Ong Heng Chuan v Ong Teck Chuan and others

• Jurisdiction: Singapore
• Judge: Judith Prakash JCA
• Judgment Date: 05 May 2021
• Neutral Citation: [2021] SGCA 46
• Published date: 08 May 2021
• Docket Number: Civil Appeal No 29 of 2020
• Year: 2021
• Hearing Date: 03 February 2021
• Plaintiff Counsel: Lin Weiqi Wendy, Zhuang Wenxiong, Kara Quek Tze-Min and Charlotte Tang (WongPartnership LLP)
• Citation: [2021] SGCA 46
• Defendant Counsel: Tan Gim Hai Adrian, Ong Pei Ching, Veluri Hari, Yeoh Jean Ann and Lim Jian Wei Joel (TSMP Law Corporation),Chiok Beng Piow Andy and Lee Hui Zhen Margaret (AM Legal LLC),The fourth respondent absent.,The third respondent absent and unrepresented
• Court: Court of Appeal (Singapore)
• Subject Matter: Companies,Oppression,Minority shareholders

Woo Bih Li JAD (delivering the judgment of the court): Introduction

The present appeal arises out of the decision of the High Court Judge (the “Judge”) in Ong Heng Chuan v Ong Teck Chuan and others [2020] SGHC 161 (the “Judgment”) dismissing the claim of the appellant, Ong Heng Chuan (“OHC”), of minority oppression under s 216 of the Companies Act (Cap 50, 2006 Rev Ed) (the “Act”) against the first and second respondents, Ong Teck Chuan and Ong Boon Chuan (respectively, “OTC” and “OBC”). It is common ground that OHC had no quarrel with the third respondent, Ong Siew Ann (“OSA”) and added her as a defendant to the action simply because of her shareholding in the fourth respondent, Tong Guan Food Products Pte Ltd (“the Company”). The siblings OHC, OTC, OBC and OSA are four of the ten children of the late Mr Ong Tong Guan (“Mr Ong”), the founder of the Company. Following a trial spanning 19 days, the Judge dismissed OHC’s claim, having found that the transactions impugned by him were undertaken by OTC and OBC in the best interests of the Company and for valid commercial reasons. They could not therefore be said to have breached their directors’ duties owed to the Company at the material time. Furthermore, even assuming arguendo that OTC and OBC had breached their duties, the Judge concluded that OHC failed to demonstrate any distinct personal wrong occasioned to him that would constitute oppressive conduct capable of being vindicated under s 216 of the Act.

On appeal, OHC launches a wide-ranging attack on the Judge’s factual findings and legal conclusions in seeking to reverse her decision.

Factual background

The facts are set out by the Judge in the Judgment and are largely undisputed. It is rather the characterisation of the relevant actions of OTC and OBC that is the subject of heated dispute between the parties. We thus summarise only the facts that are relevant for the purposes of the present appeal. Given the numerous individuals, companies and agreements involved in the present case, we provide a summary of the abbreviations adopted, in Annexures A, B and C below, with some details to the extent that such details were made available to the Court.

The Company, its subsidiaries and associated companies

The story of this family dispute begins in the 1960s. This was when Mr Ong first set up a sole proprietorship, Tong Garden Product Services. In 1980, the Company was incorporated and subsequently became the ultimate holding company for a number of subsidiaries and associated companies, collectively referred to as the “Tong Garden Group”. The Company was itself a pure holding company that did not conduct any business of its own. Its revenue was solely derived from investments in the business of its subsidiaries and associated companies. The Tong Garden Group was involved in the manufacture, marketing and sale of various snack products such as nuts, seeds and dried fruit.

Mr Ong, who remained in sole control of the Tong Garden business until his illness in early 1984, passed away later that year. Following his demise, Mr Ong’s children took over the Tong Garden business. There was a multitude of legal proceedings over the years resulting in numerous changes in shareholdings and management of the Company. The only siblings who remained shareholders in the Company at the time of the present suit were OHC, OTC, OBC and OSA. OHC and OTC each held 520,000 shares, OBC held 1,760,000 shares and OSA held 200,000 shares in the Company. These shareholdings correspond to approximately 17.33%, 58.67% and 6.67% respectively of the Company’s shares. The parties’ positions in the Company, having shifted over the years, are chronicled as follows: OHC was a director from 16 August 1980 to 7 May 2003, during which period he was also managing director from 31 July 1999 onwards. OHC was declared a bankrupt on 3 December 2004 and obtained a discharge from bankruptcy on 16 September 2016. OTC was a director from 3 July 1984 to 14 April 2001, and from 30 December 2015 onwards. In addition, the Judge found that between 14 December 2008 to 29 December 2015, OTC acted as a de facto and/or shadow director as well. This finding was not challenged by OTC on appeal and we need not say anything further in this regard. OBC was a director from 16 August 1960 to 8 December 1983, as well as from 1 September 1999 to 30 December 2015. OSA was a director from 10 April 1999 to 15 July 2009. On 12 July 2018, the Company was placed in compulsory liquidation.

