Credit Development Pte Ltd v IMO Pte Ltd

• Jurisdiction: Singapore
• Judge: Lim Teong Qwee JC
• Judgment Date: 18 January 1993
• Neutral Citation: [1993] SGHC 13
• Citation: [1993] SGHC 13
• Date: 18 January 1993
• Published date: 19 September 2003
• Plaintiff Counsel: Philip Jeyaretnam (Helen Yeo & Partners)
• Docket Number: Originating Summons No 809 of 1992
• Defendant Counsel: Chua Lee Ming (Lee & Lee)
• Court: High Court (Singapore)
• Year: 1993

Credit Development Pte Ltd (`the company`) is a private company incorporated in Singapore. According to information from documents filed in the Registry of Companies disclosed in the instant information printout dated 11 September 1992, its issued capital was $29,437,500 in fully paid shares of $1 each. About 53% of the issued capital was held by or beneficially owned by companies controlled by Overseas Trust Bank Ltd (`OTB`) of Hongkong which collapsed in 1985. Another 33% was held by Richman Associates Ltd (`RAL`), a company incorporated in the British Virgin Islands. Since 7 May 1991, the date of the last annual return filed, about 43% of the shares have been transferred by the OTB-controlled companies to RAL giving RAL more than 76% control of the company. There was a new issue and RAL further increased its holdings and at the date of hearing of this originating summons RAL probably had more than 80% control of the company. RAL is also controlled by OTB. At least two of the former directors of the company were employees of OTB. As disclosed in the instant information printout the directors are Mr Tong and Mr Pei of Hongkong and Mr Woo of Singapore who is an advocate and solicitor. All were appointed on 20 August 1991.

IMO Pte Ltd (`IMO`) holds about 7% of the issued capital of the company. It had good reason to be dissatisfied with the way the business of the company was managed. In 1987 the company in general meeting resolved to authorize the directors to create a legal mortgage in favour of OTB to secure liabilities of some of its customers but without any apparent benefit or advantage to the company. OTB-controlled shareholders voted their shares over the legitimate objections of IMO and it was only after IMO had petitioned the court for relief under s 216 of the Companies Act (Cap 50, 1990 Ed)(`the Act`) that the mortgage was discharged. In 1991 Barrow Investments Ltd (`Barrow`), a Hongkong company in liquidation, claimed $7.5m against the company and the claim was settled for $7m. OTB was the major creditor of Barrow and one of its employees who was then a director of the company was concerned in the settlement. The settlement was approved by the company in general meeting when OTB-controlled shareholders voted their majority shares again over the objections of IMO. There were other reasons for dissatisfaction given in the affidavit of a director of IMO.

On 20 April 1992, IMO sent this written requisition to the directors of the company:

Ordinary resolutions

We, the undersigned, being members of the company representing not less than 5% of the total voting rights of all members having a right to vote, in pursuance to s 183 of the Companies Act (Cap 50) hereby require you to give members of the company entitled to receive notice of the next annual general meeting, notice of the following ordinary resolutions which may properly be moved and are intended to be moved at that meeting: ...

There were five resolutions of which notice was given. The first was to appoint a firm of certified public accountants (one of the `big` firms in Singapore) to carry out 17 assignments of investigating and reporting or investigating, reporting and recommending or investigating, reporting and advising substantially in relation to loans and movement of funds involving OTB and its related companies and the conduct of the company`s directors. The second resolution was to appoint a firm of solicitors (one of the larger firms in Singapore) to carry out ten assignments. These were to investigate, report and advise on actions against former directors in relation to their conduct in the management of the business of the company and against OTB and other parties in relation to property comprised in the mortgage which was subsequently discharged and also to report on the status of the action by Barrow against the company. The third resolution required the former and present directors to give reasons for their refusal to allow minutes of directors` meetings and resolutions of directors to be inspected by members of the company. The fourth resolution required the former and present directors to give reasons for approving the transfer of shares in the company to RAL. The fifth resolution required the former and present directors to disclose their relationships with OTB and its related companies, majority shareholders and their liquidators. On 21 May 1992 IMO sent another written requisition in the same terms and giving notice of two resolutions to be moved at the next annual general meeting. The first was for full disclosure of the terms of settlement with Barrow to be laid before the members and the second resolution was for an unsigned loan agreement dated 28 December 1984 between the company and Barrow to be laid before the members. The Barrow claim and settlement are included in the assignments to be carried out by the accountants and solicitors proposed to be appointed in the resolutions of which notice was given in the earlier requisition.

