Re Chong Lee Leong Seng Co (Pte) Ltd

• Jurisdiction: Singapore
• Judge: Chan Sek Keong J
• Judgment Date: 26 June 1989
• Neutral Citation: [1989] SGHC 59
• Docket Number: Companies Winding Up No 77 of 1989
• Date: 26 June 1989
• Published date: 19 September 2003
• Year: 1989
• Plaintiff Counsel: Michael Khoo (Michael Khoo & BB Ong)
• Citation: [1989] SGHC 59
• Defendant Counsel: Davinder Singh (Drew & Napier)
• Court: High Court (Singapore)
• Subject Matter: Petition to wind up company,Whether proceedings begin by proper method -Difference between a s 216 petition and a s 254 petition,r 191 Companies (Winding Up) Rules 1969,Companies,Originating processes,ss 216 & 254 Companies Act (Cap 50),Oppression,Whether proper to begin proceedings for relief under s 216 of Companies Act (Cap 50) by winding-up petition,O 2 r 1, O 88 rr 2, 5 & 7 Rules of the Supreme Court 1970,Winding-up petition,O 88 rr 2, 5 & 7 Rules of the Supreme Court 1970,Relief under s 216,Civil Procedure

Cur Adv Vult

This is an application by way of summons-in-chambers by Chong Lee Leong Seng (Pte) Ltd (the company) to strike out the winding-up petition filed against it on the ground that the proceedings it purported to have commenced should have been commenced by way of originating petition as they are not winding-up proceedings but proceedings for reliefs under s 216 of the Companies Act (Cap 50) (the Act).

The petitioners, who are minority shareholders of the company, do not dispute that the petition has been presented as and subsequently advertised as a winding-up petition under the Companies (Winding up) Rules 1969 (the Winding Up Rules). They have also made an application to appoint provisional liquidators, which application has yet to be heard. As a result of this petition, the company had to make an application to court for certain validation orders under s 259 of the Act.

It is contended by counsel for the company that proceedings for any relief under s 216 must be commenced under O 88 of the Rules of the Supreme Court 1970 (the 1970 Rules) and not under the Companies (Winding Up) Rules 1969. The relevant rules in O 88 are as follows:

2(1) Unless otherwise provided in the Act, and except in the case of the applications mentioned in rr 3, 4 and 5, every application under the Act must, in accordance with O 5 r 3, be made by originating summons.

5 The following applications under the Act must be made by petition, namely, applications -

(h) under s 181 of the Act for relief in cases of oppression

7(1) After presentation of a petition by which any such application as is mentioned in r 5 is made, the petitioner, except where his application is one of those mentioned in para (2), must take out a summons for directions under this Rule. ...

(3) On the hearing of the summons the Court may by order give such directions as to the proceedings to be taken before the hearing of the petition as it thinks fit including in particular, directions for the publication of notices and the making of any inquiry.

Counsel accordingly argues that by reason of r 5(h), the petition presented against the company as a winding-up petition is an abuse of the process of the court and ought to be struck out under O 18 r 19 or O 92 r 4 of the 1970 Rules.

Counsel for the petitioners relies on O 1 r 2(2) of the 1970 Rules which provides as follows:

(2) These Rules shall not have effect in relation to proceedings of the kinds specified in the first column of the following Table (being proceedings in respect of which rules may be made under the written law specified in the second column of that Table):

TABLE

Proceedings Written Law.

2 Proceedings relating Companies Act,

to the winding up of 1967 s 372

of companies.

He contends that by reason of r 2(2), the present petition is correctly presented as a winding-up petition as one of the reliefs sought is the winding up of the company.

Accordingly, the primary issue before me is whether proceedings under a s 216 petition which includes an order for the winding up of the company are winding-up proceedings. If they are not, they cannot be presented by way of a winding-up petition. If they are, the further question arises whether the 1969 Rules or the 1970 Rules or both sets of Rules regulate such proceedings.

