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

CourtHigh Court (Singapore)
Judgment Date01 August 2005
Docket NumberOriginating Summons No 1268 of
Date01 August 2005
Lim Swee Khiang and another
Borden Co (Pte) Ltd and others

[2005] SGHC 135

Judith Prakash J

Originating Summons No 1268 of 2002

High Court

Civil Procedure–Trials–When submission of no case to answer may succeed–Companies–Oppression–Minority shareholders–Action by minority shareholders of company for relief against oppression by majority shareholders–Whether affairs of company being conducted or directors' powers being exercised in manner oppressive to minority shareholders or in disregard of their interests–Applicable legal principles–Section 216 Companies Act (Cap 50, 1994 Rev Ed)–Companies–Oppression–Minority shareholders–Minority shareholders refusing to accept majority shareholders' buy-out offer and seeking winding up of company instead–Whether majority shareholders' offer “reasonable”–Whether failure of minority shareholders to accept majority shareholders' buy-out offer amounting to abuse of process of court–Proper order to make

The plaintiffs were minority shareholders of a company (“Borden”) which, inter alia,manufactured a well-known medicated oil. They alleged that the defendants, the majority shareholders of Borden, had conducted the affairs of Borden in a way which was oppressive to them or disregarded their interests as members of Borden.

The primary allegation was that the fourth defendant (“Mdm Halim”), whose son ran an Indonesian company also in the business of producing medicated oil (“PT Eagle”), was in a position of conflict as she was the director of Borden and at the same time a shareholder and commissioner of PT Eagle. The defendants were also said to have caused Borden to settle legal proceedings that it had taken against PT Eagle in Malaysia.

The defendants were alleged to have acted against the interests of Borden by virtue of various acts and omissions. In addition, the plaintiffs alleged that the defendants had used their powers as directors and shareholders to try and oust the plaintiffs from Borden and keep them out of the management of Borden's business. In relation to this, it was submitted that the first plaintiff's (“S K Lim”) rights as a director had been curtailed and his involvement in the affairs of Borden had been restricted. He had also been wrongfully removed as an executive director.

The plaintiffs sought various reliefs. As an alternative, the plaintiffs prayed that the defendants be ordered to purchase the plaintiffs' shares in Borden at a price to be fixed by a valuer or by the court. Mdm Halim asserted that a reasonable offer to purchase the plaintiffs' shares had been made by the defendants and that the plaintiffs' refusal to agree to the same and their maintenance of the action amounted to an abuse of the process of the court.

At the close of the plaintiffs' case, the defendants submitted that there was no case to answer and elected not to call any witnesses on this basis.

Held, dismissing the action with costs to all the defendants:

(1) A submission of no case to answer could succeed if either the plaintiff's evidence at face value did not establish a case in law or the evidence led by the plaintiff was so unsatisfactory or unreliable that his burden of proof had not been discharged: at [14].

(2) To invoke the court's powers under s 216 of the Companies Act, the applicant had to show that the affairs of company concerned were: (a) being conducted, or the powers of the directors were being exercised, in a manner oppressive to the applicant or in disregard of his interests; or (b) that some act of the company had been done, or was threatened, that would unfairly discriminate against the applicant. In this case, the allegations made by the plaintiffs fell more within the first limb relating to the conduct of the affairs of Borden and the use of the directors' powers than within the second limb which related to specific acts that were prejudicial to the plaintiffs: at [80].

(3) The issue was whether the plaintiffs were able to establish by the evidence adduced at the trial taken at face value, that there had been a visible departure from the conditions of fair dealing and a violation of the conditions of fair play that the plaintiffs were entitled to expect, such that a case of oppression could be made, and/or that the plaintiffs had been constrained to submit to something which was unfair to them as a result of some overbearing act or attitude of the defendants: at [83].

(4) Although there was a theoretical possibility that as commissioner of PT Eagle Mdm Halim could have been in a position of conflict, there was no act or situation that the plaintiffs could point to which showed her in such a position. No situation had arisen in which she was shown to have preferred the interests of PT Eagle over those of Borden: at [85].

(5) The plaintiffs' evidence did not establish that, on its face, the removal of S K Lim's executive powers was done pursuant to a conspiracy by the defendants to deprive him of a say in the management of Borden so that the defendants could prefer the interests of PT Eagle over those of Borden, or that he was removed because he was taking further steps to investigate Mdm Halim's position in PT Eagle. There was evidence that Mdm Halim had reason to be unhappy with S K Lim's stewardship of Borden, in particular with his reluctance to deal with concerns that she as a shareholder and co-director had raised: at [86].

