Viking Airtech Pte Ltd v Foo Teow Keng and Another

Judith Prakash J:

[1] These registrar’s appeals concern the correct measure of damages payable by the defendants arising out of the first defendant’s breach of fiduciary duty to the plaintiff.

[2] The plaintiff is a company in the business of manufacturing and supplying heating, ventilation and air-conditioning systems for vessels. Until November 2003, the first defendant (“Mr Foo”) was a director and general manager of the plaintiff. The second defendant is a company which competes with the plaintiff and which is owned by Mr Foo and his wife. The second defendant was established by Mr Foo while he was still employed by the plaintiff.

[3] In this action, the plaintiff claimed damages from the defendants on the basis that Mr Foo acted in breach of his fiduciary and other duties to the plaintiff and diverted business from the plaintiff to the second defendant. The trial of liability took place before me and, in October 2007, I found in favour of the plaintiff. I made, inter alia, the following findings:

(a) that in breach of duty, Mr Foo had diverted from the plaintiff to the second defendant two contracts (the “diverted contracts”) in respect of the sale, delivery and installation of air-conditioning systems in oil tankers being constructed in Indonesia viz:

(i) a contract worth US$149,000 with PT Dok Dan Perkapalan Surabaya (Persero) (“PT Dok”); and

(ii) a contract worth US$198,000 with PT Pal Indonesia (Persero) (“PT Pal”);

(b) that in breach of duty, Mr Foo had caused the plaintiff to fail to make delivery of equipment fabricated pursuant to a contract in respect of the vessel “Pelindo II” between the plaintiff and PT Pal and, in further breach, Mr Foo had caused the second defendant to supply the equipment to PT Pal instead; and

(c) that the defendants had converted to their own use the plaintiff’s assets located in the plaintiff’s office in Shanghai.

I ordered that damages be assessed in respect of the various breaches.

[4] The assessment of damages took place before Assistant Registrar Teo Guan Siew (“the AR”) in August 2008. All parties accepted that it was for the plaintiff to prove the causal connection between the established breach of fiduciary duty and the loss which the plaintiff asserted had been suffered because of that breach (applying the case of Ohm Pacific Sdn Bhd v Ng Hwee Cheng Doreen [1994] 2 SLR 576).

[9] The AR then came to the following conclusion:

He therefore awarded the plaintiff $127,736.87 as damages for the PT Pal contract and $114,309.57 as damages for the PT Dok contract.

[10] In respect of the “Pelindo II”, the plaintiff claimed the sum of $32,468 as damages. This was calculated on the basis that the plaintiff had fabricated the system for the “Pelindo II” and would have been paid $50,830 (equivalent to the contract price of US$29,900 at the same exchange rate as mentioned above) had it delivered the same to PT Pal. As no delivery was made due to Mr Foo’s breach of duty, the plaintiff received no payment from PT Pal and had to scrap the entire system. It recovered only a salvage value of $18,361.90 from the scrapping operation and the deduction of this sum from the contract sum meant that its loss was $32,468. The AR accepted this calculation and awarded this amount to the plaintiff.

[11] In respect of the plaintiff’s conversion claim, the AR assessed the damages as being the net book value of the equipment converted as the said values appeared in the plaintiff’s accounts as at 2003. He awarded the plaintiff $6,194.22 under this head.

[12] The plaintiff claimed that it should be awarded interest on the damages to run from the respective dates of loss. The AR rejected this contention. He accepted the defendants’ submission that the plaintiff had delayed in instituting the action and had not given an explanation for the lapse of almost three years before it commenced proceedings. He therefore decided that interest at 5.33% per annum should be awarded as from the date the judgment in the suit was issued ie, 12 October 2007.

[13] Both parties were not entirely satisfied with the outcome of the assessment although, naturally, the defendants’ dissatisfaction was greater. Each appealed.

[14] The defendants appealed against the assessment of damages for the two diverted contract claims and the “Pelindo II” claim and asked for the awards to be reduced. The plaintiff’s appeal was limited to two items: (a) it wanted the deduction of 15% of the contract value from the PT Pal and PT Dok contracts to be removed and for it to be awarded the full amount of those two claims; and (b) in respect of interest, it asked for interest to be awarded either from the dates of the respective breaches or from the date of filing of the writ of summons.

(a) the plaintiff could have fabricated the equipment utilising its existing factory space or facilities and the staff;

(b) the plaintiff’s labour costs were fixed regardless of the number of contracts the plaintiff was performing; and

(c) he did not have personal knowledge of the allegation in his affidavit of evidence-in-chief that at the material time there was a shortage of workers who would be able to carry out the contracts.

[19] I agree with the finding of the AR. It was clear from the evidence that the plaintiff’s overheads were fixed and the quantum of the same would not have been affected had the plaintiff performed the diverted contracts. Mr Foo had recognised this fact during the assessment hearing. Whilst he had alleged that the plaintiff did not have sufficient facilities to perform the diverted contracts as well as other contracts which he had been in the process of obtaining for the plaintiff in 2003, no proof of this was produced. The plaintiff produced sufficient proof to establish on a prima facie basis that its overheads were fixed and would have been incurred any way. After it met this burden, the defendants had the burden of showing that what appeared to be the position on a prima facie basis was not in fact so. They did not discharge that latter burden.

[22] The AR did not deal in detail with the sum of $30,196 which had been paid by the second defendant to its sub-contractors. This sum comprised the following items:

Payment to Yeow Hwee Engineering being:

$12,720

fabrication of air-con and condensing units

$11,000

modification of carrier’s packaged unit

$ 1,000

supply of plenum box

$ 720

$16,626

$ 850 _______

$30,196

[25] The third dispute was in relation to commission and other expenses paid in Indonesia. The plaintiff took into account as part of the expenses the sum of US$5,940 ($10,098) being the 3% commission that the second defendant had paid to its agent Mr Tumanan. Mr Tumanan himself testified and claimed that the commission payable for contracts like the PT Pal contract ranged between 5% and 10% of the price of the project. During cross-examination, however, he admitted that in the case of the PT Pal contract, the contractual commission was 3%.

