SINGAPORE: Former Inter-Pacific Petroleum (IPP) director Goh Jin Hian won an appeal to the Appellate Division of the High Court, which on Thursday (Jun 5) set aside US$146 million (S$187 million) in damages previously awarded to IPP.
Goh Jin Hian, who is the son of former Prime Minister Goh Chok Tong, was previously found liable for the losses of the now-insolvent IPP, a marine fuel supplier.
On appeal, the Appellate Division of the High Court, comprising Justice of the Court of Appeal Tay Yong Kwang and Judges of the Appellate Division Woo Bih Li and Kannan Ramesh, found that even though Goh had breached his duty of care as a director, his breach did not cause loss to IPP.
IPP had sued Goh for breaching his director's duty and in February last year won the case, which was presided over by Justice Aidan Xu @ Aedit Abdullah at trial.
The company said that Dr Goh had failed to look into certain issues which would have led him to realise that the company was being defrauded.
The fraud relates to drawdowns of US$146,047,099.60 for cargo trades and US$10,508,238.71 for bunker trades between Jun 21, 2019 and Aug 2, 2029.
IPP asserted that Goh had failed to act with reasonable skill and care in the face of three "red flags" - an audit confirmation request signed by Goh, the Maritime and Port Authority of temporary suspension of IPP’s bunker craft operator licence, and three confirmations of indebtedness signed by Goh and sent to Maybank.
Goh's inquiry into IPP’s financial position over these red flags would have resulted in the sham cargo trades being uncovered, the company said.
In his defence, Goh claimed that there was no breach, no loss caused and disagreed that the three red flags were sufficient to put him on a train of inquiry.
Ruling in favour of IPP, Justice Xu then said Goh had an obligation to oversee the affairs of the company as a director.
The judge said the evidence showed that Goh played an active role in the management of the company and had assumed responsibilities, and obtained knowledge and information.
While Justice Xu said a director need not know all details, the evidence showed a lack of knowledge by Goh about IPP's cargo trading business, which was a significant portion of the company's activity.
He found that Goh failed to act reasonably in the face of the three red flags, which should have raised alarm bells. Finding that IPP had proven loss in relation to the cargo drawdowns, Justice Xu awarded the company damages of US$146,047,099.60.
Goh appealed the decision.
In a judgment issued by the Appellate Division of the High Court on Thursday, Justice Ramesh said the court agreed with Justice Xu that Goh breached his duty of care by failing to realise IPP was running a cargo-trading arm, but ruled that the company failed to prove that the lapses caused the loss.
“In our view, IPP has failed to discharge its burden of proving that Dr Goh’s ignorance of the cargo trading business was the proximate cause of the loss in question, namely the cargo drawdowns,” Justice Ramesh said.
The company failed to prove that the fraud would have been detected and the loss averted if Dr Goh had known that IPP was undertaking the cargo trading business, he said.
To prove its case, IPP had to specify the steps that Goh would have taken that would have prevented fraud.
However IPP did not state these steps or adduce any evidence. Instead it relied on "bare assertions" to suggest that Goh would have found out about the fraud and prevented the cargo drawdowns if he was aware of the cargo trading business, or acted reasonably in respect of the three red flags, Justice Ramesh said.
The Appellate Division of the High Court also disagreed with Justice Xu on the issue of the three red flags, finding that they were in fact not red flags that would have put Dr Goh on a train of inquiry.
"It cannot be part of a director’s duty of supervision and oversight to pick up fraud unless there are tell-tale or warning signs.
"A director may be a sentinel, but he is not a forensics investigator or a sleuth, unless there are signs that would put him on inquiry. There is no suggestion by IPP there were any, apart from the 'red flags', which we have concluded were not in fact red flags," Justice Ramesh said.
He found that Goh did not breach creditor duty, as he had not authorised the cargo drawdowns which IPP made between Jun 21, 2019 and Aug 2, 2019.
Consequently, the Appellate Division of the High Court allowed the appeal in part and set aside the judgment.
Goh was represented by TSMP Law Corporation's senior counsel Thio Shen Yi and Mr Nanthini Vijayakumar.
On the case, Mr Thio said: "Dr Goh has always maintained that his conduct caused no avoidable loss to IPP, and we believe he has been vindicated."
Mr Thio noted that the court had clarified the law of duties for directors, which was an "important decision with practical implications for all directors".
"Directors owe fiduciary obligations and duties of care to a company but the Appeals Court has crucially recognised the practical and commercial limits to their ability to scrutinise for and detect fraud, especially deep-seated fraud. This acknowledges the complex commercial realities that directors often operate in," he said.
Goh still faces criminal charges that are pending before the court.
