Maxz Universal v Lian: Breach of Director's Duties & Conflict of Interest in Company Financial Disputes

In 2010, the High Court of Singapore heard the case of Maxz Universal Development Group Pte Ltd v Lian Hwee Choo Phebe, concerning allegations of breach of director's duties and conflict of interest. Maxz Universal, the plaintiff, claimed that Phebe Lian, a shareholder and former director, caused financial loss by interfering with a refinancing deal and acting in conflict of interest regarding a Standby Letter of Credit. The court, presided over by Justice Lai Siu Chiu, dismissed the plaintiff's claims, finding no evidence of a causal link between Lian's actions and the failed refinancing, and no breach of duty regarding the Standby Letter of Credit.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Plaintiff's claims dismissed with costs to the defendant.

1.3 Case Type

Civil

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Shareholder Lian Hwee Choo Phebe was sued by Maxz Universal for breach of director's duties. The court dismissed the claims, finding no breach.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Maxz Universal Development Group Pte LtdPlaintiffCorporationClaim DismissedLost
Lian Hwee Choo, PhebeDefendantIndividualJudgment for DefendantWon
Jimmy Yap of Independent Practitioner

3. Judges

Judge NameTitleDelivered Judgment
Lai Siu ChiuJudgeYes

4. Counsels

Counsel NameOrganization
Edmund KronenburgBraddell Brothers
Lye Hui XianBraddell Brothers
Charmaine CheongBraddell Brothers
Jimmy YapIndependent Practitioner
Rahayu Binte MahzamHeng Leong & Srinivasan
Srinivasan V.N.Heng Leong & Srinivasan

4. Facts

  1. Phebe Lian invested $100,000 in the plaintiff in return for 10% of the plaintiff’s shares.
  2. Phebe Lian provided the plaintiff with an SBLC for $200,000 which the plaintiff used as collateral for a $200,000 credit facility from OCBC.
  3. Phebe Lian provided the plaintiff with an interest free loan of $100,000.
  4. Phebe Lian was made a director of the plaintiff.
  5. Phebe Lian provided the plaintiff with an SBLC for $1m, which enabled the plaintiff to obtain a $1m credit facility from OCBC.
  6. Phebe Lian stood as a guarantor for the plaintiff’s $5m loan from Maybank.
  7. Phebe Lian sent a letter to the plaintiff’s bankers informing them that she would be making an inquiry into the plaintiff’s financial affairs.

5. Formal Citations

  1. Maxz Universal Development Group Pte Ltd v Lian Hwee Choo Phebe, Suit No 643 of 2008/M, [2010] SGHC 64

6. Timeline

DateEvent
Phebe Lian made a capital injection of $100,000 into the plaintiff.
Phebe Lian provided the plaintiff with a Standby Letter of Credit for $200,000.
Phebe Lian provided the plaintiff with an interest free loan of $100,000.
Phebe Lian was made a director of the plaintiff.
The plaintiff obtained an $8m loan from Moscow Narodny Bank Limited.
The plaintiff obtained a loan of $5m from Maybank.
Treasure Resorts entered into a Novation Agreement with Sijori and a Supplemental Agreement with SDC.
Phebe Lian sent a letter to the plaintiff’s bankers.
Phebe Lian wrote to the banks to seek copies of the plaintiff’s bank statements.
Phebe Lian was removed as a director of the plaintiff.
Seeto and Sebastian transferred their shares in the plaintiff to Roscent Group Holdings.
CUL commenced legal action against the plaintiff.
Maybank granted Treasure Resorts a loan of $26.1m.
Phebe Lian and Kok Lan Choo commenced Originating Summons No 18 of 2008 against the plaintiff.
Phebe Lian and Kok Lan Choo commenced Suit No 536 of 2008 against the plaintiff.
The plaintiff commenced the present action against Phebe Lian.
Andrew Ang J delivered oral judgment in Suit 536 in favor of Phebe Lian and her co-plaintiff Kok Lan Choo.
Judgment reserved by Lai Siu Chiu J.
Supplemental Judgment

7. Legal Issues

  1. Breach of Director's Duties
    • Outcome: The court found that Phebe Lian did not breach her director's duties by sending the letter to Maybank or by causing CUL to extend the $1m SBLC.
    • Category: Substantive
    • Sub-Issues:
      • Failure to act in the best interests of the company
      • Conflict of interest
  2. Conflict of Interest
    • Outcome: The court found that Phebe Lian was not in breach of her director’s duties by causing CUL to extend the $1m SBLC in favor of the plaintiff in return for the $53,664 because the other directors knew of Phebe Lian’s interest in CUL.
    • Category: Substantive
    • Related Cases:
      • [1991] 4 ACSR 431
      • [1992] BCLC 22

8. Remedies Sought

  1. Monetary Damages

9. Cause of Actions

  • Breach of Director's Duties
  • Conflict of Interest

10. Practice Areas

  • Commercial Litigation

11. Industries

  • Investment
  • Real Estate

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Woolworths Ltd v KellyCourt of Appeal of New South WalesYes[1991] 4 ACSR 431AustraliaCited to support the proposition that formal disclosure is not necessary where the nature of the interest was known to the other directors.
Lee Panavision Ltd v Lee Lightning LtdEnglish Court of AppealYes[1992] BCLC 22England and WalesCited to support the proposition that non-disclosure of an interest common to all the directors and known to all of them would not be a breach of the English equivalent of s 156(1) of the Companies Act.
Dayco Products Singapore Pte Ltd (in liquidation) v Ong Cheng AikN/AYes[2004] 4SLR(R) 318SingaporeCited by the plaintiff to argue that informal disclosure or knowledge is insufficient to satisfy disclosure requirements under s 156(1) of the Companies Act, but distinguished by the court.
In re Land and Property Trust Co plc No.2N/AYes[1993] BCC 462N/ACited regarding legal advice sought by directors before commencement of suit.
Symphony Group plc v HodgsonN/AYes[1994] QB 179N/ACited regarding costs against a non-party.
Karting Club of Singapore v Mak David & othersN/AYes[1992] 1 SLR(R) 786SingaporeCited regarding the power of the court to determine who should pay costs.

13. Applicable Rules

Rule Name
Rules of Court (Cap 322, R 5 2006 Rev Ed)
O 59 r 2(2) of the Rules of Court (Cap 322, R 5 2006 Rev Ed)

14. Applicable Statutes

Statute NameJurisdiction
Evidence Act (Cap 97, 1997 Rev Ed)Singapore
Companies Act (Cap 50, 2006 Rev Ed)Singapore
s 216 of the Companies Act (Cap 50, 2006 Rev Ed)Singapore
s 156 of the Companies ActSingapore

15. Key Terms and Keywords

15.1 Key Terms

  • Standby Letter of Credit
  • SBLC
  • Director's Duties
  • Conflict of Interest
  • Refinancing
  • Shareholder Dispute

15.2 Keywords

  • Director's duties
  • Conflict of interest
  • Shareholder dispute
  • Refinancing
  • Standby Letter of Credit
  • Companies Act

17. Areas of Law

Area NameRelevance Score
Director's Duties90
Fiduciary Duties80
Corporate Law75
Company Law70
Shareholder Disputes65
Business Litigation60
Commercial Disputes50

16. Subjects

  • Company Law
  • Director's Duties
  • Financial Disputes