The Appellate Division of the Singapore High Court has in Goh Jin Hian v Inter-Pacific Petroleum Pte Ltd (in liquidation) [2025] SGHC(A) 7 allowed Dr Goh’s appeal against a US$146 million award, holding that breach of the duty of care, skill and diligence (the “Care Duty“) does not automatically establish loss. While the Court upheld Dr Goh’s breach of the Care Duty, it rejected the High Court’s ‘common sense’ inference that IPP’s losses flowed from the breach, and emphasized that the claimant must prove, via a counterfactual analysis, that the loss would have been avoided if the duty had been discharged.
Background
The dispute arose from drawdowns on Inter-Pacific Petroleum Pte Ltd (“IPP”)’s bank facilities linked to, among other things, fraudulent cargo trades to the tune of US$ 146 million (the “Cargo Drawdowns“). Dr Goh, a non-executive director of IPP, was accused of breaching the Care Duty, and a duty to act in the best interests of IPP’s creditors (the “Creditor Duty“). The High Court found that Dr Goh breached the Care Duty on account of his ignorance of the fact that IPP also had cargo trading business in addition to bunker trading business; and his failure to act reasonably in the face of three ‘red flags’. The red flags concerned an audit confirmation request signed by Dr Goh, which was sent to a large debtor of IPP specifying receivables due from it; the suspension of IPP’s license for its bunker trading business; and three confirmations of IPP’s indebtedness signed by Dr Goh which were sent to Maybank. The Court concluded that these events should have prompted Dr Goh to inquiry into IPP’s financials and his failure to do so was unreasonable. The High Court also found that the Creditor Duty was engaged since IPP was balance sheet insolvent at the material time, and this duty had been breached notwithstanding Dr Goh’s ignorance of the cargo trading business or the impugned fraudulent trades. The High Court concluded that but for
these breaches, IPP would not have made the Cargo Drawdowns and thus suffered losses in the form of its indebtedness to the banks.
The Appeal
The Court of Appeal upheld the finding that Dr Goh breached the Care Duty by not knowing of IPP’s cargo trading operations. However, the Court of Appeal disagreed with the High Court that the identified events constituted red flags which should have led Dr Goh to inquire into the business of IPP.
• The audit confirmation request coincided with the FY 2017 audited accounts showing no impaired receivables and confirming that IPP’s trade debtors were creditworthy. There was no evidence of delinquency of the debt when Dr Goh signed the audit confirmation request, and no reason for him to go beyond what the auditors had done.
• The bunkering license suspension was not a red flag that should have prompted inquiry into IPP’s financial affairs. Dr Goh focused on negotiations to lift the suspension to save what he believed was IPP’s only operations. It was not reasonable to expect a full financial review at that point, and even if one had been conducted, it was unclear whether it would have uncovered the cargo trading fraud.
• The Maybank debt confirmations merely acknowledged outstanding liabilities. While Dr Goh could have inquired about debts during the suspension, nothing in the documents linked them to cargo trades, and discovering the existence of cargo trading would not itself have signalled fraud.
The Court of Appeal also rejected the argument as to Dr Goh’s breach of the Creditor Duty. That duty applies only if a director exercised discretion in relation to the transaction in question; here, Dr Goh had not exercised such discretion over the Cargo Drawdowns.
On recovery of loss, the Court clarified that common law rules apply, including the ‘but for’ test for causation, and the requirements of foreseeability of loss. Critically, the ‘but for’ test requires the claimant to prove a counterfactual — what would have happened if the duty had been discharged. Here, that required showing, among other things, (a) the steps a director would have taken, and (b) how those steps would have uncovered the fraud and avoided the loss. The legal burden of establishing causation remains with the claimant; it does not shift merely because a counterfactual is proposed. Only if the claimant discharges the burden of proving a counterfactual on a prima facie basis does the evidential burden shift to the director to show the loss would have occurred anyway.
The Court of Appeal found that the High Court’s approach of inferring causation from ‘common sense’ was flawed because it assumed the very fact to be proved: that Dr Goh’s breach caused the loss. It was ‘a leap in logic’ to assume that awareness of the cargo trading business would have led to detection of the fraud. Given the depth of the fraud, even awareness might not have resulted in discovery. Thus, IPP needed to plead and prove a specific pathway from discharge of duty to fraud detection.
The Court held that IPP failed to establish this pathway. It did not specify the steps Dr Goh would have taken or how these would have led to uncovering the fraud, instead relying on broad assertions. The argument that due diligence would inevitably have revealed the fraud was unsubstantiated, and the alleged red flags were rejected. The Court observed that 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.
There was no evidence that IPP’s auditors or finance team had raised concerns, nor that the management accounts suggested irregularities. Even if Dr Goh had known of the cargo trading business, he would likely have assumed it was legitimate, mirroring his assumptions about the bunker trading business. The Court also doubted that key colleagues involved in the fraud would have been unable to conceal it from him, noting that the auditors failed to detect it despite checks in the course of preparing financial statements. Ultimately, the Court concluded that IPP failed to prove that Dr Goh’s ignorance of the cargo trading business was the proximate cause of the losses.
Key Takeaways
This decision is significant for directors, insolvency practitioners, and litigators pursuing duty of care claims. It makes it clear that directors are not expected to act as forensic investigators in the absence of warning signs. Only clear warning signs trigger an investigative duty, and the absence of such signs limits the scope of oversight obligations. It also clarifies that a breach of a director’s duty is not enough to recover loss. The claimant must plead a counterfactual, that the loss would have been avoided if the duty had been discharged, and present specific evidence of the steps that would have been taken, and how these would have prevented the loss.