High Court · Decided 16 October 2014

Griffin Travel Pte Ltd v Nagender Rao Chilkuri and others

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[2014] SGHC 205Case no. Suit No 835 of 2011

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Grounds of decision

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Chan Seng Onn J:
Introduction
[1] Griffin Travel Pte Ltd (“the Plaintiff”) is a travel agency which provides travel services to the marine, offshore and cruise industries. It has two shareholders: Griffin Marine Travel (Cyprus) Limited and Griffin Global Group Limited (“GGG”). GGG is wholly owned by Griffin Bidco Limited (“Bidco”). Bidco is in turn wholly owned by Griffin Global Holdco Limited (“Holdco”). The Griffin group of companies (“the Griffin Group”) consists of numerous entities around the world. For simplicity, I will refer to each individual entity based on its geographical location, eg, Griffin India.
[2] On 21 November 2011, the Plaintiff commenced proceedings for numerous alleged breaches of duties against some of its former employees (“the Defendants”), all of whom had resigned between February and September 2011. The Defendants are:
(a) Mr Nagender Rao Chilkuri (“Nagender”);
(b) Ms Joanna Kaunang (“Joanna”);
(c) Ms Leny Widjaja (“Leny”);
(d) Mr Pereira Rahul Anthony (“Rahul”);
(e) Ms Gwee Bee Ting Annie (“Annie”);
(f) Ms Ng Choo Geok Adella (“Adella”); and
(g) Mr Narra Gouri Prasad (“Prasad”).
[3] The Plaintiff’s principal allegation against the Defendants related to their involvement in five new companies (collectively, “the New Entities”), which were all set up between February and August 2011. The New Entities are:
(a) Quest Horizon Pte Ltd (“Quest Horizon”);
(b) Niado Technology Pte Ltd (“Niado”);
(c) BHEA Technologies (“BHEA Tech”);
(d) Q4T Management Pte Ltd (“Q4T Singapore”); and
(e) Quest Rightshoring Services Pte Ltd (“QRS”).
[4] There was also a sixth company, Q4T Management Pty Ltd (“Q4T Australia”), which was alleged to be linked to Q4T Singapore but was not classified as part of the New Entities by the parties. A table containing the dates of incorporation, initial shareholdings and directors of the New Entities (and Q4T Australia) is appended to this judgment as Annex 1.
[5] The key character in these proceedings was Nagender, the managing director of the Plaintiff at the material time. He was slated to become the next Global chief executive officer (“CEO”) of the Griffin Group, but, according to the Plaintiff, was eventually found unsuitable for the role. The Plaintiff contended that Nagender was embarrassed, bitter and full of resentment at this turn of events and devised a “masterplan” which was calculated to damage the Plaintiff. This alleged masterplan involved the incorporation of Quest Horizon and QRS with a view to competing with the Plaintiff’s business. Niado, BHEA Tech, Q4T Singapore and Q4T Australia were set up to supplement this masterplan. The New Entities were asserted to be part of a conglomerate with each performing a different function:
(a) Quest Horizon would be the holding company of the conglomerate;
(b) QRS would be the outsourcing arm with branches proposed to be set up in various countries such as Thailand, the Philippines and India;
(c) Niado would be the information technology (“IT”) and travel software arm;
(d) Q4T Singapore together with Q4T Australia would be the travel arm; and
(e) BHEA Tech would provide the Customer Relationship Management (“CRM”) support for the conglomerate.
[6] The Plaintiff also alleged that Nagender engineered the resignations of the Defendants and co-ordinated the incorporation of the New Entities with a view to competing with the Plaintiff.
[7] While the Plaintiff accepted that no competitive activity actually took place while the Defendants were employed by the Plaintiff, they argued that this was only because the Plaintiff found out about the masterplan before the Defendants had the opportunity to put it into motion. The Plaintiff submitted that the Defendants’ actions in formulating and implementing the alleged masterplan amounted to breaches of express and implied terms of employment by all of them and/or breaches of fiduciary duties by some of them.
[8] The Plaintiff also asserted a number of other independent breaches which were not related to the alleged masterplan.
[9] The Defendants, on the other hand, argued that the Plaintiff had “embarked on a witch hunt against the Defendants”, and, in particular, with a view to unlawfully deprive Nagender of the fruits of his service to the Plaintiff. Their case was that Nagender genuinely believed that he was still in the running for the Global CEO position until July 2011, by which time all the New Entities except QRS had already been incorporated. The New Entities were incorporated by persons other than Nagender for reasons unrelated to Nagender and his proposed appointment as Global CEO. The New Entities would not have competed with the Plaintiff even if they had engaged in their intended businesses. Moreover, even if the New Entities were competing, the Defendants had merely engaged in preparatory acts at the material time. They also denied that Nagender had instigated the resignations of the other Defendants.
[10] Further, Nagender, Joanna, Rahul, Annie and Adella had been summarily dismissed by the Plaintiff while they were serving their respective periods of notice after resigning. They counterclaimed against the Plaintiff for a declaration that they were wrongfully dismissed as well as for damages for wrongful dismissal.
[11] As for Nagender, he was a shareholder in Holdco as well as a loan note holder in Bidco (both through his investment holding company, Signature Sparks Pte Ltd (“Signature Sparks”)). The Defendants submitted that he was not only wrongfully dismissed but also unjustifiably classified as a “Bad Leaver” by Holdco and Bidco, which had the effect of depriving him of the value of his shares in Holdco and his loan note in Bidco. Accordingly Nagender and Signature Sparks counterclaimed against Holdco and Bidco for a declaration that Nagender was a “Good Leaver”. Nagender also sought an order for the fair value of the shares in Holdco to be determined and paid by Holdco to Signature Sparks, as well as an order that the nominal value of his loan stock plus accrued interest be paid by Bidco to Signature Sparks.
[12] In this judgment, I am only concerned with the issue of liability. Damages (if any) will be assessed at a separate hearing.
Dramatis Personae
The Defendants
[13] Nagender, besides being the managing director of the Plaintiff at the material time, was also a director of Holdco and Bidco. He was designated as the next Global CEO of the Griffin Group sometime in late 2009, a fact which was publicised both within the group as well as to third parties. This decision was later retracted. Nagender resigned as managing director of the Plaintiff on 16 August 2011 with his agreed last day of employment being 15 January 2012. By way of the Plaintiff’s letter dated 21 November 2011, Nagender was dismissed from his employment with the Plaintiff on allegations of gross misconduct and dishonesty.
[14] Joanna was the Plaintiff’s customer service manager at the Plaintiff’s office in Perth, Australia. Sometime in July 2011, she returned to Singapore. She assumed the position of acting general manager of the Plaintiff upon Nagender’s resignation and was positioned to be the Plaintiff’s new managing director upon Nagender’s departure. She resigned on 21 September 2011. By way of the Plaintiff’s letter dated 21 November 2011, Joanna was dismissed from her employment with the Plaintiff on allegations of gross misconduct.
[15] Leny was an executive director of the Plaintiff. She resigned from her employment on 2 February 2011. Her last day with the Plaintiff was on 30 June 2011, and she resigned from the board of directors on the same day.
[16] Rahul was the Plaintiff’s manager of operations. He resigned on 22 September 2011. By way of the Plaintiff’s letter dated 6 October 2011, Rahul was dismissed from his employment with the Plaintiff on allegations of gross misconduct.
[17] Annie was the Plaintiff’s general manager of operations. She resigned on 12 September 2011. By way of the Plaintiff’s letter dated 6 October 2011, Annie was dismissed from her employment with the Plaintiff on allegations of gross misconduct.
[18] Adella was the Plaintiff’s director of operations (it must be noted that her designation as “director” was titular only as she was not a member of the Plaintiff’s board of directors). She resigned on 24 August 2011. By way of the Plaintiff’s letter dated 6 October 2011, Adella was dismissed from her employment with the Plaintiff on allegations of gross misconduct.
[19] Prasad held the position of “Vice President – Finance” in the Plaintiff. He resigned on 1 March 2011. He left the Plaintiff after he finished serving his period of notice on 31 August 2011. Prasad is Nagender’s brother-in-law.
[20] To put things into context, I set out in Annex 2 of this judgment a timeline of the key undisputed events which includes the Defendants’ respective dates of resignation.
The witnesses
[21] The Plaintiff put forward eight witnesses:
(a) Mr Ali Hussain (“Ali”), the managing director of the Plaintiff with effect from 1 October 2011;
(b) Mr George Boyes (“George”), the CEO of GGG (effectively the Global CEO of the Griffin Group) at the material time, a director of Holdco and Bidco, and a shareholder of Holdco;
(c) Mr Agyapal Khuman (“Khuman”), the managing director of Griffin India and a director of Holdco and Bidco;
(d) Mr Marcus Hebblethwaite (“Marcus”), the chief financial officer (“CFO”) of the Griffin Group until his resignation on 27 August 2011, a director of Holdco and Bidco, and a shareholder of Holdco;
(e) Mr Alister Beveridge (“Alister”), the chief information officer of GGG;
(f) Mr Piyush Shukla (“Piyush”), the financial controller of the Plaintiff at the material time;
(g) Mr Andy Chua (“Andy”), a director of D’Perception Singapore Pte Ltd (“D’Perception”), a renovation contractor; and
(h) Mr Toh Ching Wah, a director at KPMG Forensic, a division of KPMG Services Pte Ltd, whose affidavit of evidence-in-chief (“AEIC”) and supplementary AEIC were accepted into evidence without cross-examination.
[22] All the Defendants gave evidence in court. They also called on the following persons to testify:
(a) Ms Rita Ganes (“Rita”), a former client services manager of the Plaintiff;
(b) Mr Indraneel Fuke (“Indraneel”), a director of BHEA Knowledge Technologies (P) Ltd (“BHEA India”), an IT firm based in India;
(c) Mr Ajay Satam Jagannath (“Ajay”), a former employee of the Plaintiff;
(d) Mr Sandeep Singhania (“Sandeep”), a director of Lantone Systems Pte Ltd (“Lantone”), a former IT service provider of the Plaintiff;
(e) Mr Ciocan Cornel (“Cornel”), a director and shareholder of Net Vision SEA Pte Ltd (“Net Vision”) who had previously provided software services to the Plaintiff; and
(f) Mr Tay Tat Hwa, an associate director at KordaMentha Forensic Pte Ltd, whose AEIC and Supplementary AEIC were accepted into evidence without cross-examination.
The duties owed by the Defendants to the Plaintiff
[23] Before I can determine whether the Defendants were in breach of any of their duties to the Plaintiff, I have to first consider what, exactly, those duties were. In this respect, the Plaintiff and Defendants differed in many aspects.
Whether the Staff Manual was incorporated into the Defendants’ employment contracts
[24] All of the Defendants, with the exception of Joanna, had written contracts with the Plaintiff dated 1 January 2009 (“the Employment Contracts”). As for Joanna, the parties were in agreement that from the time that she was posted to Singapore from Perth, there was no written employment contract and that her employment was governed by an implied contract of employment.
[25] The Plaintiff argued that the terms in a document known as the “Staff Manual” also formed part of the Employment Contracts. The Staff Manual consisted of the regulations and individual policies which were issued on 1 June 2002 and amended on 1 July 2002. The Plaintiff argued that the following terms in the “Staff Manual” were expressly and/or impliedly incorporated into the Employment Contracts:
[26] In Straits Advisors Pte Ltd v Michael Deeb (alias Magdi Salah El-Deeb) and others [2014] SGHC 94 at [118] and [119], I had the opportunity to sum up the legal position regarding the incorporation of contractual terms thus:
[27] Clause 15 of the Employment Contracts expressly referred to the “Policy Manual” of the Plaintiff, which the Plaintiff asserted was contained in the Staff Manual. Clause 15 stated as follows:
[28] The Defendants submitted that the Staff Manual could not have been incorporated into the Employment Contracts in the first place as the Employment Contracts expressly excluded the application of such terms. The Employment Contracts contained an entire agreement clause which provided for the replacement and exclusion of all previous employment agreements, whether oral or written. Clause 1 of the Employment Contracts stated:
[29] The Defendants also argued that the use of the word “Policy Manual” in cl 15 of the Employment Contracts at a time when the Staff Manual was in existence disclosed an intention to do away with the terms of the Staff Manual and for employees to be bound by the terms of a new Policy Manual to be drafted. No such Policy Manual has been issued. Moreover, there was no objective evidence of any intention to incorporate the Staff Manual. It was never put to any of the Defendants that there was an intention to incorporate either of these documents.
[30] The Plaintiff argued that the material that was purportedly being excluded from the Employment Contracts via the entire agreement clause had to be expressed very clearly and cl 1 of the Employment Contracts was not sufficiently clear and unambiguous as to exclude the incorporation of the Staff Manual. Moreover, the Defendants led no evidence on any intention to do away with the Staff Manual. Further, reading cl 15 of the Employment Contracts strictly would lead to ambiguity as there was no “Policy Manual” in existence. A reasonable person would read the “Policy Manual” in cl 15 as referring to the only manual in existence at the time which all the parties were aware of, ie, the Staff Manual.
[31] In my view, the Staff Manual was not incorporated into the Employment Contracts, whether expressly or impliedly. Clause 15 did not expressly incorporate the Staff Manual as it is clear from the circumstances that the “Policy Manual” was meant to refer to a specific document, even if it was not yet in existence. It is significant to note that Leny, Rahul, Adella and Annie’s previous employment agreements dated 1 January 2006 expressly referred to the Staff Manual. The reference to “Staff Manual” was specifically amended to “Policy Manual” when the Employment Contracts dated 1 January 2009 were entered into some three years later. This could not be a mere typographical error by the Plaintiff. With this amendment, I decline to draw the inference that the parties intended the Staff Manual to continue to govern the terms of their employment as with the previous employment agreements and be incorporated as part of the Employment Contracts, especially when the entire agreement clause in the Employment Contracts had expressly excluded the operation of any part of the previous employment agreements. Unlike, for example, in ABB Holdings Pte Ltd and others v Sher Hock Guan Charles [2009] 4 SLR(R) 111 (“ABB Holdings”), the Plaintiff has not been able to establish clear evidence of an intention on the part of both parties to have the Staff Manual incorporated into the Employment Contracts. The burden to do so rests with the Plaintiff.
Fiduciary duties
Whether Adella and Prasad were fiduciaries
[32] The Plaintiff claimed that Nagender, Leny, Adella and Prasad all owed fiduciary duties to it. It is undisputed that Nagender and Leny were its fiduciaries while they acted as the Plaintiff’s directors, but the Defendants denied that Adella and Prasad owed the Plaintiff any such duties.
[33] Adella was the Plaintiff’s director of operations, and was in Band 4, the Plaintiff’s second most senior classification for its employees. The Plaintiff argued that she oversaw the Plaintiff’s operations and was effectively in control of the same. She was part of the Plaintiff’s senior management team. She was critically involved in the negotiations and decision-making process in relation to supplier contracts. The Plaintiff claimed that she had the power to hire and fire staff, and that all the operations staff in three locations (Bangkok, Perth and Kuala Lumpur) reported to her.
[34] The Defendants denied that Adella was a member of the Plaintiff’s senior management team. While she coordinated communications with suppliers regarding contracts, she did not have the mandate to make any decision as to the terms of such contracts. The Defendants disputed that she had the right to fire staff, and while they accepted that she had the right to hire staff, their position was that she never hired anyone without first obtaining Leny and/or Nagender’s approval.
