Koh Keng Chew and others v Liew Kit Fah and others

• Jurisdiction: Singapore
• Judge: Chua Lee Ming J
• Judgment Date: 13 March 2017
• Neutral Citation: [2017] SGHC 52
• Plaintiff Counsel: Lim Wei Lee and Catherine Chan (WongPartnership LLP)
• Docket Number: Suit No 125 of 2014
• Date: 13 March 2017
• Hearing Date: 23 January 2017
• Subject Matter: Minority shareholders,Reference date,Oppression,Valuation of shares,Companies
• Year: 2017
• Defendant Counsel: Patrick Ang, Chong Kah Kheng and Daniel Gaw (Rajah & Tan Singapore LLP),Nicholas Ngo (TSMP Law Corporation)
• Court: High Court (Singapore)
• Citation: [2017] SGHC 52
• Published date: 18 January 2018

Chua Lee Ming J: Introduction

This was an action commenced by the plaintiffs under s 216 of the Companies Act (Cap 50, 2006 Rev Ed). On 29 July 2016, I delivered my judgment in which I gave an order for the 1st to 6th defendants to purchase the shares of the plaintiffs in the 7th to 16th defendants (see Koh Keng Chew and others v Liew Kit Fah and others [2016] 4 SLR 1208). The plaintiffs filed an appeal against that decision but have since withdrawn the appeal.

As agreed between the plaintiffs and the 1st to 6th defendants, the price will be determined by an independent valuer to be appointed. It was also agreed that the valuer to be appointed, the reference date for the valuation and the costs of the valuation will be decided by this court if the parties cannot reach agreement on the same.

Ultimately, the parties could not agree on the following issues: (a) the reference date for the valuation of the shares, (b) the framework for the valuation process, and (c) whether the valuer should issue a reasoned valuation. Accordingly, I heard the parties on these issues on 23 January 2017. I decided on 17 February 2016 as the reference date, gave certain directions as to the valuation process, and also decided against a reasoned valuation.

The 1st to 6th defendants have appealed against my decision regarding the reference date for the valuation of the plaintiffs’ shares in the 7th to 16th defendants. Before me, they had contended that the reference date should be either: 28 January 2014, ie, the date on which the writ in this action was filed; or 31 December 2014, ie, the date which the 1st to 6th defendants claimed was the reference date that the parties had agreed to in December 2015.

The law

It was common ground that the overriding principle governing share buyouts is that the price should be fair, just and equitable as between the parties. The court’s discretion is otherwise unfettered.

There is no definite and immutable rule as to the appropriate date for determination of the valuation of shares. Cases have generally selected the date the action was commenced (“the Filing Date”) or the date of the order (“the Buyout Order Date”). See Hans Tjio, Pearlie Koh & Lee Pey Woan, Corporate Law (Academy Publishing, 2015) (“Corporate Law”) at para 11.091. The use of the Filing Date has been justified on the ground that it reflects the date on which the applicant elects to treat the allegedly unfair conduct of the majority as destroying the basis on which he agreed to continue as a shareholder: In re Cumana Ltd [1986] BCLC 430 at 436. On the other hand, the use of the Buyout Order Date has been justified on the ground that it is the date closest to the actual sale and best reflects the value of what the shareholder is selling: Re London School of Electronics Ltd [1986] Ch 211 at 224. See also Profinance Trust SA v Gladstone [2002] 1 WLR 1024 (“Profinance”) at [33]–[35].

In Profinance, the English Court of Appeal reviewed a number of English decisions and agreed (at [60]) with Nourse J’s general proposition in Re London School of Electronics Ltd (at 224) that “[p]rima facie an interest in a going concern ought to be valued at the date on which it is ordered to be purchased”.

I was referred to several Singapore cases. The choice of the reference date does not appear to have been a contested issue in these cases and the decisions have gone in both directions. The Filing Date was chosen as the reference date in Lim Swee Khiang v Borden [2006] 4 SLR(R) 745 at [92] and Lim Chee Twang v Chan Shuk Kuen Helina and others [2010] 2 SLR 209 at [150(a)]. However, the Buyout Order Date was chosen in Over & Over Ltd v Bonvests Holdings Ltd and another [2010] 2 SLR 776 at [132], Eng Gee Seng v Quek Choon Teck and others [2010] 1 SLR 241 at Annex A, Sharikat Logistics Pte Ltd v Ong Boon Chuan and others [2014] SGHC 224 at [243] and Lim Seng Wah and another v Han Meng Siew and others [2016] SGHC 177 at [176]. In Tullio Planeta v Maoro Andrea G [1994] 2 SLR(R) 501, there was some discussion of the general rule stated in Re London School of Electronics Ltd but the court did not express any clear view on it (at [15]–[20]). In any event, the general rule was inapplicable in that case because the company in question was not a going concern.

The 1st to 6th defendants invited me to use the Filing Date as the reference date for the reason stated in In re Cumana Ltd. I declined the invitation. In my view, the general rule in Re London School of Electronics Ltd was to be preferred, ie, as a starting point, the Buyout Order Date should be the reference date. I agreed with the authors of Corporate Law (at para 11.091) that this “makes good sense as this is the value that best reflects what the shareholder is selling”. Further, although a buyout...