Part 1

[Slide 19] Khoo Chiang Poh v Cosmic Insurance (1974)

Facts
Khoo was appointed as MD for life under a pre-incorporation contract.
The company purported to remove him under S152.
Issue Can Khoo be removed? If so, is he entitled for damages?
Decision Khoo can be removed under S152, but he can`t sue for damages due to unsatisfactory
performance.
Reasoning
Even where there is a contract that a director should hold office for life, it is an implied term
that he shall only continue in office as long as he performs his duties satisfactorily and in the
interest of the company and its members.
The court held that Khoo had been motivated by self-interest in the discharge of his duties and
that he had breached his fiduciary duty to the company. He had not run the company on sound
principles. He did not consult the other directors in running the company and had ignored the
resolutions of BOD.
It was held that his suspension and removal were justified and his action for damages was
dismissed.
Part 2
[Slide 7] Re W & M Roith Ltd (1967)
Facts
Roith (director) had entered into a service contract with his company providing for pension.
The pension is to be given to his wife in the event of his death without taking into consideration
whether the contract was for the benefit of the company.
The liquidator rejected the claim when his executors put in a claim for the widow`s pension after
Roith`s death.
Issue Is the contract valid despite fulfilling all statutory requirements?
Decision No.
Reasoning
Directors must exercise their powers bona fide in what they consider, and not what the court
may consider, is for the benefit of the company and not for their own interests or any collateral
purpose. Any decision made by the directors must not be tainted with self-interest.
The court held that the service contract in question was not reasonably incidental to the business
of the company.
More importantly, Mr Roith did not act for the best interest of the company. In fact, he acted the
best interest for his wife. In other words, Mr Roith breached his fiduciary duty which is the
duty to act in the best interest of the company.
Hence the court held that the contract is not binding to the company.

[Slide 9] Intraco Ltd v Multi-Pak Singapore Pte Ltd (1995)

Facts
City Carton owed a $2.5 million debt to Intraco because it is in financial distres. (Debt that can`t
be fulfilled is worthless.)
Multi-Pak was controlled by the same shareholders and directors as City Carton.
Multi-Pak purchase the debt from Intraco and in return Multi-Pak issued 20% of its shares to
Intraco.
Multi-Pak then went into insolvent liquidation.
Issue Whether the directors of Multi-Pak were in breach of fiduciary duties for approving the debt
buyout of City Carton?
Decision No.
Reasoning
When a board of directors have made an honest business decision, it could not be accused to
have breached its fiduciary duties to the company merely because the decision turned out to be a
bad one on hindsight.
This case highlights the difference between negligence or wilful ignorance, and an honest but
poorly made decision that was acted out in good faith by directors. While directors are liable for
breaches of trust and failure to act honestly and with reasonable diligence, the court recognizes
that circumstantial changes may render a decision made in the best interests of the company may
have the opposite effect.
This case also illustrates that the directors may take the long view in business dealings. A
transaction which seems on the fact of it to be a bad one may be commercially justifiable if it
leads to other long-term intangible benefits for the company.
The court held that the proper test in determining whether the directors have acted bona fide
was whether an honest and intelligent man in the position of a director in the whole of the
existing circumstances, have reasonably believed that the transactions were for the benefit of the
company.
The court recognized that the transactions were not entered into solely or mainly for the purpose
of enabling Intraco to acquire the shares in Multi-Pak at no costs to themselves, but there was
actually a benefit to Multi-Pak in forming a strategic business alliance with Intraco even though
the City Carton`s debt was near-worthless.
Therefore the court held that there was no breach of directors` duties involved.
The court held that the word honestly does not mean that a director would only be in
breach of duty if he had acted fraudulently. It means to act bona fide in the interests of the
company. In exercising their discretion, the directors should only act to promote or
advance the interests of the company.

[Slide 10] Ho Kang Peng v Scintronix Corp Ltd (2014)

