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

• Jurisdiction: Singapore
• Court: High Court (Singapore)
• Judge: Judith Prakash JA
• Judgment Date: 13 March 2018
• Neutral Citation: [2018] SGHC 54
• Citation: [2018] SGHC 54
• Docket Number: Suit No 490 of 2013
• Hearing Date: 12 January 2018
• Plaintiff Counsel: Joy Tan, Jeremy Tan and Rich Seet (WongPartnership LLP)
• Defendant Counsel: Cavinder Bull SC, Kong Man Er and Fiona Chew (Drew & Napier LLC),Ang Cheng Hock SC, Jason Chan, Melissa Mak and Afzal Ali (Allen & Gledhill LLP)
• Subject Matter: Companies,Oppression,Minority shareholders,Shares,Valuation,Discount on minority shares
• Published date: 30 March 2019

Judith Prakash JA: Introduction

In this action, I granted the plaintiffs judgment on their minority oppression claim against the first and second defendants, and ordered a buyout of the plaintiffs’ shares in the company Malaysia Dairy Industries Pte Ltd (“MDI”) on the basis of a share price to be determined by an independent valuer. I further ordered that the parties be at liberty to apply for directions in case any were needed in regard to the valuation and sale of the shares. It turns out that the parties are indeed unable to agree on whether a discount should be applied in the valuation of the plaintiffs’ minority shares, and they now seek a court determination of this issue.

Background Events leading to this action

The full facts underlying this action can be found in my earlier judgment, Thio Syn Kym Wendy and others v Thio Syn Pyn and others [2017] SGHC 169 (“the Judgment”). Here, I will only outline the broad factual background and set out the facts that are relevant to the outstanding issue of share valuation.

Mr Thio Keng Poon (“Mr Thio”) was a businessman who, in the 1960s, procured the incorporation of three companies: United Realty Ltd (“URL”), a property investment holding company, MDI, a manufacturer and distributor of dairy products and beverages, and Thio Holdings Pte Ltd (“THPL”), an investment holding company. These three companies are the corporate defendants in this action. Together with their subsidiaries and a Hong Kong company, they form the Thio family’s group of businesses (“the Group”).

Mr Thio and his wife, Mdm Kwik Poh Leng (“Mdm Kwik”), have six children. They are, in order of birth: Thio Syn Luan Vicki (“Vicki”); Thio Syn Pyn (“Ernest”); Thio Syn Kym Wendy (“Wendy”); Thio Syn Ghee (“Michael”); Thio Syn San Serene (“Serene”); and Thio Syn Wee (“Patrick”).

All of the children, save Vicki, are parties in this litigation, and I will refer to them by their western personal names as I did in the Judgment.

The plaintiffs are Wendy, Michael and Serene. They are minority shareholders in each of the three corporate defendants. Collectively, they hold 20% of the shareholding in MDI and lower percentages of the share capital of URL and THPL.

The three individual defendants are Mdm Kwik, Ernest and Patrick. Together, they hold 30% of the shareholding in URL, 38.5% of the shareholding in MDI and 77.25% of the shareholding in THPL. All of them are directors of all three companies. Ernest and Patrick are, respectively, the managing director and deputy managing director of MDI.

Over the years, Mr Thio passed down the family wealth to his sons by allotting shares in URL, MDI and THPL to them. Each of his sons initially held the same number of shares but Michael’s shares were transferred to Ernest and Patrick in 1991. By the year 2000, Mr Thio, Mdm Kwik, Ernest and Patrick were the only family members who held shares in the Group. They were also directors of the Group companies.

In 2002, Mdm Kwik expressed a wish that some financial provision be made for the daughters. Mr Thio then decided that Michael, Vicki, Wendy and Serene should receive shares in the Group companies by way of bonus issues. These shares were allotted in March and April 2002.

On 23 December 2005, following a dispute in the family regarding certain proposed changes to the shareholdings in the Group, the members of the family, THPL and MDI entered into a Deed of Settlement (“the Deed of Settlement”) which provided for an adjustment of shareholdings in the Group. After the Deed of Settlement, Ernest and Patrick retained majority control of MDI through the combination of their shareholdings in MDI and their control of THPL. Around the same time as the Deed of Settlement, Michael and the three sisters were appointed directors of each of the Group companies.

Despite the Deed of Settlement, friction between Mr Thio, on the one hand, and Ernest and Patrick, on the other, increased. Mr Thio sued his wife and children and several companies in the Group for, amongst other things, oppression. Ultimately, he succeeded on part of his claims but, in 2010, the shareholders of MDI voted to remove Mr Thio as a director.

