Legal News & Analysis – Asia Pacific – Singapore – Dispute Resolution

High Court reaffirms that a forgery by an unauthorized agent cannot bind the putative principal; Court finds that in the absence of fraud or serious abuse of the corporate form, it will decline to lift the corporate veil.

 
This dispute concerned the issue of authority, as well as the lifting of the corporate veil. The Plaintiff was one of a group of property-holding companies, all owned by one Mdm. Ching as the sole shareholder and director. Mdm. Ching also owned Lee Tat Property Management, which managed the group’s properties, and of which one Razali was an employee.

 
The Defendant had rented a property owned by the Plaintiff. All dealings had been made through Razali, who had all the keys and access cards. However, it turned out that Razali had been running a fraud and had been acting without the authority of the Plaintiff. The Plaintiff then commenced an action against the Defendant for trespass.

 
The High Court held that the Defendant was in fact liable to the Plaintiff. The tenancy agreement, in which Razali had forged Mdm. Ching’s signature, was not binding on the Plaintiff as a principal could not give authority to an agent to commit a forgery. Razali also did not possess ostensible authority merely by virtue of holding the keys to the property, nor did he possess the ostensible authority to communicate the Plaintiff’s approval of the lease.

 
The Court also declined to lift the corporate veil to hold the Plaintiff liable for the wrongs committed by Razali, an employee of a separate corporate entity. Businessmen were entitled to structure their corporate entities to insulate one part of a business from another. This must have been Mdm. Ching’s intention in arranging for separate companies to hold separate properties.

For further information, please contact:

Francis Xavier SC, Partner, Rajah & Tann
[email protected]

 
Lai Yew Fei, Partner, Rajah & Tann
[email protected]

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