Tan Choon Yong v Goh Jon Keat and Others and Other Suits

• Jurisdiction: Singapore
• Judge: Tan Lee Meng J
• Judgment Date: 30 April 2009
• Neutral Citation: [2009] SGHC 106
• Docket Number: Suit No 49 of 2008
• Date: 30 April 2009
• Published date: 05 May 2009
• Year: 2009
• Plaintiff Counsel: Adrian Tan, Wendell Wong and Sophine Chin (Drew & Napier LLC)
• Citation: [2009] SGHC 106
• Defendant Counsel: Ismail Atan (Nanyang Law LLC) (to 9 February 2009) and Roy Yeo (Sterling Law Corporation) (from 9 February 2009),Mustaffa bin Abu Bakar (Mustaffa & Co)
• Court: High Court (Singapore)
• Subject Matter: Section 216 Companies Act (Cap 50, 2006 Rev Ed),Companies,Oppression,Factors to take into consideration when deciding whether oppression under s 216 Companies Act (Cap 50, 2006 Rev Ed) extant,Application of s 216 Companies Act to non-quasi-partnership with external shareholders,Scope of remedies for oppression under s 216 Companies Act

30 April 2009 Judgment reserved.

Tan Lee Meng J:

1 This judgment concerns a dispute between shareholders of Alphomega Research Group Ltd (“the company”), which led to the filing of three suits.

2 In the first suit, Suit No 49 of 2008, the plaintiff, Dr Tan Choon Yong (“Dr Tan”), a minority shareholder as well as the company’s former Chief Executive Officer (“CEO”) and former director, claimed to be the victim of oppression by the majority shareholders and directors, including the first defendant, Mr Goh Jon Keat (“Mr Goh”), and the second defendant, Ms Tan Hui Kiang (“Ms Tan”), who is Mr Goh’s relative. Among the remedies sought by Dr Tan under s 216 of the Companies Act (Cap 50, 2006 Rev Ed) (“the Act”) is an order that the company be wound up on just and equitable grounds.

3 In the second suit, Suit No 855 of 2008, Mr Goh and Ms Tan sued Dr Tan for defamation with respect to certain statements made by Dr Tan during an extraordinary meeting of the company on 19 February 2008.

4 Finally, in Suit No 856 of 2008, Dr Tan sought damages from the company for breach of his employment contract on the ground that he was summarily dismissed on 21 February 2008 without just cause.

5 All three actions were consolidated by an Order of Court on 13 November 2008.

6 During the course of the trial, Mr Goh and Ms Tan had second thoughts about proceeding with Suit No 855 of 2008. As such, they sought and were granted leave to withdraw their defamation action against Dr Tan.

7 As for Suit No 856 of 2008, towards the end of the trial, the company offered to compensate Dr Tan for summarily dismissing him without giving him the requisite notice of six months provided for under his employment contract. As the company’s offer of compensation was accepted by Dr Tan, he was given leave to withdraw his claim for damages for breach of his employment contract.

8 In view of the above-mentioned developments, this judgment will only concern Suit No 49 of 2008, which relates to Dr Tan’s complaint of oppression.

Background

9 In 2006, while Dr Tan was the Managing Director of CPG Laboratories Pte Ltd (“CPG Labs”), Mr Goh and his cousin, Mr Heng Jee Kian (“Mr Heng”), who is Ms Tan’s husband, interested him in joining a company to be set up to provide a comprehensive range of consultancy services in the engineering and construction industries, including quality testing and inspection. Dr Tan, who was a specialist in such consultancy services, was interested in the proposal.

10 On 13 February 2007, the company was incorporated. Mr Goh was appointed the company’s Chief Financial Officer (“CFO”). On 16 April 2007, Dr Tan resigned from CPG Labs, after which he joined the company and was appointed its chief executive officer (“CEO”). His monthly remuneration package was $17,800.

11 When Dr Tan joined the company, it had 4 directors, namely, Dr Tan, his wife, Ms Perlyn Sim Sock Lee (“Ms Sim”), Mr Goh and Ms Tan. Their shareholdings in the company are as follows:

Dr Tan	-	25.3%
Ms Perlyn Sim	-	0.8%
Mr Goh	-	25.3%
Ms Tan	-	25.3%

12 Mention must be made of the role of Ms Tan’s husband, Mr Heng, who called himself a “founder of the company” and its “general manager” even though he had no employment contract with the company at the material time. Dr Tan asserted that Mr Heng was like a “shadow director” of the company. He added that Mr Heng took an active part in the day to day running of the company and worked together with Mr Goh on financial matters.

13 To raise money for the company’s business, the company applied for listing on Phillip Securities’ Over-The-Counter Capital (“OTC Capital”) on 15 August 2007 so that its placement shares could be traded on OTC Capital. The role of OTC Capital in helping companies to raise capital is explained in its website as follows:

OTC Capital … is a market making trading platform for the securities of unlisted Singapore companies. It facilitates companies to raise new capital in a relatively cost-effective manner and allows the trading of the securities between registered OTC investors with Phillip Securities Pte Ltd ("PSPL") as the market maker.