[35] As for Prasad, he was the vice-president of finance and effectively the CFO of the Plaintiff. He was also classified in Band 4 and was an account signatory. The Plaintiff argued that he was in charge of the Plaintiff’s budget and expenditure; moreover he had the power to hire staff in the Plaintiff’s finance department.
[36] The Defendants said that Prasad was not entrusted with powers to approve expenses, nor did he possess the mandate to decide on budgetary allocations, business development or infrastructure expansion plans. While he was on the panel for recruitment interviews, the appointment of staff was at the directors’ discretion.
[37] To begin, while the relationship of employee and employer can be a fiduciary one, whether a fiduciary relationship in fact arises will depend on the facts of a particular case (see Quality Assurance Management Asia Pte Ltd v Zhang Qing and others [2013] 3 SLR 631 at [25]).
[38] In the English High Court decision of Nottingham University v Fishel and another [2000] IRLR 471 (“Nottingham University”), Elias J noted at [97] that:
[39] The above paragraph was cited with approval by the Court of Appeal in Smile Inc Dental Surgeons Pte Ltd v Lui Andrew Stewart [2012] 4 SLR 308 (“Smile Inc (CA)”) at [52]. The question to be asked, therefore, is whether the employee has placed himself in a position where he must act solely in the interests of his employer.
[40] The Plaintiff relied on the cases of Mona Computer Systems (S) Pte Ltd v Chandran Meenakumari and another [2011] 1 SLR 310 (“Mona”) and ABB Holdings to show that both Adella and Prasad were fiduciaries. However, the factual matrices in both these cases were rather different from that which is before me.
[41] In Mona, the plaintiff company was a family run business dealing with software and IT consultancy and development. The employee in question was the brother-in-law of the founding member of the plaintiff. It was a small business and the employee was the plaintiff’s sole full-time employee tasked with the day-to-day business operations of the plaintiff. He also managed the plaintiff’s contracts with third parties as well as those between the company’s IT personnel and the plaintiff. After the founder died, his wife became the managing director of the plaintiff. As she was not familiar with the business operations of the plaintiff, she was dependent on that employee’s experience and knowledge (at [6]). That employee also tacitly admitted that he owed the plaintiff a fiduciary duty. In such circumstances, it is unsurprising that the court found that he was, indeed, a fiduciary of the company.
[42] In ABB Holdings, one issue was whether the defendant in that case owed fiduciary duties to the second and third plaintiffs, which were part of a worldwide group of companies. He was a director of the second plaintiff and clearly owed it fiduciary duties. The issue therefore was whether he was a fiduciary of the third plaintiff even though he was not a director of that company. He was initially employed by the second plaintiff but his employment was subsequently transferred from the second plaintiff to the third plaintiff with retrospective effect. As president and director of the second plaintiff, he was responsible for the general management of the plaintiff as well as the business development, marketing and sales of the plaintiffs’ installation materials business in the Asia Pacific region. He also attended high-level meetings where the plaintiffs’ various businesses were discussed. Even though his title was reduced from that of president to vice president and general manager of “low voltage products” when he was transferred to the third plaintiff, in truth no change took place in his rights and privileges and there were no changes in the terms and conditions of his employment. He remained part of the top management. He was in a position to hire and fire employees for the third plaintiff. Accordingly, he was found to be a fiduciary of the third plaintiff (ABB Holdings at [39]). In comparison, Adella and Prasad were clearly not responsible for the general management of the Plaintiff’s business nor did they have the power to both hire and fire.
[43] The Defendants, on the other hand, argued that the facts in Nagase Singapore Pte Ltd v Ching Kai Huat and others [2007] 3 SLR(R) 265 (“Nagase”) were more relevant. In this case, two of the defendants were employees of the plaintiff company. One defendant, CY, had the designation of director of a division of the company but this was administrative only and he was not appointed a director of the plaintiff (like Adella). Another defendant, MT was the senior manager of the division. CY had the authority to make on behalf of the plaintiff a new warehousing contract with another company but it was found that MT had no power to contract with third parties on behalf of the plaintiff. Judith Prakash J found that both CY and MT were not, in fact, fiduciaries (at [29]):
[44] The Defendants submitted that Prasad and Adella, as the heads of their respective divisions in the Plaintiff (ie, finance and operations), occupied positions analogous to that of CY in Nagase. They still had to report to Nagender and Leny and had to get Nagender’s and/or Leny’s sanction for many of their decisions. They also argued that the Plaintiff had not adduced any evidence that Prasad or Adella had undertaken specific contractual obligations which placed them in a situation where equity imposed rigorous duties in addition to their contractual obligations, thus the Plaintiff had not discharged its burden of proving that Prasad and Adella owed fiduciary duties to it.
[45] I accept the Defendants’ submissions. Prasad and Adella were in Band 4, which was merely the second highest classification out of five. For example, Annie (who was Adella’s subordinate) was also in Band 4, which indicated to me that Band 4 was not a classification reserved for senior management only. While Adella was responsible for coordinating communications with suppliers, I accept her evidence that she could not make any decision as to its terms. The fact that Prasad and Adella were heads of their respective divisions was also inconclusive. In Nagase, there were approximately 45 employees working under CY in his division (at [19]), but CY was nevertheless found to be part of the middle management. Similarly, the mere fact that Prasad was effectively the CFO of the Plaintiff would not, ipso facto, mean that he was also a fiduciary (see Shepherd Andrew v BIL International Ltd [2003] SGHC 145 at [102]). Despite his position, there is no indication that Prasad had the power to make decisions of a nature that could materially affect the Plaintiff’s interests. I accept his evidence that he had no power to approve expenses or make actual decisions on budgetary allocations. Accordingly, I do not find that Prasad and Adella owed the Plaintiff any fiduciary duties.
The fiduciary duties owed by Nagender and Leny
[46] It therefore remains for me to consider the scope of the fiduciary duties owed by Nagender and Leny to the Plaintiff. In this respect, the Plaintiff pleaded that the following fiduciary duties were owed to it:
(a) to act in good faith and in the best interests of the Plaintiff;
(b) to act with honesty and loyalty towards the Plaintiff;
(c) not to use their fiduciary position to gain any unauthorised personal profit;
(d) not to compete with the Plaintiff;
(e) not to place themselves in a position where their duty to the Plaintiff and their personal interests may conflict;
(f) not to disclose information of concern to the Plaintiff and which was relevant for the Plaintiff to know to third parties;
(g) to disclose to the Plaintiff any potential threat and/or competitive risk posed to its business;
(h) to serve the Plaintiff faithfully and dutifully and not to advance or promote their own interests or other external interests to the prejudice of or contrary to the interests of the Plaintiff;
(i) not to obtain for themselves any business advantage that properly belongs to the Plaintiff without the consent of the Plaintiff; and/or
(j) to inform the Plaintiff of any activity, actual or threatened, which could damage the Plaintiff’s interests.
[47] The Defendants admitted that Nagender and Leny owed the duties stated at (a) to (f), (h) and (i) in the preceding paragraph, but denied that they owed a duty to the Plaintiff to disclose to the Plaintiff any potential threat and/or competitive risk to its business (as stated at (g) above) and/or to inform the Plaintiff of any activity, actual or threatened, which could damage the Plaintiff’s interest (as stated at (j) above).
