Yeoh Peng Lim v Yeo Peng Hay and Another

• Jurisdiction: Singapore
• Judge: Woo Bih Li J
• Judgment Date: 17 August 2005
• Neutral Citation: [2005] SGHC 145
• Court: High Court (Singapore)
• Published date: 18 August 2005
• Year: 2005
• Plaintiff Counsel: Bachoo Mohan Singh (K K Yap and Partners)
• Defendant Counsel: David De Souza and Jeanette Lee (De Souza Tay and Goh)
• Subject Matter: Companies,Accounts,Plaintiff claiming for reversal of entries and adjustments,Whether first defendant handed all cash withdrawn to plaintiff,Whether plaintiff familiar with practice of receiving shortfall,Directors,Liabilities,Debit entries,Whether plaintiff knew nature of audited accounts he was signing,Winding up,Consent of parties,Whether company should be wound up
• Citation: [2005] SGHC 145

17 August 2005

Woo Bih Li J:

Introduction

1 The plaintiff, Yeoh Peng Lim (“the Plaintiff”), and the first defendant, Yeo Peng Hay (“the First Defendant”), who is also known as Peter, are the children of one Yeo Gek Chin (“the Father”). The Plaintiff and the First Defendant are the only directors and shareholders of Yeo Brothers Launch Services Pte Ltd (“the Company”) which is the second defendant in this action.

2 The Plaintiff’s primary, but not the only, complaint was that the First Defendant had misappropriated various sums of cash from the Company and to cover up for this had caused various sums to be debited to certain accounts including the Plaintiff’s, without his consent, for the years of 1995 to 1998 and 2001.

3 The Plaintiff claimed that:

(a) there had been a genuine breakdown of his confidence in the First Defendant,

(b) the acts of the First Defendant were such that they were in total disregard of the Plaintiff’s interest as a shareholder of the Company,

(c) the adjustments were acts done which unfairly discriminated or were otherwise prejudicial to him as a member of the Company.

4 Accordingly, the Plaintiff sought the cancellation of the debit entries made in respect of his account and the accounts of other non-parties and for the sums to be debited to the First Defendant’s account with the Company. He also sought an order for the First Defendant to pay the sums to the Company and other reliefs. One of the reliefs sought was an order for the winding up of the Company and the appointment of a liquidator.

5 After considering the evidence and submissions and in view of the consent of the parties, I ordered the Company to be wound up. I also appointed the Plaintiff’s nominee, Mr Lau Chin Huat, as the liquidator of the Company. The other prayers for various reliefs were dismissed. Many of those other prayers had become academic in view of the winding-up order. The claims in respect of the sums debited to the Plaintiff’s account and the accounts of other non-parties with the Company were part of the other prayers for various reliefs which were dismissed. The Plaintiff has appealed against my decision dismissing the other prayers. Presumably the substantive appeal is in respect of the entries which the Plaintiff complained of. I set out below the background facts and my findings and reasons.

Background

6 The Father had nine sons and four daughters including an adopted daughter. The Plaintiff is the third child and the First Defendant is the ninth child. There is an age difference of about ten years between the Plaintiff and the First Defendant. As at February 2005, the Plaintiff was 60 years of age and the First Defendant 50 years of age.

7 In 1975, the Father registered a sole proprietorship under the name of Yeo Geok Chin Lighterage Service (“YGCLS”). The evidence was unclear as to whether the business had actually commenced several years before the year of registration but that uncertainty was immaterial to the case before me. The lighterage business was successful.

8 In 1980, a firm by the name of Yeo Brothers Launch Services (“the Firm”) was registered. The Firm carried on a new business of ferrying passengers using motor launches with the Plaintiff and the First Defendant as the initial two persons registered as partners of the Firm. However, until 1984, the Plaintiff had nothing much to do with the Firm. He was working only as a relief boatman for the Firm’s launches from time to time. In the meantime, he continued to work for YGCLS as a boatman. In 1984, the Father decided that the Plaintiff should work for the Firm and he did so until its dissolution in 1990. Various children of the Father also worked for the Firm from time to time and the named partners were not always the same persons. However, those developments were not material to the case before me.

9 The Company was incorporated on 10 November 1990. The Company acquired the Firm’s business and assets for $1,940,856. $1 million was paid by the issue of shares equally to the Plaintiff and the First Defendant. The balance was credited to the accounts of the Plaintiff and the First Defendant with the Company as loans to the Company. The Plaintiff and the First Defendant were and are the only registered shareholders and directors of the Company.