A s 216 action of the Act is generally known as an action for oppression. It enables a minority shareholder whose rights or interests have been prejudiced by oppressive acts of the directors or prejudicial or discriminatory acts of the company to apply to court for various reliefs to remedy such wrongs. One of the available reliefs as an alternative to others is the winding up of the company. A petitioner may seek such a relief but he need not, although in practice a petitioner usually includes it as an additional relief. However, where he does not seek this particular relief in an action based on s 216, it is impossible to characterize it as a winding-up petition or that the proceedings commenced thereby are winding-up proceedings. The petitioners here have sought such relief. Does that change the proceedings into winding-up proceedings?

The primary issue raises an important question of substantive law as to the nature of an action (which includes the winding-up relief) under s 216 of the Act. Its importance lies in the ensuing legal disabilities and consequences upon the commencement of winding-up proceedings against a company, its shareholders and directors and also outsiders who have dealings with the company: see ss 258, 259, 260, 261, 262(3), 267 and 335. As these provisions operate upon the commencement of winding-up proceedings against a company and as the winding- up of a company commences at the time of presentation of the winding-up petition (except where before the presentation of such a petition a resolution has been passed by the company for voluntary winding-up, in which case the winding up commences at the time of the passing of the resolution: see s 255), it is vital for all parties whose rights may be affected thereby to know whether a petition presented under s 216 against a company is a winding-up petition.

The statutory provisions relating to the winding up of companies are enacted in Part X (comprising ss 247 to 354) of the Act. Section 254 sets out 13 grounds on any one of which a company may be wound up by the court. These grounds are not exhaustive under the Act as s 216 also empowers the court to wind up a company, but they are exhaustive under Part X.

The legislative sources of the Act are derived from the companies` legislations of the United Kingdom and Australia. However, in both these countries, provision is made in the relevant statutes for the equivalent of a s 216 petition to be presented as a winding-up petition: see s 210(5) of the UK Companies Act 1948 (the 1948 Act) and the Winding Up Rules 1949 made thereunder, and for Australia, McPherson, The Law of Company Liquidation (3rd Ed) at p 150. It is therefore not surprising that there is no English or Australian case law directly on this point. However, there are a number of Australian decisions where the courts have decided that for certain purposes a s 216 action under the Australian legislation could not be equated with a winding-up proceeding.

In Re Australian Marinas (A`Asia) Pty Ltd [1975] VR 372 the petitioner, having petitioned the court for an order under s 186 of the Companies Act 1961 (corresponding to s 216 of the Act), made an application for discovery of documents. Two questions arose for decision by the Supreme Court of Victoria: (1) whether it was proper to make the order against the company in proceedings under s 186 and (2) whether, if so, the discovery ordered should be more limited in extent than was asked for. On the first question, the practice then prevailing in England and in Australia was that, save in exceptional cases, the courts would not make discovery orders in winding-up petitions: (1) at pp 374-375. Adam J declined to follow the prevailing practice in winding-up proceedings and held that, as a general rule, the discovery of documents so far as reasonably material and relevant to the issues raised should be ordered in aid or the relief sought by a petitioner under s 186 of the 1961 Act. His Honour said (at p 375):

Proceedings under s 186 are not, in truth, proceedings by a shareholder or shareholders for the winding up of their company but for appropriate orders with a view to bringing to an end oppression in the conducting of the affairs of a company to the prejudice of the petitioners. Although, as appears from the terms of s 186, the court has jurisdiction in proceedings under it to order the winding up of a company it should do so only if it appears the most appropriate of a number of alternative remedial orders that may be made to relieve against the oppression complained of, including the purchase of the shares by any members of the company or other members.

The same question came before the Master of the Supreme Court of New South Wales. His Honour allowed the application for discovery on the ground that a s 186 petition was not a winding-up petition. He said:

There is no reported decision in this State dealing with the question of discovery in a petition under s 186. Indeed, the Australian Marinas case appears to be the only reported case in any State. In those circumstances I consider that the decision of Adam J is one which should be

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