Dynasty Line Ltd v Sukamto Sia: Breach of Fiduciary Duty and Equitable Compensation
The Singapore Court of Appeal heard cross-appeals in Dynasty Line Limited (in liquidation) v Sukamto Sia and Lee Howe Yong regarding the assessment of equitable compensation for breaches of fiduciary duty. Dynasty Line, a BVI company, sued Sia and Lee, its former directors, for losses incurred due to pledged shares. The Court of Appeal allowed Dynasty's appeal in part and dismissed Lee's appeal, clarifying the valuation date for the shares, pre- and post-liquidation interest calculations, and joint and several liability.
1. Case Overview
1.1 Court
Court of Appeal of the Republic of Singapore1.2 Outcome
Appeal allowed in part, appeal dismissed.
1.3 Case Type
Civil
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
Appeal regarding assessment of equitable compensation for breach of fiduciary duty. Court of Appeal determined valuation date and interest calculations.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Dynasty Line Limited (in liquidation) | Appellant, Respondent | Corporation | Appeal allowed in part | Partial | |
| Sukamto Sia | Respondent | Individual | Liable for breach of fiduciary duty | Lost | |
| Lee Howe Yong | Respondent, Appellant | Individual | Appeal dismissed | Lost |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Chao Hick Tin | Judge of Appeal | Yes |
| Steven Chong | Judge | No |
4. Counsels
4. Facts
- Dynasty Line Limited was the corporate vehicle for investments of its sole shareholder, Mr Sukamto Sia.
- Sia persuaded Lee Howe Yong to join his ventures, promising him 20% of Dynasty’s profits in return for being a co-director.
- In 1996, Sia wanted to buy shares in China Development Corporation Limited (CDC) using Dynasty as the investment vehicle.
- Dynasty acquired 29,537,367 shares in CDC from several vendors for HKD230,391,462.60, but only HKD64,459,317.16 was paid.
- Between April 1996 and November 1997, Dynasty pledged almost all of those CDC shares to various financial institutions as security for loan facilities granted not to Dynasty but to Sia and his business associates.
- As Sia and his business associates defaulted on the loans, the financial institutions sold the pledged shares between June 1998 and February 2000.
- The vendors commenced proceedings against Dynasty in HK for the unpaid balance of the purchase price, and judgment was awarded against Dynasty.
5. Formal Citations
- Dynasty Line Ltd (in liquidation) v Sukamto Sia and another and another appeal, Civil Appeals Nos 208 and 223 of 2015, [2016] SGCA 55
- Dynasty Line Limited (in liquidation) v Sukamto Sia and another, Assessment of Damages No 23 of 2015, [2015] SGHC 286
6. Timeline
| Date | Event |
|---|---|
| Sale and purchase agreements for CDC shares signed. | |
| Dynasty pledged shares to Commerzbank. | |
| Dynasty pledged shares to Société Générale. | |
| CDC implemented a 5:1 stock split. | |
| Dynasty pledged shares to KG Investments Asia Limited. | |
| Dynasty pledged shares to Creditanstalt Bankverein. | |
| Forced sales of pledged shares began. | |
| Vendors sued Dynasty in Hong Kong. | |
| Forced sales of pledged shares ended. | |
| Hong Kong High Court allowed vendors’ claim and dismissed Dynasty’s counterclaim. | |
| Low commenced liquidation proceedings against Dynasty in Hong Kong. | |
| Hong Kong liquidation proceedings stayed. | |
| Low commenced liquidation proceedings in BVI. | |
| Dynasty ordered to be wound up in BVI. | |
| Liquidators sued Sia and Lee in Singapore for breach of fiduciary duty. | |
| Decision and written grounds released in Assessment of Damages No 23 of 2015. | |
| Decision on costs made. | |
| Judgment reserved. | |
| Judgment delivered. |
7. Legal Issues
- Breach of Fiduciary Duty
- Outcome: The Court of Appeal upheld the finding that Sia and Lee breached their fiduciary duties as directors of Dynasty.
- Category: Substantive
- Equitable Compensation
- Outcome: The Court of Appeal clarified the method for assessing equitable compensation, including the valuation date for shares and the calculation of pre- and post-liquidation interest.
- Category: Substantive
- Joint and Several Liability
- Outcome: The Court of Appeal held Lee and Sia jointly and severally liable for losses flowing from the Commerzbank pledge.
