Airtrust v Kao Chai-Chau: Illegality & Indemnity in Joint Tortfeasorship
In Airtrust (Singapore) Pte Ltd v Kao Chai-Chau Linda, the High Court of Singapore heard two appeals regarding the commencement of third-party proceedings by Linda Kao Chai-Chau against the Estate of Peter Fong in two related suits: one a derivative action by Airtrust (Singapore) Pte Ltd (AT (Carolyn)) and the other by the Receivers and Managers of Airtrust (Singapore) Pte Ltd (AT (RM)). The suits alleged breach of fiduciary duty and conspiracy. The court allowed the appeals, finding that Linda had a basis for seeking contribution from the Estate of Peter Fong.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Appeals allowed for the commencement of third party proceedings. Consequently, the two applications to amend the third party notices are also allowed.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Airtrust (Singapore) Pte Ltd v Kao Chai-Chau Linda examines whether illegality precludes indemnity/contribution claims against a joint tortfeasor. The court allowed the appeals for third-party proceedings.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Kao Chai-Chau Linda | Defendant | Individual | Appeal allowed | Won | |
| Airtrust (Singapore) Pte Ltd | Plaintiff | Corporation | Appeal allowed | Won |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| George Wei | Judicial Commissioner | Yes |
4. Counsels
4. Facts
- Linda was the managing director of Airtrust from 1996 to 2012.
- Suit 477/2012 is a derivative action brought by Carolyn Fong, a shareholder of Airtrust, against Linda.
- Suit 1015/2012 is brought by the Receivers and Managers of Airtrust against Linda and others.
- Linda's defense is that the transactions were carried out under the instructions of Peter Fong.
- Ernst & Young were appointed RMs of Airtrust on 17 January 2012.
- Linda sought to serve a third party notice against the Estate of Peter Fong for an indemnity and contribution.
5. Formal Citations
- Airtrust (Singapore) Pte Ltd v Kao Chai-Chau Linda and another suit, Suit No 477 of 2012, [2014] SGHC 27
- Airtrust (Singapore) Pte Ltd v Kao Chai-Chau Linda and another suit, Suit No 1015 of 2012, [2014] SGHC 27
6. Timeline
| Date | Event |
|---|---|
| Linda Kao Chai-Chau appointed as managing director of Airtrust (Singapore) Pte Ltd. | |
| Peter Fong passed away. | |
| Carolyn Fong obtained leave to institute a derivative action on behalf of Airtrust against Linda. | |
| Ernst & Young appointed Receivers and Managers of Airtrust (Singapore) Pte Ltd. | |
| Suit No 477 of 2012 filed by Airtrust (Singapore) Pte Ltd against Linda Kao Chai-Chau. | |
| Suit No 1015 of 2012 filed by the Receivers and Managers of Airtrust (Singapore) Pte Ltd against Linda Kao Chai-Chau and others. | |
| Linda commenced third party proceedings against the Estate of Peter Fong in the RM Action. | |
| The RMs applied to set aside the third party proceedings. | |
| The AR found for AT (RM) and granted SUM 2989/2013 to set aside the third party notice and refused to grant Linda leave to commence third party proceedings in the claim brought by AT (Carolyn). | |
| Application made to amend the Notice (DA) so as to state that PF, as a director of AT, had owed the same fiduciary duties as Linda, and to add an alternative claim for contribution. | |
| Appeals and applications heard before the court. | |
| Further submissions heard from counsel. | |
| AT (Carolyn) applied for leave to hand over conduct of the Derivative Action to the RMs. | |
| Judgment reserved. |
7. Legal Issues
- Breach of Fiduciary Duty
- Outcome: The court did not make a final determination on whether a breach occurred, but allowed third-party proceedings to determine potential contribution from another party.
- Category: Substantive
- Sub-Issues:
- Failure to act in the best interest of the company
- Conflict of interest
- Diversion of business opportunities
- Illegality and Indemnity
- Outcome: The court held that a claim for contribution under ss 15 and 16 of the CLA is not affected by any illegality tainting the transactions or events.
- Category: Substantive
- Sub-Issues:
- Whether illegality precludes a claim for indemnity or contribution
- Application of ex turpi causa non oritur actio
- Third Party Proceedings
- Outcome: The court found that the third party notices were not redundant and allowed the third party proceedings to be commenced.
