Low Peng Boon v Low Janie and Others and Other Appeals

JurisdictionSingapore
JudgeKarthigesu JA
Judgment Date30 January 1999
Neutral Citation[1999] SGCA 8
Docket NumberCivil Appeals Nos 244 of 1997
Date30 January 1999
Year1999
Published date19 September 2003
Plaintiff CounselWong Meng Meng SC, Chou Sean Yu and LowWee Lin (Wong Partnership)
Citation[1999] SGCA 8
Defendant CounselMichael Khoo SC, Lim Chor Pee and Jack Lee (Chor Pee & Partners),Lisa Chong (Lisa Chong & Partners),Harry Elias SC, Audrey Thng, Eddie Ng and Chan Kia Peng (Harry Elias & Partners)
CourtCourt of Appeal (Singapore)
Subject Matters 216 Companies Act (Cap 50),Companies,Oppression,Relief,Whether conduct amounts to oppression of minority shareholder -Whether winding up or sale of shares to majority shareholders the most appropriate remedy in the circumstances,Minority shareholder in family company complaining of improper use of funds, deliberate personal enrichment by dominant shareholder and approval of improper accounts
Judgment:

LP THEAN JA

(delivering the judgment of the court): These three appeals arose from the proceedings instituted by the plaintiff, Janie Low (`JL`), against her father, Low Peng Boon (`LPB`), her half-brother, Low Kee Guan (`LKG`), and her cousin, Low Kee Siong (`LKS`), and their family company, Eng Cheong Peng Kee Pte Ltd (`ECPK`), for relief under s 216 of the Companies Act (Cap 50) (`the Act`). They are all shareholders and directors of ECPK. In these proceedings, JL complained that LPB, LKG and LKS had conducted the affairs of ECPK and its subsidiaries and had exercised their powers in a manner oppressive to her or in disregard of her interests as a shareholder of ECPK. The trial judge found that JL had made out a case of oppression and made the necessary orders against LPB, LKG and LKS. All three of them appealed against the decision of the trial judge. Civil Appeal No 120 is an appeal by LPB alone against that decision of the trial judge, and CA 130/98 is an appeal by LKG and LKS against the same decision of the trial judge. Civil Appeal 244/97 is also an appeal by LPB alone but against the decision of the trial judge given while the hearing was in progress refusing to stay the proceedings or adjourn the hearing to enable ECPK to convene an extraordinary meeting to pass a special resolution for the voluntary winding up of ECPK. All the three appeals were heard together.

2. The facts

ECPK is a family company founded by LPB and his late brother, Low Peng Nam, and carries on the business of dealing in fruits, vegetables and other foodstuffs. It was incorporated on 4 June 1948, and its issued and paid up capital is $1,000,000 divided into 10,000 shares of $100 each. The shareholders of ECPK are as follows:

Name Share Percentage
Low Peng Boon 3,253 32.53%
Low Kee Guan 3,066 30.66%
Janie Low 1,452 14.52%
Low Kee Siong 400 4%
Low Kee Wah (LKS`s half brother) 400 4%
Low Kee Cheong (LKS`s half brother) 400 4%
Au Yong Woon (mother of Low Kee Cheong and Low Kee Wah) 233 2.33%
Ong Geok Mui (mother of LKS and Low Kee Chuan) 396 3.96%
Low Kee Chuan (LKS`s brother) 400 4%

3.ECPK has three wholly owned subsidiaries: Eng Cheong Peng Kee (Hong Kong) Ltd (`ECPK (HK)`), incorporated on 1 March 1955 and engaged in the business of fruiterers and greengrocers in Hong Kong; Eng Cheong Peng Kee (Malaysia) Sdn Bhd (`ECPK (M)`) incorporated on 31 March 1967 and engaged in the business of fruiterers and greengrocers in Malaysia; and ECPK Enterprises Pte Ltd (`ECPK Enterprises`) incorporated on 14 May 1970 engaged, inter alia, in holding and leasing out the premises known as Eng Cheong Tower situate at North Bridge Road. There is also a subsidiary, ECPK Technologies Pte Ltd, which is a dormant company. ECPK and it subsidiaries are hereinafter collectively referred to as `the Group`.

4.LPB is the managing director and LKG, LKS and JL are directors of ECPK, ECPK Enterprises, ECPK (HK) and ECPK (M); and in the Malaysian company one Madam Yap Yoke Ying is also a director. LPB being the managing director retains the overall management of the Group and LKG manages the trading arm of the Group, while JL and LKS jointly manage the property holding company, ECPK Enterprises.

5.Although ECPK (HK), ECPK (M) and ECPK Enterprises are wholly owned subsidiaries of ECPK, the accounts of these subsidiaries are not consolidated with that of ECPK. The corporate records of ECPK (HK) and ECPK (M) are kept in Singapore. Secretarial services for these two subsidiaries are rendered by Elite Management Services Pte Ltd, which is a company based in Singapore. Furthermore, the control, direction and all management decisions regarding ECPK and its subsidiaries emanate from Singapore.

