharge the defendant’s burden of proof.

I accept the defendant’s evidence that the plaintiff knew from the outset, even before Hocen was incorporated, that Crossbridge was to be engaged to procure business for Hocen from ZPMC. I accept also that the plaintiff knew that Crossbridge’s role would be to procure business for Hocen from ZPMC by corruption. The plaintiff’s evidence is that he found out the truth only in the course of winding up proceedings which the defendant commenced in 2007. For the reasons which follow, I reject that evidence.

I find that the plaintiff was an active participant in Hocen’s significant business decisions. Although the plaintiff was not the managing director of Hocen or directly involved in its sales function, the defendant kept the plaintiff updated from time to time on Hocen’s affairs. After all, it was largely the plaintiff’s capital which was at stake. I accept the defendant’s evidence that he would discuss every one of Hocen’s projects with the plaintiff, including purchase orders and contracts. This evidence is supported by the testimony of a member of Hocen’s staff, Goh Lnai Mun.

I find also that the plaintiff knew that Hocen was making payments to Crossbridge. It is a fact that the plaintiff signed all the cash cheques and all of the remittance instructions. He was also with the defendant on at least one occasion when the defendant withdrew cash from Hocen’s account for Crossbridge against a cash cheque. That took place at a UOB branch at MacPherson Road. The date on the cheque indicates that this took place in September 2005: see [99] above. The plaintiff explained in cross-examination that it was a “coincidence” that he and the defendant had visited UOB together on that occasion. The plaintiff says that the defendant had told him that he needed to go to the bank. As it happened, so did the plaintiff. And so, according to the plaintiff, it was purely by coincidence that they went together. The plaintiff claims that he was there only to “settle [his] family issues”, and that he did not know that the defendant was there to withdraw cash to pay Crossbridge.

I reject the plaintiff’s explanation as an afterthought. I find that the plaintiff knew exactly the purpose of the defendant’s visit to the MacPherson branch of UOB to do in September 2005. The plaintiff had signed the cash cheque which the defendant took with him to UOB that day. And, when the plaintiff asked the defendant the purpose of the payment (as the plaintiff testified he always did), I find that the defendant would have told him the true purpose of the payment in order to obtain the defendant’s signature on it. Moreover, the weight of the plaintiff’s own evidence is that he knew that the defendant was at the branch to cash a cheque. That is what he told Hocen’s liquidators when they interviewed him in 2008. That is what he pleaded in his reply and defence to the defendant’s counterclaim in 2015. In fact, his assertion there is even broader: he pleaded that he “knows that the Cash Cheques were encashed by the Defendant”, without qualifying when he acquired that knowledge. This suggests that the plaintiff always knew that the defendant cashed the cheques which the plaintiff had countersigned. And as he stated in his AEIC in 2016, he knew that the defendant had cashed a cheque when they visited the UOB branch at MacPherson together. In cross-examination, the plaintiff disclaimed that statement in his AEIC, asserting that it had arisen as a result of “some misunderstanding during [his] communication with [his] lawyers”. I do not find this explanation convincing in view of the rest of the plaintiff’s own evidence.

In this connection, it must be borne in mind that the essence of the plaintiff’s evidence is that, from the very outset in 2005 until Hocen went into liquidation in 2007: (a) he believed that Crossbridge’s role was purely as Hocen’s subcontractor; and (b) he held that belief because that was what the defendant told him. That is why the plaintiff in his evidence – which I have just referred to – is willing to admit that Crossbridge wanted payment in cash and that he knew that the defendant had some role in facilitating such payments at least on one occasion, ie, in September 2005. The foundation of the plaintiff’s claim of ignorance in this regard is effectively an assertion that the defendant – while he was making the 18 Payments to Crossbridge and when the plaintiff questioned the defendant on the need for each of the Payments, as the plaintiff claims he did – consistently and repeatedly lied to the plaintiff that Crossbridge was merely a subcontractor and that Hocen was paying Crossbridge these large sums of money purely for the never-performed Services.

In my judgment, the defendant had no reason to lie consistently and repeatedly in this manner. I attach little weight to the fact that the plaintiff has historically referred to Crossbridge consistently as a subcontractor, a point the plaintiff emphasises in his submissions: see [104] above. That fact is equally consistent with the view that the plaintiff knew all along that Crossbridge was procuring business from ZPMC for Hocen by corruption – which is the defendant’s alternative case – and that the plaintiff knew well enough to conceal his knowledge of the corrupt scheme to protect himself. That, I find, is what in fact happened. The plaintiff has offered no sensible reason why the defendant would lie to him consistently and repeatedly over a two-year period. Even if the defendant did tell him that Crossbridge was merely a subcontractor, I reject the plaintiff’s evidence that he simply took the defendant’s word at face value and authorised Hocen’s payments to Crossbridge on that basis. As I explain below at [119], the plaintiff’s own evidence is that he is a careful businessman. More importantly, my finding on the plaintiff’s attempt to conceal his own knowledge is supported by how the plaintiff dealt with the auditor’s letter dated 28 July 2006. On this point, I accept the defendant’s submission that the plaintiff’s actions in relation to that letter point to an unwillingness to be seen as authorising bribes (see [100] above).

It is useful at this point to elaborate on the auditor’s letter. The auditor addressed that letter to the defendant and copied to the plaintiff. In it, the auditor sought confirmation that the payments to Crossbridge were for cable installation services commissioned by Hocen and that the services had actually been rendered by Crossbridge. The defendant prepared a draft response to the letter. The draft expressly stated that Crossbridge’s “value-added services … enable[d] [Hocen] to win projects”. Although that phrase does not mention corruption, it is an obvious euphemism whose meaning could not have been lost on any sophisticated and experienced businessman such as the plaintiff: see [118]–[119] below.