[48] The Plaintiff relied on ABB Holdings, where Judith Prakash J at [42] found that the fiduciary duties owed to a company includes, inter alia, the following:
(a) a duty to disclose to the company information which came to the fiduciary and which was of concern to the company and was relevant to the company to know; and
(b) a duty to inform the company of any activity, actual or threatened, which could damage the company’s interests.
[49] The Defendants sought to persuade me to depart from the position taken in ABB Holdings. They referred to the High Court decision in Smile Inc Dental Surgeons Pte Ltd v Lui Andrew Stewart [2012] 1 SLR 847 (“Smile Inc (HC)”). There, the court (at [194]) considered British Midland Tool Ltd v Midland International Tooling Ltd and others [2003] 2 BCLC 523 (“British Midland Tool”) and Shepherds Investments Ltd and another v Walters and others [2007] 2 BCLC 202 (“Shepherds Investments”). The court disagreed with British Midland Tool and Shepherds Investments that a director has to disclose his intention to compete, and that once an intention to compete is formed, a director cannot as a matter of law take mere preparatory steps such as the leasing of premises and the equipping of the same (at [212] and [213]). The Defendants submitted that these observations were undisturbed by the Court of Appeal in Smile Inc (CA).
[50] The Court of Appeal’s analysis on this aspect of British Midland Tool was set out at [75] to [77] of that case:
[51] It is axiomatic that a director may in the appropriate circumstances be duty-bound to make disclosures of matters of relevance to the company. However, as noted by Lewison LJ in the UK Court of Appeal in Jeremy Michael Ranson v Customer Systems plc [2012] EWCA Civ 841 (“Ranson”) (which was not cited to me by the parties), even in the context of the fiduciary duties of a director, there is no free-standing duty to disclose. Rather, it is founded on the director’s duty “to act in what he in good faith considers to be the best interests of his company” (Ranson at [52], citing Item Software (UK) Ltd v Fassihi [2004] EWCA Civ 1244).
[52] I respectfully agree with Lewison LJ’s analysis. To conclude, Nagender and Leny did not owe free-standing duties of disclosure to the Plaintiff but that is very different from saying that a failure to disclose is never a breach of fiduciary duty. A director can hardly argue that he has upheld his general duty of single-minded loyalty if his failure to disclose was motivated by bad faith, such as where the director was aware that such non-disclosure would cause harm to the company.
Implied duty of fidelity
[53] The Plaintiff pleaded that, as employees of the Plaintiff, all of the Defendants were further subject to implied duties of good faith, fidelity and loyalty pursuant to which they were required to:
(a) act in the best interests of the Plaintiff;
(b) receive and obey the instructions of the Plaintiff;
(c) devote their time and talents to the Plaintiff’s business;
(d) do their work for the Plaintiff with honesty and integrity;
(e) avoid situations where their personal interests conflict with those of the Plaintiff;
(f) not make preparations during their employment with the Plaintiff and using the Plaintiff’s time and resources with a view to competing with the Plaintiff once their employment was over; and
(g) disclose to the Plaintiff any potential threat and/or competitive risk posed to the Plaintiff’s business.
[54] In their Defence and Counterclaim, the Defendants admitted that they were subject to implied duties of good faith, fidelity and loyalty to the Plaintiff, but they did not admit they owed the duties set out at (a) to (e) above. They further denied that they were subject to the duties set out at (f) and (g). However, in their closing submissions, the Defendants departed from their pleaded case and argued, on the authority of Cheah Peng Hock v Luzhou Bio-Chem Technology Ltd [2013] 2 SLR 577 (“Cheah Peng Hock”), that the implied duties owed are confined to implied duties of mutual trust and confidence, rather than implied duties of good faith.
[55] In Cheah Peng Hock, Quentin Loh J confined the term implied in law to one of mutual trust and confidence. This includes a duty of fidelity, ie, a duty to act honestly and faithfully (at [55]). As for an implied duty of good faith, Loh J noted at [46] that:
[56] I note that Cheah Peng Hock dealt with the issue of the duty owed by an employer to an employee, although the reasoning was of wide application.
[57] In any case, the Plaintiff readily accepted that it was the implied term of mutual trust and confidence that applied, but argued that previous cases have referred to the said implied duty as the implied duty of good faith, fidelity and loyalty, and courts have used the terms interchangeably. It submitted that the unlawful conduct in the present case would amount to a breach of the duty of fidelity.
[58] Insofar as the Plaintiff’s argument related to labels, I agree. What is crucial is, after all, the content of the duty (though of course the use of similar labels for different concepts may be confusing). As stated in Asiawerks Global Investment Group Pte Ltd v Ismail bin Syed Ahmad and another [2004] 1 SLR(R) 234 at [61], employees are expected to serve their employers diligently, honestly and loyally, but what this duty translates into factually depends on the circumstances, such as the nature of the work. For simplicity, I will refer to the implied duty as the implied duty of fidelity.
[59] The next issue is whether this implied duty of fidelity permits an employee to take preparatory steps with a view to competing with his or her former employer while still in the latter’s employ. The Court of Appeal answered this question in the affirmative in Smile Inc (CA) at [65]. Whether or not the steps taken by an employee can be considered as preparatory to future competition, or instead constitute actual competitive activity, turns on the facts of each particular case (Smile Inc (CA) at [67]).
[60] It is a matter of some controversy as to whether “mere” employees have a duty to disclose to their employer any potential threat and/or competitive risk posed to their employer’s business. To persuade me that they did have this duty, the Plaintiff placed particular reliance on the cases of UBS Wealth Management (UK) Ltd v Vestra Wealth LLP [2008] EWHC 1974 (QB), Kynixa Ltd v Hynes and others [2008] EWHC 1495 (QB) and QBE Management Services (UK) Ltd v Dymoke and others [2012] EWHC 80 (QB) (“QBE”).
[61] In QBE, a group of employees, led by the first three defendants (who were senior employees and one of whom was found to owe fiduciary duties to the company), left the plaintiff company to set up the fourth defendant, to compete with their former employers. This was a case where counsel for the defendants had admitted that two of the defendants had “crossed the line” into “impermissible preparations” in certain aspects. The first three defendants had not only recruited their colleagues into their new endeavour, but were also found to have misused confidential information and solicited the company’s clients whilst still employed, and these were all done under the cloak of secrecy. Haddon-Cave J set out at [171] to [174] a set of extracts from recent cases in the UK:
[62] In coming to his interpretation of the law, Haddon-Cave J also disagreed (at [180] and [181]) with the following passage by Hickinbottom J in Lonmar Global Risks Ltd v West [2011] IRLR 138 (“Lonmar”) at [151]:
[63] In my view, Hickinbottom J’s reasoning in Lonmar better accords with the law as set down in Smile Inc (CA), where the Court of Appeal disagreed with the contention that an employee ought to disclose his intention to compete with his employer. In this regard, the Court of Appeal considered the duty that was breached in British Midland Tool and found that duty was in fact founded upon a director’s fiduciary duties, not an employee’s duty of good faith and fidelity.
[64] A director, as a fiduciary, has a single-minded duty of loyalty to the exclusion of the fiduciary’s own interest. Employees do not ordinarily bear such an onerous obligation. They are expected to be loyal to their employer, but as Lewison J explained in Ranson at [41], the duty of loyalty in the context of an employee bears the same label but holds a very different meaning. The employee’s duty to his employer is “one where each party must have regard to the interests of the other, but not that either must subjugate his interests to those of the other” (Nottingham University at [95]).
[65] I also respectfully adopt Quentin Loh J’s pertinent observations in Scintronix Corp Ltd (formerly known as TTL Holdings Ltd) v Ho Kang Peng and another [2013] 2 SLR 633 at [94] that an employee does not normally have a duty to avoid potential conflicts of interest:
