Quality Assurance Management Asia v Zhang Qing: Employee's Fiduciary Duty & Equitable Compensation

In Quality Assurance Management Asia Pte Ltd v Zhang Qing and others, the Singapore High Court addressed the principles for assessing equitable compensation when an employee in a fiduciary relationship uses the employer's resources for personal profit. Quality Assurance Management Asia Pte Ltd sued Zhang Qing, a former employee, Feng Guiyu, Zhang’s wife, and Pinnacle Microelectronic Pte Ltd, Zhang’s company, for breach of contract and fiduciary duties. The court found Zhang liable for diverting contracts and misusing confidential information. The court dismissed the appeal in part and ordered the defendants to pay $70,562.10 to Quality Assurance Management Asia Pte Ltd.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Appeal dismissed in part. The defendants were ordered to pay the plaintiff a total of $70,562.10, with interest and costs.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore High Court case concerning an employee's breach of fiduciary duty by diverting business. The court assessed equitable compensation owed to the employer.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Quality Assurance Management Asia Pte LtdPlaintiffCorporationJudgment for PlaintiffPartial
Zhang QingDefendant, AppellantIndividualAppeal Dismissed in PartLost
Feng GuiyuDefendantIndividualJudgment against DefendantLost
Pinnacle Microelectronic Pte LtdDefendantCorporationJudgment against DefendantLost

3. Judges

Judge NameTitleDelivered Judgment
Vinodh CoomaraswamyJudicial CommissionerYes

4. Counsels

Counsel NameOrganization
See Tow Soo LingColin Ng & Partners
Kelvin TanGabriel Law Corporation

4. Facts

  1. Zhang was employed by QAM from June 2002 to September 2010.
  2. Zhang was promoted to project manager in 2006 and branch cum general manager later.
  3. Zhang incorporated Pinnacle in 2007, with his wife as the initial shareholder and director.
  4. Zhang diverted QAM's business to Pinnacle while still employed by QAM.
  5. Zhang used QAM's office premises and equipment to conduct Pinnacle's business.
  6. Zhang resigned from QAM in August 2010.
  7. QAM discovered Zhang had downloaded confidential information before his resignation.

5. Formal Citations

  1. Quality Assurance Management Asia Pte Ltd v Zhang Qing and others, Suit No 715 of 2010 (Registrar's Appeal No. 391 of 2012), [2013] SGHC 96

6. Timeline

DateEvent
Zhang joined QAM as a project engineer.
Zhang promoted to project manager.
Zhang promoted to branch cum general manager.
Pinnacle Microelectronic Pte Ltd incorporated.
Zhang bought a used Met One counter on eBay.
QAM presented Zhang with its Employee of the Year Award 2008.
Zhang knew of potential project for QAM to undertake in the Philippines for Cypress.
Zhang resigned from QAM.
QAM commenced action against the defendants.
QAM obtained an order for an interlocutory injunction.
Defence and Counterclaim filed.
QAM applied for summary judgment against the defendants.
Defendants consented to interlocutory judgment with damages to be assessed.
Discovery exercise for the assessment of damages commenced.
QAM obtained an order for specific discovery and for forensic inspection.
Discovery exercise for the assessment of damages concluded.
Parties exchanged affidavits of evidence in chief for the assessment.
Assistant Registrar heard evidence in the assessment.
Assistant Registrar heard evidence in the assessment.
Defendant's closing submissions filed.
QAM elected to claim damages.
Assistant Registrar's decision on assessment of damages.
High Court heard the defendants’ appeal.
Defendants appealed to the Court of Appeal against the High Court's decision.
High Court gave reasons for decision.

7. Legal Issues

  1. Breach of Fiduciary Duty
    • Outcome: The court found that Zhang breached his fiduciary duties to QAM by diverting business opportunities and misusing confidential information.
    • Category: Substantive
    • Sub-Issues:
      • Conflict of interest
      • Misuse of confidential information
      • Diversion of business opportunities
      • Breach of duty of loyalty
    • Related Cases:
      • [1934] 3 DLR 465
      • [1996] 1 AC 421
  2. Equitable Compensation
    • Outcome: The court assessed the equitable compensation owed by Zhang to QAM, considering the principles of causation and the deterrent function of equitable remedies.
    • Category: Substantive
    • Sub-Issues:
      • Assessment of damages
      • Causation
      • Remoteness
      • Mitigation
    • Related Cases:
      • (1997) 188 CLR 449
      • [1966] 2 NSWR 211
  3. Restitution
    • Outcome: The court held that QAM was entitled to recover bonuses paid to Zhang as money had and received, due to a causative mistake of fact.
    • Category: Substantive
    • Sub-Issues:
      • Causative mistake of fact
      • Money had and received

8. Remedies Sought

  1. Damages
  2. Injunctions
  3. Account of Profits
  4. Declaration that Zhang is not entitled to remuneration

9. Cause of Actions

  • Breach of Contract
  • Breach of Fiduciary Duty
  • Misuse of Confidential Information

10. Practice Areas

  • Commercial Litigation
  • Breach of Contract
  • Equitable Compensation
  • Fiduciary Duty Litigation

