Sim City Technology Ltd v Ng Kek Wee and others

• Jurisdiction: Singapore
• Judge: Lai Siu Chiu J
• Judgment Date: 23 October 2013
• Neutral Citation: [2013] SGHC 216
• Court: High Court (Singapore)
• Hearing Date: 16 April 2013,12 April 2013,10 April 2013,15 April 2013,09 April 2013,24 June 2013,11 April 2013,17 April 2013,18 April 2013,03 September 2013,25 June 2013
• Docket Number: Suit No 680 of 2009/X
• Plaintiff Counsel: Lisa Sam (Lisa Sam & Company)
• Defendant Counsel: Lim Chee San (TanLim Partnership)
• Subject Matter: Companies,Oppression,Directors,Duties
• Published date: 11 September 2014

Lai Siu Chiu J: Introduction

Sim City Technology Ltd (“the plaintiff”), who is a shareholder of Singalab International Private Limited (“the fourth defendant”), brought the present action under s 216 of the Companies Act (Cap 50, 2006 Rev Ed) (“the Companies Act”) to seek personal remedies for oppression and/or unfair prejudice arising from the conduct of Ng Kek Wee (“the first defendant”) and/or Chan Mun Kong (“the sixth defendant”) in managing the affairs of a group of companies, which were allegedly treated as one business with and/or integrally connected to the fourth defendant (hereinafter referred to as “the Singalab/Beans Group”).

Background facts

The relevant background to the present dispute is set out below and the various disputes of fact will be resolved later in this judgment.

The background to the formation of the fourth defendant

Prior to 13 May 2005, the first defendant and various other third party shareholders owned Beans Fusion Pte Ltd (“Beans Fusion”), which in turn owned the following four subsidiaries: Singalab Pte Ltd (“the fifth defendant”); Beans Factory Hong Kong Co Limited (“Beans Factory (HK)”); Beans Factory Pte Ltd (which owned the licensing rights to “Beans Kernl”, a programming tool to write software and programmes (“the Beans Kernl Licensing Rights”)); and Beans Factory Co Ltd (Beijing) (“Beans Factory (Beijing)”).

Sometime in 2003, the first defendant approached Lim Kok Eng (“LKE”), who was then the Managing Director (“MD”) of the plaintiff and StarVision Information Technology Pte Ltd (“StarVision”), to consider taking an interest in the business of Beans Fusion. In the first quarter of 2004, the first defendant did a management buyout of the various third party shareholders of Beans Fusion and became the sole shareholder of that company.

Subsequently, from May 2004 to May 2005, StarVision provided loans and advances amounting to approximately US$500,000 to the fifth defendant and Beans Factory (HK) to help finance the business operations and cash-flow needs of those two companies (“the US$500,000 Advance/Loan”). StarVision rendered such financial assistance to the two companies with the prospect of ultimately taking up a stake in them through a holding company, and for the Beans Kernl Licensing Rights to be transferred from Beans Factory Pte Ltd to the fifth defendant. Beans Fusion, Beans Factory Pte Ltd and Beans Factory (Beijing) would then become dormant companies and/or be ultimately liquidated.

Sometime in the second quarter of 2004, the first defendant approached the representative of the second defendant, Huang Jun Dar (“Huang”), and obtained his confirmation to invest in the fifth defendant and Beans Factory (HK).

It was eventually decided that a new company would be incorporated to own the fifth defendant and Beans Factory (HK). The fourth defendant was thus incorporated on 31 August 2004 in Singapore as an investment holding company for this purpose. The plaintiff, the first defendant, Accord Perfect Investment Corporation (“the second defendant”) and Atomic International Ltd (“the third defendant”) became shareholders of the fourth defendant in the following proportions:

S/n	Shareholder	Manner of taking up stake in fourth defendant	Shareholding in fourth defendant
1	Plaintiff (as the nominee of StarVision)	Conversion of the US$500,000 Advance /Loan into 482,626 ordinary shares	53.625%
2	First defendant (in his personal capacity)	Investment	15%
3	Second defendant (as the nominee of Huang)	Investment	6.375%
4	Third defendant	Investment	25%

According to the plaintiff, the third defendant was actually the nominee of the first defendant, but the first defendant disputed that.

Pursuant to a Sale and Purchase Agreement dated 30 September 2004, the shares of Beans Factory (HK) and the fifth defendant were eventually transferred from Beans Fusion to the fourth defendant on 31 December 2004 and 13 May 2005 respectively at a consideration of S$630,000.Thereafter, the fifth defendant and Beans Factory (HK) became wholly owned subsidiaries of the fourth defendant. Later, by way of a Deed of Assignment dated 22 June 2005, the Beans Kernl Licensing Rights were transferred from Beans Factory Pte Ltd to the fifth defendant for a nominal consideration of S$1.

