Kroll, Daniel v Cyberdyne Tech Exchange Pte Ltd

• Jurisdiction: Singapore
• Court: High Court (Singapore)
• Judge: Mavis Chionh Sze Chyi J
• Judgment Date: 21 September 2022
• Docket Number: Summons No 1507 of 2022 and Registrar's Appeal No 169 of 2022

Kroll, Daniel

and

Cyberdyne Tech Exchange Pte Ltd and others

[2022] SGHC 231

Mavis Chionh Sze Chyi J

Summons No 1507 of 2022 and Registrar's Appeal No 169 of 2022

General Division of the High Court

Civil Procedure — Costs — Security — Defendants appealing for higher quantum for security

Civil Procedure — Striking out — Abuse of process — Plaintiff rejecting defendants' buyout offer — Whether plaintiff's decision to reject buyout offer and to continue with legal proceedings amounted to abuse of process

Civil Procedure — Striking Out — Reasonableness of buyout offer — Requirements for assessing reasonableness of buyout offer

Companies — Oppression — Minority shareholders — Minority shareholder rejecting buyout offer for his shares and choosing to continue with legal proceedings — Whether minority shareholder was justified in rejecting buyout offer and choosing to seek relief by bringing claim for minority oppression

Held, allowing SUM 1507 in part and dismissing the appeal in HC/RA 169/2022:

(1) It was an abuse of process for a plaintiff to reject an offer which would provide him with everything sought and to continue instead with proceedings given that there was public interest that the court's resources should not be used for a claim that had become academic in view of such an offer having been made. Where a reasonable buy-out offer has been made to a minority shareholder, and that offer would give the minority shareholder all that he could reasonably expect to obtain from a minority oppression claim, then that offer should generally be accepted. Bringing a minority oppression claim in those circumstances would amount to an abuse of process because the relief sought in the proceedings would have been obtained had the offer been accepted. In this context, a buyout offer was a contract between the parties – and it was trite law that parties were free to contract as they saw fit. It was not the role of the court to grease the wheels of contractual negotiation in a buyout offer: at [99] and [127].

(2) The court's power under O 33 r 2 of the Rules of Court (2014 Rev Ed) (“ROC 2014”) was meant to be exercised with a view towards saving time and expense at the trial itself. It was not designed as a tool for the court to remove any impediments which stood in the way of a minority shareholder accepting a buyout offer especially absent any provisions in the ROC 2014 which were comparable to rr 1.1 and 1.4 of the Civil Procedure Rules 1998 (SI 1998 No 3132) (UK): at [133].

(3) In determining whether a minority oppression claim should be struck out where a buyout offer had been rejected by the plaintiff, adopting the following two-stage framework would be helpful. First, one should consider whether the offer presented was a “reasonable offer” taking into account Lord Hoffman's guidelines in O'Neill v Phillips[1999] 1 WLR 1092 (“O'Neill v Phillips”). Second, if the offer was a reasonable one, one should consider whether the plaintiff was justified in rejecting the offer and choosing to seek relief by bringing a claim for minority oppression. One key consideration is whether the offer encompassed all the reliefs sought in the plaintiff's claim. To determine this, close attention had to be paid to the reliefs sought and what the plaintiff could reasonably expect to obtain at trial: at [135].

(4) In the present case, per the guidelines in O'Neill v Phillips, the buyout offer was a reasonable one. This was because the offer was for the purchase of shares at fair value and the offer did not expressly provide for a minority discount. The buyout offer in this case was for the 7.67% shareholding which the plaintiff claimed to have been entitled to. Second, a set of criteria had been set for the joint appointment of a suitably qualified assessor. Third, provision had been made for the date of valuation and for parties to propose factors and matters which could affect the valuation. Fourth, there was also provision for parties to have equal access to documents and information and to make submissions to the assessor. Finally, the buyout offer had considered the costs of the assessor and assessment process, as well as the legal costs of Suit 915: at [136].

(5) While the offer was a reasonable one, that the plaintiff had chosen to reject it did not amount to an abuse of process which warranted the striking out of his claim in its entirety. First, the buyout offer did not deal with all issues in dispute in Suit 915. It could not therefore be said that there was no point in the plaintiff continuing with his claim. One such issue concerned the proper valuation of CTX. One reason the plaintiff had given, amongst others, for rejecting the buyout offer was that it excluded the valuation of CTX at US$180m. The manner in which the buyout order was framed precluded consideration of valuing CTX at US$180m. Further, the valuation in the buyout order did not address all of the plaintiff's complaints of oppressive conduct on the part of the second to fourth defendants. This was not something which could be remedied by having the assessor make adjustments. In any case, the plaintiff's allegations of oppressive conduct raised issues of mixed fact and law which were far more suitably determined by the court rather than by an appointed assessor. Finally, the plaintiff did not have sufficient information to consider the buyout offer in a meaningful manner. He had sought certain documents relating to CTX's repurchase of its shares for some S$10m but had been rebuffed on grounds that those documents were confidential: at [137] to [143].

(6) In so far as the second to fourth defendants sought to suggest that the plaintiff had commenced Suit 915, or maintained it for some ulterior or improper purpose, this suggestion was not borne out on the evidence: at [144] to [147].

