Agus Irawan v Toh Tech Chye and Others

• Jurisdiction: Singapore
• Judge: Choo Han Teck JC
• Judgment Date: 15 March 2002
• Neutral Citation: [2002] SGHC 49
• Docket Number: Originating Summons No 600868 of (Summons in Chambers No 602624 of 2001)
• Date: 15 March 2002
• Year: 2002
• Published date: 19 September 2003
• Plaintiff Counsel: Angelina Hing (Engelin The Practice LLC)
• Citation: [2002] SGHC 49
• Defendant Counsel: Thio Ying Ying and Andrew Lim Kwee Huat (Kelvin Chia Partnership),Cavinder Bull and Siraj Omar (Drew and Napier LLC)
• Court: High Court (Singapore)
• Subject Matter: Plaintiff seeking leave to bring derivative action in company's name against directors for breach of fiduciary duties,Requirement of 'good faith',Whether plaintiff acting in good faith,Rights,Members,Whether prima facie in interests of company that action be brought,s 216A Companies Act (Cap 50, 1994 Ed),Whether burden on applicant to prove good faith,Plaintiff claiming company entitled to certain rebates,Whether plaintiff shown prima facie case that company entitled to rebates,Companies,Derivative actions

Judgment

GROUNDS OF DECISION

1. This is an application by the plaintiff for leave to commence a derivative action in the name of the third defendant company against the first and second defendants. The plaintiff as well as the first and second defendants were at the material times, directors of the third defendant. The thrust of the plaintiff's application is founded on breach of fiduciary duties of directors. The subject matter were payments made in 1997 and 1998 by the Australian Wheat Board (later renamed and reconstituted as the Australian Wheat Board Limited) by way of rebates known as "volume rebates" for the purchase of wheat by the third defendant from them. Nothing significant turns on the change of name of the Australian body so it may conveniently be referred to as the Australian Wheat Board. The plaintiff claims that the third defendant company, as the customer of the Australian Wheat Board, was the rightful party entitled to these rebates but it never received them because the Australian Wheat Board gave the rebates to various other parties on the instructions of the first defendant and one Tom Goh, a manager of the third defendant. The third defendant was not a party when the plaintiff took out this application. Counsel for the company asked for leave to make submissions on behalf of the company. Leave was refused since the company was not a party to the proceedings. Consequently, an application was made and the company became the third defendant in these proceedings.

2. Mr. Lim appearing on behalf of the first and second defendants oppose the plaintiff’s application on two grounds. First, he says that the third defendant was not entitled to the rebates; and secondly, that the application must fail because the plaintiff himself consented to the rebates being paid to some external parties, and thus he has not acted in good faith when he brought the present proceedings before the court. Mr. Bull, on behalf of the third defendant, made a similar submission in opposing this application. In support of their respective positions, the parties filed numerous and lengthy affidavits. Notwithstanding that, Mr. Lim sought leave to file some more affidavits to refute "serious and wrongful assertions of facts" by the plaintiff. He also submitted that cross-examination of some deponents would be necessary for the court to determine who speaks the truth. I shall address these points shortly, but first, it will be helpful to lay down some relevant details.

3. The plaintiff was a major shareholder of the third defendant and was one of its directors until his removal in August 2000, the reason for which he claims, was to prevent him from making further inquiry into the rebate payments in question. He is presently a 40% shareholder of the third defendant. The first defendant now holds 20% of the shares and a company called Intermilling Hong Kong Limited holds the remaining 40% shares and whose interests are being represented by the second defendant on the board of directors of the third defendant. The plaintiff avers that the third defendant began purchasing wheat from the Australian Wheat Board in 1997 and it was only in late December 1999 that he discovered that rebates were paid to customers and that the third defendant enjoyed rebates of US$1.75 per metric tonne in 1997 and US$2.25 per metric tonne in 1998. However, he learnt from James Dewan, the regional marketing manager of the Australian Wheat Board, that the rebates amounting to US$950,000 were paid to third party bank accounts (one of which was said to be in Hong Kong) on the instructions of the first defendant. Consequently, in June 2000, the plaintiff through his solicitors demanded to inspect the third defendant's accounts. Instead, he was removed as a director on 11 August 2000 and was denied access to the accounts.

4. The first and second defendants initially denied that the third defendant was entitled to any rebate from the Australian Wheat Board. They also deposed that the company purchased wheat for an Indonesian entity known as BULOG (an acronym for Banda Urusan Logistik) and that if any rebate was given it would have been rightfully given to BULOG. On my direction, parties obtained the evidence from the Australian Wheat Board. It wrote a letter dated 8 November 2001 to the plaintiff stating that Citra Flour Mill was its customer from 1997 to 1999. The Australian Wheat Board also stated in its 8 November letter that it paid rebates to whichever account as may be instructed by the first defendant or Tom Goh. It also said that the Australian Wheat Board did not know what relationship BULOG had with the third defendant and neither did it have any dealings with BULOG. The said letter suggested that rebates due to Citra Flour Mill in 1997 and 1998 were paid Mitsubishi Australia Limited, and a company called Gismo Investments Limited, a company in which the first defendant was also a director until 21 August 2001. In addition to these rebates, which were known as "volume rebates", the Australian Wheat Board also gave "price rebates" on the price of wheat sold. The plaintiff avers that these price rebates, like the volume rebates, were also paid to unauthorized third party accounts when they ought rightfully be paid to the third defendant. The price rebates came to a sum of US$9,168,083.33 and were paid to a company called Milling Consultants which is owned by the first defendant and his wife.

5. The first and second defendants' version of the...