Bamian Investments Pte Ltd v Lo Haw and others
Jurisdiction | Singapore |
Judge | Audrey Lim JC |
Judgment Date | 11 July 2017 |
Neutral Citation | [2017] SGHC 166 |
Court | High Court (Singapore) |
Docket Number | Suit No 320 of 2015 |
Published date | 28 March 2018 |
Year | 2017 |
Hearing Date | 30 March 2017,28 March 2017,05 April 2017,29 March 2017,06 April 2017,17 May 2017,31 March 2017 |
Plaintiff Counsel | Gan Theng Chong and Yik Shu Ying (Lee & Lee) |
Defendant Counsel | Woo Tchi Chu and Lim Rui Cong Roy (Robert Wang & Woo LLP) |
Subject Matter | Companies,Directors,Duties,Civil Procedure,Costs |
Citation | [2017] SGHC 166 |
The plaintiff sought a declaration that the first and second defendants had breached their duties as directors of the plaintiff with respect to two general meetings of shareholders of Guangzhou Mayer Corporation Limited (“GMayer”) held in 2014, and the resolutions passed at those meetings. The plaintiff, which was the majority shareholder of GMayer, also claimed damages arising from the alleged breach. The trial was bifurcated and first proceeded on the issue of liability against the first defendant, as the second defendant passed away in April 2015 and the plaintiff could not serve the writ on his estate. After hearing the parties and considering the evidence before me, I found that the first defendant had breached his duties as a director of the plaintiff. The first defendant has appealed against my decision.
BackgroundThe relationship between the plaintiff, GMayer, and other relevant corporate bodies at the material time in 2014 was as follows.1 Mayer Steel Pipe Corporation (“Mayer Taiwan”) wholly owned Mayer Corporation Development International Limited (“Mayer BVI”). Mayer BVI in turn owned 21.56% of Mayer Holdings Limited (“Mayer HK”). Mayer Taiwan therefore indirectly owned 21.56% of Mayer HK through its shares in Mayer BVI until 19 August 2014, when Mayer BVI’s 21.56% shareholding in Mayer HK was transferred to two entities, Bumper East Ltd (“Bumper”) and Aspial Investment Ltd (“Aspial”). Mayer HK wholly owned the plaintiff, which in turn held an 81.4% shareholding in GMayer.
The background details relating to the plaintiff and GMayer were largely narrated by the first defendant (“Lo”) who has been involved in both entities since their incorporation. Mayer Taiwan was bought over in 1972 by Lo’s father and the second defendant (“Wu”). Lo’s father became the company’s chairman and Wu its general manager. Lo joined Mayer Taiwan in 19952 as an “administration specialist”3. Wu became the chairman of Mayer Taiwan when Lo’s father stepped down and remained a director of Mayer Taiwan until his passing.
In 1996, Lo and one Shen Heng-Chiang (“Shen”) went to Guangzhou, China, to set up a steel pipe manufacturing plant4. The plant was owned by a Guangzhou entity, now GMayer, which was originally incorporated in 1997 as Guangzhou Mayer Metal Corporation (“GMayer Metal”). GMayer Metal was wholly owned by Mayer Taiwan through the plaintiff, a shell company.5 When GMayer Metal was incorporated, the plaintiff appointed Lo and Wu as GMayer Metal’s directors6; Wu and Lo were appointed the chairman and vice chairman respectively7. Lo and Wu were concurrently directors of the plaintiff from 15 January 1997 until they were removed from their respective positions on 31 December 2014. The plaintiff also issued a letter of authorisation to authorise Wu to “sign on all documents relating to the Shareholders’ Meeting of [GMayer] on [the plaintiff’s] behalf”.8
In around May or June 2002, GMayer Metal became a sino-foreign equity joint venture enterprise.9 The plaintiff’s 100% shareholding in GMayer Metal was reduced to 77.52%, while the remaining shares became owned by six minority shareholders. One of these minority shareholders was WHI Limited (“WHI”), a company which was 49% owned by Lo, and which held 6.4% of GMayer Metal. The terms of the joint venture were set out in a contract executed by the plaintiff and the six minority shareholders (“GMayer Metal JV Contract”). That contract named Wu as the plaintiff’s legal representative in GMayer Metal10 and provided that GMayer Metal’s board of directors would comprise five directors appointed by the plaintiff and one by WHI. Lee Kwok Leung (“Lee”), the plaintiff’s current chairman, explained that the purpose was to “safeguard the interest of the investment company and majority shareholder [of GMayer Metal]”.11
In around October 2002, GMayer Metal was reincorporated as GMayer.12 The plaintiff’s shareholding in GMayer subsequently increased to 81.4% and WHI continued to have a 6.4% share in GMayer. Based on the agreement reincorporating GMayer (“GMayer Agreement”)13, Wu was appointed the plaintiff’s legal representative. The plaintiff and WHI also jointly nominated Lo, Wu and four others as members of the first board of directors of GMayer for a term of three years.14 According to Lo, Wu remained the plaintiff’s legal representative and authorised signatory for all shareholders’ meetings of GMayer until his demise, and WHI’s legal representative and authorised signatory was one Shi Shu Ping (“Shi”).15 With GMayer’s reincorporation, Lo became its chairman, and Wu remained a director.16 The day to day running of GMayer was left to Lo and Shen (the general manager) whilst Wu continued to run Mayer Taiwan’s business. When Lo’s first term as director of GMayer ended, he was re-nominated solely by WHI to be GMayer’s director in 2006 and in 2010, whilst the plaintiff re-nominated Wu and four others as its representatives on GMayer’s board. Lo remains the chairman of GMayer today.