11. Industries

  • Semiconductor
  • Electronics

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Hospital Products Ltd v United States Surgical CorporationHigh Court of AustraliaYes(1984) 156 CLR 41AustraliaCited to illustrate that the categories of fiduciary relationships are not closed.
University of Nottingham v FishelEmployment Appeal TribunalYes[2000] ICR 1462England and WalesCited to support the proposition that the employer/employee relationship is capable of giving rise to a fiduciary relationship, but does not ipso facto do so.
Kumagai-Zenecon Construction Pte Ltd and another v Low Hua KinHigh CourtYes[1999] 3 SLR(R) 1049SingaporeCited for the proposition that the standard of duty imposed by law on a fiduciary is the highest standard known to the law.
Low Hua Kin v Kumagai-Zenecon Construction Pte Ltd (in liquidation) and anotherCourt of AppealYes[2000] 2 SLR(R) 689SingaporeCited to show that the propositions of law in Kumagai-Zenecon Construction Pte Ltd and another v Low Hua Kin were not challenged on appeal.
Re Collie ex p. AdamsonCourt of AppealYesRe Collie ex p. Adamson (1878) 8 Ch D 807England and WalesCited to explain that the Court of Chancery never entertained a suit for damages occasioned by fraudulent conduct or for breach of trust.
Nocton v Lord AshburtonHouse of LordsYes[1914] AC 932England and WalesCited to show that equitable compensation is available for a breach of fiduciary duty by any fiduciary, not just by the archetypal trustee.
Henderson v Merrett Syndicates Ltd (No 1)House of LordsYes[1995] 2 AC 145England and WalesCited to show that the phrase fiduciary duties is a dangerous one, giving rise to a mistaken assumption that all fiduciaries owe the same duties in all circumstances.
Bristol and West Building Society v MothewCourt of AppealYes[1998] Ch 1England and WalesCited to show that not every breach of duty by a fiduciary is a breach of fiduciary duty.
Equity's Place in the Law of CommerceN/AYes(1998) 114 LQR 214N/ACited to show that the duties of good faith and loyalty are peculiar to fiduciaries and lie at the heart of the fiduciary obligation.
Harris v Digital Pulse Pty LtdSupreme Court of New South WalesYes(2003) 197 ALR 626AustraliaCited to show that the primary function of remedies is to compensate the innocent party for a breach of duty by the wrongdoer.
MFM Restaurants Pte Ltd and another v Fish & Co Restaurants Pte Ltd and another appealCourt of AppealYes[2011] 1 SLR 150SingaporeCited to show that in wholly exceptional cases, damages may be available at common law to strip a wrongdoer of his gains where other common law remedies are perceived to be inadequate.
CHS CPO GmbH v Vikas GoelHigh CourtYes[2005] 3 SLR(R) 202SingaporeCited to show that in wholly exceptional cases, damages may be available at common law to strip a wrongdoer of his gains where other common law remedies are perceived to be inadequate.
Attorney-General v Blake (Jonathan Cape Ltd, Third Party)House of LordsYes[2001] 1 AC 268England and WalesCited to show that in wholly exceptional cases, damages may be available at common law to strip a wrongdoer of his gains where other common law remedies are perceived to be inadequate.
Maguire and another v Makaronis and anotherHigh Court of AustraliaYes(1997) 188 CLR 449AustraliaCited to show that equity intervenes not so much to recoup a loss suffered by the plaintiff as to hold the fiduciary to, and vindicate, the high duty owed to the plaintiff.
Boardman and another v PhippsHouse of LordsYes[1967] 2 AC 46England and WalesCited to show the deterrent function of equitable compensation means that the common law rules of causation, foreseeability and remoteness do not readily apply to equitable wrongdoers.
Regal (Hastings) Ltd v GulliverHouse of LordsYes[1967] 2 AC 134England and WalesCited to show the deterrent function of equitable compensation means that the common law rules of causation, foreseeability and remoteness do not readily apply to equitable wrongdoers.
In re Hallett’s EstateCourt of AppealYes(1880) 13 Ch D 696England and WalesCited to show the deterrent function of equitable compensation means that the common law rules of causation, foreseeability and remoteness do not readily apply to equitable wrongdoers.
Brickenden v London Loan & Savings Company of Canada et alPrivy CouncilYes[1934] 3 DLR 465CanadaCited as authority for the proposition that a claim for equitable compensation arising from a breach of fiduciary duty will succeed so long as the wronged party can show that the fiduciary’s breach of duty is in some way connected to the loss.
Target Holdings Ltd v Redferns (a firm) & AnotherHouse of LordsYes[1996] 1 AC 421England and WalesCited to show that equity required the fiduciary’s breach of duty to be a cause of the innocent party’s loss on the “but for” test.
In re Dawson, decd.; Union Fidelity Trustee Co. Ltd. v. Perpetual Trustee Co. Ltd.Supreme Court of New South WalesYes[1966] 2 NSWR 211AustraliaCited to show that the test of liability is whether the loss would have been suffered if there had been no breach.
