Justin Yeo AR:
The Defendants, namely Wee Kim Chwee (“the 1st Defendant”), Tien Shin (“the 2nd Defendant”), Goh York Quee Bernard (“the 3rd Defendant”) and N M Solution Pte Ltd (“the 4th Defendant”), applied to strike out the Plaintiff’s Statement of Claim (Amendment No 1) (“the Statement of Claim”). Summons No 4833 of 2014 was taken out by the 3rd and 4th Defendants, while Summons No 4860 of 2014 was taken out by the 1st and 2nd Defendants (collectively, the “Summonses”). The Summonses are identical for all intents and purposes and may be dealt with together.
I rendered judgment for both Summonses on 1 December 2014, and ordered that the time for the taking out of any appeal on my decision would commence from the date of this written decision.
Facts
The Plaintiff is a shareholder of Neu-Movers Logistics Pte Ltd (“the Company”), and presently holds 40% of the shares in the Company. The Company is in the business of logistics, and provides customers with transport, storage, manpower, equipment and machinery for moving physical items from one place to another. The Plaintiff was a founder of the Company, and was its managing director until sometime in February 2012 when he was removed from that position at an extraordinary general meeting.
The 1st and 2nd Defendants are the directors and shareholders of the Company who approved the removal of the Plaintiff as managing director. The 2nd Defendant is effectively the controlling shareholder of the Company while the 1st Defendant manages its day-to-day operations and activities. The 3rd Defendant is a former employee of the Company, and is the sole director and shareholder of the 4th Defendant. The Company had allegedly assigned its goodwill and assets to the 4th Defendant.
The present suit is related to earlier proceedings instituted by the Plaintiff against the Defendants in Originating Summons 407 of 2013 (“OS 407”). The proceedings and decision in OS 407 formed a significant bulk of the arguments raised on the Summonses. OS 407 was the Plaintiff’s application for leave under s 216A of the Companies Act (Cap 50, 2006 Rev Ed) (“the Act”) to commence a derivative action in the name and on behalf of the Company against, inter alia, the four Defendants. Subsequently, the Plaintiff discontinued OS 407 against the 3rd and 4th Defendants and OS 407 proceeded without their attendance or involvement.
On 31 December 2013, Andrew Ang J (“Ang J”) issued a judgment dismissing OS 407. The learned Judge’s written decision is found in Lee Seng Eder v Wee Kim Chwee and others [2014] 2 SLR 56 (“Lee Seng Eder”). In gist, Ang J found that the requirements for leave to bring a derivative action under s 216A of the Act were not made out, for the following reasons: First, the Plaintiff had failed to give 14 days’ notice to the directors of the Company of his intention to apply to the Court under s 216A(2) of the Act despite having ample time and opportunity to do so (Lee Seng Eder at [8]). Second, it would not be in the interests of the Company to expend considerable sums of money to bring the action before liquidation (Lee Seng Eder at [15]). On this last mentioned point, Ang J noted that the precarious state of the Company’s financial position meant that liquidation of the Company is “more than likely”, and that even if leave were granted to the Plaintiff to commence the action, the liquidator “may well choose to discontinue the action upon liquidation” (Lee Seng Eder at [15]). The issue of bringing an action against the directors of the Company “should more appropriately be raised for the liquidator’s consideration after the Company is in liquidation” (Lee Seng Eder at [15]).
The Plaintiff did not appeal against the decision in Lee Seng Eder. Instead, less than a month after the decision, the Plaintiff took out the present suit against all four Defendants, raising various allegations against them. The allegations are contained in the Statement of Claim, to which I now turn.
