Case Summaries

Ascend Field Pte Ltd and others v Tee Wee Sien and another appeal [2020] SGCA 14

SUPREME COURT OF SINGAPORE

9 March 2020

Case summary

Ascend Field Pte Ltd and others v Tee Wee Sien and another appeal [2020] SGCA 14.
Civil Appeal Nos 85 and 86 of 2019

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Decision of the Court of Appeal (delivered by Judge of Appeal Judith Prakash):

Outcome: CoA allows appeal in CA 85 in respect of the unlawful means conspiracy claim and appeal in CA 86 in respect of part of the oppression claim.

Pertinent and significant points of the judgment

· A breach of fiduciary duties by a director does not by itself constitute oppression of a shareholder. Oppression arises where a violation of the shareholder’s legitimate expectations results in an injury that amounts to commercial unfairness.

· Some degree of informality and flexibility in arrangements was to be expected in quasi-partnerships.

· A company in an oppression action should be separately represented from the alleged oppressor, even where the latter continues to manage the company.

Introduction

1 Mr Tee Wee Sien (“Mr Tee”) had commenced an action against Ascend Field Pte Ltd (“AFPL”), Mr Ng Meng Lay (“Mr Ng”), Yi Fang Xiang Services (“YFX”) and Ms Kor Chee Kuan (“Ms Kor”) (collectively referred to as “the defendants”) on the grounds of oppression under s 216 of the Companies Act and conspiracy by unlawful means (“the Action”). CA 85 and 86 were the parties’ appeals against the decision of the High Court Judge (“the Judge”) to allow Mr Tee’s claims in part.

Background to the appeal

2 Mr Ng and Mr Tee set up AFPL in June 2011. Although both men agreed that they had an informal understanding prior to the incorporation of AFPL, subsequently the content of that informal understanding was in dispute. Mr Ng and Mr Tee were equal shareholders in AFPL. Prior to the incorporation of AFPL, Mr Ng and his wife, Ms Kor, were running YFX, which provided cleaning services for office premises and buildings.

3 Mr Tee was a signatory of AFPL’s bank account from AFPL’s incorporation to 2012 (when he withdrew), and from March 2015 (when he was reinstated). He subsequently claimed to have discovered various lapses in AFPL’s management after his reinstatement, including AFPL’s payment of “service fees” to YFX and the deployment of AFPL’s employees to YFX’s projects.

4 Around 2016, Mr Tee and his business partner, Mr Ching, grew concerned about Mr Ng’s management of AFPL and decided to restructure AFPL’s operations. The relationship between Mr Ng and Mr Tee subsequently broke down. Mr Tee engaged a private investigator and obtained evidence that Mr Ng had deployed AFPL’s employees, equipment and resources for YFX’s benefit. On 9 June 2016, Mr Ng removed Mr Tee as a signatory of AFPL’s bank account.

5 From April 2016 to July 2016, five contracts to clean a number of premises were diverted from AFPL to YFX. Mr Tee commenced the Action on 12 July 2016.

6 The Judge accepted that the informal understanding between Mr Ng and Mr Tee was that Mr Ng was to run AFPL’s day-to-day operations but was to seek Mr Tee and Mr Ching’s approval for major decisions. The Judge found that Mr Ng had wrongfully diverted the five AFPL contracts to YFX. The Judge ordered the defendants to account for the profits derived from these contracts. The Judge also found that there was a reciprocal arrangement for AFPL and YFX to assist each other – AFPL was ordered to account for the benefits it derived for any uncompensated use of YFX’s employees and YFX was ordered to account for the benefits it derived from its uncompensated use of AFPL’s employees. The Judge also ordered an inquiry into the extent of YFX’s use of AFPL’s vehicle and equipment. Mr Tee’s other claims of oppression under s 216 of the Companies Act were dismissed.

7 The Judge also found that Mr Tee’s conspiracy by unlawful means claim succeeded only in respect of the five contracts that were found to have been wrongfully diverted to YFX.

