Xiamen International Bank and Others v Sing Eng (Pte) Ltd

• Jurisdiction: Singapore
• Judge: Judith Prakash JC
• Judgment Date: 07 June 1993
• Neutral Citation: [1993] SGHC 126
• Docket Number: Originating Summons No 936 of 1992
• Date: 07 June 1993
• Year: 1993
• Published date: 19 September 2003
• Plaintiff Counsel: Sundaresh Menon with Chong Yee Leong and Sim Bock Eng (Wong Meng Meng & Partners)
• Citation: [1993] SGHC 126
• Defendant Counsel: Tan Jing Quee (Jing Quee Chin Joo & Teck Hui)
• Court: High Court (Singapore)
• Subject Matter: Absolute discretion of directors,Sufficiency of reasons,Directors,Reasons for refusal disclosed,Refusal to register transfer,Whether exercise of discretion subject to review by court,Review of sufficiency of reasons,s 128(2) Companies Act (Cap 50),Refusal to register transfer of shares,s 194 Companies Act (Cap 50),Companies,Transfer,Registration,Issue estoppel,Similar application on same subject matter made in earlier proceedings,Whether plaintiffs entitled to maintain application for rectification of defendant company's share register,'Person aggrieved',Shares,Res Judicata,Whether res judicata and issue estoppel would operate to bar present application,Rectification of share register,Powers

In this case I made the following orders:

(1) That the register of members of the defendants be rectified by striking out the names of Lie Mo Meng also known as Lie Moeng Kieng also known as Mu`Min Ali Gunawan and George MK Lee also known as Lie Mo Kwang also known as Gunadi Gunawan therefrom as the holders of the following shares of the defendants:

Particulars

Distinctive Nos

Certificate Number of From To

Number shares

22 113,450 75,431 188,880

(Registered owner:161,480 455,581 614,060

Lie Mo Kwang) 225,000 1,104,273 1,329,272

15,000 1,854,279 1,869,278

23 113,450 188,881 302,330

(Registered owner:161,480 614,061 775,540

Li Moeng Kieng) 225,000 1,329,273 1,554,272

15,000 1,869,279 1,884,278

1,029,860

and by inserting in lieu thereof the name of the third plaintiffs, XIB (Nominees) Ltd, as holder of the said shares, and that notice of such rectification be given to the Registrar of Companies.

(2) The defendants do forthwith deliver to the third plaintiffs the share certificates for the said 1,029,860 shares of $1 each in the capital of the defendants, Sing Eng (Pte) Ltd, issued in the name of XIB (Nominees) Ltd.

(3) The defendants do pay the plaintiffs` costs of and incidental to this application.

The defendants have appealed against all of the above orders.

The facts: Background

This application was the third proceeding instituted in the legal battle between the plaintiffs and defendants which has been running since May 1987. The basic details are set out below. More particulars will be given, where necessary, later in this judgment.

The defendant company (`the company`) was incorporated in Singapore in 1971. It has an authorized share capital of 2,500,000 ordinary shares of $1 each out of which 1,894,278 shares have been issued and paid up in full. At all material times Lie Mo Meng also known as Lie Moeng Kieng also known as Mu`Min Ali Gunawan (`Mo Meng`) and George MK Lee also known as Lie Mo Kwang also known as Gunadi Gunawan (`Mo Kwang`) each held 514,930 shares in the company. Together they held a total of 1,029,860 shares or approximately 54.4% of the paid-up capital. Until March 1992, both Mo Meng and Mo Kwang (together `the Lies`) were also directors of the company.

The first plaintiff (`Xiamen Bank`) is a bank established in China and 36.75% of its shares are owned by the second plaintiff (`PIC`) which is a company listed on the Hong Kong Stock Exchange with a paid-up capital of HK$243m. It is an investment holding company. The third plaintiff (`XIB Nominees`) is another Hong Kong company and is partly owned by a principal operating subsidiary of Xiamen Bank.

This saga began on 16 March 1986 when Mo Meng executed a guarantee in favour of Xiamen Bank. By a memorandum of charge bearing the same date, he charged all the shares held by him in the company to Xiamen Bank as security for the due payment and discharge of his obligations under the guarantee. On 21 March 1986, Mo Kwang executed an identical guarantee in favour of Xiamen Bank and, similarly, on the same date secured his obligations under his guarantee by a memorandum of charge over all his shares in the company. The terms of the two guarantees are identical and so are the terms of the two memoranda of charge. Subsequently, each of the Lies deposited with Xiamen Bank the certificates relating to the shares held by him, and also executed and delivered to Xiamen Bank blank transfers of such shares.

In February 1987, Xiamen Bank wanted to register all the shares charged to them by the Lies (`the shares`) in the name of its nominee, XIB Nominees. It completed the blank transfers and, on 9 May 1987, its solicitors forwarded the two transfers and the share certificates to the company for registration. They requested that new share certificates be issued in favour of XIB Nominees. The company did not respond to this notice.

