Yong Kheng Leong v Panweld Trading: Breach of Fiduciary Duty & Misappropriation of Funds

In Yong Kheng Leong and another v Panweld Trading Pte Ltd and another, the Court of Appeal of Singapore heard an appeal concerning a claim by Panweld Trading Pte Ltd against its director, Yong Kheng Leong, for breach of fiduciary duties and misappropriation of funds through unauthorized payments to his wife, Lim Ai Cheng. The court dismissed the appeal, finding Yong liable as a constructive trustee for the full amount of the misappropriated funds and Lim liable for knowing receipt of funds paid out in the six years prior to the commencement of the action. The court also dismissed the third-party claim against Loh Yong Lim.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeal Dismissed

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Director Yong Kheng Leong breached fiduciary duties by misappropriating Panweld Trading's funds via unauthorized payments to his wife. The court found Yong liable as a constructive trustee.

1.7 Decision Date

21 October 2012

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Loh Yong Lim	Respondent	Individual	Third party claim dismissed	Won	Burton Chen of Tan Rajah & Cheah Winston Yien of Tan Rajah & Cheah
Yong Kheng Leong	Appellant	Individual	Appeal Dismissed	Lost	Nirmala Ravindran of Low Yeap Toh & Goon Tang Hang Wu of TSMP Law Corporation Singa Retnam of Aziz Tayabali & Associates
Lim Ai Cheng	Appellant	Individual	Appeal Dismissed	Lost	Nirmala Ravindran of Low Yeap Toh & Goon Tang Hang Wu of TSMP Law Corporation Singa Retnam of Aziz Tayabali & Associates
Panweld Trading Pte Ltd	Respondent	Corporation	Judgment for Respondent	Won	Daryl Ong Hock Chye of Rodyk & Davidson LLP Foo Maw Shen of Rodyk & Davidson LLP Philip Jeyaretnam of Rodyk & Davidson LLP Wong Ping Siang of Rodyk & Davidson LLP

3. Judges

Judge Name	Title	Delivered Judgment
Chan Sek Keong	Chief Justice	No
Andrew Phang Boon Leong	Justice of the Court of Appeal	No
Sundaresh Menon	Justice of the Court of Appeal	Yes

4. Counsels

Counsel Name	Organization
Burton Chen	Tan Rajah & Cheah
Winston Yien	Tan Rajah & Cheah
Nirmala Ravindran	Low Yeap Toh & Goon
Tang Hang Wu	TSMP Law Corporation
Singa Retnam	Aziz Tayabali & Associates
Daryl Ong Hock Chye	Rodyk & Davidson LLP
Foo Maw Shen	Rodyk & Davidson LLP
Philip Jeyaretnam	Rodyk & Davidson LLP
Wong Ping Siang	Rodyk & Davidson LLP

4. Facts

Mr. Yong, a director of Panweld, made unauthorized payments to his wife, Mdm. Lim, from 1992 to 2009.
Mdm. Lim was not a genuine employee of Panweld.
Mr. Loh, the other director and majority shareholder, was initially unaware of the payments to Mdm. Lim.
Mr. Yong claimed the payments were made with Mr. Loh's approval, which Mr. Loh denied.
The total amount of misappropriated funds was $873,959.20.
Mdm. Lim received $338,410 in the six years prior to the commencement of the action.

5. Formal Citations

Yong Kheng Leong and another v Panweld Trading Pte Ltd and another, Civil Appeal No 34 of 2012, [2012] SGCA 59
Panweld Trading Pte Ltd v Yong Kheng Leong and others (Loh Yong Lim, third party), , [2012] 2 SLR 672

6. Timeline

Date	Event
1985-01-01	Panweld Trading Pte Ltd incorporated in Singapore.
1992-01-01	Mdm Lim Ai Cheng started receiving salary payments from Panweld.
1995-03-01	Mrs. Loh and Sook Min placed on Panweld's payroll.
2009-03-01	Mr. Yong informed Mr. Loh that Panweld needed a bank loan.
2010-03-11	Defence filed by Mr. Yong claiming Mr. Loh placed his wife and mistress on payroll.
2011-04-13	Amended Defence filed claiming Mdm Lim was genuinely employed.
2011-05-26	Revised Defence filed alleging tax reduction purpose for Mrs. Loh and Sook Min.
2012-02-09	Mr. Retnam accepted that the claim against Mr. Yong would not be time-barred if made out.
2012-10-22	Judgment reserved.
2012-10-22	Court of Appeal dismissed the appeal.

