Leong Quee Ching Karen v Lim Soon Huat
| Jurisdiction | Singapore |
| Judge | Goh Yihan JC |
| Judgment Date | 09 December 2022 |
| Docket Number | Originating Claim No 158 of 2022 (Registrar's Appeals Nos 297 and 298 of 2022) |
| Court | High Court (Singapore) |
[2022] SGHC 309
Goh Yihan JC
Originating Claim No 158 of 2022 (Registrar's Appeals Nos 297 and 298 of 2022)
General Division of the High Court
Civil Procedure — Pleadings — Striking out — Claimant seeking special audit to be conducted into affairs of company — Defendants making offers to buy out claimant's shares in company and for independent valuer to be appointed — Striking out minority oppression claim where buy-out offer had been made — Whether “plain and obvious” standard for striking out should apply — Whether claimant's pursuit of special audit was impossible exercise — Whether there was abuse of process — Order 9 r 16 Rules of Court 2021
Companies — Oppression — Minority shareholders — Claimant having legitimate expectation to access information relating to company — Claimant being removed from directorship and being denied information — Valuable properties from company being removed — Whether claimant made out allegations of misfeasance or misappropriation to seek special audit — Whether special audit was possible relief for minority oppression claims
Held, dismissing the appeals:
(1) Even though the striking-out applications were brought under the ROC 2021, it was still relevant to refer to authorities pre-dating the ROC 2021 to interpret O 9 r 16(1). It was trite that the bar for succeeding in a striking-out application was a high one, and this power was sparingly exercised only in plain and obvious cases: at [22], [23] and [25].
(2) The applicable law for striking out a minority oppression action under s 216 of the Companies Act in the context of a buy-out offer was the two-stage framework (the “Kroll Framework”) laid down in Kroll, Daniel v Cyberdyne Tech Exchange Pte Ltd[2022] SGHC 231 (“Daniel Kroll”): (a) was the offer presented a “reasonable offer”, taking into account the guidelines set out in O'Neill v Phillips[1999] 1 WLR 1092; and (b) if the offer was a reasonable one, was the claimant justified in rejecting that offer and choosing to seek relief by bringing a claim for minority oppression? One key consideration was whether the offer encompassed all the reliefs sought by the claimant, and close attention had to be paid to the reliefs sought and what the claimant could reasonably expect to obtain at trial: at [29] and [30].
(3) The applicable standard for striking out in the Kroll Framework remained the “plain and obvious” test for three reasons. First, the High Court in Daniel Kroll did not intend to overturn established law on striking out by using the expression “reasonably expect” when setting out the Kroll Framework. Second, the High Court had in fact applied the traditional “plain and obvious” test in its decision. Third, none of the cases which the High Court in Daniel Kroll reviewed suggested that the traditional “plain and obvious” standard has changed to that of “reasonable expectation” for striking out a minority oppression action in the face of a buy-out offer: at [37] to [41].
(4) For clarity, part of the second stage of the Kroll Framework was reframed as whether the claimant was justified in rejecting the buy-out offer after considering whether the offer encompassed all the reliefs sought, and the onus was on the defendant to show that it was impossible (and not just improbable or not reasonably expected) for the claimant to obtain the reliefs sought at the end of trial (apart from those already part of the buy-out offer). It was only when the defendant could show this, that the situation would be a plain and obvious case for striking out the claim entirely, on the basis that the continued prosecution of the action was an abuse of process. The other propositions of law laid down by Daniel Kroll in the Kroll Framework remained undisturbed: at [54] and [55].
(5) The court was not concerned with whether it was plain and obvious that a claim for minority oppression per se would be impossible, but rather whether the claim for a specific relief would be impossible. Within the application of the Kroll Framework, the operative question was whether the buy-out offer had addressed all of the claimant's concerns that prompted the minority oppression action in the first place. Ultimately, it has to be kept in mind that at the interlocutory stage, it was not realistic to expect claimants to make out their cases fully, and this explained the high threshold to be met before a case was struck off and that this draconian power should be exercised judiciously: at [56] and [57].
(6) There should not be a third stage added to the Kroll Framework, which purported to have the court use its tools and procedures to assist parties in resolving any impediment to the claimant's acceptance of the buy-out offer. While the ROC 2021 facilitated active case management, the proposed third stage did not add to the purpose of the Kroll Framework which was to guide the court in deciding whether the rejection of a reasonable buy-out offer amounted to an abuse of process. It was also unclear how this third stage would be applied in practice, and there was no legal basis for its addition to the Kroll Framework: at [58] to [64].
(7) On the facts of the case, there was no dispute between the parties that the first defendant's third buy-out offer was a reasonable offer under the first stage of the Kroll Framework. However, under the second stage, it was clear that the buy-out offer did not satisfy the claimant's desire for a special audit. The claimant's case in the minority oppression action was not about the value of her shares per se, but rather, the management of SLH. The proposed buy-out offer, which envisaged appointing an independent valuer to value the claimant's shares, did not address the root of the claimant's legitimate expectation that SLH had been properly managed and her concomitant right to access the relevant information: at [15(b)] and [67] to [69].
(8) On the issue of whether it was plain and obvious that the claimant's relief sought was impossible to obtain such that the Suit amounted to an abuse of process, the claimant's pursuit of the special audit was not an impossible exercise on the basis of the allegations that she has pleaded. First, an order for a special audit was a possible form of relief under s 216 of the Companies Act that a court could order under certain circumstances. Second, the court's supposed desire to bring an end to matters by encouraging a resolution of the dispute did not preclude an order for a special audit. Even if it were the case that the courts were generally reluctant to order a special audit, this did not mean that such an audit would never be ordered: at [78] to [83].
(9) The claimant's pursuit of the special audit was a possible relief as the parties agreed that the claimant had a legitimate expectation of having access to information pertaining to SLH and the subsidiaries, and that this expectation was breached. The claimant also made out further allegations of misfeasance or misappropriation, beyond a breach of her legitimate expectations, to seek a special audit. Further, the claimant's desire for a special audit did not offend the reflective loss principle: at [84] to [92].
Ang Xing Yao Lionel v Lew Mun Hung Joseph [2022] SGHC 277 (refd)
Bank of China Ltd, Singapore Branch v BP Singapore Pte Ltd [2021] 5 SLR 738 (refd)
Birchfield v Birchfield Holdings Ltd [2022] 2 NZLR 123 (refd)
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DyStar Global Holdings (Singapore) Pte Ltd v Kiri Industries Ltd [2018] 5 SLR 1 (refd)
Eurogreen Building Products Pte Ltd v Savourer Pte Ltd [2022] SGMC 53 (refd)
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Koh Kim Teck v Credit Suisse AG, Singapore Branch [2015] SGHC 52 (refd)
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Sprintroom Ltd, Re [2019] 2 BCLC 617 (refd)
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Teelek Realty Pte Ltd v Ng Tang Hock [2021] 2 SLR 719 (refd)
Thio Syn Kym Wendy v Thio Syn Pyn [2017] SGHC 169 (refd)
Wenlock v Moloney [1965] 1 WLR 1238 (refd)
Wing Joo Loong Ginseng Hong (Singapore) Co Pte Ltd v Qinghai Xinyuan Foreign Trade Co Ltd [2009] 2 SLR(R) 814; [2009] 2 SLR 814 (refd)
The claimant was a minority shareholder of...
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