PATRICK JOHN WEE EWE SENG v TRUE YOGA PTE LTD & 2 Ors

Facts

Mr Patrick John Wee Ewe Seng founded the CJ Group, which ran fitness centres under the "True" brand in Singapore, Thailand (TT) and Malaysia (TM). He was Group CEO under a 2008 employment agreement with True Yoga Pte Ltd and a director of True Yoga, True Fitness (STC) Pte Ltd and True Fitness Pte Ltd. In May 2017 the Singapore companies were sold to a new majority owner, Tongfang, while TT and TM stayed with the CJ Group. Both were in severe cash-flow trouble; TT shut on 9 June 2017 and TM on 10 June 2017, attracting heavy negative publicity. True Yoga ended Mr Wee's employment on 9 May 2018.

The three Singapore companies sued him in HC/S 376/2019 for breach of his employment agreement and of his fiduciary duty as their director. He counterclaimed against True Yoga for $1.9m in unpaid salary and pay in lieu of notice. The High Court judge in True Yoga Pte Ltd and others v Wee Ewe Seng Patrick John [2022] SGHC 155 found him liable, ordered damages to be assessed, held that his salary had been cut from $120,000 to $22,500 a month and that he was dismissed with cause. Mr Wee appealed in Civil Appeal No 67 of 2022.

Issues

1. Whether the Singapore companies had standing to sue for conduct relating to TT and TM
2. Whether Mr Wee breached his employment agreement in managing the closure of TT and TM
3. Whether he breached his fiduciary duty to act in good faith in the companies' interests
4. Whether his salary had been validly reduced and his employment terminated with cause

Holding

The Appellate Division (Kannan Ramesh JAD, Aedit Abdullah J and Quentin Loh SJ) dismissed the appeal in its entirety. The findings of liability on the contractual and fiduciary claims stood, as did the dismissal of the counterclaim. The parties were directed to file written submissions on costs.

Reasoning

On standing, the companies were not suing for losses of TT or TM. They claimed their own reputational loss from breach of a duty owed directly to them, so the proper plaintiff rule and Fu Loong Lithographer Pte Ltd and others v Mok Wing Chong (Tan Keng Lin and others, third parties) [2018] 4 SLR 645 did not bar them, and there was no risk of double recovery.

On the contract, the court rejected as an afterthought the line Mr Wee drew between acting as a local director and acting under the clause requiring him to perform duties assigned for related or associated companies. The evidence showed he ran TT and TM as Group CEO, and a duty to manage their business necessarily included managing their closure. What linked the companies was the shared "True" brand, so TT and TM stayed associated after the restructuring while they used it. Mr Wee knew by April 2017 that both businesses could not last without fresh funds, yet let them keep selling membership and training packages that would not be honoured, pre-sold packages for a Malaysian club that never opened, approved a notice falsely saying an outlet was shut for renovation, and made no adequate alternative arrangements for members.

The same conduct breached his fiduciary duty. Applying the objective-subjective test, selling packages under the shared brand with no expectation of performance could not have been honestly believed to be in the companies' interests.

On loss, at the liability stage only some loss had to be shown. Mr Wee's own business plan blamed weak 2017 results on the closures and on negative publicity, and he did not show that the damage flowed from the fact rather than the manner of closure.

On the counterclaim, an email of 3 May 2017, his signed audit confirmation of his 2017 pay and his own affidavit showed he agreed to the reduced salary, and True Yoga ratified it by paying that sum. Given the breaches, termination on 9 May 2018 was with cause.

From the judgment