7. Legal Issues

Breach of Fiduciary Duty
- Outcome: The court found that Mr. Yong breached his fiduciary duty to Panweld by making unauthorized payments to his wife.
- Category: Substantive
- Sub-Issues:
  - Misappropriation of funds
  - Conflict of interest
  - Failure to act in the best interests of the company
Knowing Receipt
- Outcome: The court found that Mdm. Lim was liable for knowing receipt of funds paid to her in breach of Mr. Yong's fiduciary duty.
- Category: Substantive
- Sub-Issues:
  - Receipt of assets in breach of fiduciary duty
  - Knowledge of breach
  - Unconscionable retention of benefit
Dishonest Assistance
- Outcome: The court found that Mdm. Lim was liable for dishonest assistance in Mr. Yong's breach of fiduciary duty.
- Category: Substantive
- Sub-Issues:
  - Assistance in breach of trust
  - Dishonesty
  - Facilitation of breach
Limitation of Actions
- Outcome: The court held that the claim against Mr. Yong was not time-barred due to his fraudulent breach of trust. The claim against Mdm. Lim was partially time-barred.
- Category: Procedural
- Sub-Issues:
  - Applicability of limitation periods to claims for breach of trust
  - Fraudulent breach of trust
  - Recovery of trust property

8. Remedies Sought

Monetary Damages
Account of Profits
Constructive Trust

9. Cause of Actions

Breach of Fiduciary Duty
Knowing Receipt
Dishonest Assistance

10. Practice Areas

Commercial Litigation
Corporate Governance

11. Industries

Trading

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Re Duomatic Ltd	Chancery Division	Yes	[1969] 2 Ch 365	England and Wales	Cited for the principle that shareholder assent can validate director actions.
Tokuhon (Pte) Ltd v Seow Kang Hong and others	Court of Appeal	Yes	[2003] 4 SLR(R) 414	Singapore	Cited for the principle that shareholder assent can validate director actions.
Panweld Trading Pte Ltd v Yong Kheng Leong and others (Loh Yong Lim, third party)	High Court	Yes	[2012] 2 SLR 672	Singapore	The decision from which this appeal arose.
Seah Ting Soon v Indonesian Tractors Co Pte Ltd	Court of Appeal	Yes	[2001] 1 SLR(R) 53	Singapore	Cited for the principle that an appellate court's power to review findings of fact will be sparingly exercised.
Tat Seng Machine Movers Pte Ltd v Orix Leasing Singapore Ltd	Court of Appeal	Yes	[2009] 4 SLR(R) 1101	Singapore	Cited for the principle that an appellate court's power to review findings of fact will be sparingly exercised.
Susilawati v American Express Bank Ltd	Court of Appeal	Yes	[2009] 2 SLR(R) 737	Singapore	Cited for the principle relating to parties bringing up new points or arguments on appeal which were not taken before or presented to the trial judge.
NV Multi Corp Bhd & Ors v Suruhanjaya Syarikat Malaysia	Federal Court	Yes	[2010] 5 MLJ 573	Malaysia	Cited for the principle that an appellate court is not, as a matter of principle, bound by a concession of law made by counsel below.
Paragon Finance plc v D B Thakerar & Co (a firm)	Court of Appeal	Yes	[1999] 1 All ER 400	England and Wales	Identifies two distinct types of constructive trusts.
Selangor United Rubber Estates Ltd v Cradock and Others (No 3)	High Court	Yes	[1968] 1 WLR 1555	England and Wales	Identifies two distinct types of constructive trusts.
JJ Harrison (Properties) Ltd v Harrison	High Court	Yes	[2002] 1 BCLC 162	England and Wales	Illustrates a Class 1 constructive trust.
Katherine Tang Woon Kiang v Luk King Hung	High Court	Yes	[1999] SGHC 229	Singapore	Recognizes the doctrine of limitation by analogy.
Gwembe Valley Development Co Ltd (in receivership) and another v Koshy and others (No 3)	Court of Appeal	Yes	[2004] 1 BCLC 131	England and Wales	Illustrates a Class 2 constructive trust.
Taylor v Davies	Privy Council	Yes	[1920] AC 636	United Kingdom	Cited regarding the power of disposal of company property.
