APBA Pte Ltd v Seah Shiang Ping and others

• Jurisdiction: Singapore
• Judge: Ang Cheng Hock J
• Judgment Date: 25 September 2019
• Neutral Citation: [2019] SGHC 229
• Court: High Court (Singapore)
• Hearing Date: 20 August 2018,06 May 2019,13 August 2018,26 September 2018
• Docket Number: Originating Summons No 449 of 2018
• Plaintiff Counsel: Khoo Ching Shin Shem and Teo Hee Sheng, Christian (Focus Law Asia LLC)
• Defendant Counsel: Rajiv Nair (GKS Law LLC),The third defendant absent and unrepresented.
• Subject Matter: Companies,Members,Meetings,Lack of quorum
• Published date: 01 October 2019

Ang Cheng Hock J: Introduction

This is an application under s 182 of the Companies Act (Cap 50, 2006 Rev Ed) (the “Act”) by a company’s shareholder for leave of court for an Extraordinary General Meeting (“EGM”) of the company to be convened without the necessary quorum so that resolutions can be passed for the removal of two directors, who are also shareholders of the company.¹ The application is resisted by the two shareholder-directors who claim that they have a right to remain as directors of the company as long as they remain shareholders.²

This dispute arises in the context of a split between two factions of shareholders of the company, where multifarious allegations have been made by each side against the other, and where there is a separate application in Companies Winding Up No 78 of 2018 (“CWU 78/2018”) to wind up the company on the bases that it is just and equitable to do so and also that it is insolvent. CWU 78/2018 is the subject of a separate judgment, although the material facts in relation to that winding up application are essentially the same as that for the present application.

Background to the dispute

The plaintiff in these proceedings is APBA Pte Ltd, who holds 29.8% of the shareholding of the company in question,³ Connectus Group Pte Ltd (“Connectus Group”), which has been joined as the third defendant in these proceedings. The plaintiff is owned and controlled by one Ng Sing King, also referred to as Paul Ng (“PN”). PN is a director of Connectus Group.⁴

The first and second defendants are the two directors who are the subjects of the proposed resolution for removal. They are Seah Shiang Ping, also referred to as Stacey Seah (“SS”), and Seah Chee Wan, also referred to as Alex Seah (“AS”). The Seahs are siblings. Each of them owns 23.4% of the shareholding in Connectus Group.⁵ Since Connectus Group is a defendant in name only, the Seah siblings shall collectively be referred to as the defendants in this judgment.

The remaining shareholder is one Lim Meng Foo (“LMF”). He holds 23.4% of the shareholding in Connectus Group.⁶ His daughter-in-law, one Sharon Ong (“SO”), is his nominated director on the board of the company.⁷ Whether LMF is the beneficial owner of the shares registered in his name or whether he simply holds them on trust for his son, one Edwin Lim (“EL”), is the subject of other legal proceedings.⁸

In late 2017, the plaintiff and LMF convened an EGM under s 176(3) of the Act to pass the following resolutions:⁹ the removal of the defendants as directors of Connectus Group; and the appointment of one Ng Siew King, or a suitable candidate with Certified Public Accountant (“CPA”) qualifications, to the board of Connectus Group.

Ng Siew King is the sister of PN.¹⁰

An EGM was duly convened on 10 January 2018, with the plaintiff’s representative and LMF attending. The defendants absented themselves from that meeting.¹¹ The articles of association of Connectus Group require three members of the company to form a quorum.¹² This left the meeting inquorate and incapable of transacting any business of the company.

Undeterred, the plaintiff and LMF convened another EGM to pass substantially the same resolutions, save that there was a named alternative to Ng Siew King as the director to be appointed and that a further resolution was to be passed to the effect that Connectus Group’s cheque books would be kept in the joint custody of PN and SO.¹³

This second EGM was convened on 26 March 2018. Again, the defendants were absent, causing the meeting to be inquorate.¹⁴ Thus, the resolutions could not be considered and passed.

The plaintiff filed this application under s 182 of the Act for the court to order the convening of an EGM without the need to satisfy the quorum requirements under the company’s articles in order that the aforesaid resolutions can be considered and passed for the removal of the defendants as directors (Originating Summons No 449 of 2018 (“OS 449/2018”)).¹⁵

AS and SS then filed CWU 78/2018 seeking to wind up Connectus Group on the grounds (i) that the company is unable to pay its debts, and (ii) that it would be just and equitable for the company to be wound up. APBA opposed that application.