[66] As far as the duty of disclosure is concerned, Lewison LJ endorsed (in Ranson at [48] and [54]) the statement in Nottingham University that there is no general principle that an employee is bound to inform his employer if and when he is doing outside work in breach of his contract. However, he added (at [55]):
[67] If an employer wishes to impose a legal burden on an employee to blow the whistle on himself and his colleagues, it should be made crystal clear that he has such an obligation. It would be even better if the employer also laid out the proper steps on how he should discharge this obligation. Moreover, I suspect that in many circumstances it may be more efficacious to rely on the carrot of incentives rather than the stick of legal sanction to induce employees to step forward.
[68] In my view, the Plaintiff has not established on the facts that the non-fiduciary Defendants have undertaken, expressly or impliedly, a contractual duty to report. In such circumstances, they would not be in breach of the implied term of fidelity merely by their failure to disclose any activity, actual or threatened, which could damage their employer’s interests. As stated in Lonmar at [155]:
The alleged masterplan
[69] Having established the scope of the fiduciary duties owed by Nagender and Leny as well as the implied duties owed by all the Defendants as employees of the Plaintiff, I turn now to consider whether those duties had been breached on the facts of the present case. I begin with the Plaintiff’s principal allegation that there was a masterplan linking all the New Entities together. The Plaintiff argued that the involvement of the Defendants in the New Entities disclosed an engineered scheme spearheaded by Nagender, who was able to control the New Entities through (a) the loyalty of the other Defendants to him and (b) his wife Kavita Chilkuri (“Kavita”), to incorporate a group of companies with a view to competing with the Plaintiff’s business.
[70] The Plaintiff has provided an organogram showing the links between the New Entities and the Defendants, which can be found at Annex 3 of this judgment.
[71] The existence and scope of the alleged masterplan turned primarily on Nagender’s alleged motive of wanting to cause harm to the Plaintiff as a result of him being spurned as the next Global CEO. Therefore, I consider it appropriate to analyse this aspect of the Plaintiff’s case first.
The Global CEO succession and Nagender’s resignation
[72] Nagender had a 20% shareholding in the Plaintiff in 2008. As part of a corporate restructuring exercise to facilitate the partial or full sale of the Griffin Group, Nagender transferred his shares in the Plaintiff to GGG in return for shares in GGG (ie, a share swap).
[73] In 2009, the Griffin Group entered into talks with a private equity firm, Inflexion Private Equity Partners LLP (“Inflexion”). As part of the group’s restructuring, the shares in GGG (including Nagender’s) were acquired by Bidco, which was in turn a wholly owned subsidiary of Holdco. Inflexion purchased 25% of Holdco’s shares. By a subscription agreement dated 16 December 2009 (“the Subscription Agreement”) between Holdco, Bidco and himself, Nagender, subscribed through his investment holding company, Signature Sparks, to a 9.1% stake in Holdco and a £1.6m loan note issued by Bidco.
[74] Nagender claimed that he agreed to the share swap and also to the sale of the business on the assurance that he would become the Global CEO after the sale. The Plaintiff denied that any such assurance was made. Nevertheless, it was undisputed that George had identified Nagender as the “prime candidate to be the next Global CEO”. Third parties were also told that Nagender was to be George’s successor. The plan was for Leny to succeed Nagender as managing director of the Plaintiff with Joanna as the second-in-command.
[75] George claimed that the decision not to appoint Nagender as the next Global CEO was reached in early August 2010. At that time, the Griffin Group was considering a merger with VIA, a travel company with a focus on the Nordic countries, and one of the issues being considered was whether Mr Espen Asheim from VIA would be the Global CEO of the merged entity. George claimed that he first told Nagender about this decision on or around 20 August 2010, but there is no other evidence of such a conversation.
[76] On 22 or 23 September 2010, Nagender had a heated argument with George during one of the Griffin Group’s board meetings, in which George called Nagender “obnoxious”. Nagender later called Mr Christian Hamilton (“Christian”) and Mr Gareth Healy (“Gareth”) of Inflexion, as well as Mr Dick Porter (“Porter”), who was then the chairman of the Griffin Group, to complain about George’s behaviour. This upset George, who, in an email to Christian and Gareth, expressed that he was “deeply hurt” by what Nagender did.
[77] It was undisputed that Porter told Nagender that the Griffin Group was going to source for an external candidate for the Global CEO position at around the same time.
[78] On 23 September 2010, Nagender sent an email to George, Khuman and Marcus, among others, stating that:
[79] Nagender admitted that when he sent the email, he wanted to leave the Plaintiff entirely. He claimed that the email was not sent in response to his conversation with Porter, but was rather a reaction to a separate dispute relating to company matters that culminated in the confrontation with George at the board meeting.
[80] What happened next that day is disputed, but it would appear that Nagender was placated for the time being. Nagender sent a follow up email stating: “As discussed, I agree that it would merit diffusing the current situation. Let’s give it a couple of days rest prior to meeting up to discuss and bringing the matter to its logical conclusion.”
[81] Subsequently, George and Nagender met sometime between 6 and 8 October 2010 in Mumbai, India. Both men left their meeting thinking that the issue had been resolved, but their accounts of what occurred differed materially. According to George, they came to an agreement that Nagender would not be the Global CEO but instead could take on the position as the regional head of the Griffin Group’s Asia operations. Nagender, in contrast, asserted that he had asked George in no uncertain terms as to whether there was any change in the Griffin Group’s plans regarding Nagender’s appointment as the Global CEO, to which George’s reply was no.
[82] George wrote to Christian and Gareth on 7 October 2010, setting out his account of the discussion which he had with Nagender in the following terms:
[83] George claimed that the issue of Nagender’s position going forward was finalised the next morning over breakfast on 8 October 2010. The email above suggests that there was a plan to begin with the promotion of Nagender to a regional position with added global responsibility. Therefore, it is not unreasonable to conclude that, after meeting with George in Mumbai, Nagender might have left with the impression that he was still on track to be the Global CEO, with his proposed regional position being only an interim one. If George had told Nagender in no uncertain terms that he would never be the Global CEO, I doubt that Nagender would have been so readily placated for normalcy to return.
[84] On 30 October 2010, Christian sent an email to Gareth and the major shareholders of the Griffin Group, including Nagender, attaching a powerpoint presentation that referred to the succession planning for the managers of the Griffin Group. This presentation was made in the context of Inflexion’s proposal to acquire an additional 25.1% in the Griffin Group (which did not materialise). One of the slides in the presentation stated that the recruitment for a new Global CEO would “start immediately and that this process would take c. 6-9 months”. Nagender stated that this took him by surprise; however, he maintained that the matter was still up in the air, as there was still the possibility that Inflexion’s plans might fall through. If that happened, then with George’s intention to retire and the old shareholders remaining in place, Nagender could still be the one taking over the reins.
[85] Nagender was outspoken about his disgruntlement at the events that had transpired. In a telephone conversation with Christian on 18 November 2010, he told the latter that he was “very bitter about it” and that “[i]f the transition doesn’t happen, the current CEO to the new CEO, I’m ready to go”. He also said on the stand that he was “upset at being lied to”.
