Wei Fengpin v Raymond Low Tuck Loong and others

• Jurisdiction: Singapore
• Judge: Andrew Phang Boon Leong JCA
• Judgment Date: 12 April 2022
• Neutral Citation: [2022] SGCA 32
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 63 of 2021
• Year: 2022
• Published date: 16 April 2022
• Hearing Date: 22 February 2022
• Plaintiff Counsel: Jimmy Yim Wing Kuen SC, Lee Soong Yan Kevin, Eunice Lau Guan Ting and Lim Joe Jee (Drew & Napier LLC)
• Defendant Counsel: Loo Choon Chiaw, Chia Foon Yeow, Lim Jun Wei and Sigmund Seah Bingsen (Loo & Partners LLP),Ng Yeow Khoon and Ho Wei Liang Sherman (Shook Lin & Bok LLP)
• Subject Matter: Companies,Oppression,Minority shareholders
• Citation: [2022] SGCA 32

Steven Chong JCA (delivering the judgment of the court): Introduction

This appeal can be traced to an oppression action which was commenced by the appellant (“Wei”) against the majority shareholders, the first and second respondents (“Low” and “Sim” respectively), in 2017. However, just a few months before the trial, Low and Sim caused the company, Lateral Solutions Pte Ltd (“the Company”) to be voluntarily wound up.

The High Court Judge (“the Judge”) found a litany of oppressive acts by Low and Sim against Wei. The Judge held that a buyout order of Wei’s shares in the Company could in principle be made against Low and Sim notwithstanding the supervening insolvency of the Company.

However, due to, inter alia, the lack of proper audited accounts of the Company (which was attributed to the fault and breaches of Low and Sim) and the Judge’s finding that Wei had “contributed” to the eventual demise of the Company, the Judge decided against the buyout order and instead ordered Low and Sim to return various sums which were paid out to them in breach of the Company’s Articles of Association (“the Company’s Articles”).

On its face, the remedy ordered by the Judge appeared to have addressed the wrongs committed by Low and Sim as directors of the Company and does not directly address the personal wrongs committed by Low and Sim against Wei in his capacity as the oppressed minority shareholder. It is also not seriously in dispute that Wei is unlikely to achieve any recovery based on the relief as ordered by the Judge given the insolvent state of the Company.

The key question before us is whether a buyout order should be granted to Wei in light of the unchallenged findings by the Judge against Low and Sim. As will be clear from our decision, the considerations which persuaded the Judge to refrain from making the buyout order can effectively be addressed via the selection of an appropriate valuation date. This was not specifically considered by the court below.

Facts

The Judge had set out the facts in great detail in Wei Fengpin v Low Tuck Loong Raymond and others [2021] SGHC 90 (“the Judgment”). Given that the facts are not disputed on appeal, we will only set out the facts which are germane to the appeal.

The Company was incorporated in 2005 by Sim and one Edwin Seah (“Seah”). They were the directors and shareholders of the Company at that time.

In 2006, the Company began supplying polymer parts (“the Parts”) to Apple Inc (“Apple”), and sourced the Parts from suppliers such as Sei Woo Polymer Technologies Pte Ltd (“SWP”). In 2007, Low joined the Company and later became a director in 2012.

Wei joined SWP in 1998 but later left to set up two companies, Tianjin Synergy Hanil Precision Polymer Technologies Co Ltd (“SH”) and Synergy Hanil (S) Polymer Technologies Pte Ltd (“SHS”). From 2010, pursuant to discussions between Wei and Low, SH started supplying the Parts to the Company. In 2011, an entity indirectly owned by Low, Sim and Seah entered into a joint-venture agreement with SH and SHS to form SK Lateral Rubber & Plastic Technologies (Suzhou) Co Ltd (“SKL”). SKL then began manufacturing the Parts for the Company for its onward sale to Apple.

By around 2014, the Company’s suppliers of the Parts included three companies in which Wei had a substantial interest, namely, SH, SKL and SK Lateral Permen Electronic (Suzhou) Co Ltd (“SKLP”).

In December 2014, Wei bought Seah’s shares in the Company for US$5m and was registered as a shareholder and director in January 2015. About two years thereafter, on 15 March 2017, Wei commenced HC/S 238/2017 (“Suit 238”) against Low and Sim under s 216 of the Companies Act (Cap 50, 2006 Rev Ed) (“Companies Act”), claiming that they had acted in a manner that was unfair, oppressive or prejudicial to him.

The trial for Suit 238 was scheduled for September 2020. However, on 5 May 2020, Low and Sim applied to wind up the Company on the basis that the Company was insolvent and was unable to pay its debts. Wei did not object to the application and on 12 June 2020, a winding up order was granted. Thereafter, the trial of Suit 238 took place.

