Tan Hup Thye v Refco: Breach of Fiduciary Duty & Bonus Entitlements Dispute

In Tan Hup Thye v Refco (Singapore) Pte Ltd, the High Court of Singapore heard a claim by Tan Hup Thye, the former managing director of Refco, for bonus entitlements totaling $1,460,442.03. Refco counterclaimed, alleging breach of fiduciary duties. The court, presided over by Justice Judith Prakash, dismissed Tan's claim, finding that he was not contractually entitled to the bonuses and had breached his fiduciary duties by procuring the passing of a resolution approving the bonus payments. The court gave judgment to Refco on its counterclaim for damages to be assessed.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Plaintiff's claim dismissed; judgment for Defendant on counterclaim for damages to be assessed.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Tan Hup Thye sues Refco for bonus entitlements. The court dismisses the claim, finding a breach of fiduciary duty.

1.7 Decision Date

10 May 2010

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Tan Hup Thye	Plaintiff	Individual	Claim Dismissed	Lost	M K Eusuff Ali of Tan Rajah & Cheah C R Rajah SC of Tan Rajah & Cheah Lavinia Rajah of Tan Rajah & Cheah
Refco (Singapore) Pte Ltd (in members' voluntary liquidation)	Defendant	Corporation	Judgment on Counterclaim	Won	William Ong of Allen & Gledhill LLP Ramesh Kumar of Allen & Gledhill LLP Eunice Chew of Allen & Gledhill LLP

3. Judges

Judge Name	Title	Delivered Judgment
Judith Prakash	Judge	Yes

4. Counsels

Counsel Name	Organization
M K Eusuff Ali	Tan Rajah & Cheah
C R Rajah SC	Tan Rajah & Cheah
Lavinia Rajah	Tan Rajah & Cheah
William Ong	Allen & Gledhill LLP
Ramesh Kumar	Allen & Gledhill LLP
Eunice Chew	Allen & Gledhill LLP

4. Facts

Plaintiff was managing director of Defendant until December 4, 2005.
Defendant was part of the Refco Group, which underwent restructuring in August 2005.
Refco Inc filed for bankruptcy protection in October 2005.
Man Financial Inc agreed to acquire the business of the Refco Group, including the Defendant.
Plaintiff sought to make bonus payments to employees before the takeover by Man Financial.
Refco Inc instructed the Plaintiff not to make any bonus payments.
Plaintiff procured the passing of the December Resolution approving bonus allocation.

5. Formal Citations

Tan Hup Thye v Refco (Singapore) Pte Ltd (in members’ voluntary liquidation), Suit No 778 of 2006, [2010] SGHC 149

6. Timeline

Date	Event
1984-02-01	Refco (Singapore) Pte Ltd incorporated
1986-11-01	Tan Hup Thye became managing director of Refco (Singapore) Pte Ltd
2005-08-01	Refco Group restructured
2005-10-01	Refco Inc announced discovery of undisclosed receivable
2005-10-17	Refco Inc filed for bankruptcy protection
2005-11-13	Agreement reached for Man Financial Inc to acquire Refco Group's business
2005-11-21	Board meeting held; resolution passed approving bonus payment to employees
2005-11-22	Refco Inc representatives instructed plaintiff not to make bonus payments
2005-12-03	Board of directors held meeting; resolution passed approving allocation of bonuses
2005-12-04	Plaintiff informed not to communicate board resolutions to employees
2005-12-05	Man (S) took over business of Refco (Singapore) Pte Ltd
2005-12-05	Plaintiff's employment terminated by Man (S)
2006-11-30	Refco (Singapore) Pte Ltd went into members’ voluntary liquidation
2010-05-11	Judgment reserved

