OP3 International Pte Ltd v Foo Kian Beng: Director's Duties & Creditor Interests

In a suit brought by the liquidator of OP3 International Pte Ltd against its former director, Mr. Foo Kian Beng, the General Division of the High Court of Singapore, with Hoo Sheau Peng J presiding, found Mr. Foo liable for breaches of his duties. The liquidator alleged that Mr. Foo wrongfully dissipated funds through dividend payments, repayment of moneys, and diversion of business. The court allowed the claim in part, finding Mr. Foo in breach of his duties regarding dividend payments and repayment of moneys, ordering him to return $1,182,394 to OP3. The claim for diversion of business was dismissed.

1. Case Overview

1.1 Court

General Division of the High Court of the Republic of Singapore

1.2 Outcome

Judgment for Plaintiff in part.

1.3 Case Type

Civil

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Liquidator sues former director for breach of duties. Court finds director liable for improper dividend payments and repayment of moneys.

1.7 Decision Date

14 September 2022

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Foo Kian Beng	Defendant	Individual	Judgment against Defendant in part	Lost	Noel Chua Yi How of PK Wong & Nair LLC Nair Suresh Sukumaran of PK Wong & Nair LLC Sylvia Lem Jia Li of PK Wong & Nair LLC
OP3 International Pte Ltd (in liquidation)	Plaintiff	Corporation	Judgment for Plaintiff in part	Partial	Lee Ming Hui Kelvin of WNLEX LLC Ong Xin Ying Samantha of WNLEX LLC

3. Judges

Judge Name	Title	Delivered Judgment
Hoo Sheau Peng	Judge of the High Court	Yes

4. Counsels

Counsel Name	Organization
Noel Chua Yi How	PK Wong & Nair LLC
Nair Suresh Sukumaran	PK Wong & Nair LLC
Sylvia Lem Jia Li	PK Wong & Nair LLC
Lee Ming Hui Kelvin	WNLEX LLC
Ong Xin Ying Samantha	WNLEX LLC

4. Facts

OP3 was incorporated on 20 December 2006 to engage in interior design and construction.
Mr. Foo was the sole director of OP3 from 1 August 2010 to 3 April 2020.
Smile Inc sued OP3 for defective works at its clinic, resulting in Suit 498.
OP3 declared and paid dividends to Mr. Foo and repaid moneys to him between 2015 and 2017.
OP3 experienced a drop in revenue between 2015 and 2017.
Smile Inc obtained a judgment debt against OP3 in HC/S 498/2015 on 11 November 2019.
OP3 was wound up on 3 April 2020 pursuant to a court order obtained by Smile Inc.

5. Formal Citations

OP3 International Pte Ltd (in liquidation) v Foo Kian Beng, Suit No 152 of 2021, [2022] SGHC 225

6. Timeline

Date	Event
2006-12-20	OP3 International Pte Ltd incorporated
2010-05-04	OP3 Creative Pte Ltd incorporated
2010-08-01	Foo Kian Beng became sole director of OP3 International Pte Ltd
2013-07-19	Agreement between OP3 and Smile Inc signed
2014-01-09	First Flood discovered at Smile Inc's clinic
2014-01-17	OP3 completed remedial works after First Flood
2014-07-21	Second Flood discovered at Smile Inc's clinic
2014-08-22	Smile Inc sent letter of demand to OP3
2015-05-22	Smile Inc commenced Suit 498
2015-05-25	Writ of Summons and Statement of Claim served on OP3
2017-10-05	High Court found OP3 liable to Smile Inc for damages in Suit 498
2020-04-03	OP3 wound up pursuant to court order obtained by Smile Inc
2022-03-08	Trial began
2022-04-13	Trial concluded
2022-09-15	Judgment reserved

7. Legal Issues

Breach of Fiduciary Duty
- Outcome: The court found that Mr. Foo breached his fiduciary duty by declaring and paying dividends and repaying moneys to himself when OP3 was insolvent.
- Category: Substantive
- Sub-Issues:
  - Failure to act bona fide in the best interests of the company
  - Failure to consider the interests of creditors when the company is insolvent or financially parlous
  - Improper declaration and payment of dividends
  - Misapplication of company assets
- Related Cases:
  - [2010] 4 SLR 1089
  - [2014] 3 SLR 277
  - [2019] 4 SLR 443
  - [2018] 1 SLR 271
  - [2007] 4 SLR(R) 218
  - [2018] 2 SLR 129
  - [2017] SGHC 15
  - [2011] SGHC 228
  - [2012] 4 SLR 1
  - [2007] 4 SLR(R) 513
  - [2017] 2 SLR 592
  - [2018] 2 SLR 655
Insolvency
- Outcome: The court determined that OP3 was insolvent at the end of 2016 and 2017, triggering Mr. Foo's duty to consider the interests of creditors.
- Category: Substantive
- Sub-Issues:
  - Cash flow insolvency
  - Balance sheet insolvency
  - Contingent liability
  - Duty to consider interests of creditors
- Related Cases:
  - [2017] SGHC 15
  - [2011] SGHC 228
Diversion of Business
- Outcome: The court found that OP3 failed to demonstrate that Mr. Foo diverted business from OP3 to OP3 Creative.
- Category: Substantive

