The “creditor duty”: Singapore Court of Appeal upholds director’s liability

25 June 2024

Foo Kian Beng v OP3 International Pte Ltd (in liquidation) [2024] SGCA 10 

In Foo Kian Beng v OP3 International Pte Ltd (in liquidation), the Singapore Court of Appeal found that Foo Kian Beng (“Mr Foo”), a sole director and shareholder of the respondent company, OP3 International Pte Ltd (“OP3”), acted in breach of his fiduciary duties in authorising a significant dividend payment and loan repayment to be paid to himself (“Disputed Transactions”) while OP3 faced litigation. 

The General Division of the High Court in OP3 International Pte Ltd (in liquidation) v Foo Kian Beng [2022] SGHC 225 (“High Court decision”) found OP3 to be in a financially parlous state at the time of the payments to Mr Foo. Mr Foo was obliged in these circumstances to consider the interests of OP3’s creditors as part of his fiduciary duty to act in the best interests of the company at the time he authorised the Disputed Transactions. The High Court found that Mr Foo had breached that duty as there was no legitimate reason for him to have paid himself in preference to the claims of other creditors. Mr Foo appealed. 

In dismissing Mr Foo’s appeal, the Court of Appeal set out a framework delineating how and the extent to which a director must consider creditors’ interests. The principles espoused by the Court of Appeal largely aligns with the principles set out by the UK Supreme Court in BTI 2014 LLC v Sequana SA [2022] UKSC 25. 

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