SINGAPORE — True Group, which manages popular fitness and yoga chains True Fitness and True Yoga, successfully sued its former group chief executive officer for mismanaging its closures of operations in Malaysia and Thailand.
Patrick John Wee Ewe Seng, who was Group CEO from 19 March 2008 until before he was fired on 9 May 2018, was found by High Court judge Choo Han Teck to have breached his fiduciary duties in a judgement issued Tuesday (7 July).
Three Singapore-based entities under the True Group – True Yoga, True Fitness (STC), and True Fitness – had taken Wee, also their former director, to court for breaching his contractual duties under the employment contract. Wee is the founder of True Group.
According to its website, True Group currently has over 25 clubs across its brands True Fitness, True Yoga, Yoga Edition, TFX and Urban Den, in Singapore and Taiwan.
The three plaintiffs contend that Wee had mismanaged the closures of the chains in Malaysia and Thailand before they ceased operations on 10 June 2017 and 9 June 2017 respectively.
Despite knowing that True Group (Malaysia) was in financial straits and facing impending closure months in advance, Wee had let the group publicise and sell long-term memberships until May 2017.
He also conducted pre-sales for a new club, selling 50 memberships before May 2017. This club did not open and True Group (Malaysia) closed down a month later.
Wee also misled members of True Group (Malaysia) in May 2017 by putting up a notice that the Subang Club would be closed for renovations. In fact, the club was closed as the court bailiff was taking inventory and equipment under a writ of seizure. The staff were not informed about the closure until a day prior.
While Wee claimed that members could use the facilities of another gym, CHI Fitness, after closure, the arrangement was abruptly discontinued in January 2018.
Similarly for the group’s Thailand operations, Wee had allowed membership fees to be collected from about 38,903 members each month until end-May 2017. He also permitted the sale of long-term memberships to prospective members up until the first week of June 2017.
Members were not informed of closures until the very day, and were not given alternative facilities.
Planned for someone else to deal with aftermath of closures
Wee had also appointed the wife of his friend’s tailor to be a director so that she could be his scapegoat when the closures were effected. He resigned just days before the closure, leaving the woman as the sole director to deal with the winding up and creditors’ claims.
“The defendant’s conduct suggests that he was more concerned with evading responsibility as a director of True Group (Malaysia) and True Group (Thailand), rather than dealing with the consequences of the closures on staff and members,” said the judge.
Justice Choo said that Wee owed contractual and fiduciary duty to manage the closure, but had failed to act diligently and in the companies' best interests.
“The defendant says that the plaintiffs did not ‘assign’ him the duty to properly manage the closure of True Group (Thailand) and True Group Malaysia, but, surely, that goes without saying,” he said. Through his actions, Wee had tarnished True Group’s reputation and damaged True Group (Singapore)’s business, said the judge.
The quantum of the plaintiffs’ losses to be claimed from Wee will be determined at a later date.
Meanwhile, Wee partially succeeded in a counter claim against the plaintiffs for wrongful termination and unpaid salary of S$120,000 a month for certain periods in 2018.
On this, Justice Choo ruled that there were sufficient grounds to terminate Wee given his mismanagement of the closures. However the judge found that Wee was entitled to unpaid salary for 1 January 2018 to 9 May 2018 at the rate of S$22,500 per month – a reduction which Wee had previously agreed to while still employed.
Wee is entitled to S$62,660.70 in unpaid salary after deducting partial payments he already received.
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