Hocen International Pte Ltd v Ong Shu Lin: Director's Duties & Corruption

In Hocen International Pte Ltd (in liquidation) v Ong Shu Lin, Ong Bee Chew, as the substituted plaintiff, sued Ong Shu Lin in the High Court of Singapore, alleging breach of statutory and fiduciary duties. The claim arose from payments made by Hocen, a power cable distributor, which the plaintiff argued were for corrupt purposes. The defendant denied the breach, claiming the payments were for corporate benefit. Justice Vinodh Coomaraswamy found both parties equally culpable in a corrupt scheme and ordered the plaintiff to contribute 50% to the defendant's liability. The court made no order as to costs, deeming the litigation pointless, and both parties have appealed.

1. Case Overview

1.1 Court

High Court of the Republic of Singapore

1.2 Outcome

Plaintiff to make a contribution of 50% to the defendant’s liability in these suits.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Hocen International Pte Ltd v Ong Shu Lin involves a breach of director's duties and corruption, resulting in a contribution order.

1.7 Decision Date

28 November 2017

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Hocen International Pte Ltd (In liquidation)	Plaintiff	Corporation	Partial	Partial	Lionel Leo of WongPartnership LLP Oh Sheng Loong of WongPartnership LLP Doralyn Chan of WongPartnership LLP
Ong Shu Lin	Defendant	Individual	Partial	Partial	Leo Cheng Suan of Infinitus Law Corporation Teh Ee-Von of Infinitus Law Corporation Grismond Tien of Infinitus Law Corporation
Ong Bee Chew	Substituted Plaintiff	Individual	Partial	Partial

3. Judges

Judge Name	Title	Delivered Judgment
Vinodh Coomaraswamy	Judge	Yes

4. Counsels

Counsel Name	Organization
Lionel Leo	WongPartnership LLP
Oh Sheng Loong	WongPartnership LLP
Doralyn Chan	WongPartnership LLP
Leo Cheng Suan	Infinitus Law Corporation
Teh Ee-Von	Infinitus Law Corporation
Grismond Tien	Infinitus Law Corporation

4. Facts

Hocen was in the business of selling and distributing power cables.
Hocen had two shareholders and two directors: Ong Bee Chew and Ong Shu Lin.
Hocen went into liquidation in October 2007.
The plaintiff claimed the defendant breached his duties by causing Hocen to make payments of about S$1.8m which were of no corporate benefit.
The defendant denied any breach of duty, claiming the payments led to and sustained Hocen’s substantial business selling cables.
Hocen engaged Crossbridge to provide quality assurance and progress monitoring services.
The defendant caused Hocen to issue cash cheques and make bank remittances to Crossbridge.

5. Formal Citations

Ong Bee Chew v Ong Shu Lin, Suit No 655 of 2011 and Suit 179 of 2012, [2017] SGHC 285

6. Timeline

Date	Event
2005-05-01	Hocen International Pte Ltd incorporated.
2005-08-01	Davin Chan, Raymond Goh Lnai Mun, and Loh Siew Choong employed by Hocen.
2005-09-01	Hocen began making payments to Crossbridge International Pte Ltd.
2006-07-01	Relationship between plaintiff and defendant began to deteriorate.
2006-09-20	Hocen responded to auditor's letter.
2007-01-01	Hocen entered into four written contracts with Crossbridge.
2007-08-01	Defendant applied for Hocen to be wound up.
2007-08-01	Plaintiff engaged Pinkerton to carry out checks on Crossbridge and ZPMC.
2007-10-01	Court made winding up order for Hocen.
2007-10-01	Three accountants appointed as Hocen’s liquidators.
2008-05-01	Liquidators corresponded with Zhang Yixiao over Hocen’s debt to ZPMC.
2008-01-01	Plaintiff sent Andy Heng to meet Daniel Cheng of Crossbridge to explore business opportunity with ZPMC.
2009-09-01	Liquidators submitted a confidential report of their findings to the Commercial Affairs Department.
2010-10-01	Plaintiff applied under ss 315 and 284 of the Companies Act for the liquidators to disclose the outcome of their review insofar as it related to Crossbridge.
2011-04-01	High Court ordered disclosure of liquidators' report.
2011-09-01	Liquidators commenced first suit against the defendant.
2012-03-01	Liquidators commenced second suit against the defendant.
2012-05-01	Liquidators applied for an order that the defendant account for the cash which he had withdrawn against the cash cheques.
2013-01-01	Court ordered the defendant to furnish the account.
2013-03-01	Defendant filed an affidavit stating he had handed all of the cash to different representatives of Crossbridge on various occasions.
2013-04-01	Liquidators agreed to permit the plaintiff to take over the carriage of these suits.
2013-11-01	Liquidators caused Hocen to assign to the plaintiff its causes of action against the defendant.
2016-01-05	Ong Bee Chew’s Affidavit of Evidence-in-Chief dated
2016-01-04	Ong Shu Lin’s Affidavit of Evidence-in-Chief dated
2016-03-08	Certified Transcript
2016-03-15	Certified Transcript
2016-03-01	Trial began.
2016-11-29	Trial concluded.
2017-11-29	Judgment delivered.

