Actis Excalibur Ltd v KS Distribution Pte Ltd and others

• Jurisdiction: Singapore
• Judge: Colin Seow AR
• Judgment Date: 31 October 2016
• Neutral Citation: [2016] SGHCR 11
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 788 of 2016 (Summons No 4103 of 2016)
• Published date: 01 November 2016
• Year: 2016
• Hearing Date: 20 September 2016
• Plaintiff Counsel: Thio Shen Yi SC, Kelvin Koh and Niklas Wong (TSMP Law Corporation)
• Defendant Counsel: Mahesh Rai and Jeremy Yeap (Drew and Napier LLC)
• Subject Matter: Courts and Jurisdiction,High Court,Judicial Precedent,Civil Procedure,Joinder of Parties
• Citation: [2016] SGHCR 11

Colin Seow AR: Introduction

This judgment relates to Summons No 4103 of 2016 (“the Application”), which is an application taken out by one Kris Taenar Wiluan and one Richard James Wiluan (“the 1st Putative Defendant” and “the 2nd Putative Defendant” respectively) seeking leave to intervene in Originating Summons No 788 of 2016 (“OS 788/2016”).

OS 788/2016 is an application taken out by Actis Excalibur Limited (“the Plaintiff”) seeking, inter alia, leave of court under section 216A of the Companies Act (Cap 50, 2006 Rev Ed) (“the Act”) to “bring actions in the name and on behalf of” KS Distribution Pte Ltd (“KS Distribution”), Aqua-Terra Oilfield Equipment & Services Pte Ltd (“ATOES”) and SSH Corporation Ltd (“SSH”) (collectively “the Companies”) against the Putative Defendants for “breaches of fiduciary and directors’ duties” owed to the Companies.

Brief background of the dispute

The Plaintiff is a 44.65% shareholder of KS Distribution, which is a joint venture company set up by the Plaintiff and another company known as KS Energy Ltd (“KS Energy”). Both the 1st and 2nd Putative Defendants are, in among other capacities, KS Energy’s nominee directors in KS Distribution.

According to the Plaintiff, ATOES and SSH are companies which are effectively wholly owned by KS Distribution. It has also been alleged by the Plaintiff in its supporting affidavit filed under OS 788/2016 that (a) both the 1st and 2nd Putative Defendants are the de facto directors of ATOES, (b) the 1st Putative Defendant is a de facto director of SSH, and (c) the 2nd Putative Defendant is a director of SSH.

Very broadly as can be gleaned from its supporting affidavit filed under OS 788/2016, the Plaintiff appears to be contending, inter alia, that KS Distribution, ATOES and SSH have, under the 1st and 2nd Putative Defendants’ management and control, been entering into undeclared and illegitimate “related party transactions” with entities related to the 1st and 2nd Putative Defendants. In this regard, the Plaintiff alleges that its contentions are backed by a public accountant’s preliminary report issued on 15 July 2016 (“KordaMentha Preliminary Report”) and which “reveals numerous breaches of fiduciary duties” by the 1st and 2nd Putative Defendants.

In OS 788/2016, the Plaintiff thus seeks, inter alia, leave to commence an action against the 1st and 2nd Putative Defendants under section 216A of the Act, the material parts of which read as follows:

Derivative or representative actions

216A.—(1) In this section and section 216B —

“complainant” means — (a) any member of a company; (b) the Minister, in the case of a declared company under Part IX; or (c) any other person who, in the discretion of the Court, is a proper person to make an application under this section.

(2) Subject to subsection (3), a complainant may apply to the Court for leave to bring an action or arbitration in the name and on behalf of the company or intervene in an action or arbitration to which the company is a party for the purpose of prosecuting, defending or discontinuing the action or arbitration on behalf of the company.

(3) No action or arbitration may be brought and no intervention in an action or arbitration may be made under subsection (2) unless the Court is satisfied that — (a) the complainant has given 14 days’ notice to the directors of the company of his intention to apply to the Court under subsection (2) if the directors of the company do not bring, diligently prosecute or defend or discontinue the action or arbitration; (b) the complainant is acting in good faith; and (c) it appears to be prima facie in the interests of the company that the action or arbitration be brought, prosecuted, defended or discontinued.

[…]

For completeness, it should be mentioned that, as at the date of this judgment, OS 788/2016 is still pending fixing before a High Court Judge for determination.

The parties’ arguments in the Application

As mentioned earlier, the Application before me relates to the 1st and 2nd Putative Defendants seeking leave to intervene in OS 788/2016. In their affidavits filed in support of the Application, the 1st and 2nd Putative Defendants argue, inter alia, that they “should be given a timeous opportunity to respond to the Plaintiff’s allegations” against them, and that denying them an opportunity to respond to those allegations at this juncture would be unfair and prejudicial to them. In particular, they highlighted that the intended purpose of their intervention at this stage of the proceedings is so that they could adduce evidence in OS 788/2016 to demonstrate the following: that many of the Plaintiff’s allegations against the 1st and 2nd Putative Defendants, including allegations arising from the KordaMentha Preliminary Report, are baseless and unsustainable; that it is plainly not in the interest of KS Distribution, ATOES and SSH to commence the Plaintiff’s intended action against the 1st and 2nd Putative Defendants, not least because OS 788/2016 has prayed, among other things, for an order that the Companies “pay the legal fees and disbursements incurred by the Plaintiff in connection with the [proposed actions] on an indemnity basis” ; and that the Plaintiff’s application in OS 788/2016 is not taken out in good faith.