[86] This was followed by an email dated 23 November 2010 from Porter in advance of a board meeting on 25 November 2010 in London to the global shareholders, which stated that:
[87] Sometime in November 2010, another heated exchange occurred between George and Nagender at a board meeting. Nagender asserted that any change in the CEO appointment plans would make his stay in the Griffin Group untenable and he would leave if someone else was appointed as the Global CEO. Subsequently, Bob Westerndarp (the head of Griffin US) sent an email to the global shareholders on 26 November 2010 indicating that the search for a new Global CEO needed to start immediately, and that Nagender has “expressed that he has lost interest in the business”.
[88] In response, on 26 November 2010, Nagender sent an email stating:
[89] It seems that Nagender was prepared to leave the Plaintiff for good at this point, although of course he could later change his mind. On the same day, George replied to Nagender asking him to “please rest this”. He also asked Nagender to wait until an upcoming meeting in Athens before making any decision. Nagender did not follow up with his resignation threat.
[90] At the shareholders’ meeting in Athens, Greece on 12 January 2011, it was agreed that the management shareholders would not start the recruitment process for a new CFO and CEO until the VIA merger discussions were aborted (or a successful merger negated the need for such recruitment). Nagender was appointed as the chairman of the management committee of the Griffin Group.
[91] On 14 January 2011, George sent Porter an email about a discussion with Nagender, stating:
[92] The parties interpreted the events in Athens very differently. According to the Defendants, it signalled to Nagender that there remained a real chance that he might be appointed as the Global CEO. George himself said he had met with Nagender privately and assured him that he still had a role to play within the Griffin Group. George also agreed during cross-examination that the reason Nagender had decided to stay on was that the management committee had agreed to temporarily put on hold the external recruitment of a potential CEO. Notwithstanding this, the Plaintiff maintained that Nagender had not been given any assurances that he was going to be the Global CEO and the status quo remained. The Plaintiff said that any intention to revert to the original plan to make Nagender the next Global CEO would have been expressly recorded.
[93] Based on the email of 14 January 2011, it seems clear to me that Nagender’s position as at mid-January 2011 was that he would stay with the Griffin Group and not resign. This change of heart is not surprising as he could probably tolerate the status quo but not when someone else was made Global CEO instead of him. That would result in too much of a loss of face for him.
[94] In February 2011, George and Nagender went to Houston, USA, and Brazil to assess the operations of the Griffin entities there and to see if any improvements could be made. I accept the Defendants’ argument that there was no reason for Nagender to be involved in any of these tasks, nor would Nagender want to take on any of these larger global roles, if he did not think that he had at least the chance of taking over as the Global CEO.
[95] On 24 March 2011, Nagender sent a rather long email to the shareholders of the Griffin Group, which contained the following statement:
[96] For the Plaintiff, this was seen as yet another resignation threat, and that the bitter tone was strongly at odds with any belief that Nagender may have on still becoming the Global CEO. The Defendants’ explanation for this email was that Nagender was simply writing down his opinion on what had not worked for him in the past year.
[97] On 28 March 2011, George replied to Nagender’s abovementioned email with a similarly lengthy response. Of note was the following paragraph:
[98] In my view, this was a clear indication from George that Nagender would not be made the Global CEO. Nagender’s evidence was that this was merely “another change in the scenario” and so he decided not to react. It might well be true that he decided not to react immediately. But I believe that from this point onwards, Nagender would have seen clearer signals that he might never be made the Global CEO. George had couched his email response to Nagender in palatable language that he was “not ready to become the Global CEO of Griffin” and perhaps at a later time he might possibly be. However, I am inclined to the view that Nagender would now be seriously considering his own future in the company that he had long worked very hard for. Yet, it is probably premature to say that he would have immediately come to a firm decision to leave the company upon learning of George’s views.
[99] Sometime in May 2011, there was a phone conversation between Porter, Khuman and Nagender during which it was explained to Nagender that George wished to step down later in 2011 and that a search was beginning immediately for a new, externally sourced CEO to replace him (George). I believe that this would be a much stronger signal to Nagender because there were now some plans for a definite change in Global CEO with George stepping down in a few months’ time. Moreover with a new Global CEO to be sourced externally, it would be quite untenable for Nagender to stay. I believe Nagender would be pushed hard to make up his mind to resign. I can understand that resignation from a very senior position in a company that a person had long worked for would be a major and very difficult decision to make. No doubt that person would have to go through some long and hard thinking before finally reaching a firm decision to quit.
[100] On 9 June 2011, George forwarded to the global shareholders an email he had sent to Gareth on 2 June 2011 admonishing Inflexion for its meddling in the business. Interestingly, it contained a line that said that the “activity for recruiting a CEO has to be postponed”.
[101] On 21 and 22 June 2011, Nagender resigned from the board of Griffin India and the Griffin Global board respectively. I view them as concrete steps taken by Nagender pursuant to a clear decision to resign which I believe must have been firmed up earlier. This reaction was additionally sparked by an email from Marcus attaching notes from a previous discussion and minutes from a global board meeting on 24 May 2011 in which Nagender was not in attendance. The latter contained the line “Singapore was discussed and an approach agreed”. Nagender apparently considered “Singapore was discussed” to mean “Nagender was discussed” and took umbrage.
[102] It is not disputed that Marcus called Nagender on 22 July 2011 to notify him of the possible appointment of one Mr Simon Morse as the executive chairman of the Griffin Group’s board. Nagender recorded this conversation. He asked Lantone to retrieve the recording. Lantone then informed him that there were other phone recordings from the Plaintiff’s phone extensions. Nagender asked Lantone to retrieve these files as well. He claimed that it was then that he came across certain conversations between George and Khuman on 20 June and 4 July 2011 which revealed to him “the scale of complicity between these two individuals” and he decided to quit because it “would be untenable to continue working with such manoeuvring occurring behind the scenes”. I think this confirmed the decision that he had already made earlier to quit and a point of no return had now been reached for his decision to resign.
[103] On 16 August 2011, Nagender finally acted and tendered his resignation as the managing director of the Plaintiff. On 19 September 2011, he also resigned from the Plaintiff’s board of directors.
Analysis on the Global CEO succession issue
[104] The Plaintiff’s case was that Nagender knew in late 2010 and definitely before February 2011 (when the first of the New Entities, Quest Horizon, was incorporated) that he was not going to be appointed as the Global CEO.
[105] The Defendant’s case was that until mid-2011, there was no clear message from the Griffin Group that Nagender would not be made the Global CEO at any time. Moreover, the Defendants asserted that Nagender’s position was that he would only leave the Plaintiff when he was sure that he would not be made the Global CEO, and that day only came sometime in July 2011.
