Ng Joo Soon (alias Nga Ju Soon) v Dovechem Holdings Pte Ltd and another suit

• Jurisdiction: Singapore
• Judge: Philip Pillai JC (as he then was)
• Judgment Date: 18 August 2010
• Neutral Citation: [2010] SGHC 242
• Plaintiff Counsel: Adrian Tan, Blossom Hing Shan Shan and Sheryl Wei Kejia (Drew & Napier LLC)
• Docket Number: Suit No 59 of 2009 consolidated with Suit No 140 of 2009
• Date: 18 August 2010
• Hearing Date: 14 March 2010,17 March 2010,12 March 2010,10 March 2010,15 March 2010,25 March 2010,08 March 2010,11 March 2010,16 March 2010,28 April 2010,09 March 2010,13 March 2010
• Subject Matter: Companies
• Published date: 24 August 2010
• Citation: [2010] SGHC 242
• Defendant Counsel: Chandra Mohan s/o K Nair (Tan Rajah & Cheah)
• Court: High Court (Singapore)
• Year: 2010

Philip Pillai J: Introduction

The plaintiff, Ng Joo Soon (“NJS”), brought two principal actions, which were consolidated on 3 June 2009. In Suit No 59 of 2009 (“Suit 59”), NJS seeks, inter alia, a declaration that he was wrongfully removed as a director of the defendant, Dovechem Holdings Pte Ltd (“the Company”) and an order that he be allowed to inspect the accounting and other records of the Company pursuant to s 199 of the Companies Act (Cap 50, 2006 Rev Ed) (the “Companies Act”). In Suit No 140 of 2009 (“Suit 140”), NJS claims against the Company for breach of agreements pursuant to which the Company was to pay him: (a) a monthly payment of $25,000.00 (the “Monthly Interest Reimbursement”); (b) a monthly allowance of U$20,000.00 or $35,000.00 (at an agreed exchange rate of U$1 to $1.75) (the “Monthly Life Allowance”); (c) a monthly instalment of $13,750.00 for 24 months for amounts mistakenly deducted from an outstanding loan (the “Deduction Instalment Repayment”); and (d) a monthly instalment of $140,278.00 for 36 months (the “Loan Instalment Repayment”). He seeks an order for specific performance of the payment of those amounts. Further, he seeks relief against Andrew Ng Iet Pew (“Andrew”), Anta Ng (“Anta”), Ng Ju Aik (“Ju Aik”) and Ng Joo Tian (“Joo Tian”), the second to fifth defendants respectively (collectively “the Family Defendants”), who are directors of the Company, for inducing the Company’s breach of contract and for conspiring with each other to cause the relevant breach. NJS and the Family Defendants, who are NJS’s younger brothers and his nephews, are all and the only directors and shareholders of the Company.

This case is at one level a corporate and contractual dispute, but during trial, considerable underlying family emotional tensions were evident. The tensions were the result of a complex mix of personalities and generations, with the Family Defendants displaying mixed feelings of respect coupled with resentment towards the plaintiff for what he did to them. Lawsuits such as these reflect an unfortunate but increasing incidence of fractious generational transitions within Singapore family businesses which are unable, for various reasons, to achieve the balance of an orderly succession characterised by mutual familial respect and filial dignity .The outcome of lawsuits are determined by the law and the evidence before the court and provide resolution only of the legal issues. The underlying family tensions, being beyond the purview of the court, remain to be resolved by the parties themselves.

Facts Starting out

NJS was born in 1938 in Malaysia as the fourth child of a couple who were rubber tappers. He received an education in Mandarin up to junior high school. In 1957, NJS came to Singapore to seek a better future. He started a paint and chemical solvent business in 1960 known as Thiam Joo Pte Ltd which eventually grew to become the Dovechem Group (“the Group”) (hereinafter references to “the Group” mean all the companies described and referred to as “Dovechem Group” in the 26 December 2001 Meeting Notes in [6] below. For accuracy it should be noted that “the Group” here is used to refer to companies in which the family have interests and not holding and subsidiary companies within groups as defined in s 5 of the Companies Act. Around 1965, NJS invited his younger brother, Joo Tian, and later in 1972, another younger brother, Ju Aik, to join him in the business. They also contributed to the growth of the business and were later issued shares in the company for which they did not pay. Subsequently, other members of the Ng family also came to work in the business. Anta and Andrew, who are NJS’s nephews, joined in the 1970s and 1980s respectively, after receiving overseas education scholarships from the Group. It is estimated that 16 members of the family work in the Group.

Building a conglomerate

NJS was the Company’s and the Group’s managing director. He and the other family members developed the family business into a considerable conglomerate with businesses in chemicals, formaldehydes and resins, paints, bulk terminals, steel drums, transportation and property, with country holding companies and operating subsidiaries in Singapore, Malaysia, Indonesia and China. The Company is the holding company of all the Singapore subsidiaries and associated companies in Indonesia and China. NJS was the 52% majority shareholder of the Company. He was the leader and public face of the family business with the other family members each having less than 17% shareholding in the Company and contributing in various financial and operational capacities.

