Zolton Techs v Tan Chew Sim: Director's Fiduciary Duties & Business Opportunity Diversion
In a suit before the High Court of Singapore, Zolton Techs Singapore Pte Ltd, the plaintiff, brought an action against Tan Chew Sim, the defendant, for breach of fiduciary duties for allegedly diverting a business opportunity. The defendant, a director of the plaintiff, in turn, sought an indemnity from Chow Hoo Siong, the third party, who was the other director and majority shareholder. The plaintiff also claimed a liquidated sum for an alleged loan and unauthorized expenses. The defendant counterclaimed for owed salaries and sales commissions. The court dismissed the plaintiff's claims, finding that the business opportunity diversion was consented to, and the expenses were part of an agreement. The court allowed the defendant's counterclaim in part, awarding a performance bonus and salary in lieu of notice.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Plaintiff's claims dismissed; Defendant's counterclaim allowed in part.
1.3 Case Type
Civil
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
The High Court found no breach of fiduciary duty by a director who diverted a business opportunity with consent. The court dismissed claims for loan repayment and credit card expenses.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Zolton Techs Singapore Pte Ltd | Plaintiff | Corporation | Claims dismissed | Lost | Fong Lee Cheng Jennifer, Koh Choon Guan Daniel, Ng Jia En |
| Tan Chew Sim | Defendant | Individual | Counterclaim allowed in part | Partial | Chong Siew Nyuk Josephine, Yeo Fang Ying, Esther |
| Chow Hoo Siong | Third Party | Individual | N/A | Neutral | Fong Lee Cheng Jennifer, Koh Choon Guan Daniel, Ng Jia En |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Lee Seiu Kin | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Fong Lee Cheng Jennifer | Eldan Law LLP |
| Koh Choon Guan Daniel | Eldan Law LLP |
| Ng Jia En | Eldan Law LLP |
| Chong Siew Nyuk Josephine | Josephine Chong LLC |
| Yeo Fang Ying, Esther | Josephine Chong LLC |
4. Facts
- The plaintiff, Zolton Techs, was in the business of supplying and maintaining food and beverage production machinery.
- The defendant, Tan Chew Sim, was a director of the plaintiff company.
- The third party, Chow Hoo Siong, was the other director and 90% shareholder of the plaintiff company.
- The dispute arose from a business opportunity to supply mashed potato machines to 7-Eleven.
- The defendant supplied the machines through Stellar Corporate Management Pte Ltd (SCM), a company controlled by her.
- The plaintiff claimed the defendant breached her fiduciary duties by diverting the business opportunity.
- The defendant claimed the diversion was consented to by the third party via the Mashed Potato Agreement.
- The defendant also counterclaimed for wrongful termination, owed salaries, and 5% of the plaintiff's revenue for 2010.
5. Formal Citations
- Zolton Techs Singapore Pte Ltd v Tan Chew Sim, Suit No 502 of 2011, [2018] SGHC 160
6. Timeline
| Date | Event |
|---|---|
| Zolton Techs Singapore Pte Ltd set up by Chow Hoo Siong | |
| Tan Chew Sim appointed as a director of Zolton Techs Singapore Pte Ltd | |
| Zolton Techs Singapore Pte Ltd provided maintenance services to 7-Eleven's mashed potato machines | |
| Nestlé Singapore stopped supplying mashed potato machines to 7-Eleven | |
| 7-Eleven sent a purchase order for 100 machines to Zolton Techs Singapore Pte Ltd | |
| Lim sent an email requesting the plaintiff to arrange to install and demonstrate one mashed potato machine by the next week | |
| Mashed potato machines were supplied to 7-Eleven by Stellar Corporate Management Pte Ltd | |
| Defendant obtained an expedited personal protection order against the third party | |
| Mashed potato machines were supplied to 7-Eleven by Stellar Corporate Management Pte Ltd | |
| Suit commenced | |
| Defendant filed for divorce | |
| Interim judgment for divorce granted | |
| Suit stayed pending resolution of divorce appeals | |
| Appeals relating to ancillary matters disposed of | |
| Trial began | |
| Trial concluded | |
| Judgment reserved |
7. Legal Issues
- Breach of Fiduciary Duty
- Outcome: The court found no breach of fiduciary duty because the diversion of the business opportunity was consented to by the other director and majority shareholder.
- Category: Substantive
- Sub-Issues:
- Diversion of business opportunity
- Recovery of Loan and Expenses
- Outcome: The court dismissed the claim for recovery of the loan and expenses, finding that there was an agreement for the defendant to be entitled to the same.
- Category: Substantive
- Entitlement to Salary in Lieu of Notice
- Outcome: The court allowed the counterclaim for one month's salary in lieu of notice.
- Category: Substantive
- Entitlement to Accrued Leave
- Outcome: The court disallowed the claim for accrued leave.
- Category: Substantive
- Entitlement to Performance Bonus
- Outcome: The court allowed the counterclaim for 5% performance bonus of the plaintiff's revenue.
- Category: Substantive
8. Remedies Sought
- Damages
- Compensation
- Indemnity
9. Cause of Actions
- Breach of Fiduciary Duty
- Recovery of Debt
10. Practice Areas
- Commercial Litigation
11. Industries
- Food and Beverage
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| TDT v TDS and another appeal | High Court | Yes | [2016] 4 SLR 145 | Singapore | Cited for the disposal of appeals relating to ancillary matters in the divorce proceedings between the defendant and the third party. |
| Balfour v Balfour | N/A | Yes | [1918] All ER Rep 860 | N/A | Cited for the principle that domestic arrangements are not intended to create legal consequences. |
| James v Thomas H. Kent & Co | N/A | Yes | [1951] 1 KB 551 | N/A | Cited for the common law principle that employment contracts for an unspecified period can be terminated by reasonable notice. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Fiduciary Duty
- Business Opportunity
- Director's Duties
- Mashed Potato Agreement
- Corporate Credit Card
- Performance Bonus
- Salary in Lieu of Notice
- Accrued Leave
15.2 Keywords
- Director
- Fiduciary Duty
- Business Opportunity
- Singapore
- Company Law
16. Subjects
- Corporate Governance
- Contract Law
- Employment Law
17. Areas of Law
- Company Law
- Directors' Duties
- Fiduciary Duty