TYC Investment Pte Ltd v Chan Siew Lee Jannie and another

• Jurisdiction: Singapore
• Judge: Audrey Lim JC
• Judgment Date: 15 August 2017
• Neutral Citation: [2017] SGHC 202
• Plaintiff Counsel: Chu Hua Yi and Michelle Lee Ying-Ying (Dentons Rodyk & Davidson LLP)
• Docket Number: Originating Summons No 453 of 2017
• Date: 15 August 2017
• Hearing Date: 12 July 2017,22 June 2017
• Subject Matter: Effect of bankruptcy on directorship,Bankruptcy,Memorandum and articles of association,Insolvency law,Companies,Directors,Effect of setting aside bankruptcy order,Effect,Bankruptcy order,Disqualification
• Year: 2017
• Defendant Counsel: Chelva Retnam Rajah, S.C., Chia Ru Yun Megan Joan and Perry Elizabeth Wong (Tan Rajah & Cheah),Bachoo Mohan Singh (Bachoo Mohan Singh Law Practice)
• Court: High Court (Singapore)
• Citation: [2017] SGHC 202
• Published date: 26 April 2018

Audrey Lim JC:

The first defendant, Jannie Chan (“JC”), and the second defendant, Henry Tay (“HT”), established the plaintiff company, TYC Investment Pte Ltd (“TYC”), and were its two directors. JC was made a bankrupt in September 2016 by a third party, and the bankruptcy order was subsequently set aside. The dispute essentially centres on the effect of the bankruptcy, and the subsequent setting aside of it, on JC’s directorship in TYC.

Background

This is one of the many disputes involving the same parties. Although background facts pertaining to the parties have been set out in TYC Investment Pte Ltd v Tay Yun Chwan Henry [2014] 4 SLR 1149 (“TYC Investment”) and in Chan Siew Lee v TYC Investment Pte Ltd and others and another appeal [2015] 5 SLR 409 (“Chan Siew Lee v TYC”), I repeat some of the relevant facts here for ease of reference.

TYC is a family holding company incorporated in 1979 by JC and HT (previously wife and husband). Pursuant to Article 8 of TYC’s articles of association (“the TYC Articles”), JC and HT were appointed the “permanent Governing Directors” of TYC. JC and HT each hold a founder share giving them 44% and 46% of the voting rights in TYC respectively. Their three children, Michael Tay, Audrey Tay and Sabrina Tay, own ordinary shares, with 5%, 2.5% and 2.5% voting rights respectively.

Pursuant to JC and HT’s divorce, they entered into a deed of settlement dated 9 April 2010 (“the DOS”) to settle the division of their matrimonial assets and JC’s claim for maintenance. They subsequently entered into another agreement dated 15 May 2012, which was an agreement for amendment to the DOS and settlement of litigation between them (“the SSD”). The SSD made amendments to the DOS and stipulated matters relating to the management of TYC. In particular, clause 10 of the SSD states:

10. Payment voucher system for all future payments for TYC. Neither HT nor JC will sign a cheque on TYC’s bank accounts unless the other has signed a voucher approving.

TYC was not a party to the SSD. However, JC and HT thereafter entered into a deed agreement on 11 June 2012 (“the TYC Deed”), the effect of which was to confer on TYC all rights and benefits and impose on TYC all obligations, provisions, covenants and conditions “under the [DOS] as amended in accordance with the terms set out in the SSD”, as if it were a party thereto.

On 29 September 2016, JC was made a bankrupt pursuant to an application by the Australia and New Zealand Banking Group Ltd (“ANZ Bank”) (see B323/2016). The bankruptcy application was premised on a judgment debt obtained by ANZ Bank against JC in Suit 885 of 2013. JC appealed against the bankruptcy order made, but by the time the appeal was heard on 1 December 2016, ANZ Bank and JC had already reached a settlement agreement. By consent of the parties, the appeal against the bankruptcy order was allowed, the bankruptcy order was set aside and leave was granted to withdraw the bankruptcy application.¹ Meanwhile, on 7 October 2016, TYC lodged a notification (“the Notification”) with the Accounting and Corporate Regulatory Authority (“ACRA”) that JC had been disqualified as a director pursuant to her being made a bankrupt on 29 September 2016.

TYC’s claim and JC’s counterclaim

TYC claimed that as a result of JC’s bankruptcy, her directorship in TYC had been vacated by reason of Article 72(b) of Table A to the Fourth Schedule of the Companies Act (Cap 50, 2006 Rev Ed) (“Table A”), which was incorporated into the TYC Articles by virtue of Article 1 of the TYC Articles. It took the position that although the bankruptcy order against JC was subsequently set aside on appeal, there was also no provision in the TYC Articles that entitled her to be reinstated as a director. Further, by reason of JC’s bankruptcy, clause 10 of the SSD has been frustrated by operation of law or illegality. As TYC requires a minimum of two directors for its management, HT sought the following reliefs: a declaration that the remaining director of TYC, namely HT, be at liberty to appoint another director of TYC pursuant to Article 8 of the TYC Articles; alternatively, that TYC be at liberty to convene an extraordinary general meeting (“EGM”) to pass a resolution to appoint a new director; a declaration that clause 10 of the SSD is frustrated by reason of operation of law or illegality as a result of the bankruptcy order made against JC; and a declaration that TYC be at liberty to reimburse Amstay Pte Ltd (“Amstay”), a company wholly-owned by HT, for any payments made by Amstay on TYC’s behalf in the ordinary course of TYC’s business.