At trial, the plaintiff accepted that he knew the contents of the auditor’s letter and of the defendant’s initial draft response. I accept the defendant’s evidence that it was the plaintiff who insisted that the defendant delete the reference to Crossbridge’s value-added services enabling Hocen to win projects. So Hocen’s response on 20 September 2006 to the auditor’s letter had those words deleted. Although the response was signed by Goh Lnai Mun rather than either the plaintiff or the defendant, they both signed a letter about two weeks later endorsing the contents of the response. The plaintiff acknowledged at trial that this joint letter was akin to a board resolution.

It is significant to me that the plaintiff felt unable to deny in cross-examination that he had seen the auditor’s letter or that he wanted the reference to Crossbridge helping Hocen to win projects deleted. All he could say, repeatedly, was that he could not remember:

To similar effect are the plaintiff’s disingenuous responses in a second passage in his cross-examination:

The plaintiff is being disingenuous in these two passages. I find that the reference to Crossbridge enabling Hocen to “win projects” in the response to the auditor’s letter was indeed deleted on the plaintiff’s direction. Further, it was deleted because the plaintiff knew that Crossbridge had been engaged and funded to procure business for Hocen from ZPMC by corruption and the plaintiff did not want even to hint at that true purpose to any person outside Hocen.

The plaintiff has also shown himself to be an experienced and astute businessman. He has more than 20 years of experience in business. He actively runs his family business, Hocen Machinery, and was running two other companies, Cheng Hock Heng Machinery Pte Ltd and Ong Tuan Seng Development Pte Ltd, during the period that Hocen was operating. He was by no means a babe in the woods. He would have understood precisely what the defendant was doing in entering into the Crossbridge Contracts and in causing Hocen to make the Payments.

The plaintiff is also a careful businessman who seeks clarification before signing cheques. In an affidavit which the plaintiff filed on 5 September 2007 to oppose the defendant’s winding up application, the plaintiff asserted that it is his practice to sign cheques only “after being satisfied that such payments were due and payable and upon sight of the relevant documents or clarification from the [defendant] or [Hocen]’s staff”. He confirmed this again in another affidavit filed on 1 October 2007. I therefore find it difficult to believe the plaintiff’s suggestion that he would have signed letters, cash cheques and remittance instructions simply because the defendant told him to do so. I find that the plaintiff signed the cash cheques and remittance instructions after ascertaining from the defendant the true reason for each Payment and because he knew and accepted the corrupt scheme of which the Payments were a part. Further, given the defendant’s practice of keeping the plaintiff informed of contracts that Hocen entered into, it is highly unlikely that the plaintiff would be ignorant of Crossbridge’s true role, or that he would not have asked and been honestly informed of the true nature of the “value-added services” that Crossbridge was performing.

Finally, I accept the defendant’s submission that the plaintiff’s belief in the success of Hocen’s arrangement with Crossbridge was precisely what drove his attempt, after Hocen was wound up in 2007, to replicate Hocen’s business with Andy Heng’s assistance through another company called Hocen International (1986) Pte Ltd. At trial, Heng testified that in 2008, the plaintiff sent him to Shenzhen to meet Daniel Cheng of Crossbridge to “explore business opportunity [sic]” with ZPMC. In the event, Cheng was unwilling to help. But the point here is that the plaintiff’s actions show that he must have known about the true nature of the arrangement between Hocen, Crossbridge and ZPMC, and about the substantial profits which this arrangement yielded for Hocen while it lasted.

For all of these reasons, I find that the plaintiff knew from the outset, even before Hocen was incorporated, that Crossbridge was to be engaged and funded, and was indeed engaged and funded, to procure business for Hocen from ZPMC by corruption.

The Pinkerton reports

Before leaving this section, I should briefly mention the significance to this case of two reports prepared by a firm of private investigators called Pinkerton (Singapore) Pte Ltd (“Pinkerton”). The plaintiff engaged Pinkerton in August 2007 to carry out checks on Crossbridge and on ZPMC. The plaintiff accepts that portions of Pinkerton’s first report, and the entirety of its second report, are inadmissible hearsay. In any event, the contents of the two reports are also of little significance. The plaintiff submits that these reports prove that Crossbridge was a company existing only on paper. The plaintiff intended this to support his additional contention that the defendant must have pocketed part of the Payments because Crossbridge had no real existence. As the plaintiff does not need to succeed in this contention in order to succeed in his claim (see [18] above), I need not analyse this contention further.

What is significant about the Pinkerton reports, however, is this. It might be argued that the plaintiff’s conduct in engaging a private investigator to inquire into Crossbridge and ZPMC suggests that the plaintiff did not know Crossbridge’s role in procuring business for Hocen from ZPMC. I do not accept that argument. The context in which the plaintiff engaged Pinkerton must be borne in mind. By mid-2007, the relationship between the plaintiff and the defendant had seriously deteriorated. The plaintiff’s evidence is that he filed an application to inspect Hocen’s accounting and other records in order to pursue his suspicions about the defendant’s management of Hocen. Instead of cooperating, the defendant deflected the plaintiff’s application by applying to wind up Hocen.

I reject the plaintiff’s evidence entirely. For the reasons I have given above, I accept the defendant’s evidence that he always kept the plaintiff truthfully informed about Hocen’s dealings with Crossbridge. The plaintiff, on the other hand, was always careful to distance himself from the corrupt scheme. Commissioning the Pinkerton reports is equally consistent with the view that, after the plaintiff fell out with the defendant, and when the plaintiff realised that he could not continue to earn profits through Hocen’s business with ZPMC, the plaintiff engaged Pinkerton to gather dirt on the defendant for the plaintiff to use in his intended vendetta against the defendant: see [33] above.

The Pinkerton reports do not assist the plaintiff’s denial that he was privy at the material time to the corrupt scheme involving Crossbridge.

