Suying Design Pte Ltd v Ng Kian Huan Edmund and other appeals

• Jurisdiction: Singapore
• Judge: Judith Prakash JA
• Judgment Date: 13 May 2020
• Neutral Citation: [2020] SGCA 46
• Year: 2020
• Date: 13 May 2020
• Published date: 16 May 2020
• Hearing Date: 25 November 2019
• Subject Matter: Companies,Oppression,Minority shareholders
• Plaintiff Counsel: Ong Boon Hwee William and Lee Bik Wei (Allen & Gledhill LLP),Khoo Boo Teck Randolph, Tan Huiru Sally and Vanessa Chiam Hui Ting (Drew & Napier LLC),Tan Chee Meng SC, Paul Loy Chi Syann and Hui Janie Anne (WongPartnership LLP)
• Citation: [2020] SGCA 46
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeals Nos 71—73 of 2019

Belinda Ang Saw Ean J (delivering the judgment of the court): Introduction

These appeals arise out of the decision of the High Court Judge (“the Judge”) in HC/S 867/2015 (“Suit 867”). They revolve around the Judge’s finding that a claim of oppression under s 216 of the Companies Act (Cap 50, 2006 Rev Ed) had been made out. The appeals turn, on the one hand, on detailed factual issues, and on the other hand, on the propriety of the claim under s 216.

The parties in Suit 867 were all involved in the interior design business. The plaintiff in Suit 867 was Mr Ng Kian Huan, Edmund (“Mr Ng”). He was the sole shareholder and director of Metropolitan Office Experimental Pte Ltd (“MOX”). The third defendant in Suit 867 was Ms Tan Teow Feng Patty (“Ms Tan”). She has run Suying Design Pte Ltd (“SDPL”), the second defendant in Suit 867, since its incorporation in 1999. The first defendant in Suit 867 was Suying Metropolitan Studio Pte Ltd (“SMSPL”), a company incorporated on 20 February 2012 by, inter alia, Ms Tan and Mr Ng, who were made directors of SMSPL. At its incorporation, SMSPL’s shareholders were: Ms Tan, who held 40% of SMSPL’s shares; Mr Ng, who held 35%; Ms Anita Chiu (“Ms Chiu”), who held 20%; and Mr Lim Chai Boon (“Mr Lim”), who held 5%. Mr Lim’s 5% shareholding underwent a series of transfers, and was eventually transferred to Ms Martinez Gejane Siman (“Ms Martinez”). The remainder of SMSPL’s shares have not changed hands since its incorporation.

In Suit 867, Mr Ng claimed that Ms Tan acted in an oppressive manner by, inter alia, misappropriating SMSPL’s funds and transferring them to herself and SDPL, withholding payments he was entitled to, and demanding that he return dividends and director’s fees previously paid to him. In his decision in [2019] SGHC 56 (“the Judgment”), the Judge allowed a number of these claims, and found that a case of oppression had been made out against Ms Tan. He ordered SMSPL to be wound up, and SDPL and Ms Tan to repay various sums of money to SMSPL. In CA/CA 71 and 72/2019 (“CA 71” and “CA 72” respectively), SDPL and Ms Tan respectively appeal against the Judge’s findings against them. In CA/CA 73/2019 (“CA 73”), Mr Ng cross-appeals against the Judge’s rejection of some of his claims. The central issue in these appeals is whether the Judge’s finding of oppression under s 216 of the Companies Act was correct.

Ms Tan and SMSPL also brought numerous counterclaims against Mr Ng, MOX, and Mr Ng’s wife, Ms Chong Chin Fong (“Ms Chong”, also known as Jazz), in Suit 867. In the Judgment, the Judge found Mr Ng liable for a number of these counterclaims based on various causes of action, including negligence and diversion of corporate opportunities. However, there is no appeal in respect of any of the counterclaims. Therefore, although our decision in the present appeals has a bearing on one of the counterclaims (see [99] below), there is no basis for us to disturb the Judge’s rulings in the counterclaims.

Events leading to the commencement of Suit 867

It is common ground between Mr Ng and Ms Tan that the two of them, together with Ms Chiu and Mr Lim, decided to set up a new company. Consequently, SMSPL was incorporated on 20 February 2012. It is also not disputed that with the incorporation of SMSPL, all new business from the date of SMSPL’s incorporation, whether emanating from Ms Tan or Mr Ng, would be routed to SMSPL as the contracting and performing party. Existing staff of SDPL and MOX would effectively join SMSPL.

In March 2015, Ms Tan informed Mr Ng that she would retire in June 2015, and that SMSPL would be left to Mr Ng and Ms Martinez to run (see the Judgment at [12]). Ms Tan’s retirement was not new; it was an event envisaged prior to the incorporation of SMSPL. However, on 13 July 2015, Mr Ng informed Ms Tan and Ms Chiu that he intended to leave SMSPL. According to Mr Ng, he did so for three reasons: (i) he realised that Ms Tan had no genuine intention of leaving SMSPL; (ii) there was a “rift” between himself and Ms Tan due to their different working styles; and (iii) he wanted more time for personal commitments. Later that day, Mr Ng, Ms Tan and Ms Martinez met and agreed to close down the company; they agreed to meet again in October 2015 for this purpose (see the Judgment at [13]).

