Mukherjee Amitava v DyStar Global Holdings (Singapore) Pte Ltd and others

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 06 September 2018
• Neutral Citation: [2018] SGCA 57
• Year: 2018
• Date: 06 September 2018
• Published date: 22 September 2018
• Hearing Date: 06 September 2018
• Subject Matter: Companies,Director's right to inspect company's records,Directors,Section 199 of the Companies Act (Cap 50, 2006 Rev Ed)
• Plaintiff Counsel: Dinesh Dhillon Singh, Lim Dao Kai, Margaret Ling, Ivan Lim, and Elyssa Lee (Allen & Gledhill LLP)
• Defendant Counsel: Nandakumar Ponniya Servai, Wong Tjen Wee, Lucas Lim, Liu Ze Ming, Daniel Ho and Nicolette Oon (Wong & Leow LLC),See Chern Yang and Teng Po Yew (Premier Law LLC)
• Court: Court of Appeal (Singapore)
• Citation: [2018] SGCA 57
• Docket Number: Civil Appeal No 115 of 2017

Sundaresh Menon CJ (delivering the judgment of the court ex tempore): Introduction

This appeal concerns an application for access to and inspection of documents (“the Inspection Application”) pursuant to s 199 of the Companies Act (Cap 50, 2006 Rev Ed) (“the Act”). It was brought by the appellant, Mr Mukherjee Amitava, in respect of documents of DyStar Global Holdings (Singapore) Pte Ltd (“the Company”), of which he was a director. The respondents resisting the Inspection Application are the Company and three of its five directors, Mr Ruan Weixiang, Mr Xu Yalin and Mr Yao Jianfang (collectively, “the Longsheng directors”).

The Inspection Application was issued less than three months after the commencement of a minority oppression suit against the Company’s de facto majority shareholder, a company incorporated in China known as Zhejiang Longsheng Group Co Ltd (“Longsheng”). Longsheng holds its interest through its subsidiaries, Senda International Capital Limited (“Senda”) and Well Prospering Limited (“Well Prospering”). The minority shareholder that brought the minority oppression suit is Kiri Industries Ltd (“Kiri Industries”), which is also the shareholder that appointed the appellant as director of the Company. The matter came before a High Court judge (“the Judge”) whose primary finding was that the Inspection Application had been made for the ulterior purpose of obtaining information to support Kiri Industries’ case in the minority oppression suit (which was ongoing at the time he heard the Inspection Application). He therefore denied the appellant’s request.

The minority oppression suit was heard before the Singapore International Commercial Court (“the SICC”) and it has since concluded. The SICC found that minority oppression was made out, and ordered Senda to purchase Kiri Industries’ shareholding in the Company (see DyStar Global Holdings (Singapore) Pte Ltd v Kiri Industries Ltd and others and another suit [2018] SGHC(I) 06 (“DyStar SICC”)). An appeal has been filed against the decision of the SICC and is pending.

Background The structure of the Company

The Company is an investment holding company incorporated in Singapore. It has three shareholders: (a) Senda which owns about 62% of the company; (b) Well Prospering which owns a single share in the company; and (c) Kiri Industries Ltd (“Kiri Industries”) which owns about 38% of the company. Senda and Well Prospering are both wholly-owned subsidiaries of Longsheng; in effect, therefore, Longsheng is the company’s ultimate majority shareholder. The Company has five directors, and under the Company’s shareholder agreement, three were to be appointed by Longsheng and two by Kiri Industries. Kiri Industries appointed the appellant and Mr Manishkumar Pravinchandra Kiri. Longsheng appointed the Longsheng directors. Mr Ruan was appointed as the chairman of the board of directors.

Concerns about related party loans

Sometime before July 2014, concerns were raised over loans that had been made by the Company to entities related to Longsheng. The directors of the Company got round to discussing borrowing conditions for such related party loans, and in October 2014, the directors of the Company agreed on a set of such conditions (“the Borrowing Conditions”). These conditions, in essence, stipulated that related party loans would only be approved if the total amount loaned was no greater than the cash margins that Longsheng had provided to guarantee the Company’s bank borrowings; in addition, the interest rates charged by the Company for the related party loans were not to be lower than the Company’s own borrowing costs. In short, the Company should not be subsiding the borrowing costs of the related parties; nor should the Company be granting loans to related parties to an extent greater than that to which Longsheng was securing the Company’s bank borrowings.