[106] In my view, it is unlikely that Nagender had conceived of a plan for revenge as early as February 2011, when he was supposed to have masterminded the setting up of Quest Horizon, which was eventually incorporated on 21 February 2011. Quest Horizon was allegedly the first of the New Entities which was formed to compete with the Plaintiff. Nagender was never given any conclusive indication that his appointment as the Global CEO was definitely off the table at this time. While the events of the Athens meeting on 12 January 2011 could not be said to be a clear indicator that the plan to make him the Global CEO had been reinstated, it was an example of the conflicting signals that Nagender had been getting. In fact, Nagender was appointed as the chairman of the management committee of the Griffin Group, and George even sent an email on 14 January 2011 to tell Porter that Nagender had decided to stay. This was because the management committee had agreed to put on hold the external recruitment of a potential CEO. In February 2011, George and Nagender visited the USA and Brazil to assess the Griffin Group’s operations there and establish if improvements could be made. It does not appear to me that Nagender at this point of time was already harbouring a firm intention to resign. Why would Nagender want to be involved in any of these tasks and take on larger global roles if he had already made up his mind to resign at this time? Given Nagender’s personality where he would not hesitate to make his displeasure known, I do not think it is likely that he would agree to take on these additional tasks in February 2011.
[107] However, subsequently in an email dated 28 March 2011 (see [97] above), George told Nagender that he was not ready to be made the Global CEO. By this time, his relationship with George was already very strained. Furthermore, Nagender was told by Khuman and Porter sometime in May 2011 that there were plans to search for an external CEO to replace George, who wished to step down later in 2011. By now, he had been told by both the incumbent Global CEO and the chairman that he would not be stepping up to the Global CEO position. Nagender’s resignations from the board of Griffin India and the Griffin Global board came swiftly thereafter on 21 and 22 June 2011 respectively. These resignations from the two boards indicate to me that Nagender would likely have made up his mind to resign by now. If it were otherwise, why would he resign from the Griffin India board and the Griffin Global board? However, Nagender gave a reasonable explanation why he made up his mind to resign only in July 2011 (see [102]). I accept Nagender’s evidence to mean that, in his mind, his decision to resign had been firmed up to the point that he would not change his mind at all whatever the circumstances and even if the Plaintiff were to re-offer him the Global CEO position. He had crossed the Rubicon.
[108] Based on the evidence set out above, I find that Nagender would likely have made a firm decision to quit the Plaintiff sometime between May and July 2011. In fact, as my subsequent analysis on one of the issues in this case will reveal, this timeframe can probably be further narrowed to be somewhere between 17 June and July 2011 (see [376] below). Although it is not possible to pin-point the specific date at which his resignation decision was finally made, what seems clear to me is that, as at February 2011, Nagender had not yet made up his mind to resign and it is unlikely that he would have started implementing a devious masterplan to undermine the Plaintiff, if there was even one at all. One inference is that the earlier planning and eventual incorporation of Quest Horizon on 21 February 2011 was more likely the independent private activity of its shareholders than one involving Nagender as the mastermind instigating these shareholders to join him in setting up a conglomerate to be spearheaded by him with Quest Horizon as a holding company in order to compete with the Plaintiff. Furthermore, I do not believe that any of the other Defendants would have shared any of the ill feelings that Nagender harboured, which arose from the Plaintiff’s refusal to appoint him as Griffin’s Global CEO.
[109] I now examine the circumstances surrounding the setting up of the New Entities.
The setting up of the New Entities
The Defendants’ evidence on Quest Horizon and Niado
[110] According to the Defendants, the idea for Quest Horizon originated from discussions that Adella had in late 2010 with some of her colleagues, including Annie and Madhu Kumar (“Madhu”), who was the general manager of the Plaintiff’s branch in Perth, Australia until his resignation on 4 October 2011. Adella had the idea of pooling her money with some of her colleagues to invest in preparation for retirement, and one of the investment ideas was to invest in property in Thailand. She also reached out to Nagender, who declined to participate. Instead, he told Adella that he would be happy to give them advice or assistance. Adella said it was Nagender who came up with the idea of incorporating a company. Adella also approached Leny but she similarly declined as she already had plans to invest in her father’s vegetable export business in Medan. In the end, only Joanna, Annie, Madhu and Adella decided to participate.
[111] In January 2011, Leny set up an online discussion group named new-venture-2011@googlegroups.com (“the Google Group”). Joanna said she had asked Leny to set up the Google Group to facilitate communications regarding the incorporation of Quest Horizon as Joanna was based in Sydney and Leny was more tech savvy than she was. Other than Annie, Joanna, Adella and Madhu, the Google Group also included Leny, Prasad and Nagender, even though the three persons had not expressed any interest in investing in Quest Horizon. Leny was a member because she helped set up the Google Group, while Prasad and Nagender were added so that their advice regarding matters of incorporation could be sought.
[112] On 6 January 2011, Joanna sent an email to the Google Group stating:
[113] Nagender replied on the same day saying “Quest Horizon looks good”. As to why Nagender’s input on Quest Horizon’s name was sought, Nagender said he thought that Joanna was merely seeking his opinion out of courtesy. Adella also testified that the future Quest Horizon shareholders had already decided on Quest Horizon as the name for their new enterprise, so the fact that Nagender thought the same way was merely coincidence.
[114] The original idea of purchasing property in Thailand was later abandoned after Adella found out about the restrictions on foreign ownership there. Despite this setback, Madhu, Joanna, Annie and Adella decided to proceed with the pooling of their moneys and the incorporation of Quest Horizon in order to be prepared for any investment opportunities which might arise, although they did not have any firm decision as to what they were going to do.
[115] On 21 February 2011, Quest Horizon was incorporated with Annie and Adella as directors. There were four shareholders – Joanna (10%), Annie (10%), Adella (35%) and Madhu (45%) – and their respective shareholdings reflected their contributions. The initial paid up capital was $250,000.
[116] Prasad did not end up assisting in the incorporation of Quest Horizon (which was done with the assistance of KhattarWong LLP). However, he helped by liaising with IP Consultants Pte Ltd (“IP Consultants”) which Quest Horizon had engaged as its corporate secretary.
[117] In March 2011, Quest Horizon email accounts were created for the members of the Google Group. Leny (allegedly at Joanna and Annie’s request) had asked Sandeep of Lantone to set up an email domain for Quest Horizon. As for Nagender, they created an account for him out of politeness. Nagender claimed he did not know he had a Quest Horizon email account. Quest Horizon’s email access records showed that Nagender’s email account was created on 25 March 2011 and last accessed mere days later on 31 March 2011, indicating that he did not use the email account much, if at all.
[118] Quest Horizon’s first (and only) corporate investment was in Niado. According to the Defendants, the opportunity first came about when Cornel approached Nagender with a proposal to collaborate on setting up a business-to-business booking system relating to travel procurement. By way of background, Cornel had known Nagender for a long time. Cornel’s company, Net Vision, had previously delivered a product named Transocean Reservation Exchange or “TREX” to the Plaintiff, which was used to meet the travel requirements of one of the Plaintiff’s major customers, Transocean Inc. Cornel and Nagender had a “casual discussion” regarding Cornel’s proposal in late 2010, but the main discussion took place sometime in early March 2011. Cornel also approached Sandeep, who agreed to participate in this venture with a small stake.