The Statement of Claim
The Statement of Claim is a relatively short document comprising 14 paragraphs. However, despite its brevity, the document was unclear and it was uncertain as to how the different complaints and claims raised interfaced with each other. I raised numerous queries to counsel for the Plaintiff, Mr Ong Ying Ping (“Mr Ong”), seeking clarification on various aspects of the Statement of Claim. In brief, there were five fundamental uncertainties concerning the Statement of Claim. The first major uncertainty stemmed from the fact that the Statement of Claim was unclear about what acts of the Defendants were being alleged to result in the Plaintiff suffering loss and damage. Paragraph 13 of the Statement of Claim purported to provide the particulars of all the loss and damage suffered by the Plaintiff. It indicated that as a result of the matters set out “particularly [in] paragraphs 10, 11 and 12A [of the Statement of Claim]”, the Plaintiff suffered the losses that he is now claiming for. No specific reference, however, was made to paragraphs 7, 8, 9 and 12 of the Statement of Claim, and it was uncertain what loss or damage the Plaintiff alleged had arisen vis-à-vis those paragraphs. Mr Ong clarified upon my query that paragraph 13 of the Statement of Claim was erroneous, and that it should have referred to paragraphs 7 to 12A of the Statement of Claim. The second major uncertainty was that paragraph 13 of the Statement of Claim, which purported to list the loss and damage suffered by the Plaintiff, did not specify that the Plaintiff had suffered any loss and damage from the 2nd Defendant’s alleged breach of contract. The Plaintiff’s claim for “damages for breach of contract” was somewhat confusingly contained in a separate paragraph. Upon my query, Mr Ong clarified that the loss and damage from the breach of contract should have been pleaded in paragraph 13 of the Statement of Claim, and applied to amend the Statement of Claim to indicate the same. The third major uncertainty stemmed from paragraph 14(b) of the Statement of Claim. In this paragraph, the Plaintiff purported to claim “[d]amages against [sic] the [1st and 2nd] Defendants’ breach of fiduciary duties”. This paragraph appeared to be related to paragraph 6 of the Statement of Claim, which confusingly stated that “the 1st and 2nd Defendant and [sic] each of them owed a duty to the Plaintiff to discharge his [sic] fiduciary duty [sic] to the Company in order to preserve the value of the Plaintiff’s shares in the Company”. There was some confusion as to how the Plaintiff could seek damages for breaches of fiduciary duties, when he had expressly pleaded in paragraph 5 of the Statement of Claim that these fiduciary duties were owed to the Company rather than to him. Upon my query, Mr Ong clarified that the “duty” owed to the Plaintiff was a duty on the part of the 1st and 2nd Defendants to discharge their fiduciary duties to the Company, as this would have an impact on the value of the Plaintiff’s shares in the Company. He further characterized the nature of the “duty” as a duty not to oppress a minority shareholder, and suggested that it was a duty that correlated with s 216 of the Act. To this end, he suggested that their alleged breach of fiduciary duties had resulted, inter alia, in the 1st and 2nd Defendants causing the Company to assign or transfer the Company’s assets at an undervalue or nominal value (“the Suspect Transactions”), which in turn resulted in: The Plaintiff losing his employment with the Company. The Company becoming insolvent and hence being unable to pay the Plaintiff the sum of $36,000. The diminution of the value of the Plaintiff’s shares in the Company. The fourth major uncertainty related to the oppression claim against the 1st and 2nd Defendants as stated in paragraph 12A of the Statement of Claim. It was unclear as to where the oppression claim featured in the summary of claims stated by the Plaintiff in paragraph 14 of the Statement of Claim. On my query, Mr Ong clarified that the oppression claim in paragraph 12A was subsumed under the claim against the 1st and 2nd Defendants for breaches of their fiduciary duties, and that this should have been made clearer. He therefore applied to amend the Statement of Claim accordingly. The fifth major uncertainty stemmed from the fact that although the Plaintiff sought an account of monies “misappropriated or recovered by the Defendants”, as well as the monies received by the Defendants “which were secret profits received in fraud on the Company” (see paragraphs 14(c) and 14(d) of the Statement of Claim), the body of the Statement of Claim was entirely silent on any form of fraud or misappropriation. Mr Ong could not explain why this was so, and asked to be given an opportunity to amend the Statement of Claim.
With Mr Ong’s clarification and corresponding application to amend, I classified the Statement of Claim into three main categories of claims so that the parties and the court could proceed on a common understanding. The three categories were as follows: The first category was a contractual claim against the 2nd Defendant (“the Category One Claim”). The Plaintiff alleged that, in consideration of his agreement to relinquish his position as managing director, the 2nd Defendant had agreed that the Company would pay to the Plaintiff a sum of $36,000, being a sum equivalent to four and a half months of the Plaintiff’s last drawn salary at that time; and that the 2nd Defendant would purchase the Plaintiff’s shares in the Company. It should be noted that the contractual claim against the 2nd Defendant is limited to the latter point, viz an alleged breach of the contract to purchase the Plaintiff’s shares. It did not extend to the former point, viz the agreement that the Company would pay the Plaintiff a sum of $36,000. The second category of claim concerned the Plaintiff’s seeking of damages against...
