Are Directors’ Personally Liability for Company Debts?

The Case of Goh Jin Hian v InterPacific Petroleum Pte Ltd (in liquidation) [2025] SGHC(A) 7

The Appellate Division (“AD”) has overturned the General Division of the High Court’s first-instance decision in Goh Jin Hian v Inter Pacific Petroleum Pte Ltd (in liquidation), providing important clarification on the scope of directors’ statutory and common law duties and in particular, the minimum 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, and the role of causation in claims founded on a breach of the duty of skill, care and diligence (the “Care Duty”). 

While the AD agreed that Dr Goh had breached both his Care Duty and his duty to act in the best interests of the company’s creditors once the company becomes insolvent (the “Creditor Duty”), it rejected the High Court’s “common sense” inference that Inter Pacific Petroleum Pte Ltd’s (“IPP”) losses directly flowed from those breaches. The AD held that IPP had failed to discharge its burden of proving that Dr Goh’s lack of familiarity with the cargo trading business was the proximate cause of the losses suffered. 

Background of the High Court Case

Dr Goh Jin Hian was a non-executive director of IPP, a marine fuel supplier engaged in both bunker and cargo trading. Between June and August 2019, IPP drew down approximately US$146 million under banking facilities extended by two banks for the purposes of cargo trading. These sums were not repaid. Subsequently, investigations revealed that the purported cargo trades were fraudulent, and the alleged customers denied entering these trades. 

IPP was placed in judicial management on 4 September 2019, and entered liquidation on 25 March 2021. The liquidators commenced proceedings against Dr Goh for breaches of his director’s duties.  

At first instance, the High Court held that Dr Goh breached the Care Duty. The Court identified three “red flags” which ought to have prompted further inquiry by Dr Goh:

1. An audit confirmation he signed to be sent to a major debtor;
   
   
2. The suspension of IPP”s bunker trading licence; and
   
   
3. Dr Goh’s provision of three confirmations of IPP’s indebtedness to Maybank, specifying receivables allegedly due to IPP.

The High Court found that in the face of these matters, a reasonable director would have made further inquiries into IPP’s financial position. Dr Goh’s failure to do so was held to be unreasonable, and his lack of familiarity with IPP’s cargo trading operations was said to have compounded the breach. 

The High Court further held that IPP was balance-sheet insolvent at the material time, such that Dr Goh owed a duty to act in the best interest of IPP’s creditors (the “Creditor Duty”). It concluded that Dr Goh’s breaches caused IPP to proceed with the cargo drawdowns, thereby resulting in substantial losses. Dr Goh was found liable for breaches of both duties, and damages of approximately US$146 million were awarded in IPP’s favour. Dr Goh appealed.

Decision on Appeal

Care Duty

The AD clarified that the Care Duty requires directors to act honestly and with reasonable diligence, reflecting both statutory obligations and common law principles (Ho Yew Kong v Sakae Holdings Ltd [2018] 2 SLR 333). 

Section 157(1) of the Companies Act 1967 provides that a director “must at all times act honestly and use reasonable diligence in the discharge of duties of his or her office,” encapsulating the common law duty of care. The standard of care to be applied “will not be lowered to accommodate any inadequacies in the individual’s knowledge,” and will instead “be raised if he held himself out to possess or in fact possesses some special knowledge or experience.” All directors, regardless of whether they are engaged in an executive or non-executive capacity (sleeping or otherwise), are subject to a “minimum objective standard of care which entails the obligation to take reasonable steps to place oneself in a position to guide and monitor the engagement of the company.” 

The AD upheld the finding that Dr Goh breached the Care Duty by not knowing of IPP’s cargo trading operations. 

Creditor Duty 

The AD reaffirmed that a director’s duty to consider the interests of creditors arises once the company is insolvent or in a state of financial peril. At that stage, the director must make decisions in good faith, based on what he or she considers to be in the best interests of the company, having regard to its financial position at the material time. 

The AD emphasised that liability for breach of the Creditor Duty requires an active decision by the director; mere inaction, without more, is insufficient. On the facts, none of the losses attributed to Dr Goh Jin Hian were the result of decisions taken by him over the cargo drawdowns. 

Causation

IPP bore the burden of proving its losses were caused by Dr Goh. This required IPP to establish, on the balance of probabilities, that but for the breaches of director’s duties by Dr Goh, it would not have suffered loss. To do so, IPP had to prove and explain what specific steps Dr Goh should have taken if he was aware of the cargo trading business, and how those steps would have uncovered the fraud and prevented the cargo drawdowns. 

IPP failed to discharge this burden. IPP had relied on bare assertions that Dr Goh should have detected the fraud and prevented the cargo drawdowns had he been aware of the cargo trading business or acted reasonably to the three alleged “red flags.” The AD rejected this approach, inferring causation cannot be founded on bare assertions or “common sense”alone.

The AD found that the matters characterised as “red flags” were not, in fact, red flags. There was no evidence that the auditors or IPP’s financial management had alerted Dr Goh to any irregularities, nor did the management accounts or financial statements disclose anything of the concern. 

Dr Goh was asked to sign audit confirmations and did so. The liquidator’s real complaint was that he ought to have gone further to independently verify repayment of the cargo drawdowns, an expectation that the AD found to impose an unrealistically high standard of care on directors.

The AD observed: