New Ping Ping Pauline v Eng's Noodles House Pte Ltd and others

• Jurisdiction: Singapore
• Judge: Valerie Thean J
• Judgment Date: 22 December 2020
• Neutral Citation: [2020] SGHC 271
• Published date: 25 December 2020
• Docket Number: Suit No 20 of 2019
• Year: 2020
• Hearing Date: 04 August 2020,29 July 2020,21 July 2020,24 July 2020,03 August 2020,05 August 2020,20 July 2020,28 September 2020,27 July 2020,22 July 2020,30 July 2020,23 July 2020,06 August 2020,28 July 2020,07 August 2020
• Plaintiff Counsel: Leslie Yeo and Jolene Tan (Sterling Law Corporation)
• Citation: [2020] SGHC 271
• Defendant Counsel: Leo Cheng Suan and Denise Tay (Infinitus Law Corporation),Suresh S/O Damodara, Clement Ong and Joni Khoo (Damodara Ong LLC)
• Court: High Court (Singapore)
• Subject Matter: Companies,Unlawful means,Equity,Breach,Fiduciary relationships,Whether leave necessary to commence,Conspiracy,Duties,Tort,Common law derivative action

Valerie Thean J: Introduction

Mr Ng Ba Eng (“Mr Ng”) ran a successful wanton mee hawker stall at Dunman Street that had a strong following and from 2002, won many awards. In 2009, his son (the second defendant, hereinafter called “Desmond”) joined him at the stall. Around 2012, they were approached by a businessman customer, Jason, who proposed a collaboration. After successful negotiations, the first defendant (“the Company”) was incorporated on 27 February 2012 and father and son commenced operations from the Company’s new premises at Tanjong Katong Road. Pauline, Jason’s wife and the plaintiff in this action, and Desmond were the sole shareholders and directors of the Company.

Mr Ng passed away in 2013. The Company continued to prosper but the relationships between the partners started to deteriorate. In 2018, following a fall-out between the business partners, the Company failed to secure the renewal of the lease of its operating premises, and the business of the Company came to a standstill. These premises were eventually taken over by a new business called “Eng’s Wantan Noodle Pte. Ltd.” (“Eng’s Wantan Noodle”). In this common law derivative action and counterclaim, the Ng family and Pauline lock horns over Mr Ng’s legacy.

Facts The parties and their claims

Mr Ng’s father first sold wanton mee from a pushcart in the Duku Road vicinity. Mr Ng helped his father from a very young age and learned the skills of the trade under his father’s tutelage. ¹ Mr Ng carried on the business after his father retired in 1976.² Later, when street hawkers were reorganized into hawker centres, he moved to a hawker stall in Dunman Food Centre and continued his business there (“the Hawker Business”).³ Desmond assisted Mr Ng at the stall from 2009.

In early 2012, Jason approached Mr Ng with a business proposal to expand the Hawker Business.⁴ The Company was incorporated on 27 February 2012 with a share capital of $2, with the plaintiff (“Pauline”) and Desmond each initially holding 50% of the shares in the Company.⁵ Pauline and Desmond were also the directors of the company at the point of incorporation.⁶ Desmond employed the third defendant (“Bill”), an employee at one of Jason’s companies, to assist with managing the Company’s finances.⁷ Following the issuance of additional shares on 12 August 2015, Pauline and Desmond each had their shareholdings reduced to 47.5% and Bill was given 5% of the shareholding.⁸

The Company ceased business operations on 28 February 2018.⁹ Pauline was removed as a director on 8 June 2018¹⁰. Desmond resigned as a director on 9 July 2018.¹¹ Bill is presently the only director of the Company,¹² having assumed directorship on 8 June 2018.¹³

In this action, Pauline contends Bill and Desmond have breached their fiduciary duties to the Company.¹⁴ Desmond concedes he has such duties but denies any breach of them. Bill denies having any fiduciary duties prior to his becoming a director. Pauline’s case is that Bill was vested with such duties as a “senior employee”. Bill and Desmond, together with the other defendants, are also accused of conspiring to injure the Company by setting up a competing business.¹⁵ This competing business is the sixth defendant, Eng’s Char Siew Wantan Mee Pte Ltd (“Eng’s Char Siew”), which was incorporated on 5 March 2018¹⁶ by Desmond’s sisters, the fourth and fifth defendants (“Mui Hong” and “Mei Ling” respectively). Mui Hong and Mei Ling each hold 50% of the shares in Eng’s Char Siew and have been the sole directors of Eng’s Char Siew since its incorporation.¹⁷ Pauline contends that Eng’s Char Siew was set up as part of a conspiracy to injure the first defendant.

In this context, Pauline brings a common law derivative action, claiming that the defendants (save for the Company) have conspired to injure the Company by setting up Eng’s Char Siew;¹⁸ Desmond and/or Bill has/have breached his/their fiduciary duties to the Company;¹⁹ Desmond and/or Bill has/have breached his/their duties under s 157 of the Companies Act (Cap 50, 2006 Rev Ed) (“the Companies Act”);²⁰ and that Bill had misappropriated monies from the Company (“the Misappropriation claim”).²¹

The Misappropriation claim was eventually withdrawn on the tenth day of trial.²²

Mui Hong, Mei Ling and Eng’s Char Siew, in turn, counterclaim that Pauline has committed the tort of passing off (“the Counterclaim”).²³ They contend that Pauline and Jason are associated with Eng’s Wantan Noodle, and helped set up its first outlet at the former premises of the Company.²⁴ In doing so, Pauline and Jason, whom Bill regards as the “shadow plaintiff” ²⁵ and whom Desmond, Mui Hong and Mei Ling regard as the “real plaintiff” ²⁶ of this suit, have both allegedly , “stolen the family business”. Neither Jason nor Eng’s Wantan Noodle have been joined in the Counterclaim.

