Summit Co v Pacific Biosciences: Winding Up Petition by Minority Shareholder

Summit Co (S) Pte Ltd, a minority shareholder, petitioned the High Court of Singapore to wind up Pacific Biosciences Pte Ltd, arguing an irretrievable breakdown in the relationship with the majority shareholder, Pasture Pharma Pte Ltd, and the loss of the company's substratum. The High Court, presided over by Belinda Ang Saw Ean J, dismissed the petition, finding that the issues stemmed from a disagreement over the terms of Summit's exit from the company, not from mismanagement or a loss of substratum. The court determined that Summit's petition was an attempt to exit the company at will, which is not a valid ground for winding up under Section 254(1)(i) of the Companies Act.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Petition dismissed.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

The High Court dismissed Summit Co's petition to wind up Pacific Biosciences, finding no irretrievable breakdown or loss of substratum.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Summit Co (S) Pte LtdPetitionerCorporationPetition dismissedLost
Pacific Biosciences Pte LtdRespondentCorporationPetition dismissedWon

3. Judges

Judge NameTitleDelivered Judgment
Belinda Ang Saw EanJudgeYes

4. Counsels

Counsel NameOrganization
Nirmala RavindranLow Yeap Toh & Goon
Ooi Oon TatLow Yeap Toh & Goon
Philip FongHarry Elias Partnership
Jacelyn ChanHarry Elias Partnership

4. Facts

  1. Summit held 25% of Pacific Biosciences' shares; PPPL held the remaining 75%.
  2. Summit provided warehousing and logistics services to Pacific Biosciences until June 2004.
  3. Summit decided to terminate the Distribution Agreement due to restructuring of its business.
  4. Summit and PPPL discussed the possibility of PPPL buying out Summit's shares.
  5. Summit requested a due diligence to determine the fair value of its shares, but encountered resistance.
  6. Summit filed a petition to wind up Pacific Biosciences, alleging an irretrievable breakdown in the relationship and loss of substratum.
  7. The ex parte order was subsequently set aside on 12 April 2005.

5. Formal Citations

  1. Summit Co (S) Pte Ltd v Pacific Biosciences Pte Ltd, CWU 34/2005, [2006] SGHC 190

6. Timeline

DateEvent
Memorandum of Understanding signed between PPPL and Summit.
Pacific Biosciences Pte Ltd incorporated.
Distribution Agreement between Summit and Pacific Biosciences dated.
Distribution Agreement renewed on the same terms.
Summit gave six months’ notice to terminate Distribution Agreement.
Pacific Biosciences entered into an alternative warehousing and distribution arrangement with Diethelm Singapore Pte Ltd.
Lloyd met Dan and Ken in New York.
Lloyd made an offer of $3,202.50 for Summit’s shares.
Lloyd on behalf of PPPL made another offer to Ong for PPPL to purchase Summit’s shares in the Company for $23,500.
Joseph was allowed on the Company’s premises for the due diligence.
Lloyd wanted Joseph to leave on the evening of 1 November unless Lloyd was given an explanation as to why Joseph’s continued presence was required.
Dan’s counter offer of 24 November 2004, which was a rough-and-ready not “rocket science” formula for PPPL to purchase Summit’s minority shareholding, was substantially more than Lloyd’s offer.
Lloyd rejected Summit’s proposal but was, however, agreeable to Summit buying out PPPL’s shareholding based on Summit’s proposed formula.
Lloyd subsequently allowed Joseph to return to the Company’s premises on 14 December 2004 to continue his audit.
The solicitors for Ong wrote to the Company for an inspection of the documents pursuant to s 199 of the Act.
Summit filed a petition to wind up the Company.
Summit obtained an ex parte order appointing Mr Kon Yin Tong and Mr Wong Kian Kok of M/s Foo Kon Tan Grant Thornton as provisional liquidators of the Company.
Statement of Affairs dated 16 March 2005 submitted by Lloyd after the appointment of provisional liquidators.
The ex parte order was subsequently set aside on 12 April 2005.
Judgment reserved.