It was the plaintiff’s case that at the time the fourth defendant was set up, there was an understanding between the parties that the business of the fourth defendant (viz, its subsidiaries) was to grow and expand, with the ultimate aim of the fourth defendant being listed or acquired. To that end, the first defendant was put in charge of running the business. In or around October 2004, an executive committee (“the Exco”) was formed consisting of the first defendant, two of the plaintiff’s representatives, namely LKE and Ng Han Kim (“Ng”), and the second defendant’s representative, Huang.

The management of the fourth defendant and its subsidiaries

I now turn to look at the management of the fourth defendant and its subsidiaries.

The fourth defendant

Ng, representing the plaintiff, was appointed as a director of the fourth defendant from 1 September 2004 to 30 June 2005. The first defendant has been the Group Chief Officer (“CEO”), Chief Technical Officer (“CTO”) and MD of the fourth defendant since its incorporation.

The fifth defendant

The first defendant became the MD of the fifth defendant on 1 November 2002 and continued to remain as such after the fourth defendant acquired the shares of the fifth defendant. Ng and Huang (but not LKE) were also initially the directors of the fifth defendant but they resigned in May/June 2005.

In 2005, there was a proposed merger and acquisition (“M&A”) between the fifth defendant and Cyber Village Holdings Ltd (“CVHL”). One Tony Pua (“Pua”) from CVHL was then appointed as the second director of the fifth defendant. It subsequently came to the parties’ attention that Pua’s appointment could be a potential conflict of interest as the M&A was still in the works. Therefore, on 7 October 2005, the first defendant emailed the sixth defendant (who had been an employee of Beans Factory Pte Ltd since 2 May 2000 and an employee of the fifth defendant since 1 April 2004) to ask him to consider being an “interim director” of the fifth defendant.

On 19 October 2005, the first defendant followed up with another email to the sixth defendant asking for an update on the status of his consideration and whether he was “ok for Nov to Dec”. That same day, the sixth defendant replied asking the first defendant whether he (ie, the sixth defendant) would need to perform any tasks as a director. The first defendant responded that same day informing him that there were no tasks at that moment and that the directorship would “be over by Dec”.

On 20 October 2005, the sixth defendant confirmed his agreement to “take up the director role till Dec”. Thereafter, on 28 October 2005, the first defendant appointed the sixth defendant as a director of the fifth defendant. Sometime in November 2005, the proposed M&A deal with CVPL fell through. It is not disputed that the sixth defendant was never a signatory to the fifth defendant’s accounts during the time that he was a director of the fifth defendant.

The sixth defendant’s resignation from his directorship of the fifth defendant was filed with the Accounting and Corporate Regulatory Authority of Singapore (“ACRA”) on 27 May 2009. The sixth defendant claimed that he had actually resigned earlier on 1 January 2008 as indicated in a letter dated 3 December 2007, but his resignation was only lodged later due to an oversight. The plaintiff disputed that. It was the plaintiff’s case that the sixth defendant continued as a director of the fifth defendant and only resigned on 27 May 2009.

Beans Factory (HK)

The first defendant was the Chairman of Beans Factory (HK) from 2004 until the sale of Beans Factory (HK) to its local manager, Fong Ho Wan (“Fong”) on 14 April 2008 (see [21]–[22] below).

The background to the formation of Beans Factory (Malaysia)

In June 2006, Lim Beng Cheang (“LBC”), a Malaysian working for StarVision’s sister company in Malaysia, was instructed by the plaintiff to assist the first defendant in expanding the fourth defendant’s business (viz, its subsidiaries) to Malaysia. To this end, a Malaysian private limited company known as Beans Factory Solutions Sdn Bhd (“Beans Factory (Malaysia)”) was incorporated. LBC held one of two subscriber shares in Beans Factory (Malaysia), while the first defendant held the other share. It was the plaintiff’s case that those shares were held on trust for the Singalab/Beans Group.

LBC and his sister were appointed as the two requisite local directors of Beans Factory (Malaysia), while the first defendant was appointed as the third director. LBC and the first defendant were the two signatories to the bank account of Beans Factory (Malaysia).

The disposal of the fourth defendant’s subsidiaries The transfer of the fourth defendant’s interest in the fifth defendant to the first defendant

The first defendant claimed that at a meeting with the shareholders of the fourth defendant on 12 June 2006 (“the 12 June 2006 Meeting”), he told them that the fifth defendant was not doing well and asked them to inject more capital into the fifth defendant. The shareholders allegedly declined to do so. The first defendant then proposed that he obtain bank loans in the name of the fifth defendant and put up a personal guarantee for the loans. According to the first defendant, the shareholders agreed. The first defendant then proceeded to arrange for the fourth defendant’s interest in the fifth defendant to be transferred to him (“the Transfer”). Those shares were vested in the first defendant on 28 July 2006. As we shall see at [46] below, the first...