The Wellness Group Pte Ltd v TWG Tea Co Pte Ltd and others

• Jurisdiction: Singapore
• Judge: Chua Lee Ming J
• Judgment Date: 16 November 2017
• Neutral Citation: [2017] SGHC 298
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 206 of 2017
• Year: 2017
• Published date: 31 August 2018
• Hearing Date: 10 July 2017
• Plaintiff Counsel: Chua Sui Tong (Rev Law LLC)
• Defendant Counsel: Siraj Omar and Premalatha Silwaraju (Premier Law LLC),Davinder Singh s/o Amar Singh, SC, Jaikanth Shankar, Tan Ruo Yu, Charlene Wong Su-Yi and Serena Ng Su-Lin (Drew & Napier LLC)
• Subject Matter: Companies,Directors,Appointment
• Citation: [2017] SGHC 298

Chua Lee Ming J: Introduction

The plaintiff, The Wellness Group Pte Ltd (“Wellness”), sought, inter alia, an order that Associate Professor Mak Yuen Tee (“AP Mak”) be appointed as a director of the first defendant, TWG Tea Company Pte Ltd (“TWG Tea”). The application was based on a Shareholders’ Agreement dated 18 March 2011 (“the SHA”) which Wellness and TWG Tea had signed together with the other two shareholders of TWG Tea, ie, the second defendant, OSIM International Pte Ltd (“OSIM”) and the third defendant, Paris Investment Pte Ltd (“Paris”).

On 10 July 2017, I dismissed the application. Wellness has appealed against my decision.

Undisputed facts

Wellness was established for the purposes of wholesale and/or retail of lifestyle and/or wellness related products. TWG Tea operates Wellness’ tea division.

In early 2011, the then-director and chief executive officer (“CEO”) of TWG Tea, Mr Manoj Mohan Murjani (“Manoj”), started negotiations with Mr Ron Sim Chye Hock (“Ron Sim”) regarding an investment by OSIM into TWG Tea. OSIM was then a public company listed on the Singapore Stock Exchange; Ron Sim was the CEO, a director and Chairman of OSIM.

On 18 March 2011, OSIM acquired 35% of the shares in TWG Tea. The other two shareholders, Wellness and Paris, held 54.7% and 10.3% respectively. On the same day, Wellness, OSIM, Paris and TWG Tea signed the SHA. Clause 5.2 of the SHA provides for the composition of TWG Tea’s board of directors, and reads as follows: 5.2 Composition: The Board shall comprise: 5.2.1 two persons appointed by [Paris] and [Wellness]; and 5.2.2 one person appointed by [OSIM], for so long as [OSIM’s] Shareholding Percentage is not less than 25 per cent. That person shall be Mr Ron Sim.

Subsequently, disputes arose between Manoj and Ron Sim. In December 2011, Ron Sim called for a TWG Tea board meeting to review the suitability of Manoj continuing as CEO and if thought appropriate to remove him as CEO. For various reasons, the board meeting was not held.

On 14 August 2012, Manoj resigned as CEO of TWG Tea. On 28 September 2012, he also resigned as a director of TWG Tea. Wellness did not appoint anyone to replace Manoj on the board of TWG Tea at the time.

Subsequently, for reasons which I need not go into, OSIM’s shareholding in TWG Tea increased to 45% while Wellness’ and Paris’ shareholdings decreased to 46.3% and 8.7% respectively.

On 18 October 2013, OSIM purchased all the shares in Paris. Their combined shareholding in TWG Tea was 53.7%.

In November 2013, TWG Tea had a rights issue to raise capital. Wellness did not subscribe to this rights issue. OSIM and Paris together subscribed for the entire rights issue. Consequently, OSIM and Paris, combined, held 69.9% of the shares in TWG Tea while Wellness’ shareholding was diluted to 30.1%. To date, Wellness continues to hold 30.1% of the shares in TWG Tea.

In February 2014, Wellness and Manoj commenced a minority oppression action in S 187/2014 against OSIM, Paris and the directors of TWG Tea. On 22 April 2016, I dismissed the claims in S 187/2014 – see The Wellness Group Pte Ltd and another v OSIM International Ltd and others [2016] 3 SLR 729. Wellness’ appeal in Civil Appeal No 64 of 2016 was dismissed by the Court of Appeal on 25 October 2016.

For present purposes, the only relevant finding in S 187/2014 is that there is an implied term in the SHA that the majority shareholder(s) (whoever they may be) would be entitled to appoint two directors to the board of TWG Tea, and the minority shareholder(s) in TWG Tea would be entitled to appoint one director so long as they hold at least 25% of the shares in TWG Tea (“the Implied Term”) (at [121(c)]). The Implied Term addressed the situation where Wellness, whether by itself or with Paris, ceased to be the majority shareholder/s in TWG Tea. In the present case, Wellness has ceased to be the majority shareholders and OSIM together with Paris form the majority shareholders. Since Wellness (as the minority shareholder) holds 30.1% of the shares in TWG Tea, it is entitled to appoint one director to the board of TWG Tea.

Wellness’ attempts to appoint a director to the Board

For some four years, Wellness did not exercise its right to appoint a director to the board of TWG Tea after Manoj resigned on 28 September 2012. On 26 October 2016, Wellness informed TWG Tea that it wished to re-appoint Manoj as a director of TWG Tea, pursuant to cl 5.2 of the SHA and the Implied Term.

On 1 November 2016, OSIM and Paris wrote to Wellness stating that they were unable to agree to the appointment of Manoj due to, inter alia, his wrongful and dishonest actions that damaged TWG Tea’s interests. OSIM and Paris indicated that they would be willing to take steps to appoint either one Ms Kanchan Murjani (“Kanchan”) or Mr Finian Tan (“Finian”), both of whom were also directors of Wellness, if Wellness nominated either of them.ⁱ

On 3 November 2016, TWG Tea informed Wellness that the board was of the view that Manoj’s appointment to the board would not be in the best interests of TWG Tea, having regard to his prior conduct and all the relevant circumstances. However, the board recognised Wellness’ right to appoint a director to the board, and indicated that it was prepared to accept the appointment of either Kanchan or Finian to the TWG Tea board.ⁱⁱ For reasons best known to Wellness, it did not take up the suggestion to nominate either Kanchan or Finian.

On several other occasions in December 2016 and January 2017, Wellness wrote to TWG Tea, OSIM and Paris reiterating its request to appoint Manoj as director with immediate effect.ⁱⁱⁱ However, Wellness’ request continued to be rejected.^iv

On 13 February 2017, Wellness wrote to TWG Tea (“the 13 February Letter”) and proposed the appointment of AP Mak as a director of TWG Tea.^v The...