From 2011, discussions took place between Wendy, Serene and Vicki on the one hand, and Ernest and Patrick on the other, regarding a possible purchase by Ernest and Patrick of their sisters’ shares. Without informing their brothers, Michael and the sisters appointed Ernst & Young LLP (“E&Y”) to prepare valuations of URL, MDI and THPL. According to Michael, their only instruction to E&Y was to provide the indicative value of 100% equity stake in each company and the indicative value of the siblings’ respective equity stakes in each of the companies as of December 2010. E&Y provided its indicative valuation results in a presentation dated 9 September 2011 which was revised on 11 November 2011. E&Y valued MDI’s equity as being between $1,197.6m and $1,295.2m.

The family met twice in November 2011 and February 2012 to discuss the proposed buyout. Several proposals were made but most of the siblings were unable to reach an agreement. Ernest and Patrick suggested that the valuation of shares be conducted on a net tangible asset basis using reports produced by the companies’ auditor. Wendy and Serene proposed a joint appointment of an independent valuer. Ernest and Patrick then counter-proposed that Wendy appoint another valuer at her own cost. Michael later presented the figures derived from E&Y’s valuations, but Ernest and Patrick disagreed with them and offered to purchase each of the sisters’ shareholding for $31.98m and Michael’s for $70.64m. Although Vicki sold out to Ernest and Patrick in May 2013, the plaintiffs considered that the offers made to them were grossly inadequate. Discussions on the proposed buyout eventually broke down.

My findings in the Judgment

In 2013, the plaintiffs brought a minority oppression action against the defendants. After a trial, I made the following findings: Although the companies in the Group were “family companies” in the sense that most of the directors in the relevant companies were members of the Thio family, the Thios did not operate on the basis of a relationship of mutual trust and confidence in relation to how the companies were run. I therefore concluded that URL, MDI and THPL were neither quasi-partnerships nor companies akin to quasi-partnerships. There was no common understanding among the parties that the plaintiffs were entitled to participate in the management of the Group as directors. Only the claim of minority oppression against Ernest and Patrick in respect of the affairs of MDI was made out and only in the following respects: their use of MDI to further their personal pursuit of Mr Thio when the matter could have been settled by accepting Serene’s offer to make compensation for the sums claimed from Mr Thio; their conduct in selectively using the results of an independent report prepared by a consultancy firm to justify increasing their remuneration, drastically reducing Michael’s remuneration and taking away long established benefits for non-executive directors, while simultaneously refusing to implement comments that would have taken away their own benefits; and perhaps to a lesser extent, their engineering of a situation where they would have received unjustifiable backdated emoluments from MDI’s Malaysian subsidiaries had they not renounced the payments at the last minute.

I granted the plaintiffs judgment against Ernest and Patrick in respect of their claim in relation to MDI. Considering the breakdown of goodwill and trust among the parties and that the relationships between them had unravelled irretrievably, I ordered Ernest and Patrick to buy out the plaintiffs’ respective shares in MDI on the basis of a share price to be determined by an independent valuer who was to value the company as of the date of the Judgment, 17 July 2017, as a going concern. I further ordered that the parties be at liberty to apply for directions in case any were needed in regard to the valuation and the sale.

Events following the Judgment

The parties jointly appointed Mr Richard Hayler (“Mr Hayler”) as the independent valuer. In the course of finalising Mr Hayler’s terms of reference, Ernest and Patrick sought to include a term stating that the plaintiffs’ shares in MDI were to be valued on the basis of “fair market value”, which would allow for a discount to be applied to the valuation of the shares. The plaintiffs disagreed and the parties were unable to reach a compromise.

On 20 November 2017, the parties jointly wrote to the court requesting a hearing to seek directions on the issue of whether a discount should be applied to the valuation of the plaintiffs’ shares in MDI. The parties were in agreement that no formal application needed to be filed.

The parties’ cases

The sole issue before the court is whether any discount should be applied to the plaintiffs’ shares.

The plaintiffs’ case

The plaintiffs submit that the general rule is that no discount should be applied when a buyout is ordered by the court under s 216(2)(d) of the Companies Act (Cap 50, 2006 Rev Ed) as a remedy in minority oppression cases. In support of this proposition, they rely on several High Court cases such as Low Janie v Low Peng Boon and others [1998] 2 SLR(R) 154 (“Low Janie”) and Poh Fu Teck and others v Lee Shung Guan and others [2017] SGHC 212 (“Poh Fu Teck”), which in turn cited the English decision of In re Bird Precision Bellows Ltd [1984] 1 Ch 419 (“In re Bird”). These cases explain that it would ordinarily be unfair for oppressed minority shareholders to be bought out at a discount, as they should not be treated as having elected freely to sell their shares (Low Janie at [63]–[64]; Poh Fu Teck at [38]; In re Bird at 430). The plaintiffs further argue, on the basis of several decisions of the High Court...