10 Various sums of cash were withdrawn from time to time from the Company’s current account with Chung Khiaw Bank Ltd (“CKB”) which later merged with United Overseas Bank Limited (“UOB”). Apparently the Father, the Plaintiff and the First Defendant were the authorised signatories and any two of them could operate the account. The First Defendant was the only person to withdraw cash from the account using cash cheques signed by two of the authorised signatories. It was not clear from the evidence who the usual two signatories were. In any event, the Plaintiff’s evidence was that he was aware that the First Defendant was the one withdrawing the cash. Indeed it was common ground that after withdrawal, the First Defendant would hand cash to the Plaintiff. The dispute was whether he had handed the entire sum withdrawn or only part thereof to the Plaintiff.

11 The Plaintiff used the cash he received to advance money to boatmen who were operating the launches and to pay for operating expenses like the purchase of spare parts and repairs. The salaries or fees of the boatmen were paid by cheque. However, in each of the years in question, there was a shortfall between the aggregate amount of cash withdrawn from the Company’s current account and the two petty cash accounts of the Company which were used for cash advances to boatmen and cash expenses. The shortfall was accounted for by journal entries made before the commencement of audit or by audit adjustments, that is adjustments arising from audit, and included entries or adjustments made to the Plaintiff’s account with the Company. The Plaintiff also complained about certain entries or adjustments which were unrelated to the shortfall.

12 Before I set out below the various entries or adjustments which the Plaintiff complained about, I should mention that the auditor of the Company’s accounts was Sim Hang Khiang of Jee Ah Chian & Co. It was Mr Sim’s undisputed evidence that he was introduced by a client of his to the Father at a lunch which the First Defendant also attended. After the lunch, the Father called him to appoint him as the auditor in place of the previous auditor. Mr Sim’s firm was appointed on 26 January 1995. Initially, he audited the Company’s accounts for 1993, 1994 and 1995 and then for subsequent years. The bookkeeper of the Company for the years in question was Ho Soo Pin also known as Steve Ho.

13 I should also mention that the Plaintiff said he was not able to obtain all the accounting records of the Company when he started making inquiries about the accounts in 2003. The Plaintiff accused the First Defendant of refusing to make available the entire accounting records of the Company. The First Defendant in turn said the entire accounting records were kept at the office of the Company. The Company’s office was at the following addresses:

(a) from about 10 November 1990 to about 21 August 1996 – at 25 Jurong Pier Road;

(b) from about 21 August 1996 to about 31 July 2002 – at 20 Jurong Pier Road #02-02/03; and

(c) from about 31 July 2002 to about April 2004 – at #18/19 Pasir Panjang Lighter Wharves.

The Plaintiff subsequently engaged an accountant, one J H Tan, who listed out the accounting documents kept at the office. The list disclosed that only some accounting documents for certain years were kept at the office.

14 The administrative staff doing work like issuing cheques and invoices were relocated from the Company’s office to the First Defendant’s office at Tras Street in 1998. The First Defendant’s wife, Tan Bee Lan, was one of the staff doing such work. The oral evidence of Mr Sim and his working papers suggested that, at times, Mr Sim would liaise with the First Defendant on the accounts but never with the Plaintiff.

15 Mr Sim’s evidence was that after the directors had signed the audited accounts for the relevant year at his office, the accounting records would be returned to the directors. The directors carried them away. It was not disputed that the First Defendant had brought the Plaintiff (who did not drive) to and from Mr Sim’s office each time in his car and the accounting records were brought back in his car.

16 I was of the view that the First Defendant was relatively more familiar than the Plaintiff with the accounts. It was he, and not the Plaintiff, who knew where the rest of the accounting records were kept. That was why he could mention that the accounting records were kept at the Company’s office but, as I have said, not all the accounting records were found there. I set out below the entries and adjustments which the Plaintiff complained of.

$300,000

17 As at November 1995, the shortfall was $300,000. Mr Sim said that when he asked the Father about the shortfall of $300,000, the Father told him that the cash withdrawn had been utilised and the Father directed that the shortfall be debited to the directors’ accounts such that their accounts would be more or less equal after the debiting was done. The First Defendant’s account was first debited with this sum on 30 November 1995. Then on 31 December 1995, the First Defendant’s account was credited with $300,000 and the Plaintiff’s account was debited with $300,000. However, even after the $300,000 was debited to the Plaintiff’s account, there was, as at 31 December 1995, a debit balance of $550,683.27 in the First Defendant’s account while the Plaintiff’s account had a credit balance of $482,279.15.

18 The debiting of the $300,000 to the Plaintiff’s account was one of the entries which the Plaintiff wanted reversed.

19 At this juncture, it is appropriate to refer to another company, Sing-Batam Ferries Pte Ltd (“Sing-Batam”). Sing-Batam was...