Chan Tong Fan v Sloane Court Hotel: Derivative Action for Breach of Directors' Duties

In Chan Tong Fan v Sloane Court Hotel Pte Ltd, the High Court of Singapore dismissed Chan Tong Fan's application for leave to commence a derivative action in the name of Sloane Court Hotel against its directors, Chiam Toon Tau, Chiam Ai Thong, and Chiam Toon Chew, for alleged breaches of directors' duties. The court, presided over by Judith Prakash J, found that Chan Tong Fan failed to demonstrate good faith and that the proposed action would be in the company's interest. The alleged breaches included excessive remuneration, failure to optimize property usage, unaccounted renovation expenses, and unrealized exchange losses. The judgment was delivered on 2013-09-27.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Application dismissed

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Chan Tong Fan sought leave to commence a derivative action against Sloane Court Hotel's directors for breach of duties. The application was dismissed due to lack of good faith and failure to show it was in the company's interest.

1.7 Decision Date

26 September 2013

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Chan Tong Fan	Plaintiff	Individual	Application dismissed	Lost	Gregory Vijayendran of Rajah & Tann LLP Benjamin Smith of Rajah & Tann LLP Rachel Chow of Rajah & Tann LLP
Sloane Court Hotel Pte Ltd	Defendant	Corporation	Application dismissed	Won	Kong Man Er of Drew & Napier LLC
Chiam Toon Tau	Other	Individual	Application dismissed	Neutral	Jared Chen of Cavenagh Law LLP Nish Shetty of Cavenagh Law LLP
Chiam Ai Thong	Other	Individual	Application dismissed	Neutral	Jared Chen of Cavenagh Law LLP Nish Shetty of Cavenagh Law LLP
Chiam Toon Chew	Other	Individual	Application dismissed	Neutral

3. Judges

Judge Name	Title	Delivered Judgment
Judith Prakash	Judge	Yes

4. Counsels

Counsel Name	Organization
Gregory Vijayendran	Rajah & Tann LLP
Benjamin Smith	Rajah & Tann LLP
Rachel Chow	Rajah & Tann LLP
Kong Man Er	Drew & Napier LLC
Jared Chen	Cavenagh Law LLP
Nish Shetty	Cavenagh Law LLP

4. Facts

Chan Tong Fan sought leave to bring a derivative action against the directors of Sloane Court Hotel.
The directors were accused of breaches of duty, including excessive remuneration and failure to optimize property usage.
Shareholders passed resolutions that it was not in the company's interest to take action against the directors.
The plaintiff alleged that the directors had failed to account for renovation expenses.
The plaintiff complained about unrealized exchange losses on overseas investments.
The plaintiff held 15.56% of the shares in Sloane Court Hotel.
Three of the plaintiff’s siblings were directors of SCH and together they held 37.42% of the shares.

5. Formal Citations

Chan Tong Fan v Sloane Court Hotel Pte Ltd, Originating Summons No 935 of 2012, [2013] SGHC 193

6. Timeline

Date	Event
1971-01-01	CHLR and SCH set up by HL Chiam and Mdm Lim
1988-01-01	Ms Chiam Ai Thong made director of SCH
1989-01-01	Mr Chiam Toon Tau appointed director of SCH
1990-04-01	Toon Tau appointed managing director, Ai Thong appointed acting director and Toon Chew appointed as working director
1992-01-01	SCH requested permission to develop the SCH land into service apartments, permission refused
1993-01-01	Two-storey block of flats on the SCH land demolished
1994-01-01	SCH had plans to build an addition to the hotel on the SCH land
1996-02-01	EOGM held to decide on the use of the land but no conclusion was reached
2010-10-01	Application filed
2012-10-15	Ai Thong and Toon Tau applied for leave to intervene in proceedings
2012-11-07	Notice of EOGM of SCH sent out to all its shareholders
2012-11-23	EOGM held
2012-12-12	2012 AGM for SCH held
2013-04-23	Plaintiff’s application dismissed
2013-09-27	Decision Date

7. Legal Issues

Breach of Directors' Duties
- Outcome: The court found that the plaintiff failed to establish a prima facie case that the directors had breached their duties.
- Category: Substantive
- Sub-Issues:
  - Excessive remuneration
  - Failure to obtain optimal usage of property
  - Unaccounted renovation expenses
  - Unrealized exchange losses
Good Faith in Derivative Actions
- Outcome: The court found that the plaintiff failed to establish that he was acting in good faith.
- Category: Procedural
Company's Interest in Derivative Actions
- Outcome: The court found that the plaintiff failed to establish that the proposed action would be in the company's interest.
- Category: Procedural

8. Remedies Sought

Leave to commence a derivative action

9. Cause of Actions

Breach of Directors' Duties

10. Practice Areas

Commercial Litigation

11. Industries

Hospitality

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Panweld Trading Pte Ltd v Yong Kheng Leong and others	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 and/or shareholders of the company honestly decide that it would not be in the company’s interests to commence or defend the proposed action.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Companies Act (Cap 50, 1999 Rev Ed)	Singapore
Companies Act s 169	Singapore
Companies Act s 216A	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Derivative action
Directors' duties
Excessive remuneration
Property tax
Renovation expenses
Exchange losses
Good faith
Company's interest

15.2 Keywords

Derivative action
Directors' duties
Sloane Court Hotel
Breach of duty
Singapore
Company law

17. Areas of Law

Area Name	Relevance Score
Director's Duties	90
Company Law	75
Minority Oppression	60
Duty to Account	50
Commercial Disputes	30

16. Subjects

Company Law
Directors' Duties
Civil Procedure