Facts
Ho Kang Peng was a former director and CEO of the company.
He signed an agreement on behalf of the company to pay Bontech Enterprise Co Ltd for
consultation services.
However, this was a scam agreement as no such services were rendered.
The court found that the agreement was used to channel money to a Chinese man as bribes to
procure business for the company.
The court also found that only Ho and two other directors had knowledge of the unauthorized
payments.
Issue Do such payments made in the interests of profit maximization constitute a breach of
director`s duties?
Decision Yes.
Reasoning
Attribution:
In cases where the company brings a claim against its directors for improper acts in which the
company has no knowledge of, the court states that it would not generally be sensible or realistic
to attribute knowledge to the company whom itself was the victim of the agent`s or employee`s
dishonesty, and if the attribution would have the effect of defeating the right of the company to
recover from a dishonest agent or employee.
- To prove that company has no knowledge of the decision: Both a decision of a majority of
directors at a board meeting and an informal decision taken by all of the directors of a
company were attributable to the company and would be binding on the company. It was not
disputed that there was never any formal board approval of the agreement and the payments,
and on the evidence, only three directors knew about the agreement.
In cases where an innocent third party brings an action against the company for the improper
acts of the directors, the company should be bound by the improper acts as the acts of the
wrongdoer director(s) would be attributed to that of the company.
Director`s Duties:
- The court acknowledged that while the bribes that were paid to a third party were intended to
benefit the company financially (at least in the short term), and a court would generally be
slow to interfere with commercial decisions made by directors, a director would not be
regarded as having acted bona fide in the company`s best interests where such director had
engaged in dishonest activity.
- The best interests of a company do not involve only profit maximization, and certainly is not
profit maximization by all means.
- It was as much in the interests of the company to have its directors act within their powers
and for proper purposes, to obtain full disclosure from its directors, and not to be deceived by
its directors.
- There could be no doubt that a director who caused a company to pay bribes and, therefore,
ran the risk of the company being subjected to criminal liability was not acting in the
company`s best interests.

- As this was a risk which no director could honestly believe to be taken in the interests of the
company, the making of such payments constituted a breach of director`s duties to act in
good faith in the interests of the company.
[Slide 10] Dynasty Line Limited (In Liquidation) v Sukamto Sia (2014)
Reasoning
When a company is in robust financial health, its directors are entitled to pay greater heed to
what is best for the shareholders. However, where there are mounting concerns over the
company`s financial health, then the directors will need to pay more heed to the creditors`
interests.
The court ruled that the directors must consider the interests of the company`s creditors as soon
as they have reasons to doubt their company`s continued solvency, and not just when the
company is technically insolvent or close to it.
The court held that the two directors breached their fiduciary duties as directors when they
pledged away their company`s only asset at a time when its solvency was in question.
The court found that the security transactions imperiled Dynasty`s ability to satisfy its liabilities,
and severely compromised its ability to meet its obligations under the various sales and purchase
agreements. The court further found that Sia knew that by pledging the shares as collateral for
loans to himself and third parties, he had directly jeopardised or prejudiced Dynasty`s ability to
repay the liabilities that it owed to its creditors.
The court therefore held that Sia breached his fiduciary duty by wholly disregarding the interests
of Dynasty`s creditors.

1. Cite S157 CA a director is required at all times to act honestly, which means to act
bona fide to promote or advance the interests of the company
2. The court has to decide whether or not the act is in interests of company Subjective or
objective?
- Clear evidence of belief that a decision is in the company`s best interests will be sufficient to
demonstrate compliance with the duty and to overcome the fact that the decision was viewed
by the court as patently unreasonable. However, in the absence of such conclusive evidence
of belief that subjective duty to act in the best interests of the company contains an element
of objectivity based on the strength of the reasons given by the director for believing that the
decision was one that benefited the company. This is to say, that the court will not substitute
its own view of what a director should have done for the directors` own decision. Instead the
court is concerned to identify whether or not the director acted honestly in the exercise of his
power.
a) Self interest vs Company`s interest cite Roith case don`t cite above stt
b) Honest but poorly made decision that cause the company lost money cite Multi-Pak
case
c) Scam agreement cite Ho Kang Peng case
d) Interest of the company vs interest of the creditors when business is down cite Dynasty
case

[Slide 13] Howard Smith v Ampol Petroleum (1974)

