Nordic International v. Innhaug: Director's Breach of Fiduciary Duty in Charterparty Assignment
Nordic International Limited, the plaintiff, sued Morten Innhaug, the defendant, in the High Court of Singapore, alleging breach of fiduciary duties as a director. The case concerned the assignment of a charterparty to a company owned by Innhaug. The court, presided over by Justice Steven Chong, found Innhaug liable for breaching his duties to Nordic International by prioritizing his own interests over the company's, and ordered an account of profits. The assessment of compensation for the withholding of charter hire was reserved pending the outcome of arbitration between Nordic International and BGP.
1. Case Overview
1.1 Court
High Court of the Republic of Singapore1.2 Outcome
Judgment for Plaintiff
1.3 Case Type
Civil
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
Nordic International sued Innhaug for breaching fiduciary duties by assigning a charterparty to his company. The court found Innhaug liable for prioritizing his interests.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Nordic International Limited | Plaintiff | Corporation | Claim Allowed | Won | Anthony Soh Leong Kiat, Andrew Ho Yew Cheng, June Lim Pei Ling |
| Morten Innhaug | Defendant | Individual | Claim partially dismissed | Lost | Joseph Tan Wee Kong, Joanna Poh Ying Ying |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Steven Chong | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Anthony Soh Leong Kiat | Via Law Corporation |
| Andrew Ho Yew Cheng | Via Law Corporation |
| June Lim Pei Ling | Via Law Corporation |
| Joseph Tan Wee Kong | Legal Solutions LLC |
| Joanna Poh Ying Ying | Legal Solutions LLC |
4. Facts
- Morten Innhaug incorporated Nordic International to purchase a fishing trawler for conversion into a seismic survey vessel.
- Sinwa Limited invested in Nordic International, acquiring 50% ownership.
- Morten secured a Time Charter with BGP for the vessel at US$37,000 per day.
- BGP sought to cancel the Time Charter due to operational problems and market downturn.
- Morten negotiated with BGP and TGS to assign the Time Charter and seismic services agreement to Nordic Maritime without informing the Sinwa directors.
- Nordic Maritime stood to make US$15,500 a day from the assignments.
- TGS terminated the seismic services agreement due to dissatisfaction with the vessel's condition.
- NGS paid Nordic International charter hire for August to December 2008.
- Morten initially stopped Sinwa from commencing arbitration proceedings against BGP for outstanding charter hire.
- Morten called a shareholders’ meeting to create a deadlock to buy back Sinwa’s shares.
5. Formal Citations
- Nordic International Ltd v Morten Innhaug, Suit No 875 of 2010, [2017] SGHC 1
- Sinwa SS (HK) Co Ltd v Morten Innhaug, , [2010] 4 SLR 1
- Morten Innhaug v Sinwa SS (HK) Co Ltd and others, Originating Summons No 22 of 2010, [2011] SGHC 20
6. Timeline
| Date | Event |
|---|---|
| Nordic International Limited incorporated | |
| Ship management agreement signed between Nordic Maritime and Nordic International | |
| Time Charter signed to charter the Vessel to BGP Geoexplorer Pte Ltd | |
| Shareholder's agreement signed between Sinwa Limited and Morten Innhaug | |
| Sinwa Limited's rights novated to Sinwa SS (HK) Co Ltd | |
| Sinwa guaranteed a term loan of US$16m that Oversea-Chinese Banking Corporation extended to Nordic International | |
| BGP indicated its wish to cancel the Time Charter | |
| Morten emailed BGP regarding compensation and transfer of vessel operation | |
| BGP indicated in-principle agreement to Morten's proposal | |
| Memorandum of Agreement signed by BGP, Nordic Maritime, and TGS | |
| Kjell informed the Sinwa directors by email that Nordic would be taking over the seismic operation of the Vessel | |
| Morten incorporated Nordic Geo-Services Ltd | |
| Notice of Assignment of Time Charter Party from BGP to NGS | |
| Sinwa wrote to Morten to place on record its objections to the purported assignment | |
| TGS sent Nordic Maritime a notice of termination of the seismic services agreement | |
| Termination of the seismic services agreement was with effect from | |
| Morten informed BGP that the Time Charter between BGP and Nordic International was reinstated | |
| BGP objected to the purported reinstatement of the Time Charter | |
| Nordic International informed BGP that it had yet to pay the charter hire for January and February 2009 | |
| Nordic International informed BGP that it had yet to pay the charter hire for January and February 2009 | |
| BGP replied that the Time Charter had been novated to Nordic Maritime | |
