Venkatraman Kalyanaraman v Nithya Kalyani and others

• Jurisdiction: Singapore
• Judge: Hoo Sheau Peng JC
• Judgment Date: 10 August 2016
• Neutral Citation: [2016] SGHC 157
• Plaintiff Counsel: Mahmood Gaznavi (Mahmood Gaznavi & Partners) (instructed) and Lazarus Nicholas Philip (Justicius Law Corporation)
• Docket Number: Suit No 616 of 2015 (Registrar’s Appeal No 336 of 2015 and Summons No 1228 of 2016)
• Date: 10 August 2016
• Hearing Date: 04 January 2016,18 April 2016,19 February 2016
• Subject Matter: Common law derivative action,Minority shareholders,Striking out,Oppression,Derivative action,Res judicata,Extended doctrine of res judicata,Issue estoppel,Civil Procedure,Companies
• Published date: 16 August 2016
• Citation: [2016] SGHC 157
• Defendant Counsel: N Sreenivasan SC and Tan Kai Ning Claire (Straits Law Practice LLC)
• Court: High Court (Singapore)
• Year: 2016

Hoo Sheau Peng JC: Introduction

Pursuant to an application brought by the defendants (“the Defendants”) under O 18 r 19 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed), the learned Assistant Registrar (“AR”) struck out the statement of claim (“SOC”) and reply (“Reply”) of the plaintiff, Mr Venkatraman Kalyanaraman (“the Plaintiff”). By way of Registrar’s Appeal No 336 of 2015, the Plaintiff appealed against the AR’s decision. I dismissed the appeal on the grounds that the claims based on a first set of allegations ought to be struck out as an abuse of process under O 18 r 19 (1)(d) pursuant to the rule in Henderson v Henderson (1843) 3 Hare 100 (to be referred to as “the Henderson rule” and “Henderson” respectively), and that the claims based on a second set of allegations ought to be struck out as disclosing no reasonable cause of action under O 18 r 19(1)(a).

I should add that in the course of the appeal, the Plaintiff twice sought to amend the SOC. The first was an informal application, with the proposed amendments contained in a draft amended SOC (“the first draft amended SOC”) annexed to a further round of written submissions. Thereafter, and pursuant to directions, a formal application was filed via Summons No 1228 of 2016, with revised amendments contained in the second draft amended SOC annexed thereto (“the second draft amended SOC”). As the second draft amended SOC would not cure the defects in the SOC in relation to the claims based on the second set of allegations, and would still be liable to be struck out on various grounds under O 18 r 19(1), I dismissed the Plaintiff’s application to amend.

The Plaintiff has appealed against the outcome in Registrar’s Appeal No 336 of 2015. I now give my reasons, beginning with the background facts.

Background facts

The parties’ disputes relate to a company known as Akashya Systems Pte Ltd (“Akashya”). The Plaintiff, a resident of India, used to own 50% of the shares in Akashya. Following certain events in 2005, the Plaintiff’s shareholding was reduced, and now stands at 8%.

The first defendant, Ms Nithya Kalyani (“the First Defendant”) is a director of Akashya, as well as its secretary. The second defendant, Mr Sri Murali s/o Sinnothei Renganathan (“the Second Defendant”) was the former auditor of Akashya. He is also the First Defendant’s husband. The third defendant, Mr Marimuthu Palaniswami (“the Third Defendant”) is an Australian national who is a director and shareholder of Akashya. Like the Plaintiff, he used to own 50% of Akashya’s shares, and presently his shareholding is also 8%.

The last shareholder of Akashya, owning the remaining 84% of its shares, is a company known as Collaborative Business Systems Pte Ltd (“Collaborative”). The Third Defendant is the sole shareholder of Collaborative, and the Second and Third Defendants are its directors.

The shareholding structure described above came about after an Extraordinary General Meeting purportedly held on 6 July 2005 (“the 6 July 2005 EGM”). At the 6 July 2005 EGM, a shareholders’ resolution was ostensibly passed, issuing fresh shares for Akashya at S$1.00 each (“the 6 July 2005 resolution”). This substantially increased the share capital of Akashya. All the newly issued shares were purchased by Collaborative, resulting in the reduction in the Plaintiff’s shareholding from 50% to 8%. The Plaintiff challenged the validity of the 6 July 2005 resolution, and this led to the events set out below.

The Plaintiff’s complaints to the authorities

On 10 June 2009, the Plaintiff wrote to the Accounting and Corporate Regulatory Authority (“ACRA”), making various allegations against the Defendants. He claimed that the Defendants had falsified documents submitted to ACRA and falsified the Plaintiff’s signature on various company documents, including the minute sheet for the 6 July 2005 EGM. In fact, the Plaintiff alleged that the 6 July 2005 EGM never took place. He also alleged that the fresh shares of Akashya were issued at below its actual value. Thus, the Plaintiff claimed that the Defendants “fraudulently conspired to cheat [the Plaintiff] by diluting [his] shareholdings” in Akashya from 50% to 8%. By the actions, the Defendants had purportedly failed to comply with their duties of integrity, objectivity, professionalism and due care. The Plaintiff also lodged a police report on this matter in India.