Breach of duty

Having found that the plaintiff was complicit in the defendant’s corrupt scheme, I find also that plaintiff’s conduct breached his duties to Hocen. Applying the principles stated at [75]–[86] above, I hold firstly that the plaintiff satisfies the subjective aspect of the test for breach of duty because he had actual knowledge that Crossbridge had been engaged and funded to procure business for Hocen from ZPMC by corruption. Next, given that the Payments were part of a corrupt scheme, and given that the plaintiff authorised the Payments with knowledge of the scheme, he like the defendant must be considered objectively to have failed to act bona fide in the interests of Hocen.

Further, I find that the plaintiff’s breach of duty is no less culpable than the defendant’s breach of duty. The fact that the plaintiff was not the one who cashed the cheques or delivered the cash to Crossbridge is no mitigation. The plaintiff and the defendant both agreed, as I have found, to engage and fund Crossbridge to procure business for Hocen from ZPMC by corruption. They simply had different roles in carrying out a single corrupt scheme, which was from start to finish entirely contrary to Hocen’s interest. I therefore see no basis to move beyond an equal apportionment of liability.

Thus, I find that the plaintiff is obliged to contribute to the defendant’s liability in these suits in the proportion of 50%.

Issue 3: Ex turpi causa non oritur actio

Introduction

I have found that both the plaintiff and the defendant are in breach of duty to Hocen because they both participated in a scheme to engage and fund Crossbridge to procure business for Hocen from ZPMC by corruption. That brings me to the defendant’s final alternative defence: the doctrine of ex turpi causa non oritur actio or, as it is sometimes known, the defence of illegality. Although this doctrine is not a defence in the true sense of the word, it probably does no harm to refer to it as such, so long as it is always recognised that ex turpi causa is founded on high public policy rather than the parties’ private interests: see ANC Holdings Pte Ltd v Bina Puri Holdings Bhd [2013] 3 SLR 666 (“ANC Holdings”) at [78].

I should point out that the defendant has not pleaded his reliance on the ex turpi causa doctrine. Instead, he raises it only in his submissions, and even then only in his reply submissions. But because ex turpi causa rests on public policy, a court is required to act in any case to which it applies, if necessary of its own motion: ANC Holdings at [84]; Les Laboratoires Servier v Apotex Inc [2014] 3 WLR 1257 (“Les Laboratoires”) at [23]. Both parties have also had the opportunity to make oral submissions on ex turpi causa.

It is well-established that the ex turpi causa doctrine is not confined to criminal wrongdoing but extends even to non-criminal conduct which carries the necessary degree of turpitude: see ANC Holdings at [82] and Les Laboratoires at [25]. I use “turpitude” as a term of art encompassing all conduct, criminal or otherwise, which is capable of invoking the ex turpi causa doctrine.

The classic statement of the ex turpi causa doctrine is that “No court will lend its aid to a man who founds his cause of action on an immoral or an illegal act” per Lord Mansfield in Holman v Johnson (1775) 1 Cowp 341 at 343. Put that way, there are three elements which must be present in order for the doctrine to arise. They correspond to each of the Latin words “ex”, “turpi” and “causa”, though not in that sequence. The three elements are: (a) there must be turpitude; (b) the claimant must found his cause of action on that turpitude; and (c) the turpitude must be the claimant’s own turpitude.

On the last element, I consider that the person whose turpitude I must examine is Hocen, not the plaintiff. That is because the cause of action which the plaintiff asserts in these suits is a cause of action vested in Hocen, and which the plaintiff has acquired only by assignment. The policy underlying the ex turpi causa doctrine is to prevent an inconsistency in the law by holding a plaintiff to be entitled to relief in one context while holding that the conduct underlying that entitlement is illegal in another context: ANC Holdings at [80]. That underlying policy requires consistency to be tested as between the counterparties to the substantive cause of action and not as between the procedural parties to litigation which arises out of that cause of action. Otherwise, the purpose of the doctrine could be easily evaded by the artifice of assignment.

It is not seriously disputed that the first of the three elements I have set out at [131] above is established in this case. Engaging and funding an intermediary to procure business from a commercial counterparty by corruption is undoubtedly turpitude. Arriving at that conclusion does not require me to consider or make any findings on the niceties of the criminal law on corruption, whether in Singapore or in China. That is because, as I have pointed out, the concept of turpitude is not confined to criminal conduct. A corrupt scheme of this nature is undoubtedly turpitude within the meaning of the ex turpi causa doctrine.

So too, the second element is established in this case. The corrupt scheme is in substance an essential ingredient of Hocen’s cause of action against the defendant. That cause of action asserts that the defendant’s conduct in causing Hocen to make the Payments is a breach of duty because Hocen derived no corporate benefit from the Payments. The turpitude is an essential ingredient of the cause of action because it is the turpitude which negates the undoubted economic benefit which Hocen derived from the Payments and renders that economic benefit incapable of being a corporate benefit.

Only the third of the three elements therefore arises in this case. That requires me to determine whether the turpitude in this case is Hocen’s own turpitude. The fundamental question is one of attribution: is the defendant’s turpitude attributable to Hocen such that the turpitude is Hocen’s own?

Is the turpitude Hocen’s own?

In my view, the defendant’s turpitude is not attributable to Hocen. The principle is that a company who makes a claim against a director arising from the director’s breach of duty is treated in law as being a victim of that breach of duty. In those circumstances, the law will not allow the director to attribute any turpitude involved in his breach of duty to the company in order to invoke the ex turpi causa doctrine and defeat the company’s claim.

This principle is part of the general approach to attributing a director’s conduct – whether involving turpitude or otherwise – to a company. The general approach is to treat the applicable rule of attribution as being dependent on the purpose and context in which the question of attribution arises. It is thus entirely possible, and indeed entirely just, for the same act of a director to be attributable to the company for one purpose or in one context and not to be attributable to the company for other purposes or in other contexts.

I will now elaborate on the position, beginning with the applicable principles.

