Ng Heng Liat and Others v Kiyue Company Ltd and Another

JurisdictionSingapore
Judgment Date22 March 2003
Date22 March 2003
Docket NumberOriginating Summons No 1115 of
CourtHigh Court (Singapore)
Ng Heng Liat and others
Plaintiff
and
Kiyue Co Ltd and another
Defendant

[2003] SGHC 62

Kan Ting Chiu J

Originating Summons No 1115 of 2002

High Court

Companies–Directors–Duties–Breaches of fiduciary duties as directors of the company–Application by directors for declaration that they had not breached fiduciary duties to company–Counterclaim by defendant for contrary declaration–Whether defendant as shareholder of company has locus standi under rule in Foss v Harbottle to bring counterclaim–Whether counterclaim should be struck out

The plaintiffs were directors of Aquagen International Pte Ltd (“AIPL”), the second defendant. The first defendant, Kiyue Company Ltd (“Kiyue”), was a minority shareholder of AIPL.

The plaintiffs objected to AIPL's participation in some arbitration proceedings while Kiyue was in favour of it. As a result of the plaintiffs' repeated failure to confirm if they would attend a board meeting to discuss this difference of opinion, no quorate meeting was convened and the matter was not discussed. Kiyue issued a notice under s 216A of the Companies Act to the directors of AIPL to request them to commence action against the plaintiffs for breaches of their fiduciary duties as directors of AIPL. The plaintiffs responded by filing an originating summons against Kiyue. They sought a declaration that they had not acted and were not acting in breach of their directors' or fiduciary duties to AIPL. Kiyue filed a counterclaim for a declaration that the plaintiffs had breached and were in breach of their fiduciary duties to AIPL. The plaintiffs then applied to strike out the counterclaim on the basis that pursuant to the rule in Foss v Harbottle,fiduciary duties were owed to AIPL and not to its shareholders such as Kiyue who thus did not have the locus standi to bring the counterclaim. The assistant registrar dismissed the application to strike out. The plaintiffs appealed.

Held, allowing the appeal and striking out the counterclaim:

(1) A defendant could be a claimant when he made a counterclaim. When he did so, there was no reason why his claim should not have to satisfy the same proper plaintiff rule under Foss v Harbottle: at [12].

(2) Although the Companies Act allowed for the rule to be relaxed in some circumstances, the legislature did not abrogate the rule altogether: at [13].

(3) It was for the court to grant or refuse leave under s 216A of the Companies Act. It was not for the parties to waive the rule. Hence by suing Kiyue, the plaintiffs could not be taken to have accepted Kiyue as the proper party to bring the counterclaim: at [15].

(4) When Kiyue issued the notice earlier under s 216A, it accepted and acknowledged that it would have to apply to court for leave to act in the company's name. Having taken that position, it could not now proceed with the counterclaim on its own. The leave of the court was not a procedural formality; there might be opposition from the company and other shareholders and the court would have to be satisfied that there was a proper case for leave to be granted: at [17], [18] and [24].

(5) Order 28 r 7 (1) of the Rules of Court which provided that a defendant might make a counterclaim instead of bringing a separate action assumed that the defendant could bring a separate action. It did not remove the need for the defendant to be the proper party seeking the redress sought in the counterclaim: at [19].

(6) Under a s 216 application, the main questions to be considered were whether Kiyue was acting in good faith and whether the proposed action was in the interests of AIPL. These issues were distinct from the issues in the plaintiffs' action, ie the duties they owed to AIPL and whether they were in breach. If Kiyue was allowed to bring the counterclaim, these issues would be bypassed: at [22] and [23].

Edwards v Halliwell [1950] 2 All ER 1064 (folld)

Foss v Harbottle (1843) 2 Hare 461; 67 ER 189 (refd)

Companies Act (Cap 50, 1994 Rev Ed) ss 216, 216A

Rules of Court (Cap 322, R 5, 1997 Rev Ed) O 28 r 7 (1)

Harish Kumar (Engelin Teh...

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4 cases
  • Sembcorp Marine Ltd v PPL Holdings Pte Ltd and another
    • Singapore
    • High Court (Singapore)
    • 30 Mayo 2012
    ...enshrined in Foss v Harbottle (1843) 2 Hare 461: 67 ER 189 and applied in Singapore in Ng Heng Liat and ors. v Kiyue Co Ltd and anor [2003] 4 SLR(R) 218. The defendants in this suit were mere shareholders of the company and were not bringing a derivative action on behalf of PPL Shipyard und......
  • Yip Fook Chong (alias Yip Ronald) and another v Loy Wei Ezekiel and another
    • Singapore
    • High Court (Singapore)
    • 28 Abril 2020
    ...proper plaintiff rule in Foss v Harbottle [1843] 67 ER 189, applied in Singapore in Ng Heng Liat and others v Kiyue Co Ltd and another [2003] 4 SLR(R) 218; Ho Yew Kong v Sakae Holdings Ltd and other appeals and other matters [2018] 2 SLR 333. It provides that in an action to seek redress fo......
  • Sembcorp Marine Ltd v PPL Holdings Pte Ltd and another
    • Singapore
    • High Court (Singapore)
    • 30 Mayo 2012
    ...enshrined in Foss v Harbottle (1843) 2 Hare 461: 67 ER 189 and applied in Singapore in Ng Heng Liat and ors. v Kiyue Co Ltd and anor [2003] 4 SLR(R) 218. The defendants in this suit were mere shareholders of the company and were not bringing a derivative action on behalf of PPL Shipyard und......
  • MCH International Pte Ltd and others v YG Group Pte Ltd and others
    • Singapore
    • High Court (Singapore)
    • 31 Mayo 2017
    ...without leave, these issues would be bypassed and not brought up for consideration in this action: see Ng Heng Liat v Kiyue Co Ltd [2003] 4 SLR(R) 218 (“Ng Heng Liat”) at [22] and [23]. In light of the above, I find that, despite the concerns raised by the plaintiffs in respect of the servi......
2 books & journal articles
  • THE SHAREHOLDER'S PERSONAL CLAIM
    • Singapore
    • Singapore Academy of Law Journal No. 2011, December 2011
    • 1 Diciembre 2011
    ...See also Edwards v HalliwellUNK[1950] 2 All ER 1064; Heng Mui Pheow v Tan Ting Koon[1989] 1 SLR(R) 670; Ng Heng Liat v Kiyue Co Ltd[2003] 4 SLR(R) 218. 2 See also Companies Act 1993 (New Zealand) s 169(2) which specifically recognises this. 3[2002] 2 AC 1. See generally C Mitchell, “Shareho......
  • Company Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2003, December 2003
    • 1 Diciembre 2003
    ...assent in the present case, the loan agreement was binding on the defendant. Derivative actions 7.10 In Ng Heng Liat v Kiyue Co Ltd[2003] 4 SLR 218, Kan Ting Chiu J struck out a counterclaim by the first defendants on the basis that the first defendants as minority shareholders of the secon......

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