7. Legal Issues

  1. Just and Equitable Winding Up
    • Outcome: The court held that there was no irretrievable breakdown in the relationship between shareholders and no loss of substratum of the company. The court also held that the petition was an attempt to exit the company at will, which is not a valid ground for winding up under Section 254(1)(i) of the Companies Act.
    • Category: Substantive
    • Sub-Issues:
      • Irretrievable breakdown in relationship between shareholders
      • Loss of substratum of the company
      • Minority shareholder's right to exit at will

8. Remedies Sought

  1. Winding Up of Company
  2. Distribution of Assets

9. Cause of Actions

  • Winding Up on Just and Equitable Grounds

10. Practice Areas

  • Commercial Litigation
  • Insolvency Law

11. Industries

  • Pharmaceuticals
  • Logistics

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Sim Yong Kim v Evenstar Investments Pte LtdCourt of AppealYes[2006] 3 SLR 827SingaporeApproved Lord Wilberforce’s exposition of the meaning of “just and equitable” in Ebrahimi v Westbourne Galleries Ltd and concluded that the notion of fairness was the touchstone by which to decide whether the court should grant relief under s 254(1)(i) of the Act.
Ebrahimi v Westbourne Galleries LtdHouse of LordsYes[1973] AC 360United KingdomCited for Lord Wilberforce’s exposition of the meaning of “just and equitable”.
Re R A Noble & Sons (Clothing) LtdUnknownYes[1983] BCLC 273United KingdomCited for the test for unfairness is an objective one.
Re Fildes Bros LtdUnknownYes[1970] 1 WLR 592United KingdomCited for the principle that the facts and circumstances making it just and equitable to liquidate the company must subsist at the time the order is made.
Tang Choon Keng Realty (Pte) Ltd v Tang Wee ChengUnknownYes[1992] 2 SLR 1114SingaporeCited for the principle that where a company is a ‘going concern’, an aggrieved minority member would want to wind up the company if the real relief he seeks can be satisfied without a winding up.
Loch v John Blackwood, LimitedPrivy CouncilYes[1924] AC 783United KingdomCited for the principle that the relationship of trust and confidence between directors which had allegedly broken down must, under the just and equitable ground to wind up a company, lie in the management of the company.
Chong Choon Chai v Tan Gee ChengUnknownYes[1993] 3 SLR 1SingaporeCited for the principle that lack of probity on the part of the director(s) in the conduct of the affairs of the Company has to be established before an order to wind up under s 254(1)(i) will be made.
Re Ah Yee Contractors (Pte) LtdUnknownYes[1987] SLR 383SingaporeCited for the principle that a petitioner who is a shareholder of fully paid-up shares had to show that he had a tangible interest in winding up the company.
In re German Date Coffee CompanyCourt of AppealYes(1882) 20 Ch D 169United KingdomCited for the principle that the petitioner has to show that the substratum of the business of the Company has gone or, in the words of Lord Justice Baggallay in In re German Date Coffee Company (1882) 20 Ch D 169 at 188, that there is an impossibility in carrying on the business of the company as at the date of the petition.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Section 254(1)(i) Companies Act (Cap 50, 1994 Rev Ed)Singapore
Section 199 of the ActSingapore

15. Key Terms and Keywords

15.1 Key Terms

  • Winding Up
  • Just and Equitable
  • Minority Shareholder
  • Irretrievable Breakdown
  • Substratum
  • Due Diligence
  • Distribution Agreement
  • Memorandum of Understanding

15.2 Keywords

  • Winding Up
  • Shareholder
  • Companies Act
  • Minority
  • Pacific Biosciences
  • Summit Co
  • Singapore
  • High Court

17. Areas of Law

Area NameRelevance Score
Winding Up95
Minority Oppression80
Company Law75
Insolvency Law60

16. Subjects

  • Company Law
  • Winding Up
  • Shareholder Disputes