Applicable principles

The principles by which the acts of a natural person will be attributed to a company are well-settled. They are derived from Lord Hoffmann’s analysis in the decision of the Privy Council in Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500 (“Meridian”). Lord Hoffmann grouped the rules of attribution into three sets. The first set comprises the primary rules of attribution which are found in the company’s constitution or implied by company law which deem certain acts by certain natural persons to be the acts of the company (at 506D). The second set comprises the general rules of attribution by which a natural person may have the acts of another attributed to him, ie, the principles of agency; and by which a natural person may be held liable for the acts of another, such as estoppel, ostensible authority and vicarious liability (at 506F). The third and final set comprises special rules of attribution which the court must fashion in exceptional cases where applying the first or second set of principles would defeat the policy underlying a particular provision of the substantive law as it was intended to apply to a company (at 507D–F). Lord Hoffmann’s analysis was endorsed by the Court of Appeal in Ho Kang Peng ([78] supra) at [47]–[48].

In my view, what is critical in the present case is the purpose for which these rules of attribution exist. It is important to distinguish between two kinds of purposes. I shall call them the functional purpose and the substantive purpose.

The functional purpose of the rules of attribution, as the name suggests, describes the function of those rules. In the Court of Appeal’s words in Ho Kang Peng at [47], “[a]ttribution rules…serve to determine when and which natural person’s acts and thoughts are to be treated as the company’s own”. In Meridian (at 506C), Lord Hoffmann provided the conceptual basis for these rules: they are a necessary part of corporate personality. A company exists, as Lord Hoffmann said, only because there is a rule (usually in a statute) which deems the company to exist as a juridical person and to have certain of the powers, rights and duties of a natural person. But there is little sense in deeming a juridical person to exist unless there are also rules to determine which acts of the natural persons associated with it are to be treated in law as its own acts: Meridian at 506B-C. The important point, however, is that the functional purpose of the rules of attribution does not explain the reason for invoking a particular rule of attribution in a particular case.

It is the substantive purpose of the rules of attribution which supply that reason. The special rules of attribution in Lord Hoffmann’s third set (see [140] above) are a clear example of this concept. One such rule was crystallised and applied as a distinct rule of attribution in Meridian. In that case, two senior employees of Meridian Global Fund Management Asia Ltd (“Meridian”) caused Meridian to acquire shares in a listed company in New Zealand, Euro-National Corporation Ltd (“ENC”). Both employees knew that the acquisition was sufficiently large to require Meridian, under New Zealand’s securities legislation, to give immediate notice both to ENC and the New Zealand stock exchange that Meridian had become a substantial shareholder of ENC. But Meridian failed to give the required notice. In acquiring the shares, the two employees acted with the company’s authority but without the knowledge of its board of directors and of its managing director. Meridian’s directors therefore did not know that Meridian had become a substantial shareholder of ENC. Lord Hoffmann had no hesitation in holding that the underlying policy of New Zealand’s securities legislation required the employees’ knowledge that Meridian was a substantial shareholder of ENC to be attributed to Meridian without any need to consider whether either of the two employees was the directing mind and will of Meridian. The intent of the notice requirement was to compel a person who had become a substantial shareholder of a public company to give immediate notice of that fact, ie, as soon as he knew of it. In order to avoid defeating the policy of the legislation, and given its intent as it applied to companies, it was appropriate to attribute to Meridian the knowledge of the natural person who had caused Meridian to acquire the relevant shares: Meridian at 511D. Lord Hoffmann concluded by surveying other English cases which had applied what might appear to be inconsistent rules of attribution on superficially similar facts and said at 512B: “Each [special rule of attribution] is an example of an attribution rule for a particular purpose, tailored as it always must be to the terms and policies of the substantive rule.”

Of course, not every case in which a question of attribution arises requires the court to tailor a rule of attribution to support the underlying policy of a substantive rule of law as it was intended to apply to companies. But the court must, in every case, have regard to the reason for which a particular rule of attribution is being invoked. That is why, narrowing the focus to directors for the time being, the law distinguishes between cases in which a director’s knowledge or acts are sought to be attributed to the company: (a) when a third party seeks to hold a company liable for breach of a duty owed to the third party; and (b) when a company seeks redress from a director for breach of duty owed to the company.

This distinction is a valid one in both a moral and a legal sense. It is entirely just that a company should be bound by the knowledge or acts of its directors when an innocent third party sues the company for a breach of duty, even if the director’s knowledge or acts may, in other contexts, not be attributed to the company. By the same token, it is equally just that a company should not be bound by the knowledge or acts of a director when the company itself sues the director as the victim of his breach of duty, even if the director’s knowledge or acts may, in other contexts, be attributed to the company. These two propositions, and the underlying distinction between the two types of cases, was articulated by the English Court of Appeal in Bilta (UK) Ltd (liquidation) v Nazir (No 2) [2014] Ch 52 (“Bilta (CA)”) at [34]–[35] and approved by the Singapore Court of Appeal in Ho Kang Peng at [70].

To the second proposition above, Ho Kang Peng suggests an exception. The court said at [70]:

The suggested exception appears to be in two parts. First, it suggests that, if a company is a one-man company, any act by the sole director-shareholder which is a breach of duty will be attributed to the company without the need for further formality, even if the act amounts to turpitude. Second, it suggests that even if the company is not a one-man company, any act by a director which is a breach of duty will be attributed to the company if the act is approved formally by the board or ratified formally by the shareholders, even if the act amounts to turpitude.

I should point out that the existence and scope of this suggested exception was not part of the ratio of Ho Kang Peng. The company in that case was not a one-man company and the director in that case had no board approval or shareholder ratification whatsoever for carrying on with the corrupt scheme. The exception, however, is pertinent in the present case. The plaintiff and the defendant, as I have found, acted in concert in engaging and funding Crossbridge to procure business for Hocen from ZPMC by corruption. That makes Hocen for present purposes conceptually indistinguishable from a one-man company. If the suggestion at [70] of Ho Kang Peng is correct, the directors’ corrupt scheme is attributable to Hocen despite the turpitude involved and even in a claim by Hocen against the directors for breach of duty arising from that turpitude.