On 17 July 1992, the company by its director Mr Tong replied to the requisitions. He said the directors had considered the requisitions carefully and declined to include the resolutions in the agenda of the next annual general meeting. The main reason given was that these matters came within the purview of the directors and a general meeting was not the proper forum to deliberate on these matters. Other reasons were also given in the letter. Having decided not to include any of the resolutions in the agenda of the next annual general meeting, the directors took out this originating summons in the name of the company to ask whether the company was bound to give its members notice of the resolutions and to table these resolutions at the next annual general meeting or any other general meeting and for further or other relief. An order for costs of the application to be taxed and paid by IMO to the company was also sought. I decided that the answer to the question asked was `Yes` in respect of the first and second resolutions in the requisition dated 20 April 1992 and `No` to the other resolutions and ordered the company to pay costs. The company now appeals against this decision.

Section 183 of the Act provides:

(1) Subject to this section, a company shall on the requisition in writing of such number of members of the company as is specified in subsection (2) and, unless the company otherwise resolves, at the expense of the requisitionists -

(a) give to members of the company entitled to receive notice of the next annual general meeting notice of any resolution which may properly be moved and is intended to be moved at that meeting; and

(b) ...

(2) The number of members necessary for a requisition under subsection (1) shall be -

(a) any number of members representing not less than 5% of the total voting rights of all the members having at the date of the requisition a right to vote at the meeting to which the requisition relates; or

(b) ...

...

(6) Notwithstanding anything in the company`s articles, the business which may be dealt with at an annual general meeting shall include any resolution of which notice is given in accordance with this section, and for the purposes of this subsection notice shall be deemed to have been so given notwithstanding the accidental omission, in giving it, of one or more members.

Article 88 of the articles of association of the company provides:

(1) The business of the company shall be managed by the directors, who may exercise all such powers of the company as are not, by the statutes or by these articles, required to be exercised by the company in general meeting, subject nevertheless to the provisions of the statutes, these articles and to such regulations, being not inconsistent with the said provisions and articles, as may be prescribed by the company in general meeting; but no regulation made by the company in general meeting shall invalidate any prior act of the directors which would have been valid if that regulation had not been made.

Article 88(1) is in terms almost identical with reg 73 of Table A in the Fourth Schedule to the Act.

Article 1 provides:

The regulations in Table `A` in the First Schedule to the Companies Ordinance

(Cap 174), shall not apply to the company except so far as the same are repeated or contained in these articles.

By art 2 the expression `the statutes` means `every Ordinance or Act of Parliament for the time being in force concerning banking and joint stock companies and affecting the company` and `these articles` means `these articles of association or other regulations of the company, for the time being in force`.

Division of powers and s 183

Section 183(1) requires the company to give notice of `any resolution which may properly be moved`. Unlike s 183(6) it is not expressed to be `notwithstanding anything in the company`s articles`. What resolution may properly be moved? It is not in dispute that all the other requirements of s 183 are satisfied. The Act gives no definition and there are no authorities on the question. Mr Jeyaretnam referred to a note in Magnus and Estrin on Companies Law and Practice (5th Ed) at p 154n on a similar provision in the English legislation:

Resolution which may properly be moved. As to different types of resolution see

ss 141, 142. A resolution is not valid and is therefore not one which may properly be moved (i) if it is ultra vires; or (ii) if it is in respect of a matter which requires a particular type of resolution and the resolution is not of that type, eg where a special resolution is required, an ordinary or extraordinary resolution will not be valid; or (iii) if it is contrary to public policy.

He said there was a fourth category. He said that a resolution which trespassed into the domain of the directors and was not valid and which when passed the directors would not have to obey was...