Fong Wai Lyn Carolyn v Airtrust: Derivative Action for Breach of Fiduciary Duty
In Fong Wai Lyn Carolyn v Airtrust (Singapore) Pte Ltd and another, the High Court of Singapore heard an application by Fong Wai Lyn Carolyn for leave to bring a derivative action on behalf of Airtrust (Singapore) Pte Ltd against Linda Kao Chai-Chau, alleging breaches of fiduciary duties. The court granted leave in part, specifically regarding claims related to KSCCI, Ribands, and Mega-Bond. The court also allowed the defendants' applications to set aside ex parte freezing and search orders. The judge was Judith Prakash J.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Leave to commence derivative proceedings granted in part; applications to set aside freezing and search orders allowed.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Derivative action by Fong Wai Lyn Carolyn against Linda Kao Chai-Chau for breach of fiduciary duty. Leave granted in part; freezing and search orders set aside.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Fong Wai Lyn Carolyn | Plaintiff, Applicant | Individual | Leave to commence derivative proceedings granted in part, Applications to set aside freezing and search orders allowed | Partial, Lost | CR Rajah, Muthu Arusu, Andy Leck, Daniel Chia, Tan Ijin, Liu Zeming |
| Airtrust (Singapore) Pte Ltd | Defendant | Corporation | Applications to set aside freezing and search orders allowed | Won | Quek Mong Hua, Julian Tay, Esther Yee |
| Linda Kao Chai-Chau | Defendant | Individual | Leave to commence derivative proceedings granted in part, Applications to set aside freezing and search orders allowed | Lost, Won | Davinder Singh, Bhavish Advani, Elan Krishna, Christopher Anand Daniel, Kenneth Pereira |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Judith Prakash | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| CR Rajah | Tan Rajah & Cheah |
| Muthu Arusu | Tan Rajah & Cheah |
| Andy Leck | Wong & Leow LLC |
| Daniel Chia | Wong & Leow LLC |
| Tan Ijin | Wong & Leow LLC |
| Liu Zeming | Wong & Leow LLC |
| Quek Mong Hua | Lee & Lee |
| Julian Tay | Lee & Lee |
| Esther Yee | Lee & Lee |
| Davinder Singh | Drew & Napier LLC |
| Bhavish Advani | Drew & Napier LLC |
| Elan Krishna | Drew & Napier LLC |
| Christopher Anand Daniel | Advocatus Law LLP |
| Kenneth Pereira | Advocatus Law LLP |
4. Facts
- Fong Wai Lyn Carolyn sought leave to bring a derivative action against Linda Kao Chai-Chau for alleged breaches of fiduciary duties.
- Fong alleged that Kao diverted business opportunities from Airtrust to companies in which Kao or her family had an interest.
- Fong claimed Kao did not disclose her or her relatives’ interests in these companies to Airtrust’s board of directors.
- Kao argued that the transactions were done with Peter Fong's approval or knowledge and for the benefit of third parties.
- The court found that the complaints concerning the service fees received by KSCCI and Ribands had a reasonable basis.
- The court found that the complaint concerning Mega-Bond had a reasonable basis and a semblance of merit.
- The court found that there was no substance in Fong’s complaints in respect of the IOM business.
5. Formal Citations
- Fong Wai Lyn Carolyn v Airtrust (Singapore) Pte Ltd and another, Originating Summons No 505 of 2010 (Summons Nos 2592, 2593, 2619, 2620 and 5602 of 2010), [2011] SGHC 88
6. Timeline
| Date | Event |
|---|---|
| Leave Application filed | |
| Ex parte freezing and search orders sought | |
| Ex parte orders granted | |
| Court papers served on defendants | |
| Notice of intention to commence derivative proceedings given | |
| Leave Application allowed in part; Setting Aside Applications allowed | |
| Application for Erinford injunction dismissed | |
| Judgment issued |
7. Legal Issues
- Breach of Fiduciary Duty
- Outcome: Leave granted in part to commence derivative proceedings on claims related to KSCCI, Ribands, and Mega-Bond.
- Category: Substantive
- Sub-Issues:
- Diversion of business opportunities
- Self-dealing
- Failure to disclose conflicts of interest
- Derivative Action Requirements
- Outcome: Court found that the notice requirements were impracticable in the circumstances and that the plaintiff was acting in good faith. The court also found that it was in the prima facie interests of the company that a derivative action be commenced.
- Category: Procedural
- Sub-Issues:
- Notice requirements
- Good faith
- Prima facie interests of the company
- Setting Aside Ex Parte Orders
- Outcome: Applications to set aside freezing and search orders allowed due to material non-disclosure, no real risk of dissipation of assets, and questionable manner in which the search order was conducted.