6.ECPK and its subsidiaries are a group of prosperous companies and have substantial assets including large cash reserves. The main assets include the Eng Cheong Towers at North Bridge Road and ECPK`s main office at 15 and 16 Hongkong Street. The business was essentially built up by LPB. LPB is now about 85 years old. Sometime in 1984 he suffered a debilitating stroke and as a result he is semi-paralysed and uses a wheel chair to move around. His state of health is such that he requires 24 hour nursing and medical care. In spite of his lack of mobility he did not cease to take on an active role in the management of the affairs of ECPK and its subsidiaries. He continues to retain the overall management of the companies and receives reports on the financial status and business affairs of the companies from the other directors to whom he has left the day to day operations and management. Since the time he suffered the stroke he has stopped going to the offices of ECPK and its subsidiaries. Annual general meetings of ECPK are held and conducted at LPB`s house at 2C, Amber Road, Singapore.

7.LPB`s remuneration as the managing director of ECPK includes annual bonuses paid from the net profits of ECPK and ECPK (HK). As for LKS who manages the trading arm of the Group, his remuneration also includes an annual bonus derived from the net profits of ECPK. In the case of JL and LKG who jointly manage the property arm, ECPK Enterprises, their remuneration includes an annual bonus derived from the net profits of ECPK Enterprises.

8.JL`s claim for relief under s 216 of the Companies Act is based on the following: (a). that LPB had used huge amounts of funds of ECPK (HK) for payment of his travelling and other expenses to Hong Kong and China and these trips were for his personal purpose and not for the purpose of any business of ECPK (HK);

(b). that the profits of ECPK (HK) year after year were not distributed to shareholders through ECPK but were accumulated and placed on fixed deposits for the purpose of increasing the amount of bonus paid to LPB which was calculated at the rate of 20% of the net profits, before tax, of ECPK (HK), and that further in computing the profits of ECPK (HK), the gains in foreign exchange differences were taken into account, in spite of a shareholder`s resolution of ECPK to the contrary passed on 31 December 1991;

(c). that in the account of ECPK (M) for the financial year ending 30 June 1995 there was a meteoric rise in the advertisement expenses from RM255 in 1994 to RM283,314 in 1995 with no proper explanation given by LPB and/or LKG;

(d). that LPB, LKG and LKS had acted oppressively and in an indifferent manner towards her in response to her various queries on the accounts relating to the improper use of funds of ECPK (HK) and ECPK (M); and

(e). that LKS with the approval of LKG purchased a Jaguar XJR car with the funds from ECPK Enterprises without her knowledge and in disregard of JL`s views, at the time when she was not in Singapore.

9.At the trial the main witnesses who gave material evidence were JL and LPB. LKG and LKS, despite having filed their respective affidavits, elected not to give any evidence, and thus their affidavits of evidence-in-chief not being tested were not admitted and considered by the trial judge. In the course of the trial, counsel for LPB applied for either a stay of the proceedings or an adjournment of the hearing to allow ECPK to convene an extraordinary general meeting to pass a special resolution for the voluntary winding up of ECPK. The trial judge, however, rejected this application and continued with the trial.

10. Decision below

At the conclusion, the trial judge held that JL had succeeded in making out a case against all three of them under s 216 of the Companies Act. He said, at [para ] 10 as follows:

[T]here is the clearest evidence of a visible departure from the standards of fair dealing and a violation of the conditions of fair play by the first, second and third defendants [LPB, LKG and LKS]. The plaintiff has proved her case. The affairs of ECPK (S) and its subsidiaries are being conducted and the first, second and third defendants` powers as directors are being exercised in a manner oppressive to the plaintiff and in disregard of her interests as a shareholder of ECPK (S) and its subsidiaries. Nothing that was said by the first defendant in evidence indicated the contrary. Instead it reinforced the plaintiff`s case. The first defendant was certainly not a non-participant as he claimed. He was the key beneficiary. His evidence lacked credibility.

11.The trial judge then went on and made specific findings against each of them. As against LPB, he found as follows. First, LPB had incurred huge travelling and other expenses for himself and his nurse and LKG`s wife who accompanied him in his travels to Hong Kong and China and all these expenses were paid by ECPK (HK), and in that connection the travelling expenses for his trips to China, although paid out of the funds of ECPK (HK), were not recorded and accounted for in the books of ECPK (HK). His travels were purely for his own purposes and not for any business of ECPK (HK). Thus, he had made use of funds of ECPK (HK) for his own personal needs.

12.Secondly, LPB had year after year amassed and accumulated the profits of ECPK (HK) and placed them in fixed deposits for the purpose of increasing the quantum of his bonus which was calculated at the rate of 20% of the profits each year. He neither caused dividends to be declared nor caused profits to be returned to the shareholders through ECPK. In determining the bonus at 20% payable out of the profits, ECPK (HK) included in the computation of profits unrealised foreign exchange gains in disregard of the shareholders` resolution to the contrary passed on 31 December 1991.

13.In respect of the huge advertisement expenses amounting to RM283,314 incurred by ECPK (M) in 1995, the trial judge appeared to have accepted that LPB did not know anything about such expenses, but he found that LPB approved the accounts of ECPK (M) at the annual general meeting held on 22 March 1996.

14.Lastly, the trial judge found that LPB was `a dominant and autocratic person` and that at the annual general meeting of ECPK held on 24 February...

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