Golden Harvest Films Distribution (Pte) Ltd v Golden Village Multiplex Pte Ltd
| Jurisdiction | Singapore |
| Judge | Chan Sek Keong CJ |
| Judgment Date | 21 December 2006 |
| Neutral Citation | [2006] SGCA 44 |
| Court | Court of Appeal (Singapore) |
| Year | 2006 |
| Published date | 12 January 2007 |
| Plaintiff Counsel | Chan Kia Pheng and Koh Kang Ming Shaun (KhattarWong) |
| Defendant Counsel | Ling Daw Hoang Philip (Wong Tan & Molly Lim LLC) |
| Subject Matter | Companies,Directors,Meetings,Board of directors of joint venture vehicle comprising two groups of three directors each,Each group nominated by different party to joint venture,One group of directors walking out of meeting,One of remaining three directors at meeting appointing himself as chairman,Remaining three directors passing resolution,Whether appointment of chairman irregular,Whether meeting not invalidated by irregular appointment of chairman,Section 392(2) Companies Act (Cap 50, 1994 Rev Ed),Memorandum and articles of association,Company's articles of association silent on procedure by which to appoint chairman of board meeting,Whether clause in shareholders' agreement implemented in practice but not incorporated in company's articles of association may be used to supplement such articles of association |
| Citation | [2006] SGCA 44 |
| 21 December 2006 |
|
Andrew Phang Boon Leong JA (delivering the grounds of decision of the court):
Introduction
1 The present appeal turned on rather unusual facts and raised important issues centring around the conduct of meetings of the company (here, the meeting of the board of directors) in general and the appropriate legal norms that ought to be observed in the conduct of such meetings in particular.
2 We dismissed the appeal, and now give the detailed grounds for our decision.
3 The unusual fact situation in the present proceedings occurred in the context of a joint venture (“the JV”) between parties which belonged to conglomerates that were located in Hong Kong and Australia, respectively. These will be set out in more detail in the next part of this judgment. By way of a quick preliminary sketch, however, this joint venture was to be effected through the respondent company. To this end, the two conglomerates to the JV each nominated three directors to the board of directors of the respondent (“the Board”), with a total of six nominated directors. If there was a deadlock in relation to any decision by the Board, the chairman would, under the articles of the respondent, have the casting vote.
4 In a nutshell, the present proceedings arose in the following way. A warrant to act was given by the respondent’s managing director to a firm of lawyers, authorising it (the law firm) to act on its behalf in a claim against the appellant (who is the first defendant and part of the aforementioned Hong Kong conglomerate, there also being a claim against the listed holding company of the appellant as the second defendant). The respondent required a resolution of its board of directors to ratify this warrant to act. Not surprisingly, the directors nominated to the Board by the party to the JV belonging to the Hong Kong conglomerate objected to a director nominated by the party to the JV belonging to the Australian conglomerate being appointed as chairman of the meeting of the Board held to ratify the warrant to act referred to above (“the Board meeting”) (such an appointment would, in the event of a deadlock in voting, have probably resulted in the resolution being passed). These directors (nominated by the party to the JV belonging to the Hong Kong conglomerate) ultimately walked out of the Board meeting. It was also not surprising when the remaining three directors (nominated by the party to the JV belonging to the Australian conglomerate) continued with the Board meeting and passed the resolution.
5 There was in fact no legal impediment to the continuation of the meeting despite the walk-out by the three directors nominated by the party to the JV belonging to the Hong Kong conglomerate, as even chairmen are not competent to terminate validly constituted board meetings prematurely. In fact, the learned trial judge (“the Judge”) had cited the English decisions of National Dwellings Society v Sykes [1894] 3 Ch 159 and Catesby v Burnett [1916] 2 Ch 325 to support this proposition (see Golden Village Multiplex Pte Ltd v Golden Harvest Films Distribution (Pte) Ltd
(a) Whether the appointment of the chairman was irregular; and
(b) Whether, if (a) above was answered in the affirmative, the Board meeting had nevertheless not been invalidated by the procedural irregularity as, pursuant to s 392(2) of the Companies Act (Cap 50, 1994 Rev Ed) (“the Act”), such an irregularity had neither caused nor might have caused “substantial injustice that cannot be remedied by any order of the Court”.
6 Counsel for the appellant, Mr Chan Kia Peng, rightly conceded that if issue (a) above was answered in the negative, the appeal would fail. He argued, however, that issue (a) should be answered in the affirmative and that the irregularity concerned (in this appeal, the irregular appointment of the chairman during the Board meeting referred to above) could not be “cured” via s 392(2) of the Act. Not surprisingly, counsel for the respondent, Mr Philip Ling, argued to the contrary.
7 So much by way of a brief – and broad – overview of the issues involved in the present appeal. We turn now to set out the factual background leading to the present appeal in more detail.