- Category: Procedural
- Sub-Issues:
- Material non-disclosure
- Real risk of dissipation of assets
- Abuse in execution of search order
8. Remedies Sought
- Leave to bring an action in the name of and on behalf of the company
- Access to business records
- Freezing order
- Search order
9. Cause of Actions
- Breach of Fiduciary Duty
10. Practice Areas
- Commercial Litigation
- Corporate Law
11. Industries
- Power
- Oil and Gas
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Urs Meisterhans v GIP Pte Ltd | High Court | Yes | [2011] 1 SLR 552 | Singapore | Cited for the principle that the court can rely on affidavit evidence filed by both sides to ascertain whether the action to be brought in the company’s name has any semblance of merit. |
| Pang Yong Hock v PKS Contracts Services Pte Ltd | Court of Appeal | Yes | [2004] 3 SLR(R) 1 | Singapore | Cited for the principle that an applicant intending to commence a derivative action has the burden of showing a reasonable basis for his complaints and that the intended action is a legitimate or an arguable one. |
| Agus Irawan v Toh Teck Chye | High Court | Yes | [2002] 1 SLR(R) 471 | Singapore | Cited for the principle that an applicant intending to commence a derivative action has the burden of showing a reasonable basis for his complaints and that the intended action is a legitimate or an arguable one. |
| Teo Gek Luang v Ng Ai Tiong | High Court | Yes | [1998] 2 SLR(R) 426 | Singapore | Cited for the principle that an applicant intending to commence a derivative action has the burden of showing a reasonable basis for his complaints and that the intended action is a legitimate or an arguable one. |
| Sinwa SS (HK) Co Ltd v Morten Innhaug | High Court | Yes | [2010] SGHC 157 | Singapore | Cited for the principle that it would be sufficient for the court to rely on affidavit evidence filed by both sides in support of their claims to ascertain whether the action to be brought in the company’s name had any semblance of merit. |
| Law Chin Eng and Another v Hiap Seng & Co Pte Ltd (Lau Chin Hu and others, applicants) | High Court | Yes | [2009] SGHC 223 | Singapore | Cited for the principles in deciding whether the good faith element had been met. |
| Poondy Radhakrishnan and Another v Sivapiragasam s/o Veerasingam | High Court | Yes | [2009] SGHC 228 | Singapore | Cited for the principles in deciding whether the good faith element had been met. |
| Pang Yong Hock and another v PKS Contracts Services Pte Ltd | High Court | Yes | [2003] SGHC 195 | Singapore | Distinguished from the present Leave Application. |
| Balbir Pathak v Nizar Moloo | Court of Queen's Bench of Alberta | Yes | (2008) ABQB 389 | Canada | Cited for the principle that shareholder fights leading to a commencement of a derivative action were insufficient to taint the good faith of an application as long as there was a valid basis for the claim. |
| Tam Tak Chuen v Eden Aesthetics Pte Ltd & Anor | High Court | Yes | [2010] 2 SLR 667 | Singapore | Cited for the principle that shareholder fights leading to a commencement of a derivative action were insufficient to taint the good faith of an application as long as there was a valid basis for the claim. |
| Asian Corporate Services (SEA) Pte Ltd v Eastwest Management Ltd (Singapore Branch) | High Court | Yes | [2006] 1 SLR(R) 901 | Singapore | Cited for the elements required for a search order and whether a non-disclosure is of sufficient materiality to justify or require an immediate discharge of the ex parte order. |
| Bahtera Offshore (M) Sdn Bhd v Sim Kok Beng and another | High Court | Yes | [2009] 4 SLR(R) 365 | Singapore | Cited for the elements required for a freezing order. |
| Lock International plc v Beswick | Court of Appeal | Yes | [1989] 1 WLR 1268 | England and Wales | Cited for the principle that the facts alone were insufficient to persuade me that there was a real risk that the defendants would disobey any court order to deliver up documents as and when required. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 2006 Rev Ed) s 216A | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Derivative action
- Fiduciary duty
- Conflict of interest
- Diversion of business opportunities
- Self-dealing
- Ex parte order
- Freezing order
- Search order
- Material non-disclosure
- Good faith
- Prima facie interests of the company
- Nominee shareholder
- Offshore companies
15.2 Keywords
- Derivative action
- Fiduciary duty
- Companies Act
- Singapore
- Airtrust
- Linda Kao
- Corporate governance
- Civil procedure
16. Subjects
- Company Law
- Corporate Governance
- Civil Litigation
17. Areas of Law
- Company Law
- Fiduciary Duty
- Civil Procedure
- Derivative Actions
- Injunctions