7. Legal Issues

Breach of Fiduciary Duty
- Outcome: The court found that the plaintiff breached his fiduciary duties by procuring the passing of the December Resolution.
- Category: Substantive
- Sub-Issues:
  - Conflict of interest
  - Failure to act in the best interests of the company
  - Improper use of position for personal gain
- Related Cases:
  - [1967] 2 AC 134
  - 54 CLR 583
  - [1996] 1 Ch 274
Contractual Entitlement to Bonus
- Outcome: The court found that the plaintiff had no contractual right to the bonus.
- Category: Substantive
- Sub-Issues:
  - Discretionary bonus
  - Implied terms
  - Company policy and practice
- Related Cases:
  - [2000] 2 SLR(R) 30
Validity of Board Resolution
- Outcome: The court found that the December Resolution was invalid due to conflict of interest and insufficient quorum.
- Category: Procedural
- Sub-Issues:
  - Quorum
  - Conflict of interest
  - Compliance with Articles of Association
- Related Cases:
  - [1904] 1 Ch 32

8. Remedies Sought

Monetary Damages
Indemnity

9. Cause of Actions

Breach of Contract
Breach of Fiduciary Duty

10. Practice Areas

Commercial Litigation
Corporate Law
Employment Disputes

11. Industries

Financial Services

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Regal (Hastings) Ltd v Gulliver	House of Lords	Yes	[1967] 2 AC 134	England and Wales	Cited in support of the proposition that the law does not allow a director to make use of his position to obtain a profit for himself.
Furs Ltd v Tomkies	High Court	Yes	54 CLR 583	Australia	Cited in support of the proposition that a director shall not obtain for himself a profit by means of a transaction in which he is concerned on behalf of the company unless all the material facts are disclosed to the shareholders and the shareholders approve such profit.
In re Greymouth Point Elizabeth Railway and Coal Company Limited	High Court of Justice	Yes	[1904] 1 Ch 32	England and Wales	Cited for the principle that a quorum of directors means a quorum competent to transact and vote on the business before the board.
Neptune (Vehicle Washing Equipment) Ltd v Fitzgerald	High Court of Justice	Yes	[1996] 1 Ch 274	England and Wales	Cited for the principle that a director of a company owes a fiduciary duty to the company to act bona fide in the best interests of the company and to prefer its interests to his own where they conflict.
Golden Harvest Films Distribution (Pte) Ltd v Golden Village Multiplex Pte Ltd	Court of Appeal	Yes	[2007] 1 SLR(R) 940	Singapore	Cited for the proposition that where articles are silent it may be possible to invoke past practices to 'fill in the gaps'.
Clark v BET Plc Ltd and another	Employment Appeal Tribunal	Yes	[1997] IRLR 348	England and Wales	Cited regarding the exercise of discretion in determining salary increases.
Clark v Nomura International plc	High Court of Justice	Yes	[2000] IRLR 766	England and Wales	Cited regarding the awarding of discretionary bonuses.
Horkulak v Cantor Fitzgerald International	Employment Appeal Tribunal	Yes	[2003] IRLR 756	England and Wales	Cited regarding the exercise of discretion in awarding discretionary bonuses.
Horkulak v Cantor Fitzgerald International	Court of Appeal	Yes	[2004] 1 RLR 942	England and Wales	Cited regarding the exercise of discretion in awarding discretionary bonuses.
Latham v Credit Suisse First Boston	Court of Appeal	Yes	[2000] 2 SLR(R) 30	Singapore	Cited for the principle that unless a bonus has been expressed to be guaranteed, an employee cannot claim to be legally entitled to a bonus, the granting and quantum of which are entirely at the discretion of the employer.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
No applicable statutes

15. Key Terms and Keywords

15.1 Key Terms

Bonus Entitlements
Fiduciary Duty
December Resolution
Acquisition Agreement
Bonus Formula
Contractual Obligation
Quorum
Conflict of Interest
Discretionary Bonus
Members’ Voluntary Liquidation

15.2 Keywords

bonus
fiduciary duty
contract
Refco
Tan Hup Thye
liquidation

17. Areas of Law

Area Name	Relevance Score
Fiduciary Duties	85
Corporate Law	70
Company Law	70
Winding Up	65
Director's Liability	60
Contract Law	60
Insolvency Law	50
Breach of Duty	50
Breach of Contract	50
Business Litigation	40

16. Subjects

Corporate Governance
Employment Contracts
Bonus Payments
Fiduciary Responsibilities