COMMERCIAL LITIGATION

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The counterclaim that was brought by Oxel against Sandipala’s directors on the ground of unlawful means conspiracy made the Court of Appeal consider when a director should be held personally liable for the consequences arising from his company’s breach of a contract, to which he himself, is not a party. Generally, directors act to represent their company, and so may decide that it is sometimes within the company’s scope of interest to breach its contract and compensate the other contracting party as opposed to continuing to perform.

In this second articles, we look at the director’s appeal to the High Court in Abdul Ghani bin Tahir v Public Prosecutor [2017] SGHC. On appeal, the High Court reduced the sentence imposed on the Defendant to 12 months’ imprisonment and a S$500,000 fine. The High Court also overturned the costs order.

Abdul Ghani bin Tahir v Public Prosecutor [2017] SGHC is a landmark case is based on the issue of money laundering offences committed through bank accounts belonging to a company. This is the first prosecution of its kind under the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (“CSDA”), which subsequently led to the conviction and imprisonment of the director of a company due to neglect that contributed to the company’s bank accounts being used for the purposes of money laundering. It is also the first reported case of a director who was sentenced to imprisonment for failing to exercise reasonable diligence under section 157(1) of the (“Companies Act”).

This appeal to the High Court led to the imprisonment term for the Defendant director to be reduced by more than half. In doing so, the Court established sentencing guidelines for the relevant offences regarding situations which warrant custodial sentences, relevant aggravating factors, and the corresponding starting points for sentencing.

The High Court also overturned a cost order issued against the Defendant for the conduct of his defence at the trial court.

Directors of an insolvent company owe a fiduciary duty to the general body of creditors of company. Directors may be found in breach of such duties if they continue the business of their company without due regard for the collective interest of the creditors.