Chan Tong Fan v Chiam Heng Luan Realty: Derivative Action, Directors' Duties, Family Business
In Chan Tong Fan and another v Chiam Heng Luan Realty Pte Ltd, the Singapore High Court addressed an application by shareholders Chan Tong Fan and his wife for leave to commence a derivative action against the directors of Chiam Heng Luan Realty Pte Ltd for alleged breaches of their duties. The court, presided over by Judith Prakash J, allowed the application only in respect of one proposed cause of action related to the accounting of rental income from Shanghai properties, while dismissing the prayers to pursue other proposed claims. The court found that the plaintiffs had not demonstrated sufficient grounds to pursue the other claims, and that the directors had acted in the best interests of the company.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Application allowed in part.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Shareholders Chan Tong Fan sought derivative action against Chiam Heng Luan Realty's directors for breach of duties. The court allowed action for Shanghai property accounting only.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Chan Tong Fan | Plaintiff | Individual | Application allowed in part | Partial | |
| Chiam Heng Luan Realty Pte Ltd | Defendant | Corporation | Application allowed in part | Partial |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Judith Prakash | Judge | Yes |
4. Counsels
4. Facts
- Plaintiffs sought leave to commence derivative actions against the directors of Chiam Heng Luan Realty Private Limited.
- The plaintiffs alleged breaches of directors’ duties related to various transactions and properties.
- The directors are accused of leasing the Balmoral Property to Sloane Court Hotel Pte Ltd at below market rate.
- The directors allegedly extended interest-free and unsecured loans to themselves.
- The directors allegedly failed to account for rental income from Shanghai and Malaysian properties.
- The directors allegedly caused Chiam Heng Luan Realty Private Limited to incur renovation expenses for Sloane Court Hotel Pte Ltd.
- The shareholders passed a resolution to ratify the directors' actions at an Extraordinary General Meeting.
5. Formal Citations
- Chan Tong Fan and another v Chiam Heng Luan Realty Pte Ltd, Originating Summons No 933 of 2012, [2013] SGHC 192
6. Timeline
| Date | Event |
|---|---|
| Chiam Heng Luan Realty Private Limited and Sloane Court Hotel Pte Ltd incorporated. | |
| Ms Chiam Ai Thong, Mr Chiam Toon Tau and Mr Chiam Toon Chew appointed directors of Chiam Heng Luan Realty Private Limited and Sloane Court Hotel Pte Ltd. | |
| Mdm Lim Wee Leng passed away. | |
| Ms Chiam Ai Huem made a director of Chiam Heng Luan Realty Private Limited. | |
| Mr Chiam Heng Luan died. | |
| Toon Chew provided the plaintiffs with a set of accounts for the financial years 1976, 1979, 1981 and 1983 to 1997. | |
| Annual General Meeting held. | |
| Plaintiffs received minutes of the 2011 Annual General Meeting. | |
| Notice of Extraordinary General Meeting of Chiam Heng Luan Realty Private Limited sent out to all its shareholders. | |
| Extraordinary General Meeting held. | |
| 2012 Annual General Meeting for Chiam Heng Luan Realty Private Limited held. | |
| Plaintiffs’ application allowed in part. | |
| Decision Date. |
7. Legal Issues
- Breach of Directors' Duties
- Outcome: The court allowed the application in part, finding an arguable case for breach of duty regarding the accounting of rental income from the Shanghai Properties.
- Category: Substantive
- Sub-Issues:
- Failure to act honestly
- Failure to exercise due diligence
- Breach of fiduciary duty
- Derivative Action
- Outcome: The court granted leave to bring a derivative action only in respect of the Shanghai Properties issue, finding that the plaintiffs had not demonstrated good faith or that it was in the company's interest to pursue the other claims.
- Category: Procedural
- Sub-Issues:
- Good faith of complainant
- Interests of the company
8. Remedies Sought
- Leave to commence derivative action
- Account of all loans extended to the Directors
- Payment of all loans to the company
- Damages
- Account of the rental moneys received
9. Cause of Actions
- Breach of Directors' Duties
- Breach of Fiduciary Duty
10. Practice Areas
- Commercial Litigation
11. Industries
- Real Estate
- Hospitality
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Fong Wai Lyn Carolyn v Airtrust (Singapore) Pte Ltd | Singapore High Court | Yes | [2011] 3 SLR 980 | Singapore | Cited for principles regarding statutory derivative actions and the burden of proof on the complainant. |
| Ang Thiam Swee v Low Hian Chor | Singapore High Court | Yes | [2013] 2 SLR 340 | Singapore | Cited for principles regarding statutory derivative actions and the burden of proof on the complainant. |
| Panweld Trading Pte Ltd v Yong Kheng Leong | Singapore High Court | Yes | [2012] 2 SLR 672 | Singapore | Cited for the principle that courts do not grant leave for a derivative action if the directors/shareholders honestly decide it's not in the company's interest. |
| Re Winpac Paper Products Pte Ltd | Singapore High Court | Yes | [2000] 1 SLR(R) 415 | Singapore | Cited for the principle that courts are slow to intervene in commercial decisions made by a company's board of directors. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 1999 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Derivative action
- Directors' duties
- Family business
- Shareholders
- Rental income
- Shanghai Properties
- Balmoral Property
- Loans
- Accounting
- Good faith
- Interests of the company
15.2 Keywords
- derivative action
- directors duties
- company law
- shareholders
- singapore
- family business
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Director's Duties | 80 |
| Company Law | 75 |
| Fiduciary Duties | 70 |
| Corporate Law | 65 |
| Minority Oppression | 60 |
| Shareholders Rights | 60 |
| Business Litigation | 50 |
| Accounting | 40 |
| Civil Procedure | 30 |
16. Subjects
- Company Law
- Directors' Duties
- Shareholder Rights
- Derivative Actions