Ascorp Technology v Chew Youn Chong: Breach of Fiduciary Duty and Corporate Opportunity

In a suit before the High Court of Singapore, Ascorp Technology Pte Ltd, acting through its director Patrick Joseph Ryan, sued Chew Youn Chong and Adtronic Technologies Pte Ltd for breach of fiduciary duty and misappropriation of corporate opportunities. Chew Youn Chong counterclaimed against Ascorp for unpaid salary and profit shares and against Patrick Joseph Ryan for indemnity. The court found Chew Youn Chong liable for breaching his fiduciary duties by placing himself in a position of conflict of interest and granted Ascorp an account of sales and profits earned by Adtronic. The court allowed Chew Youn Chong's counterclaim against Ascorp for unpaid profit shares but dismissed his claim for salary in lieu of notice and his claim against Patrick Joseph Ryan.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Judgment for Plaintiff in part; Counterclaim allowed in part.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore High Court case involving Ascorp Technology's claim against Chew Youn Chong for breach of fiduciary duty and misappropriation of corporate opportunities.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Ascorp Technology Pte LtdPlaintiffCorporationJudgment for Plaintiff in partPartialGodwin Gilbert Campos
Chew Youn ChongDefendantIndividualCounterclaim allowed in partPartialAndrew J Hanam
Adtronic Technologies Pte LtdDefendantCorporationJudgment against DefendantLostAndrew J Hanam
Ryan Patrick JosephThird PartyIndividualClaim DismissedDismissedGodwin Gilbert Campos

3. Judges

Judge NameTitleDelivered Judgment
Chan Seng OnnJudgeYes

4. Counsels

Counsel NameOrganization
Godwin Gilbert CamposGodwin Campos LLC
Andrew J HanamAndrew LLC

4. Facts

  1. CYC and PJR entered into a Shareholders Agreement on 8 April 2003.
  2. CYC was appointed Managing Director of Ascorp.
  3. Infineon was Ascorp’s main customer.
  4. CYC incorporated Adtronic Technologies Pte Ltd on 28 November 2005.
  5. CYC was removed as Managing Director of Ascorp on 13 February 2006.
  6. Adtronic sent quotations to STM between 26 and 28 February 2006 to supply items with similar functions as the HQ64L cartridge.
  7. CYC signed multiple cheques to himself, each not exceeding $5,000.

5. Formal Citations

  1. Ascorp Technology Pte Ltd v Chew Youn Chong and another (Ryan Patrick Joseph, third party), Suit No 699 of 2006, [2011] SGHC 118

6. Timeline

DateEvent
Shareholders Agreement entered into between PJR and CYC
Infineon forecasted to Ascorp that it would order at least 2 sets of MQ64L cartridges per month for 2005
Accounts and Business Review Meeting held
Infineon revised its forecast to two sets a week
CYC entered into a Consignment Stock Agreement with Infineon on behalf of Ascorp
CYC exercised purchase options
Ascorp had sold Infineon 19 sets of MQ64L cartridges
CYC exercised purchase options
PJR emailed CYC asking to be advised of the monthly net profit from January to June 2005
CYC and PJR met so that the latter could countersign cheques for CYC’s allowance for April to June 2005
Consignment Stock Agreement renewed
Meeting arranged between CYC and PJR at Raffles Town Club
CYC emailed PJR suggesting a “share purchase option or winding up [Ascorp]”
CYC incorporated the second defendant, Adtronic Technologies Pte Ltd
CYC emailed Ricky Peng regarding the split pins problem
PJR responded to the email exchanges to encourage Ricky Peng not to give up on the project
CYC's solicitors informed PJR and NSL that the most equitable solution is to wind up Ascorp
Board meeting held
All of Ascorp’s employees tendered their resignation
PJR sent out a notice calling for a Board meeting
Board meeting held; CYC removed as the Managing Director of Ascorp
Infineon sent Ascorp an email requesting MQ64L cartridges to be delivered
CYC and PJR met with Infineon
Ricky Peng refused to continue supplying its goods and services to Ascorp
Ascorp delivered only one MQ64L cartridge
Ascorp received a letter from Infineon stating that Ascorp was in breach of the Consignment Stock Agreement
Meeting between Infineon and PJR
Adtronic sent quotations to STM
Adtronic sent quotations to STM
CYC resigned as director of Ascorp
PJR met with a Mr Tay of STM
Ascorp brought the present action against CYC and Adtronic
Judgment reserved

7. Legal Issues

  1. Breach of Fiduciary Duty
    • Outcome: The court found that CYC had breached his fiduciary duties to act honestly and in the best interest of Ascorp by placing himself in a position of conflict of interest.
    • Category: Substantive
    • Sub-Issues:
      • Conflict of interest
      • Misappropriation of corporate opportunity
      • Failure to act in the best interest of the company
      • Breach of duty of honesty
    • Related Cases:
      • [2010] 3 SLR 813
  2. Enforcement of Shareholders Agreement
    • Outcome: The court found that Ascorp was precluded from enforcing the terms of the Shareholders Agreement through the Contracts (Rights of Third Parties) Act as that has been expressly excluded by clause 17 of the Shareholders Agreement.
    • Category: Procedural

8. Remedies Sought

  1. Account of sales and profits
  2. Damages

9. Cause of Actions

  • Breach of Fiduciary Duty
  • Breach of Contract

10. Practice Areas

  • Commercial Litigation

11. Industries

  • Technology

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Swiss Butchery Pte Ltd v Huber ErnstHigh CourtYes[2010] 3 SLR 813SingaporeCited for the principle that a director cannot exploit a maturing business opportunity of the company for his own personal purposes and profit.
ECRC Land Pte Ltd v Wing On Ho ChristopherHigh CourtYes[2004] 1 SLR(R) 105SingaporeCited for the principle that the court should not substitute its own judgment for that of the directors in reviewing the directors’ exercise of discretion.
Vita Health Laboratories Pte Ltd v Pang Seng MengHigh CourtYes[2004] 4 SLR(R) 162SingaporeCited for the principle that the court should not substitute its own judgment for that of the directors in reviewing the directors’ exercise of discretion.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap 50, 2006 Rev Ed)Singapore
Contracts (Rights of Third Parties) Act (Cap 53B, 2002 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Fiduciary duty
  • Conflict of interest
  • Corporate opportunity
  • Shareholders Agreement
  • Managing Director
  • MQ64L cartridges
  • HQ64L cartridges
  • Consignment Stock Agreement

15.2 Keywords

  • fiduciary duty
  • conflict of interest
  • corporate opportunity
  • Ascorp
  • Chew Youn Chong
  • Adtronic
  • Singapore
  • High Court

16. Subjects

  • Company Law
  • Fiduciary Duties
  • Commercial Litigation

17. Areas of Law

  • Company Law
  • Contract Law
  • Fiduciary Duty
  • Corporate Opportunity