On 26 May 1987 Xiamen Bank sent a written demand to each of the Lies demanding payment by them of the amounts due under the guarantees. No payment was received and Xiamen Bank proceeded to enforce the charges over the shares. On 22 June 1987 its solicitors served on the company a transfer notice under art 34 of the articles of association of the company (`the articles`). By this notice Xiamen Bank, which was described as a person entitled to transfer the shares, gave notice of its desire to transfer the shares.

No reply was received from the company. On 31 July 1987 Xiamen Bank, pursuant to the power of sale contained in the guarantees and the memoranda of charge, entered into a sale agreement with PIC whereby it sold all the shares to PIC. The solicitors for Xiamen Bank then wrote to the company notifying it of the sale and forwarding two transfers, each of 514,930 shares, for registration. The letter requested the company to register the transfer and to issue new certificates in the name of XIB Nominees. The company refused to do so.

In November 1987 PIC made, by way of originating summons, an application in this court under s 194 of the Companies Act (Cap 50) (`the Act`) for an order that the share register of the company be rectified by striking out the names of Mo Meng and Mo Kwang respectively and substituting therefor the name of XIB Nominees as holder of the shares as nominee of PIC and further for an order for the delivery of the share certificates. The parties to the originating summons were PIC as the plaintiff and the company as defendant. PIC was successful in the High Court. On appeal by the company to the Court of Appeal, however, the orders made by the High Court were set aside and PIC`s application was dismissed. These proceedings are hereinafter called `the first proceedings`.

Seventh attempt to register

After the decision of the Court of Appeal in the first proceedings, the plaintiffs made five further unsuccessful attempts to procure the registration of the shares in the name of XIB Nominees. To overcome some of the obstacles they faced, an originating summons was taken out by PIC and Xiamen Bank as the plaintiffs against the Lies as the defendants (OS No 1305 of 1990). On 24 April 1992, a declaration was made in that application that the Lies held the shares on trust for PIC. Thereafter, the plaintiffs tried for the seventh time to procure the desired registration of the shares.

To understand the actions the plaintiffs took to accomplish this, it was necessary to examine the pre-emption provisions of the articles. Articles 33 to 36 establish the procedure to be followed when a member or other person entitled to do so wishes to transfer any of the shares which he holds in the company. Basically the procedure is that the person proposing to transfer a share must give notice in writing (the transfer notice) to the company of his desire to transfer the same and specify in the notice the sum fixed as the fair value of the share. The transfer notice constitutes the company the agent of the proposed transferor for the sale of the share to any member of the company at the price so fixed.

If, within 14 days after being served with the transfer notice, the company finds a member willing to purchase the share and gives the proposed transferor notice of this, the latter must, upon payment, transfer the share to that member. If, however, within the 14 days there is no member willing to purchase the share, the proposed transferor is at liberty to, at any time within the ensuing two months, sell and transfer the share to anyone at all.

On 3 June 1992, the plaintiffs` present solicitors, M/s Wong Meng Meng & Partners, sent the company a transfer notice in respect of the shares. By the transfer notice the company was constituted the agents of the Lies for the sale of their shares to any of its members. The notice stated that Xiamen Bank was the lawful attorney of the Lies with powers to do all acts in their names to sell, realize, transfer or otherwise dispose of their shares. It went on to say that, on behalf of the Lies, Xiamen Bank gave notice to the company, pursuant to its articles, that they as attorney of the Lies desired to transfer the shares.

The company refused to offer the shares to its members for sale on the basis (as set out in their letter of 15 June 1992) that neither Mo Meng or Mo Kwang had informed the company that he had appointed an attorney to act for him in respect of the shares. In their reply of 10 July 1992, Xiamen Bank and PIC by their solicitors stated:

(a) that Xiamen Bank was the lawful chargee of the shares;

(b) that the shares had been sold by Xiamen Bank to PIC in lawful exercise of their power of sale as chargee of the shares;

(c) that by the terms of the guarantees, the Lies had each appointed Xiamen Bank as their `lawful attorney at any time to do all the acts and deeds in [their names] ... to sell, realize, transfer or otherwise dispose of [the shares]`;

(d) that by the order of court made in OS No 1305 of 1990 the court had declared that the shares were held on trust for PIC by the Lies.

The company was given a further 14 days to offer the shares for resale to their members.

On 23 July 1992 the company wrote again. It said categorically that it did not intend to circulate M/s Wong Meng Meng & Partners` letter to the other shareholders on the basis that PIC`s claim for registration of the shares had been rejected by the court in the first proceedings, unless the plaintiffs could obtain confirmation from the Lies, being the registered shareholders, of their intention to sell the shares.

On 19 August 1992 the plaintiffs` solicitors wrote to the company, inter alia, in the following terms:

As 14 days have passed from our letter dated 10 July 1992 and you have not been able to find a member willing to purchase the shares, we enclose herewith two share certificates together with the respective transfer forms duly executed for registration. Please let us have new share certificates for the shares registered in the name of XIB (Nominees) Ltd as soon as

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