High Court dismisses Darco Water's claim against ex-CEO

Published Tue, Mar 8, 2022 · 06:16 PM

THE Singapore High Court has dismissed a claim by Darco Water Technologies against its former chief executive Thye Kim Meng, in relation to 2 projects in Vietnam.

Darco Water had alleged that Thye had breached duties owed to the company in managing the 2 projects, and sought claims of US$1.6 million. However, Thye denied that he was in breach of his duties.

In a written judgment on Tuesday (Mar 8), Justice Hoo Sheau Peng dismissed Darco Water's claims as she did not find any breaches of director's duties by Thye.

Darco Water, which is listed on the Singapore Exchange mainboard, is involved in the business of water and waste-water treatment solutions. Thye, who founded Darco Water, was a director in the company from Oct 2001 to May 2019.

In 2017 and 2018, Thye - who was managing director and chief executive of Darco Water - had been interested in a water treatment project, and a solar generation business opportunity in Vietnam. A deposit and payments totalling US$1.6 million were made in relation to these projects.

However, neither project materialised, and the deposit and payments were not fully recovered by Darco Water as at the time of the trial.

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Darco Water had alleged that Thye, as a director, owed a range of overlapping statutory, fiduciary and common-law duties to the company. It also alleged that Thye failed to take any steps to recover payments relating to the solar project, even though no due diligence was completed on the project, and a sale and purchase agreement was not entered into.

Darco Water sought a declaration that Thye had breached his fiduciary duties to the company and claimed losses amounting to US$1.6 million.

In his defence, Thye denied a breach of his duties and said it was his bona fide belief that the acquisition in relation to the water project would be for the benefit of Darco Water, and the entry into the framework agreement and payment of the deposit would further the company's interest.

He added that the payments in relation to the solar project were also made in Darco Water's commercial interest. Thye said that even if he were to be found in breach of his duties, he could be excused of liability as he acted honestly and reasonably.

Justice Hoo did not find any breach in director's duties, and observed that commercial decisions made bona fide by directors may turn out to be poor loss-making ones for any number of reasons.

"This aptly captures the situation at hand," she wrote.

Justice Hoo noted that the plaintiff's only 2 witnesses who worked on the projects were "not able to testify with any degree of conviction" that there was anything seriously wrong with Thye's actions at the material time.

She also disagreed that Thye was required to recover payments in relation to the solar project, as evidence suggested that due diligence was conducted and nothing untoward was uncovered.

"There was therefore no basis for the defendant to recover the payments," she said.

She also noted that it was unclear why Thye - rather than Darco Water's subsidiary, which was the contracting party to the agreement in Nov 2018 - would be expected to seek a refund of the payments.

"It appears to me that it is the board which has become aggrieved with the outcomes of the two projects," Justice Hoo wrote. "It is trite that the court is slow to interfere in commercial decisions which have been made honestly even if they turn out, on hindsight, to be financially detrimental."

The parties would need to provide their costs submissions to the court by letter within 2 weeks.

Shares of Darco Water closed at S$0.125 on Tuesday, down S$0.025 or 16.7 per cent.

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