M+W Singapore v Leow Tet Sin: Dishonest Assistance, Breach of Contract, Fraudulent Trading

M+W Singapore Pte Ltd, a construction company, sued Leow Tet Sin and Yukiyasu Nakagawa, directors of Jurong Data Centre Development Pte Ltd (JDD), in the High Court of Singapore on 16 January 2015, for $5,348,413.51. M+W claimed the directors were liable for dishonestly assisting in a breach of trust, inducing a breach of contract, or engaging in fraudulent trading under the Companies Act, related to the misuse of a GST refund that was subject to a debenture in M+W's favor. The court, presided over by Judith Prakash J, found the directors liable for dishonest assistance in a breach of trust and inducing a breach of contract, ordering them to pay the claimed sum with interest and costs. The claim for fraudulent trading was dismissed.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Judgment for Plaintiff

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Construction company M+W Singapore sues JDD directors for dishonest assistance, inducing breach of contract, and fraudulent trading. The court found the directors liable for dishonest assistance and breach of contract.

1.7 Decision Date

15 January 2015

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
M+W Singapore Pte Ltd	Plaintiff	Corporation	Judgment for Plaintiff	Won	Chua Sui Tong of WongPartnership LLP Daniel Tan of WongPartnership LLP Lim Wei Lee of WongPartnership LLP Huang Haogen of WongPartnership LLP
Leow Tet Sin	Defendant	Individual	Claim upheld against Defendant	Lost	Narayanan Vijay Kumar of Vijay & Co Niroze Idroos of Vijay & Co
Yukiyasu Nakagawa	Defendant	Individual	Claim upheld against Defendant	Lost	Narayanan Vijay Kumar of Vijay & Co Niroze Idroos of Vijay & Co

3. Judges

Judge Name	Title	Delivered Judgment
Judith Prakash	Judge	Yes

4. Counsels

Counsel Name	Organization
Chua Sui Tong	WongPartnership LLP
Daniel Tan	WongPartnership LLP
Lim Wei Lee	WongPartnership LLP
Huang Haogen	WongPartnership LLP
Narayanan Vijay Kumar	Vijay & Co
Niroze Idroos	Vijay & Co

4. Facts

M+W Singapore was contracted by JDD to design and build a data centre for $213,458,436.03.
JDD defaulted on progress payments, owing M+W Singapore about $60 million by October 2009.
JDD executed a debenture in favor of M+W Singapore to secure the debt, granting a fixed charge over Monetary Claims.
JDD received a GST refund of $6,456,230.09 from IRAS and spent $5,348,413.51 of it on various payments.
M+W Singapore was unaware of the GST refund and did not consent to the payments made from it.
The debenture required JDD to pay all Monetary Claims into a Claims Account and hold the proceeds on trust for M+W Singapore, but no such account was identified.
The defendants, as directors of JDD, authorized the payments from the GST refund without M+W Singapore's consent.

5. Formal Citations

M+W Singapore Pte Ltd v Leow Tet Sin and another, Suit No 731 of 2011, [2015] SGHC 10

6. Timeline

Date	Event
2009-02-01	M+W Singapore appointed by Jurong Data Centre Development Pte Ltd to design and build a data centre.
2009-02-19	Construction agreement signed between JDD and M+W Singapore.
2009-08-01	JDD began to default on prompt payment of progress payments.
2009-08-21	Memorandum of Understanding signed between Elchemi, Japan Land and Japan Asia.
2009-10-01	JDD owed M+W Singapore about $60m.
2009-10-24	Meeting held in Tokyo to discuss the indebtedness owing to M+W Singapore.
2009-10-28	JDD executed a debenture in favor of M+W Singapore.
2009-11-02	JDD did not make payment as promised.
2009-11-03	Japan Land and CPH entered into an Investment Agreement.
2009-11-03	M+W Singapore commenced proceedings under SOPA against JDD.
2009-11-06	Rodyk & Davidson LLP sent a letter to M+W Singapore regarding the debenture.
2009-11-10	M+W Singapore's solicitors sent a rebuttal letter to Rodyk & Davidson LLP.
2009-11-18	JDD, M+W Singapore and Elchemi met with JTC officers.
2009-11-25	M+W Singapore, JDD and CPH entered into a Refinancing Agreement.
2009-12-10	An adjudication order was made ordering JDD to pay M+W Singapore $29,086,796.35.
2009-12-11	JDD executed the Assignment of Building Agreement in favor of M+W Singapore.
2009-12-23	JDD filed a claim for a GST refund in the amount of $6,456,230.09.
2010-01-12	M+W Singapore entered into an agreement with CPH as assignee, Elchemi as guarantor and JDD as debtor.
2010-01-15	JDD received $6,456,230.09 GST refund from IRAS.
2010-01-28	CPH did not pay M+W Singapore any money.
2010-03-09	DBS Ltd made a formal offer to JDD of a loan facility of up to $227m.
2010-03-12	M+W Singapore terminated the Refinancing Agreement.
2010-03-16	The CPH Assignment was terminated.
2010-03-22	M+W Singapore issued JDD with a notice of default.
2010-04-08	The court appointed provisional liquidators for JDD.
2011-03-01	Judgement delivered in OS 389.
2015-01-16	Decision Date

7. Legal Issues

Dishonest Assistance
- Outcome: The court found the defendants liable for dishonestly assisting JDD in its breach of trust.
- Category: Substantive
- Sub-Issues:
  - Breach of trust
  - Knowledge of breach
  - Dishonesty
- Related Cases:
  - [2007] 1 SLR(R) 453
  - [2003] 3 SLR(R) 644
  - [2010] 2 SLR 589
  - [2006] 1 WLR 1476
  - [1995] 2 AC 378
Inducement of Breach of Contract
- Outcome: The court found the defendants liable for inducing a breach of contract.
- Category: Substantive
- Sub-Issues:
  - Knowledge of contract
  - Intention to breach
  - Causation
- Related Cases:
  - [2000] 2 SLR(R) 407
  - [2008] 1 AC 1
  - [2010] 2 SLR 426
  - [1949] 1 Ch 556
  - [1920] 3 KB 497
  - [2004] 4 SLR(R) 801
  - [2008] 1 SLR(R) 80
  - [2011] 1 SLR 1155
Fraudulent Trading
- Outcome: The court did not find that the business was carried on with a fraudulent purpose to deceive its creditors and dismissed the claim.
- Category: Substantive
- Sub-Issues:
  - Intent to defraud creditors
  - Knowing participation
- Related Cases:
  - [2005] 3 SLR(R) 263
  - [2007] 2 SLR(R) 77
  - [1961] 1 AC 103
  - [1903] 1 Ch 728
Res Judicata
- Outcome: The court held that the defendants were estopped from denying that the GST Refund was a Monetary Claim and subject to a fixed charge in favor of the plaintiff due to issue estoppel and the judgment in rem in OS 389.
- Category: Procedural
- Sub-Issues:
  - Issue estoppel
  - Judgment in rem
- Related Cases:
  - [2007] 1 SLR(R) 453
  - [2003] 3 SLR(R) 644