8. Remedies Sought

Monetary Damages
Return of Dividends
Account of Profits

9. Cause of Actions

Breach of Fiduciary Duty
Wrongful Dissipation of Funds

10. Practice Areas

Commercial Litigation
Insolvency Litigation

11. Industries

Construction
Interior Design

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Liquidators of Progen Engineering Pte Ltd v Progen Holdings Ltd	Court of Appeal	Yes	[2010] 4 SLR 1089	Singapore	Cited for the principle that directors owe no duty to creditors when a company is solvent, but such a duty arises when a company is insolvent.
Dynasty Line Ltd (in liquidation) v Sukamto Sia	Court of Appeal	Yes	[2014] 3 SLR 277	Singapore	Cited for the principle that a broad assessment of the circumstances is to be undertaken to determine if there was reason to doubt the financial viability of the company.
Traxiar Drilling Partners II Pte Ltd (in liquidation) v Dvergsten, Dag Oivind	Court of Appeal	Yes	[2019] 4 SLR 443	Singapore	Cited for the principle that directors have a fiduciary duty to take into account the interest of the company’s creditors when making decisions for the company when a company is insolvent.
Parakou Investment Holdings Pte Ltd and another v Parakou Shipping Pte Ltd (in liquidation) and other appeals	Court of Appeal	Yes	[2018] 1 SLR 271	Singapore	Cited for the principle that the court discussed whether the company was in a financially parlous state, to determine whether the director owed a duty to consider the interests of creditors.
W&P Piling Pte Ltd (in liquidation) v Chew Yin What and others	High Court	Yes	[2007] 4 SLR(R) 218	Singapore	Cited as the basis to suggest that such a duty only arises when a company is on the verge of insolvency. However, W&P Piling pre-dates Progen Engineering.
Diablo Fortune Inc v Duncan, Cameron Lindsay and another	High Court	Yes	[2018] 2 SLR 129	Singapore	Cited to distinguish between being in a parlous financial situation and being on the verge of insolvency.
Parakou Shipping Pte Ltd (in liquidation) v Liu Cheng Chan and others	High Court	Yes	[2017] SGHC 15	Singapore	Cited for the principle that contingent liabilities should be taken into account when considering the solvency of a company in the context of breach of a director’s duties.
Kon Yin Tong and another v Leow Boon Cher and others	High Court	Yes	[2011] SGHC 228	Singapore	Cited for the principle that the burden of proof is borne by the party making the allegation of insolvency.
Tan & Au LLP v Goh Tee Lee	Court of Appeal	Yes	[2012] 4 SLR 1	Singapore	Cited for the principle that the court does not rely on ex post facto knowledge but instead rely on the circumstances at the material time in assessing the conduct of auditors and solicitors.
PlanAssure PAC (formerly known as Patrick Lee PAC) v Gaelic Inns Pte Ltd	High Court	Yes	[2007] 4 SLR(R) 513	Singapore	Cited for the principle that the auditors should not be assessed with the benefit of hindsight.
Goh Chan Peng and others v Beyonics Technology Ltd and another and another appeal	Court of Appeal	Yes	[2017] 2 SLR 592	Singapore	Cited for the test to assess whether Mr Foo breached his duty to act bona fide in the best interests of OP3.
Turf Club Auto Emporium Pte Ltd and others v Yeo Boong Hua and others and another appeal	Court of Appeal	Yes	[2018] 2 SLR 655	Singapore	Cited for the extent to which a fiduciary may rely on legal advice in the context of deciding whether the director had breached his fiduciary duties to the company.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Insolvency, Restructuring and Dissolution Act	Singapore
Companies Act 1967	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Insolvency
Fiduciary Duty
Contingent Liability
Dividend Payments
Diversion of Business
Creditors' Interests
Financial Reporting Standards
Balance Sheet Test
Cash Flow Test
Going Concern
Letter of Demand
Rectification Works

15.2 Keywords

director duties
fiduciary duty
insolvency
creditors
dividends
liquidation
singapore

17. Areas of Law

Area Name	Relevance Score
Director's Liability	90
Fiduciary Duties	85
Company Law	75
Insolvency Law	70
Winding Up	60
Business Litigation	50
Duty to Account	40

16. Subjects

Corporate Law
Insolvency Law
Directors' Duties