Lim Beng Nga and another v Yat Guan Pte Ltd and others

• Jurisdiction: Singapore
• Judge: Aedit Abdullah J
• Judgment Date: 23 March 2020
• Neutral Citation: [2020] SGHC 54
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 1010 of 2016
• Year: 2020
• Published date: 27 March 2020
• Hearing Date: 21 November 2019,12 November 2019
• Plaintiff Counsel: Ng Ka Luon Eddee and Siew Guo Wei (Tan Kok Quan Partnership)
• Defendant Counsel: Chey Cheng Chwen Anthony (Chey LLC),Tan Jin Yong, Vanessa Claire Koh Yuet Feng and Yang Yung Chong (Lee & Lee)
• Subject Matter: Companies,Shares,Transfer
• Citation: [2020] SGHC 54

Aedit Abdullah J: Introduction

This case concerned a family dispute over the shares of the 1st Defendant, Yat Guan Private Limited (“the Company”). The Plaintiffs, Mr Lim Beng Nga and Mr Lim Beng Huan, brothers, sued their other siblings and nephews to challenge the validity of certain share transfers on grounds that they were in breach of a pre-emption clause in the Company’s Memorandum and Articles of Association (“M&AA”). The Plaintiffs also challenged the resolutions for such transfers as being void for lack of proper notice. I dismissed the Plaintiff’s applications; the Plaintiffs have now appealed.

Background The parties

The original shareholders of the Company were the Plaintiffs’ late father, Mr Lim Thiam Tee (“father”), and their late eldest brother, Mr Lim Beng Qui (“eldest brother”).¹ The eldest brother helped the father run the Company whilst the Plaintiffs and other siblings were still studying.² Their father worked hard his entire life for the Company and for the family until he collapsed at the age of 78.³ Following the father’s demise, his shares were split equally amongst his five children.⁴

The following diagram sets out the familial relations between the Plaintiffs and 2nd to 8th Defendants:⁵

The 17 November 2014 transfer

Prior to 17 November 2014, the eldest brother and the 2nd Plaintiff, Mr Lim Beng Huan, were the only two directors of the Company.⁶ On 17 November 2014, a meeting of the Board of Directors of the Company was held which was attended by the eldest brother, the 2nd Plaintiff, the Company secretary Mr Chiang See Thong (“Mr Chiang”) and the 4th Defendant, Mr Lim Er Lin (“Lin”), who is the son of the eldest brother.⁷ The purpose of the meeting was to appoint Lin as a director of the Company, and to allow the 2nd Plaintiff to step down.⁸ However, under Article 65 of the M&AA, a director was required to hold at least one share in the Company.⁹ Hence, at the meeting, the Board of Directors comprising the eldest brother and the 2nd Plaintiff resolved and approved the transfer of one share from the eldest brother to Lin.¹⁰ No payment was made by Lin for the one share.¹¹ The transfer of the one share was later lodged on 22 May 2015.¹²

At the same meeting, it was resolved that Lin be appointed as an additional director of the company with effect from 17 November 2014.¹³ The 2nd Plaintiff also resigned as a director of the company with immediate effect, which was approved by the new Board of Directors comprising the eldest son and Lin.¹⁴

The 14 September 2016 dispositions

The Plaintiffs’ second eldest brother, Mr Lim Beng Sit (“second eldest brother”), subsequently passed away intestate¹⁵ on 7 January 2012¹⁶ and his wife, the 3rd Defendant, was appointed Administratrix over his Estate.¹⁷ The 3rd Defendant and her three children, namely, the 7th Defendant Mr Lim Er Luen, Mr Lim Erbin and Ms Lin Ying, were the beneficiaries to the estate.¹⁸ The late second eldest brother held 670 shares in the Company.¹⁹ On 15 August 2016, the 3rd Defendant, Mr Lim Erbin and Ms Lin Ying signed a Deed of Disclaimer stating that they were relinquishing all claims to these 670 shares in the Company.²⁰ Thus, the 7th Defendant was the sole remaining beneficiary to these 670 shares.²¹

Shortly after, on 16 September 2015, the eldest brother passed away.²² With his passing, Lin became the sole director of the Company.²³ The eldest brother had made a will to transfer all his shares in the Company entirely to Lin.²⁴ The eldest brother’s other son, Mr Lim Ni Eng, who is the 6th Defendant, is the sole executor of the eldest brother’s estate.²⁵

On 30 August 2016, a Notice of Extraordinary General Meeting (“EGM”) was sent to the Plaintiffs by Mr Chiang. The relevant portion of the EGM Notice is quoted as follows:²⁶

I am hereby instructed by the director, [Lin] to call for an Extraordinary General Meeting of the Company to be held at 20 Sungei Kadut Street 3 Sungei Kadut Industrial Estate Singapore 729150 on 14 September 2016 (Wednesday) at 4.00 p.m. for the following purposes:- 1. To approve the transfer of 1,021 shares from the Estate of [the eldest brother], in accordance with the Grant of Probate, Last Will and Testament of [the eldest brother], deceased. 2. To approve the transfer of 670 shares from the Estate of [the second eldest brother], in accordance with the Grant of Letters of Administration. 3. To appoint the following persons as Directors of the Company – a. [the 6th Defendant] b. [the 5th Defendant] 4. To appoint and authorise an officer of the Company to attend to IRAS Summons Notice No. IRAS0033512016. A copy of the summons is attached herewith. 5. To fix a date to convene the Annual General Meeting of the Company.

