(Non‐)Enforcement of Directors’ Duties in Corporate Groups: Goh Chan Peng v Beyonics Technology Ltd

Published date01 July 2018
AuthorAlan K. Koh
Date01 July 2018
(Non-)Enforcement of Directors’ Duties in Corporate
Groups: Goh Chan Peng vBeyonics Technology Ltd
Alan K. Koh
Corporate groups, a ubiquitous feature of modern business, pose formidable challenges for
common law courts relying on traditional corporate law doctrine. Arising out of a corporate
group’s recent bid to recover millions of dollars in lost profits from a former director and CEO
who had diverted a core business, Goh Chan Peng vBeyonics Technology Ltd raised thorny issues
of separate legal entity doctrine, single economic unit theory, and reflective loss shared by
common law legal systems. Despite finding that the defendant had breached his duties to the
ultimate holding company, the Singapore Court of Appeal absolved the faithless director from
most of his liabilities, relying on limited domestic precedent to the exclusion of a rich body of
Commonwealth jurisprudence – including the House of Lords’ landmark Johnson vGore Wood
decision. This note explores the paths not taken by the court, and highlights the pitfalls of a
narrow, autochthonous approach to problems of common law doctrine.
Corporate groups come in all shapes and sizes. From multinationals rivalling
national economies in scale to small and medium enterprises controlled by
individuals or families, corporate groups are a nightmare for any traditional
corporate law doctrinalist. To paraphrase a noted scholar of corporate groups,
notions of the corporate entity developed to serve the needs of 19th century
England that focus on each component company rather than the group as the
legal actor may be outmoded in light of the emergence of corporate groups
Anyone who needs a reminder of the tension between classical corporate law
dogma and the messy realities of modern day business practice would do well
to acquaint themselves with the facts of Goh Chan Peng vBeyonics Technology
Ltd2(Beyonics). The defendant, Chief Executive Officer (CEO) of a corporate
group and director of the group’s ultimate holding company, received bribes
Research Associate, Centre for Asian Legal Studies, Faculty of Law, National University of Sin-
gapore; Advocate and Solicitor, Singapore. I am grateful to the anonymous reviewer for their
detailed and exceptionally incisive feedback, my colleagues Samantha S.Tang, TanZhong Xing, and
Christian Hofmann for their helpful comments. The usual caveats apply.
1 P. Blumberg, The Multinational Challenge to Corporation Law: The Search for a New Corporate
Personality (Oxford: OUP, 1993) 205; M. Gillooly, ‘Introduction’ in M. Gillooly (ed), The Law
Relating to Corporate Groups (Annandale, NSW: Federation Press,1993) xix. For the UK context,
see D. D. Prentice, ‘Some Aspects of the Law Relating to Corporate Groups in the United
Kingdom’ (1999) 13 Connecticut J Int’l L 305.
2 [2017] SGCA 40; [2017] 2 SLR 592 (Beyonics (CA)).
C2018The Author. The Modern Law Review C2018The Moder n Law ReviewLimited. (2018)81(4) MLR 673–700
Published by John Wiley& Sons Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA
(Non-)Enforcement of Directors’ Duties in Corporate Groups
and diverted valuable business contracts, costing the corporate group millions
of dollars in lost profits. There is one catch: the corporate group’s profits were
channelled via an offshore subsidiary of which the unfaithful group ‘CEO’ was
apparently not a director. The seven million (Amer ican) dollar question: should
the ‘CEO’ be spared from compensating the group’s lost profits?
Allowing the defendant’s appeal in par t, the Singapore Court of Appeal
(SGCA) upheld the trial court’s3finding that the defendant director/CEO had
breached his director’s duties to the holding company, but rever sed the order
that the defendant make equitable compensation to the tune of over US$7m.
A veritable Matryoshka doll of legal quandaries, the SGCA’s brave judgment
exposes the challenges of doing substantive justice with inflexible doctrinal
rules in disputes involving corporate groups.
This note analyses three problems flowing from the SGCA’s judgment. The
first is the SGCA’s attempt at engaging with the hallowed separate legal entity
doctrine and the controversial ‘single economic unit’ theory in the context
of modern corporate groups. While the SGCA’s rejection of single economic
unit theory in favour of re-affirming the separate legal entity doctrine might
appear to be in line with the established orthodoxy, closer examination reveals
that Beyonics’ doctrinal foundations may not be as sound as they seem. Second,
the Beyonics court’s cursory consideration of the reflective loss principle –
which was decisive in the appeal’s ultimate result – without the benefit of
serious discussion of leading Commonwealth cases was a missed opportunity
for Singapore to respond to the challenge posed by corporate groups to classical
corporate law. Finally, an extended conclusion rounds off with an exploration
of how the SGCA’s exclusive reliance on domestic jurisprudence in tackling
thetwoissuesaboveinBeyonics4sheds light on the potential pitfalls of an
autochthonous judicial approach to issues of common law doctrine.
Facts and procedural history
Beyonics involved a claim for breach of director duties brought by a Singapore-
incorporated company, Beyonics Technology Ltd (BTL) against its former
director, Goh Chan Peng (Goh). BTL operated its business through several
subsidiaries, collectively known as ‘the Beyonics Group’. The Beyonics Group
had a precision engineering division that supplied baseplates, an important
component of hard disk drives, to Seagate Technology International (Sea-
gate). The revenue flowing from the Beyonics Group’s business with Seagate
was recognised in the accounts of a Mauritius-incorporated subsidiary in the
3Beyonics Technology Ltd vGoh Chan Peng [2016] SGHC 120 (Beyonics (HC)). Parts of the High
Court trial judgment are reported at [2016] 4 SLR 472, but for the avoidance of doubt all
citations to Beyonics (HC) are to the full, unreported version.
4 Non-Singapore cases and literature were cited elsewhere in Beyonics (CA), but not on the two
substantive points that are the subject of this note.
674 C2018 The Author. The Modern Law Review C2018 The Modern Law Review Limited.
(2018) 81(4) MLR 673–700

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