Hoban Steven Maurice Dixon and another v Scanlon Graeme John and Others

• Jurisdiction: Singapore
• Judgment Date: 21 March 2007
• Date: 21 March 2007
• Docket Number: Civil Appeal No 64 of 2006
• Court: Court of Appeal (Singapore)

Hoban Steven Maurice Dixon and another

Plaintiff

and

Scanlon Graeme John and others

Defendant

[2007] SGCA 12

Chan Sek Keong CJ

,

Andrew Phang Boon Leong JA

and

Belinda Ang Saw Ean J

Civil Appeal No 64 of 2006

Court of Appeal

Civil Procedure–Judgments and orders–Circumstances in which court order becomes inoperative–When supervening event negating mechanism by which court order to be implemented–Civil Procedure–Judgments and orders–Principles applicable to interpretation of court order–Whether interpretation to give effect to parties' intentions–Whether interpretation to be in conformity with established principles of law or practice–Companies–Shares–Valuation of shares–Expert appointed by court order to value shares in company to determine pricing mechanism for purchase/sale of such shares–Court order containing condition allowing judge to adjust expert's valuation taking into account any “non-pecuniary material circumstances”–Valuation of shares unfavourable to parties seeking to sell shares to exit company–Such parties inviting judge to adjust valuation on ground of minority oppression–Judge declining to intervene–Whether grounds for court to enhance valuation of such shares existing

The first appellant was the managing director of the third respondent. The second appellant was a company founded by the first appellant for the purpose of holding shares in the third respondent. The first and second respondents were the directors and shareholders of the third respondent.

The appellants' original claim was for certain reliefs by reason of minority oppression on the parts of the first and second respondents under s 216 of the Companies Act (Cap 50, 1994 Rev Ed) (“the liability issue”). Shortly after the commencement of the hearing, the parties indicated that they no longer desired the court to determine the liability issue and agreed to the appointment of an expert (“the expert”) to value the third respondent's shares (“the subject shares”) in order to facilitate the appellants' equitable exit. On 7 June 2004, the trial judge made an order (“the June 2004 Order”) which directed the parties to proceed with the appointment of an expert for the purpose of valuing the subject shares. However, the June 2004 Order contained a condition allowing the trial judge to adjust the expert's valuation, taking into account any “non-pecuniary material circumstances”. The June 2004 Order also provided that the first and second respondents might elect not to purchase the subject shares as valued in which event the third respondent would be wound up.

The expert valued the subject shares, on the basis of its net asset value as at May 2004 to be negative, at “nil” value. Dissatisfied with this valuation, the appellants invited the trial judge to adjust the expert's valuation on the basis of the first and second respondents' oppression. The trial judge declined to intervene and upheld the expert's valuation on the ground that the parties had agreed not to raise the liability issue. The appellants appealed to the Court of Appeal which remitted the case back to the trial judge to exercise his discretion on whether or not to adjust the valuation. The trial judge held a trial on whether there were non-pecuniary material circumstances to enable him to adjust the valuation. He again confirmed that there was no basis to vary the expert's valuation.

On appeal to the Court of Appeal, the appellants argued that the trial judge had erred in not adjusting the “nil” valuation by taking into account the various prices offered by third parties to buy the subject shares from the first and second respondents. After the hearing of the appeal, the Court of Appeal invited the parties to submit written arguments on whether the expert's “nil” valuation had rendered the June 2004 Order inoperative.

Held, dismissing the appeal and making the declaration that the June 2004 Order was inoperative:

(1) The appellants had not raised any arguments that had not been considered by the trial judge at the second hearing where he clarified that the discretion he had retained for himself to adjust the expert's valuation was limited to considering “any other non-pecuniary circumstances” that were unrelated to the parties' existing differences. In providing this clarification, the trial judge ruled out the possibility of treating the various abortive offers to purchase the shares of the shareholders who were not parties to this action as being non-pecuniary in nature as well as being unrelated to the parties' existing differences. For this reason, any argument that these offers were relevant was bound to fail: at [18].

(2) It was well established that where a court order was intended to substantially give effect to the parties' intentions, it would be relevant to consider these intentions even when giving consideration to the express wording of the order. In this respect, the trial judge had chosen to use the word “purchase” because he had assumed that the subject shares had some commercial value and that the first and second respondents should pay a fair price for them in order to allow the appellants to exit the third respondent. The trial judge could not have envisaged that the June 2004 Order could have resulted in a gift of the subject shares to the first and second respondents. This was a reasonable interpretation of the trial judge's intention as any exit mechanism that would allow the subject shares to be given away free could not be an equitable mechanism, and a contrary interpretation would be unreasonable and unjust: at [32], [38] to [40], [41].

