Ng Eng Kiat v Heap Huat Rubber: Pre-emptive Rights & Fraud in Share Transfer

The Official Assignee of the Estate of Ng Eng Kiat, Bankrupt, The Official Assignee of the Estate of Ng Siew Hoon, Bankrupt, and The Official Receiver and Liquidator of Ng Quee Lam Pte Ltd sued Heap Huat Rubber Company Sdn Bhd and Ng Siew San in the High Court of Singapore, alleging breach of pre-emptive rights and fraud in the transfer of shares. The plaintiffs claimed that the defendants violated Article 25 of Heap Huat's articles of association and that Ng Siew San made false statements in prior proceedings. The court dismissed the plaintiffs' action, finding no merit in the claims and applying the principle of res judicata.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Plaintiffs’ action dismissed with costs.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Trustee for bankrupts sued Heap Huat over share transfers, alleging breach of pre-emptive rights and fraud. The court dismissed the action.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
The Official Assignee of the Estate of Ng Eng Kiat, BankruptPlaintiffGovernment AgencyClaim DismissedLostPhilip Jeyaretnam, Gwendolyn Chellam
The Official Assignee of the Estate of Ng Siew Hoon, BankruptPlaintiffGovernment AgencyClaim DismissedLostPhilip Jeyaretnam, Gwendolyn Chellam
The Official Receiver and Liquidator of Ng Quee Lam Pte LtdPlaintiffGovernment AgencyClaim DismissedLostPhilip Jeyaretnam, Gwendolyn Chellam
Heap Huat Rubber Company Sdn BhdDefendantCorporationJudgment for DefendantWonC R Rajah SC, Moiz Sithawalla
Ng Siew SanDefendantIndividualJudgment for DefendantWonC R Rajah SC, Moiz Sithawalla

3. Judges

Judge NameTitleDelivered Judgment
Lai Siu ChiuJudgeYes

4. Counsels

Counsel NameOrganization
Philip JeyaretnamHelen Yeo & Partners
Gwendolyn ChellamHelen Yeo & Partners
C R Rajah SCTan Rajah & Cheah
Moiz SithawallaTan Rajah & Cheah

4. Facts

  1. Ng Eng Kiat was adjudged bankrupt in 1988.
  2. Ng Siew Hoon was made bankrupt in 1992.
  3. Ng Quee Lam Pte Ltd was compulsorily wound up in 1991.
  4. Ng Eng Kiat, Ng Siew Hoon, and Ng Quee Lam Pte Ltd were shareholders of Heap Huat Rubber Company Sdn Bhd.
  5. Ng Siew San purchased shares from Ng Quee Lam Pte Ltd at RM0.10 per share.
  6. The plaintiffs alleged that the defendants breached Article 25 of Heap Huat's articles of association.
  7. The plaintiffs alleged that Ng Siew San made false statements in an affidavit filed in prior proceedings.

5. Formal Citations

  1. The Official Assignee of the Estate of Ng Eng Kiat, Bankrupt and Others v Heap Huat Rubber Company Sdn Bhd and Another, Suit 600114/2000, [2000] SGHC 177

