Wee Chong Jin CJ

In this appeal the respondent is the Official Receiver and Liquidator of Kie Hock Shipping (1971) Pte. Ltd. ("the Company") a private exempt company which was compulsorily wound up on May 27, 1978. The appellant, Tay Beng Chuan, was one of five directors and held 2% of the issued shares of the company. Another director was Tay Hock Gwan who was the Permanent Managing Director and the other directors were a wife, a son, and a daughter of Tay Hock Gwan. The appellant is a nephew of Tay Hock Gwan who together with members of his family owned the other 98% of the issued shares of the company which carried on a shipping business.

After the winding up order the Minister of Finance in exercise of his powers under sections 195 and 196 of the Companies Act ("the Act") appointed two Inspectors to investigate the affairs of the Company. Their terms of reference, inter alia , were:

"(B)2) To inquire specifically into the following matters:——

(i) Losses suffered through negligence or fraud on the part of the officers;

(v) Any dealings which may be in breach of fiduciary duty required of the officers;

(vii) Any failure on the part of the officers to act honestly and diligently;

(ix) Any inappropriate applications of the company's funds.

The Inspectors conducted a lengthy investigation during which they examined many witnesses including Tay Hock Gwan, the appellant and the other directors of the Company and on September 30, 1980 they submitted their Report ("The Inspectors' Report"). It would appear that, based on the Inspectors' Report, criminal proceedings were instituted in early 1981 by the Public Prosecutor against Tay Hock Gwan and the appellant. Five charges for offences under the Act were preferred against the appellant, one of them being for "failing to cause action to be taken by the (Company) to recover debts owed to (the Company) by twelve companies incorporated in the Republic of Panama ... which on December 30, 1977, amounted to $10,291,000.00 and which were allowed to accumulate to $11,551,000.00 by May 26, 1978, and thereby commit a breach of duty under section 132(1) of the Act to at all times use reasonable diligence in the discharge of the appellant's duty as a director of the Company." The appellant was fined $1,500 when on September 29, 1981, he pleaded guilty to that charge.

On October 15, 1981, the respondent as liquidator of the Company took out an application by way of a Summons-in-Chambers in the Winding-Up proceedings against Tay Hock Gwan and the appellant pursuant to section 305 of the Act seeking from the High Court the following orders:

"(1) A declaration that one Tay Hock Gwan and the Appellant had been guilty of misfeasance or breach of duty in-relation to Kie Hock Shipping (1971) Pte. Ltd. ("the Company"):

(a) in failing between December 30, 1977 and May 26, 1978, to cause action to be taken by the Company to recover debts owed to it by twelve companies incorporated in the Republic of Panama, namely:

Compania Naviera Thompson SA

Africa Shipping Co. Ltd. Inc.

Gammewah Enterprises Ltd. SA

Tali Shipping Co. Ltd. SA

Compania De Navegacia Laiton SA

Holley Shipping Co. Ltd. SA

Keringo Shipping Co. Ltd. SA

Kadima Shipping Co. Ltd. SA

Benteng Enterprises Co. Ltd. SA

Sahaka Enterprises

Salama Shipping Ltd. SA

Gambella Enterprises Ltd. SA

(collectively "the Panamanian Companies") which on December 30, 1977 amounted to $10,291,000.00 and

(b) in allowing the said debts to accumulate such that by May 26, 1978 they totalled $11,551,000.00;

(2) An order that Tay Hock Gwan and the Appellant do jointly and severally pay to the respondent herein the sum of $11,551,000.00 being the total amount of the said unrecovered debts and interest thereon at 8% per annum from May 26, 1978 until payment or such sum by way of compensation in respect of the misfeasance or breach of duty as this Honourable Court thought just;"

The twelve Panamanian companies named in the application are the twelve Panamanian companies named in the criminal ch