Case Summaries

Suying Design Pte Ltd v Ng Kian Huan Edmund and other appeals [2020] SGCA 46

SUPREME COURT OF SINGAPORE

13 May 2020

Case summary

Suying Design Pte Ltd v Ng Kian Huan Edmund and other appeals [2020] SGCA 46
Civil Appeals Nos 71–73 of 2019

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Decision of the Court of Appeal (delivered by Justice Belinda Ang Saw Ean):

Outcome: CoA allows appeal against the High Court’s decision to allow the minority oppression claim of a minority shareholder and director who complained of acts of oppression after choosing to resign from the company.

1 This case involved cross-appeals against the decision of the High Court Judge (“the Judge”) in HC/S 867/2015 (“Suit 867”), which found that a claim for minority oppression under s 216 of the Companies Act (Cap 50, 2006 Rev Ed) (“a s 216 action”) had been made out.

Background to the appeal

2 The plaintiff in Suit 867 was Mr Ng Kian Huan, Edmund (“Mr Ng”). He was the sole shareholder and director of Metropolitan Office Experimental Pte Ltd (“MOX”). The third defendant was Ms Tan Teow Feng Patty (“Ms Tan”). She ran Suying Design Pte Ltd (“SDPL”), the second defendant. The first defendant was Suying Metropolitan Studio Pte Ltd (“SMSPL”), a company incorporated on 20 February 2012 by, inter alia, Ms Tan (who held 40% of its shares) and Mr Ng (who held 35% of its shares). Ms Tan and Mr Ng were also directors of SMSPL.

3 In Suit 867, Mr Ng claimed that Ms Tan acted in an oppressive manner by, inter alia, misappropriating SMSPL’s funds to herself and SDPL, withholding payments he was entitled to, and demanding that he return dividends and director’s fees previously paid to him. In his decision in [2019] SGHC 56, the Judge allowed a number of these claims, and found that a case of oppression had been made out against Ms Tan. He ordered SMSPL to be wound up, SDPL and Ms Tan to repay various sums of money to SMSPL, and SMSPL to pay certain sums to Mr Ng.

4 In CA/CA 71/2019 (“CA 71”) and CA/CA 72/2019 (“CA 72”), SDPL and Ms Tan respectively appeal against the Judge’s findings against them. In CA/CA 73/2019 (“CA 73”), Mr Ng cross-appeals against the Judge’s rejection of some of his claims.

The material facts

5 It was not disputed that Ms Tan and Mr Ng had agreed that after the incorporation of SMSPL, all new business from SDPL and MOX would be routed to SMSPL. The existing staff of SDPL and MOX would effectively join SMSPL. What was disputed, however, was the treatment of invoices issued by SDPL and MOX after SMSPL’s incorporation for their projects in existence prior to this date (“post-incorporation invoices”). For convenience, this dispute was termed the “Oral Agreement”.

a. Mr Ng’s version of the Oral Agreement was that all receivables for post-incorporation invoices were to be transferred to SMSPL after deducting expenses incurred by MOX and SDPL for their respective projects.

b. Ms Tan’s version of the Oral Agreement was that MOX and SDPL would retain their receivables for post-incorporation invoices but would reimburse SMSPL for the use of SMSPL’s resources in completing these projects.

6 When SMSPL was incorporated, it had been envisaged that Ms Tan would eventually retire. However, on 13 July 2015, Mr Ng informed Ms Tan that he intended to leave SMSPL. According to Mr Ng, he did so because he realised Ms Tan had no genuine intention of leaving SMSPL; their different working styles had caused a “rift”; and he wanted more time for personal commitments. Later that day, Ms Tan and Mr Ng met and agreed to close down the company.

7 On 15 July 2015, Ms Tan withdrew a total of $1,164,580 from SMSPL’s bank account. She later returned $492,580 which she claimed was paid by mistake. According to Ms Tan, the remaining $672,000 was her gratuity and adjusted pay for January to June 2015 (“the Gratuity Payments”). On 29 July 2015, Ms Tan signed off on nine debit notes from SDPL to SMSPL (“the Debit Notes”) for $1,642,510.99, and caused SMSPL to pay this amount to SDPL. According to Ms Tan, these were repayments of loans.

8 Mr Ng commenced Suit 867 on 27 August 2015. On 9 October 2015, Mr Ng filed an application in HC/OS 921/2015 (“OS 921”) to inspect the accounts and records of SMSPL as a director. In Mr Ng’s absence, an EGM was fixed for 8 January 2016 to remove Mr Ng as director. Mr Ng obtained an interim injunction to preserve his capacity as a director to proceed with OS 921. Mr Ng’s application in OS 921 was subsequently granted on 25 January 2016.

9 Mr Ng’s last day of work at SMSPL was 12 October 2015. SMSPL ceased operations in April 2016.

The decision on appeal

10 Where a minority shareholder’s loss is merely a reflection of the loss suffered by the company, the proper party to recover that loss is the company, and not the shareholder in a s 216 action. Although there are cases where what appears to be a corporate wrong can also be a personal wrong, the prerequisite is that a distinct injury is suffered by the shareholder. It must further be shown that the distinct injury amounts to commercial unfairness to the shareholder, assessed against the behaviour the shareholder is entitled to expect, whether arising from a formal document or an informal understanding: at [30], [32] and [34].