He was charged with false trading in his role as former CEO of New Silkroutes Group in September 2023 and has 39 charges under the Securities and Futures Act.
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Goh Jin Hian, who is the son of former Prime Minister Goh Chok Tong, was previously found liable for the losses of the now-insolvent IPP, a marine fuel supplier.
On appeal, the Appellate Division of the High Court, comprising Justice of the Court of Appeal Tay Yong Kwang and Judges of the Appellate Division Woo Bih Li and Kannan Ramesh, found that even though Goh had breached his duty of care as a director, his breach did not cause loss to IPP.
BACKGROUND
IPP had sued Goh for breaching his director's duty and in February last year won the case, which was presided over by Justice Aidan Xu @ Aedit Abdullah at trial.
The company said that Dr Goh had failed to look into certain issues which would have led him to realise that the company was being defrauded.
The fraud relates to drawdowns of US$146,047,099.60 for cargo trades and US$10,508,238.71 for bunker trades between Jun 21, 2019 and Aug 2, 2029.
IPP asserted that Goh had failed to act with reasonable skill and care in the face of three "red flags" - an audit confirmation request signed by Goh, the Maritime and Port Authority of temporary suspension of IPP’s bunker craft operator licence, and three confirmations of indebtedness signed by Goh and sent to Maybank.
Goh's inquiry into IPP’s financial position over these red flags would have resulted in the sham cargo trades being uncovered, the company said.
In his defence, Goh claimed that there was no breach, no loss caused and disagreed that the three red flags were sufficient to put him on a train of inquiry.
Ruling in favour of IPP, Justice Xu then said Goh had an obligation to oversee the affairs of the company as a director.
The judge said the evidence showed that Goh played an active role in the management of the company and had assumed responsibilities, and obtained knowledge and information.
While Justice Xu said a director need not know all details, the evidence showed a lack of knowledge by Goh about IPP's cargo trading business, which was a significant portion of the company's activity.
He found that Goh failed to act reasonably in the face of the three red flags, which should have raised alarm bells. Finding that IPP had proven loss in relation to the cargo drawdowns, Justice Xu awarded the company damages of US$146,047,099.60.
Goh appealed the decision.
APPEAL ALLOWED IN PART
In a judgment issued by the Appellate Division of the High Court on Thursday, Justice Ramesh said the court agreed with Justice Xu that Goh breached his duty of care by failing to realise IPP was running a cargo-trading arm, but ruled that the company failed to prove that the lapses caused the loss.
“In our view, IPP has failed to discharge its burden of proving that Dr Goh’s ignorance of the cargo trading business was the proximate cause of the loss in question, namely the cargo drawdowns,” Justice Ramesh said.
The company failed to prove that the fraud would have been detected and the loss averted if Dr Goh had known that IPP was undertaking the cargo trading business, he said.
To prove its case, IPP had to specify the steps that Goh would have taken that would have prevented fraud.
However IPP did not state these steps or adduce any evidence. Instead it relied on "bare assertions" to suggest that Goh would have found out about the fraud and prevented the cargo drawdowns if he was aware of the cargo trading business, or acted reasonably in respect of the three red flags, Justice Ramesh said.
The Appellate Division of the High Court also disagreed with Justice Xu on the issue of the three red flags, finding that they were in fact not red flags that would have put Dr Goh on a train of inquiry.
"It cannot be part of a director’s duty of supervision and oversight to pick up fraud unless there are tell-tale or warning signs.
"A director may be a sentinel, but he is not a forensics investigator or a sleuth, unless there are signs that would put him on inquiry. There is no suggestion by IPP there were any, apart from the 'red flags', which we have concluded were not in fact red flags," Justice Ramesh said.
He found that Goh did not breach creditor duty, as he had not authorised the cargo drawdowns which IPP made between Jun 21, 2019 and Aug 2, 2019.
Consequently, the Appellate Division of the High Court allowed the appeal in part and set aside the judgment.
Goh was represented by TSMP Law Corporation's senior counsel Thio Shen Yi and Mr Nanthini Vijayakumar.
On the case, Mr Thio said: "Dr Goh has always maintained that his conduct caused no avoidable loss to IPP, and we believe he has been vindicated."
Mr Thio noted that the court had clarified the law of duties for directors, which was an "important decision with practical implications for all directors".
"Directors owe fiduciary obligations and duties of care to a company but the Appeals Court has crucially recognised the practical and commercial limits to their ability to scrutinise for and detect fraud, especially deep-seated fraud. This acknowledges the complex commercial realities that directors often operate in," he said.
Goh still faces criminal charges that are pending before the court.
He was charged with false trading in his role as former CEO of New Silkroutes Group in September 2023 and has 39 charges under the Securities and Futures Act.
Continue reading...