Thio Syn Kym Wendy and others v Thio Syn Pyn and others

• Jurisdiction: Singapore
• Judge: Judith Prakash JA
• Judgment Date: 17 July 2017
• Neutral Citation: [2017] SGHC 169
• Court: High Court (Singapore)
• Docket Number: Suit No 490 of 2013
• Year: 2017
• Published date: 14 August 2018
• Hearing Date: 12 May 2016,04 May 2016,13 May 2016,06 May 2016,19 May 2016,29 April 2016,10 May 2016,20 May 2016,27 April 2016,05 August 2016,05 May 2016,26 April 2016,11 May 2016,18 May 2016,28 April 2016,03 May 2016,17 May 2016
• Plaintiff Counsel: Alvin Yeo SC, Joy Tan, Liew Yik Wee, Ho Wei Jie and Rich Seet (WongPartnership LLP)
• Defendant Counsel: Ang Cheng Hock SC, Jason Chan, Paul Ong and Melissa Mak (Allen & Gledhill LLP),N Sreenivasan SC (Straits Law Practice LLC) (instructed) and Paul Seah, Keith Tnee, Alcina Chew and Rachel Chin (Tan Kok Quan Partnership) (on record),Siraj Omar and Joanna Chew (Premier Law LLC)
• Subject Matter: Companies,Oppression,Minority Shareholders,Separate legal personality
• Citation: [2017] SGHC 169

Judith Prakash JA: Background

This action is a minority oppression claim by a brother and two sisters against their mother and two brothers in relation to the conduct of the affairs of three family-owned companies. The acts of commercial unfairness alleged by the plaintiffs span three broad categories concerning the affairs of the companies. It is also alleged that the companies are quasi-partnerships and that there was a common understanding that the plaintiffs were entitled to be directors of the companies.

Mr Thio Keng Poon (“Mr Thio”), born in 1931, was an enterprising businessman in the early years of independent Singapore. In 1960, he incorporated a company called United Realty Ltd (“URL”) which carried on business as a property investment holding company. It was a successful undertaking: URL now owns and rents out a number of residential, commercial and industrial properties. The root of the family fortune was, however, the joint venture that Mr Thio entered into in 1963 with the Australian Dairy Produce Board to manufacture and market sweetened condensed milk in Singapore and Malaysia.

The joint venture company, Malaysia Dairy Industries Pte Ltd (“MDI”), has been extremely successful. It now manufactures and distributes dairy products, fruit juices and health drinks under two well-established brands in this region, Vitagen and Marigold. By about 1968, the Australian Dairy Produce Board had been bought out and MDI was owned wholly by members of Mr Thio’s family, including his wife, Mdm Kwik Poh Leng (“Mdm Kwik”), and his siblings. In due course, subsidiary companies were incorporated in Malaysia, viz, Malaysia Milk Sdn Bhd (“MMSB”) and Cotra Enterprises Sdn Bhd (“CESB”). Collectively, MMSB and CESB are sometimes referred to as “the Malaysian Subsidiaries”. A Singapore subsidiary, Modern Dairy International Pte Ltd (“Modern Dairy”), was also started.

In 1969, Mr Thio procured the incorporation of Thio Holdings Pte Ltd (“THPL”) as an investment holding company. THPL owns 30% of the shares of MDI and 26.25% of the shares of URL. It also wholly owns Cotra Enterprises (Private) Limited, a Singapore company which is presently inactive. The shares of THPL are currently held by Mr Thio, his wife and five of his children. These same individuals are also shareholders in URL and MDI. These three companies, MDI, THPL and URL, are the corporate defendants in this action.

Mr Thio and Mdm Kwik have six children. They are: Thio Syn Luan Vicki (“Vicki”), born in 1956; Thio Syn Pyn (“Ernest”), born in 1957; Thio Syn Kym Wendy (“Wendy”), born in 1959; Thio Syn Ghee (“Michael”), born in 1961; Thio Syn San Serene (“Serene”), born in 1962; Thio Syn Wee (“Patrick”), born in 1964. For the purposes of this judgment, since the siblings have very similar Chinese names, to avoid confusion I will refer to them by their western names. These are the names which the siblings used for each other in the proceedings and in the correspondence which passed amongst them.

The plaintiffs in this action are Wendy, Michael and Serene. They are minority shareholders in each of the three corporate defendants. Together, they hold 18% of the shareholding of THPL, 13.75% of the shareholding of URL, and 20% of the shareholding of MDI.

The individual defendants in this action are Mdm Kwik, Ernest and Patrick. Together, they hold 77.25% of the shareholding of THPL, 30% of the shareholding of URL and 38.5% of the shareholding of MDI. All of them are directors of all three companies. Ernest and Patrick are, respectively, the managing director and deputy managing director of MDI. Mdm Kwik has been a director of all three companies since their respective dates of incorporation but has never played an active role in their day-to-day management.

Mr Thio himself still has a substantial (ie, over 5%) minority interest in URL and MDI and has a small shareholding in THPL. He was not a party to this litigation but his conduct and his relationships with his various children set the stage for the action. The eldest child of the Thio family, Vicki, played no part in the litigation.