11 A minority shareholder cannot start a s 216 action simply because he wants to leave and take his investment in the company with him. He must be able to establish some conduct on which an oppression action may be grounded. At the same time, the fact that the minority shareholder seeks to withdraw from the company for reasons other than oppression is a useful cross-check – it may show that the oppression was not systemic or wide-ranging, or that the minority shareholder has brought the s 216 action for ancillary purposes: at [36].

12 In the present case, Mr Ng wanted to exit SMSPL with his investment but SMSPL’s articles did not easily allow for a sale of his shares. However, s 216 was not satisfied merely or primarily because a minority shareholder wished, for his own personal reasons, to leave the company but has no other means to do so. It was thus vital to consider whether the wrongs Mr Ng alleged provided sufficient basis on which to find minority oppression: at [41], [43] and [44].

Pre-13 July 2015 conduct

13 The court found that neither Mr Ng nor Ms Tan had established their version of the Oral Agreement:

a. Mr Ng’s pleaded case was not entirely consistent with his case at trial, and this tended to undermine the credibility of his version of the Oral Agreement: at [52].

b. Mr Ng’s version of the Oral Agreement made little commercial sense for Ms Tan. While Ms Tan had reasons for allowing Mr Ng some advantages, these attractions alone would not be sufficient given the magnitude of the monetary benefit to Mr Ng under his version of the Oral Agreement: at [54] and [57].

c. Ms Tan’s version of the Oral Agreement was equally not without difficulties, since she kept no proper records on which to base reimbursements, and took no account of the use of SMSPL’s non-manpower resources: at [59] and [60].

d. The evidence showed that SMSPL and SDPL’s staff had a poor grasp of their accounts, and adopted incorrect practices and inaccurate documentation surrounding transfers of money. The fact that the documentary evidence was so unsatisfactory and unreliable posed a significant problem in establishing the truth behind the disputed facts: at [67].

e. The parties argued that various transfers made to SMSPL were for purposes consistent with their version of the Oral Agreement. While the court found in favour of Ms Tan’s case on three sets of transfers, those findings did not strongly support her version of the Oral Agreement, as they did not conclusively show systemic reimbursement to SMSPL for MOX and SDPL’s use of its resources. The court did not find in favour of either party’s case for the remaining two sets of transfers from MOX and SDPL respectively, as no definitive conclusion could be reached as to their purpose. As a whole, the facts did not clearly indicate what Oral Agreement the parties actually acted in accordance with: at [92] and [93].

14 The paucity of reliable evidence in the present case was such that the Judge erred in preferring Mr Ng’s version of the Oral Agreement. Neither Mr Ng nor Ms Tan had discharged their respective burdens of proving their version of the Oral Agreement. There was therefore no Oral Agreement to breach: at [94] and [95].

Post-13 July 2015 conduct

15 Since no Oral Agreement had been established, Mr Ng failed to show that the purported loan repayments under the Debit Notes were wrongful: at [103].

16 The Gratuity Payments to Ms Tan were not justified. However, while Mr Ng, as a shareholder, may have been entitled to expect that SMSPL’s funds would not be siphoned away, the breach of this expectation did not in itself constitute a distinct injury to a shareholder in a s 216 action. The wrongdoing was to the company: at [107], [112] and [114].

17 Although Ms Tan and SMSPL had denied Mr Ng access to SMSPL’s financial documents, Mr Ng was seeking these documents in his capacity as a director rather than a shareholder; conduct complained of in a s 216 action must affect the shareholder in his capacity as shareholder: at [122] and [123].

18 Mr Ng had not been wrongfully excluded from decision-making in SMSPL from October 2015. By this point, Mr Ng had resigned from SMSPL and left its active management. The parties had also agreed on 13 July 2015 that SMSPL would be wound up. The attempt to remove Mr Ng as director was not oppressive, since he was by then a director in name only. The making of adjustments to SMSPL’s accounts without consulting Mr Ng was also not oppressive, since in the course of SMSPL’s liquidation any potential claims would have been appropriately and adequately dealt with. Where the business is at an end and intended to be wound up, any propensity to disregard the minority’s interests would carry less weight since the interposing of a liquidator in the process would provide a check on the majority’s conduct: at [128], [129], [131], [133] and [134].

19 Ms Tan’s demands for Mr Ng to repay his director’s fees and dividends received from SMSPL were not made in good faith, but they were not oppressive, since they were bare demands which Mr Ng did not comply with. Ms Tan and SMSPL’s refusal to pay him the unpaid balance of his director’s fee for 2013 and his pro-rated salary for October 2015 was also not oppressive, since any debts owed by SMSPL to Mr Ng would have been resolved in the process of winding up SMSPL: at [136] and [138].

20 Consequently, Mr Ng was not the proper plaintiff to bring any of the claims against Ms Tan or SDPL that were for loss caused to SMSPL. All of the Judge’s orders in relation to Mr Ng’s oppression claim were therefore set aside, except for the orders made by the Judge against SMSPL, which did not file an appeal – these were claims Mr Ng was entitled to bring outside of a s 216 action. CA 71 and CA 72 were therefore allowed in part, and CA 73 was dismissed: at [140][143].

 

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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