Both matters were fixed to be heard before me. I heard parties’ arguments in OS 449/2018 over several hearings. I reserved judgment until after I heard CWU 78/2018. The parties agreed that the evidence in CWU 78/2018 could be used in OS 449/2018 and vice versa. This is because the factual background to both applications is the same.

The full details of background to the various disputes between the parties are set out in my judgment issued in CWU 78/2018.

However, I should point out that several matters relevant to these present proceedings are not in dispute. First, even though he is not a party to the present proceedings, LMF has expressed his support for the proposed resolutions.¹⁶ Together with the plaintiff, they hold 53.2% of the shareholding of the company.¹⁷ The articles of association of the company provide that a director can be removed or appointed by an ordinary resolution of the shareholders.¹⁸ Thus, the proposed resolutions would have been passed if the EGMs had been quorate.

Second, it is not in dispute that the defendants’ absences at the EGMs were deliberate. The defendants’ solicitors had written to state that the defendants were exercising their “right” not to attend the EGM because the plaintiff and LMF were attempting to remove them as directors and this would be contrary to their entitlement to remain as directors of Connectus Group.¹⁹

The parties’ cases The plaintiff’s case

The plaintiff’s case is that the will of the 53.2% majority of Connectus Group is that the defendants be removed as directors of the company. The defendants have deliberately tried to frustrate the will of the majority by failing to appear at the EGMs to consider and pass the ordinary resolutions for their removal. As a result of their absence, the EGMs have been inquorate. This constitutes an impracticability to call a meeting to transact business in the manner as prescribed by the articles of association of the company.²⁰

As such, the plaintiff argues that the court should exercise its discretion under s 182 of the Act to order a meeting to be called where a quorum of two members would be sufficient. That would allow them to pass the resolutions to remove the defendants and also appoint a director of the plaintiff’s and LMF’s choosing.

The plaintiff submits that the court should exercise its discretion in its favour because there are good reasons to do so. First, the resolution to remove the defendants is supported by the majority of the shareholders, that is, the plaintiff and LMF.²¹ Second, the plaintiff cites instances where it is alleged that the defendants have been “actively acting against” the interests of Connectus Group.²² As an example, it alleges that the defendants have deliberately failed to take steps to repatriate the company’s share of profits earned by a joint venture in China to Singapore so that Connectus Group can pay off its debts.²³ In fact, the plaintiff goes further to claim that the defendants’ conduct has jeopardised Connectus Group’s claim to such profits from the joint venture in China.²⁴

Another instance cited by the plaintiff of the defendants’ conduct is their alleged complicity in permitting EL, then the Chief Executive Officer (“CEO”) of Connectus Group, to take numerous advances on his salaries and commissions from the company. This caused the company’s finances to deteriorate.²⁵

The plaintiff also claims that the company is deadlocked at the board and shareholders level because there are now two roughly equal factions of directors and shareholders who cannot agree as to the way forward for the company.²⁶ As such, it is argued that the court needs to intervene to break that deadlock.

Finally, the plaintiff rejects the defendants’ assertions that Connectus Group is essentially a quasi-partnership.²⁷ Hence, the defendants have no legitimate expectation to be entitled to remain as directors of the company just because they are shareholders. If the defendants believe that their interests have been disregarded or that the plaintiff is acting unfairly or in bad faith, they have recourse to other remedies in law for minority oppression.²⁸

The defendants’ case

The defendants describe the plaintiff’s application as an abuse of the process of the court because it has allegedly been brought for collateral purposes. This is because, according to the defendants, the plaintiff wants the court’s assistance to take over control of the board of Connectus Group.²⁹ It is argued that s 182 of the Act is not intended for such a purpose.

It is argued that the substantive rights of the shareholders cannot be overridden by s 182 of the Act, which is procedural in nature.³⁰ The defendants made some reference to a Shareholders Agreement signed between the parties on 12 November 2012 (“the SHA”), which grants them rights to each appoint a director to the board of Connectus Group, subject to certain qualifications which are not relevant here.³¹ However, it became clear from the submissions and evidence that the defendants accept that the SHA is no longer in force.

The defendants submit that Connectus Group is essentially a quasi-partnership, and hence they are entitled to participate in the management of the company.³² In support of this, the defendants cite a letter written by the plaintiff dated 5 August 2015 (“the August 2015 letter”) where, when faced with a proposed resolution at an upcoming EGM of Connectus Group for the removal of PN as a director, it is claimed that the plaintiff’s right to board representation is inextricably tied to its shareholding in the company.³³ The plaintiff also indicated in that letter that it was prepared to sell its stake in the company to the other...