JX Holdings Inc and another v Singapore Airlines Ltd

• Jurisdiction: Singapore
• Judge: Edmund Leow JC
• Judgment Date: 29 September 2016
• Neutral Citation: [2016] SGHC 212
• Citation: [2016] SGHC 212
• Defendant Counsel: Chan Chee Yin Andrew, Teo Jun Yi and Michelle Lim Wen Yong (Allen & Gledhill LLP)
• Published date: 14 January 2017
• Hearing Date: 07 June 2016
• Plaintiff Counsel: Joseph Tay Weiwen and Claire Yeo (Shook Lin & Bok LLP)
• Date: 29 September 2016
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 303 of 2016
• Subject Matter: Corporations,Shares,Companies,Transmission,Conflict of Laws,Choice of law

Edmund Leow JC: Introduction

This is an application made under s 194 of the Companies Act (Cap 50, 2006 Rev Ed) (“Companies Act”) for a rectification of the defendant’s register of members and for further consequential orders. The basis of the application is that certain shares in the defendant were purchased by a company which, owing to a complicated series of mergers and restructuring exercises under Japanese law, no longer exists. The first plaintiff claims to be the ultimate successor in title to these shares and seeks an order for rectification in order that its entitlement might be recognised. The defendant does not object to the application in principle, but it submits that it is the second, and not the first plaintiff, which is the legal owner of the shares.

The broad issue in this application, therefore, was whether title to the shares lies with the first plaintiff or with the second. Although ostensibly simple, this issue engages novel points of law concerning the doctrine of universal succession under private international law as well as the difference between a “transfer” and a “transmission” of shares within the meaning of s 130(1) of the Companies Act. As will become clear in the course of my judgment, the outcome of my decision may well determine whether stamp duty is eventually payable. For this reason, I reserved judgment on this matter and directed that the parties seek the input of the Inland Revenue Authority of Singapore (“IRAS”), which was duly received on 26 August 2016.

From the outset, I record my appreciation to the parties for the considerable assistance they rendered the court through their written submissions. In particular, it was made clear to me that the defendant had no direct interest in the outcome of the application and was only participating in these proceedings in order to assist the court. The defendant rendered such assistance not just by providing a set of very helpful written submissions but also by appearing at the oral hearing to address me on the various questions of law which arose. I now give my judgment and will begin with a brief recitation of the relevant facts.

Background

The facts are undisputed and lie within a narrow compass. In February 1986, Kyodo Oil Co Ltd (“KOL”), a company incorporated in Japan, purchased 20,000 ordinary shares in the defendant, Singapore Airlines Limited (“the SIA Shares”). Following a share issuance in 1993 and a capital reduction exercise in 2007, KOL became (and continues to be) the registered owner of 37,340 ordinary shares in the Defendant. These shares now carry rights to dividends in both cash and kind, which are as follows: (a) $398,996.80 in dividend payouts; (b) 27,258 shares in Singapore Airport Terminal Services Limited (“SATS Shares” – these were issued as dividends in specie on the SIA Shares in 2009); and (c) $28,075.74 in dividend payments in respect of the SATS Shares.¹ Where necessary, I will refer to the SIA Shares and the SATS Shares collectively as “the Shares”.

Between December 1992 and July 2010, KOL underwent multiple corporate restructuring exercises. The precise details are not relevant to this application and it suffices merely to say that KOL ceased to exist in 1993 and its rights and obligations then passed through a series of corporate entities which were created in the interim restructuring exercises and eventually vested in Nippon Oil Corporation (“NOC”).² In July 2010, NOC underwent what was referred to by Mr Kotaro Kubo, the plaintiff’s Japanese law expert, as an “absorption-type split”. I will elaborate on the details of this legal arrangement later, but it suffices to say for now that under Art 2 of the absorption-type company split agreement (“2010 Split Agreement”), the shares were transferred from NOC to the first plaintiff, JX Holdings Inc. NOC was subsequently renamed JX Nippon Oil & Energy Corporation and it is the second plaintiff in this application.³

In the course of a review, it was discovered that the shares originally purchased by KOL were still registered in KOL’s name even though it had long ceased to exist. The share certificates and the dividend cheque payments were held by M&C Services Private Limited, the share registrar for the defendant and SATS. It was also discovered that the SATS Shares were currently held by the defendant and the sum of $28,075.74 which had been issued as dividends on the SATS Shares since their issuance in 2009 had been paid to the defendant.⁴

The present application

To address this, the first plaintiff commenced Originating Summons No 303 of 2016 (“the present application”) to seek the following orders:⁵ the register of members of the defendant be amended such that the SIA Shares currently held in the name of KOL be registered in the name of the first plaintiff instead; the defendant transfer the SATS Shares, which had been held on behalf of KOL, to the first plaintiff; and all dividends declared in respect of the Shares be paid over to the first plaintiff.

