JUDGMENT

Nallini Pathmanathan JCA:

Introduction

[1] This is an appeal by Soh Chee Gee ('the defendant') against the decision of the High Court in allowing the claim against him filed by his former employer, Syn Tai Hung Trading Sdn Bhd ('the plaintiff') premised on the tort of breach of fiduciary duty in the course of the defendant's employment as the plaintiff's Chief Executive Officer ('CEO'). The plaintiff contended that the defendant's failure to adhere to the plaintiff's credit policy had caused loss to the plaintiff company. The High Court agreed with the plaintiff's submissions and awarded damages to the plaintiff.

[2] We dismissed the defendant's appeal and affirmed the finding of the High Court that the defendant had breached the fiduciary duty which he owed to the plaintiff company in his capacity as the CEO. However, we varied the decision of the High Court in that we disallowed the loss claimed in the sum of RM16 million odd because we found that the plaintiff had not succeeded in proving the same. The defendant sought leave to appeal to the Federal Court. We therefore set out the reasons for our decision below.

[3] The salient facts as set out below are largely adopted from the statement of agreed facts and the submissions of both parties.

The Salient Facts

[4] The plaintiff is a company in the business of trading and distributing construction materials.

[5] The plaintiff is a wholly owned subsidiary of Petro-Pipe Industrial Corporation Sdn Bhd (PPIC) which in turn is a subsidiary of Wah Seong Corporation Berhad (WSC).

[6] The defendant was employed by the plaintiff on 16 November 2000. Eight years later, from 1 January 2008, the defendant was appointed an Executive Director in the plaintiff company. The use of the term executive director refers to his position as an employee and not as a member of the Board of Directors. This is evident from the letter entitled "Promotion and Salary Adjustment" dated 15 December 2007.

[7] As of 1 January 2009, he was promoted and appointed to the post of CEO. On 3 March 2010, the defendant's post was rebranded 'Senior Vice President' but for all intents and purposes he functioned as the plaintiff's CEO. In his capacity as the CEO, he occupied a fiduciary position vis-a-vis the plaintiff throughout the course of his employment.

[8] As the CEO, the defendant's main responsibilities were to manage the plaintiff's daily operations and to ensure the continuous development of the plaintiff's business. The defendant also checked, supervised and approved the financial reports which were prepared by the Head of the plaintiff's Finance Department which would monitor, study and make recommendations pertaining to the plaintiff's financial status. In addition, the defendant would conduct a credit evaluation of the plaintiff's customers after the plaintiff's Credit Control Department had checked, studied and commented on customer applications for credit facilities.

[9] In or around April 2013, the plaintiff's internal audit exercise raised several issues including issues relating to transactions with Cosmo Painters Sdn Bhd ('Cosmo'). An independent investigative review was commenced which turned up information which suggested that the defendant may have acted against the plaintiff's interest. As a consequence, the plaintiff commenced disciplinary proceedings against, inter alia, the defendant. After a domestic inquiry into the defendant's alleged wrongdoings, the plaintiff dismissed the defendant from employment on 27 September 2013. (The sequence of events is set out in full in paras 23-28 below.) The plaintiff's case against the defendant is based on transactions with Lotus Paints Sdn Bhd ('Lotus') and Cosmo.

[10] Lotus is a company which supplies a product known as Lota Paints ('the product'). Cosmo is a customer of the plaintiff and it purchases the said product.

[11] Lotus and Cosmo are related entities. Their common shareholders are So Hwee Cheng (Rosalind) and So Chai Chueh. The f