Events leading to this action Events up to 2002

The three defendant companies, together with their subsidiaries and a Hong Kong company called Premier Enterprise Limited (“PEL”), form the Thio family’s group of businesses (“the Group”). Until the 1990s, Mr Thio was the moving spirit of the Group. He was assisted by his brother and by a non-relative, one Mr Lim Choo Peng (“Mr Lim”), who is still a director of MDI. As his sons grew up, Mr Thio brought first Ernest, and then Patrick, into the business. Ernest was appointed a director of THPL, MDI and URL in 1983. Patrick joined MDI in the early 1990s and took over the marketing portfolio. In 1995, Ernest became the deputy managing director of MDI and took over the reins of the day-to-day management of the company. Mr Thio retained the titles of managing director and chairman but played less of a leadership role.

Mr Thio has been described as a “traditional autocratic patriarch”. Over the years he gradually passed down the family wealth to his sons by allotting shares in MDI, THPL and URL to them. Initially, each of his three sons held the same number of shares but in 1991, when Michael was experiencing some financial difficulty, his shares were transferred to Patrick and Ernest. In the mid-1990s, after a shareholders’ dispute between Mr Thio and his younger brother, Mr Thio bought out the latter and transferred his brother’s shares to Patrick and Ernest. Thus, by the year 2000, the family members who held shares in the Group were Mr Thio, Mdm Kwik, Ernest and Patrick only. They were also directors of the Group companies.

In 2002, Mdm Kwik expressed a wish that some financial provision be made for her daughters. Ernest suggested that Michael and his sisters be given real property. Mr Thio disagreed and decided that Michael and his sisters should receive shares in the Group companies by way of bonus issues. The shares were issued to the four of them in March and April 2002, but Mr Thio retained full power in respect of the shares through blank share transfer forms and powers of attorney which each of them executed in his favour. Thereafter, Mr Thio usually acted as their proxy at shareholder meetings. At that stage, none of the four was made a director of any of the companies.

Events culminating in the Deed of Settlement and the appointment of the plaintiffs as directors

In May 2005, Michael’s wife gave birth to twin sons. These babies were the first grandsons to bear the Thio surname. Mr Thio then proposed that bonus shares in the Group be issued to Michael’s sons and that the constitutions of MDI and URL be amended so as to allow only his descendants bearing the Thio surname to hold shares in these companies. Ernest and Patrick objected to the proposed amendment. Their siblings were not in favour of it either. In anger, Mr Thio terminated Ernest’s employment as deputy managing director of MDI on 8 December 2005. Ernest was reinstated by the other directors on the same day.

The dispute was eventually resolved by way of a Deed of Settlement entered into among the members of the Thio family, THPL and MDI on 23 December 2005 (“the Deed of Settlement”). The stated purpose of the Deed of Settlement was to record the family members’ agreements with respect to “the rationalisation of their respective shareholdings and entitlements in” the Group. The structure of the shareholdings in MDI, THPL and URL today still reflects the arrangement made under the Deed of Settlement except for the fact that Vicki’s shares have been transferred to Ernest and Patrick. Under the Deed of Settlement, part of Ernest’s and Patrick’s shareholdings in THPL and MDI, as well as part of THPL’s shareholding in MDI, were transferred to Mr Thio. Ernest and Patrick also transferred some of their shares in URL to Michael. The Deed of Settlement and the share transfers were all executed on the same day in a lawyer’s office.

Apart from providing for the adjustment of shareholdings, the Deed of Settlement contains two clauses which are of importance in this litigation. These are cll 13 and 15 which read as follows: 13. The Parties agree that the Companies [defined to include THPL, MDI, URL, PEL and another Hong Kong company] will be managed and operated for profit and in accordance with best corporate practices to return to shareholders maximum returns. 15. This Deed sets forth the entire agreement and understanding of the Parties with respect to the subject matter contained herein and supersedes all prior discussions and agreement, whether written or oral, relating to the subject matter herein.

Separately, directors’ resolutions in writing were passed appointing the three sisters and Michael as directors of each of the Group companies. These resolutions are all dated 23 December 2005 but the parties dispute exactly when such appointments were proposed and executed.

After the Deed of Settlement, Patrick and Ernest retained majority control over MDI through the combination of their shareholdings in MDI and their control of THPL. The Deed of Settlement did not, however, end friction between them and Mr Thio as he continued to give them instructions and became angry when they disagreed with him. Another source of friction was that at some point Mr Thio had developed a relationship with another woman and set up a second family in Hong Kong. Ernest and Patrick were very upset with him because they felt it was an injury to Mdm Kwik who had been a devoted and dutiful wife. Mr Thio spent much time abroad but when he returned to Singapore he would live in the family home, sharing the same bedroom with Mdm Kwik as previously.

Disputes with Mr Thio

By 2007, Mr Thio had not been actively involved in the day-to-day management of the Group for almost ten years. In November 2007, Ernst & Young LLP...