Background to the dispute

Broadly speaking, the history of this dispute may be divided into four time periods: First, the period prior to the incorporation of the Company. This period was crucial to the development of the goodwill associated with the Company that forms the basis for the Counterclaim. Second, the period spanning the incorporation of the company and the years of good, dispute-free business which the Company enjoyed. This period is crucial to understanding the initial agreement between the parties at the time of incorporation, their respective roles and remuneration within the Company, and in particular, the role that Bill played in the company (ie, whether he had been vested with fiduciary duties or not). Third, the period which saw the relationship between the business partners (ie, Pauline and Desmond) deteriorate. Pauline claims that the conspiracy to injure the Company was incepted and executed during this period. This conspiracy is, in turn, the lynchpin of Pauline’s common law derivative action as she complains that the conspiracy amounts to a fraud on the minority. Fourth, the period directly preceding and immediately after the Company ceased business. This period offers further insight into the conspiracy complained of, and also whether Pauline and Jason had themselves, attempted to appropriate the Company’s business for their own purposes.

With this in mind, I turn to the facts.

Pre-incorporation

The Hawker Business began its operations on the first floor of the Dunman Food Centre before subsequently moving to the basement. The stall in the basement (“the Dunman Stall”) bore a white signboard with the English words “Eng’s Char Siew Wan Ton Mee” in blue and the Chinese characters “榮高叉燒雲吞麵” in red.²⁷ These trade names (together, “the Original Tradenames”) were at all times prominently displayed on the signboard at the Dunman Stall:²⁸ Figure 1: The Original Tradenames

Business was brisk and the stall’s wanton mee gained many admirers. The Hawker Business won many accolades, including the South East District Food Awards in 2002²⁹ and an “Excellent” rating from Makansutra (a local food reviewing website) in 2003.³⁰ Mr Ng himself was later anointed a “hawker master” in 2011 by the Straits Times and Lianhe Zaobao³¹ (the local English and Chinese broadsheets respectively).

The cooking was shouldered primarily by Mr Ng.³² Mr Ng was “the walking brand”³³, “the one who [won] all the award[s]”³⁴ and the “main thing that people will come to the shop [for]”.³⁵ From 2009, Desmond assisted him at the stall daily by helping to cook, collecting takings and tending to customers. ³⁶ The rest of the family played various supporting roles: Mui Hong, assisting with publicity;³⁷ Mei Kuen (Mr Ng’s eldest daughter), “simple bookkeeping” and helping Mr Ng file tax returns;³⁸ Mei Ling, Desmond’s wife (“Ah Keat”) and Desmond’s mother (“Mdm Loh”), wrapping the wantons and cutting chillis.³⁹

Incorporation of the Company and employment of Bill

In or around early 2012, Jason approached Mr Ng with a business proposal to expand the Hawker Business.⁴⁰ No written records document the eventual agreement between the parties. It is common ground between the parties that (a) Jason advanced a sum of $150,000 as part of the agreement,⁴¹ (b) there had been substantial goodwill built up by the Hawker Business prior to the incorporation of the Company, (c) the subject of trademarks, goodwill or tradenames was not discussed when the Company was being incorporated,⁴² and (d) there was no written licensing agreement for any trademarks or tradenames.⁴³

Pursuant to this agreement, the Company was incorporated on 27 February 2012 with Pauline and Desmond each initially holding 50% of the shares in the Company.⁴⁴ Bill, then an employee in Jason Parquet Specialist Pte Ltd (“JPS”),⁴⁵ joined the Company to assist with its accounts and finances.⁴⁶ There is no dispute that Bill was paid approximately $1,500 per month as an employee of the company and received 5% of the profits at year-end.⁴⁷ It is however disputed whether this was as part of a profit-sharing agreement or from his 5% shareholding in the Company.

The Company began business at its new premises at 287 Tanjong Katong Road Singapore 437070 (“the 287 Premises”) around May 2012.⁴⁸ Desmond was the formal tenant under the tenancy agreement for these premises (“the 287 Tenancy Agreement),⁴⁹ but there was an express clause in the lease that stated that the premises were for the business of the Company (ie. Eng’s Noodles House Pte Ltd).⁵⁰ There was also a renewal clause⁵¹ that entitled the tenant (Desmond) to write to the landlord three months before the expiry date of the tenancy (15 March 2018), to seek a renewal of the lease at a “rent to be agreed, or based on the prevailing market rent but otherwise containing the like conditions, covenants and stipulations as [we]re [t]herein contained with the exception of th[at] option for renewal” (“the Option to Renew”).

The 287 Premises used two signboards (respectively, “the Top 287 Signboard” and “the Bottom 287...