(6) Although the new management deprived S K Lim of access to his office and instructed the staff not to deal with him after he ceased to be an executive director, such conduct did not amount to oppression. As S K Lim was no longer in the management, he would not have the right to give instructions directly to the staff and since they had previously been used to taking instructions from him, denying him access to them would have helped the new management take over control: at [91].

(7) The defendants had not acted unreasonably or in an overbearing manner vis-à-vis the plaintiffs in deciding to settle the Malaysian proceedings. There was also insufficient evidence to substantiate, amongst other things, the plaintiffs' allegation of direct competition from PT Eagle in the Vietnamese market and S K Lim's suspicions alone could not be accepted as evidence. As for various other decisions made by the defendants in the running of Borden, they could be considered as policy decisions. To establish oppression, the plaintiffs had to show that there was an ulterior motive behind a particular policy decision and that it was taken to promote the interests of PT Eagle or the defendants' own interests, rather than those of Borden, because of the defendants' association with PT Eagle. The plaintiffs had failed to show this: at [67], [70], [87] and [92].

(8) Even if the plaintiffs had been able to establish oppression by the majority shareholders, they would have had difficulties in obtaining the relief that they sought. The plaintiffs asked the court to wind up Borden. Generally speaking, where a company was doing well, as Borden was, the court would be reluctant to order it to be wound up: at [94].

(9) Where there was a reasonable offer to purchase the allegedly oppressed party's shares, then an action for oppression could not be sustained. An offer was reasonable where: (a) the offer was to purchase the shares at a fair value; (b) if value was not agreed, it would be determined by a competent expert; (c) the offer was to have the value determined by an expert as an expert; (d) the offer provided for an equality of arms between the parties; and (e) the question of costs was considered in the offer: at [97].

(10) The defendants' offer substantially met the pre-requisites of a reasonable offer to purchase. Despite receiving the defendants' offer very shortly after the commencement of the action, the plaintiffs did not act to resolve the situation notwithstanding that they had applied to court to have their shares bought out. This prayer was only removed after the matter came to trial. The plaintiffs were guilty of an abuse of process in continuing with this action and in refusing to respond to the defendants' offer of a buy-out. It was, however, too late to strike out the action. The proper remedy was a dismissal: at [98] and [102].

Bansal Hemant Govindprasad v Central Bank of India [2003] 2 SLR (R) 33; [2003] 2 SLR 33 (folld)

Company (No 003843 of 1986), Re a [1987] BCLC 562 (refd)

Jermyn Street Turkish Baths Ltd, Re [1971] 1 WLR 1042 (refd)

Kong Thai Sawmill (Miri) Sdn Bhd, Re [1978] 2 MLJ 227 (refd)

Low Peng Boon v Low Janie [1999] 1 SLR (R) 337; [1999] 1 SLR 761 (refd)

O'Neill v Phillips [1999] 1 WLR 1092 (folld)

Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324 (refd)

Companies Act (Cap 50, 1994 Rev Ed) s 216 (consd);s 216A

Lok Vi Ming SC, Joanna Foong and Sean La'Brooy (Rodyk & Davidson) for the plaintiffs

Justin Yip (Drew & Napier LLC) for the first defendant

Foo Say Tun (Wee Tay & Lim) for the second, third, and fifth to eighth defendants

Alvin Tan (Wong Thomas & Leong) for the fourth defendant

Lionel Tay and Paul Ng (Rajah & Tann) for the ninth defendant.

Judith Prakash J


1 This is an action by minority shareholders for relief against oppression. The plaintiffs complain that the defendants, apart from the first defendant, conducted the affairs of Borden Company (Private) Limited (“Borden”) in a manner which was oppressive to them or which disregarded their interests as members of Borden.

2 Borden was set up in 1960 to manufacture medicinal and pharmaceutical products. It has been successful and is now particularly well known for its medicated oil which is sold under the “Eagle” brand name (“Eagle oil”). Borden has an authorised and paid-up capital of $1m divided into 10,000 ordinary shares of $100 each. Originally, Borden had six promoters. Currently, only one promoter, Lim Kheng Puan, the tenth defendant...

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