[119] Cornel testified that Nagender declined his proposal around a week or two after the discussion in early March 2011 without saying why. Nagender suggested that Cornel approach “the ladies” – namely, Joanna, Annie and Adella. Cornel had worked closely with the three of them, as well as Leny, while on the TREX project. Cornel said he decided to talk to them because they had the expertise from a travel agent’s perspective, which was the type of input he needed for the project. Cornel stated that Joanna, Annie and Adella agreed to his proposal towards the end of March 2011. I believe the evidence of Cornel, and in particular, that he had approached Nagender, who declined to join in the venture. I pause here to observe that if there was a conglomerate spearheaded by Nagender to compete with the Plaintiff in the travel agency business, it would be very odd that he would have allowed the intended holding company of that conglomerate, ie, Quest Horizon – which Nagender was supposed to have a 45% interest with Madhu as his nominee according to the Plaintiff (which will be discussed subsequently) – to take up a 45% share in Niado, when Nagender showed no interest in the project proposed by Cornel in the first place.
[120] Sometime in the middle of April 2011, Adella and Annie started sourcing for business premises for Niado, as well as Quest Horizon. As for why the search started so quickly, Cornel’s evidence was that the lease for Net Vision was also expiring. Net Vision therefore needed a space quickly and it made sense to get premises together with Niado. The decision to take two adjacent office units at Changi Business Park (“the Changi Offices”) was made by 25 April 2011. Again, I have no reason to disbelieve this part of Cornel’s evidence.
[121] Niado was incorporated on 27 April 2011 with a paid-up capital of $80,000, and with Annie, Cornel and Sandeep as directors. Quest Horizon and Cornel each held 45% of the shares while Sandeep held the remaining 10%. Cornel testified that the word “Niado” came from the names of his two children.
[123] On 31 May 2011, Niado and Quest Horizon signed tenancy agreements for the Changi Offices. Quest Horizon was the named tenant for unit no 08-03 while Niado was the named tenant for unit no 08-04. The total rent for the Changi Offices came up to a combined $11,323.11 a month.
[124] Quest Horizon’s unit in the Changi Offices would eventually be shared by the following companies: Net Vision, BHEA Tech, EGSoft Pte Ltd (“EGSoft”), and Signature Sparks. EGSoft was owned by one of the Defendants’ ex-colleagues, Mr Yashpal Singh. While these parties contributed to the rent, Quest Horizon did not charge them a premium. Adella explained that the sharing of premises was merely a means of reducing the rent. I accept Adella’s evidence on this point.
[125] Leny had an active role in the renovation of the Changi Offices. Leny said she had agreed to help because Madhu and Joanna were in Australia while Adella and Annie were busy with the Plaintiff’s work. By this time, Leny had already resigned and was serving the tail end of her notice period, which meant that she had more time.
Analysis
[127] The Plaintiff argued that there were numerous suspicious circumstances that gave rise to the inference that Quest Horizon was meant to be much more than a passive investment company:
(a) the Defendants had differing views as to why and how Quest Horizon came to be formed;
(b) Quest Horizon’s activities were inconsistent with a passive investment vehicle;
(c) the named directors and shareholders did not appear to have been the driving force behind Quest Horizon; and
(d) the evidence supported the Plaintiff’s case that Quest Horizon was incorporated as the holding company in Nagender’s conglomerate of companies.
[128] I will not deal in this judgment with each and every one of the numerous arguments raised by the Plaintiff as I am of the view that the Defendants have given adequate explanations for all that transpired. I will, however, canvass some of the Plaintiff’s more important arguments.
[129] Regarding the alleged inconsistencies in the Defendants’ evidence surrounding the formation of Quest Horizon, these were all minor discrepancies at best. For example, whether the initial discussion to pool their monies together for investment purposes took place around Adella’s desk or in a conference room was immaterial and this is the sort of detail that can easily slip from one’s mind. As for the differences in the Defendants’ accounts of the purpose and idea behind Quest Horizon’s formation, it was merely a case of different individuals using different ways or turns of phrase to express the same thing. For example, Joanna mentioned that the idea of pooling their savings was “really for growing [their] savings faster” while Leny said it was a way to “pool funds together for investment”.
[130] The Plaintiff also argued that Quest Horizon was not just a passive investment vehicle, as a passive investment vehicle would not have selected an unestablished start-up like Niado as a major investment. It was hardly the type of stable, low-risk investment that people looking to safeguard their capital would normally invest in.
[131] There is nothing out of the ordinary for the shareholders of Quest Horizon to select Niado as its major investment. Cornel was a persuasive man who was clearly not short on confidence. He made big promises of big profits – his projected valuation of Niado was a head-turning $50m to $100m. While investing in Niado was clearly a risk, it was not an uneducated one since Joanna, Adella and Annie had worked with Cornel before and knew how well TREX had worked for the Plaintiff. I am not surprised that the shareholders of Quest Horizon would have invested in Niado despite it being a start-up company because they shared in Cornel’s vision and believed in his promises of high returns at that time. Nagender, however, showed no interest for reasons of his own. It would appear that Niado has remained a struggling start-up and Nagender was wise not to have invested in it.
[132] The Plaintiff argued that if Cornel so strongly desired the particular expertise of Quest Horizon’s shareholders, it was strange that he only required Annie, Adella and Joanna to “answer” his “questions”. I do not find this strange because while Cornel might have the relevant domain knowledge in software development, he needed the users’ input and perspective to help him develop the software system. For this, Annie, Adella and Joanna would be capable of providing the necessary users’ input. I accept Cornel’s evidence that he wanted to have a travel agent’s perspective and answering his questions was really all they could do to help. In any event, they would not have the full picture of what was involved in developing the whole system.
[133] The Plaintiff also raised several points regarding Quest Horizon’s leasing of the Changi Offices, which are summarised as follows:
(a) A passive investment vehicle would not need any business space of its own and the taking of actual office space would mean significant overhead costs.
(b) Niado was not active in 2011 and would not have required such a large space. Quest Horizon also took up office space beyond what Niado needed.
(c) Even if the additional space was taken so that Niado could expand, the rush to obtain the tenancy of the Changi Offices was inexplicable.
(d) Therefore, the taking of the tenancy wholly for Niado’s benefit was unbelievable. The lease of the Changi Offices must have been for Quest Horizon’s own benefit, which does not accord with the stated purpose of Quest Horizon being a passive investment company.
[134] It was certainly possible for Quest Horizon to have acquired larger premises than it needed for Niado’s future expansion. I also accept Cornel’s explanation that he was also looking for new premises for Net Vision at the same time, which accounted for the hurry.

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Griffin Travel Pte Ltd v Nagender Rao Chilkuri and others

Grounds of decision

Introduction

Dramatis Personae

The Defendants

The witnesses

The duties owed by the Defendants to the Plaintiff

Whether the Staff Manual was incorporated into the Defendants’ employment contracts

Fiduciary duties

Whether Adella and Prasad were fiduciaries

The fiduciary duties owed by Nagender and Leny

Implied duty of fidelity

The alleged masterplan

The Global CEO succession and Nagender’s resignation

Analysis on the Global CEO succession issue

The setting up of the New Entities

The Defendants’ evidence on Quest Horizon and Niado

Analysis