The court’s decision

8 The Court of Appeal held that the essence of a claim for relief under s 216 lies in upholding the commercial agreement between the shareholders of the company, irrespective of whether the agreement is founded in the company’s formal constitutional documents, in less formal shareholders’ agreements or, in the case of quasi-partnerships, in the legitimate expectations of the shareholders: at [29].

9 The Court of Appeal applied the framework in Ho Yew Kong v Sakae Holdings Ltd and other appeals and other matters [2018] 2 SLR 333 to determine whether the s 216 claim was founded on a personal or corporate wrong. This required the Court of Appeal to determine what Mr Tee’s legitimate expectations were qua shareholder of AFPL: at [40].

10 While the Court of Appeal adopted the Judge’s findings in respect of the unchallenged terms of the informal understanding, the Court disagreed that there was no agreement to close down YFX. Some degree of informality and flexibility in arrangements was to be expected in quasi-partnerships: at [44]-[46] and [54].

11 The Court of Appeal found that, by allowing YFX to continue to run existing contracts and take on new ones after AFPL was incorporated up to end April 2015, Mr Ng was preferring the interest of YFX over that of AFPL and acting contrary to Mr Tee’s legitimate expectations. As the parties reached an understanding in May 2015 that TFX need not be closed, the Court of Appeal allowed Mr Tee’s appeal in respect of the contracts which YFX had after AFPL’s incorporation up to end April 2015: at [58].

12 The Court of Appeal held that Mr Ng had a significant conflict of interest when he caused AFPL to forgo the Gillenia and Stellar RV contracts, especially given that he allowed YFX to profit from its acquisition of the foregone contracts. This constituted both a breach of his fiduciary duty to AFPL and a distinct personal wrong against Mr Tee. The Court of Appeal also affirmed the Judge’s findings that the five AFPL contracts from April to July 2016 were wrongfully diverted from AFPL to YFX: at [65] and [69].

13 The Court of Appeal found that it was wrong for Mr Ng to make AFPL pay YFX for the use of YFX’s workers while YFX made uncompensated use of AFPL’s labour. This breach of duty went beyond being a corporate wrong, and was oppressive to Mr Tee’s interests as a shareholder. The Court of Appeal also upheld the Judge’s order for an inquiry into the exact extent of YFX’s use of AFPL’s resources: at [75]-[76] and [79].

14 The Court of Appeal agreed with the Judge’s finding that, although Mr Ng’s procurement of supporting quotations from YFX was improper, it was not oppressive: at [89].

15 The Court of Appeal held that, considering the system of internal controls that Mr Ng, Mr Tee and Mr Ching had agreed to implement, it was oppressive for Mr Ng to remove Mr Tee as a bank signatory in June 2016: at [92].

16 The Court of Appeal found that any failure to declare dividends could not be attributed to Mr Ng and did not amount to oppressive conduct on his part. It also found that no loan was made from AFPL to Mr Ng: at [98] and [101].

17 The Court of Appeal ordered an inquiry into the damages payable to AFPL by Mr Ng for acting in breach of his fiduciary duty to AFPL in diverting its contracts to YFX and, in respect of the period from AFPL’s incorporation up to end April 2015 for allowing YFX to remain in existence and compete with AFPL, and for providing the use of AFPL’s resources and manpower to YFX without fee. The said inquiry shall be conducted in this action by Mr Tee but any damages found to be payable shall be paid by Mr Ng to AFPL and shall constitute a debt to AFPL. The Court of Appeal left it to the liquidators of AFPL to inquire as to any misconduct by YFX, Ms Kor or Mr Ng against AFPL: at [110].

18 The Court of Appeal found that Mr Tee’s claim in unlawful means conspiracy should not have been allowed as the conspiracy, if any, was directed at AFPL, not Mr Tee. It was for the liquidators, on behalf of AFPL, to investigate any allegations of unlawful means conspiracy: at [112]-[113].

19 The Court of Appeal held that it was improper for counsel for Mr Ng and YFX/Ms Kor to act for AFPL in CA 85, as a company in an oppression action should be separately represented from the alleged oppressor: at [114].

This summary is provided to assist in the understanding of the Court’s grounds of decision. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s grounds of decision.

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