Tang Choon Keng Realty (Pte) Ltd and Others v Tang Wee Cheng

• Jurisdiction: Singapore
• Judge: Chan Sek Keong J
• Judgment Date: 01 June 1991
• Neutral Citation: [1991] SGHC 74
• Docket Number: Suit No 147 of 1991
• Date: 01 June 1991
• Published date: 19 September 2003
• Year: 1991
• Plaintiff Counsel: Wong Meng Meng (Dilhan Pillay with him) (Shook Lin & Bok)
• Citation: [1991] SGHC 74
• Defendant Counsel: Engelin Teh (Quek Peck Hong with her) (Colin Ng & Partners)
• Court: High Court (Singapore)
• Subject Matter: Sufficient ground to wind up company,Petition,Injunction to restrain petition,Whether an abuse of process of court to present both,Whether petitions bound to fail,Sole or predominant object of petitioner in presenting petition,Application to discharge interim injunction to restrain presentation of petitions under ss 216 and 254 of Companies Act (Cap 50, 1990 Ed),Whether member of company may be so restrained,Winding up,Discretion of court,Whether court by itself competent to make decision on mental competency of a person,Member's right to present winding up petition,Petition for relief from oppression,Whether application should be allowed at interlocutory proceedings,Comparison between the two,Companies,Real purpose to test veracity of defendant,Civil Procedure,When discretion exercised to grant injunction,Injunctions,Affidavits,s 216 Companies Act (Cap 50, 1990 Ed),Whether petitioner genuinely desires remedies obtainable thereby,Rights,Sections 216 and 254 petitions,Members,Oppression,Application to cross-examine defendant on affidavit to prove mental incompetency,Winding-up order granted as a last resort,Discretion of court to grant relief unfettered,Whether petition bound to fail,Purpose for which discretion exercised,Factors for consideration,Whether member may be restrained from presenting petition

Cur Adv Vult

This is an application by the defendant (`TWC`) to discharge an interim injunction obtained ex parte by the plaintiffs, restraining him until judgment or further order from presenting any petition in the form of two draft petitions annexed to the ex parte application or any other petitions for the windup of the first plaintiff (`TCKR`) on any of the grounds therein referred to. The two draft petitions are: (1) a petition (`the oppression petition`) under s 216 of the Companies Act (Cap 50, 1990 Ed) (`the Act`); and (2) a petition (`the winding-up petition`) under s 254 of the Act.

TWC is the eldest son of Tang Choon Keng (`TCK`) and the second and third plaintiffs (`TWS` and `TWK`) are the two younger sons. They are shareholders and directors of TCKR, the family company. The immediate background to the application before me is as follows. On 3 January 1991, TWC`s solicitors wrote to the plaintiffs a letter in which they: (i) referred generally to the conflicts between TWC, his company called Dynasty Hotel (Pte) Ltd (`DH`) and the plaintiffs; (ii) enclosed the two draft petitions which TWC intended to file in order to resolve the conflicts; (iii) gave the plaintiffs two weeks to come up with constructive proposals to resolve the conflicts. On 9 January 1991, the plaintiffs` solicitors replied that the second plaintiff was not in Singapore and would be back on 28 January 1991. They did not request TWC for time for the plaintiffs to consider whether they would like to make any proposals. On 19 January 1991, the plaintiffs commenced this action claiming: (a) a declaration that the filing of the said petitions would be an abuse of process of the court, and (b) an injunction to restrain TWC from presenting them. They immediately applied for and obtained, ex parte, the interim injunction, the subject matter of the application before me.

The draft petitions of TWC

The contents of the two draft petitions are the same, except for the remedies that are being sought. In summary, they state as follows:

(1) TCKR was incorporated on 23 May 1958 with the object, inter alia, of acquiring and developing properties; between 1960 and 1971, TCKR acquired a number of properties adjoining Orchard Road.

(2) On 4 March 1961, CK Tang (Pte) Ltd (`CKT`) was incorporated to carry on the business of the family department store.

(3) The original directors of TCKR were TCK, TSK (TCK`s wife) and TWC; TWS became a director in September 1976 and TWK became a director in January 1979.

(4) During 1968-1978, TCKR, by TWC, conceived a plan to redevelop the properties into a complex called `House of Tang` consisting of a department store and a luxury hotel to be called `Dynasty Hotel`, and when completed, the store would be operated by CKT and the hotel by DH (which was incorporated on 5 August 1978) as a wholly-owned subsidiary of TCKR but was to be capable of becoming a public company in the future.

(5) In 1980, TWC ceased to be the managing director of CKT in order to devote his efforts to the development of the `House of Tang`, and when completed, to the management of the hotel through DH; the said development was completed in March 1982.

(6) TCKR, by an agreement for lease dated 25 January 1979, agreed to let the new store premises which has an area of about 150,000sq ft, to CKT at the monthly rent per square foot of $2 for rent and $0.45 for service charge, which TWC says was low even in January 1979.

(7) TCKR, to be able to service its bank loans, needed a monthly rental of $1.133m, after taking into account the rent from CKT; consultants advised that DH could only afford to pay $558,330 per month to break even; however, as both CKT and DH were family companies, it was agreed that DH would pay rent at $818,000 per month, even though DH would incur a loss of $8.246m for the first three years of operation; TWC says that this was agreed on the understanding that TCKR would help out DH as much as possible on finances, and would in all respects have regard to the fact that DH was part of the family enterprise.