Halton International Inc and another v Guernroy Ltd	Court of Appeal	Yes	[2006] EWCA Civ 801	England and Wales	Discusses the difference between JJ Harrison and Gwembe Valley.
Hovenden v Lord Annesley	High Court of Chancery	Yes	[1806] 2 Sch & Lef 607	Ireland	Discusses the possession of an express trustee.
Soar v Ashwell	Court of Appeal	Yes	[1893] 2 QB 390	England and Wales	Discusses constructive trust.
Clarkson v Davies	Privy Council	Yes	[1923] AC 100	United Kingdom	Discusses constructive trust.
Competitive Insurance Co Ltd v Davies Investments Ltd	High Court	Yes	[1975] 3 All ER 254	England and Wales	Discusses constructive trust.
Armitage v Nurse	Court of Appeal	Yes	[1998] Ch 241	England and Wales	Defines fraudulent breach of trust.
Twinsectra Ltd v Yardley	House of Lords	Yes	[2002] 2 AC 164	United Kingdom	Discusses dishonesty in the context of breach of trust.
Re Pantone 485 Ltd, Miller v Bain and others	High Court	Yes	[2002] 1 BCLC 266	England and Wales	Observations about the irrelevance of the director having parked the secret profits in his other company.
George Raymond Zage III and another v Ho Chi Kwong and another	High Court	Yes	[2010] 2 SLR 589	Singapore	Defines the test for liability for knowing receipt.
Comboni Vincenzo and another v Shankar's Emporium (Pte) Ltd	High Court	Yes	[2007] 2 SLR(R) 1020	Singapore	Discusses actual knowledge or the wilful avoidance of knowledge.
Banque Nationale de Paris v Hew Keong Chan Gary and others	High Court	Yes	[2000] 3 SLR(R) 686	Singapore	Discusses liability for dishonest assistance.
Warman International Ltd v Dwyer	High Court	Yes	[1995] 128 ALR 201	Australia	Possible remedies that the Judge could, in theory, have granted include equitable compensation, rescission, account, injunctive relief, as well as other proprietary reliefs such as the imposition of a constructive trust.
Tito and Others v Waddell and Others (No 2)	High Court	Yes	[1977] 1 Ch 106	England and Wales	Discusses the difficulty evident in the bedevilled history of the development of English law in this area.
Coulthard v Disco Mix Club Ltd and another	High Court	Yes	[2000] 1 WLR 707	England and Wales	Discusses the difficulty evident in the bedevilled history of the development of English law in this area.
Cia de Seguros Imperio v Heath (REBX) Ltd and others	Court of Appeal	Yes	[2001] 1 WLR 112	England and Wales	Discusses the difficulty evident in the bedevilled history of the development of English law in this area.
Cholmendeley v Clinton	High Court	Yes	(1821) 4 ER 721	England and Wales	Where an equitable claim is made and it is closely analogous to a claim which is barred by a statutory time limit the court will apply the same limitation and bar the action.
Knox v Gye	House of Lords	Yes	(1872) LR 5 HL 565	United Kingdom	Where the remedy in Equity is correspondent to the remedy at Law, and the latter is subject to a limit in point of time by the Statute of Limitation, a Court of Equity acts by analogy to the statute, and imposes on the remedy it affords the same limitation.
Smith v Clay	High Court	Yes	(1767) 3 Bro CC 639	England and Wales	In determining the time limit for laches, courts would usually follow the lead given by the Legislature and adopt the statutory period of limitation.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Limitation Act (Cap 163, 1996 Rev Ed)	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Fiduciary Duty
Constructive Trust
Knowing Receipt
Dishonest Assistance
Misappropriation
Limitation Act
Shareholder Assent
Director's Duties

15.2 Keywords

fiduciary duty
breach of trust
director
misappropriation
knowing receipt
dishonest assistance
limitation act
singapore
court of appeal

17. Areas of Law

Area Name	Relevance Score
Fiduciary Duties	95
Misappropriation of Funds	80
Corporate Law	70
Company Law	70
Director's Duties	60
Trust Law	60
Fraud and Deceit	50
Commercial Disputes	40
Civil Procedure	30

16. Subjects

Corporate Law
Trusts
Equity
Civil Litigation