When an employee gets fired and sued after helping boss with $120k

Imagine facing the double whammy of not being able to recover $120,000 owed to you and yet being sued for defamation when you set a debt collector to chase for payment.

That was what happened to an employee here when she made the mistake of trusting her boss, who used to mentor and groom her as part of the succession planning for his company.

The woman, who was a finance manager of the company that offered administrative-related services, had been mentored by the boss over a number of years as part of his succession planning.

This built up her levels of trust for the man to a point where she was keen to help out when he told her that the firm was facing cash-flow problems. After all, the man was like “a father” to her, she noted, and she was assured that the money would be repaid as soon as the situation improved.

The woman helped to pay the salaries of her colleagues that totalled $18,000, by transferring the money from her bank account. She did this even though she was not paid her monthly salary of $2,000.

This meant she was owed $20,000 by helping her boss pay the salaries.

When the company ran into further trouble and was not able to pay the rent, she transferred $100,000 to the corporate account to keep the business afloat.

On both occasions, she was banking on the trust she had in the boss, who promised that she would get her money back within weeks.

But that promise turned out to be an empty one and she began to press him for her money.

It was then that she saw the ugly side of the man she once respected: He told her that he never took her money and that the cash she had handed over was a loan to the company.

This meant that if the firm became insolvent, her debt would not be repaid.

The woman never gave up in pestering the boss to return $120,000 to the point where she was sacked for “insubordination and conflict of interest”.

Since all bets were off and the relationship had soured to the point of no return, she engaged debt collectors.

The licensed collectors were diligent in their work and tried to look for the boss six times in order to serve “a red letter” containing the demand for repayment of the debt.

On the first occasion, they went to his office but he was not in and so the letter was handed to an employee. The letter had his name written in a box labelled “Debtor’s Name”, with the following message: “We are looking for the Above Person, demanding an amount of SGD120,000.”

The collectors also visited his home three times but failed to find him. On the last visit, they also handed a similar red letter to the boss’ domestic helper.

They then went to the workplace of his wife and daughter but did not ask to see them. They loitered outside the premises waiting for him but in the end, they left after slipping a red letter under the office door.

Their last visit was to the man’s home, where they again passed the letter to the domestic helper as he was not there.

Claim for debt and defamation

The boss took offence at the red letters, claiming they painted him as a businessman who refused or was unable to pay his debts. This led him to filing a defamation suit against the woman and her debt collectors.

In return, the woman filed her own claim against him for the return of her $120,000.

She lost her case at the district court because she failed to prove that she had made a personal loan to her boss and not to the company. This was because in both instances, the funds were not given to him.

As a result of this finding, she also lost in the defamation suit because she was not justified in chasing the boss for the debt when he did not personally owe her money.

So she was ordered to compensate the man $10,000 for the hurt to his reputation.

When she appealed to the High Court, Justice Pang Khang Chau upheld the decision relating to the loan because there was no evidence to support the claim that the boss had borrowed the money personally from the woman.

But the judge had a different view relating to the debt collection saga because as the owner of his company, the boss had control over whether the company would repay or withhold repayment of the loans.

He noted that being the person in charge, the boss had allowed his company to incur the loans and had subsequently failed to direct it to repay the debts despite repeated requests from the woman.

The judge found that these facts alone would have destroyed this particular area of his reputation such that “he could not be said to have any reputation... to be worthy of legal protection”.

So the judge saw no reason to award substantial damages to him and slashed the earlier award of $10,000 to just a nominal $1.

The case provides a good lesson on why you should never part with any money without a good record of the transaction.

No proof of the personal loan

If you are handing over a large sum without documenting the transaction, you are likely to face an uphill task in recovering it in a dispute.

Without any proof of the purpose of the transfer, the recipient can come up with a host of reasons to deny repayment, such as claiming the transfer was meant to pay up your debt or that it was meant as a payment for services rendered in the past.

There have been quite a number of cases here on how the claimants failed to recover their loans simply because they did not put the transactions in writing.

This case was no different because the woman made the transfers based on her trust in the boss and the phone messages they exchanged. But none of these messages showed that the boss had asked for a personal loan from her.

For instance, the woman made direct transfers of $18,000 from her own account to the bank accounts of her colleagues and these loan transactions were not even reflected in the company’s account, let alone the boss’ personal account.

The transfer of $100,000 to the company for paying rent was recorded in the corporate account but the woman failed to prove that this sum was a loan to the boss who then used it as funds to pay rent.

Instead, the entry seemed to indicate that she had offered the loan directly to the company, without the boss being responsible for the debt personally. After all, she told two colleagues about the transfer and how she was trying to recover the sum from the company.

As all the transactions did not involve the boss directly, the court found that the woman could not prove that she had given a personal loan to him and not the company.

So when it comes to transactions involving large sums of money, it is always better to put the terms in writing so that you do not have to face the risk of dealing with broken promises.

Tan Ooi Boon is the Invest Editor of The Straits Times

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.

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