Bartlett v Barclays Bank Trust Co. Ltd. (Nos. 1 and 2)Chancery DivisionYes[1980] Ch. 515England and WalesCited to show that the common law rules of remoteness of damage and causation do not apply.
In re Miller's Deed TrustsN/AYes[1978] 75 L.S.G. 454N/ACited to show that the common law rules of remoteness of damage and causation do not apply.
Nestle v National Westminster Bank Plc.Court of AppealYes[1993] 1 W.L.R. 1260England and WalesCited to show that the common law rules of remoteness of damage and causation do not apply.
Firstlink Energy Pte Ltd v Creanovate Pte Ltd and another actionHigh CourtYes[2007] 1 SLR(R) 1050SingaporeCited to show that the principles in Kumagai-Zenecon were endorsed and applied.
Creanovate Pte Ltd and another v Firstlink Energy Pte Ltd and another appealCourt of AppealYes[2007] 4 SLR(R) 780SingaporeCited to show that the propositions of law in Firstlink Energy Pte Ltd v Creanovate Pte Ltd and another action were not challenged on appeal.
Then Khek Khoon and another v Arjun Permanand Samtani and anotherHigh CourtYes[2012] 2 SLR 451SingaporeCited to show that Kumagai Zenecon and Firstlink Energy are correct on their facts and generally, but they do not lay down an absolute rule that all loss and damage, no matter how it is caused, lie at the doorstep of a party in breach of its fiduciary obligations.
Ohm Pacific Sdn Bhd v Ng Hwee Cheng DoreenHigh CourtYes[1994] 2 SLR(R) 633SingaporeCited to show that the legal burden of proving but-for causation remains on the plaintiff throughout.
John While Springs (S) Pte Ltd and Another v Goh Sai Chuah Justin and OthersHigh CourtYes[2004] 3 SLR(R) 596SingaporeCited to show that once the plaintiff adduces some evidence to connect the breach to the loss, equity will readily shift the evidential burden on causation to the breaching fiduciary.
O’Halloran v RT Thomas & Family Pty LtdSupreme Court of New South WalesYes(1998) 45 NSWLR 262AustraliaCited to show that the court does not allow an examination into the relative importance of contributory causes.
Barton (Alexander) v Armstrong (Alexander Ewan)Privy CouncilYes[1976] AC 104England and WalesCited to show that the court does not allow an examination into the relative importance of contributory causes.
Bell v Lever Brothers LtdHouse of LordsYes[1932] AC 161England and WalesCited to show that an employee has in general no implied duty to confess his own misdeeds to his employer.
Sybron Corporation and Another v Rochem Ltd and othersChancery DivisionYes[1984] 1 Ch 112England and WalesCited to show that an employee has in general no implied duty to confess his own misdeeds to his employer.
Chua Choon Cheng and others v Allgreen Properties LtdHigh CourtYes[2009] 3 SLR(R) 724SingaporeCited to show that an employee has in general no implied duty to confess his own misdeeds to his employer.
Item Software (UK) Ltd v FassihiCourt of AppealYes[2004] EWCA Civ 1244England and WalesCited to show that an employee who is also a fiduciary and who owes his employer a general fiduciary duty of loyalty is obliged pursuant to that general duty to disclose his own wrongdoing to his employer.
ABB Holdings Pte Ltd and others v Sher Hock Guan CharlesHigh CourtYes[2010] SGHC 267SingaporeCited to show that where a plaintiff is put to an election between what is commonly referred to as damages and an account of profits, the substance of the election is between a loss-based measure of recovery and a gain-based measure of recovery.
Chun Cheng Fishery Enterprise Pte Ltd v Chuang Hern HsiungHigh CourtYes[2010] SGHC 298SingaporeCited to show that QAM was entitled to recover the sum of $17,580.10 which QAM paid to Tecbiz as damages flowing from Zhang’s breach of duties.
Chun Cheng Fishery Enterprise Pte Ltd v Chuang Hern Hsiung and anotherHigh CourtYes[2011] SGHC 167SingaporeCited to show that the decision in Chun Cheng Fishery Enterprise Pte Ltd v Chuang Hern Hsiung was appealed against but not on this point.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Supreme Court of Judicature ActSingapore
Civil Law ActSingapore
Misrepresentation Act (Cap 390, 1994 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Fiduciary duty
  • Equitable compensation
  • Breach of contract
  • Confidential information
  • Diversion of business
  • Causation
  • Restitution
  • Bonus
  • Mistake of fact
  • Loss of profits
  • Loss of opportunity

15.2 Keywords

  • Fiduciary duty
  • Equitable compensation
  • Breach of contract
  • Employee
  • Employer
  • Singapore
  • High Court
  • Damages
  • Restitution

17. Areas of Law

Area NameRelevance Score
Fiduciary Duties95
Contract Law60
Breach of Contract60
Breach of Confidence50
Fraud and Deceit40
Misrepresentation30
Company Law25

16. Subjects

  • Fiduciary Duty
  • Employment Law
  • Contract Law
  • Commercial Litigation