(7) While the second to fourth defendants failed in their bid to strike out the plaintiff's claim in its entirety, they succeeded in having paras 55–56 of the plaintiff's statement of claim struck out. The plaintiff had alleged in those paragraphs that his signature on Monetary Authority of Singapore (“MAS”) Form 11 (Appointment of Chief Executive Officer or Director/ Change of Director's Nature of Appointment from Non-Executive to Executive) which was submitted by CTX to MAS in its application for an MAS licence had been forged. Even if such a forgery was proven, this had no relation to the plaintiff's claim for minority oppression. The pleadings in these paragraphs were legally unsustainable and should be struck out under O 18 r 19(1)(b): at [171] to [173].

(8) The second to fourth defendants' appeal in HC/RA 169/2022 was dismissed. The second to fourth defendants had not taken substantively different positions in their respective defences. There was therefore no basis for ordering separate security for costs for each defendant: at [179] and [180].

[Observation: The reader might also wish to peruse the decision in Leong Quee Ching Karen v Lam Soon Huat and others[2022] SGHC 309 where the General Division of the High Court had also considered a striking-out application in the context of a minority oppression suit where an offer to buyout the plaintiff's shares had been made.]

Case(s) referred to

ACB v Thomson Medical Pte Ltd [2017] 1 SLR 918 (refd)

Balk v Otkritie International Investment Management Ltd [2017] EWCA Civ 134 (refd)

Bunga Melati 5, The [2012] 4 SLR 546 (refd)

Chee Siok Chin v Minister for Home Affairs [2006] 1 SLR(R) 582; [2006] 1 SLR 582 (refd)

Christie v Christie (1872–1873) LR 8 Ch App 499 (refd)

Company No 006834 of 1988, Re A (1989) 5 BCC 218 (refd)

Company No 00836 of 1995, Re A [1996] BCC 432 (refd)

Foss v Harbottle (1843) 2 Hare 461 (refd)

Federal Insurance Co v Nakano Singapore (Pte) Ltd [1991] 2 SLR(R) 982; [1992] 1 SLR 390 (refd)

Gabriel Peter & Partners v Wee Chong Jin [1997] 3 SLR(R) 649; [1998] 1 SLR 374 (refd)

Harborne Road Nominees Ltd v Karvaski [2011] EWHC 2214 (Ch) (refd)

Harun bin Syed Hussain Aljunied v Abdul Samad bin O K Mohamed Haniffa [2017] SGHC 248 (refd)

Ho Yew Kong v Sakae Holdings Ltd [2018] 2 SLR 333 (refd)

Humpuss Sea Transport Pte Ltd v PT Humpuss Intermoda Transportasi TBK [2015] 4 SLR 625 (refd)

Lai Swee Lin Linda v AG [2006] 2 SLR(R) 565; [2006] 2 SLR 565 (refd)

Leong Chee Kin v Ideal Design Studio Pte Ltd [2018] 4 SLR 331 (refd)

Lim Chee Twang v Chan Shuk Kuen Helina [2010] 2 SLR 209 (refd)

Lim Swee Khiang v Borden Co (Pte) Ltd [2005] 4 SLR(R) 141; [2005] 4 SLR 141, HC (refd)

Lim Swee Khiang v Borden Co (Pte) Ltd [2006] 4 SLR(R) 745; [2006] 4 SLR 745, CA (refd)

Loveridge v Loveridge [2021] EWCA Civ 1697 (refd)

Ng Chee Weng v Lim Jit Ming Bryan [2012] 1 SLR 457 (refd)

Ng Kek Wee v Sim City Technology Ltd [2014] 4 SLR 723 (refd)

North Holdings Ltd v Southern Tropics Ltd [1999] 2 BCLC 625 (refd)

O'Neill v Phillips [1999] 1 WLR 1092 (refd)

Prudential Enterprise Ltd, Re [2001] 2 HKC 686 (refd)

Prudential Enterprise Ltd, Re [2002] 2 HKC 375 (refd)

Robinson v H G Robinson & Sons Ltd [2020] EWHC 1 (Ch) (refd)

Sprintroom Ltd, Re [2019] EWCA Civ 932 (refd)

Tan Eck Hong v Maxz Universal Development Group Pte Ltd [2019] 3 SLR 161 (refd)

TMT Asia Ltd v BHP Billiton Marketing AG (Singapore Branch) [2019] 5 SLR 69 (refd)

Tong Seak Kan v Jaya Sudhir a/l Jayaram [2016] 5 SLR 887 (refd)

Trinity Construction Development Pte Ltd v Sinohydro Corp Ltd (Singapore Branch) [2021] 3 SLR 1039 (refd)

Facts

The plaintiff was a shareholder of the first defendant, Cyberdyne Tech Exchange Pte Ltd (“CTX”), since 31 March 2019. He was appointed as a director of CTX on or around 3 June 2020 and had resigned on 22 February 2021. The plaintiff had initially subscribed to a 1.4% shareholding in CTX for the sum of S$810,000 pursuant to a share subscription agreement dated 31 March 2019. On 10 February 2021, he was given additional shares in CTX which took his total shareholding to 7.67%....