Around 2004, Mayer Taiwan decided to list GMayer on the Hong Kong Stock Exchange through Mayer HK, a shell company.17 Mayer Taiwan’s interest in Mayer HK was restructured to be held by Mayer BVI as an intermediary. Essentially, Mayer BVI, Mayer HK and the plaintiff were shell companies meant to facilitate Mayer Taiwan’s ultimate interest in GMayer18. Lo explained that the real manufacturing assets were concentrated in GMayer19, and Lee stated that GMayer was the only company (among GMayer, Mayer HK and the plaintiff) which was in active trade and business20.
By 2003, one Huang family in Taiwan had become the largest single shareholder of Mayer Taiwan. With diminished shareholding, Wu stepped down as chairman of Mayer Taiwan in 2004 but retained his seat on the board. He was also given the title of honorary chairman in recognition of his invaluable contributions to Mayer Taiwan, a title he retained until his passing.21 Around 2012, Lo fell out with the Huang family and was not re-elected as a director of Mayer Taiwan in 2013. However, he kept his title as “administration specialist” to preserve his pension entitlements. Since then, Lo has been working almost exclusively at GMayer with Shen to expand its business.
The plaintiff’s caseThe plaintiff’s case was set out by Lee, its director and chairman since 31 December 201422. From 2013, Mayer HK started facing problems with GMayer. Primarily it was unable to obtain the cooperation of GMayer’s management to conduct an annual audit of GMayer, despite numerous attempts. On 23 April 2014, the plaintiff’s board of directors passed a resolution to take appropriate legal action to protect its rights given GMayer’s failure to cooperate and comply with the audit requirements. Lo and Wu were not present at this meeting. The plaintiff’s lawyers then wrote to GMayer on 30 April 2014 to inform it to cooperate and assist Mayer HK’s auditors with the annual audit.23 However, GMayer refused to do so.
First general meeting of 30 May 2014 Shortly after, GMayer held a general meeting of shareholders on 30 May 2014, in Guangzhou, China (“the First GM”). Lee claimed that the plaintiff did not receive any notification of that meeting.24 At the First GM, a resolution to amend the Articles of Association of GMayer (“the Articles”) was passed (“the First Resolution”). In particular25:
The plaintiff asserted that the First Resolution was passed as part of Lo and Wu’s wrongful plan to seize, maintain and consolidate their control over GMayer and their power to approve investments and related transactions without the need for the plaintiff’s approval. This was to the plaintiff’s detriment. Before Articles 61 and 66 of the Articles were amended, the plaintiff (as the 81.4% shareholder of GMayer) was by itself able to pass special resolutions and resolutions regarding the appointment and removal of GMayer’s directors. With the amendments, the plaintiff had lost the ability to do so, and so the amendments had effectively and substantially decreased the plaintiff’s control of GMayer. Moreover the amended Articles 41 and 61 now required general meetings of shareholders to be held in GMayer’s office in China, and proxy votes would no longer be counted for the purposes of passing special resolutions. This consolidated the power of GMayer in China and made it more difficult for the plaintiff to be involved in its business on a shareholder level. Finally, the amended Articles 92.viii.b and 92.viii.c vested more power in GMayer’s directors to deliberate and approve...
To continue reading
Request your trial