True fitness group wins lawsuit against founder and ex-CEO over closures
Home-grown fitness chain True Group has won its lawsuit against former group chief executive officer Patrick Wee for mismanaging the closures of its operations in Malaysia and Thailand in 2017.
On Tuesday (July 5), the High Court found that Mr Wee, who is the youngest son of late chief justice Wee Chong Jin, had breached his contractual duties and director's duties to the group he founded.
Despite knowing that business operations in the two countries were facing financial woes and heading for closure, Mr Wee did not stop selling long-term membership packages, said Justice Choo Han Teck.
"The defendant ought to have known that the members would be outraged, and reasonably so, upon the closure of the gyms which would in turn damage True Group's reputation and businesses in other countries," he said in his judgment.
The judge said Mr Wee's failure to provide alternative options for members after the abrupt closures also tarnished the group's reputation and damaged its Singapore business.
The quantum of losses that the group can claim from Mr Wee will be determined at a later date.
The group has to pay $62,660.70 to Mr Wee, 57, as he partly succeeded in his counterclaim for unpaid salary.
Mr Wee was sued by three Singapore-based companies in the group - True Yoga, True Fitness (STC) and True Fitness - which operate a chain of fitness centres, gyms and related services under various names.
He founded True Yoga in 2004 and was fired as group CEO in May 2018.
The plaintiffs contended that his failure to properly manage the closure of True Group (Malaysia) and True Group (Thailand) were in breach of his contractual duties under his employment contract as well as his fiduciary duties as a director of the three companies.
Mr Wee contended that True Group (Malaysia) and True Group (Thailand) ceased to be "related or associated" to the plaintiffs after a 2017 restructuring exercise.
But Justice Choo said Mr Wee owed a duty to the plaintiffs to properly manage the closures.
The judge said the evidence showed that Mr Wee knew months in advance that True Group (Malaysia) and True Group (Thailand) were facing impending closure.
Mr Wee was in discussions with potential white-knight investors and insolvency lawyers to plan the companies' exit from the Malaysia and Thailand markets, the judge noted.
Despite this, in May 2017, True Group (Malaysia) sold 43 new memberships, ranging from one-year to five-year plans.
Up to the first week of June 2017, True Group (Thailand) was still selling memberships with terms of of up to three years.
Justice Choo added that the staff in Malaysia and Thailand were informed about the closure only days before, while members were only informed on the day itself.
Mr Wee also misled the members in Malaysia into believing that the gyms would remain operational by putting up a notice on May 10, 2017, stating that the Subang Club was closed for renovations.
The club was in fact closed because the court bailiff was taking its inventory and equipment under a writ of seizure.
Justice Choo added that Mr Wee's conduct suggests that he was more concerned with evading responsibility than dealing with the consequences of the closures on staff and members.
Mr Wee had appointed the wife of his friend's tailor - identified only as Ms Moonjaisai - as a director of True Group (Thailand) as early as January 2017.
On May 30, 2017, days before shutting down the Thailand operations, Mr Wee resigned his directorship, leaving Ms Moonjaisai to deal with the legal consequences of winding up and the creditors' claims.