We shall, for ease of reference, refer to the companies that form part of the Tong Garden Group as the Singapore Entities, Malaysian Entities and Thai Entities. These entities run the Tong Garden Group’s operations in Singapore, Malaysia and Thailand respectively: Singapore Entities: Incorporated in 1994, Food Products (S) was the main operating entity in Singapore. It was a wholly-owned subsidiary of TGHPL, which was in turn a wholly-owned subsidiary of the Company. Food Products (S) was wound up by way of a voluntary members’ liquidation on 8 July 2013. Malaysian Entities: Food Products (M) was the manufacturing arm of the Tong Garden Group in Malaysia while Snack Food (M) took care of sales and marketing in Malaysia. Both were subsidiaries of Tong Garden Holdings Sdn Bhd, itself a subsidiary of TGHPL. Thai Entities: Tong Garden (T) was the main operating entity of the Tong Garden Group in Thailand and Nut Candy (T) was its subsidiary. Another Thai company, NOI (T), was the subject of some dispute, with OHC alleging that the Company had an interest in NOI (T), while OTC asserted that NOI (T) “was never a subsidiary or an associated company of the Company, and the Company has never had any direct or indirect interest in it” (Judgment at [16]–[17]).

Companies owned or controlled by OTC

The alleged oppressive actions (see [8] below) further involve several companies that are not part of the Tong Garden Group but are either owned or controlled by OTC. These are: TGFS, which was incorporated on 7 March 2008 and was in turn wholly-owned by OTC FCPL. OTC is the sole director of TGFS. TGFM, which was incorporated on 3 April 2008 and was 99% owned by OTC FCPL. OTC is one of TGFM’s directors. The other two shareholders of TGFM are OTC and his wife, YLC. OTC FCPL, which was incorporated on 12 September 2014 and was wholly-owned by OTC, who is also a director of that company. TGMSB, which was incorporated on 3 April 2008 and was a company ultimately controlled by OTC.

The alleged oppressive acts

OHC’s claim of oppression centres around three categories of actions, broadly framed: First, the sale and diversion of the “Tong Garden” and “NOI” trademarks (collectively, the “Trademarks”) from the Tong Garden Group to Villawood. We shall refer to this as the “Trademarks Sale”. Second, a series of actions that the parties had referred to as part of a broad restructuring exercise of the Tong Garden Group. We shall refer to this as the “Restructuring” for the sake of simplicity as the parties have done so. Third, the disposal of the business of the Tong Garden Group in Thailand to OTC’s companies. We shall refer to this as the “Thai Entities Sale”.

OHC pleaded that these acts breached his “legitimate expectations” as to how the Company should be run based on his strict legal rights, such rights being based on or derived from: the Articles of Association of the Company, s 157 of the Act, common law and equity, and OTC’s and OBC’s directors’ duties owed to the Company. As such, these impugned acts constituted oppressive conduct under s 216 of the Act by the majority shareholders in the Company who exercised their powers in a manner that prejudiced him. The fundamental and predicate question was thus whether the impugned acts constituted breaches of the duties that OTC and OBC owed to the Company as its directors.

To remedy the alleged oppressive conduct, OHC sought an order for the buy-out of his minority stake in the Company or, in the alternative, an order for OTC to transfer to him a number of shares, to be determined, in Tong Garden (T), NOI (T), TGFS and TGFM for the nominal purchase consideration of $1.

The Trademarks Sale

By an agreement dated 13 March 2000 (“the 2000 Villawood Agreement”), the Tong Garden Group (through the Company, TGHPL, Food Products (S) and NOI Food Products Pte Ltd) sold, inter alia, the “Tong Garden” and “NOI” trademarks, together with the goodwill of the business relating to the goods in respect of which these trademarks were registered, to Villawood. These trademarks, as specified in the Schedule contained therein, related to the Trademarks that were registered in Singapore and Malaysia.

Villawood was a company incorporated in the British Virgin Islands and was owned and controlled by OBC and his wife, who was also a director of Villawood at the material time. The consideration paid by Villawood in exchange for the Trademarks was $260,003 which was a price based on a desktop valuation of the “Tong Garden” brand conducted by PricewaterhouseCoopers Management Services Pte Ltd (“PwC”). PwC had been engaged by OHC in his capacity as the then-managing director of TGHPL. In its report dated 17 February 2000 (the “Report”), PwC opined that the value of the “Tong Garden” and the “NOI” brand names was “estimated to be in the range of S$200,000 – $260,000”. The 2000 Villawood Agreement was signed by OHC and OTC (in their capacity as directors, and on behalf of the Tong Garden Group of companies) and OBC (in his capacity as director, and on behalf of Villawood). The 2000 Villawood Agreement was then approved by a TGHPL director’s resolution on 17 March 2000, likewise signed by OHC and OTC.

Sometime in October 2002, Villawood granted a ten-year licence to Food Products (S) and Snack Food (M) to manufacture and sell products bearing, among other things, the Trademarks (“the October 2002 Licence”). The...