Facts
Howard Ltd and Ampol Ltd were both trying to take control of Millers.
Directors of Millers considered that it would be in the best interests of company to be taken over by
Howard.
However, Howards takeover bid could not succeed as Ampol controlled sufficient shares in Millers to
block the bid.
Directors of Millers issued new shares to Howard, which diluted Ampol`s holdings to the point where it
could no longer block the takeover.
Issue Is the directors exercising their power for proper purpose?
Decision No.
Reasoning
The court stated that it was necessary to determine the substantial purpose for which a power was
exercised.
A director will be in breach of his duties if the substantive purpose is outside the nature and limits of the
power to which he is accorded under the company`s constitution, even if such improper purpose is in
the best interests of the company.
Shares were issued to strategic shareholders for the purposes of defending a takeover bid, rather than to
raise capital for the company, which was an improper use of the power to issue shares.
[Slide 18] Regal (Hasting) v Gulliver (1942)
Facts
Several directors and the company (Regal) each invested their own money into a cinema.
Following the takeover, the directors and the company made significant profit.
Issue Was there a breach in the directors` fiduciary duty because they acquired personal profits even
when the company also acquired gain?
Decision Yes.
Reasoning
A director may not retain a profit made by reason and in the course of his fiduciary relationship with the
company.
If an opportunity to make a profit or obtain a benefit comes to the director because he is a director, that
profit or benefit must be disclosed to the company and approved.
In the absence of such disclosure and approval, the director is liable to account for that profit.
The court held that the directors had not disclosed their intention to acquire the shares to the
shareholders and obtained the approval of the shareholders to their action. Accordingly, the directors
were in breach of the duty not to make a secret profit.
Although there was no dispute that the directors were honest and well-intentioned, and there were no
bad faith, the rule of no secret profit is still applied because even if there is no realistic possibility of
conflict between the interest of company and the duty of the director, so long as a director has made a
profit in the course of his fiduciary relationship with the company, the directors still have to account for
the profits, and thus they had to hand back their gains to the company.
Lord McMillan set out a two-fold test pertaining to the duty of directors to avoid a conflict of
interest in which in order to establish a liability it was necessary:

(i)
(ii)

That what the directors did was so related to the affairs of the company that it can
properly be said to have been done in the course of their management and in utilisation of
their opportunities and special knowledge as directors; and
That what they did resulted in a profit to themselves.

[Slide 21] Personal Automation Mart Pte Ltd v Tan Swe Sang (2000)
Reasoning
It is established law that a director may not obtain for himself any property or business
advantage that properly belongs to his company or for which it has been negotiating.
It is a clear breach of duty for a person to set up a competing firm to take advantage of contracts
that should have gone to the company of which he is a director.
This obligation persists even after the director concerned has resigned, at least where the
resignation can be said to have been prompted by the wish to obtain the property or business
advantage for himself.
The fact that the company could not itself have succeeded in getting the property or business
opportunity is irrelevant.
[Slide 22] IDC v Cooley (1972)
Facts
Mr Cooley had been employed by IDC as a MD to develop contacts and businesses.
He was approached by a third party who did not wish to deal with his employer, but wish to
employ him personally.
Mr Cooley then resigned his post due to ill health and began working for the third party.
Issue Was Mr Cooley in breach of his fiduciary duty as director?
Decision Yes.
Reasoning
It was held that Cooley had allowed his own interest to conflict with IDC by faking illness so
that he could leave IDC`s employ and take the benefit of a contract for himself in which he was
offered in his private capacity while negotiating with the third party. He was ordered to account
for the benefit he had received under the contract for breach of director`s duty.
It may be argued that Cooley was approached in his private capacity, did not utilize any
corporate facilities in obtaining the contract for himself, and that IDC had virtually no chance of
landing the contract, and hence it is unlikely that he had here taken a corporate opportunity over
IDC.
But the court held that the reasoning are irrelevant, because Cooley had one capacity and one
capacity only in which he was carrying on business at that time. Information which came to
Cooley while he was MD and which was of concern to the plaintiffs (IDC) and relevant for them
to know, was information which it was his duty to pass on to the plaintiffs.
The court also held that if Cooley is not required to account, he will have made a large profit as
a result of having deliberately put himself into a position in which his duty to IDR who were
employing him and his personal interests conflicted.
The court also held that Cooley should have stayed with IDC and sought to convince the third
party to change its mind. Cooley should have disclosed to IDC that he had been approached if he
wants to take up that offer.

[Slide 24] Peso Silver Mines Ltd v Cropper (1966)

Facts
Peso is a mining company and Cropper is the MD of Peso.
Peso was offered certain mining claims but turned it down in the interest of Peso after careful
consideration.
Cropper was then approached by a geologist to form a new company to purchase the claims,
which they did.
After control of Peso changed, the new board sued former director Cropper for breach of its
fiduciary duty and an accounting of his profits from the purchase.
Issue Was Cropper in breach of his fiduciary duty as director?
Decision No.
Reasoning
The case suggests that a director may usurp a corporate opportunity where the company has
bona fide rejected the proposal and the director is approached in a private capacity, without the
necessity of disclosure to the company, and hence this will not amount to a breach of the
directors` duties.
It was held that the decision of the Peso directors to reject the opportunity had been made in
good faith and for sound commercial reasons in the interests of the company. They could
therefore exploit the opportunity themselves.
The court found that there was no duty to account as Cropper had not acquired any confidential
information about the mining claim from his position on the board and that he had been
approached not in his position as a director but as a member of the public. In addition, Cropper
used his own resources, not Peso`s, to invest in the group that purchased the prospector`s offer.
The court held that there had been no breach of Cropper`s fiduciary duties as director and thus
no liability to account for the shares/profits.
Corporate management who take advantage by using their positions as directors or
officers to appropriate a business opportunity, even in situations where the company is
unable to accept the opportunity, have a conflict of interest. If they divert the opportunity
to themselves, they will breach their fiduciary duty to the company and be liable to
account for any profits or other gain that they make as a result. IDC Case
On the other hand, if the board of directors, acting in good faith and in the companys best
interests, rejects the opportunity, it may be available to directors or officer in their private
capacities. In such circumstances, directors and officers who privately pursue such
opportunities must scrupulously avoid using any confidential information or other
corporate resources available to them in their capacities as members of management.
Peso case

