United Investment and Finance Ltd v Tee Chin Yong and Others

• Jurisdiction: Singapore
• Judgment Date: 27 July 1966
• Date: 27 July 1966
• Docket Number: Consolidated Suits Nos 804, 945 and 946 of 1964
• Court: High Court (Singapore)

United Investment and Finance Ltd

Plaintiff

and

Tee Chin Yong and others

Defendant

[1966] SGHC 21

F A Chua J

Consolidated Suits Nos 804, 945 and 946 of 1964

High Court

Civil Procedure–Costs–Principles–Proceedings instituted by managing director without authorisation by board of directors–Managing director and solicitors not party to proceedings–Whether costs can be ordered against managing director and solicitors–Companies–Directors–Managing directors–Whether appointment as managing directoripso facto conferred power to commence actions on company's behalf–Companies–Directors–Share qualification requirement under articles–Directors acquiring qualification shares–Qualification shares not fully paid up–Whether full payment required–Companies–Meetings–Whether one director could constitute quorum for extraordinary general meeting

The defendants had applied for and were allotted shares in the plaintiff company (“the allotment contracts”). However, the defendants failed to make full payment by the stipulated deadlines. An extraordinary general meeting was then held on 13 April 1963 where a special resolution was passed to reduce the plaintiff's quorum for the general meeting and directors' meeting to two (“the 13 April 1963 meeting”). Another board meeting was held on 9 November 1963 where a resolution was passed to forfeit the defendants' shares (“the resolution for forfeiture”). This later meeting was attended by only two directors.

The plaintiff's managing director (“Wong”) then commenced the present actions, seeking the balances payable by the defendants under the allotment contracts. The plaintiff alleged that the defendants' shares had been validly forfeited by reason of their failure to make full payment.

The defendants counterclaimed for declarations, inter alia, that they were still the proprietors of the shares allotted to them and that the shares had not been forfeited.

Four issues arose in the present action. First, whether the plaintiff's directors were disqualified from acting as directors as they had not made full payment for their qualification shares within the stipulated time period, such that the resolutions passed by them were null and void. Second, whether the special resolution passed at the 13 April 1963 meeting was invalid. Third, whether the resolution of 9 November 1963 forfeiting the defendants' shares was valid. Fourth, whether the present actions had been commenced without the plaintiff's authority.

Held, striking out the actions and counterclaims:

(1) Under the articles, the qualification for a director was the “holding ... of one hundred shares”. The directors were qualified to act as directors as they had acquired their qualification shares, which were allotted and registered in the books of the company. There was no requirement for fully paid up shares: at [31] and [32].

(2) Only one of two persons who attended the meeting on 13 April 1963 was qualified to attend and vote. The articles of the plaintiff company did not authorise a one-man meeting. There was therefore no extraordinary general meeting held on 13 April 1963 and the special resolution which was purported to be passed on that day was invalid. Consequently, there was no quorum at the meeting on 9 November 1963 and the resolution purporting to be passed that day was invalid: at [42] and [44].

(3) The present actions had been commenced without the authority of the plaintiff. The plaintiff had not discharged the burden of showing that Wong had the power and authority to institute and defend actions on its behalf. Wong's mere appointment as managing director did not confer such power and authority upon him: at [48] and [51].

(4) Given that the actions had been brought without authority, the trial had proved to be abortive. The plaintiff's actions, as well as the counterclaims brought by the defendants, would be struck out. No order would be made as to costs because Wong and the solicitors acting for the plaintiff were not parties to these proceedings and could not be ordered to pay the costs: at [56] to [58].

[Observation: Even if the resolution for forfeiture was duly passed, the declarations prayed for by the defendants that their shares had not been forfeited would be granted. The plaintiff's directors had not exercised their discretion to forfeit shares for the non-payment of calls for the benefit of all shareholders. Instead, they had abused their power to forfeit shares: at [44].]

Daimler Company Limited v Continental Tyre & Rubber Company (Great Britain) Limited [1916] 2 AC 307 (refd)

East v Bennet Brothers Limited [1911] 1 Ch 163 (distd)

Harris v The North Devon Railway Company (1855) 20 Beav 384; 52 ER 651 (refd)

John Shaw & Sons (Salford) Limited v Peter Shaw and John Shaw [1935] 2 KB 113 (refd)

Sanitary Carbon Co, Re [1877] WN 223 (refd)

Sharp v Dawes (1876) 2 QBD 26 (refd)

Companies Ordinance (Cap 174, 1955Rev Ed)s 144 (1)

S H Elias and J Tan Chor-Yong (J Tan Chor-Yong & Co) for the plaintiff

John Pillai (Pillai & Co) for the defendants.

F A Chua J

1 The plaintiffs claim $41,000 from the defendant Tee Chin Yong, $80,000 from the defendant Peter Wong Tak On, and $18,000 from the defendant Tan Khia Fatt being the balances payable by the defendants under contracts by them to take 500, 1,000 and 200 shares respectively of $100 each in the plaintiff company and/or upon allotment of such shares to the defendants and/or upon the forfeiture of such shares on 9 November 1963 by reason of the defendants having failed to pay such balances.

2 The defendants in their defences admitted that they agreed to take the shares allotted to them and agreed that the balances claimed were outstanding but denied that they refused to pay the balances or that their shares were duly forfeited. They also said that these proceedings were instituted without any proper authority. The defendants counterclaimed for a declaration, inter alia, that (a) they are still the proprietors of the shares allotted to them and (b) the said shares have not been forfeited.

3 The plaintiffs filed a reply and defence to counterclaim.

4 The facts shortly are these. The plaintiff company was incorporated on 23 November 1961. The capital of the company is $50m divided into 50,000 shares of $100 each. The main object of the company is to carry on the business of hire purchase financiers. The subscribers and first directors were Geh Chong Keat, S K Lee, James Lim Hock Guan and the defendant Peter Wong Tak On. The defendants Tee Chin Yong, Peter Wong Tak On and Tan Khia Fatt applied for and were allotted, on 16 January 1962, 500, 1,000 and 200 shares respectively of $100 each in the plaintiff company on the terms that the amounts due for the shares were to be paid as follows:

Deposit of 10% on 31 January 1962.

First instalment 30% on 14 February 1962.

Second instalments 15% on 28 February 1962.

Third instalment 15% on 14 March 1962.

Fourth instalment 15% on 28 March 1962.

Fifth instalment 15% on 11 April 1962.

5 The shares of the defendants were entered on the company's register of shareholders. The defendant Tee Chin Yong has paid a total of...