Lim Swee Khiang and Another v Borden Co (Pte) Ltd and Others

• Jurisdiction: Singapore
• Judge: Andrew Ang J
• Judgment Date: 25 September 2006
• Neutral Citation: [2006] SGCA 33
• Docket Number: Civil Appeal No 88 of 2005
• Date: 25 September 2006
• Published date: 29 September 2006
• Year: 2006
• Plaintiff Counsel: Lok Vi Ming SC, Ajinderpal Singh, Edric Pan and Sun Ru-Shi (Rodyk & Davidson)
• Citation: [2006] SGCA 33
• Defendant Counsel: Justin Yip (Drew & Napier),Alvin Tan (Wong Thomas & Leong),Foo Say Tun (Wee Tay & Lim)
• Court: Court of Appeal (Singapore)
• Subject Matter: Action by minority shareholders of company for relief against oppression by majority shareholders,Civil Procedure,Oppression,Minority shareholders refusing to accept majority shareholders' buy-out offer and seeking winding up of company instead,Section 216(2) Companies Act (Cap 50, 1994 Rev Ed),Applicable legal principles,Section 216(1) Companies Act (Cap 50, 1994 Rev Ed),Trial,Whether affairs of company being conducted or directors' powers being exercised in manner oppressive to minority shareholders or in disregard of their interests,Appropriate remedy where company operational and successful,Appropriate burden of proof on plaintiffs,Companies,Submission of no case to answer by defendants

25 September 2006 Judgment reserved.

Chan Sek Keong CJ (delivering the judgment of the court):

Background

1 The appellants, who are the minority shareholders of the first respondent, Borden Company (Private) Limited (“Borden”), have appealed against the dismissal by the High Court of their application under s 216(1) of the Companies Act (Cap 50, 1994 Rev Ed) (“CA”) to wind up Borden on the ground that the majority shareholders, namely the second to tenth respondents, had oppressed or disregarded their interests as minority shareholders.

2 These proceedings, which were commenced by way of originating summons on 9 September 2002, were later converted into a writ action on 17 August 2004 and a statement of claim was filed. The first appellant, Lim Swee Khiang (“SKL”), filed three affidavits altogether, on 9 September 2002 (“the first affidavit”), on 16 July 2003 (“the second affidavit”) and on 15 January 2004, deposing to various acts and events concerning the respondents that he alleged were oppressive or in disregard of his interests and those of his family company as minority shareholders. The respondents filed affidavits containing little more than bare denials. In the course of these proceedings, both the appellants and the respondents amended their pleadings several times.

3 At the trial, SKL testified and confirmed the statements in his three affidavits and was cross-examined by defence counsel. After the appellants had closed their case, defence counsel made a submission of no case to answer. The trial judge reserved judgment and, subsequently, dismissed the claim with costs. She held that SKL’s testimony failed to establish a prima facie case of oppression and that in any case the action was an abuse of process as the appellants had rejected the respondents’ offer to buy them out. Her judgment is reported at [2005] 4 SLR 141.

Observations

4 Before we consider the rival contentions of the parties in this appeal, it is desirable that we examine a few matters relating to these proceedings in order to better understand the forensic strategy of the respondents in dealing with the allegations of oppression against them. In an ordinary case, the court is not concerned with how each party strategises the conduct of his case, but this case has a number of features that require this court to examine closely the complete silence of the respondents to the claims of the appellants.

Submission of no case to answer

5 The first matter is the submission of no case to answer. It is a trite principle that under our adversarial system of justice, each party has the right to conduct his action or his defence, as the case may be, in a way that benefits him most. It is also an accepted principle that he who asserts must prove and therefore a defendant is entitled to put the plaintiff to strict proof of everything he is alleging, without having to respond in any way to the allegations. However, it is also accepted that where a defendant calls no evidence to rebut the evidence of the plaintiff, a submission of no case in those circumstances is a very high-risk strategy. This is particularly so as the appellants are alleging a series of oppressive and prejudicial acts and omissions of the respondents. Absent mala fides on their part, the appellants would indeed have to have obtained very poor or even negligent advice if they could not make out a case of oppression on the evidence they had adduced in court.

6 In Central Bank of India v Hemant Govindprasad Bansal [2002] 3 SLR 190 at [21], S Rajendran J said:

A decision by a defendant not to adduce evidence in his defence is a decision that ought not to be lightly taken. Where a defendant makes such an election, the result will be that the court is left with only the plaintiff’s version of the story. So long as there is some prima facie evidence that supports the essential limbs of the plaintiff’s claim(s), then the failure by the defendant to adduce evidence on his own behalf would be fatal to the defendant.