7. Legal Issues

Breach of Director's Duties
- Outcome: The court found that the defendant breached his duties as a director to Hocen.
- Category: Substantive
- Sub-Issues:
  - Failure to act honestly
  - Failure to use reasonable diligence
  - Failure to act bona fide in the interests of the company
Ex Turpi Causa Non Oritur Actio
- Outcome: The court found that the defendant could not rely on the ex turpi causa doctrine to defeat the claim.
- Category: Substantive
Attribution of Director's Conduct to Company
- Outcome: The court found that the defendant's turpitude was not attributable to Hocen.
- Category: Procedural

8. Remedies Sought

Damages
Equitable Compensation

9. Cause of Actions

Breach of Fiduciary Duty
Breach of Statutory Duty

10. Practice Areas

Commercial Litigation
Corporate Litigation

11. Industries

Manufacturing
Shipping

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Britestone Pte Ltd v Smith & Associates	Court of Appeal	Yes	[2007] 4 SLR(R) 855	Singapore	Cited to explain the distinction between the legal and evidential burdens of proof.
Goh Chan Peng and others v Beyonics Technology Ltd and another and another appeal	Court of Appeal	Yes	[2017] SGCA 40	Singapore	Cited for the principle that to determine civil liability for breach of the duty to act bona fide in the interests of a company, the court will assess the intention of a director on a subjective and an objective basis.
Ho Kang Peng v Scintronix Corp Ltd	Court of Appeal	Yes	[2014] 3 SLR 329	Singapore	Cited for the principle that a director who creates a sham contract and who causes the company to participate in corruption cannot be said to be acting bona fide in the interests of the company even if his subjective intent is to maximise the company’s profits.
ANC Holdings Pte Ltd v Bina Puri Holdings Bhd	Court of Appeal	Yes	[2013] 3 SLR 666	Singapore	Cited for the principle that the ex turpi causa doctrine is not confined to criminal wrongdoing but extends even to non-criminal conduct which carries the necessary degree of turpitude.
Les Laboratoires Servier v Apotex Inc	Unknown	Yes	[2014] 3 WLR 1257	England	Cited for the principle that the ex turpi causa doctrine is not confined to criminal wrongdoing but extends even to non-criminal conduct which carries the necessary degree of turpitude.
Holman v Johnson	Unknown	Yes	(1775) 1 Cowp 341	England	Cited for the classic statement of the ex turpi causa doctrine that “No court will lend its aid to a man who founds his cause of action on an immoral or an illegal act”.
Meridian Global Funds Management Asia Ltd v Securities Commission	Privy Council	Yes	[1995] 2 AC 500	Unknown	Cited for the principles by which the acts of a natural person will be attributed to a company.
Bilta (UK) Ltd (liquidation) v Nazir (No 2)	English Court of Appeal	Yes	[2014] Ch 52	England	Cited for the distinction between cases in which a director’s knowledge or acts are sought to be attributed to the company when a third party seeks to hold a company liable for breach of a duty owed to the third party and when a company seeks redress from a director for breach of duty owed to the company.
Belmont Finance Corporation Ltd v Williams Furniture Ltd	English Court of Appeal	Yes	[1979] 1 Ch 250	England	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.
In re Hampshire Land Co	Unknown	Yes	(1896) 2 Ch 743	England	Cited as the older principle that the Belmont principle is a generalisation of.
A-G’s Ref (No 2 of 1982)	English Court of Appeal	Yes	[1984] QB 624	England	Cited for applying the Belmont principle in a criminal case.
Pertamina v Thahir Kartika Ratna and others	Unknown	Yes	[1981–1982] SLR(R) 653	Singapore	Cited as the first reported local decision to apply the Belmont principle.
Stone & Rolls Ltd (in liquidation) v Moore Stephens (a firm)	House of Lords	Yes	[2009] 1 AC 1391	England	Cited for the controversy of whether a one-man company is either outside the Belmont principle altogether or within an exception to that principle such that that the director-shareholders’ wrongdoing may nevertheless be attributed to the company.
Lim Leong Huat v Chip Hup Kee Construction Pte Ltd	High Court	Yes	[2009] 2 SLR(R) 318	Singapore	Cited for dicta in that case support the redress-liability distinction as the explanation for when the Belmont principle operates.
Airtrust (Singapore) Pte Ltd v Kao Chai-Chau Linda and another suit	High Court	Yes	[2014] 2 SLR 673	Singapore	Cited for echoing Andrew Ang J’s observations.
Bilta (UK) Ltd (in liquidation) and others v Nazir and others (No. 2)	UK Supreme Court	Yes	[2015] 2 WLR 1168	England	Cited for the central and unanimous holding of the Supreme Court in Bilta (SC).
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 in order for the company to be bound such that it could no longer recover the salary from the director, there must be a sufficient basis for the court to infer that: (a) there was an agreement between the shareholders with regard to the impugned act; and (b) what the key contents of that agreement were.
Re Duomatic Ltd	Unknown	Yes	[1969] 2 Ch 365	England	Cited for the principle where all the shareholders, particularly in a closed private company with a track record of informality in their deals, assent to a particular course of dealing, even in relation to the disposal of assets, this may be effective to bind the parties.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Companies Act (Cap 50, 2006 Rev Ed)	Singapore
Section 157(1) of the Companies Act (Cap 50, 2006 Rev Ed)	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Power Cables
Liquidation
Directors' Duties
Fiduciary Duty
Corporate Benefit
Corruption
Crossbridge
ZPMC
YICT
Sham Contract
Ex Turpi Causa
Attribution
One-Man Company

15.2 Keywords

Director
Duties
Corruption
Company
Liquidation
Singapore
Hocen
Ong Shu Lin
Ong Bee Chew
Crossbridge
ZPMC
Fiduciary Duty
Breach of Duty

17. Areas of Law

Area Name	Relevance Score
Director's Duties	90
Breach of Duty	85
Fiduciary Duties	80
Company Law	75
Corporate Benefit	70
Corruption	65
Commercial Disputes	60
Fraud and Deceit	50
Contract Law	40
Winding Up	30
Insolvency Law	25
Criminal Law	20

16. Subjects

Company Law
Directors' Duties
Fiduciary Duty
Corporate Governance
Civil Procedure
Corruption