On 15 July 2015, Ms Tan withdrew a total of $1,164,580 from SMSPL’s bank account using 23 cheques for $50,000 each and one cheque for $14,580 (see the Judgment at [14]). According to Ms Tan, this was her gratuity and adjusted pay for January to June 2015 (“the Gratuity Payments”). She signed these cheques herself as only sums above $50,000 required two signatures. Ms Tan returned an amount of $492,580 on 27 July 2015, which she claimed was an accidental excess payment. The Gratuity Payments therefore ultimately totalled $672,000.

After Mr Ng had been removed as a signatory of SMSPL’s bank account on 29 July 2015, Ms Tan signed off on nine debit notes from SDPL to SMSPL (“the Debit Notes”) (see the Judgment at [16]–[17]). Ms Tan determined that the net amount due from SMSPL to SDPL under these Debit Notes was $1,642,510.99, and effected payment of this amount. According to Ms Tan, these were repayments of loans made by SDPL to SMSPL. Mr Ng disputed the propriety of all the above payments in Suit 867.

Next, there were a number of events relating to the corporate affairs of SMSPL that took place after Mr Ng announced his decision to resign. On 12 August 2015, SMSPL issued notice of an extraordinary general meeting (“EGM”) for the ratification of the amounts under the Debit Notes as consultancy fees (see the Judgment at [18]).

Mr Ng commenced Suit 867 on 27 August 2015, accompanied by a summons for an injunction to restrain SMSPL from holding this EGM (HC/SUM 4106/2015). A consent order was eventually recorded for the withdrawal of the EGM.

We digress for a moment to explain the parties’ disagreement over the treatment of invoices issued by SDPL and MOX after 20 February 2012 (“the post-incorporation invoices”) that eventually became a focus of Mr Ng’s complaint of oppression at trial below. With the differing versions of what Mr Ng and Ms Tan had orally agreed to on the treatment of the post-incorporation invoices in the trial below, the parties, for brevity and simplicity, called this particular dispute the “Oral Agreement”. Thus, all references to the Oral Agreement in the parties’ respective written submissions have to be understood in the context described here. Specifically, their disagreement lies in how sums paid pursuant to the post-incorporation invoices for SDPL and MOX’s projects which were in existence prior to this date (ie, pre-incorporation) were to be dealt with. However, Ms Tan’s treatment of post-incorporation invoices was not specifically raised as one of Mr Ng’s complaints of oppression at the time Suit 867 was commenced, as we will discuss in the next paragraph.

Based on Mr Ng’s case at trial, his version of the Oral Agreement (“Mr Ng’s Version”) is that all receivables were to be transferred to SMSPL after deducting expenses incurred by MOX and SDPL for their respective projects (see the Judgment at [9]). The version of the Oral Agreement maintained by Ms Tan (“Ms Tan’s Version”) is that MOX and SDPL would retain their receivables but would reimburse SMSPL for the use of SMSPL’s resources in completing these projects. To be clear, Mr Ng did not specifically raise his version of the Oral Agreement and Ms Tan’s non-observance of the same as constituting oppressive conduct before he sued. Instead, it was pleaded for the first time in the Statement of Claim filed on 9 September 2015.

Events post Writ of Summons

On 9 October 2015, Mr Ng filed an application in HC/OS 921/2015 (“OS 921”) to inspect the accounts and records of SMSPL in his capacity as a director of the company. A directors’ meeting was held on 17 December 2015 in Mr Ng’s absence and an EGM was fixed on 8 January 2016 to remove Mr Ng as director. Mr Ng obtained an interim injunction before the EGM to preserve his capacity as a director to proceed with OS 921. Mr Ng’s application in OS 921 was subsequently granted on 25 January 2016.

Mr Ng’s last day of work at SMSPL was 12 October 2015, and he indicated then that he would transfer a number of SMSPL’s projects to MOX. This was possible as SMSPL was by then in the process of ceasing operations. SMSPL ceased operations in April 2016. Mr Ng remained a director of SMSPL until 5 April 2017.

The proceedings and the decision below Mr Ng’s case at the trial

As Mr Ng’s counsel made clear at the trial, it was not Mr Ng’s case that he resigned from SMSPL because of any oppression. Instead, Mr Ng’s case was that after he resigned, Ms Tan decided to siphon money away from SMSPL and to obstruct Mr Ng in various other ways. The siphoning of money was alleged to have taken the form of the Debit Notes and the Gratuity Payments. Although Mr Ng therefore accepts that he resigned from SMSPL for personal reasons and not because of oppression, his case is that he discovered after his resignation that, all along, there had been oppressive acts by Ms Tan in the form of Ms Tan failing to transfer receivables that were due from SDPL to SMSPL. These receivables were the subject of Annexes A, B, C1 and C2 of the Statement of Claim.

In short, Mr Ng’s primary case is that his resignation from SMSPL prompted Ms Tan to engage in a series of oppressive acts in order to prevent him from realising the fair value of his stake in SMSPL. Mr Ng’s further case is that he has unknowingly been the subject of oppression throughout his tenure in SMSPL, as Ms Tan had been violating the Oral Agreement all along.

Derivative action under s 216A Companies Act

In his Statement of Claim, one of the reliefs pleaded by Mr Ng was for an order to allow him to commence a derivative action against Ms Tan and SDPL in SMSPL’s name under s...