Lian Hwee Choo Phebe and another v Maxz Universal Development Group Pte Ltd and others and another suit

• Jurisdiction: Singapore
• Judge: Andrew Ang J
• Judgment Date: 08 September 2010
• Neutral Citation: [2010] SGHC 268
• Court: High Court (Singapore)
• Docket Number: Suits Nos 536 and 75 of 2008
• Year: 2010
• Published date: 01 February 2011
• Hearing Date: 28 July 2009,21 July 2009,03 August 2009,18 August 2009,17 August 2009,02 December 2009,27 July 2009,05 August 2009,29 July 2009,31 July 2009,22 July 2009,13 August 2009,11 August 2009,12 August 2009,24 July 2009,19 August 2009,06 August 2009,14 August 2009,07 August 2009,23 July 2009,04 August 2009,01 February 2010,20 August 2009,06 November 2009
• Plaintiff Counsel: Jimmy Yap (Jimmy Yap & Co), N Sreenivasan (Straits Law Practice LLC) and Srinivasan s/o V Namasivayam and Rahayu bte Mahzam (Heong Leong & Srinivasan)
• Defendant Counsel: Edmund J Kronenburg, Leong Kit Wan, Joan Sim and Lye Hui Xian (Braddell Brothers),Davinder Singh SC, Harpreet Singh Nehal SC, Chew Kiat Jinn, Jackson Eng and Dawn Ho (Drew & Napier LLC),Siraj Omar and See Chern Yang (Premier Law LLC),Harish Kumar s/o Champaklal and Goh Seow Hui (Rajah & Tann LLP),Thrumurgan s/o Ramapiram @ Thiru (Thiru & Co),Allister Lim (Allister Lim & Thrumurgan)
• Subject Matter: Companies,Minority Oppression
• Citation: [2010] SGHC 268

Andrew Ang J: Introduction

These two suits involve various claims by the plaintiffs, Lian Hwee Choo Phebe, also known as Jennifer Lian (“LHC”), and Kok Lan Choo (“KLC”), who were two minority shareholders in a company, Maxz Universal Development Group Pte Ltd (“MDG”).

The plaintiffs originally filed Originating Summons No 18 of 2008 (“OS 18”) on 8 January 2008 seeking, inter alia, an injunction against MDG and its directors to restrain them from allotting new shares in MDG. OS 18 was subsequently converted to a writ action, Suit No 75 of 2008 (“Suit 75”), on 29 January 2008. The main relief sought in Suit 75 was to set aside a rights issue of shares (“First Rights Issue”) pursuant to a resolution by MDG dated 13 December 2007 (“First Rights Issue Resolution”). On 1 August 2008, the plaintiffs filed Suit No 536 of 2008 (“Suit 536”) for relief from oppression under s 216 of the Companies Act (Cap 50, 2006 Rev Ed) (“Companies Act”). Suit 536 arose from substantially the same facts as Suit 75. The defendants in Suit 75 were also defendants in Suit 536, although another five defendants were added as co-conspirators in oppression in the latter action. They were all directors or majority shareholders of MDG at some point. Although the plaintiffs originally pleaded the tort of conspiracy under Suit 536, this was abandoned in their closing submissions.

I heard both actions intermittently from July to October 2009. The parties agreed that the evidence adduced for the purpose of addressing the issues in Suit 536 would also be used to deal with the issues arising in Suit 75. On 1 February 2010, I ordered that the First Rights Issue be struck down and, by way of relief under s 216 of the Companies Act, ordered a buy-out of the plaintiffs’ shares. I now give my reasons for doing so.

Background

MDG was founded by one Vincent Ling Wong King (“Ling”), KLC’s husband. He was approached by Seeto Keong (“Seeto”) and Koh Keng Guan (“Gary Koh”) to use the company as their corporate vehicle for property development. Ling agreed and gave shares to Seeto and Gary Koh, both of whom became directors. However, Gary Koh left sometime in 2003 because of bankruptcy proceedings taken out against him. In 2004, Ling transferred his shares to KLC. He remained active in the affairs of the company despite not holding shares or a directorship.

The first plaintiff LHC was in the business of property development. In January 2005, at the invitation of one Benedict Kusni (“Kusni”), she invested $100,000 in MDG through her corporate vehicle, Phebe Investments Pte Ltd (“PIPL”). She received 30,000 shares which comprised 10% of the shares in MDG. Those shares were registered under PIPL. (She later alleged that she ought to have been issued 60,000 shares but instead half of that number of shares was issued to Kusni without her knowledge or consent.)

MDG was controlled at that time primarily by Seeto, the third defendant, and Sebastian Wong Cheen Pong (“Sebastian Wong”), the sixth defendant. Seeto was the chief executive officer of MDG and held MDG shares from around May 2003 to May 2007. Sebastian Wong was an undischarged bankrupt and, oddly, the financial controller of MDG. The plaintiffs alleged that he was a de facto director and also a beneficial shareholder in MDG through his wife, the seventh defendant Loke Sau Fun (“Loke”) and subsequently his daughter, Gwendolyn Wong Sze Wen (“Gwendolyn Wong”), the eighth defendant. Loke held 226,000 shares in MDG from November 2004 to June 2006 at the behest of Sebastian Wong because the latter was facing bankruptcy proceedings. When bankruptcy proceedings were commenced against Loke as well, she transferred the shares to their daughter Gwendolyn Wong. The shareholdings in MDG in January 2005 were as set out below:

Shareholder	Shares held	Percentage of total shares
Seeto	120,000	40
KLC	60,000	20
Loke	60,000	20
PIPL	30,000	10
Kusni	30,000	10
Total:	300,000	100

