CHAI CHUNG HOONG v PUBLIC PROSECUTOR

Facts

Chai Chung Hoong, a chartered accountant and managing director of 3E Accounting Pte Ltd, which offered corporate secretarial and nominee director services, became the local resident nominee director of four newly incorporated Singapore companies: Naylor, Stretton, Abassco and Rivoli. A previous nominee director, Kelvin Mun, had resigned after a bank told him a testimonial for a foreign director did not match its records, and he lodged a police report. On 2 October 2012 a person called "Florina" emailed the appellant asking for his services, and he accepted the appointments the same day. It was undisputed that between 6 December 2012 and 6 February 2013 fraud victims were induced to transfer money into the companies' bank accounts, so the companies dealt with stolen property under s 410 of the Penal Code.

He faced four charges of failing to use reasonable diligence as a director by failing to exercise any supervision over the companies' affairs, resulting in their dealing with stolen property, contrary to s 157(1) and punishable under s 157(3)(b) of the Companies Act. A District Judge convicted him after trial and imposed three weeks' imprisonment per charge, two consecutive, for a global term of six weeks, plus five years' disqualification as a director. He appealed against conviction and sentence (Magistrate's Appeal No 9057 of 2022). His case was that he had a "supervisory infrastructure", had the foreign directors sign indemnity, secretarial and address agreements, reasonably relied on checks by Kelvin Mun's firm and DBS, saw no red flags, and that causation was not proved.

Issues

1. Whether the appellant's various actions amounted to any supervision over the companies' affairs.
2. Whether he met the standard of reasonable diligence expected of a company director.
3. Whether his lack of supervision resulted in the companies dealing with stolen property.
4. Whether the global sentence of six weeks' imprisonment was manifestly excessive.

Holding

See Kee Oon J dismissed the appeal against both conviction and sentence. The global sentence of six weeks' imprisonment and the disqualification order were upheld.

Reasoning

The court rejected two preliminary points: the District Judge had asked whether there was any supervision, not whether it was adequate, and the charges, framed over the whole of each directorship, did not mislead the appellant.

The court separated customer due diligence before appointment from the duty to supervise after appointment on 2 October 2012, which was what the charges concerned. The agreements were self-protective indemnities, not supervision; the email record showed they were signed only after 2 October 2012, they were undated and unwitnessed, and they were never enforced. The address arrangement was never implemented and he never opened the bank letters. His only checks were desktop searches on Rivoli. He did no background checks on the foreign directors, did not know what the companies did, never verified Florina's identity or authority, and acted as a "post-box", sending bank documents and tokens to addresses in Beirut without question. Reliance on others' checks did not discharge his personal duty, and absence of red flags was no excuse. Steps after investigations began came too late. The court described his approach as a "don't ask, don't tell" policy.

A nominee director owes the same objective standard of diligence as any director, and his qualifications raised what was expected of him. Lack of guidelines did not matter where there was no supervision at all. On causation, it was enough that the transfers could have been averted had he acted with reasonable diligence; his failure need not be the sole cause.

On sentence, the Abdul Ghani framework applied though it post-dated the offences. He was reckless, the custodial threshold was crossed, and his culpability was slightly lower than in that case, so six weeks was not manifestly excessive.

From the judgment