JSI Shipping case

In the case of
JSI Shipping (S) Pte Ltd v Teofoongwonglcloong (a firm)
[2007] 4 SLR 460; [2007] SGCA 40,

Riggs, one of the plaintiff company's directors, who was the only one based in Singapore, had drawn excessive remuneration and made other unjustified claims which resulted in a loss of over $1.8m to the company. Unfortunately, Riggs fled the country and no monies were recovered from him.

The defendants were auditors of the plaintiff company over the relevent period of 3 financial years when they issued unqualified audit reports relating to the ccompany's financial statement.

The court found that the auditors were negligent in not verifying the amounts that Riggs was entitled to. They failed to seek alternative evidence when Riggs told that that he had no written employment contract. Furthermore, the court found that the fact that the defendants had asked the other director who was based overseas asked to sign off on the directors' report and draft accounts did not absolve the auditors from liability as they had not made it clear to the overseas director the importance of him verifying their correctness of what he had signed.

On the facts, the court therefore found that the auditors were liable for the loss.