Singapore High Court dismisses liquidator’s claims against former executive chairman for breach of directors’ duties
30 July 2019
Poh Lian Construction (Pte) Ltd v Lauw Wisanggeni [2019] SGHC 114
In the recent case of Poh Lian Construction (Pte) Ltd v Lauw Wisanggeni, the Singapore High Court considered whether the former executive chairman of
Poh Lian Construction (Pte) Ltd breached his director’s duties. After hearing the witness evidence and parties’ submissions, the High Court dismissed all of the liquidators’ claims against the former executive chairman.
Facts
The plaintiff, Poh Lian Construction (Pte) Ltd (“Poh Lian”), is a company whose portfolio of projects included at one time numerous large-scale public and private residential and commercial projects. It was a wholly-owned subsidiary of United Fiber System Limited (“UFS”), a company listed on the Singapore Exchange. Poh Lian was placed under interim judicial management on 7 March 2013 and in liquidation on 10 October 2014.
The first defendant was Lauw Wisanggeni, the former executive chairman and executive director. The liquidators alleged the first defendant breached his director duties in relation to the management of three construction projects. Among others, he allegedly caused Poh Lian to submit an underpriced tender for Sophia Residence, caused Poh Lian to wholly subcontract the construction of Bishopsgate Residence in breach of the main contract and mismanaged the labour for the construction of Goodwood Residence. In addition, it was alleged the first defendant concealed Poh Lian’s true financial position for the board of directors and the board of UFS.
Holding
The High Court observed that the plaintiff's case at the end of the trial was not entirely consistent with its case as pleaded in the Statement of Claim, and further held that the high bar to decide on the basis of unpleaded claims was not met in the present case. Therefore, the court refused to factor in the decision the plaintiff’s arguments made at the close of the trial which were substantially outside the scope of its pleaded case.
Sophia Residence
The High Court held that the first defendant discharged their duty of honesty and diligence in managing Poh Lian’s business as far as the Sophia Residence project was concerned.
Bishopsgate Residence
Even though the High Court found that Poh Lian wholly subcontracted the construction of the Bishopsgate Residence, the first defendant did not commit any breach of duty as he was uninvolved, did not know of its details and did not authorise the subcontracting.
Goodwood Residence
The High Court held that there was no mismanagement of labour for Goodwood Residence. It was not possible to get cheap labour at that time, and the defendants’ hiring of labour was not unreasonable in the circumstances.
Alleged Concealment
The High Court held that the allegation on active concealment was not made out. Sufficient information relating to profits and losses was supplied to Poh Lian’s board. As to information on cash flow issues, the plaintiff could not run a case based on concealment or lack of diligence in surfacing cash flow issues as its pleaded case was not wide enough to encompass this claim.
Goodwood Residence Unit
The first defendant’s purchase of the Goodwood Residences unit did not fall within the no-profit rule. The unit was available for purchase by the general public, it was purchased at market value, and there was nothing to suggest that the first defendant benefited from his position qua director of the plaintiff. It was not pleaded that the first defendant breached the no-conflict rule.
Comment
The High Court reiterated the general rule that a court should decide on the basis of unpleaded issues or claims only in the very rare circumstances where “no prejudice is caused to the other party” or where “it would be clearly unjust for the court not to do so”. It is a timely reminder that one’s case must be properly pleaded and the case advanced at trial must be within the scope of the pleaded case. Where necessary, parties may want to consider amending their pleadings.
Allen & Gledhill Partners Chong Yee Leong and Nicholas Tan and Senior Associate Sheryl Koh acted successfully for the first defendant.