Ho Kang Peng v Scintronix: Breach of Fiduciary Duty for Unauthorized Payments
In Ho Kang Peng v Scintronix Corp Ltd, the Court of Appeal of Singapore heard an appeal from Ho Kang Peng, the former CEO of Scintronix, who was found liable in the High Court for breach of fiduciary duties. The claim arose from unauthorized payments made to Bontech Enterprise Co Ltd. The Court of Appeal dismissed the appeal, finding that Ho Kang Peng breached his fiduciary duties by authorizing the payments, even though they were intended to procure business for the company.
1. Case Overview
1.1 Court
Court of Appeal1.2 Outcome
Appeal Dismissed
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Ho Kang Peng, former CEO of Scintronix, was found liable for breaching fiduciary duties by authorizing unauthorized payments. The court dismissed his appeal.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Ho Kang Peng | Appellant | Individual | Appeal Dismissed | Lost | |
| Scintronix Corp Ltd (formerly known as TTL Holdings Ltd) | Respondent | Corporation | Appeal Dismissed | Won |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Sundaresh Menon | Chief Justice | No |
| Chao Hick Tin | Justice of the Court of Appeal | Yes |
| V K Rajah | Justice of the Court of Appeal | No |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Alvin Tan Kheng Ann | Wong Thomas & Leong |
| Tony Yeo | Drew & Napier LLC |
| Fong King Man | Drew & Napier LLC |
4. Facts
- Ho Kang Peng was the CEO and a director of Scintronix Corp Ltd.
- Scintronix made payments to Bontech Enterprise Co Ltd under a consulting agreement.
- No actual consulting services were provided by Bontech.
- Ho Kang Peng authorized the payments without board approval.
- The payments were allegedly handed over to Oh Chye Huat, a Shanghai-based director.
- The payments were intended to procure business from Pioneer Technology (Shanghai) Co Ltd.
- The Bontech Agreement lacked a schedule outlining the scope of services.
5. Formal Citations
- Ho Kang Peng v Scintronix Corp Ltd (formerly known as TTL Holdings Ltd), Civil Appeal No 24 of 2013, [2014] SGCA 22
- Ho Kang Peng v Scintronix Corp Ltd (formerly known as TTL Holdings Ltd), , [2013] 2 SLR 633
6. Timeline
| Date | Event |
|---|---|
| Ho Kang Peng became CEO of TTL Holdings Limited | |
| Ho Kang Peng became an executive director of TTL Holdings Limited | |
| Remuneration committee approved monthly payment for outstation allowances | |
| Bontech Agreement signed | |
| Ho Kang Peng stepped down as CEO and executive chairman | |
| Internal audit report published | |
| Ho Kang Peng stepped down as non-executive director | |
| Audit committee meeting held | |
| Suit commenced against Ho Kang Peng | |
| Decision from which this appeal arose is reported at [2013] 2 SLR 633 | |
| Civil Appeal No 24 of 2013 | |
| Judgment reserved |
7. Legal Issues
- Breach of Fiduciary Duty
- Outcome: The court found that the Appellant breached his fiduciary duties by authorizing payments that were not in the best interests of the company.
- Category: Substantive
- Sub-Issues:
- Failure to act bona fide in the interests of the company
- Failure to exercise reasonable diligence
- Making unauthorized payments
- Related Cases:
- [1994] 1 SLR(R) 513
- [1994] 3 SLR(R) 1064
- [1942] Ch 304
- [1970] 1 Ch 62
- [1996] 1 SLR(R) 161
- [2004] 4 SLR(R) 162
- [2002] 2 SLR(R) 848
- [2011] 3 SLR 1093
- [2005] BCC 596
- Attribution of Knowledge
- Outcome: The court found that the knowledge of certain directors could not be attributed to the company in order to establish a defence against breach of fiduciary duty.
- Category: Procedural
- Sub-Issues:
- Identifying the corporate organ
- Application of attribution rules
- Authorisation by the company
- Related Cases:
- [1915] AC 705
- [1995] 2 AC 500
- [2012] 1 SLR 992
- [1998] 3 SLR(R) 31
- [1992] BCLC 1084
- [1970] Ch 212
- (1999) 33 ACSR 357
- Ex Turpi Causa
- Outcome: The court found that the defence of ex turpi causa did not apply because the company was the victim of the director's breach of duty.