| Sinwa filed Originating Summons No 960 of 2009 to commence this derivative action | |
| Nordic International commenced arbitration against BGP | |
| Morten applied to court, in Originating Summons No 22 of 2010, for a determination of the meaning of cl 8.1 of the shareholders’ agreement | |
| Valuation report dated which Nordic Maritime commissioned Altech Maritime Consultants Pte Ltd to produce | |
| Court of Appeal granted leave to Sinwa to commence a derivative action against Morten’s alleged breaches of his directors’ duties | |
| Court dismissed Morten's application in OS 22 | |
| BGP filed a court application for a declaration that the arbitrator had no jurisdiction to hear the claim brought by Nordic International against it | |
| Morten and Kjell voted against the commencement of arbitration against BGP | |
| Morten commenced arbitration against Sinwa under the rules of the Singapore International Arbitration Centre | |
| Arbitrator issued a partial award ordering Sinwa to sell its shares to Morten at a price to be assessed | |
| Sinwa sought leave of court in Suit No 1166 of 2013 to commence arbitration proceedings on behalf of Nordic International against BGP | |
| Leave was eventually granted by consent | |
| Notes of Evidence | |
| Notes of Evidence | |
| Notes of Evidence | |
| Hearing before Steven Chong J | |
| Hearing before Steven Chong J | |
| Judgment reserved |
7. Legal Issues
- Breach of Fiduciary Duty
- Outcome: The court found that Morten Innhaug breached his fiduciary duties to Nordic International by prioritizing his own interests over the company's.
- Category: Substantive
- Sub-Issues:
- Conflict of interest
- Self-dealing
- Failure to act in the best interests of the company
- Making a profit out of position without consent
- Related Cases:
- [1974] AC 821
- [1967] 2 AC 134
- [2010] 3 SLR 1069
- [2012] 1 BCLC 67
- [2014] 1 SLR 847
- Relief from Liability under Section 391 of the Companies Act
- Outcome: The court found that Morten Innhaug was not entitled to relief from liability under section 391 of the Companies Act.
- Category: Procedural
- Related Cases:
- [2007] 4 SLR(R) 218
- [2013] 1 SLR 1428
- [1995] 1 SLR(R) 576
- Consent or Ratification of Breach of Duty
- Outcome: The court rejected Morten Innhaug's argument that Nordic International had consented to or ratified his breach of fiduciary duties.
- Category: Substantive
- Related Cases:
- [2010] SGCA 44
- [1996] 1 SLR(R) 540
- [2010] 1 SLR 241
- Equitable Compensation
- Outcome: The court ordered an assessment of the appropriate amount of compensation in respect of loss of charter hire caused by Morten Innhaug's breach of fiduciary duty, but directed that such assessment take place only after the conclusion of the arbitration between Nordic International and BGP.
- Category: Remedial
- Related Cases:
- [1996] 1 AC 421
- [1995] 1 WLR 1206
- [1996] 1 SLR(R) 397
- [2015] 5 SLR 178
8. Remedies Sought
- Account of Profits
- Equitable Compensation
9. Cause of Actions
- Breach of Fiduciary Duty
- Derivative Action
10. Practice Areas
- Commercial Litigation
- Corporate Law
- Arbitration
11. Industries
- Maritime
- Oil and Gas
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Sinwa SS (HK) Co Ltd v Morten Innhaug | High Court | Yes | [2010] 4 SLR 1 | Singapore | Cited for the initial High Court decision in the derivative action, outlining Sinwa's allegations against Morten. |
| Morten Innhaug v Sinwa SS (HK) Co Ltd and others | High Court | Yes | [2011] SGHC 20 | Singapore | Cited for the court's determination of the meaning of clause 8.1 of the shareholders' agreement, requiring unanimous decisions on the assignment and arbitration. |
| Ho Kang Peng v Scintronix Corp Ltd (formerly known as TTL Holdings Ltd) | Court of Appeal | Yes | [2014] 3 SLR 329 | Singapore | Cited regarding the court's interference with commercial decisions of directors. |
| Howard Smith Ltd v Ampol Petroleum Ltd | Privy Council | Yes | [1974] AC 821 | United Kingdom | Cited for the principle that a director in a conflict of interest cannot assert that their action was bona fide or in the company's interests. |
| Regal (Hastings) Ltd v Gulliver | House of Lords | Yes | [1967] 2 AC 134 | United Kingdom | Cited for the principle that a director can be in breach of the no-conflict rule even if their conduct caused no loss to the company and that liability to account arises simply because profits are made. |
| Tan Hup Thye v Refco (Singapore) Pte Ltd (in members’ voluntary liquidation) | High Court | Yes | [2010] 3 SLR 1069 | Singapore | Cited for the principle that self-dealing prohibits a director from entering into transactions with themselves or companies they are interested in. |