Yet, as plaintiff’s counsel accepted during oral submissions, it is not clear even from Ho Kang Peng that all types of breach of duty by a director can be approved by a company’s board or ratified by its shareholders. Even if they can be, the limits of the effect of such approval or ratification are not clear when it is the company who is suing the directors for breach of duty. If the effect were unlimited, there would be no substantive protection for shareholders against rogue directors and no substantive protection for creditors against either rogue shareholders or rogue directors.

This approach would also mean that, as long as the shareholders and directors of any company act unanimously, the court in the exercise of its limited supervisory jurisdiction cannot hold the directors to the minimum standard of commercial morality even in those limited circumstances where that jurisdiction might, in practical terms, come to be exercised (see [84] above). To deal with this difficulty, it seems appropriate for me to examine a number of cases in which a company proceeded against a director for breach of duty where the director was either formally or informally authorised to commit that breach.

I begin with the leading case of Belmont Finance Corporation Ltd v Williams Furniture Ltd [1979] 1 Ch 250 (“Belmont”). Ho Kang Peng at [71] cites Belmont with approval for the proposition that “where a company makes a claim against a director premised on the latter’s breach of duty, the company is a victim, and the law will not allow the enforcement of that duty to be compromised by the director’s reliance on his own wrongdoing”. I shall refer to this as the Belmont principle. This principle is a generalisation of an older principle, known as the Hampshire Land principle after the leading case of In re Hampshire Land Co (1896) 2 Ch 743 at 749.

In Belmont, the directors of Belmont Finance participated in a scheme to extract value from the company by making it buy shares at a highly inflated price. The directors concluded that transaction with board approval. The company then went into receivership. The receivers brought an action in the name of the company against the directors for breach of duty in causing the company to buy the shares. The English Court of Appeal held that the directors could not rely on the ex turpi causa doctrine against the company because their knowledge of the true nature of the transaction was not to be attributed to the company. Buckley LJ (with whom Orr and Goff LJJ agreed) held at 261-262:

The words I have italicised in the passage above explains why the Belmont principle has also been referred to as the “fraud exception”. But subsequent cases show that fraud is not the only type of breach of duty which attracts the operation of the principle.

In A-G’s Ref (No 2 of 1982) [1984] QB 624, a criminal case, the English Court of Appeal applied the Belmont principle. The defendants were charged with theft from solvent companies which they wholly owned and controlled. The issue was whether, for the purposes of s 2(1)(b) of the English Theft Act 1968, the defendants had appropriated the property of another “in the belief that [they] would have the other’s consent if the other knew of the appropriation and the circumstances of it”. The English Court of Appeal acknowledged the rule of attribution which attributes to a solvent company the unanimous decision of all of its shareholders (at 640). But the court did not consider this principle to be applicable. It also rejected the argument that the companies, having no will other than that of their directors, must be taken to have consented to whatever the directors did. One of the court’s reasons for rejecting this argument was the Belmont principle. Kerr LJ, who delivered the leading judgment, cited the passage from Buckley LJ’s judgment (which I have reproduced at [151] above) and said that “[s]o far as the authorities in the realm of the civil law are concerned, [Belmont] directly contradicts the basis of the defendants’ argument in the present case”. He held, further, that there was no reason why the position in criminal law should be any different (at 641).

The next case is Pertamina v Thahir Kartika Ratna and others [1981–1982] SLR(R) 653 (“Pertamina”). This is the first reported local decision to apply the Belmont principle. Pertamina was a dispute over the beneficial interest in money held in Singapore banks by a deceased Indonesian national, Thahir. His employer, Pertamina, claimed that it was entitled to the money because it represented the proceeds of bribes which Thahir had received in breach of duty to Pertamina. His wife applied to strike out Pertamina’s claim, arguing that Pertamina’s claim was obviously unsustainable because a number of named employees of Pertamina knew and consented to Thahir receiving the bribes. Sinnathuray J rejected the wife’s argument as being itself obviously unsustainable on the basis of the passage from Buckley LJ’s judgment in Belmont (see [151] above) It is implicit in Sinnathuray J’s reasoning that he considered that the consequence of applying the Belmont principle was that even if Pertamina’s other employees did have knowledge of Thahir’s breach of duty, their knowledge was not attributable to Pertamina itself in its claim against Thahir for breach of duty.

The Belmont principle is now a well-established rule of attribution in English and Singapore company law. What has been a matter of controversy until relatively recently is whether a one-man company is either outside the Belmont principle altogether or within an exception to that principle such that that the director-shareholders’ wrongdoing may nevertheless be attributed to the company.

The House of Lords divided 3:2 on this issue in the very difficult case of Stone & Rolls Ltd (in liquidation) v Moore Stephens (a firm) [2009] 1 AC 1391 (“Stone & Rolls”). In Stone & Rolls, an insolvent one-man company, acting by its liquidators, brought an action against its auditors for breach of duty for failing to detect and terminate the fraud which the company’s sole director-shareholder, Stojevic, had perpetrated on its bankers using the company as his vehicle. The auditors argued that the company’s claim was defeated by the ex turpi causa doctrine, the company being a fraudster.

The majority of the House of Lords – comprising Lords Walker, Brown and Phillips – agreed with the auditors. Lords Walker and Brown came to their conclusion by applying a rule of attribution. They accepted that a one-man company is outside the Belmont principle such that Stojevic’s fraud was attributable to the company and the ex turpi causa doctrine defeated the claim: Stone & Rolls at [167]–[168] and [200].

Lord Phillips agreed with Lords Walker and Brown that the company’s claim should fail, but for a fundamentally different reason. In Lord Philips’ view, that result followed, not primarily because of a rule of attribution, but because the principles of public policy which underlie ex turpi causa led to it: Stone & Rolls at [67]. Those principles did so because: (a) the auditors owed a duty of care only to the company and its members and not to its creditors; (b) all those to whom the auditors owed their duty of care were complicit in the company’s fraud; and (c) the company’s liquidators were now pursuing the claim for the ultimate benefit of the creditors, parties to whom the company’s auditors owed no duty of care in tort: Stone & Rolls at [83]–[86].

