TYC Investment v Tay Yun Chwan: Shareholder Powers & Director Duties in Payment Disputes
In TYC Investment Pte Ltd and others v Tay Yun Chwan Henry and another, the High Court of Singapore addressed a dispute within a family holding company, TYC Investment Pte Ltd, involving ex-spouses Dr. Henry Tay Yun Chwan and Ms. Jannie Chan Siew Lee, who were also the company's only directors. The case centered on whether shareholders could authorize legal proceedings against a director who vetoed payments and the extent of a director's contractual right to withhold payment approvals. The court dismissed the originating summons, except for two consent orders, finding that while the EGM had the power to appoint solicitors, it could not authorize unilateral cheque signing by HT. The court also found that JC did not breach her fiduciary duties.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Originating Summons dismissed in its entirety, save for Consent Order No 1 and Consent Order No 2.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
TYC Investment case on shareholder powers to authorize legal action against a director and the scope of director's duties in payment approvals.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| KPMG Services Pte Ltd | Other | Corporation | |||
| Jannie Chan Siew Lee | Defendant | Individual | Required to pay costs | Lost | |
| Tay Yun Chwan Henry | Defendant | Individual | Costs to be borne by himself | Neutral | |
| Overseas-Chinese Banking Corporation Limited | Other | Corporation | |||
| TYC Investment Pte Ltd | Plaintiff | Corporation | Prayers dismissed in part | Partial | |
| Amstay Pte Ltd | Other | Corporation | |||
| Express Co Registration & Management Ltd | Other | Corporation | |||
| TYC Investment Pte Ltd and others | Plaintiff | Corporation | |||
| Tay Yun Chwan Henry and another | Defendant | Individual | |||
| The Hour Glass Limited | Other | Corporation |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Lee Kim Shin | Judicial Commissioner | Yes |
4. Counsels
4. Facts
- HT and JC, ex-spouses, are the only two directors of TYC, a family holding company.
- A Payment Clause in the TYC Deed requires both HT and JC to approve payments by TYC.
- JC refused to approve certain payments, including KPMG Fees and Nassim Road Expenses.
- HT called an EGM to address JC's refusal to approve payments and her obligation to redeem pledged THG shares.
- Resolutions were passed at the EGM, with HT and Michael (HT and JC's son) holding 51% of the voting rights, to authorize legal proceedings against JC.
- TYC commenced OS 895 seeking declarations that cheques signed by HT without JC's approval are valid.
- The main dispute was whether shareholders could authorize legal proceedings against a director who vetoed payments.
5. Formal Citations
- TYC Investment Pte Ltd and others v Tay Yun Chwan Henry and another, Originating Summons No 895 of 2013, [2014] SGHC 192
- TYC Investment Pte Ltd and others v Tay Yun Chwan Henry and another, Civil Appeal Nos 149 and 150 of 2014, [2015] SGCA 40
6. Timeline
| Date | Event |
|---|---|
| TYC Investment Pte Ltd established | |
| The Hour Glass Limited established | |
| Deed of Settlement between HT and JC | |
| HT and JC divorced | |
| HT commenced court proceedings to obtain an injunction to restrain JC from making unilateral payment decisions | |
| Agreement for Amendment to the DOS and Settlement of Litigation between HT and JC | |
| OS 1080 discontinued | |
| Deed among HT, JC and TYC executed | |
| JC refused to approve certain payments by TYC | |
| Deadline for JC to redeem pledged THG shares | |
| KPMG submitted an invoice for $19,424.05 to TYC | |
| HT reminded JC through a series of letters from his solicitors that she was obliged under the DOS to fully redeem the pledged THG shares | |
| The KMPG Fees were eventually paid by HT’s own company, Amstay Pte Ltd | |
| Extraordinary general meeting of TYC held | |
| HT appointed TSMP Law Corporation as solicitors for TYC | |
| HT informed TYC’s other shareholders of TSMP’s appointment by email | |
| Approximately 6.53m THG pledged shares that had yet to be redeemed | |
| Plaintiffs commenced OS 895 | |
| Two further substantive prayers were added to OS 895 by way of orders made in Summons 6201 of 2013 | |
| First round of oral arguments | |
| Second hearing took place | |
| JC shall procure OCBC to inform TYC on or before 10 April 2014 the costs and expenses necessary for TYC to procure the complete redemption, return and/or recovery of the Outstanding THG Shares | |
| Deadline for JC to comply with her obligation to procure full redemption of the Outstanding THG Shares | |
| Third hearing took place | |
| Decision Date | |
| Appeal to this decision in Civil Appeal Nos 149 and 150 of 2014 was allowed in part by the Court of Appeal |
7. Legal Issues
- Shareholder Powers
- Outcome: The court held that the EGM had the power to appoint solicitors to commence proceedings to determine the rights and obligations of the relevant parties under the Divorce Settlement Agreements, so as to break the deadlock in management.