6. Timeline

DateEvent
Ng Quee Lam Pte Ltd incorporated
Heap Huat Rubber Company Sdn Bhd incorporated
Ng Kwee Teng valued lots 43, 44 and 46 at RM165,000
CH Williams Talhar & Wong Sdn Bhd valued Lot 51 at RM1.37m
Ng Eng Kiat adjudged bankrupt
Ng Kwee Teng adjudged bankrupt
Chay Eng Huat (Melaka) Sdn Bhd agreed to sell land to Ally Azran Holdings Sdn Bhd for RM2.3m
Sale of lots 38 and 120 town area XVI
NQL offered to buy NEK shares at RM0.50 each
NQL shares transferred to the second defendant
Ng Quee Lam Pte Ltd compulsorily wound up
First plaintiff gave notice to first defendant's secretary of intent to dispose of NEK shares
Excelux offered RM2.60 per share
Johor Baru law firm offered RM3.00 per share to buy NEK shares
First defendant demanded S$32,992.60 from NEK
First defendant resolved to sell NEK shares to second defendant and siblings at RM2.65 per share
350 shares of Ng Siew Hoon transferred to Ng Siew Mui
Transfer of 350 shares approved by first defendant's board of directors
Ng Siew Hoon sold 350 shares
Ng Siew Hoon made a bankrupt
Third plaintiff ascertained NQL shares had been transferred to second defendant
Ng Siew Hoon completed questionnaire stating she owned 350 shares
Ng Siew Hoon affirmed affidavit stating she had sold her 350 shares
First plaintiff discovered NEK was no longer owner of NEK shares
First defendant agreed to sell Lot 51 to Laksamana for RM1.75m
Ng Siew Hoon affirmed statutory declaration stating she had not been paid for shares
Supplementary agreement between first defendant and Laksamana Realty Sdn Bhd
First defendant disposed of Johore properties
Third plaintiff instituted proceedings against second defendant in Originating Summons No. 1193 of 1995
Second defendant filed affidavit in OS proceedings
Court dismissed Originating Summons No. 1193 of 1995
Lee Huat Investment Pte Ltd appointed first defendant's general agent
Kong Choot Sian appointed company's consultant
David Ng Puay Tiong appointed administration supervisor
Malaysian tax authorities issued letter setting out computation of real property gains tax
Malaysian tax authorities issued letter setting out computation of real property gains tax
Second defendant and siblings agreed to transfer shares back to NEK
Plaintiffs obtained letters from Malaysian tax authorities
Action commenced by plaintiffs
Judgment delivered

7. Legal Issues

  1. Breach of Pre-emptive Rights
    • Outcome: The court held that the company's articles of association did not grant existing shareholders a pre-emptive right to shares being offered for sale to another existing shareholder.
    • Category: Substantive
    • Sub-Issues:
      • Failure to offer shares to existing members
      • Improper transfer of shares
    • Related Cases:
      • [1931] 1 Ch 234
      • [1943] 2 All ER 234
  2. Fraud
    • Outcome: The court found no fraudulent conduct on the part of the defendants in obtaining the dismissal of the originating summons.
    • Category: Substantive
    • Sub-Issues:
      • False statements in affidavit
      • Concealment of material facts
  3. Limitation
    • Outcome: The court held that the plaintiffs' claim was time-barred under s 6(1)(a) of the Limitation Act, as more than six years had lapsed from the date of the share transfer.
    • Category: Procedural
    • Sub-Issues:
      • Time-barred claim
      • Discovery of fraud
  4. Res Judicata
    • Outcome: The court held that the principle of res judicata applied to preclude the third plaintiff from making the same claim against the second defendant, as the issue had already been decided in the originating summons proceedings.
    • Category: Procedural
    • Sub-Issues:
      • Action estoppel
      • Issue estoppel

8. Remedies Sought

  1. Set aside judgment in OS
  2. Set aside transfers of shares
  3. Damages

9. Cause of Actions

  • Breach of Contract
  • Fraud

10. Practice Areas

  • Commercial Litigation
  • Insolvency Law

11. Industries

  • Rubber Industry
  • Real Estate Development

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Delavenne v BroadhurstChancery DivisionYes[1931] 1 Ch 234England and WalesFollowed for the principle that restrictions on share transfers to non-members do not apply when the transfer is to an existing member.
Greenhalgh v MallardCourt of AppealYes[1943] 2 All ER 234England and WalesFollowed for the principle that restrictions on share transfers to non-members do not apply when the transfer is to an existing member.
Carew-Reid v Public TrusteeSupreme CourtNo20 ACSR 443AustraliaDistinguished on the facts; the court found the facts to be different from the present case.
Mohamed Yahaya v MS Ally Sdn BhdHigh CourtNoCSLR V 379MalaysiaDistinguished on the facts; the actual dispute did not turn on the pre-emption article.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Bankruptcy Act (Cap 20)Singapore
Limitation Act (Cap 163)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Pre-emptive rights
  • Share transfer
  • Fraud
  • Bankruptcy
  • Liquidation
  • Articles of association
  • Res judicata
  • Limitation Act

15.2 Keywords

  • share transfer
  • pre-emptive rights
  • fraud
  • bankruptcy
  • company law
  • Heap Huat Rubber
  • Ng Eng Kiat

16. Subjects

  • Company Law
  • Bankruptcy
  • Share Transfers
  • Fraudulent Misrepresentation

17. Areas of Law

  • Company Law
  • Bankruptcy Law
  • Civil Procedure
  • Contract Law