Lee Seng Eder v Wee Kim Chwee and others

• Jurisdiction: Singapore
• Judge: Andrew Ang J
• Judgment Date: 31 December 2013
• Neutral Citation: [2013] SGHC 287
• Court: High Court (Singapore)
• Hearing Date: 26 November 2013,24 September 2013
• Docket Number: Originating Summons No 407 of 2013
• Plaintiff Counsel: Ong Ying Ping and Tay Ting Lan Susan (OTP Law Corporation)
• Defendant Counsel: Lai Swee Fung (UniLegal LLC),Goh Soon Chye Gavin (Tan & Lim)
• Subject Matter: Companies,Directors,Duties
• Published date: 10 February 2014

Andrew Ang J: Introduction

The plaintiff, Lee Seng, Eder (“Lee”), sought leave in the present application to commence a derivative action in the name and on behalf of the third defendant, Neu-Movers Logistics Pte Ltd (“the Company”), against the first and second defendants, Wee Kim Chwee (“Wee”) and Tien Shin (“Tien”), pursuant to s 216A of the Companies Act (Cap 50, 2006 Rev Ed) (“the Act”).

Facts

Wee and Tien are directors and shareholders of the Company, which is in the business of providing transportation and warehousing services. Lee is one of the founders of the Company and was its managing director until his resignation on 29 March 2012. After his resignation, Lee remained a shareholder of the Company.

Lee’s complaint was that Wee and Tien had allowed certain other parties to appropriate the Company’s assets and goodwill in the following ways: Wee and Tien allowed N M Solution Pte Ltd (“NMS”), a company incorporated by one Goh York Quee Bernard, a former employee of the Company, to “take over” the revenue to be earned from contracts with the Company’s customers. The Company’s employees “became” NMS’ employees and donned the NMS uniform. NMS used the Company’s vehicles. Two trucks (out of the 22 in the Company’s name) were eventually bought by Sino-Freight Forwarding & Services Pte Ltd (“Sino-Freight”), a company controlled by Tien.

There were other allegations on both sides that need not be repeated because they were irrelevant for the purposes of this present application.

Discussion

The requirements for leave to bring a derivative action under s 216A of the Act are as follows: 14 days’ notice to the directors of the company (“Requirement 1”); the action must be prima facie in the interests of the company (“Requirement 2”); and the complainant must be acting in good faith.

Has 14 days’ notice been given to the directors of the Company?

Sections 216A(3)(a) and 216A(4) provide that: (3) No action may be brought and no intervention in an action may be made under subsection (2) unless the Court is satisfied that — (a) the complainant has given 14 days’ notice to the directors of the company of his intention to apply to the Court under subsection (2) if the directors of the company do not bring, diligently prosecute or defend or discontinue the action;

…

(4) Where a complainant on an application can establish to the satisfaction of the Court that it is not expedient to give notice as required in subsection (3)(a), the Court may make such interim order as it thinks fit pending the complainant giving notice as required.

[emphasis added]

Counsel for Lee, Mr Ong Ying Ping (“Mr Ong”), argued that it was not expedient to provide the 14 days’ notice because Lee had reasonable concerns that Wee and Tien would destroy or tamper with the evidence of their conspiracy to deplete the assets of the Company while diverting its goodwill and customers to NMS. Mr Ong also contended that the present situation was similar to the facts of Fong Wai Lyn Carolyn v Airtrust (Singapore) Pte Ltd [2011] 3 SLR 980 (“Fong Wai Lyn”). In Fong Wai Lyn, the complainant only gave notice seven days after the leave application had been filed because she was afraid that the giving of 14 days’ notice would have caused the concealment of assets and the destruction of evidence. Judith Prakash J held that the notice requirement had nonetheless been satisfied on the facts because it was impracticable to comply with the notice requirements in the circumstances of that case.

In my view, Mr Ong’s reliance on Fong Wai Lyn was misplaced. The present facts are clearly distinguishable from those in Fong Wai Lyn because notice in that case had been given, albeit belatedly. On the present facts, Lee did not give notice at any point in time. Lee had expressed concern regarding the possible destruction or tampering with evidence by Wee and Tien if notice was given. However, in the absence of an Anton Piller order, the risk could have materialised at any time after the originating summons was served on them (ie, August 2013). In other words, from August 2013, the risk that Wee...