The minority in the House of Lords comprised Lords Scott and Mance. They rejected the one-man company limit on the Belmont principle. They held instead that the Belmont principle operated even in the case of a one-man company, if only to protect the company’s creditors. I quote from Lord Mance’s speech at [229]:

Stone & Rolls was not a claim by a company against its director arising from the director’s breach of duty. Instead, it was a claim by a company against a third party arising from the third party’s breach of duty to the company. In this context, Lords Phillips and Walker expressed the view that the Belmont principle applies only when the company is a “primary victim” of the director’s wrongdoing (in the sense that the director’s acts result directly in the company’s loss) and not a “secondary victim” (where the company’s loss arises only in consequence of the company having to compensate the primary victim for its loss): Stone & Rolls at [5] and [55] per Lord Phillips and at [171]–[174] per Lord Walker. On this analysis, the company in Stone & Rolls was merely a secondary victim, because Stojevic targeted the company’s fraud at the company’s banks and not at the company itself. This distinction, if valid, would mean that Stojevic’s knowledge would have been equally attributable to the company, despite the Belmont principle, if the company had been suing Stojevic for breach of duty in Stone & Rolls.

In their discussion of Stone & Rolls, the learned authors of Corporate Law ([75] supra) give short shrift to the distinction between primary and secondary victims for the purpose of deciding when the Belmont principle applies. They prefer instead to distinguish between cases where the company is seeking redress against a director for breach of duty and cases where a third party is holding the company liable for a wrong: Corporate Law at 07.042. They call this the “redress-liability” distinction: Corporate Law at 07.044. And this is the distinction drawn in Bilta (CA) and adopted in Ho Kang Peng, as I have noted at [144] above.

The authors of Corporate Law draw support for the redress-liability distinction from the speeches of Lords Mance and Scott (who were in the minority) in Stone & Rolls. What is relevant to the present case is that their Lordships considered that the Belmont principle applied even to a one-man company, as long as it was invoked in the context of a company seeking redress against a director for breach of duty. On this analysis, and contrary to the implication of Lords Philips’ and Walker’s view (at [159] above), the Belmont principle would have applied to prevent the knowledge of Stojevic from being attributed to the company were the company to sue Stojevic for breach of duty. I quote from Lord Scott’s speech at [109] (but see also Lord Mance’s view at [229] quoted at [157] above):

In Lim Leong Huat v Chip Hup Kee Construction Pte Ltd [2009] 2 SLR(R) 318, the plaintiff sought to add the defendant company’s managing director as an additional defendant to the plaintiff’s action alleging that the company and the director had conspired unlawfully to cause the plaintiff loss. The managing director was allegedly the controlling mind of the company. The High Court allowed the application on the basis that the managing director and the company were, in law, separate legal entities and therefore capable of conspiring with each other (at [30]). Again, this is not a case involving a company bringing a claim against its director. However, dicta in that case support the redress-liability distinction as the explanation for when the Belmont principle operates. Andrew Ang J opined that where the company seeks redress from a director as a “victim” of a conspiracy involving the director, the Belmont principle operates to preclude the director’s conduct or knowledge being attributed to the company so as to render the company a co-conspirator (at [22]–[23]):

Andrew Ang J’s observations were echoed by the High Court in Airtrust (Singapore) Pte Ltd v Kao Chai-Chau Linda and another suit [2014] 2 SLR 673 at [55]–[56].

Finally, I come to the decision of a supernumerary panel of the UK Supreme Court in Bilta (UK) Ltd (in liquidation) and others v Nazir and others (No. 2) [2015] 2 WLR 1168 (“Bilta (SC)”). As I have mentioned (see [144] above), the English Court of Appeal’s decision in this case, Bilta (CA), was cited with approval in Ho Kang Peng. The company in Bilta was in liquidation. Its liquidators commenced an action in the name of the company against its two directors, one of whom was its sole shareholder, arguing that they had unlawfully conspired with other parties to cause it loss. The directors allegedly did so by involving the company in a carousel VAT fraud, which left the company with a liability to account to the tax authorities for output VAT in excess of £38m but with no assets with which to discharge that liability. The directors applied to strike out the company’s claim. One of their arguments was premised on the ex turpi causa doctrine: the directors contended that their own knowledge of the fraud was to be attributed to the company. The English Court of Appeal rejected this argument and held that the judge at first instance had been right in refusing to strike out the claim. The Supreme Court dismissed the directors’ appeal against the Court of Appeal’s decision.

The central and unanimous holding of the Supreme Court in Bilta (SC) was summarised by Lord Neuberger (with whom Lords Clarke and Carnwath agreed) at [7]:

This proposition is a clear statement that the Belmont principle applies even to one-man companies, albeit when the company is in liquidation. Their Lordships in Bilta (SC) offered two possible ways of characterising this proposition. According to Lord Mance (with whom Lords Neuberger, Clark, Carnwath, Toulson and Hodge agreed on this point: Bilta (SC) at [9] and [191]), the question of attribution is always an open one. Whether or not it is appropriate to attribute a director’s act, knowledge or state of mind to a company in a given claim must depend on the nature and factual context of the claim in question: Bilta (SC) at [37]–[44]. As Lord Neuberger put it (at [9]):

Lord Mance (at [41]) traces the origin of this view back to Lord Hoffmann in Meridian, who “made clear” that “the key to any question of attribution is ultimately always to be found in considerations of context and purpose”. In a similar vein, I too read Meridian as standing for a broader concept of bearing in mind the substantive purpose for invoking rules of attribution: see [142] above.