- Category: Procedural
- Sub-Issues:
- Redundancy of third party claim
- Overlap between defence and third party claim
8. Remedies Sought
- Indemnity
- Contribution
9. Cause of Actions
- Breach of Fiduciary Duty
- Conspiracy
10. Practice Areas
- Commercial Litigation
- Corporate Law
- Fiduciary Duty
- Third Party Claims
11. Industries
- No industries specified
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Fong Wai Lyn Carolyn v Airtrust (Singapore) Pte Ltd and another | High Court | Yes | [2011] 3 SLR 980 | Singapore | Cited for the High Court's finding that Peter Fong was the controlling mind and will of Airtrust at the material times when granting leave under section 216A of the Companies Act. |
| Burrows v Rhodes and Jameson | Queen's Bench Division | Yes | [1899] 1 QB 816 | England and Wales | Cited for the principle that an indemnity cannot be claimed in respect of an illegal act. |
| K and Another v P and Another | Chancery Division | Yes | [1993] Ch 140 | England and Wales | Cited for the principle that the ex turpi causa defence is not available as an answer to a claim for contribution under the Civil Liability (Contribution) Act 1978 (UK). |
| Nganthavee Teriya (alias Gan Hui Poo) v Ang Yee Lim Lawrence and others | High Court | Yes | [2003] 2 SLR(R) 361 | Singapore | Cited for the principle that a third party claim is not precluded on the basis that the third party, if liable, was liable as a party to the conspiracy, and that even if the tort was a crime, a claim for contribution is permitted. |
| Yemen Salt Mining Corp v Rhodes-Vaughan Steel Ltd | British Columbia Supreme Court | Yes | (1976) Carswell BC 141 | Canada | Cited for the principle that third party proceedings should be set aside if the basis of the claim against the third party is the same as the defence raised in the main action. |
| Westcoast Transmission Co v Interprovincial Steel & Pipe Corp | British Columbia Supreme Court | Yes | (1985) Carswell BC 48 | Canada | Cited for the principle that third party claim was redundant as the acts of the third party would be attributable to the plaintiff. |
| Yong Kheng Leong and another v Panweld Trading Pte Ltd and another | Court of Appeal | Yes | [2013] 1 SLR 173 | Singapore | Cited for the principle that if a director had agreed to salary payments, then the other director would not be liable in the first place, and if the director had not agreed to this, then there would be no basis for seeking any indemnity or contribution from the director. |
| In re W & M Roith Ltd | High Court | Yes | [1967] 1 WLR 432 | England and Wales | Cited for the principle that a covenant was not made bona fide for the benefit of the company. |
| Lim Leong Huat v Chip Hup Hup Kee Construction Pte Ltd | High Court | Yes | [2009] 2 SLR(R) 318 | Singapore | Cited for the principle that even where a business is managed solely by one person, that one person and the company are in law, nevertheless, separate legal entities. |
| 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 the assets of a limited company and/or that of its errant director, even one who was the controlling mind of the company, should not be made liable to answer for conspiracy. |
| Attorney-General’s Reference (No 2 of 1982) | Court of Appeal | Yes | [1984] QB 624 | England and Wales | Cited for the issue of whether a person in total control of a limited liability company is capable of stealing the property of the company. |
13. Applicable Rules
| Rule Name |
|---|
| Rules of Court (Cap 322, R 5, 2006 Rev Ed) O 16 r 1(1) |
| Rules of Court (Cap 322, R 5, 2006 Rev Ed) O 16 r 4(3) |
| Rules of Court (Cap 322, R 5, 2006 Rev Ed) O 16 r 6 |
| Rules of Court (Cap 322, R 5, 2006 Rev Ed) O 18 r 19 |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 2006 Rev Ed) s 216A | Singapore |
| Companies Act (Cap 50, 2006 Rev Ed) s 157 | Singapore |
| Civil Law Act (Cap 43, 1999 Rev Ed) s 15(1) | Singapore |
| Civil Law Act (Cap 43, 1999 Rev Ed) s 19(2) | Singapore |
| Civil Law Act (Cap 43, 1999 Rev Ed) s 16(2) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Third party proceedings
- Indemnity
- Contribution
- Breach of fiduciary duty
- Derivative action
- Alter ego
- Controlling mind
- Joint tortfeasor
- Ex turpi causa
- Civil Law Act
- Companies Act
15.2 Keywords
- Third party
- Indemnity
- Contribution
- Fiduciary duty
- Illegality
- Director
- Company
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Fiduciary Duties | 85 |
| Company Law | 75 |
| Commercial Disputes | 60 |
| Civil Procedure | 50 |
| Contract Law | 40 |
| Arbitration | 30 |
| Restructuring and Insolvency | 30 |
| Damages | 20 |
16. Subjects
- Civil Litigation
- Third Party Claims
- Company Law
- Fiduciary Duty
- Indemnity
- Contribution