In January 2015, Mr Manishkumar wrote to the Longsheng directors, requesting them to declare dividends for the preceding financial year, 2014, on the basis that the Company had made profits after making provisions to clear past year losses. The Longsheng directors replied a couple of days later, informing Mr Manishkumar that it would not be appropriate to declare dividends because the Company had a high level of expenses and required large sums of working capital.

On 14 February 2015, the appellant e-mailed Mr Xu to find out about a reference to related party loans exceeding $90m in “Board papers” presented at a previous board meeting, further noting that the cash margins for the last quarter of 2014 had not been confirmed. After exchanging a number of e-mails with Mr Xu and his representative, the appellant discovered that two related party loans for US$20m and US$80m had been granted without the prior knowledge and approval of the appellant and Kiri Industries.

In April 2015, the appellant also discovered that the Borrowing Conditions had been breached for the months between September and December 2014. Subsequently, the appellant made a series of requests for documents and information, but these efforts were blocked as Mr Ruan had instructed the management of the Company to route the appellant’s requests through the board instead.

The commencement of the minority oppression suit

On 26 June 2015, Kiri Industries commenced proceedings against Senda and the Company in the High Court, seeking relief on the ground of minority oppression. In turn, counterclaims were brought by Senda against Kiri Industries and their related parties for conspiracy and contractual breach, including the alleged breach of a non-competition clause. Subsequently, the suit was transferred to the SICC.

The lead-up to the Inspection Application

On 18 July 2015, the appellant wrote to the Company and the Longsheng directors in his capacity as a director of the Company and as a member of the Audit Committee and the Compensation/Remuneration Committee of the Company. In his letter, he complained that his past requests for information had not been properly addressed. He noted that it was important for board members to be kept apprised of the financial affairs and management of the Company, and requested documents relating to the Company’s and its subsidiaries’ accounts (including profit and loss statements, balance sheets, loan documentation, investments, etc).

On 1 August 2015, the appellant received replies from Senda, the Company’s Chief Executive Officer, Mr Eric Hopmann, and the Longsheng directors. Both Senda and Mr Hopmann deferred to the decision of the board of directors. The Longsheng directors refused to comply with the appellant’s requests, taking the position that the appellant’s requests were made in furtherance of the minority oppression suit, and that the information sought could be used to commit further possible breaches of the non-competition clause (see [9] above). The Longsheng directors also told the appellant that they were willing to meet to discuss the requests for information and sought responses from the appellant in respect of any wrongful competition that Kiri Industries was engaging in. It should be noted, however, that the Judge formed the view that the Longsheng directors in fact had no intention of acceding to any part of the appellant’s request in the 18 July 2015 letter (Mukherjee Amitava v DyStar Global Holdings (Singapore) Pte Ltd [2017] SGHC 314 (“Judgment”) at [95]).

The appellant filed the Inspection Application on 15 September 2015, about six weeks after the Longsheng directors’ reply. The requests listed in the schedule appended to his Application was identical to those set out in the schedule appended to his letter dated 18 July 2015. The first hearing of the Inspection Application took place on 17 August 2016, and the Judge granted an adjournment to let the parties attempt to reach an agreement on the scope of inspection. The Judge commented, in his Notes of Argument, that it appeared as though the real issue between the parties was the scope of the plaintiff’s right to inspect rather than the question of the entitlement to exercise that right.

The parties were not able to come to an agreement on the scope of the requests that could properly be made in the context of the Inspection Application. The appellant then appointed a public accountant, Mr Chan Yee Hong. As stated in Mr Chan’s affidavit, his mandate was to assist the appellant in identifying and reviewing the accounting and records of the Company, with a view to enabling him to understand “the transactions and financial position of [the Company] as recorded in its consolidated financial statements, having regard to concerns that he has on the same (particularly on related party transactions entered into by [the Company]”. According to the appellant, Mr Chan was engaged to “provide his independent and objective views on identifying the accounting and other records that he would expect to be kept by the company, focusing on the areas that have been (and remain) of particular concern to [the appellant]” [emphasis added].

On 11 November 2016, the appellant wrote to the solicitors for the respondents, attaching a new schedule of items (henceforth referred to as the “amended schedule”) which focused on “(i) related party transactions entered into by the DyStar Group and (ii) remuneration and bonuses paid by the DyStar Group to its directors and management.” In the letter, the appellant noted that these were areas of particular concern and that such information was required to enable him to carry out his duties as a director as well as a member of the Company’s Audit and Remuneration Committee.

The conclusion of the minority oppression suit

On 3 July 2018, the SICC issued its decision in respect of the minority oppression suit. Among other findings, the SICC found that related party loans in October 2014 and January 2015 exceeded the applicable cash margins, and the Borrowing...