Teo Gek Luang v Ng Ai Tiong and Others

• Jurisdiction: Singapore
• Judge: Lai Kew Chai J
• Judgment Date: 16 May 1998
• Neutral Citation: [1998] SGHC 164
• Docket Number: Originating Summons No 379 of 1997
• Date: 16 May 1998
• Published date: 19 September 2003
• Year: 1998
• Plaintiff Counsel: Ranvir Kumar Singh (Kumar & Loh)
• Citation: [1998] SGHC 164
• Defendant Counsel: Subir Singh Panoo (Sim Mong Teck & Partners)
• Court: High Court (Singapore)
• Subject Matter: ss 216A & 216B Companies Act (Cap 50, 1994 Ed),Companies,Rights,Whether plaintiff acting in good faith,Members,Whether prima facie in the company's interests to bring an action in the company's name,Minority shareholder bringing representative action in company's name

Judgment:

LAI KEW CHAI J

This was an application filed on 10 April 1997 under s 216A of the Companies Act (Cap 50, 1994 Ed) for an order permitting the plaintiff, a shareholder of Transcity Cargo System Private Ltd (`the company`), to commence a representative action in the name and on behalf of the company against the first defendant (`Mr Ng`), the managing director of the company to recover the alleged sum of $258,000 which Mr Ng was alleged to have unlawfully withdrawn from and therefore was owing to the company.

2.On 6 April 1998 the application came up before me for hearing. Two affidavits were filed by the plaintiff and four affidavits were filed on behalf of the four personal defendants, including one by Benny Ou Chuan Kwang (`Mr Ou`) filed on 20 June 1997. Mr Ou was at the material times the Finance Manager of the company, having joined it on 8 August 1996. Mr Ou affirmed that according to the accounting records of the company Mr Ng was owing the company only $13,322.58.

3.At the conclusion of the hearing, I granted leave to the plaintiff to bring an action in the name and on behalf of the company against Mr Ng to recover the sum of $13,322.58. But exercising the discretion `in the interests of justice` conferred on me under s 216A(5) I made the following interim orders and imposed the following conditions. I ordered that the plaintiff shall not commence the action within 22 days. If Mr Ng paid the company the sum of $13,322.58 within 14 days from the date of my order, the plaintiff shall not commence the action. The plaintiff was authorised to control the conduct of the action and the defendants were ordered to pay the plaintiff the costs of the application fixed at $2,500.

4.The plaintiff owned 75,000 shares in the company which constituted 25% of the issued and paid-up capital of the company. Until her maternity in March 1996 she was head of the accounts and administration division of the company. Mr Ng at all material times was the Managing Director of the company. He did not hold any share in the company. His wife, the second defendant, was a director of the company. She held 150,000 shares which represented 50% of the issued and paid-up capital of the company. The third defendant was a director and member of the company, holding 15,000 shares or 5% of the paid-up capital of the company. He was at all material times the head of the Ocean Division of the company in relation to its business of cargo handling. The fourth defendant was a director and member of the company. He held 60,000 shares of the company or 20% of its paid-up capital. He was the Head of the Air Division of the company, which dealt with the movement of cargo by air.

5.In her first affidavit filed on 10 April 1997 she alleged that prior to the commencement of her maternity leave Mr Ng had made numerous withdrawals of money from the company for his own use which were subsequently treated as debts owing to the company. She alleged that he had failed to make repayment although they were due and payable.

6.She began her maternity leave on 21 March 1996 but she kept in touch with her office. She was connected by modem to the accounting system of the company. She said she discovered that Mr Ng had made numerous `unauthorised withdrawals of money from the company`s bank accounts for his own use.` I was told by counsel for the plaintiff that the withdrawals could be divided into two categories. First, a total of about $160,000 or $170,000 was lent to Mr Ng with the consent of all directors, including the plaintiff. Second, Mr Ng withdrew $70,000 or $80,000 without the consent of the plaintiff. But the plaintiff alleged that she was `constrained` subsequently to agree to all the loans, since they had been withdrawn and taken, but Mr Ng was required to repay them by 30 March 1996, the latest date.

7.She said that an extraordinary general meeting of the company was held on 12 August 1996 to discuss the schedule of repayment by Mr Ng. The meeting was unsuccessful because Mr Ng refused to have any discussion. Instead, Mr Ng suggested that he bought out her shares, or the plaintiff bought out his wife`s shares or, thirdly, that all the shares in the company be sold to a third party. The plaintiff rejected all three proposals.

8.By her solicitors` letter of 25 September 1996 the plaintiff notified the Board of Directors of the company of her intention to apply to court for permission to commence a representative action in the name of the company against Mr Ng `for, inter alia, damages for applying the funds of the company for his own use.` On 14 October 1996 an extraordinary general meeting of the company was convened. She alleged that Mr Ng refused to proceed with the meeting on the alleged ground that he had insufficient notice of that meeting. As a result, there was no meeting. In the circumstances, she contended that the remaining directors in refusing to commence proceedings against Mr Ng to recover the debts were not acting in the interest of the company.

9.In the joint rebuttal affidavit of Mr Ng, the third and fourth defendants they affirmed that Mr Ng was the `main founder` of the company, which was his `brainchild`, and that he was the main driving force behind the company. He had left his previous company with whom Mr Ng had certain legal problems. He needed financial assistance in his disputes with his former employers who were in competition with the company. They said that all the directors of the company, including the plaintiff, had agreed to give financial assistance to Mr Ng by letting him take loans from the company and to repay the same when he was financially able to do so. It was in the interest of the company that Mr Ng could resist the claims of the company`s competitors. All accounting vouchers, except air and ocean freight operational vouchers, were raised by the plaintiff. In the initial stages...