DC 3814/2009: defamation proceedings by the Defendants

In response to the Plaintiff’s allegations in his letter to ACRA, the Defendants commenced DC 3814/2009, bringing an action in defamation against the Plaintiff. The Plaintiff duly filed a defence, raising the defences of fair comment, justification and qualified privilege. In so doing, he elaborated that the Defendants had “conspired to defraud” him, that Akashya had issued new shares to Collaborative without his consent, knowledge and approval, that Collaborative was wholly owned by the Third Defendant, with the First and Third Defendants as its directors, and that his shareholding had been diluted from 50% to 8%.

On 12 September 2011, the first day of the trial for the matter, the parties reached a settlement and entered into two written agreements, both of which were tendered to the court for the terms to be recorded. The full terms of the first written agreement (“the Settlement Agreement”) are as follows:

1. The [Plaintiff] hereby retracts all allegations made by him that are the subject matter of the proceedings herein [ie, in DC 3814/2009] whether such allegations were made in Singapore or India.

2. The [Plaintiff] undertakes not to make the same or similar allegations in Singapore or in India.

3. The [Plaintiff] shall withdraw any complaints or first information reports made, whether in India or in Singapore.

4. The [Defendants] shall not make any reports or complaints against the [Plaintiff], whether in India or in Singapore.

5. The [Plaintiff] shall pay the [Defendants] the sum of S$100,000.

6. In consideration of the above, the [Defendants] shall discontinue this action forthwith.

The second written agreement was a sale and purchase agreement, which provided that the Third Defendant was to purchase the entire shareholding of the Plaintiff in Akashya for S$750,000.

DC 264/2012: enforcement proceedings by the Defendants

After futile attempts to proceed with the transfer of the Akashya shares under the second written agreement, and to obtain the payment of S$100,000 under clause 5 of the Settlement Agreement, the Defendants commenced DC 264/2012 to enforce the payment of S$100,000. On 8 November 2012, in light of the Plaintiff’s failure to enter an appearance or file a defence, default judgment was entered in favour of the Defendants. The default judgment, inter alia, ordered the Plaintiff to pay the sum of S$100,000 to the Defendants. The Defendants proceeded to enforce the default judgment against the Plaintiff by way of a writ of seizure and sale on 13 May 2013. As the Plaintiff had no other assets in Singapore, his shares in Akashya were seized.

Almost a year after the default judgment, on 10 October 2013, the Plaintiff filed an application to set it aside and to stay any execution proceedings arising from the default judgment on the grounds that there had been irregular service of the writ of summons and/or that the two written agreements were void due to illegality or public policy. This application was dismissed by a deputy registrar on 21 July 2014. The Plaintiff’s appeals to a District Judge and then to a High Court Judge were dismissed on 20 August 2014 and 26 November 2014 respectively. The Plaintiff’s summons for leave to appeal to the Court of Appeal was dismissed by the High Court Judge on 21 January 2015.

The Defendants then proceeded to enforce the default judgment by way of a second writ of seizure and sale. The auction arising from the writ of seizure and sale was scheduled to be conducted on 8 July 2015.

The present action The Plaintiff’s pleaded case

Two weeks before the scheduled auction, on 22 June 2015, the Plaintiff commenced the present action. After the commencement of the action, the Plaintiff filed an injunction application to restrain the Defendants from dealing with his remaining 8% shares in Akashya, pending a final determination of the present suit. The parties subsequently agreed that there be no substantive order made on the application, while the Defendants would not proceed with the auction.

As pleaded in the SOC, the Plaintiff’s case rests on two main causes of action, supported by essentially the same allegations. First, he claimed that the Defendants engaged in unlawful means conspiracy with one another to dilute the shareholding of the Plaintiff, gain control of Akashya, as well as deprive the Plaintiff of the ownership and profits of Akashya. Further or in the alternative, he claimed that the First and Third Defendants, as directors of Akashya, breached their duties to act bona fide in the interests of Akashya, and to act for proper purposes.

Broadly, the claims were premised on two sets of allegations: First, there are allegations relating to how the Plaintiff’s shareholding in Akashya came to be diluted, which I will continue to refer to subsequently as “the first set of allegations” (as so referred to in [1]). Essentially, it is alleged that at the time of the 6 July 2005 EGM, a minimum of two shareholders was needed to pass certain resolutions, including a resolution to issue new share capital. After receiving calls from the Third Defendant who asked the Plaintiff to come to Singapore from India to attend a “CPIB probe” relating to Akashya, the Plaintiff duly came to Singapore on 5 July 2005 and returned to India on 7 July 2005. During the period he was in Singapore, the Defendants forged his signature on the EGM attendance sheet and minutes, thereby passing the 6 July 2005 resolution which issued 250,000 fresh shares...