Khoh Chen Yeh Shane v Seng Realty & Development Pte Ltd

• Jurisdiction: Singapore
• Judgment Date: 12 April 2012
• Date: 12 April 2012
• Docket Number: Originating Summons No 1002 of 2010
• Court: High Court (Singapore)

Khoh Chen Yeh Shane (administrator of the estate of Ching Kwong Kuen, deceased)

Plaintiff

and

Seng Realty & Development Pte Ltd and another

Defendant

[2012] SGHC 79

Judith Prakash J

Originating Summons No 1002 of 2010

High Court

Companies—Pre-emption clause in articles of association—Whether transfer of legal title in shares from trustee to beneficiary triggered pre-emption obligations—Whether ‘any transfer of shares’ referred to transfer of both legal and beneficial interests

The testator, Ching Kwong Kuen (‘KK Ching’), created trusts of shares in the first defendant (‘Seng Realty’) and the second defendant (‘National Aerated’). After KK Ching's death, his youngest son (‘Paul Ching’) commenced the action in Ching Chew Weng Paul v Ching Pui Sim [2010] 2SLR76 (‘Ching v Ching’) to, inter alia, recover those shares (‘the Seng Shares’ and ‘the National Shares’). The judge ordered the defendant in Ching v Ching(‘MsChing’) to transfer the Seng Shares and National Shares to KK Ching's estate.

MsChing executed the transfers but Seng Realty and National Aerated refused to register the transfers and deliver the share certificates. The plaintiff, as executor of KK Ching's estate, brought this action to compel the registration of the transfers and delivery of share certificates. Seng Realty was ordered to register the transfer of the Seng Shares and deliver the share certificates to the plaintiff. National Aerated argued, however, that the pre-emption clauses in its articles of association (‘the National pre-emption clauses’) were applicable and MsChing was obliged to first offer the National Shares to the existing members of National Aerated. The plaintiff argued, first, that the word ‘transfer’ in the National pre-emption clauses referred to a transfer of both legal and beneficial title (and the transfer here was of legal title only); and secondly, that the National pre-emption clauses were not meant to apply to the return of shares from bare trustees to beneficiaries.

Held, dismissing the application

(1) The case authorities showed that the word ‘transfer’ in the pre-emption clauses referred to a transfer of legal title and not a transfer of beneficial title. This interpretation was supported here by National Aerated's articles of association which provided that National Aerated would only recognise registered owners of its shares and not trusts in its shares: at [12] to [18].

(2) In the cases where the word ‘transfer’ was held to mean a transfer of both legal and beneficial title, the pre-emption clauses were meant to apply in the context of sales only. They were distinguishable from the National pre-emption clauses which were meant to apply to any form of transfer: at [19] to [27].

(3) The obligations under the National pre-emption clauses were triggered when MsChing, a bare trustee, sought to return the National shares to KK Ching's estate, the beneficiary. This was not a case where the beneficiaries disclaimed any desire to compel a transfer of the legal title. The plaintiff had triggered MsChing's obligation to transfer the shares and she was a ‘proposing transferor’ under the National pre-emption clauses: at [28] to [30].

Ching Chew Weng Paul v Ching Pui Sim [2010] 2SLR 76 (refd)

Guan Soon Development Pte Ltd v Yeo Gek Lang Susie [2006] 3 SLR (R) 387; [2006] 3 SLR 387 (distd)

Lyle & Scott Ltd v Scott's Trustees [1959] AC 763 (refd)

Ord v Calan Healthcare Properties Ltd [2005] 2 NZLR 96 (distd)

Robert Parkinson v James Products Ltd (HC AK CIV 2008-404-003098) (3 September 2008) (HC, NZ) (distd)

Safeguard Industrial Investments Ltd v National Westminster Bank Ltd [1981] 1 WLR 286 (folld)

Safeguard Industrial Investments Ltd v National Westminster Bank Ltd [1982] 1 WLR 589 (distd)

Sing Eng (Pte) Ltd v PIC Property Ltd [1990] 1 SLR (R) 792; [1990] SLR 81 (folld)

Companies Act (Cap 50, 2006 Rev Ed) s 130

Hri Kumar Nair SC, Wendell Wong, Emmanuel Duncan Chua and Kueh Xiu Ying (Drew & Napier LLC) for the plaintiff

Deborah Barker SC and Ang Keng Ling (KhattarWong) for the second defendant.

Judith Prakash J

Introduction

1 The plaintiff is the sole administrator of the estate of ChingKwongKuen, deceased (‘KK Ching’). He brought this originating summons against two companies, the first defendant, Seng Realty & Development Pte Ltd (‘Seng Realty’) and the second defendant, National Aerated Water Company Pte Ltd (‘National Aerated’), to obtain orders to compel the directors of both defendants to register certain share transfers that had been executed in his favour. I heard the application and on 14 March 2011, I dismissed the application in respect of National Aerated. Subsequently, I acceded to the plaintiff's request for further arguments. The further arguments were heard in April 2011. After taking time for consideration, on 12 September 2011, I decided that the original decision was correct and should be maintained. The plaintiff has appealed.

Facts

2 This case arose as a consequence of the decision in Ching Chew Weng Paul v Ching Pui Sim [2010] 2 SLR 76 (‘Ching v Ching’). The background facts are clearly set out in the judgment of Steven Chong JC from [5] to [14].

3 In brief, KK Ching had created trusts of certain shares and assets. His youngest son, Paul Ching Chew Weng (‘Paul Ching’) claimed to be either the beneficiary of those trusts or the beneficiary of KK Ching's estate (‘the estate’) and in those capacities, commenced Ching v Ching to recover the shares and assets. One of the defendants in that action, Ching Pui Sim (‘MsChing’), held 765,000 shares in Seng Realty (‘the Seng Shares’) and 72,270 shares in National Aerated (‘the National Shares’).

4 Paul Ching was successful in his action in his capacity of beneficiary of his father's estate and Steven Chong JC ordered, inter alia, that MsChing should transfer the Seng Shares and the National Shares to the estate. Pursuant to the judgment, MsChing executed the transfer of the Seng Shares on 3 March 2010 and that of the National Shares on 30 June 2010. Both transfers were in favour of the plaintiff as the executor of the estate.

5 Subsequently, the plaintiff's solicitors wrote to the first and second defendants requesting them to register the transfers of the Seng Shares and National Shares respectively and deliver the new share certificates to the plaintiff as executor of the estate, as required under s 130 of the Companies Act (Cap 50, 2006 Rev Ed) (‘the Act’). The first and second defendants refused to do as requested.

6 The plaintiff then brought this action to compel the defendants to register the said transfers and deliver the said share certificates. In my judgment on 14 March 2010, I granted the plaintiff's first prayer, ie, that SengRealty be ordered to register the transfer of the Seng Shares and deliver the new share...