Sometime later in 2005, MDG successfully negotiated with the Sentosa Development Corporation (“SDC”) for the acquisition and redevelopment of the former Sijori Resort at 23 Beach View, Sentosa Island (“the Property”) then leased by SDC to Sijori Resort Pte Ltd (“SRPL”) into a 200-room, five-star hotel (“the Project”). A special purpose vehicle, Treasure Resort Pte Ltd (“TR”), was incorporated on 28 June 2005 to be the owner and operator of the hotel (then renamed the “Treasure Resort”) and to run the Project. MDG thus became, essentially, a holding company with approximately 94.6% of TR’s share capital. (The exact number of shares in TR owned by MDG remains the subject of litigation between MDG and other parties with which we are not concerned.) The value of the Property subsequently increased substantially after the Singapore government announced that a new integrated resort would be built on land adjacent to the Property.

In November 2005, the share capital of MDG was increased to $20m and 830,000 new shares were issued and allotted to the existing shareholders in proportion to their existing shareholdings. On 11 May 2006, LHC was appointed a director of MDG. She caused the MDG shares under PIPL to be transferred to herself. At or about this time, Loke transferred her shares in MDG to her daughter Gwendolyn Wong. In November 2006, following a dispute between LHC and Kusni, a shareholders’ meeting was held at which it was agreed that Kusni would transfer to LHC the 10% shareholding previously issued to him. In turn, MDG would issue 113,000 shares to Kusni for a consideration of $100,000. The shareholdings in MDG in December 2006 became as follows:

Shareholder	Shares held	Percentage of total shares
Seeto	452,000	36.36
LHC	226,000	18.18
KLC	226,000	18.18
Gwendolyn Wong	226,000	18.18
Kusni	113,000	9.09
Total:	1,243,000	100

Apart from her initial investment of $100,000, LHC, through her corporate vehicle Corporate United Ltd (“CUL”), procured a standby letter of credit (“SBLC”) for $200,000 to secure a $200,000 overdraft facility from Oversea-Chinese Banking Corporation Ltd (“OCBC”). This SBLC was to be discharged by 11 November 2005 but MDG failed to arrange for such discharge. In November 2005, LHC, again through CUL, provided another “loan” of $100,000 (it is unclear if what was provided was another SBLC) upon the request of Kusni and Seeto apparently to be used towards the acquisition of the Property. This “loan” was to be repaid by 16 December 2005 but it was not.

On 11 May 2006, LHC was made a director of MDG. Two weeks later, she agreed, after persuasion by Seeto, to procure another SBLC through CUL, this time for $1m to secure MDG’s bank borrowings from OCBC. It was agreed that the SBLC would be discharged on or before 30 November 2006 but later, at Seeto’s request, this was extended to 27 February 2007. Seeto provided his personal guarantee to CUL and also gave MDG’s post-dated cheque for $1m as assurance that the SBLC would be discharged.

In or about June 2006, MDG obtained credit facilities from Moscow Narody Bank Ltd (later re-named “VTB Bank”) of up to $8m to be used towards the purchase, renovation and refurbishment of the Property and for working capital.

On or about 1 November 2006, MDG also obtained banking facilities of up to $2.5m from Malayan Banking Berhad (“Maybank”). The facilities were later in November 2006 increased to $5m (“the Maybank loan”) and utilised. The Maybank loan was secured by the joint and several guarantee of Seeto and LHC and by two Insurance Guarantee Bonds for a total of $5m by SHC Capital Ltd (“SHC”).

On or about 27 December 2006, LHC wrote to MDG saying that although she had been a shareholder and director for more than a year, she had not seen any of the company’s accounts. She requested that she be given a set of MDG’s accounts for 2005 and 2006. In the same letter, LHC asked when MDG intended to repay the outstanding $300,000 “loans” owed to CUL and how the “loans” had been utilised. Likewise, she asked how the $1m “loaned” from CUL was utilised. Finally, she also proposed that the company’s cheques be signed by two joint signatories instead of the existing single signatories. She did not get a satisfactory reply and therefore instructed solicitors to make a demand on MDG on 19 January 2007 for repayment of the $300,000.

On 22 January 2007, LHC wrote to the company secretary of MDG requesting for copies of all the minutes of meetings of MDG’s board of directors during the year 2006 and copies of all resolutions passed within the same period. She also asked for a copy of MDG’s accounts “passed” at the last Annual General Meeting (“AGM”). Not having received any of the documents sought, she wrote to MDG’s bankers on 29 January 2007 notifying them that with immediate effect all cheques and other correspondence with the bank had to bear her signature. (In the letters, she misdescribed herself as “Managing Director” but rectified the same by a subsequent letter of 7 February 2007.)

On 15 March 2007, LHC was removed from directorship of MDG by a group of shareholders – Seeto, Gwendolyn Wong and Kusni – at an Extraordinary General Meeting (“EGM”).

In May 2007, the second defendant Tan Boon Kian (“Rodney Tan”) invested in MDG through his wholly-owned British Virgin Islands corporate vehicle Roscent Group Ltd (“Roscent”) by buying all the shares belonging to Gwendolyn Wong and Seeto, ie, 678,000 (or 54%) of the shares in MDG. Rodney Tan was a wealthy individual who controlled the Cairnhill group of companies (“the Cairnhill Group”). On 1 June 2007, Rodney Tan was appointed a director of MDG. Rodney Tan advanced a number of loans to MDG totalling $1,978,468.05. He eventually entered into a convertible loan agreement (“the CLA”)...