The joint venture and its parties
8 The respondent was incorporated as the vehicle to carry out the objectives of the JV between the Golden Harvest conglomerate in Hong Kong and the Village Roadshow conglomerate in Australia (the Hong Kong and Australian conglomerates referred to above) to acquire, hold, construct, develop, lease, operate, dispose of and exploit cinema complexes in Singapore. The appellant is part of the Golden Harvest conglomerate.
9 The JV was governed by the terms of a shareholders’ agreement (“Shareholders’ Agreement”) entered into by the following parties:
(a) Village Cinemas Australia Pty Ltd (“Village”);
(b) Golden Screen Limited (“Golden Harvest”);
(c) Dartina Development Limited (“the Company”); and
(d) Golden Village Multiplex Pte Ltd (the respondent).
10 Village and Golden Harvest own 50% of the Company’s shares each, and the Company owns all the shares of the respondent.
11 As already mentioned above, the Shareholders’ Agreement gave Village and Golden Harvest the right to nominate three directors each for appointment to the Board. Therefore, of the six directors who sit on the Board, Graham William Burke, Peter Edwin Foo and Kirk Senior are Village nominees, while Raymond Chow, Phoon Chiong Kit (“PCK”) and Roberta Chin Chow are Golden Harvest nominees. All three Golden Harvest-nominated directors are also directors of the appellant. The Shareholders’ Agreement also gave Village a right to appoint the chairman of the respondent. However, the Shareholders’ Agreement was never incorporated into the articles of association of the respondent. The relevant provisions are reproduced at [33] below.
The main proceedings
12 The respondent commenced Suit No 413 of 2005 (“the main action”) against the appellant and the second defendant (also from the Golden Harvest group of companies), and Suit No 557 of 2005 (“Suit 557/2005”) against PCK, one of the three Golden Harvest-nominated directors of the respondent.
The main action
13 The main action arose out of an agreement for lease dated 23 December 2002 (“Agreement for Lease”) executed with IMAX Corporation (“IMAX”) for the lease of the IMAX system. The appellant was one of the original lessors in the Agreement for Lease. Subsequently, the original lessors assigned all of their rights, duties and obligations under the Agreement for Lease to the respondent and, by an agreement in writing dated 11 February 2004 (“Transfer Agreement”), it was agreed, inter alia, that on the terms and in the circumstances set out in the Transfer Agreement, upon the happening of a specified event, the appellant shall accept a transfer of the respondent’s rights and obligations under the Agreement for Lease and pay the respondent a transfer sum (“Transfer Sum”), and the second defendant shall accept a transfer of obligations as guarantor.
14 The respondent’s case was that the specified event had taken place and it had accordingly issued the Notice of Transfer (“Transfer Notice”) to the appellant on 23 November 2004 for, inter alia, the appellant to take over the respondent’s rights and obligations under the Agreement for Lease and to pay to the respondent the Transfer Sum. The appellant and second defendant disagreed with the position taken by the respondent and refused to comply with the Transfer Notice.
15 Prior to the issuance of the Transfer Notice, the performance of the IMAX Theatre had been discussed at length at meetings of the Board on 6 October 2003 and 31 March 2004. Both those meetings were attended by PCK. It was ultimately decided by the Board during the meeting on 31 March 2004 that the respondent would cease operation of the IMAX Theatre with effect from 1 January 2005 and, in exercise of its rights under the Transfer Agreement, transfer its rights and obligations under the Agreement for Lease to the appellant. Pursuant to such decision of the Board, the Transfer Notice was issued by the respondent to the appellant.
16 At a subsequent meeting of the Board held on 15 February 2005 which was also attended by PCK, various steps, inter alia, to be taken by the respondent were minuted pursuant to the issuance of the Transfer Notice, including informing IMAX of the respondent’s decision; re-charging to the appellant costs such as the annual maintenance fee and minimum rent payable to IMAX under the Agreement for Lease; and billing the appellant the Transfer Sum. The minutes of this board meeting showed that PCK gave instructions to proceed with the above steps.
17 Notwithstanding the fact that PCK as a director of the respondent had knowledge of the operations of the IMAX Theatre and, being privy to internal communications between the staff of the respondent, had even put forward his own ideas and feedback as to how certain issues were to be addressed, and despite the fact that he had previously agreed to the transfer along with the other directors of the respondent, PCK subsequently wrote two letters on behalf of the appellant alleging that the respondent was in breach of its obligations under the Transfer Agreement in failing to properly promote and market the IMAX Theatre in Singapore and that the Transfer Notice had not been validly given.
18 By reason of the appellant’s and second defendant’s failure to take and accept the transfer of rights and obligations under the Agreement for Lease, and in particular, the appellant’s failure to pay the respondent the Transfer Sum,...
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