(3) Although there was no legal basis to interfere with the trial judge's decision not to interfere in the expert's “nil” valuation, the result was that no purchase was possible as envisaged by the June 2004 Order, and accordingly it could not be implemented and was inoperative: at [42] and [46].

Dalkeith Investments Pty Ltd, Re (1985) 3 ACLC 74 (refd)

David Freud Ltd v Vickbar Ltd [2006] EWCA Civ 1622 (folld)

Dynasty Pty Ltd v Coombs (1995) 13 ACLC 1,290 (refd)

Haw Par Bros (Pte) Ltd v Dato Aw Kow [1971-1973] SLR (R) 813; [1972-1974] SLR 183 (folld)

Robshaw Brothers Ltd v Mayer [1957] Ch 125 (folld)

Sujatha v Prabhakaran Nair [1988] 1 SLR (R) 631; [1988] SLR 648 (folld)

Yeo Hung Khiang v Dickson Investment (Singapore) Pte Ltd [1999] 1 SLR (R) 773; [1999] 2 SLR 129 (refd)

Companies Act (Cap 50, 1994 Rev Ed) s 216

Rules of Court (Cap 322, R 5, 2006 Rev Ed) O 57 r 9A, O 57 r 10, O 57 r 13 (3), O 57 r 13 (4)

Supreme Court of Judicature Act (Cap 322, 1999 Rev Ed) ss 37 (5), 37 (6)

Rohan Harith (Shook Lin & Bok) for the appellants

Tito Shane Isaac and P Padman (Tito Isaac & Co) for the respondents.

Judgment reserved.

Chan Sek Keong CJ

(delivering the judgment of the court):

1 This is an appeal against the decision of the trial judge given on 29 May 2006 in the re-trial of Suit No 679 of 2003, in which he refused to make an adjustment to the expert's valuation of the shares in Bulkpak Pte Ltd (“the Third Respondent”).

Background

2 Steven Maurice Dixon Hoban (“the First Appellant”) is the former managing director of the Third Respondent, a company that he co-founded sometime in or about September 1996. Vivaldi Investments Ltd (“the Second Appellant”) is the First Appellant's holding company for his shares in the Third Respondent. Graeme John Scanlon (“the First Respondent”) and Stanley Adam Zagrodnik (“the Second Respondent”) are currently directors and shareholders of the Third Respondent.

3 As at 28 September 2006, the Third Respondent's issued capital of 2,140,000 shares was held as follows: 30% by the Second Appellant and 70% collectively by the First and Second Respondents and/or their nominee, one Lai Mang Hong (“Lai”). All the shareholders have also made various loans to the Third Respondent at various times, the amounts of which, excluding accrued interest, are as follows:

	Shareholders' loan (US$)	Loan convertible to shares at 0.5:1 (S$)	Construction loan convertible to shares at 1:1 (S$)
Appellants	240,000	4,000	-
The First Respondent	280,000	150,000	-
The Second Respondent	280,000	147,200	-
Lai	-	698,800	251,980

4 The Third Respondent and its subsidiaries (namely, PT Bulkpakindo, an Indonesian company, and Bulkpak Ltd, an English company) are involved in the production of custom-made flexible intermediate bulk containers (“FIBCs”). FIBCs are commonly utilised to transport a wide range of solids and semi-solids, including polymers, agrochemicals, minerals, foodstuff, pharmaceuticals, chemicals and building materials.

Proceedings before the trial judge

5 The appellants' original claim was for certain reliefs by reason of minority oppression on the part of the First and Second Respondents under s 216 of the Companies Act (Cap 50, 1994 Rev Ed) (“the liability issue”). The alleged acts of oppression by the First Respondent and/or the Second Respondent included the following:

(a) progressively and systematically excluding the First Appellant from the management of the affairs of the Third Respondent;

(b) completely disregarding the First Appellant's rights and interests as a shareholder;

(c) pursuing a carefully crafted campaign to dilute the appellants' shareholdings in the Third Respondent; and

(d) colluding to mislead the First Appellant with regard to information concerning the proposed sale of shares of the existing shareholders of the Third Respondent to prospective purchasers and conducting the sale of shares negotiations in a manner detrimental to the interests of the First Appellant.

The respondents denied all these allegations.

6 When the trial commenced, the trial judge inquired of counsel for the parties whether their clients were serious about litigating their dispute or were only concerned with finding an...