- Category: Substantive
8. Remedies Sought
- Equitable Compensation
9. Cause of Actions
- Breach of Fiduciary Duty
10. Practice Areas
- Commercial Litigation
- Insolvency Litigation
11. Industries
- Finance
- Investment
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Dynasty Line Limited (in liquidation) v Sukamto Sia and another | High Court | Yes | [2015] SGHC 286 | Singapore | The High Court's decision on the assessment of equitable compensation payable by the defendants to the plaintiff in respect of their breaches of fiduciary duty was appealed. |
| Dynasty Line Ltd (in liquidation) v Sia Sukamto and another | High Court | Yes | [2013] 4 SLR 253 | Singapore | Cited for the High Court's findings on the liability of Sia and Lee for breaches of fiduciary duty. |
| Dynasty Line Ltd (in liquidation) v Sia Sukamto and another and another appeal | Court of Appeal | Yes | [2014] 3 SLR 277 | Singapore | The Court of Appeal's decision affirming the liability of Sia and Lee for breach of fiduciary duties as directors of Dynasty. |
| Re Carriage Co-operative Supply Association | Court of Chancery | Yes | (1884) 27 ChD 322 | England and Wales | Cited for the principle that fiduciaries' liability for a breach of duty will be joint and several where the fiduciaries jointly participated in the act leading to that breach. |
| Lee Tat Development Pte Ltd v Management Corporation Strata Title Plan No 301 | High Court | Yes | [2005] 3 SLR(R) 157 | Singapore | Cited regarding the requirements for issue estoppel. |
| The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT International Ltd (nTan Corporate Advisory Pte Ltd and others, other parties) and another appeal | Court of Appeal | Yes | [2015] 5 SLR 1104 | Singapore | Cited regarding the requirements for issue estoppel. |
| In Re VGM Holdings, Limited | High Court | Yes | [1942] Ch 235 | England and Wales | Cited for the rule that a trustee-beneficiary liable to pay a sum to his trust fund should not be ordered to pay that part of it which would be distributed to him qua beneficiary. |
| Target Holdings Ltd v Redferns | House of Lords | Yes | [1996] 1 AC 421 | England and Wales | Cited for the test for equitable compensation, which is to put the trust estate or the beneficiary back into the position it would have been in had there been no breach. |
| Ramskill v Edwards | Court of Appeal | Yes | [1881] 31 Ch 100 | England and Wales | Cited regarding the liability of a director defendant towards a co-director plaintiff. |
| Dubai Aluminium Co Ltd v Salaam and others | House of Lords | Yes | [2003] 2 AC 366 | England and Wales | Cited regarding disgorgement of gains arising from secondary liability for dishonest assistance and/or knowing receipt. |
| Pulvers (A Firm) v Chan | High Court | Yes | [2007] EWHC 2406 | England and Wales | Cited regarding disgorgement of gains arising from secondary liability for dishonest assistance and/or knowing receipt. |
| Re-Source America International Ltd v Platt Site Services Ltd and another, Barkin Construction Ltd | Court of Appeal | Yes | [2004] EWCA Civ 665 | England and Wales | Cited regarding negligence at common law. |
| Bishopsgate Investment Management Ltd v Maxwell | High Court | Yes | [1993] BCC 120 | England and Wales | Cited regarding directors acting in concert. |
| Gluckstein v Barnes (Official Receiver and Official Liquidator of Olympia, Limited) | House of Lords | Yes | [1900] AC 240 | England and Wales | Cited regarding directors acting in concert. |
| Wallersteiner v Moir (No 2) | Court of Appeal | Yes | [1975] QB 373 | England and Wales | Cited for the principle that in equity, interest is awarded whenever a wrongdoer deprives a company of money which it needs for use in its business. |
| D’Oz International Pte Ltd v PSB Corp Pte Ltd and another appeal | Court of Appeal | Yes | [2010] 3 SLR 267 | Singapore | Cited regarding the presumption of similarity of laws. |
| Denis Matthew Harte v Tan Hun Hoe and Another | High Court | Yes | [2001] SGHC 19 | Singapore | Cited for the rationale of Order 22A Rule 10 of the Rules of Court and why compliance has to be strict. |
| CCM Industrial Pte Ltd v Uniquetech Pte Ltd | High Court | Yes | [2009] 2 SLR(R) 20 | Singapore | Cited regarding the court's jurisdiction to award indemnity costs under Order 22A Rule 9(5) even if Order 22A Rule 9(3) was inapplicable. |
| Selangor United Rubber Estates Ltd v Cradock and others (No 4) | High Court | Yes | [1969] 1 WLR 1773 | England and Wales | Cited regarding distributions should not be done to prefer one beneficiary to another’s prejudice or cause or risk causing additional costs and expenses falling on some beneficiaries in exoneration of others. |
13. Applicable Rules
| Rule Name |
|---|
| Rules of Court (Cap 322, R 5, 2014 Rev Ed) |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| BVI Insolvency Act | British Virgin Islands |
| BVI Insolvency Act (Act No 5 of 2003) | British Virgin Islands |
| BVI Limitation Ordinance 1961 | British Virgin Islands |
15. Key Terms and Keywords
15.1 Key Terms
- Breach of fiduciary duty
- Equitable compensation
- Joint and several liability
- Pledge of shares
- Liquidation
- Directors' duties
- Valuation date
- Pre-liquidation interest
- Post-liquidation interest
- Commerzbank pledge
15.2 Keywords
- fiduciary duty
- equitable compensation
- directors
- liquidation
- Singapore
- BVI
- Dynasty Line
- Sukamto Sia
- Lee Howe Yong
17. Areas of Law
16. Subjects
- Breach of Fiduciary Duty
- Equitable Compensation
- Corporate Governance
- Insolvency