Guan Soon Development Pte Ltd v Yeo Gek Lang Susie (administratrix of the estate of Teo Lay Swee, deceased) and Others

• Jurisdiction: Singapore
• Judgment Date: 14 June 2006
• Date: 14 June 2006
• Docket Number: Civil Appeal No 134 of 2005
• Court: Court of Appeal (Singapore)

Guan Soon Development Pte Ltd

Plaintiff

and

Yeo Gek Lang Susie (administratrix of the estate of Teo Lay Swee, deceased) and others

Defendant

[2006] SGCA 18

Chan Sek Keong CJ

,

Andrew Phang Boon Leong JA

and

Tan Lee Meng J

Civil Appeal No 134 of 2005

Court of Appeal

Companies–Memorandum and articles of association–Articles of association amended but effective date of amendments not evident on face of amendments–Whether minutes of directors' meeting indicating effective date of amendments can serve to qualify amended articles–Companies–Shares–Transfer–Articles of association referring to transfer of shares–Whether shareholders intending for “transfer” to apply to transmissions of shares–Whether transmission of shares of deceased member under testamentary disposition or otherwise by operation of law subject to pre-emption right of existing members

The deceased's shares in the appellant company were transmitted to his estate. The deceased's widow, the first respondent, was the administratrix of the deceased's estate. The shares held by the deceased were distributed to the respondents (the deceased's widow and children) according to the provisions of the Intestate Succession Act (Cap 146, 1985 Rev Ed) (“the Act”). The respondents successfully applied to the High Court for an order compelling the appellant to register them as shareholders on the ground that the appellant's articles of association had been amended resulting in the addition of a new article (“Art 31A”). Article 31A stated that the members' right of pre-emption would not apply in respect of any “transfer” of shares following the death of a member where the deceased's shares were transferred to, inter alia, “such person (s) who shall become entitled to a share in consequence of the death of the member in accordance with the applicable laws of intestacy”. The appellant appealed against the decision of the High Court.

The appellant argued that the respondents were not allowed to rely on Art 31A as it was part of amendments to the appellant's articles of association made after the death of the deceased. In support of this argument, the appellant relied on a minute of its directors' meeting with a statement to the effect that the amendments were not intended to apply to deaths of members occurring before the amendments (“the qualifying statement”). The appellant also argued that even if Art 31A were read without the qualifying statement, it would still not apply to the shares that were distributed to the third, fourth and fifth respondents as it applied only to transfers and not to transmissions of shares. It was further argued that the respondents' claim was not based on any provision of the Act or any other provision of law and that the actual number of shares they received by way of distribution was not in accordance with the applicable laws of intestacy.

Held, dismissing the appeal:

(1) Art 31A itself did not stipulate the time from which it was to apply and accordingly, the amendment took place from the day it was made. Furthermore, the text of Art 31A had been filed with the Registry of Companies without the qualifying statement and it was this version of Art 31A that was subsequently incorporated in the appellant's memorandum and articles of association. A reasonable inference to be drawn from these facts was that the version of Art 31A filed with the Registry of Companies was that which was actually passed by the directors' meeting and that the qualifying statement was merely a statement of intention of the shareholders present. More importantly, when the company first sent out its notice of annual general meeting, the attached text of Art 31A did not contain the qualifying statement: at [10] and [11].

(2) Art 28 of the appellant's articles of association provided that, save as provided by Art 31 and Art 31A of its articles, no share could be transferred to any non-member if any member was willing to purchase the share at fair value. Art 31A excluded the pre-emption rights in respect of any transfer of shares following the death of any member, upon a “transfer” in the situations prescribed in Art 31A. It was arguable that the shareholders must have understood the expression “transfer” in Art 28 to apply to a transmission of the shares of a deceased member under a testamentary disposition or otherwise by operation of law and also to a transfer by an administrator to a beneficiary. Accordingly, the effect of Art 31A was that, on the basis that Art 28 applied to transmissions of shares, it removed the pre-emption right of members against beneficiaries of the deceased member's shares arising from an intestacy while restricting the category of testamentary beneficiaries: at [18] and [19].

(3) Art 31A merely required that the beneficiaries' entitlements resulted from the death of a member “in accordance with the applicable laws of intestacy”. The words of Art 31A were to be read purposively to give effect to the fundamental objective of pre-emption articles to keep the ownership of the shares within members of the same family or of families who originally agreed to associate themselves in that way. Therefore, whatever the number of shares in specie a beneficiary got from the distribution of assets of the estate, such distribution would accord with the applicable laws of intestacy even though the number of shares so distributed did not correspond to the number of shares he would have received if the shares had been distributed in specie: at [20] and [21].

Barton v London and Northern Western Railway Company (1889) 24 QBD 77 (refd)

Bentham Mills Spinning Company, In re (1879) 11 Ch D 900 (refd)

Greenhalgh v Mallard [1943] 2 All ER 234 (refd)

Kenzler, Re (1982-1983) 7 ACLR 767 (refd)

Lee Chee Ngor Moreta v Prudential Enterprise Ltd [1991] 2 HKC 499 (distd)

Lee Eng Eow v Low Ah Lian [1992] 1 MLJ 678 (refd)

Moodie v W & J Shepherd (Bookbinders) Ltd [1949] 2 All ER 1044 (refd)

Scott v Frank F Scott (London), Limited [1940] Ch 794 (refd)

Intestate Succession Act (Cap 146, 1985 Rev Ed)

Siraj Omar (Tan Kok Quan Partnership) for the appellant

Tan Bar Tien (B T Tan & Co) for the respondents.

Chan Sek Keong CJ

(delivering the grounds of decision of the court):

1 This is an appeal against the decision of the High...