On the other hand, Lord Sumption took the narrower view that the Belmont principle was better regarded as an exception only to the agency-based rules of attribution, ie, only to the rules of attribution in the second set of Lord Hoffmann’s rules of attribution: see [140] above. That is why Lord Sumption refers to it as the breach of duty “exception”: Bilta (SC) at [71]. The basis of the exception is public policy, or as Lord Neuberger paraphrased it, “common sense, rationality and justice”: Bilta (SC) at [9]. The policy in question can be readily discerned: to allow a director to rely on his own turpitude in resisting a claim by the company in respect of a breach of duty involving that turpitude would undermine the very reason and utility of that duty.

Inherent in Lord Sumption’s characterisation of the Belmont principle as an “exception” only to “agency-based rules” of attribution is a desire to keep the principle within definable bounds for the sake of certainty in articulation and clarity in analysis. These values are undoubtedly desirable. Nevertheless, I prefer the view taken by Lord Mance and the rest of their Lordships. In my view, Lord Sumption’s view of the Belmont principle as an exception is too narrow, insofar as that view confines the principle’s operation only to the second set of Lord Hoffmann’s attribution rules: see [140] above. In each of the cases I have discussed which involve one-man companies, the turpitude of the director could have been attributed to the company under the first set of Lord Hoffmann’s attribution rules as well, ie, the primary, corporate, rules of attribution. Thus, in Belmont itself, the director’s wrongdoing had been performed under board approval. In A-G’s Ref (No 2 of 1982), the two directors, as the companies’ only two shareholders, may be regarded as having informally approved their own scheme to misappropriate the company’s funds. This being the case, it is conceptually more accurate for the Belmont principle to be described as part of the approach which takes the question of attribution to be an open one that is always rooted in the context and purpose of the claim in which that question arises.

At a fundamental level, however, it seems to me important to appreciate that Lord Sumption’s view shares the same normative roots as Lord Mance’s, namely, Lord Hoffmann’s idea in Meridian that the purpose for which attribution is relevant is all-important. Thus Lord Sumption observes that the concept of a breach of duty “exception” is a “valuable tool of analysis, but it is no more than that”. His Lordship then goes on to say at [92]–[93] of Bilta (SC):

Having reviewed these authorities, I have no hesitation in agreeing with Lord Neuberger’s statement of the rule in Bilta (SC) at [7] (see [164] above). I return to the distinction between the functional purpose and the substantive purpose of the rules of attribution which I drew at the beginning of this discussion: see [141]–[143] above. The authorities make it clear that as between the two, the substantive purpose is the logically anterior. One must first consider the nature of the claim which is brought, and the nature of the rights and liabilities to be determined, before deciding the applicable rule of attribution. Where a company claims that those who wholly own and control the company are in breach of duty to the company, the turpitude of the defendants will not be attributed to the company such that the company’s claim is defeated by the ex turpi causa doctrine.

Of course, the elephant in the room remains: what about the theoretical objection that in the case of a one-man company, there is a complete identity of interests between the director-shareholders and the company? As I have mentioned at [83] above, there is no distinction in fact between ownership and control in such a company and therefore no real principal-agent problem. Can it sensibly be said that the acts and knowledge of its sole director-shareholder will not be attributed to the company if the company were to sue the director for breach of duty?

It may be tempting to corral the elephant by suggesting that the answer lies in the traditional anthropomorphic view of the company as an independent person, ie, by holding that there always exists a company “as such”, separate from its members, to be protected. But the modern law has moved away from that idea. Lord Hoffmann famously stated in Meridian at 507A that “[t]here is in fact no such thing as the company as such, no ding an sich, only the applicable rules.” The result, in Lord Hoffmann’s view, is that “[t]o say that a company cannot do something means only that there is no one whose doing of that act would, under the applicable rules of attribution, count as an act of the company” (at 507A). The transparency and boldness of this statement will not be lost on the careful reader: it is an assertion of the brutal fact that one must simply look to the rules which the courts have fashioned to decide what counts as the act of a company. Consequently, the only question is whether those rules are sound. This may be theoretically problematic, but at least the source of the problem is clear. Lord Sumption describes it in the following terms in Bilta (SC) at [66]:

Therefore, is the Belmont principle, as refined by the UK Supreme Court in Bilta (SC), a sound principle? In my view, it is. It effectively addresses a specific problem arising from abuse of directors’ powers, that is, it prevents an errant director from relying on his own turpitude to avoid being held accountable for his acts or knowledge. It also draws a valid distinction between cases in which a company seeks redress against the director and cases in which a third party seeks to hold the company liable. And it enables external administrators of a company (whether liquidators or receivers) to hold the company’s directors to a minimum standard of commercial morality, which is in the public interest. That is as much the case for a solvent company as it is for an insolvent company.

Having considered the applicable law, I turn now to apply it to the facts.

Analysis and decision

My findings of fact necessarily entail that both shareholders of Hocen knew that the directors of Hocen engaged and funded Crossbridge to procure business for Hocen from ZPMC by corruption and approved the directors’ conduct, albeit informally. That result follows from the nature of Hocen, because its shareholders are its directors. As the plaintiff and the defendant were acting in concert in this corrupt scheme, Hocen was effectively a one-man company, like the companies in A-G’s Ref (No 2 of 1982) ([152] supra), Stone & Rolls ([155] supra) and Bilta (SC) ([163] supra).

Yet, as I have shown from the cases, the Belmont principle applies even to companies like Hocen. By that principle, the plaintiff’s and the defendant’s corrupt scheme cannot be attributed to Hocen in a claim by Hocen against them for breach of duty in involving Hocen in that scheme. That is because Hocen is seeking redress against its directors for wrongs they have committed against Hocen.

