Jimat bin Awang and Others v Lai Wee Ngen

• Jurisdiction: Singapore
• Judge: Karthigesu JA
• Judgment Date: 17 October 1995
• Neutral Citation: [1995] SGCA 77
• Docket Number: Civil Appeal No 178 of 1994
• Date: 17 October 1995
• Year: 1995
• Published date: 19 September 2003
• Plaintiff Counsel: SH Almenoar, Tan Chin Seng and Lee Yean Yean (Tan Rajah & Cheah)
• Citation: [1995] SGCA 77
• Defendant Counsel: Cheong Yuen Hee and Peter Wong Chee Keong (Willian Lai & Alan Wong)
• Court: Court of Appeal (Singapore)
• Subject Matter: s 161 Companies Act (Cap 50, 1994 Ed),allotment contravened s 161 of Companies Act,Relief under s 216 Companies Act,Application for leave to commence proceedings in name of company by members of company,Whether ground established for relief to be granted,Allotment of shares to respondent,Members made to resign as directors,ss 216(1)(b) & 216(2)(c) Companies Act (Cap 50 1994 Ed),Acts unfairly discriminatory or prejudicial to members of company,Oppression,Legal and equitable ownership of shares,Allotment of shares to new members,Companies,Shares,Transfer,Whether appellants were sole beneficial Owners,Whether appellants remained legal owners,Allotment

Cur Adv Vult

The appellants applied to the High Court for leave to commence proceedings in the name of a company known as North Shore Marina Pte Ltd (`the company`) on the ground that certain acts of the company unfairly discriminated against or were prejudicial to the appellants as members of the company. The application by way of an originating petition was brought pursuant to s 216 of the Companies Act (Cap 50, 1994 Ed) (`the Act`), which provides, as far as is material:

(1) Any member ... of a company ... may apply to the Court for an order under this section on the ground -

(b) that some act of the company has been done ... which unfairly discriminates against or is otherwise prejudicial to one or more of the members ...

(2) If on such application the Court is of the opinion that either of such grounds is established the Court may ... make such order as it thinks fit and ... the order may -

(c) authorise civil proceedings to be brought in the name of or on behalf of the company by such person or persons and on such terms as the Court may direct; ...

In the proceedings below, Lim Tiong Qwee JC found that no ground within s 216(1)(b) of the Act had been established for relief to be granted by the court. Accordingly, he dismissed the petition with costs. This is an appeal against his decision.

The material facts are these. For many years, the first and third appellants, namely, Jimat bin Awang and Gerard Basil De Souza, as well as one Yap Choon Heng (`Yap`) owned and operated boatels in Ponggol, an area in Singapore well-known for its facilities for sea sports. The second appellant, Zainal bin Jantan, used to run a water-skiing centre in the same locality. In 1985, they were asked to vacate their business premises when the Urban Redevelopment Authority (`the URA`) compulsorily acquired land in Ponggol for redevelopment. As a temporary reprieve, the URA allowed them to operate their businesses under temporary occupation licences. In August 1993, the URA informed them that some 49,860 sq m of land with a 240 m long shoreline (`the site`) would be set aside for boatel development. A public tender would be held for the site. The appellants and Yap were attracted by the idea of jointly developing and managing a boatel. On 4 September 1993, they incorporated the company as the vehicle to carry out their plans. They became its first shareholders and directors, each owning one fully paid share of $1.

Subsequently, the appellants and Yap sought the advice of both a firm of architects and a real estate consultancy company, Knight Frank Cheong Hock Chye & Baillieu (Property Consultants) Pte Ltd (`Knight Frank`) about their plans. Knight Frank advised them that an appropriate bid price for the site would be $17.5m. According to the terms and conditions of tender issued by the URA, a 10% deposit of the bid price must be submitted together with the bid. The appellants and Yap did not have the financial means to do so. In February 1994, Yap invited the respondent, Lai Wee Ngen, to participate in the project. The respondent, an advocate and solicitor, was formerly a client at Yap`s boatel.

The tender for the site closed at 12 noon on 24 February 1994. At the eleventh hour, the appellants, Yap and the respondent reached an agreement which enabled the company to submit a bid of $17.5m for the site. The agreement as encapsulated in a memorandum of understanding dated 24 February 1994 (`the memorandum`) included these essential terms:

(1) In consideration of Lai Wee Ngen paying the initial deposit of Singapore Dollars One Million Seven Hundred and Fifty Thousand Only ($1,750,000) in pursuance of the tender, the parties [the appellants and Yap] agree to the following:

(i) that Lai Wee Ngen be appointed forthwith as a director of North Shore Marina Pte Ltd;

(ii) that Lai Wee Ngen be allotted 16 ordinary shares of $1.00 each in North Shore Marina Pte Ltd;

(iii) that the parties shall within two (2) weeks of the date of this memorandum of understanding pay to Lai Wee Ngen the sum of Singapore Dollars Eighty Seven Thousand and Five Hundred Only ($87,500) each.