[26] The defendants produced three documents relating to payments made to Mr Tumanan. They were identified respectively as PBA268, PBA270 and PBA271. PBA268 is a payment voucher addressed to Mr Tumanan and contains details of three amounts paid to him. One of these amounts is stated to be the sum of US$5,940 as “Representative fee for tanker 30,000 DWT (3%)” and the reference for this payment is given as “P/O: VHA/003/10166”. The second document, PBA270, is the commercial invoice from Mr Tumanan’s company, CV Tiberias Jaya, addressed to the second defendant whereby he claimed, inter alia, US$5,940 as the 3% representative fee for “Tanker 30,000 DWT”. The third document, PBA271, is the second defendant’s Purchase/Work Order No. VHA/003/10166 and this shows the second defendant’s agreement to pay CV Tiberias Jaya US$5,940 as Mr Tumanan’s 3% commission for the same project. All these documents therefore substantiated only the payment of US$5,940 which the plaintiff had already taken into account in its calculation of $158,373.13.

[27] The defendants, however, argued that in addition they had paid Mr Tumanan a further 2% of the contract price as expenses. This sum was not mentioned in the affidavit of evidence-in-chief filed by Mr Foo and it was not supported by any payment voucher or commercial invoice. Mr Tumanan claimed during cross-examination that there was a document to support the additional 2% but Mr Foo contradicted this evidence when he himself testified. Whilst Mr Foo asserted that when doing business in Indonesia one has to pay some extra commission and buy some extra equipment from the locals as a way of showing appreciation, he was unable to substantiate that assertion with any evidence as to any amount expended for such a purpose in relation to the specific contract under consideration. In any case, even if the second defendant might have had to undertake such expenditure, that does not mean that the plaintiff would have had to do it as well. That being the case, there was no evidence before the AR on which he could justify increasing the expenses accepted by the plaintiff by an amount reflecting that additional 2% or any other figure. No other evidence was pointed to on the appeal that would undermine the decision of the AR. Thus, the defendants’ argument has to be rejected.

[29] For the reasons given above, I see no merit in the defendants’ appeal in relation to the assessment of damages for the diverted contracts.

[34] In my judgment therefore the plaintiff’s appeal on this issue must be allowed.

[39] The defendants also endeavoured to raise an argument to the effect that they should not be made liable for any loss in respect of this contract on the basis that the plaintiff itself had been negligent in not making the delivery and therefore caused its own loss. The AR rejected this argument and I do too on the basis that the defendants’ liability had been determined at the trial and they were not entitled to raise arguments on liability at the assessment stage. If the defendants were dissatisfied with the judgment, their recourse was to appeal.

[40] The AR awarded the plaintiff interest on all sums awarded at the rate of 5.33% p.a. from 12 October 2007, the date when judgment on liability was delivered. He chose that date as the starting point for the interest calculation because he accepted the defendants’ submission that there had been delay by the plaintiff in commencing the action. The plaintiff appealed against the commencement date of the interest calculation.

[41] On appeal, the plaintiff submitted that it should be entitled to interest in respect of its damages for the diverted contracts from the respective dates on which the second defendant received payment from PT Pal (10 May 2004) and PT Dok (1 July 2004) for these contracts. As for the “Pelindo II” contract, the plaintiff submitted that interest should be payable from 31 March 2004 as Mr Foo had said that the second defendant had received payment for this system by February or March 2004. The plaintiff also made a submission on interest in relation to the conversion of its assets in Shanghai. In respect of this claim, it asked for interest from the date when the goods were converted ie, 10 November 2003. Alternatively, the plaintiff asked that interest be awarded on all the claims from the date on which it filed its writ.

[42] The defendants responded that as far as interest was concerned, the AR had exercised his discretion correctly and the plaintiff was not entitled to interest from the earlier dates claimed due to its delay in commencing proceedings. I agree that there was delay in commencing proceedings. It was clear from the evidence that the plaintiff knew about its various heads of claim on varying dates between November 2003 and the end of that year. That being the case, it was not, prima facie, reasonable for the plaintiff to have delayed commencing proceedings until March 2006. It would have been reasonable for the plaintiff, after undertaking some investigation, to have started its actions by mid 2004. The plaintiff did not give any explanation for the delay. Accordingly, I agree with the AR to the extent that the plaintiff was not entitled to recover interest for the period before it started the action. However, I do not agree that the plaintiff should only recover interest from the date of judgment. Once the proceedings were commenced, time started to run once again in respect of interest. There is no allegation that once started, the actual prosecution of the claim was dilatory. Proceedings seem to have moved along in the normal course. Thus, I can see no reason for the award of interest to be only from the date of judgment and I will therefore adjust the date of award accordingly.

[43] In the result, the plaintiff’s appeal has succeeded in full and the defendants’ appeal has failed, except on one issue. The awards made below must be adjusted as follows:

(a) in respect of the claim for the PT Pal diverted contract, the amount awarded to the plaintiff is increased to $178,226.87;

(b) in respect of the claim for the PT Dok diverted contract, the amount awarded to the plaintiff is increased to $152,304.57; and

(c) in respect of the claim for the “Pelindo II”, the amount awarded to the plaintiff is decreased to $19,341.47.

(d) the plaintiff shall be entitled to interest on all of the above amounts and on the amount awarded in respect of the conversion of the Shanghai assets at the rate of 5.33% per annum from 1 March 2006 until the date of payment.

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