| Premier Waste Management Ltd v Towers | High Court | Yes | [2012] 1 BCLC 67 | United Kingdom | Cited for the principle that a director’s liability for disloyalty does not depend on proof of fault or that a conflict of interest caused the company loss. |
| Mona Computer Systems (S) Pte Ltd v Singaravelu Murugan | High Court | Yes | [2014] 1 SLR 847 | Singapore | Cited for the principle that making the fiduciary account for an unauthorized profit is a gains-based remedy unrelated to whether the fiduciary's conduct caused any loss to the principal. |
| Tan Hock Keng v L & M Group Investments Ltd | Court of Appeal | Yes | [2002] 1 SLR(R) 672 | Singapore | Cited for the contractual interpretation of the obligation 'to procure'. |
| Re Allied Business and Financial Consultants Ltd | Court of Appeal | Yes | [2009] 2 BCLC 666 | United Kingdom | Cited regarding the irrelevance of whether the company could take up the corporate opportunity or whether the opportunity was within the company’s scope of business. |
| W&P Piling Pte Ltd (in liquidation) v Chew Yin What and others | High Court | Yes | [2007] 4 SLR(R) 218 | Singapore | Cited for the three cumulative requirements for relief under section 391 of the Companies Act. |
| Long Say Ting Daniel v Merukh Nunik Elizabeth (personal representative of the estate of Merukh Jusuf, deceased) | High Court | Yes | [2013] 1 SLR 1428 | Singapore | Cited for the definition of 'honestly' in the context of section 391 of the Companies Act. |
| Hytech Builders Pte Ltd v Tan Eng Leong and another | High Court | Yes | [1995] 1 SLR(R) 576 | Singapore | Cited for the principle that conduct characterized by a degree of surreptitiousness can hardly be said to be honest. |
| Bamford v Bamford | Chancery Division | Yes | [1970] Ch 212 | United Kingdom | Cited regarding the director obtaining ratification by making a full and frank disclosure and calling together the general body of the shareholders. |
| Chin Siew Seng v Quah Hun Kok Francis and another appeal | Court of Appeal | Yes | [2010] SGCA 44 | Singapore | Cited regarding the director not breaching his fiduciary duty as all the directors and shareholders knew and consented to the latter company’s receipt of the ship-brokering commissions. |
| Goh Kim Hai Edward v Pacific Can Investment Holdings Ltd | High Court | Yes | [1996] 1 SLR(R) 540 | Singapore | Cited regarding a principal may choose to ratify an unauthorised transaction that the agent entered into with a third party without exonerating that agent of any breach of duty. |
| Eng Gee Seng v Quek Choon Teck and others | High Court | Yes | [2010] 1 SLR 241 | Singapore | Cited regarding the ratification of the unauthorised transaction may be implied from the mere acquiescence or inactivity of the principal. |
| Target Holdings Ltd v Redferns (a firm) and another | House of Lords | Yes | [1996] 1 AC 421 | United Kingdom | Cited for the principle that equitable compensation for breach of trust is designed to make good a loss in fact suffered by the beneficiaries and which, using hindsight and common sense, can be seen to have been caused by the breach. |
| Deeny and others v Gooda Walker Ltd (in liquidation) (No 3) | Queen's Bench Division | Yes | [1995] 1 WLR 1206 | United Kingdom | Cited regarding the assessment of damages should be reserved until after those claims have been finally determined. |
| China Resources Purchasing Co Ltd v Yue Xiu Enterprises (S) Pte Ltd and another | High Court | Yes | [1996] 1 SLR(R) 397 | Singapore | Cited regarding the assessment of damages should be reserved until after those claims have been finally determined. |
| Freight Connect (S) Pte Ltd v Paragon Shipping Pte Ltd | Court of Appeal | Yes | [2015] 5 SLR 178 | Singapore | Cited regarding the assessment of damages should be reserved until after those claims have been finally determined. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
| English Law of Property Act 1925 (c 20) | United Kingdom |
| Civil Law Act (Cap 43, 1999 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Charterparty
- Time Charter
- Seismic services agreement
- Assignment
- Fiduciary duty
- Director's duties
- Conflict of interest
- Self-dealing
- Novation
- Shareholder's agreement
- Deadlock clause
- Derivative action
15.2 Keywords
- Directors
- Duties
- Companies
- Fiduciary duty
- Charterparty
- Assignment
- Conflict of interest
16. Subjects
- Company Law
- Directors' Duties
- Fiduciary Duty
- Contract Law
- Arbitration
17. Areas of Law
- Company Law
- Directors' Duties
- Fiduciary Duty
- Contract Law
- Arbitration