Decision below

The principal part of the Judgment dealt with the substantive claim, ie, whether oppression was made out on the evidence before the court. The examination of the evidence by the Judge in relation to the oppression finding was both comprehensive and flawless. There is no need to repeat these findings save to identify the specific oppressive acts which were found by the Judge.

The Judge found that Low and Sim had conducted the affairs of the Company in a manner that was oppressive to Wei, and the acts which they had caused the Company to take also unfairly discriminated against or were prejudicial to Wei (see the Judgment at [137]): They declared dividends of US$1.5m each to themselves (to the exclusion of Wei) in breach of the Company’s Articles and without informing Wei (the “Dividends”), although he was then a director and shareholder of the Company. The Dividends were paid to Low and Sim by way of a payment of US$800,000 each while the balance US$700,000 was set off against the sums which were owed by Low and Sim to the Company. They paid excessive and unjustified bonuses of about S$1.5m collectively to themselves without Wei’s knowledge or consent, although he was then a director and shareholder of the Company (the “Big Bonuses”), and had also concealed this matter from Wei and ignored his queries on the bonuses. They deliberately withheld the Company’s financial information from Wei and only provided the information after repeated chasers; and from June 2016, completely withheld such information from Wei to conceal their actions in relation to the Dividends and the Big Bonuses. They subsequently sought to buyout Wei’s shares in the Company without providing him with the relevant financial information to determine the fair value of the shares. They refused to call board meetings despite being obliged to do so. They intentionally omitted to audit the Company’s accounts from Financial Year (“FY”) 2015, file annual returns from FY2014 and call Annual General Meetings to deal with the Company’s accounts since Wei became a shareholder/director of the Company, in order to conceal the true state of affairs of the Company from him. They diverted a corporate opportunity to LSW Pte Ltd (“LSW”), a company incorporated by Low, so as to exclude Wei from benefitting through the Company. Low failed to disclose to Wei related-party transactions between LSW and the Company despite his conflict of duty and interest. They failed to involve Wei in key management decisions pertaining to transactions between LSW and the Company, such as the Company advancing loans to LSW for its set-up and operations and the subsequent decision not to recover the loans from LSW.

The Judge also found that a buyout order can be made notwithstanding the supervening insolvency of the Company (see the Judgment at [143]–[151]).

The Judge’s two principal findings, namely, that oppression was made out and that a buyout order can be made notwithstanding the Company’s supervening insolvency were not challenged by Low and Sim on appeal.

Notwithstanding the findings of multiple oppressive acts by Low and Sim against Wei, the Judge did not make a buyout order. Three key considerations were cited by the Judge to explain her decision not to grant the buyout order (see the Judgment at [153]). First, the Company’s accounts have not been audited since FY2015 and were unlikely to be audited as the Company had already been wound up. There may thus be difficulties in determining the fair value of the shares as at the date of the decision or as at April 2016 (as Wei had sought in the court below) and any such attempts at determination would likely be time-consuming and expensive. Secondly, the liquidators may carry out investigations and take appropriate steps to redress any wrongs committed by its directors to the Company. Finally, Wei also contributed to the Company’s demise when he diverted business from the Company to SH, thereby undercutting the Company. It would not be fair to give Wei a “windfall” by way of a buyout of his shares that may now be worth little when Wei had contributed in part to the devaluation of those shares.

The Judge instead ordered Low and Sim to return various sums which were paid out to them in breach of the Company’s Articles (see the Judgment at [154]). Even though Wei sought a valuation of his shares as at April 2016 or “such other date as the court deems fit”, the Judge did not examine the propriety of ordering the valuation on an alternative date to address the considerations identified. To be fair to the Judge, the alternative valuation dates were not explicitly raised by the parties below. Perhaps their focus was understandably on the substantive oppression issue.

Parties’ cases on appeal Wei’s case

On appeal, Wei submitted that the Judge had erred in refusing to make a buyout order on account of the three considerations identified (see above at [17]). First, there is no requirement in law that a buyout order can only be made if there are fully audited accounts. Expert evidence can also be adduced to assist the court or alternatively, the court may order a buyout on the basis of a fixed sum.

Second, any redress obtained by the liquidators would only vindicate the corporate wrongs done by Low and Sim to the Company. They do not provide any remedy for the personal wrongs done to Wei as a minority shareholder.

Third, Wei did not divert business away from the Company to SH and did not contribute to the Company’s demise. In any event, any wrongdoing should not preclude a buyout order.

Wei proposed four possible periods for the valuation of his shares: (a) December 2014/January 2015; (b) December 2015/January 2016; (c) December 2016/January 2017; and (d) 15 March 2017....