Encountering the 1997 Financial Crisis

In 1997, the Company encountered financial difficulties during the Asian Financial Crisis. NJS provided personal loans totalling $6.1m to the Company between 1997 and 2001. He borrowed these funds from banks by mortgaging his house. Anta, Joo Tian and Ju Aik also lent the Company sums of $498,000, $750,000 and $850,000 respectively.

On 26 December 2001, there was a meeting chaired by Andrew which marked the handover of leadership from NJS to Andrew. NJS and the Family Defendants attended the meeting. The records of the meeting, which I shall refer to as the 26 December 2001 Meeting Notes, were described as “Dovechem Group, Minutes of the Members Meeting, Thiam Joo Office, Singapore 26 December 2001 Agenda: The Way Forward for the Dovechem Group”. (I refer to the records as “Meeting Notes” rather than “Minutes”, as they were originally titled, in order to distinguish them from formal board and shareholder minutes and resolutions which have to be duly maintained by the Company in accordance with s 188 of the Companies Act. The Meeting Notes were not part of or filed and maintained as minutes of directors’ or shareholders’ meetings in accordance with s 188, nor did they purport to be directors’ or shareholders’ resolutions of the Company.) The 26 December 2001 Meeting Notes state that accountants and lawyers were appointed to advise on the Group’s current financial position and legal issues. Further, to show the Group’s commitment to repay its loans, it was proposed that Andrew be the new President/Chief Executive Officer of the Group to spearhead the negotiation with the bankers and creditors and to lead the Group into the new generation. Andrew proposed a new shareholding structure to ensure representation of the original directors in the next generation. It was also agreed that (a) cash injections by certain family members including NJS would be reimbursed with interest as soon as the Company deemed itself capable of doing so, and (b) in the event that NJS had no income, the company would grant him a cash payment of US$20,000 on a monthly basis. The 26 December 2001 Meeting Notes were signed by everyone attending as being “confirmed, accepted and acknowledged” by the signatories. It also contained a closing note: “Chinese translated copy of this minutes [sic] will be provided upon request.”

At a subsequent meeting on 14 January 2002 attended by NJS and the Family Defendants, it was confirmed that out of the $6.1m, a sum of $5,050,001.55 (“the Loan”) remained due and owing from the Company to NJS. The notes of that meeting also reflected that: (a) starting from January 2002, all interest incurred by individual members listed on a loan list would be borne by the Company; (b) NJS would be paid a monthly allowance of US$20,000 in the event that he left the Group or a company named Dovechem Stolthaven or was without salary; and (c) if possible, a bilingual version of the minutes was to be made available, and in the event of dispute, the Chinese version would prevail over the English version. The notes were also signed as “confirmed, accepted and acknowledged” by NJS and the Family Defendants. Andrew was recorded as the chair of the meeting.

Responding to the 1997 Crisis Ceding management and shareholder control in exchange for personal guarantees

In the aftermath of the Asian Financial Crisis of 1997, there were recriminations by the Family Defendants against NJS that it was his investment decisions, and not the Asian Financial Crisis, which had led to the corporate financial crisis of the Group. Because of the need to conclude schemes of arrangement acceptable to the creditor banks who in turn required personal guarantees of each of the family directors and shareholders, and because the Family Defendants would not agree to provide personal guarantees otherwise, NJS was obliged and agreed to dilute his shareholdings and effect generational management succession.

It was agreed that NJS would cede his 52% majority shareholding control for a diluted stake of 24%, with Andrew acquiring 25% and Ju Aik, Ju Tian and Anta each holding 17%. Further, Andrew was to manage the Company and Group but NJS was to become non-executive chairman of the Company. All these were inscribed in a Restructuring Agreement of 8 July 2002 (“the Restructuring Agreement 2002”) between NJS and the Family Defendants, to which the Company was not a party. Pursuant to the Restructuring Agreement 2002, NJS also retained the option to transfer his shares to his children or to exercise a put option to the Family Defendants after completion of the schemes of arrangement. Clause 4 of the Restructuring Agreement 2002 further provided: 4.1 Upon the restructuring of shareholdings in the Private Companies pursuant to Clause 3.2, the Parties shall procure that each of the Private Companies shall have a board of directors consisting of five directors, each of whom shall be appointed by each Party. NJS shall be (i) the non-executive chairman of the board of directors of Dovechem Holdings Pte Ltd and (ii) the executive chairman of the boards of directors of Dovechem Stolthaven Limited until the completion of the Loan Restructuring Exercise. PT Antaprima Dutaperkasa shall have a board of commissioners...