In the light of this principle, the respondents would have to be supremely confident of the absence of any merits in the appellants’ claims of oppression, either on the facts or on the law, to resort to a submission of no case to answer. But it could well be that they had been advised that the rejection by the appellants of their buyout offer was a complete answer to the appellants’ claims (the abuse of process argument) or that if the strategy failed, they would not be in any worse position than being ordered to buy out the appellants, for the reason that the court would be unlikely to order Borden to be wound up, given that a winding up order is a last resort remedy.

The respondents’ refusal to explain anything

7 As it is, the respondents’ silence in this case has resulted in many gaps in SKL’s narrative that might have been filled if the respondents, or some of them, had testified. There were many events and incidents in SKL’s account that needed some explanation on the part of the respondents, especially Mdm Halim, to complete the story, so to speak, and to clarify the actual relationships between the respondents, especially between Mdm Halim and her son, Edy Chew, who owns and controls PT Eagle Indo Pharma (“PT Eagle”). This would have been one way of restoring the mutual trust and confidence that the appellants once had in the way the respondents were managing the affairs of Borden. Instead, the respondents rubbed salt into the appellants’ wounds by keeping obdurately silent and seeking to put the blame on SKL through questions put in cross-examination. This strategy led the trial judge to focus her attention on specific events and incidents which, taken in isolation, gave the impression that SKL was principally to be blamed for the way he was treated by the other respondents and also for Borden’s inability to take any action to protect its interests against its licensee, PT Eagle.

8 To avoid any misunderstanding with respect to the thrust of our observations, we wish to explain that the trial judge in fact dealt with the issue of the silence of the respondents in a proper way. The appellants had complained that the silence of the respondents was one of the matters making it clear that the respondents had conducted the affairs of Borden in a manner that departed from the standards of fair dealing. The trial judge dismissed this argument, explaining that the respondents had the right not to go into the witness box. But, in our view, what the appellants had intended to convey by their submission was that the refusal to explain anything was a reflection of the way the respondents had treated SKL. In any case, our observation makes a separate point altogether, which is that the respondents, instead of taking the trouble to explain matters to SKL to repair a personal relationship that had broken down, resorted to legal niceties to perpetuate it.

The appeal and the respondents’ applications to strike out the appeal

9 After judgment, the respondents made a similar buyout offer to the appellants. After rejecting the offer, the appellants appealed against the trial judge’s decision. On 26 October 2005, the fourth respondent (“Mdm Halim”) applied to court (in Notice of Motion No 97 of 2005) to strike out the appeal on the ground that it was an abuse of process. The second, third, fifth, sixth, seventh, eighth and tenth respondents collectively filed a similar application (Notice of Motion No 107 of 2005). On 23 January 2006, the Court of Appeal dismissed the applications. The court held that the appeal was not an abuse of process because the buyout offer was not a reasonable offer in that it did not include the damages claimed by the appellants arising from the oppressive acts of the respondents.

No abuse of process

10 In this appeal, the respondents have again contended in their written submission that the appeal is an abuse of process for the reason that the appellants have rejected their second buyout offer. The clear implication of the Court of Appeal’s dismissal of the respondents’ applications to strike out the appeal in Notices of Motion Nos 97 and 107 of 2005 is that the respondents’ argument would fail. For this reason, the respondents have not pressed this argument before us.

Unrebutted evidence and undisputed facts

11 To appreciate fully the nature of the appellants’ complaints of oppression or disregard by the respondents of their interests as minority shareholders in Borden, it is useful to set out at this juncture the unrebutted testimony of SKL on the salient facts. In this regard, we consider as unrebutted any statement made by SKL that has not been withdrawn, or qualified (and if qualified, only to that extent), when challenged by the respondents’ counsel in cross-examination. We take note that unrebutted evidence is not necessarily credible or good evidence as it may be inherently incredible or so unsatisfactory that it cannot be relied upon.

Business of Borden

12 Borden was incorporated in 1960 to carry on the business of medicinal and pharmaceutical products. Its most successful product is its “Eagle Brand” medicated oil. Borden is the registered owner of the trade mark which depicts an eagle device, the words “EAGLE BRAND” in English and Chinese and the words “CHAP LANG” which Borden has used and continues to use for its medicated oil and other products. In addition to Singapore, Borden has also registered the trade mark in Malaysia, Australia, Canada, the United States of America, Taiwan, Hong Kong, the Philippines and Vietnam.

Borden is a family-owned “quasi-partnership”

13 Borden was originally set up by six families. The appellants and the respondents, and also the trial judge in the way she dealt with the appellants’ case, have accepted that, in the words of Lord Wilberforce in Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 (“Ebrahimi”),Borden is to be regarded as a “quasi-partnership”. Mdm Halim has also confirmed this legal...