JC in turn counterclaimed as follows:² a declaration that she was and still is a permanent Governing Director of TYC; a declaration that Article 72 of Table A contradicts or conflicts with the TYC Articles, in particular Article 8, and that Article 72 is inapplicable; a declaration that clause 10 of the SSD remains applicable and binding despite the bankruptcy order in B323/2016; a declaration that by reason of Article 16 of the TYC Articles, TYC cannot amend, vary or waive any of its rights or obligations under or pursuant to the TYC Deed or any clauses of the SSD except with the unanimous consent of all its shareholders; a declaration that the Notification filed on 7 October 2016 with ACRA on HT’s instructions is null, void and illegal; an order that TYC file with ACRA, a “Local Company Change of Particulars of Company Officers or Auditors” notification, indicating that JC is a director of TYC; and if the court finds that JC was no longer a director of TYC because of the bankruptcy order, that she be reinstated to the office of permanent Governing Director.

EGM of 11 April 2017

Initially, HT, on TYC’s behalf, commenced Originating Summons 1029 of 2016 (“OS 1029”) seeking the same reliefs as in this Originating Summons. When OS 1029 was before me, I was of the view that it was inappropriate for TYC to bring those proceedings. As the main issue to be determined in OS 1029 (and the present one) was whether JC was still a director of TYC, it was not appropriate for HT alone to act on TYC’s behalf in commencing proceedings as that presupposed that JC’s position as a director of TYC had already been vacated. In addition even assuming that HT was the sole director, TYC’s articles did not seem to permit HT to conduct or manage the affairs of TYC on his own (including commencing proceedings on TYC’s behalf). Hence the proper way to proceed was for HT to convene an EGM (under Article 44 of Table A) for TYC’s shareholders to pass the appropriate resolution to authorise TYC to appoint solicitors to commence such legal proceedings. Both TYC’s and JC’s counsel (Mr Chu and Mr Singh respectively) agreed to this approach. I thus dismissed OS 1029 with liberty to TYC to commence a fresh OS once the necessary shareholders’ resolution was passed.

TYC’s EGM was held on 11 April 2017, with the relevant resolution passed by all shareholders present (ie, HT, Michael Tay and Sabrina Tay’s proxy). JC and Audrey Tay were not present at the EGM and did not appoint a proxy. Before me, Mr Singh confirmed³ that JC is not disputing that the present originating summons has been properly commenced by TYC.

The issues

The prayers sought by TYC were premised on JC no longer being a director of TYC, such that HT is the sole remaining director. The main issues that I have to consider are therefore whether JC’s position as a director of TYC was automatically vacated when the bankruptcy order was made, and if so, whether the subsequent setting aside of that order on 1 December 2016 automatically reinstated JC as a director of TYC.

Effect of bankruptcy order on JC’s directorship in TYC

The provisions in the TYC Articles that are relevant to this issue are set out below.

Article 1

The regulations in Table “A” in the Fourth Schedule to the Companies Act, Cap 50 as may be from time to time amended, revised or supplemented, shall apply to the Company, except insofar as they contradict or conflict with any of the provisions stated hereunder.

Article 3A

Subject to Table “A”, the directors shall not be less than two and not more than ten, and the first directors shall be [HT] and [JC].

Article 8

Subject to Article 3, the said [HT] and [JC] shall be the permanent Governing Directors of [TYC] until they resign from the office, that is they will not whilst they hold such office be taken into account in determining the rotation of retirement of directors and the provision of Section 153 of the Companies Act will not apply to them and whilst they retain the said office, they will have authority to exercise all the powers, authorities and discretion by these Articles expressed to be vested in the directors generally including the power to convene a general meeting of [TYC], and of all the other directors, if any, for the time being of [TYC], shall be under their control and shall be bound to conform to their discretion in regard to [TYC’s] business.

Subject to Article 3, the said [HT] and [JC] whilst they hold the office of Governing Directors may from time to time, and at any time, appoint any other persons to be alternate Governing Directors of [TYC] and may define, limit and restrict their powers and may fix and determine their remuneration and duties and may at any time, remove any alternate Governing Directors howsoever appointed. Every such appointment or removal must be in writing under the hands of the said Governing Directors.

Subject to Article 3, the said [HT] and [JC], whilst they hold the office of Governing Directors, may from time to time, and at any time appoint any other persons to be directors of the Company, and may define, limit and restrict their powers and may fix and determine their remuneration and duties and may at any time, remove any director howsoever appointed. Every such appointment or removal must be in writing under the...