Tokuhon v Seow: Directors' Fiduciary Duties & Termination of Distributorship

Tokuhon (Pte) Ltd (“TPL”) sued Seow Kang Hong, Mrs. Seow, and Gamma 2000 (S) Pte Ltd (“Gamma”) for breach of fiduciary duties. The Court of Appeal dismissed TPL's action, finding that Mrs. Seow's actions did not cause the termination of TPL's distributorship agreement and that the Seows had not breached their fiduciary duties. The court found the termination was due to the partners' inability to cooperate.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeal dismissed with costs.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Appeal regarding breach of fiduciary duties by directors. The court dismissed the action, finding no breach caused the distributorship termination.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Tokuhon (Pte) LtdAppellantCorporationAppeal DismissedLost
Seow Kang HongRespondentIndividualJudgment in favor of RespondentWon
Wong Kah JooRespondentIndividualJudgment in favor of RespondentWon
Gamma 2000 (S) Pte LtdRespondentCorporationJudgment in favor of RespondentWon

3. Judges

Judge NameTitleDelivered Judgment
Chao Hick TinJustice of the Court of AppealYes
Kan Ting ChiuJudgeNo
Yong Pung HowChief JusticeNo

4. Counsels

Counsel NameOrganization
Roderick E MartinMartin and Partners
Indranee RajahDrew and Napier LLC
Justin YipDrew and Napier LLC
Sham SabnaniDrew and Napier LLC

4. Facts

  1. Tokuhon (Pte) Ltd was incorporated in 1962 by three family business entities.
  2. Tokuhon (Pte) Ltd was appointed as the sole distributor of Tokuhon medicated plasters in Singapore, Malaysia and Brunei.
  3. Internal squabbles arose among the three partners in the 1990s.
  4. China Merchants was appointed as agents with the authority to appoint authorised distributors.
  5. Mrs. Seow sent letters to Chien detailing internal conflicts among the management.
  6. Tokuhon (Pte) Ltd's distributorship was terminated in May 2000.
  7. Gamma 2000 (S) Pte Ltd was awarded the distributorship after the termination.

5. Formal Citations

  1. Tokuhon (Pte) Ltd v Seow Kang Hong and Others (No 2), CA 133/2002, [2003] SGCA 39

6. Timeline

DateEvent
Tokuhon (Pte) Ltd incorporated by three family business entities.
Tokuhon (Pte) Ltd took over retailers from Continental Trading Co.
China Merchants Import & Exports Co Ltd appointed as agents by Tokuhon Corporation.
Dr Chang complained to Chien about Tokuhon products being dumped into Singapore market.
China Merchants wrote to Dr Chang acknowledging difficulties in Tokuhon (Pte) Ltd.
Dr Chang proposed direct sales method to China Merchant.
Chien flew to Singapore to assess the position on the ground.
Weng Seng Heng wrote to Chien seeking sole distributorship.
Mrs Seow wrote to Dr Chang voicing disapproval of his surreptitious move.
Dr Chang offered to sell his shares in Tokuhon (Pte) Ltd.
Mrs Seow wrote to Chien informing him of her intention to withdraw from Tokuhon (Pte) Ltd.
Tokuhon Corporation expressed dissatisfaction over low number of orders received.
Chien went to Japan to discuss terminating the distributorship of Tokuhon (Pte) Ltd.
China Merchants issued the termination letter.
Ng arrived in Tokyo hoping to obtain the distributorship for his own firm.
Tokuhon (Pte) Ltd held its annual general meeting.
Dr Chang and Ng arrived in Tokyo to persuade Tokuhon Corporation to give the distributorship to Nan Tat and Weng Seng Heng.
Mrs Seow tendered her resignation from the Board.
Mrs Seow flew to Tokyo to talk to Chien and Tokuhon Corporation.
Chien telephoned Mrs Seow to inform her that she had been selected to be the new distributor.
Affidavit of Chien filed in a company winding-up proceeding.
Decision Date

7. Legal Issues

  1. Breach of Fiduciary Duty
    • Outcome: The court held that Mrs. Seow was not in breach of her fiduciary duties in communicating with Chien, given the conduct of the partners.
    • Category: Substantive
    • Sub-Issues:
      • Disclosure of confidential information
      • Conflict of interest
      • Usurping business opportunity
  2. Causation of Loss of Distributorship
    • Outcome: The court held that the real cause of the termination of the distributorship was the inability of the partners/directors to work together.
    • Category: Substantive
  3. Duties of Former Director
    • Outcome: The court held that the Seows had not breached any fiduciary duties by accepting the distributorship after ceasing to be directors, as there was no maturing business opportunity being usurped.
    • Category: Substantive

8. Remedies Sought

  1. Damages for loss of distributorship

9. Cause of Actions

  • Breach of Fiduciary Duty

10. Practice Areas

  • Commercial Litigation
  • Corporate Law

11. Industries

  • Pharmaceuticals
  • Distribution

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Island Export Finance Ltd v Umunna & AnorN/AYes[1986] BCLC 460England and WalesFollowed the principle that a director’s duties to the company do not necessarily end with his ceasing to be such a director.
IDC v CooleyN/AYes[1972] 2 All ER 162England and WalesDistinguished on the facts; concerned a director who failed to disclose information of interest to the company and used it for his own personal purposes.
Canadian Aero Services v O’MalleyCanadian Supreme CourtYes4 OD.L.R. 371CanadaDistinguished on the facts; concerned former directors usurping a maturing business opportunity.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap 50, 1994 Rev Ed) s 391(1)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Distributorship
  • Fiduciary duty
  • Termination
  • Directors' duties
  • Internal conflicts
  • Partnership
  • Sole distributor
  • China Merchants
  • Tokuhon Corporation

15.2 Keywords

  • fiduciary duty
  • directors
  • distributorship
  • termination
  • company law
  • singapore

17. Areas of Law

Area NameRelevance Score
Director's Duties95
Fiduciary Duties90
Company Law85
Contract Law30

16. Subjects

  • Company Law
  • Fiduciary Duties
  • Contract Law
  • Agency Law