In submissions, counsel for the 1st and 2nd Putative Defendants put forth several legal arguments which may be broadly summarised into the following: the Application is taken out pursuant to O 15 r 6(2)(b)(ii) of the Rules of Court (Cap 322, R 5, 2007 Rev Ed) (“the ROC”) where the applicable test, as elucidated by the Court of Appeal in Attorney-General v Aljunied-Hougang-Punggol East Town Council [2016] 1 SLR 915 (“AG v AHPETC”), is that of (i) the question or issue between one of the parties and the proposed intervener must be linked, factually or otherwise, to the relief or remedy claimed in the cause or matter, and (ii) it would be “just and convenient” to permit an intervention; there is a preponderance of past High Court decisions demonstrating the readiness of the High Court in allowing putative defendants to intervene or appear in applications taken out pursuant to section 216A of the Act. Several decisions of High Court Judges were cited by counsel in this regard: see Chan Tong Fan and another v Chiam Heng Luan Realty Pte Ltd (Chiam Toon Tau and another, non-parties) [2013] SGHC 192 at [17], Chan Tong Fan v Sloan Court Hotel Pte Ltd (Chiam Toon Tau and another, non-parties) [2013] SGHC 193 at [9], Tak Chuen v Eden Aesthetics Pte Ltd and another (Khairul bin Abdul Rahman and another, non-parties) [2010] 2 SLR 667 at [8], Law Chin Eng and Another v Hiap Seng & Co Pte Ltd (Lau Chin Hu and others, applicants) [2009] SGHC 223 at [6], and Low Hian Chor v Steel Forming & Rolling Specialists Pte Ltd and another [2012] SGHC 10 at [11]. (At this juncture, I should also mention that counsel also cited the cases of Fong Wai Lyn Carolyn v Airtrust (Singapore) Pte Ltd and another [2011] 3 SLR 980, Kwee Lee Fung Ivon v Gordon Lim Clinic Pte Ltd and another [2013] SGHC 65, Lee Seng Eder v Wee Kim Chwee and others [2014] 2 SLR 56, Wong Lee Vui Willie v Li Qingyun and another [2015] 1 SLR 696 and Yeo Sing San v Sanmugam Murali and another [2016] SGHC 14 for support in this regard. However, these latter cases do not, in my view, give much mileage to counsel because in all those cases, the directors in question were right from the outset already joined by the plaintiffs as co-defendants with the companies involved when applications under section 216A of the Act were taken out); although an Assistant Registrar (“AR”) is not bound by decisions of High Court Judges, an AR should not depart from such decisions unless there are strong and compelling reasons for the AR to do so; and in any event, this court should alternatively allow the Application under O 92 r 4 of the ROC in the exercise of its inherent powers.

On the other hand, the key legal arguments advanced by counsel for the Plaintiff can be broadly summarised as follows: the proper test to be applied in respect of O 15 r 6(2)(b)(ii) of the ROC is that of whether the 1st and 2nd Putative Defendants are “necessary” or “proper” parties to the proceedings in OS 788/2016, as supported by the Court of Appeal’s decision in Wee Soon Kim Anthony v Law Society of Singapore [2001] 2 SLR(R) 821 and the High Court’s decision in Tan Yow Kon v Tan Swat Ping and others [2006] 3 SLR(R) 881; the framework and rationale underpinning section 216A of the Act would be undermined if the 1st and 2nd Putative Defendants were to be allowed to intervene at the leave stage and make the hearing of OS 788/2016 a rehearsal of their arguments in opposition to the proposed substantive derivative action; the string of High Court decisions relied upon by the 1st and 2nd Putative Defendants do not demonstrate any reasoning or grounds as to why leave allowing putative defendants to intervene or appear in applications taken out pursuant to section 216A of the Act were granted in those instances. There is therefore no ratio decidendi of any past High Court judgments which compels this court to grant leave allowing the 1st and 2nd Putative Defendants to intervene in OS 788/2016. In any case, as a matter of principle, an AR is not bound by decisions of High Court Judges; and in any event, this court should not allow the Application on the alternative basis of O 92 r 4 of the ROC given that the touchstone of “need” has not been met on the facts of the case.

Primary issues of law to be determined in the Application

Given the parties’ legal arguments above, the primary issues of law for determination in the Application are as follows: What precedential status, if any, should be accorded by an AR to decisions of High Court Judges in respect of a matter to be determined by the AR? What is the appropriate test to be applied under O...