On 10th October 2024, we published a Postscript to an article published on 20th June 2023 titled “DIRECTORS BeAWARE”.

The first article discussed the case of BIT Baltic Investment & Trading Pte Ltd (in compulsory liquidation) v Wee See Boon [2023] SGCA 17 while the Postscript examined the case of Inter-Pacific Petroleum Pte Ltd v Goh Jin Hian [2024] SGHC 178.

We highlighted key takeaways and noted that Dr Goh had appealed against the decision in Inter-Pacific Petroleum Pte Ltd v Goh Jin Hian [2024] SGHC 178 requiring him to pay damages of US$156 million to IPP.

On 5 June 2025, the Court of Appeal (CA) delivered its decision in the IPP case.

The CA Decision

IPP’s case was essentially that Dr Goh had been asleep at the wheel as a director and failed to take the steps required of him under the law to apprise himself of IPP’s affairs and to monitor the same.

Specifically, Dr Goh failed to detect that IPP was being run in a fraudulent manner and failed to prevent IPP from making particular drawdowns so as to become liable to the Banks to repay the same. In particular:

• Dr Goh had no knowledge of one of the principal lines of IPP’s business i.e. its cargo trading business. The fact that Dr Goh had not known of this line of business meant that he could never have been in a position to discharge his minimum obligation to monitor and supervise the activities of IPP.
• Dr Goh had failed to act reasonably in the face of three “red flags”:

The Court of Appeal allowed the appeal in part holding that:

• Dr Goh breached his duty as a director because he was not aware of the cargo trading business.
• However, he did not breach his duty as a director as regards the red flags as these were insufficient to trigger an inquiry into its financials.

Crucially, the CA held that IPP has failed to discharge its burden of proving that the fraud would have been detected and the loss averted if Dr Goh had known that IPP was undertaking the cargo trading business.

Takeaway

Does the CA decision water down the scope of directors’ duties?

In our view, it does not save that the CA provide clarification on the level of supervision and oversight required.

This is because the CA’s decision turned on the issue of causation i.e. the causal relationship between the breach of duty and the loss suffered. The CA found that IPP had failed to discharge its burden of proving that Dr Goh’s ignorance of the cargo trading business was the proximate cause of the loss in question.

However, the CA also held:

“…it cannot be part of a director’s duty of supervision and oversight to pick up fraud unless there are tell-tale or warning signs. A director may be a sentinel, but he is not a forensics investigator or a sleuth, unless there are signs that would put him on inquiry.”

Thus, the following takeaway points in our previous articles remain valid with a qualification as indicated:

• The law does not make any distinction between active and inactive directors.
• Every director is subject to the same duties and is expected to acquire and maintain sufficient knowledge and understanding of a company’s business in order to perform those duties adequately.
• This is so regardless of whether the director has an inactive role or is appointed for the sole purpose of satisfying statutory requirements.
• Directors’ duties serve as a level of safeguard against potential corporate misconduct. Permitting certain directors to “sleep on duty” contributes nothing to reducing such misconduct.
• A director’s particular designation is not determinative or conclusive of the role that he plays in the company. Rather, the content of a director’s duty is determined by the involvement, responsibilities or functions he undertakes. Put simply, the focus is on substance rather than form.
• Regardless of whether a director was in form or substance an executive or non-executive director, he would be subject to a “minimum objective standard of care which entails the obligation to take reasonable steps to place himself in a position to guide and monitor the management of the company”.
• The standard of care owed would never be lowered, but may be heightened, by the subjective characteristics of the particular director at hand.
• Although there is nothing wrong per se in a director delegating some functions, there comes a point when delegation crosses into dereliction or abdication. Thus, a director must always supervise the discharge of delegated functions, failing which he would have breached his duty of skill, care and diligence.
• Even if a director receives periodic financial information from his subordinates, this does not obviate the need for him to make his own inquiries into the company’s financial health at appropriate junctures. However, he is not required to investigate or make exhaustive inquiries into individual transactions or events unless there are signs that would put him on inquiry.
• A director’s duty to acquire and maintain a sufficient knowledge and understanding of the company’s affairs was a continuing “The law does not permit a director to get by in a state of somnambulism for the most part, only to be roused on occasion by his subordinates”.
• Directors are officers who must remain alert and watchful at the helm. A director cannot now be viewed as a mere sentinel who may occasionally “doze off at his post”.
• While directors may take commercial risks, this is not an excuse for a director who considers his role to be a sinecure or an honorary function.

	K. Murali Pany Senior Partner JTJB Singapore Office E : murali@jtjb.com T : 6224 3645

For more information, please feel free to contact our Corporate & Commercial Practice Group– here

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