Subsequently, on 8 September 2016, the Plaintiffs wrote to Mr Chiang and Lin as follows:²⁷

On the topic of items (1) and (2)… I think there is not enough information provided in the EGM Notice. The EGM Notice should have stated who the shares will be transferred to, and how many shares to each person receiving the shares. Without knowing this information, the shareholders cannot consider whether to vote for or against the proposal and the EGM Notice is defective.

…

A new EGM Notice should be sent stating for items (1) and (2) who the shares will be transferred to, and how many shares to each person receiving the shares. The Grant of Probate for the Estate of [eldest brother] and the Letters of Administration for the Estate of [second oldest brother] should also be given to all the shareholders with the parts not related to the share transfer redacted. The EGM will therefore have to be postponed to at least 14 days after the new EGM Notice is sent out…

Mr Chiang replied the next day, stating:²⁸ 1. The transfer of shares from the Estate of [the oldest brother] is to be transferred to [Lin] (1,019 shares), [the 5th Defendant] (1 share) and [the 6th Defendant] (1 share) 2. The transfer of 670 shares from the Estate of [second oldest brother] is to be transferred to [the 7th Defendant] (670 shares) 3. We do not see the necessity to re-send or to re-schedule another date for the EGM to be convened. Hence, the EGM scheduled on 14th September 2016 per notice of meeting remained unchanged.

[emphasis in original]

The EGM proceeded on 14September 2016 and it was attended by Lin, the 3rd Defendant, the 8th Defendant and Mr Chiang.²⁹ The meeting resolved to approve the following transactions: The transfer of the 670 shares from the second eldest brother’s Estate to the 7th Defendant;³⁰ Out of the 1,021 shares held by the eldest brother’s Estate³¹ – The transfer of 1,019 shares to Lin; The transfer of one share to the 5th Defendant; and The transfer of one share to the 6th Defendant.

The meeting also resolved and approved the appointment of the 5th and 6th Defendants as directors of the Company.³²

The parties’ cases Plaintiffs’ submissions

The Plaintiffs filed HC/OS 1010/2016 and sought:³³ A declaration that the resolutions passed at the EGM on 14 September 2016 are void; A declaration that the transfer of one share of the Company from the eldest brother to Lin is void; A declaration that the Plaintiffs are entitled to purchase the 1,021 shares of the Company registered in the name of the eldest brother, the 670 shares registered in the name of the Estate of the second eldest brother and the one share listed in (b); Any registration of the shares in (c) in the names of the 4th–7th Defendants to be deemed void; An order that any lodgement made to the Registrar of Companies effecting the transfer of the shares referred to in (c) to the 4th, 5th, 6th and/or 7th Defendants be cancelled; and An order that any votes cast at any General Meeting after 14 September 2016 by any person claiming to be vested with the shares referred to in (c), save for the Executor of the Estate of the [eldest brother], and the 3rd Defendant, should not be taken into consideration for the purpose of passing any resolution.

The Plaintiffs argued that all dispositions of shares made pursuant to resolutions passed at the EGM on 14 September 2016 are null and void as the EGM Notice was improper, given that it did not specify the identity of the transferee of shares,³⁴ did not specify the desire of the Estates of the eldest brother or second eldest brother to transfer or sell the shares they had,³⁵ and the Plaintiffs could not verify the authenticity of the purported transfers as they did not have a copy of the will of the eldest brother.³⁶

The Plaintiff argued in the alternative that the dispositions breached the pre-emption clause in the M&AA as the shares had not been offered for sale to the Plaintiffs.³⁷ The dispositions made pursuant to the EGM were subject to the M&AA pre-emption clause as they were transfers and not transmissions.³⁸ A transmission refers only to a disposition in favour of the personal representative or administrator, and any subsequent dispositions in favour of the beneficiaries constitutes a transfer.³⁹ The dispositions here were made in favour of the beneficiaries, and hence constituted transfers. Further, the grant of letter of administration for the Estate of the second eldest brother did not mandate any transfer of shares.⁴⁰

The Plaintiffs also argued that the transfer of one share by the late eldest brother to Lin was void as it breached the pre-emption clause in the M&AA.⁴¹ The fact that no consideration was given does not change the fact that it was a transfer.⁴² Further, there was no General Meeting of shareholders to approve the said transfer, and there was no notice of the share transfer.⁴³

Defendants’ submissions

The 3rd and 7th Defendants were separately represented from the other Defendants, but will be included with the other Defendants since they adopt the same legal position.⁴⁴

The Defendants submitted that the EGM Notice was valid as it met the requirements...