On one view, however, it could be argued that unlike the companies in Belmont ([150] supra), A-G’s Ref (No 2 of 1982) ([152] supra) and Bilta (SC) ([162] supra), Hocen did not actually suffer “loss”. Quite the contrary: the bribes which the parties caused Hocen to pay yielded substantial profits for HocenHocen (see [89] above). I do not accept that as a valid distinction. I have held on the authority of Ho Kang Peng that the profits which Hocen earned through corruption (and the opportunity to earn those profits by those means) cannot be regarded as a corporate benefit which the defendant acquired for Hocen: see [94] above. Accordingly, there remains a breach of duty sufficient to invoke the Belmont principle against the defendant. The result is that Hocen, and therefore the plaintiff (to whom Hocen assigned its cause of action), is not barred from proceeding against the defendant just because Hocen’s director-shareholders informally assented to this corrupt scheme. To be clear, I say nothing about a case in which the company cannot in any sense be regarded as having suffered loss or detriment.

It follows that the defendant cannot rely on the ex turpi causa doctrine to defeat the claim in this case. These suits cannot be regarded as resting on Hocen’s own wrong because the Belmont principle prevents the defendant from attributing his turpitude to Hocen. For the same reasons, the plaintiff’s turpitude is not attributable to Hocen either.

Two points by way of postscript

The Duomatic principle

Before concluding, I turn to deal with two cases whose reasoning appears to be inconsistent with the analysis I have adopted. Essentially, the inconsistency arises because those cases appear to take the view that a company may be precluded from bringing a claim against its director for breach of duty if the breach was approved by the board or by the shareholders. The first of these cases is Ho Kang Peng. As I mentioned at [146] above, the Court of Appeal suggested that the director in that case would have “protected himself” from a future claim by the company if he had obtained board approval before signing the impugned agreements. However, this was obiter dicta as no board approval was in fact obtained in that case. So I need say no more about it.

The second case is Yong Kheng Leong and another v Panweld Trading Pte Ltd and another [2013] 1 SLR 173 (“Yong Kheng Leong”). In that case, a company sued a director for having caused the company to pay the director’s wife a salary over a period of 17 years when she had done no work for the company to earn that salary. In that case too, the only two shareholders of the company were its only two directors (at [26]). The director argued that the other shareholder could be taken to have impliedly assented to the salary payments such that the company could no longer seek to avoid the payments and recover them from the defendant director (at [25]). It was true that the director had made no attempt to conceal the salary payments from management or the other shareholder. However, on the facts of that case, the Court of Appeal held that the other shareholder’s conduct amounted, at most, to some degree of forbearance rather than to implied assent (at [26]). In order for the company to be bound such that it could no longer recover the salary from the director, there must be a sufficient basis for the court to infer that: (a) there was an agreement between the shareholders with regard to the impugned act; and (b) what the key contents of that agreement were (at [25]).

It does not appear that the Belmont principle or any of the cases in that line of authority were cited to the Court of Appeal in Yong Kheng Leong. The court’s in-principle acceptance of the argument from implied assent must be considered in that light. To be specific, counsel for the director in that case, Dr Tang Hang Wu, presented the implied assent argument in reliance on “the principle [in Re Duomatic Ltd [1969] 2 Ch 365] … where all the shareholders, particularly in a closed private company with a track record of informality in their deals, assent to a particular course of dealing, even in relation to the disposal of assets, this may be effective to bind the parties” (at [25]). This is a well-established principle which falls under the primary rules of attribution, ie, the first set of the rules of attribution which Lord Hoffmann identified in Meridian Global: see Bilta (SC) at [187]. It was also a principle which the court in A-G’s Ref (No 2 of 1982) decided specifically to override on the authority of Belmont: see [152] above. In other words, the Belmont principle does not deny or contradict the Duomatic principle. Instead, to borrow Lord Sumption’s analytical language, it constitutes an “exception” to it, just as it is, on his view, an exception to the agency-based rules of attribution which would ordinarily apply: see [167] above. As Lord Neuberger said in Bilta (SC) at [7], the Belmont principle applies “even though the wrong-doing or knowledge of the directors may be attributed to the company in many other types of proceedings”.

Hence, it is appropriate to read Yong Kheng Leong as saying that the company could have met Dr Tang’s argument with the Belmont principle. The company could have argued that even if the other shareholder had impliedly assented to the payments, the Belmont principle would operate to preclude the director from attributing that shareholders’ assent to the company. This argument, of course, was not raised in Yong Kheng Leong. There was also no need for the court to consider this argument because, on the facts, the court found that there was in fact no implied assent. Accordingly, there is no real inconsistency between my analysis and the decision in Yong Kheng Leong.

Unclean hands

I have thus far focused on the position of Hocen. That is because at the centre of the ex turpi causa analysis is the issue of whether the defendant’s turpitude can be attributed to Hocen (see [133] above). It is convenient at this juncture to consider the plaintiff’s position and to deal with a point unrelated to attribution. It could be said that the plaintiff has brought these suits with unclean hands and that that is a sufficient reason not to hold the defendant liable in equity. That point can be disposed of quickly for two reasons.

The first reason is that, although the plaintiff is, on my finding, in breach of duty to Hocen, the plaintiff does not assert in these suits a personal cause of action vested in him. He asserts in these suits a corporate cause of action initially vested in Hocen and which the liquidators have assigned to him. Hocen, as a company, does not have unclean hands because the acts of its directors cannot be attributed to it (for the reasons set out at [174]–[177] above).

The second reason is that, even if the allegation of unclean hands is available as against the plaintiff, I have found the defendant to have breached not only his fiduciary duties but also his statutory and common law duties. The defence of unclean hands may defeat a claim in equity but cannot defeat a statutory or a common law claim.

Judgment

In light of my findings in each of the two suits, I have entered judgment: (a) requiring the defendant to pay the plaintiff the full sum which the plaintiff claims in that suit; and (b) requiring the plaintiff upon receiving that sum from the defendant, to pay the defendant back half of that sum.

The liquidators’ decision to assign Hocen’s cause of action underlying these two suits to the plaintiff has changed nothing. That is because the plaintiff paid nothing for the assignment and, in return, promised under cl 2.4 of the assignment to pay over to the liquidators 50% of any sum which he recovers from the defendant in these suits. Further, by cl 2.4(iv) of the assignment, the plaintiff authorised the liquidators to pay that 50% to the defendant alone.