8. Remedies Sought

Recovery of $5,348,413.51

9. Cause of Actions

Dishonest Assistance
Inducement of Breach of Contract
Fraudulent Trading

10. Practice Areas

Commercial Litigation
Construction Law
Insolvency Law

11. Industries

Construction

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Goh Nellie v Goh Lian Teck	High Court	Yes	[2007] 1 SLR(R) 453	Singapore	Cited for the principles of res judicata, including cause of action estoppel, issue estoppel, and abuse of process.
Kwa Ban Cheong v Kuah Boon Sek	High Court	Yes	[2003] 3 SLR(R) 644	Singapore	Cited for the principle that a judgment in rem declares rights and title to property to all the world.
George Raymond Zage III v Ho Chi Kwong	Court of Appeal	Yes	[2010] 2 SLR 589	Singapore	Cited for the test of dishonesty in dishonest assistance claims, requiring knowledge of irregular shortcomings that ordinary honest people would consider a breach of honest conduct.
Barlow Clowes International Ltd (in liquidation) v Eurotrust International Ltd	Privy Council	Yes	[2006] 1 WLR 1476	United Kingdom	Cited for clarifying the objective standard for determining dishonesty, where a defendant's mental state is assessed against ordinary standards.
Royal Brunei Airlines Sdn Bhd v Philip Tan Kok Ming	Privy Council	Yes	[1995] 2 AC 378	United Kingdom	Cited for establishing that accessory liability can be found even if the assisting third party did not obtain any benefit himself and for its factual similarity to the current case regarding the use of funds held on trust.
Tribune Investment Trust Inc v Soosan Trading Co Ltd	High Court	Yes	[2000] 2 SLR(R) 407	Singapore	Cited for the principle that intention to interfere with contractual rights must be knowingly determined objectively in inducement of breach of contract claims.
OBG Ltd and another v Allan and others	House of Lords	Yes	[2008] 1 AC 1	United Kingdom	Cited for distinguishing between ends, means, and consequences in determining intention for inducement of breach of contract.
Zim Integrated Shipping Services Ltd v Dafni Igal	High Court	Yes	[2010] 2 SLR 426	Singapore	Cited for supporting the proposition that acts merely having the effect of breaching a contract are insufficient for inducement of breach of contract.
British Motor Trade Association v Salvadori and others	Chancery Division	Yes	[1949] 1 Ch 556	United Kingdom	Cited for the principle that entering into a contract incompatible with another party's contract does not automatically establish inducement of breach of contract.
Said v Butt	King's Bench Division	Yes	[1920] 3 KB 497	United Kingdom	Cited for the rule that agents are not liable for inducing breach of contract if they acted bona fide within the scope of their authority.
Chong Hon Kum Ivan v Levy Maurice	High Court	Yes	[2004] 4 SLR(R) 801	Singapore	Cited for following Said v Butt and endorsing the principle that a director is not liable in tort for a company's breach of contract if acting within their authority.
Nagase Singapore Pte Ltd v Ching Kai Huat	High Court	Yes	[2008] 1 SLR(R) 80	Singapore	Cited for the observation that the rule in Said v Butt protects those who genuinely and honestly endeavor to act in the company's best interests, and for holding that the rule did not apply to a person who wrongfully and dishonestly caused his employer to overcharge its customers.
Ng Joo Soon v Dovechem Holdings Pte Ltd and another suit	High Court	Yes	[2011] 1 SLR 1155	Singapore	Cited for addressing the Said v Butt rule and stating that directors might be mistaken about contractual obligations without acting without bona fides.
Tang Yoke Kheng (trading as Niklex Supply Co) v Lek Benedict	Court of Appeal	Yes	[2005] 3 SLR(R) 263	Singapore	Cited for defining fraud as an act or omission involving dishonesty that deceives an innocent party, and for establishing the standard of proof for fraud as a balance of probabilities.
Liquidator of Leong Seng Hin Piling Pte Ltd v Chan Ah Lek	High Court	Yes	[2007] 2 SLR(R) 77	Singapore	Cited for the principle that the subjective intention of the defendant to act in good faith is evaluated against objective facts and the standard of a reasonable man.
Welham v Director of Public Prosecutions	House of Lords	Yes	[1961] 1 AC 103	United Kingdom	Mentioned but deemed immaterial to the outcome of the case due to different facts (forgery case).
In Re London and Globe Finance Corporation, Limited	Court of Appeal	Yes	[1903] 1 Ch 728	United Kingdom	Mentioned but deemed immaterial to the outcome of the case due to different facts (criminal proceedings against directors).

13. Applicable Rules

Rule Name
Rules of Court (Cap 322, r 5, 2006 Rev Ed) Order 18, r 12(1)(a)

14. Applicable Statutes

Statute Name	Jurisdiction
Companies Act (Cap 50, 2006 Rev Ed) s 340	Singapore
Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed)	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Debenture
Monetary Claims
GST Refund
Dishonest Assistance
Inducement of Breach of Contract
Fraudulent Trading
Fixed Charge
Construction Contract
Refinancing Agreement
Investment Agreement

15.2 Keywords

construction
debenture
dishonest assistance
breach of contract
fraudulent trading
director liability
GST refund

17. Areas of Law

Area Name	Relevance Score
Company Law	75
Dishonest assistance	70
Contract Law	65
Fraud and Deceit	60
Inducement of Breach of Contract	60
Director's Duties	55
Fraudulent Trading	50
Estoppel	50
Fiduciary Duties	40
Bankruptcy	30
Arbitration	25

16. Subjects

Construction Dispute
Breach of Trust
Breach of Contract
Director's Duties
Fraudulent Trading