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Case Update: CEO of Company breached his fiduciary duties but not liable for MYR16 million loss

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DAMAGES
Quantum — Whether sum claimed for as loss not proven — Whether loss unproven as trial court disallowed documentary evidence which could have proven amount of loss — Whether evidence showed that benefits derived by third parties dealing with the company caused loss amount and that the defendant himself had not personally gained from his actions or misappropriated company’s funds

Soh Chee Gee v Syn Tai Hung Trading Sdn Bhd
[2019] 2 MLJ 379, Court of Appeal
- see the grounds of judgment here

Facts The appellant, Soh Chee Gee, a chartered accountant, was employed by the respondent, Syn Tai Hung Trading Sdn Bhd as its chief executive officer (CEO). An internal audit carried out by the respondent showed that the appellant had been responsible for several irregularities in the respondent’s business dealings with two other companies (Cosmo and Lotus) which had caused the respondent to suffer significant losses. The investigation resulted in a domestic inquiry which found the appellant guilty of various wrongdoings. The appellant was dismissed from employment. At the domestic inquiry, the respondent found that the appellant had:
 
a. unilaterally allowed Cosmo to raise its credit limit and extend its credit term twice in its trading transactions with the respondent which resulted in the respondent suffering serious cash-flow problems;
b. permitted Lotus to by-pass the respondent in delivering goods to Cosmo; and
c. become a cheque signatory for both Cosmo and Lotus.

Both Cosmo and Lotus were eventually wound up on the ground of insolvency and their guarantors were declared bankrupts. The respondent sued the appellant for breach of his fiduciary duties as CEO which caused it to suffer a loss of more than MYR16 million which was the amount allegedly owed to it by Cosmo. The High Court allowed the claim and gave judgment for the said sum. The instant appeal was against that decision.

Issue The main issue was whether the appellant had breached his express and/or implied duties and/or fiduciary duties to the respondent.

Held The Court of Appeal affirmed the High Court’s finding that the appellant had breached his express and/or implied duties and/or fiduciary duties to the respondent but set aside the award of MYR16 million to the respondent. It was held that there was no legal basis to hold him liable for the totality of the losses suffered by the respondent as the claim for the damages was not established.