Ang Thiam Swee v Low Hian Chor: Statutory Derivative Action, Minority Shareholders' Rights, and Corporate Governance

In Ang Thiam Swee v Low Hian Chor, the Court of Appeal of Singapore heard an appeal arising from a dispute between two minority shareholders, Ang Thiam Swee and Low Hian Chor, regarding the alleged misappropriation of company funds from Steel Forming & Rolling Specialists Pte Ltd. Low sought leave under Section 216A of the Companies Act to commence a statutory derivative action against Ang for breach of director's duties. The High Court granted Low leave, but the Court of Appeal reversed this decision, finding that Low was not acting in good faith and that the action was not prima facie in the company's interest. The Court of Appeal allowed Ang's appeal with costs.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeal Allowed

1.3 Case Type

Civil

1.4 Judgment Type

Written Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Appeal concerning misappropriation of company funds between minority shareholders. The Court of Appeal reversed the High Court's decision, denying Low leave to commence a statutory derivative action.

1.7 Decision Date

30 January 2013

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Ang Thiam Swee	Appellant	Individual	Appeal Allowed	Won	Tan Yew Cheng of Leong Partnership
Low Hian Chor	Respondent	Individual	Application Denied	Lost	Foo Soon Yien of Bernard & Rada Law Corporation Diana Seah Kanglin of Bernard & Rada Law Corporation

3. Judges

Judge Name	Title	Delivered Judgment
Chao Hick Tin	Justice of the Court of Appeal	Yes
Andrew Phang Boon Leong	Justice of the Court of Appeal	Yes
V K Rajah	Justice of the Court of Appeal	Yes

4. Counsels

Counsel Name	Organization
Tan Yew Cheng	Leong Partnership
Foo Soon Yien	Bernard & Rada Law Corporation
Diana Seah Kanglin	Bernard & Rada Law Corporation

4. Facts

Ang and Low were minority shareholders in Steel Forming & Rolling Specialists Pte Ltd.
Gan, the majority shareholder, was convicted of making fraudulent tax claims.
Stone Forest's investigations revealed that Gan had misappropriated company funds.
Low sought leave to commence a statutory derivative action against Ang for breach of director's duties.
Low alleged that Ang had also misappropriated company funds.
The High Court granted Low leave to bring the action.
Ang appealed the High Court's decision.

5. Formal Citations

Ang Thiam Swee v Low Hian Chor, Civil Appeal No 123 of 2011, Summons No 1423 of 2012 and Summons No 2120 of 2012, [2013] SGCA 11
Low Hian Chor v Steel Forming & Rolling Specialists Pte Ltd and another, , [2012] SGHC 10

6. Timeline

Date	Event
1970-01-01	Ang and Low met while operating metal fabrication machines.
1984-02-01	Steel Forming & Rolling Specialists Pte Ltd incorporated.
2009-10-27	Gan convicted of making fraudulent tax claims.
2009-12-16	Bankruptcy proceedings initiated against Gan.
2010-02-01	Gan attempted to convene an extraordinary general meeting to remove Low as director.
2010-05-06	Gan declared a bankrupt.
2010-10-14	Stone Forest report issued, mentioning unsubstantiated payments to Ang.
2011-01-06	Low's letter of demand to Ang for return of monies allegedly misappropriated.
2011-07-15	Low filed Originating Summons seeking leave to commence action against Ang.
2012-01-01	High Court allowed Low's application.
2013-01-31	Court of Appeal reversed the High Court's decision.

7. Legal Issues

Good Faith in Statutory Derivative Action
- Outcome: The Court of Appeal held that Low was not acting in good faith, as his motives were driven by personal interests and spite rather than the interests of the company.
- Category: Substantive
- Sub-Issues:
  - Ulterior motive
  - Abuse of process
  - Honest belief in a good cause of action
Prima Facie Interests of the Company
- Outcome: The Court of Appeal held that the proposed statutory derivative action was not prima facie in the interests of the company, as it was questionable and would disrupt the company's operations for reasons unconnected with good corporate governance.
- Category: Substantive
- Sub-Issues:
  - Legitimate and arguable claim
  - Practical and commercial interests of the company
  - Alternative remedies

8. Remedies Sought

Leave to commence a statutory derivative action
Recovery of misappropriated funds

