Energenics Holdings Pte. Ltd & Anor v Hazarika

A claimant must plead and prove its own loss. Loss suffered by a subsidiary cannot ordinarily be treated as loss suffered pound for pound by its parent, particularly where the companies operate in different jurisdictions and tax systems. Any limited exception for simple corporate groups requires evidence that the loss was equivalent.

A person is a de facto director only where, in substance, he or she assumes functions properly dischargeable only by a director. The allegation must be pleaded with the supporting facts and proved by evidence. For dishonesty-based claims, the claimant must prove both conduct dishonest by ordinary standards and the defendant’s awareness that the conduct was dishonest.

EHPL claimed damages for breach of two share sale agreements after the defendant failed to transfer shares in Neuftec Ltd. Neuftec claimed an account or equitable compensation for alleged breach of fiduciary duty, dishonest assistance and knowing receipt concerning payments made from company funds.

The court found a contractual breach but held that EHPL had not proved recoverable loss. It rejected the fiduciary and related claims after finding that the defendant was not a de facto director during the relevant period, had acted honestly, and had not been shown to have dishonestly assisted or knowingly received misapplied funds.

1. Contract claim. The defendant breached the 2006 and 2007 share sale agreements by failing to transfer the shares when the obligation became absolute. EHPL established no recoverable loss. It had not pleaded or proved that losses allegedly suffered by EEL were losses suffered by EHPL, and the alleged reflective losses were not foreseeable when the agreements were made. Nominal damages were exceeded by the credit due for sums recovered from the Morgans.
2. Reflective loss. The court applied the separate legal personality principle and the guidance in Gerber Garment Technology Inc v Lectra Systems Inc [1997] RPC 443, read subject to Johnson v Gore Wood & Co [2002] 2 AC 1. Any possible simple-case exception was obiter and, in any event, the Singapore and English companies’ different jurisdictions, taxation and financial circumstances made equivalence far from self-evident.
3. De facto directorship. The allegation had to identify and prove functions undertaken by the defendant that could properly be discharged only by a director. The relevant factors included management involvement, the nature of the tasks, participation in corporate governance, access to company information, major decisions and assumption of responsibility for company assets. The pleaded case was inadequately particularised and the evidence did not establish a de facto directorship.
4. Dishonesty and limitation. Applying Twinsectra Limited v Yardley [2002] UKHL 12, dishonesty required conduct dishonest by ordinary standards and awareness of that dishonesty. The fiduciary, dishonest assistance, conspiracy and knowing receipt claims failed on the evidence and pleadings. The limitation exception for constructive trustees under section 21 of the Limitation Act 1980 applied only to the first category identified in Paragon Finance Plc v DB Thakerar & Co [1999] 1 All ER 400, not to the claims advanced here.
5. The claim was dismissed.