- Category: Substantive
- Sub-Issues:
- Reserve powers of general meeting
- Shareholder approval of legal proceedings
- Director's Fiduciary Duties
- Outcome: The court found that JC did not breach her fiduciary duties by refusing to approve payment of the KPMG Fees.
- Category: Substantive
- Sub-Issues:
- Breach of fiduciary duty
- Improper purpose
- Exercise of discretion
- Implied Terms in Contract
- Outcome: The court found that it was not necessary to imply a term in the TYC Deed that HT and JC's power to approve any payment by TYC under the Payment Clause cannot be exercised dishonestly, for an improper purpose, capriciously or arbitrarily.
- Category: Substantive
- Sub-Issues:
- Business efficacy
- Officious bystander test
8. Remedies Sought
- Declaratory Judgment
- Specific Performance
9. Cause of Actions
- Breach of Contract
- Breach of Fiduciary Duty
10. Practice Areas
- Commercial Litigation
- Corporate Governance
11. Industries
- No industries specified
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Foss v Harbottle | N/A | Yes | (1843) 2 Hare 461 | N/A | Cited for the rule that the proper plaintiff in a suit for the enforcement of a corporate right is the company itself. |
| Saloman v A Saloman & Co Ltd | N/A | Yes | [1897] AC 22 | N/A | Cited for recognizing that a company was a separate legal entity from its members. |
| Automatic Self-Cleansing Filter Syndicate Co Ltd v Cunninghame | N/A | Yes | [1906] 2 Ch 34 | N/A | Cited for rejecting the notion that directors were agents of the members in general meeting and establishing that the division of powers between the directors and shareholders would depend on the construction of a company’s constitution. |
| Quin & Axtens Ltd v Salmon | N/A | Yes | [1909] AC 442 | N/A | Cited as authority that the members in general meeting cannot override board decisions or direct the board to act in a certain way. |
| John Shaw & Sons (Salford) Ltd v Peter Shaw and John Shaw | N/A | Yes | [1935] 2 KB 112 | N/A | Cited as authority that the members in general meeting cannot override board decisions or direct the board to act in a certain way. |
| Marshall’s Valve Gear Co Ltd v Manning Wardle & Co Ltd | N/A | Yes | [1909] 1 Ch 267 | N/A | Cited as authority that the members in general meeting can control the board of directors by passing an ordinary resolution, provided the resolution is not inconsistent with the Companies Act or the articles of the company. |
| Credit Development Pte Ltd v IMO Pte Ltd | N/A | Yes | [1993] 1 SLR(R) 68 | Singapore | Cited for the issue of whether the shareholders had the power to pass resolutions to appoint accountants and solicitors to investigate the affairs of the company. |
| Barron v Potter | N/A | Yes | [1914] Ch 895 | N/A | Cited for the principle that if directors are unable or unwilling to exercise their powers, there must be some power in the company to do itself that which would otherwise be done. |
| Foster v Foster | N/A | Yes | [1916] 1 Ch 532 | N/A | Cited for the principle that if directors are unable to appoint a managing director because of internal friction, the general meeting has the power to do so. |
| Alexander Ward & Co v Samyang Co | N/A | Yes | [1975] 1 WLR 673 | N/A | Cited for the principle that in the absence of an effective board, the general meeting has a residual authority to use the company’s power. |
| Massey & Anor v Wales & Ors | New South Wales Court of Appeal | Yes | [2003] NSWCA 212 | Australia | Cited for the principle that where the board is unwilling or unable to act, the general meeting has some kind of reserve power. |
| Edwards v Halliwell | N/A | Yes | [1950] 2 All ER 1064 | N/A | Cited for the principle that if the alleged wrong is capable of being ratified by a majority of shareholders in general meeting, then no individual shareholder should be permitted to maintain an action in respect of the matter. |
| Bamford v Bamford | N/A | Yes | [1969] 2 WLR 1107 | N/A | Cited for the proposition that the decision to commence legal proceedings against errant directors could be made by the shareholders passing an ordinary resolution. |
| Sembcorp Marine Ltd v PPL Holdings Pte Ltd and another and another appeal | N/A | Yes | [2013] 4 SLR 193 | Singapore | Cited for the three-step framework for implying a term in fact in an agreement. |
| Tan Chin Yew Joseph v Saxo Capital Markets Pte Ltd | N/A | Yes | [2013] SGHC 274 | Singapore | Cited to demonstrate how the first step of the Sembcorp Marine framework ought to be applied. |
| Marks and Spencer PLC v BNP Paribas Securities Services Trust Company (Jersey) Limited & Air | N/A | Yes | [2014] EWCA Civ 603 | N/A | Cited for the principle that a party does not show that a term is unnecessary simply by showing that the parties’ agreement could work without the implied term. |
| Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board | N/A | Yes | [1973] 1 WLR 601 | N/A | Cited for the principle that the court will not improve a contract which the parties have made, however desirable the improvement may be. |
| Philips Electronique Grand Public SA and Another v British Sky Broadcasting Limited | N/A | Yes | [1995] EMLR 472 | N/A | Cited for the principle that the power to imply terms into a contract should not be considered as routine. |
| The Somewhat Uncommon Law of Commerce | N/A | Yes | (2014) 26 SAcLJ 23 | Singapore | Cited for the danger with implication, being by its nature an exercise in filling in what parties had not addressed their minds to, is that the court might too easily rewrite the contract to its own preference. |
| Paragon Finance plc v Nash and another | N/A | Yes | [2002] 1 WLR 685 | N/A | Cited for the principle that the lender's discretion to set rates ought to be fettered by an implied term that the rates would not be set dishonestly, for an improper purpose, capriciously or arbitrarily. |
| Equitable Life Assurance Society v Hyman | N/A | Yes | [2002] 1 AC 408 | N/A | Cited for the principle that the discretion conferred on directors by the articles of association of a mutual life assurance society was restricted by an implied term that the directors could not adopt a course of action that had the effect of overriding or undermining the guaranteed annuity rate. |
| Brogden v Investec Bank Plc | N/A | Yes | [2014] EWHC 2785 (Comm) | N/A | Cited for the principle that where a contract gives responsibility to one party for making an assessment or exercising a judgement on a matter which materially affects the other party’s interests and about which there is ample scope for reasonable differences of view, the decision is properly regarded as a discretion which is subject to the implied constraints that it must be taken in good faith, for proper purposes and not in an arbitrary, capricious or irrational manner. |
| Socimer International Bank Ltd v Standard Bank London Ltd | N/A | Yes | [2008] 1 Lloyd’s Rep 558 | N/A | Cited for the principle that clauses giving one party a power to make decisions under the contract which may have an effect on both parties are limited, as a matter of necessary implication, by concepts of honesty, good faith, and genuineness, and the need for the absence of arbitrariness, capriciousness, perversity and irrationality. |
| Ho Kang Peng v Scintronix Corp Ltd (formerly known as TTL Holdings Ltd) | N/A | Yes | [2014] 3 SLR 329 | Singapore | Cited for the principle that a director shall act bona fide to promote or advance the interests of the company. |
| In re Smith and Fawcett Ltd | N/A | Yes | [1942] Ch 304 | N/A | Cited for the principle that directors must exercise their discretion bona fide in what they consider is in the interests of the company. |
| Cheam Tat Pang and another v Public Prosecutor | N/A | Yes | [1996] 1 SLR(R) 161 | Singapore | Cited for the principle that the court should consider the margin of deference that should be afforded to directors. |
| Breckland Group Holdings v London and Suffolk Properties Ltd | N/A | Yes | [1989] BCLC 100 | N/A | Cited as authority that the members in general meeting cannot override board decisions or direct the board to act in a certain way. |
| Intraco Ltd v Multi-Pak Singapore Pte Ltd | N/A | Yes | [1994] 3 SLR(R) 1064 | Singapore | Cited for the principle that the courts have been slow in interfering with commercial decisions of directors which have been made honestly even if they turn out, on hindsight, to be financially detrimental. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 2006 Rev Ed) s 157A(1) | Singapore |
| Companies Act (Cap 50, 2006 Rev Ed) s 157A(2) | Singapore |
| Companies Act s 157(1) | Singapore |
| Companies Act s 409A | Singapore |
| Companies Act s 216A | Singapore |
| Companies Act s 216B | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Governing Directors
- Payment Clause
- Extraordinary General Meeting
- Outstanding THG Shares
- Divorce Settlement Agreements
- Shareholder Reserve Powers
- Director's Duties
- Implied Term
- Foss v Harbottle
- Sembcorp Marine
- Business Efficacy
15.2 Keywords
- company law
- shareholder
- director
- fiduciary duty
- contract
- payment
- resolution
- general meeting
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Company Law | 90 |
| Contract Law | 70 |
| Fiduciary Duties | 60 |
| Shareholders Rights | 50 |
| Family Law | 30 |
16. Subjects
- Corporate Law
- Shareholder Rights
- Director Responsibilities
- Contractual Interpretation