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

JudgeAndrew Phang Boon Leong JA
Judgment Date27 March 2019
Neutral Citation[2019] SGCA 19
Plaintiff CounselCavinder Bull SC, Kong Man Er and Fiona Chew (Drew & Napier LLC),Jason Chan, Paul Ong, Melissa Mak and Afzal Ali (Allen & Gledhill LLP)
Date27 March 2019
Docket NumberCivil Appeals Nos 56 and 59 of 2018
Hearing Date18 February 2019
Subject MatterDiscount on minority shares,Companies,Shares,Minority shareholders,Oppression,Valuation
Defendant CounselAlvin Yeo SC, Joy Tan, Ho Wei Jie, Jeremy Tan and Wang Chen Yan (WongPartnership LLP)
CourtCourt of Appeal (Singapore)
Citation[2019] SGCA 19
Published date30 March 2019
Andrew Phang Boon Leong JA (delivering the grounds of decision of the court): Introduction

Both appeals are the latest instalment in a series of suits between the members of the Thio family. These suits concern the management of three companies incorporated in the 1960s (“the Group”) by Mr Thio Keng Poon (“Mr Thio”), the family patriarch. One of those companies, Malaysia Dairy Industries Pte Ltd (“MDI”), is the subject of these appeals.

Three of the Thio siblings, namely, Thio Syn Kym Wendy (“Wendy”), Thio Syn San Serene (“Serene”) and Thio Syn Ghee (“Michael”), are the respondents in these appeals (“the Respondents”). They are minority shareholders of the Group, including MDI. They acquired their shares by way of bonus issues in 2002, because their parents, Mr Thio and Mdm Kwik Poh Leng (“Mdm Kwik”), wished to provide for them financially. Their brothers, Thio Syn Pyn (“Ernest”) and Thio Syn Wee (“Patrick”), are the appellants (“the Appellants”). They are controlling shareholders of the Group, including MDI.

In earlier proceedings, the Respondents sought relief from minority oppression for acts committed by the Appellants and Mdm Kwik, and asked for a buyout order in respect of their shares in the Group. The trial judge (“the Judge”) found for the Respondents in part (see Thio Syn Kym Wendy and others v Thio Syn Pyn and others [2017] SGHC 169 (“Liability Judgment”)). Her decision was largely affirmed by this court on appeal (see Thio Syn Kym Wendy and others v Thio Syn Pyn and others and other appeals [2018] 2 SLR 788 (“CA Judgment”)).

In the CA Judgment, we affirmed the Judge’s finding that while the Group were “family companies” in the sense that most of the directors 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. Neither was there a common understanding among the parties that the Respondents were entitled to participate in the management of the Group as directors. Thus, the companies were neither quasi-partnerships nor akin to quasi-partnerships (CA Judgment at [6]–[7]).

We also affirmed the Judge’s decision to allow the claim of minority oppression in two respects. First, the Appellants’ use of MDI to further their personal pursuit of Mr Thio for his alleged multiple expense claims in the Group went well beyond the rational corporate action required to recover the amounts due to the companies. The matter could have been settled by accepting Serene’s offer to make compensation for the sums claimed from Mr Thio. Indeed, in engaging lawyers to issue the letters of demand despite Serene’s offer, the Appellants essentially incurred more costs for the Group that approximated to a large percentage of what was ultimately recovered. In the circumstances, their use of MDI for the purposes of their vendetta was commercially unfair vis-à-vis the other shareholders including the Respondents (Liability Judgment at [75]–[79]; CA Judgment at [14]).

Second, the Appellants’ conduct in selectively using the results of an independent report prepared by Aon Hewitt, a consultancy firm (“the AH report”) to justify increasing their remuneration, drastically reducing Michael’s remuneration and taking away long established benefits for non-executive directors (including the other Respondents), while simultaneously refusing to implement comments that would have taken away their own benefits, was oppressive and unfair. Pertinently, Michael’s employment resulted from familial, not corporate, considerations. Mdm Kwik wanted his livelihood to be provided for, and Ernest and Patrick accordingly found a position for him and paid him a salary that would achieve that aim. In other words, Michael was not recruited on the usual basis of a company with a vacancy giving a qualified applicant a market rate salary for the job. His position was special and, therefore, using the AH report to justify a return to market rates for Michael’s remuneration and to deprive him of an allowance from MDI would not have been anticipated. Seen in this context, the reduction of Michael’s remuneration was a spiteful act and not one motivated by rational corporate considerations (Liability Judgment at [81]–[90]; CA Judgment at [15]).

In the circumstances, we affirmed the Judge’s order that the Appellants purchase the Respondents’ shares in MDI on the basis of a share price to be determined by an independent valuer who shall value the company as a going concern. The Judge also granted the parties liberty to apply (CA Judgment at [26]; Liability Judgment at [114]).

As it turned out, parties could not agree whether a discount should be applied to the valuation of the Respondents’ shares in MDI. They therefore sought a court determination of the issue. The Judge’s decision can be found at Thio Syn Kym Wendy and others v Thio Syn Pyn and another [2018] SGHC 54 (“Valuation Judgment”). The present appeals arise out of the Valuation Judgment.

