Biting the Hand That Feeds: A Breach of Fiduciary Trust

Between 2008 and 2013, two employees of the Singapore Statutory Boards Employees’ Cooperative Thrift and Loan Society misappropriated a total of S$5,100,000.00 to live the “extravagant lifestyle” they desired.

For abusing their position of trust, Arni Ahmad, assistant manager at the time, was sentenced to twelve (12) years in jail, while Hanati Jani, an administrative executive at the time, received nine (9) years and eight (8) months’ imprisonment.

As an employer, reading such cases can make you wary of trusting an employee with any degree of responsibility, but running a thriving business alone can quickly wear you down. What matters, instead, is that you go about it wisely. Here are some things you should know when you trust an employee with power and make them a fiduciary.

Who Are Fiduciaries?

In general, a fiduciary is a person who has been assigned responsibility to act for or on behalf of another in a certain matter. In most cases:

  • The fiduciary has power or discretion;
  • The fiduciary can exercise that power or discretion in a way that affects the other person or organisation’s legal or practical interests; and
  • The other person or organisation is particularly vulnerable or dependent upon the fiduciary

Brief examples of fiduciaries include trustees to a beneficiary, directors to a company, agents to the principal, and high-ranking employees to an employer. In the case of Arni Ahmad and Hanati Jani, they were trusted with the responsibility of processing the movements of other members’ accounts as fairly high-ranking employees.

What is Fiduciary Trust?

Because the fiduciary has been given a responsibility for particular matters, there exists a presumed relationship of trust and confidence between the fiduciary and the beneficiary.

This trust gives rise to particular general duties that the fiduciary will have to fulfill:

  • Duty to avoid conflict of interest and duty; and
  • Duty to avoid unauthorised profits.

In general, the fiduciary has a duty of good faith where his or her employer entrusts him or her with more authority over certain matters. The fiduciary also has a duty of care to the company, where he or she should take reasonable care in acting in the company’s best interests.

Law on Breach of Fiduciary Trust

The courts of Singapore have developed case law in the area of fiduciaries. This means that in cases where a breach of fiduciary trust is discussed, the decisions in past similar cases will be referred to.

On top of Singapore’s common law, there may be statutes regulating certain types of relationships. For instance, the Companies Act (Cap 50) imposes statutory duties onto the directors of a company.

Additionally, Section 405 of the Penal Code sets out the offence of Criminal Breach of Trust (CBT) and its variations, for those who breach their fiduciary duties. The sentence for an offender largely relies on the amount of power they were entrusted with; for example, a public servant found to be in breach of his duties is liable for a maximum of twenty (20) years’ imprisonment, while a clerk found liable for the same offence will be liable for up to fifteen (15) years’ imprisonment.

What Counts as a Breach of Duty?

The Penal Code states that CBT occurs when a person, who is entrusted with property or has dominion over property, dishonestly misappropriates or converts said property to his own use. If there is insufficient evidence of dishonest intent when the offender was acting, he or she may still be charged under a difference offence, such as Breach of Contract.

In other words, if you trust an employee with, for example, the management of your company’s accounts, and he or she takes some of the company’s money for his or her own use, there has been a breach of duty. The type of offence the employee can be charged with will depend on the facts of the case, such as whether the employee acted with dishonesty.

Is A Matter Ever Too Small For A Breach of Duty?

While most reported cases involve large amounts of money being taken from companies by employees, this is not the only kind of case that constitutes a CBT. So long as a company’s property has been dishonestly taken or used by a fiduciary, CBT has been committed. The amount taken may even be as low as 50 cents, as in Bahru Zaman Bin Ali v PP.

A fiduciary’s intention or plan to breach his or her duty may also be a cause for action. In such a situation, you may seek to stop the fiduciary from acting with an injunction from the court.

If you suspect an employee of breaching his or her fiduciary duty, be sure to consult an experienced lawyer for advice.

What Remedies Can I Claim For?

Should there be a breach of fiduciary duty, you may bring a case against the fiduciary in breach and seek remedies for any damages suffered. Some remedies that may be obtained through the courts for a breach of fiduciary duty are:

  • Recission of a contract involving a breach of fiduciary duty (e.g. employment contract);
  • Compensation payable by the fiduciary to the beneficiary;
  • An account of the ill-gotten profits payable by the fiduciary to the beneficiary;
  • Proprietary remedies (e.g. transferring title of ill-gotten property to beneficiary); and
  • Injunctions or specific performance to stop the fiduciary from committing a breach

You should consider the kind of action you want to be taken against the fiduciary in breach. Engaging an experienced lawyer who knows the facts of your case can increase your chances of a successful claim.

How we can help

As an employer, having the trust you put in an employee broken can be devastating, to both you and your business. Even the smallest of breaches can have disastrous effects, but acting quickly may be distressing and confusing.

At I.R.B. Law LLP, our knowledgeable and understanding lawyers are more than willing to work through your case with you. Your company is your second family, after all, and having such experienced lawyers fight your case only makes sense. We aim to provide quality services at affordable prices, so you can place all your focus on getting the best outcome for your second family without worrying about your wallet.

Contact us at [email protected] or +65 6298 2537 when you are ready to discuss your case.