(iv) that Lai Wee Ngen shall have 80% interest in the tender and each of the member of the parties shall have 5% interest in the tender each respectively.

(2) In the event that any of the member of the parties fail to comply with cl 1(iii) above, that member or members of the parties shall not have any interest(s) and his or their respective interest(s) as stated in cl 1(iv) shall be passed to Lai Wee Ngen. [ italics ours.]

That same morning, the appellants and Yap held a meeting, described in the minutes as a meeting of the board of directors, in which two important resolutions were passed pursuant to the memorandum. The first secured the appointment of the respondent as a director of the company. The second was recorded in the minutes as follows:

Resolved ...

Allotment of shares

That 16 fully paid up ordinary shares of $1 each be and are hereby allotted to the undermentioned allottee at par for cash:

Allottee No of shares

Lai Wee Ngen 16

That the seal of the company be affixed to the share certificates in accordance with the articles of association of the company.

On 8 March 1994, the respondent wrote to the appellants and Yap reminding them of the obligation to pay him $87,500 each by the next day. On 9 March 1994, only Yap duly paid $87,500 to the respondent. At 5.30pm that day, the appellants, Yap and the respondent attended an extraordinary general meeting. It was resolved that every shareholder or group of shareholders with 20% of the fully paid shares in the company should have the right to nominate a director. Furthermore, upon the nomination of five directors by the shareholders, `the present directors shall resign`. Three new directors, namely, Matthew Ho Wah Chung, Tan Aik Kim and Teo Ek Tian, were appointed at this meeting. At 7.30pm, the same five persons resolved at a board meeting to approve the transfers of one share each from the appellants to the respondent, `upon the said transfer being executed by the below mentioned transferee [the respondent], stamped and delivered to the company and that the secretary be directed to register the same accordingly`.

Also, sometime on 9 March 1994, the respondent wrote to the appellants stating:

As you have failed to comply with cl 1(iii) and in accordance with cl (2) of the said memorandum, your interest in the said tender shall be passed to me. However, in consideration of you transferring your one (1) fully paid-up share in North Shore Marina Pte Ltd to me, I hereby agree to transfer the said share back to you upon you forwarding the sum representing five (5) per cent of the twenty-five (25) per cent of the tender price within one (1) week of URA`s acceptance of our tender.[ italics ours.]

In this regard, 25% of the tender price, less the 10% deposit, was to be paid within 28 days of the award of the tender pursuant to the terms and conditions of tender.

On 11 March 1994, another offer was made by the respondent to the first and second appellants in the following terms:

I confirmed (sic) that I am prepared to transfer 100 per cent of the shares held by me in North Shore Marina Pte Ltd to the both of you on the condition that you pay to me the sum of Singapore Dollars One Million Seven Hundred and Fifty Thousand only ($1,750,000) and all the cost incurred by the company pertaining to the abovementioned tender within one week of URA`s acceptance of the company`s tender deed.

On 18 March 1994, Tan Rajah & Cheah, the solicitors for the first and second appellants, accepted the offer. On 4 April 1994, the tender was awarded to the company by the URA. On 5 April 1994, Tan Rajah & Cheah wrote to the respondent, stating:

... Our clients interpret this [the contract as contained in the letters] to mean within one week from the date of the announcement of the award, ie one week from 4 April 1994.

In order for our clients to effectuate payment of the requisite sum, our clients request that you let us have for review the costs incurred by the company in this regard, together with all documents to substantiate the same.

There was no reply from the respondent. In his evidence, the respondent said that he had informed the first and second appellants that he was waiving the costs incurred. By 11 April 1994, there was no tender of full or part payment. On 12 April 1994, the respondent informed the first and second appellants that the offer had lapsed. However, on 27 April 1994, the respondent made yet another offer to the two appellants in these terms:

We refer to your letter of 25 April 1994.

As agreed between your clients and our client this morning, our client is prepared to transfer all his shares in North Shore Marina Pte Ltd to your clients upon receipt of either a cashier`s order or your firm`s cheque for the sum of $1.75m no later than 4pm today at our head office. Your clients need not pay the expenses incurred thus far.

The letter reached Tan Rajah & Cheah at about 1pm that afternoon. The first and second appellants could not comply with the offer in the letter. In his affidavit, the respondent said that at about 9.30am that day, the two appellants informed him that they had raised $1.75m and that the money was with their solicitors. It was agreed that payment would be made by 4pm. The first appellant said in evidence that a company called Chuan Hup Holdings Ltd had just signed a memorandum of understanding with the appellants. The money was available from Chuan Hup Holdings Ltd subject to some conditions. Unfortunately, the conditions could not be satisfied within the short space of a day.

From 9 March 1994, the business of the company was carried on without the participation of the appellants. Subsequently, 4,756,244 and 4,243,756 fully paid shares were allotted by the company in...