[Slide 34] Daniels v Anderson (1995)

Facts
AWA Ltd set up a foreign exchange operation, and Koval was hired to run the operation.
Koval was effectively unsupervised and ran up massive liabilities.
The board were assured by the management and the auditor about the losses in the operations.
It turned out that Koval was in fact losing money and concealing this fact from his superiors,
and his activities caused substantial losses to AWA.
The company sued its auditor for negligence.
The auditor pleaded that the company had been contributorily negligent too.
Issue Were all directors liable?
Decision No, only chief executive director was liable. Non-executive directors are held not liable.
Reasoning
The court recognized that executive directors had more powers than non-executive directors, and
non-executive directors were not expected to discharge directorial duties in a detailed and
knowledgeable manner. Hence, the non-executive director in the case was not found negligent.
Furthermore, it was recognized that an executive owed a higher standard of care than a nonexecutive director. Consequently, an executive director had a more onerous task to show that his
or her reliance on management was reasonable.
Rogers CJ suggested that non-executive directors may only be expected to pronounce on matters
of policy and may rely on management to inform of anything important, and hence they could
not be as well-informed about a company`s affairs as an executive director who was involved
with them on a daily basis. Thus, non-executive directors should be judged by a lower standard
of care.

[Slide 36] Ong Chow Hong v PP (2011)

Facts
Ong Chow Hong was the non-executive chairman of Airocean Group Limited.
Thomas Tay, the CEO and executive director of Airocean, was brought to the Corrupt Practices
Investigation Bureau for investigations on allegations of corruption against Airocean.
The company secretary contacted all the directors of Airocean and informed them of SGX`s
request for a clarificatory statement on Thomas being the subject of CPIB investigations.
Ong informed her that he was playing golf, and that he would agree to any announcement issued
by Airocean if Peter Madhavan (another independent director of Airocean and a lawyer by
profession) approved it.
Airocean sent out an allegedly misleading public statement later that night, which led to three
directors including Ong being charged.
Issue Was Ong in breach of his fiduciary duty as director?
Decision Yes.
Reasoning
The charge was in relation to Mr Ong having approved the release of an announcement by
Airocean Group to Singapore Exchange without first having sight or knowledge of the
statement.
Whilst there are provisions in the companies act that provide for allowances to allow directors to
get external advice and information, they are still expected to supervise and determine for
themselves if the advice and information is reliable, thus the duties that they owe to the company
are non-delegable and the ultimate responsibility for these duties lie solely with the directors.
The court held that although "there are limits to the extent of knowledge and expertise a director
may be expected to have, and that some reliance may be placed on the advice given by
professionals, each director of a listed company has a solemn and non-delegable duty of due
diligence to ensure compliance with market rules and practices".
The court noted that Ong had consciously abdicated from his responsibilities when he delegated
his responsibilities to Peter Madhavan, and was either indifferent to his wider responsibilities or
failed to appreciate them, which amount to a criminal offence under the Act or a violation to a
director`s solemn and non-delegable duty of due diligence to ensure compliance with market
rules and practices.
Ong was charged with, pleaded guilty to and was convicted of, failing to use reasonable
diligence in the discharge of his official duties as a director of Airocean under S157(1).
Madhavan won an appeal against his conviction for his role in filing misleading
regulatory statements from Airocean. He was acquitted on of all charges relating to nondisclosure and misleading disclosure. The court held that the evidence did not show that
the information omitted or undisclosed was materially price-sensitive.
Judge of Appeal Chao Hick Tin allowed a criminal revision petition by Mr Ong and set
aside his conviction, ordering that the dine, which Mr Ong had already paid, be refunded

to him. He said that it would constitute a serious injustice if the conviction were
allowed to remain, considering that other directors involved in the case have since been
acquitted of their charges.