Section 194 of the Companies Act, under which relief is sought, provides in material part as follows:

Power of Court to rectify register

194.—(1) If — (a) the name of any person is without sufficient cause entered in or omitted from the register; or (b) default is made or unnecessary delay takes place in entering in the register the fact of any person having ceased to be a member,

the person aggrieved or any member or the public company may apply to the Court for rectification of the register, and the Court may refuse the application or may order rectification of the register and payment by the company of any damages sustained by any party to the application.

…

(4) No application for the rectification of a register in respect of an entry which was made in the register more than 30 years before the date of the application shall be entertained by the Court.

[emphasis added]

As a preliminary point, I note that applications for rectification must be taken up within 30 years of an entry having been made in the register. Given that the shares in question were purchased in February 1986, this application could potentially be time-barred. However, Mr Andrew Chan, counsel for the defendant, indicated that his client would not be raising the time-bar and was content for the application to proceed.⁶ As it is settled law that limitation periods do not operate as a bar unless specifically pleaded as a defence (see W Gregory Dawkins v The Right Hon Baron Penrhyn [1878] 4 App Cas 51 at 59 per Earl Cairns LC), I am satisfied that the present claim can proceed.

In order to have standing to invoke s 194(1) of the Companies Act, one must either be a “person aggrieved” or a member of the company. In Sing Eng (Pte) Ltd v PIC Property Ltd [1990] 1 SLR(R) 792 at [14], the Court of Appeal held that the expression “person aggrieved” was to be construed as referring only to the classes of persons falling within the ambit of the preceding sub-paragraphs: namely, (a) a person whose name is without sufficient cause entered into or omitted from the register or (b) a person who has ceased to be a member but, by reason of default or unnecessary delay, is still listed as a member in the register. In this case, I am prepared to find, based on the undisputed facts, that both plaintiffs fall within the ambit of s 194(1)(a) of the Companies Act – that is to say, they are persons whose names might have been omitted from the register without sufficient cause.

The question, then, is whether relief should be granted. It is well settled that the court has a wide discretion in this matter. This is clear both from the language of the statute (which uses the permissive “may”), as well as the authorities on the subject (see the decision of the Court of Appeal in Re Asian Organisation Ltd [1961] MLJ 295 (“Re Asian Organisation”) at 297A). Prima facie, it would appear that rectification should be ordered to ensure that the register accurately reflects the true state of legal entitlements. However, even if a plaintiff can show that the register is incorrect and that he is the rightful owner of the shares, the court will have regard to the ambient circumstances of the case, including delay, acquiescence in the existing state of affairs, or any other form of iniquity in deciding whether to exercise its discretion in favour of rectification. Ultimately, the test is whether the plaintiff has shown sufficient “equity to disturb the existing state of affairs” (see the decision of English High Court in Bellerby v Rowland & Marwood’s Steamship Company Limited [1901] 2 Ch 265 at 273, cited with approval in Re Asian Organisation at 296G–296I).

The parties’ arguments

The plaintiffs’ case is simple. Mr Joseph Tay, counsel for the plaintiffs, contends that under Japanese law, all of KOL’s rights and obligations (including its ownership of the Shares and the associated rights) had passed through an unbroken chain of succession to the first plaintiff. He relies in this regard on the expert opinion of Mr Kubo. However, due to an administrative oversight, the first plaintiff’s name was omitted from the register. This, he submits, constitutes a sufficient basis for the court to exercise its power of rectification under s 194 of the Companies Act. Further bolstering the first plaintiff’s case, Mr Tay also submits, are the following factors: The interim entities which were created in the corporate restructuring exercises have ceased to exist save for the plaintiffs, and the second plaintiff has explicitly waived any and all rights it might have to the SIA Shares in favour of the first plaintiff.⁷ The first plaintiff has executed a deed undertaking to indemnify the defendant against any claims which it might become subject to as a result of the rectification.⁸ The first plaintiff undertakes to ensure that any orders made by the court are brought to the attention of IRAS in order that any...