- Category: Substantive
- Sub-Issues:
- Public policy
- Improper act
- Attribution of knowledge
- Related Cases:
- (1775) 1 Cowp 341
- [2009] 1 AC 1391
- [2005] 2 BCLC 328
- [2014] Ch 52
- [1979] Ch 250
8. Remedies Sought
- Damages
9. Cause of Actions
- Breach of Fiduciary Duty
- Breach of Statutory Duty
- Breach of Contractual Duty
10. Practice Areas
- Commercial Litigation
- Corporate Law
11. Industries
- Manufacturing
- Plastics
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Multi-Pak Singapore Pte Ltd (in receivership) v Intraco Ltd and others | High Court | Yes | [1994] 1 SLR(R) 513 | Singapore | Cited for the principle that a director is required at all times to act honestly, which means to act bona fide to promote or advance the interests of the company. |
| Intraco Ltd v Multi-Pak Singapore Pte Ltd | Court of Appeal | Yes | [1994] 3 SLR(R) 1064 | Singapore | Cited for the principle that the court will be slow to interfere with commercial decisions of directors which have been made honestly even if they turn out, on hindsight, to be financially detrimental. |
| Re Smith & Fawcett Ltd | Court of Appeal | Yes | [1942] Ch 304 | England and Wales | Cited for the principle that directors must exercise their discretion bona fide in what they consider is in the interests of the company. |
| Charterbridge Corporation Ltd v Lloyds Bank Ltd and another | High Court | Yes | [1970] 1 Ch 62 | England and Wales | Cited for the test of whether an intelligent and honest man in the position of a director of the company concerned, could, in the whole of the existing circumstances, have reasonably believed that the transactions were for the benefit of the company. |
| Cheam Tat Pang and another v Public Prosecutor | High Court | Yes | [1996] 1 SLR(R) 161 | Singapore | Cited for the principle that it will be difficult to find that a director has acted bona fide in the interests of the company if he takes risks which no director could honestly believe to be taken in the interests of the company. |
| Vita Health Laboratories Pte Ltd and others v Pang Meng Seng | High Court | Yes | [2004] 4 SLR(R) 162 | Singapore | Cited for the principle that the requirement of bona fide or honesty will not be satisfied if the director acted dishonestly even if for the purported aim of maximizing profits for the company. |
| Lim Weng Kee v Public Prosecutor | High Court | Yes | [2002] 2 SLR(R) 848 | Singapore | Cited for the principle that the civil standard of care and diligence expected of a director is objective, namely, whether he has exercised the same degree of care and diligence as a reasonable director found in his position. |
| Ong Chow Hong (alias Ong Chaw Ping) v Public Prosecutor and another appeal | High Court | Yes | [2011] 3 SLR 1093 | Singapore | Cited for the principle that each director of a listed company has a solemn and non-delegable duty of due diligence to ensure compliance with market rules and practices. |
| Secretary of State for Trade and Industry v Swan | High Court | Yes | [2005] BCC 596 | England and Wales | Cited for the principle that the making of payments to an unidentified individual based on absent documentation was, on its face, a matter which called out for at least some inquiry. |
| Lennard’s Carrying Company, Limited v Asiatic Petroleum Company, Limited | House of Lords | Yes | [1915] AC 705 | England and Wales | Cited for the principle that a company, by its very legal character, can only act through its officers and agents. |
| Meridian Global Funds Management Asia Ltd v Securities Commission | Privy Council | Yes | [1995] 2 AC 500 | United Kingdom | Cited for the rules of attribution in corporate law. |
| The Dolphina | High Court | Yes | [2012] 1 SLR 992 | Singapore | Cited for adopting Lord Hoffmann’s analysis of the rules of attribution. |
| SAL Industrial Leasing Ltd v Lin Hwee Guan | Court of Appeal | Yes | [1998] 3 SLR(R) 31 | Singapore | Cited for the principle that the informal assent of all the directors of a company would suffice as well. |
| Runciman v Walter Runciman plc | High Court | Yes | [1992] BCLC 1084 | England and Wales | Cited for the principle that the extension of a director’s term of office without a formal board resolution was valid where there was unanimous agreement of all the directors, and was binding as between the company and that director. |
| Bamford and another v Bamford and others | Court of Appeal | Yes | [1970] Ch 212 | England and Wales | Cited for the principle that directors can obtain absolution and forgiveness of their sins by making a full and frank disclosure and calling together the general body of the shareholders. |
| Pascoe Ltd (in liq) v Lucas | Supreme Court of South Australia | Yes | (1999) 33 ACSR 357 | Australia | Cited for the principle that the shareholders are entitled to approve or ratify the actions of those who have the responsibility for the management. |
| Holman v Johnson | King's Bench | Yes | (1775) 1 Cowp 341 | England and Wales | Cited for the principle of public policy, ex turpi causa non oritur actio. |
| Stone & Rolls Ltd (in liquidation) v Moore Stephens (a firm) | House of Lords | Yes | [2009] 1 AC 1391 | England and Wales | Cited for the principle that the ex turpi causa rule operates as a defence to a claim only because the court as a matter of public policy will not involve itself in a dispute between parties where both sides are equally tainted by the same wrong. |
| Morris and others v Bank of India | Court of Appeal | Yes | [2005] 2 BCLC 328 | England and Wales | Cited for the principle that there are some circumstances in which an individual’s knowledge of fraud cannot and should not be attributed to a company. |
| Bilta (UK) Ltd (in liquidation) and others v Nazir and others (No 2) | Court of Appeal | Yes | [2014] Ch 52 | England and Wales | Cited for the principle that there could be no attribution of the unlawful conduct of its directors to the company such that the ex turpi causa defence was engaged. |
| Belmont Finance Corporation Ltd v Williams Furniture Ltd and others | Court of Appeal | Yes | [1979] Ch 250 | England and Wales | Cited for the principle that where a company makes a claim against a director premised on the latter’s breach of duty, the company is a victim, and the law will not allow the enforcement of that duty to be compromised by the director’s reliance on his own wrongdoing. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 2006 Rev Ed) s 157 | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Fiduciary Duty
- Bontech Agreement
- Unauthorized Payments
- Pioneer Business
- Outstation Allowances
- Directing Mind and Will
- Ex Turpi Causa
- Rules of Attribution
- Board Approval
- Reasonable Diligence
15.2 Keywords
- fiduciary duty
- unauthorized payments
- company law
- corporate governance
- Singapore
- Scintronix
- Ho Kang Peng
- Bontech
- Pioneer
- breach of duty
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Fiduciary Duties | 95 |
| Director's Duties | 80 |
| Breach of Duty | 75 |
| Company Law | 70 |
| Corporate Governance | 65 |
| Contract Law | 30 |
| Commercial Law | 25 |
16. Subjects
- Company Law
- Fiduciary Duties
- Corporate Governance
- Commercial Law