24 April 2018
A | A

Company law feed-image    Tort feed-image   

Supreme Court Note: PT Sandipala Arthaputra v STMicroelectronics Asia Pacific Pte Ltd [2018] SGCA 17

Supreme Court Note
17 Apr 2018

PT Sandipala Arthaputra (“Sandipala”), an Indonesian company that manufactures electronic identification cards, contracted to buy 100m microchips from a Singapore company called Oxel Systems Pte Ltd (“Oxel”) for US$60m. The microchips were to be manufactured by another Singapore company, STMicroelectronics Asia Pacific Pte Ltd (“ST-AP”), and encoded with Oxel’s software. Sandipala wanted to use these Oxel chips to fulfil a contract with the Indonesian government to produce electronic identification cards called “e-KTP cards”. The Oxel chips were incompatible with the e-KTP cards and Sandipala began rejecting the Oxel chips. In June 2012, Sandipala sued Oxel and other parties for, among other things, breach of contract, fraudulent misrepresentation, and unlawful means conspiracy. Oxel counterclaimed against Sandipala for breach of the same contract. It also claimed that Sandipala and its directors, Mr Paulus Tannos and Ms Catherine Tannos, had conspired to cause Oxel loss by seeking to extricate, by unlawful means, Sandipala from its obligations under the contract. The Judge dismissed Sandipala’s claims and allowed Oxel’s counterclaims for breach of the contract and unlawful means conspiracy against Sandipala and its two directors. Sandipala and its two directors appealed against the Judge’s decision.

The Court of Appeal dismissed Sandipala’s appeal in relation to its claims and Oxel’s counterclaim for breach of contract but allowed the appeal in relation to Oxel’s counterclaim against Sandipala and its directors in unlawful means conspiracy. The basic legal question raised by that counterclaim was whether a director should be held personally liable for directing his company’s breach of contract, to which only the company, and not him, is party. The answer to that question had always been taken to be the principle stated in an English case decided in 1920 called Said v Butt, which is that if a director acts in good faith within the scope of his authority, then he is immune from liability in tort for procuring his company’s breach of contract. But the precise scope of the principle in Said v Butt was unclear, both in Singapore and in other common law jurisdictions. ([53], [55] and [57])

The Court of Appeal elucidated the principle in Said v Butt as follows: a director would ordinarily be immune from liability in tort for authorising or procuring his company’s breach of contract in his capacity as a director, unless his decision is made in breach of any of his personal legal duties to the company. The plaintiff bears the burden of proving that the defendant-director’s act was performed in breach of such a duty, which might include a breach of his fiduciary duty to act in the company’s best interest or a breach of his contractual duty towards the company to act within the scope of his authority as granted by the company. The principle therefore focuses on the director’s conduct and intention, not in relation to the third party, but in relation to his company. ([65]–[66])

In this case, the Court concluded that the Tannoses were entitled to the protection of the Said v Butt principle as there was no evidence that they were acting in breach of their personal duties to Sandipala when directing Sandipala’s breach of contract. Hence, although Sandipala would remain liable for the consequences of the breach of contract, the Tannoses would not be personally liable for the same. ([80]–[83])

The Court then discussed the question whether the principle in Said v Butt, as interpreted by the Court, would apply to absolve directors from personal liability for a company’s torts, as opposed to a company’s breach of contract, which this case involved. The Court observed that there were different views on this question, but did not consider it necessary to resolve the issue as it did not arise on the facts.

At PT Sandipala Arthaputra v STMicroelectronics Asia Pacific Pte Ltd [2018] SGCA 17 paras 53, 55, 57, 65–66, 80–83. To view this judgment, click <here>.

Disclaimer: This summary is provided to assist in the understanding of the Court’s grounds of decision. It is not intended to be a substitute for the reasons of the Court.