Ex-IPP director Goh Jin Hian wins appeal, court says firm failed to prove his breach caused losses
Ex-IPP director Goh Jin Hian wins appeal, court says firm failed to prove his breach caused losses
Source: Straits Times
Article Date: 06 Jun 2025
Author: Grace Leong
The court concluded that this was a case of 'a deep-seated fraud'.
The Appellate Division of the High Court has found Goh Jin Hian, a former director of insolvent marine fuel supplier Inter-Pacific Petroleum (IPP), is not liable to pay US$146 million (S$187.9 million) plus interest in compensation for losses suffered by the firm.
In overturning a lower court ruling that found Goh was not entitled to relief from liability, the Appellate Division wrote: 'While we agree with the (High Court) judge that Dr Goh had breached the care duty by reason of his ignorance of the cargo trading business, IPP has failed to show... that the breach caused the loss in question.'
Goh, the son of former prime minister Goh Chok Tong, served as a director of IPP from June 28, 2011 to Aug 12, 2019.
The court clarified that 'it cannot be part of a director's duty of supervision and oversight to pick up fraud unless there are telltale warning signs'.
A 63-page ruling delivered on June 5 by Justice Kannan Ramesh, a judge of the Appellate Division, stated: '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.'
The other two judges presiding were justices Tay Yong Kwang and Woo Bih Li.
'It does not follow that where a director has fallen asleep at the wheel, any or all losses occasioned to the company during the slumber should be vested on the director. Where the director has breached the duty of care, skill and diligence, the burden is on the company to prove that the breach has caused the loss suffered by the company,' the court ruled.
Senior Counsel Thio Shen Yi of TSMP Law Corporation, who represented Goh, noted that the latest decision is an important clarification on the law of the duties of directors.
'Dr Goh has always maintained that his conduct caused no avoidable loss to IPP, and we believe he has been vindicated. This is an important decision that has practical implications for all directors,' said Mr Thio, who acted for Goh with Ms Nanthini Vijayakumar, a partner of TSMP Law.
Deloitte & Touche, IPP's judicial managers turned liquidators, had sued Goh to recover US$156 million in losses, accusing him of 'sleepwalking through his time as a director', and failing to discover and stop drawdowns in trade financing between June and July 2019 to fund alleged non-existent or sham transactions.
IPP alleged that Goh failed to act reasonably in the face of three 'red flags' – an audit confirmation request signed by Goh specifying receivables allegedly owed by Mercuria Energy Trading to IPP, the suspension of IPP's bunker craft operator licence, and three confirmations of indebtedness signed by Goh and sent to Maybank.
High Court Justice Aedit Abdullah had found that Goh was not entitled to relief from liability because of 'the egregiousness of his breaches of duty, chief among which was his ignorance as to IPP's cargo trading business' – a 'vehicle of fraud' that had 'disastrous consequences' for the company.
'It was through his combination of misfeasance and nonfeasance, in failing to even be aware of IPP's cargo trading business, that the fraudsters were able to use IPP's cargo trading business as a vehicle of fraud in the first place,' Justice Aedit said in his grounds of decision in July 2024.
Goh had appealed against the ruling in February 2024 that found him liable for breach of director's duties and statutory duties and losses suffered by IPP.
In allowing Goh's appeal, the Appellate Division found that the three purported red flags IPP relied on 'were not in fact red flags that would have put Goh on a train of inquiry leading to the fraud in the cargo trading business being uncovered, and the loss thereby averted'.
The court concluded that this was a case of 'a deep-seated fraud'.
Although Goh was not aware of the cargo trading business, the court ruled that 'it does not follow that if Goh had been aware of the cargo trading business, he would have discovered the fraud and thereby put a stop to it'.
The court ruled: 'There is no suggestion by IPP there were any, apart from the 'red flags', which we have concluded were not in fact red flags. Further, there was no allegation that the auditor and IPP's financial manager alerted Goh of any issues with the accounts, or that the monthly management accounts and financial statements suggested anything untoward.
'Thus, there is nothing to the point that if Goh had been aware of the cargo trading business, he would have exercised oversight in a manner which would have picked up the fraud and averted the loss.'
Mr Thio said: '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.'
Mr Terence Quek, chief executive of the Singapore Institute of Directors, noted that the High Court's decision 'was alarming to the general director community as it suggested that directors of all stripes can be held personally liable for losses caused by fraud committed by other directors'.
'That is likely to have caused concern to many executive and non-executive directors in MNC (multinational corporation) subsidiaries (and) family-owned companies,' he said.
'This decision provides much welcome clarity on the true scope of directors' duties in a private company. The ruling recognises that while directors must exercise care and diligence, they cannot be held personally liable for every act of misconduct – particularly when committed by others under difficult-to-detect circumstances,' he added.
'But the judgment is also sobering, as it recognised that Goh did breach his director duties.'
Source: The Straits Times © SPH Media Limited. Permission required for reproduction.
Goh Jin Hian v Inter-Pacific Petroleum Pte Ltd (in liquidation) [2025] SGHC(A) 7
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