OTC is not an approved exchange or a market and PSPL is not a recognized market operator market within the meaning of section 6 of the Securities and Futures Act ("SFA"). Therefore, OTC is practically self-regulated within the ambit of any relevant legislation or guidelines issued by the Monetary Authority of Singapore (“MAS”). The operations of OTC are conducted, managed and monitored by the personnel of PSPL and the management of OTC; while the OTC Committee approves the application submissions of companies seeking admission to OTC and also sets the rules of trading, disclosure and continuing obligations of the companies whose securities are quoted.

14 OTC Capital required the company to have a Corporate Advisor for so long as it retained its admission status. The company appointed Mr Tan Meng Heng (“Mr MH Tan”) as its Corporate Advisor.

15 For the purpose of being listed on OTC Capital, the company prepared a “Small Offer Document” (“SOD”) for OTC Capital and its investors. To attract investors to put their money into the company, the SOD highlighted Dr Tan’s expertise in the company’s business and the fact that he was going to lead the company.

16 On 4 October 2007, the company was listed on OTC Capital and it managed to raise $3,816,800 from 19,084,000 placement shares at $0.20 per share.

17 Within weeks after it was listed in October 2007, the company became dysfunctional and although Dr Tan and his specialist team from CPG Labs were crucial to the company’s business, by December 2007, Mr Goh and Ms Tan planned to get rid of Dr Tan. Mr Goh called the Corporate Advisor, Mr MH Tan, to request that an announcement be made on OTC Capital’s website that Dr Tan had been removed as the CEO. However, Mr Goh was informed that the proper procedure for removing a CEO must be followed.

18 Dr Tan complained that as soon as investors’ funds had poured into the company following its listing on OTC Capital, he faced numerous obstructions in the running of the company. More will be said about these obstructions but what needs to be noted now is that Dr Tan claimed that he was denied access to important company accounts and human resources records and that despite his repeated requests, the employment “contracts” that Mr Goh and Ms Tan allegedly signed with the company in July 2007 were not shown to him. He was also not given sufficient co-operation to enable him to address OTC Capital’s serious concerns about the manner in which the company had utilised investors’ funds.

19 On 4 January 2008, OTC Capital’s chairman, Mr Ong Teong Hoon (“Mr Ong”), had a meeting with Dr Tan, Mr Goh, Mr Heng and the company’s deputy chief operations officer, Mr Leong Chin Toon (“Mr Leong”), to try and resolve the problems in the company. At this meeting, it was clarified that the CEO was in charge of the company and that Mr Heng should not meddle in the company’s affairs for although he was a shareholder, he was neither a director nor an employee. Mr Ong said that at the end of the meeting, the parties agreed to try and work together. However, 6 days’ later, on 10 January 2008, Mr Goh and Ms Tan instructed the company secretary to issue a Notice of an Extraordinary General Meeting (“EOGM”) to be held on 28 January 2008 for the purpose of removing Dr Tan from the post of CEO and Dr Tan and Ms Sim from the board of directors (“the board”). The Notice stated that the EOGM was convened “by order of the board” when it was not.

20 On 14 January 2008, Dr Tan lodged a report with the Commercial Affairs Department (“CAD”), in which he complained that he had been denied access to the company’s financial records, administrative records of the purchase of a factory at No 6 Sungei Kadut Way, records of the rental agreement and rental income from the said factory and the employment “contracts” of Mr Goh and Ms Tan. Dr Tan added that he was very concerned about the missing documents and that he was worried about the potential abuse of the company’s resources to “enrich certain groups of shareholders and their supporters against the interest of the investors and company”.

21 On 15 January 2008, OTC Capital suspended the trading of the company’s shares and requested the company to account for the use of placement proceeds raised on OTC Capital.

22 On 25 January 2008, Dr Tan sought and was granted an injunction by Choo Han Teck J to restrain Mr Goh and Ms Tan “from convening, holding or otherwise allowing to be held an Extraordinary General Meeting … of [the company] on 28 January 2008 or on any other adjourned date and from carrying into effect the purported Notice of Extraordinary General Meeting dated 10 January 2008 … or further acting thereon”.

23 On 26 January 2008, Dr Tan received a Notice from the company secretary dated 24 January 2008 cancelling the EOGM of 28 January 2008. OTC Capital was quite annoyed about the last minute cancellation of the EOGM as it had made arrangements with investors who required proxies at the proposed EOGM.

24 On 28 January 2008, OTC Capital wrote a strongly worded letter to Dr Tan. The relevant part of the letter is as follows:

5	Fundamentally, the Company’s application to have its shares listed for trading on OTC Capital carries with it also the obligation generally to ensure proper disclosure of information and the conduct of its business affairs such that orderly market making and the integrity of trading via OTC Capital is not compromised.
6	… [Y]our CAD report flows from a fundamental dispute having arisen between yourself and other key officers and shareholders of the Company and that one result of that report is an attempt to have you removed as CEO and director of the Company.
7	We have only this morning been told that the EGM purportedly called to resolve on your removal as director and CEO is now cancelled...