(8) On 3 February 1982, TCKR and DH signed an agreement for a 25-year lease for the total premises, at a monthly sum of $818,000 for the first five years (being $618,500 for rent and $200,000 for furniture, fittings and fixtures as listed in the schedule to the draft lease), thereafter to be revised to reflect the market rent, regard being had to the cost to TCKR of refurbishing and renewing the scheduled furniture, fittings and fixtures set out in the schedule to the draft lease (which has yet to be executed).

(9) On 10 March 1982, DH increased its share capital from $2 to $7,650,002 which was as follows: (a) TWC-7,000,001 (91.5%); (b) TWS-400,001 (5.2%), and (c) TWK-250,000 (3.3%); as required by TCKR, TWS and TWK were each granted an option to subscribe for further shares in DH up to 15% of is issued capital, exercisable before 19 December 1985 or upon the earlier approval of the public listing of DH`s shares.

(10) On 18 March 1982, TCK transferred certain shares held by him in TCKR to TWS and TWK, as a result of which they, in combination, became the majority shareholders of TCKR; since then the shares in TCKR were held as follows: (a) TCK-20 (0.04%); (b) TWC-24,000 (47.06%); (c) TWS-12,900 (25.47%); (d) TWK-12,900 (25.47%); and (e) estate of TSK-1,000 (1.96%), held beneficially for TWS and TWK equally.

(11) It was inherent in the above arrangements that: (a) one member of the Tang family, viz TWC, would assume almost the entire financial responsibility for, and to commit his efforts and resources to, a new and risky business, viz DH; (b) TWC could realize benefit from his commitment only if DH would be floated as a public company within a reasonable time, and/or enabled to make and retain profits by its hotel operations; (c) these results were achievable only if TCKR enabled DH to own the hotel or have a long and secure lease on such terms as to enable DH to remain profitable; and/or TCKR could not and did not take from DH the major part of its operating profit by way of rent and charges, and assisted or did not hinder DH in the operation of the hotel; (d) each member of the family would manage TCKR so as to protect and advance the interest of each other; (e) DH would be treated as a family business and not purely as an outsider tenant.

(12) On 19 March 1984, TWC suffered a serious stroke which continues to incapacitate him from speaking; he was able to and did attend board meetings from April 1985 to 20 June 1990 with one or both of his sons as his spokesman or spokesmen.

(13) Since TWC`s stroke, TWS, who has been acting as the principal executive director of TCKR, together with TWK, have exercised and continue to exercise their powers as directors in a manner oppressive to TWC; and TCKR has acted and threatens to act in a manner which unfairly discriminates against and is prejudicial to TWC.

(14) The acts which are oppressive and/or unjust and inequitable are as follows:

(a) ) on 26 March 1990, TWS and TWK proposed to TWC that they should cease to be directors of DH, and that TWC should cease to be a director of CKT and of TCKR;

(b) ) on 18 May 1990, TWK wrote to TWC, expressing the view that TWC was unable to understand or comprehend business affairs;

(c) ) on 20 June 1990, at a board meeting of TCKR, TWS caused the other directors, by a majority, to decide to exclude TWC`s sons from attending the meeting to assist TWC, and thereby effectively denied TWC the right to participate in the meeting, whereupon TWC left the meeting;

(d) ) shortly after TWC`s stroke, TCKR, by TWS, demanded from DH arrears of rental of $5.5m and sought to charge compound interest of 1% per month on such arrears and also threatened to take legal proceedings;

(e) ) between February and September 1985, it was agreed that (i) the said arrears would be treated as a term loan with interest, and (ii) from 1 January 1985 to 31 December 1987, later extended to 31 December 1988, the rent payable by DH would be $400,000 per month plus 4% of gross revenue, subject to a minimum of $500,000 per month, which was the market rent;

(f) as TCKR made no decision on the rent in 1989 up to June 1990, DH continued to pay the same rent as before; in April 1990, DH prepared its unaudited annual accounts for 1989 which, on that basis, showed a profit of just over $3m; copies of the accounts were given to TWS and TWK as directors of DH and also to DH`s bankers; on 12 July 1990, TCKR informed DH of its decision to charge DH rent at $818,500 with effect from 1 January 1989, and on 31 August 1990 sought to justify the charge on the ground that it was the market rent, which TWC denies for each of the review periods;

(g) although DH has paid and continues to pay $200,000 per month for furniture, etc TCKR has failed to refurbish and renew the same, and has left DH to bear this cost;

(h) TCKR continued to charge CKT rent at $2 per sq ft for three terms expiring in March 1982, 1985 and 1988, which was below the market rent, and an increased rental would have benefited TCKR and also enabled it to service its loans without so much reliance upon DH;

(i) TCKR had agreed with DH on 11 January 1983 that in consideration of DH providing certain services to CKT, TCKR would pass on to DH the service charge of $67,500 per month then payable by CKT, and also any future increased service charge; TCKR increased CKT`s service charge to $150,000 per month from 1 April 1985 but failed to pass on the increase to DH;

(j) TCKR also sought to impose a service charge on DH when DH was under no obligation to pay any service charge to TCKR;

(k) from time to time in 1990, DH sought TCKR`s assistance in obtaining governmental approval for alterations to and/or change of use of part of the hotel premises, but TCKR failed to do so in a manner which it ought to have done, having regard to the relationship between DH and TCKR, but on...