The decision in the court below

The Judge held that the shares should not be valued on a discounted basis. She noted that where the company in question is a quasi-partnership, there is a strong presumption that no discount should be applied. However, she considered that the converse did not apply. Instead, the starting point is that there is no general rule when valuing non-quasi-partnerships – the court must look at all the facts and circumstances when determining whether a discount should be applied. The Judge also clarified that the above principles relate only to the question of whether the court should order a minority discount for lack of control, and not in respect of a discount for non-marketability. In her judgment, the question of whether to apply a discount for non-marketability should ordinarily be left to be determined by the independent valuer in his expertise. She thus left it to the valuer to consider whether it would be appropriate to apply any discount for a lack of marketability of MDI’s shares (Valuation Judgment at [24]–[32] and [40]). No appeal was filed with respect to her decision on non-marketability.

On the facts of this case, the Judge concluded that the Respondents’ shares should not be valued on a discounted basis. She reached her decision on the basis that the Group was “family-run and family-owned, even if it did not amount to a quasi-partnership or import any obligations of mutual trust and confidence between the shareholders”. She found that “[t]he family-run nature of the Group and the way in which the various parties had come into their shareholdings suggest that the [Appellants] were always meant to ensure that the interests of MDI and their siblings would be protected or at least not harmed”. She also took into account “the [Appellants’] commercially unfair and oppressive actions and the [Respondents’] lack of culpability as minority shareholders in causing the breakdown of the relationship between the parties” (Valuation Judgment at [39]).

While the parties had also relied on other factual aspects of the case to support their respective positions as to whether a discount should be applied, the Judge did not think that much weight should be placed on most of them (Valuation Judgment at [35]–[38]). We will address these factual aspects below.

The issue

The sole issue in these appeals was whether the Judge was correct to order that no minority discount on the basis of lack of control be applied to the Respondents’ shares in MDI. This encompassed the legal issue as to whether there is or should be a presumption that minority shares in non-quasi-partnerships should be valued at a discount.

The parties’ arguments The Appellants’ arguments

The Appellants urged this court to recognise a presumption that shares in non-quasi-partnerships should be valued on a discounted basis. They relied on a line of English cases, including Irvine v Irvine (No 2) [2006] EWHC 583 (“Irvine v Irvine”), Strahan v Wilcock [2006] 2 BCLC 555 (“Strahan v Wilcock”) and Booth v Booth [2017] EWHC 457 (Ch) (“Booth v Booth”) in support of their proposition. They submitted that the purpose of a buyout is to bring to an end to, or remedy the oppression, not to punish the shareholder who has acted oppressively. Thus, a minority shareholding should be valued in the ordinary way unless there is any reason why that particular shareholding has special characteristics. They submitted that where the minority shareholder was not entitled to participate in management (as in non-quasi-partnerships), any buyout should proceed on the general basis that a minority discount should be applied to reflect the value of the shareholding which is fair to both the vendor and purchaser, because (a) while the shareholder is not a willing seller, an ordinary minority shareholder who takes shares as an investment has no right or expectation to receive more than the actual value of his shares; and (b) no rights of control are attached to the minority shareholding. They argued that a valuation of minority shares which do not reflect these realities would be “artificial”.

The Appellants further submitted that the facts of this case did not justify a pro-rata valuation. In particular, they pointed out that the Respondents acquired the shares by way of a gift and did not contribute to the financial success of the company. They also emphasised that the Respondents were interested in selling their shares in 2011 – in other words, they were not unwilling sellers and should not be treated as such.

The Respondents’ arguments

The Respondents agreed with the Judge that the court must look at all the facts and circumstances when determining whether a discount should be applied when valuing minority shares in quasi-partnerships. They pointed out that the Appellants’ reliance on Strahan v Wilcock and Irvine v Irvine was misplaced, because the court’s observations in the former were obiter...

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7 cases
  • Kiri Industries Ltd v Senda International Capital Ltd and another and other appeals and other matters
    • Singapore
    • Court of Appeal (Singapore)
    • 6 July 2022
    ...went on appeal and the appeal was dismissed by the Court of Appeal in Thio Syn Pyn v Thio Syn Kym Wendy and others and another appeal [2019] 1 SLR 1065. The focus of the Court of Appeal in that case was whether a distinction could be made between quasi-partnerships and other companies in de......
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    ...I hold that no discount should be made for the minority interest. In Thio Syn Pyn v Thio Syn Kym Wendy and others and another appeal [2019] 1 SLR 1065 (“Thio Syn Pyn”), the Court of Appeal clarified that in the context of non-quasi-partnerships, whether a discount should be applied would de......
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    ...[2018] SGHC 54 (“Thio Syn Kym (HC)”)28 at [29], affirmed on appeal in Thio Syn Pyn v Thio Syn Kym Wendy and others and another appeal [2019] 1 SLR 1065 (“Thio Syn Kym (CA)”)29 at [17]. Where, eventually, a court orders the shares of the oppressed minority shareholder to be bought out, he is......
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1 books & journal articles
  • Company Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2019, December 2019
    • 1 December 2019
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