9. Cause of Actions

Breach of Director's Duties
Misappropriation of Company Funds

10. Practice Areas

Commercial Litigation
Corporate Law

11. Industries

Manufacturing

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Low Hian Chor v Steel Forming & Rolling Specialists Pte Ltd and another	High Court	Yes	[2012] SGHC 10	Singapore	Cited as the decision under appeal, where the High Court allowed Low's application for leave to bring a statutory derivative action.
Pang Yong Hock and another v PKS Contracts Services Pte Ltd	Court of Appeal	Yes	[2004] 3 SLR(R) 1	Singapore	Cited for the principles regarding good faith in statutory derivative actions and the interplay between good faith and the interests of the company.
Swansson v R A Pratt Properties Pty Ltd and Another	Unknown	Yes	(2002) 42 ACSR 313	Australia	Cited for the distinction between an applicant's motivation and purpose in bringing a derivative action, and the test for good faith.
Primex Investments Ltd v Northwest Sports Enterprises Ltd and 453333 BC Ltd	Unknown	Yes	[1996] 4 WWR 54	Canada	Cited for the principle that an applicant acting out of self-interest is not necessarily lacking in good faith.
Richardson Greenshields of Canada Limited v Kalmacoff et al	Unknown	Yes	(1995) 22 OR (3d) 577	Canada	Cited for the principle that the extent of a shareholder's stake in the outcome of proceedings is of little weight in deciding good faith.
Agus Irawan v Toh Teck Chye and others	Unknown	Yes	[2002] 1 SLR(R) 471	Singapore	Cited for the principle that the court can assume good faith if the applicant has a reasonable and legitimate claim, but this principle was qualified by the court.
South Johnstone Mill Ltd (ACN 101 695 575) and Others v Dennis and Scales (ACN 004 044 987) and Another	Unknown	Yes	(2008) 64 ACSR 447	Australia	Cited for the principle that more than a bald assertion is required to establish an applicant's honest belief in a good cause of action.
Tremblett v SCB Fisheries Ltd	Newfoundland Supreme Court	Yes	(1993) 116 Nfld & PEIR 139	Canada	Cited for the principle that there is a substantial onus on the applicant to positively establish good faith.
Tam Tak Chuen v Eden Aesthetics Pte Ltd and another (Khairul bin Abdul Rahman and another, non-parties)	Unknown	Yes	[2010] 2 SLR 667	Singapore	Cited for the principle that the onus is on the applicant to establish good faith.
Discovery Enterprises Inc v Ebco Industries Ltd	Unknown	Yes	[1997] BCTC LEXIS 5338	Canada	Cited for the principle that the applicant's belief in the merits of the proposed action is central to determining good faith.
Teo Gek Luang v Ng Ai Tong and others	Unknown	Yes	[1998] 2 SLR(R) 426	Singapore	Cited for the principle that the company's claim must be legitimate and arguable to be in the interests of the company.
Fong Wai Lyn Carolyn v Airtrust (Singapore) Pte Ltd and another	High Court	Yes	[2011] 3 SLR 980	Singapore	Cited for the principle that bad faith is usually inferred from the lack of an arguable cause of action or a prima facie case.
Gabriel Peters & Partners (suing as a firm) v Wee Chong Jin and others	Unknown	Yes	[1997] 3 SLR(R) 649	Singapore	Cited for the principle that an action brought for an ulterior or collateral purpose may be struck out as an abuse of process.
Urs Meisterhans v GIP Pte Ltd	Unknown	Yes	[2011] 1 SLR 552	Singapore	Cited for the principle that the complainant must show a reasonable basis for the complaint and that the intended action is legitimate or arguable.

13. Applicable Rules

Rule Name
Rules of Court (Cap 322, R 5, 2006 Rev Ed) O 18 r 19

14. Applicable Statutes

Statute Name	Jurisdiction
Companies Act (Cap 50, 2006 Rev Ed) s 154	Singapore
Companies Act (Cap 50, 2006 Rev Ed) s 216A	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Statutory Derivative Action
Minority Shareholders
Good Faith
Prima Facie Interests of the Company
Breach of Director's Duties
Misappropriation
Companies Act
Abuse of Process
Collateral Purpose

15.2 Keywords

statutory derivative action
minority shareholders
good faith
company interests
breach of duty
misappropriation
corporate governance

17. Areas of Law

Area Name	Relevance Score
Derivative action	95
Director's Duties	90
Minority Oppression	85
Company Law	75
Director's Liability	70
Duty to Account	65
Fraud and Deceit	60
Corporate Litigation	50
Estoppel	30

16. Subjects

Company Law
Civil Litigation
Corporate Governance