Lloyd's Maritime and Commercial Law Quarterly
CORPORATE CLAIMS AGAINST DIRECTOR FOR PAYING BRIBES ON COMPANY’S BEHALF
Wai Yee Wan*
Ho v Scintronix
Introduction
Can a company recover the value of the bribe from a director who has paid the bribe, on behalf of the company, to a third party to secure certain benefits for the company, and where it is not alleged that the director had personally benefited from the bribe? This question raises several complex issues relating to directors’ standard of care, corporate authorisation and corporate illegality, which were considered by the recent decision of the Singapore Court of Appeal in Ho Kang Peng v Scintronix Corp (formerly known as TTL Holdings).1
Ho was the chief executive officer and executive director of TTL, a Singapore company listed on Singapore Exchange. After he stepped down as chief executive officer and ceased to be a director, TTL brought an action against Ho for causing TTL to enter into a sham consultancy agreement (which was effectively an agreement to pay bribes) with, and to pay the bribes to, a third party in respect of securing certain businesses for TTL in its operations in China. It was not alleged that Ho received any of the bribes. Ho’s defence was that the payments were merely a continuation of payments that were previously authorised by the board of TTL prior to his joining TTL or, alternatively, the claim was barred by ex turpi causa. The Court of Appeal upheld the High Court’s finding that Ho was acting in breach of director’s duties and that the defences did not apply to protect Ho in respect of such breach.
Standard of care
The court found that the consultancy agreement and payments pursuant thereto were bribes paid by TTL to a third party in order for TTL to obtain business from an entity called Pioneer. Ho was found to be in breach of s.157 of the Singapore’s Companies Act,2 which sets out the duty of care of a director to act honestly and use reasonable diligence in the discharge of his duties.3 Ho failed to act honestly or bona fide in the interests of TTL, as the bribes would expose TTL to criminal liability, even if the purported aim of such payments was to maximise profits for TTL. Ho also failed to use reasonable diligence in discharging his duties as chief executive officer, because, as he admitted, he relied on his subordinates and continued the practice of making such payments, without making inquiries as to the real purpose of such payments, which were prima facie irregular and suspicious.
* Associate Professor of Law, Singapore Management University.
1. [2014] SGCA 22; 3 SLR 329.
2. Companies Act (Cap 50, 2006 rev. edn).
3. This provision sets out, non-exhaustively, the statutory duty of care of a director. See also Lim Weng Kee v PP [2002] SLR(R) 848 (holding that the provision is to be interpreted in light of the common law standard for duty of care for directors).
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