Chan Siew Lee v TYC Investment: Shareholder Reserve Powers & Director Deadlock

Chan Siew Lee appealed a decision regarding shareholder reserve powers in TYC Investment Pte Ltd, where the board of directors, consisting of Chan Siew Lee and Dr. Henry Tay Yun Chwan, was deadlocked. The Court of Appeal of Singapore clarified the circumstances under which shareholders can exercise management powers when the board is unable to act, specifically concerning the approval of payments. The court allowed the appeal in part, granting a declaration that shareholders have reserve power to authorize payments for KPMG Fees, Express Co Fees, and part of TSMP Fees related to litigating shareholder reserve powers.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeal allowed in part.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Appeal regarding shareholder reserve powers when a company's board of directors is deadlocked. The court clarified the scope of such powers.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
TYC Investment Pte LtdRespondent, AppellantCorporationAppeal allowed in partPartial
Chan Siew LeeAppellant, Second RespondentIndividualAppeal allowed in partPartial
Lonzo Properties Pte LtdRespondent, AppellantCorporationNeutralNeutral
Bonzo Properties Pte LtdRespondent, AppellantCorporationNeutralNeutral
Amstay Properties Pte LtdRespondent, AppellantCorporationNeutralNeutral
Dr Henry Tay Yun ChwanRespondent, AppellantIndividualNeutralNeutral

3. Judges

Judge NameTitleDelivered Judgment
Sundaresh MenonChief JusticeYes
Chao Hick TinJustice of the Court of AppealNo
Andrew Phang Boon LeongJustice of the Court of AppealNo

4. Counsels

Counsel NameOrganization
Thio Shen YiTSMP Law Corporation
Freddie Lim ShaochunTSMP Law Corporation
Rachel Tan Pei QianTSMP Law Corporation
Cheong Jun Ming MervynEugene Thuraisingam LLP
Eugene ThuraisingamEugene Thuraisingam LLP
Jerrie Tan Qiu LinEugene Thuraisingam LLP

4. Facts

  1. Dr Tay and Ms Chan, former husband and wife, were the only directors of TYC Investment Pte Ltd.
  2. The parties entered into a Deed of Settlement and an Agreement for Amendment to the DOS and Settlement of Litigation as part of their divorce settlement.
  3. Clause 10 of the SSD, the Payment Clause, required both Dr Tay and Ms Chan to sign a voucher approving all future payments for TYC.
  4. Ms Chan refused to approve various payments by TYC, leading to a deadlock.
  5. Dr Tay called an extraordinary general meeting of TYC to overcome the administrative deadlock.
  6. Resolutions were passed at the EGM to approve the reimbursement of expenses to Dr Tay and Amstay Pte Ltd, and to authorize Dr Tay to unilaterally sign cheques.
  7. Ms Chan refused to approve the payment of TSMP Law Corporation's legal fees and Express Co Registration & Management Ltd's corporate secretarial fees.

5. Formal Citations

  1. Chan Siew Lee v TYC Investment Pte Ltd and others and another appeal, Civil Appeal Nos 149 and 150 of 2014, [2015] SGCA 40
  2. TYC Investment Pte Ltd and others v Tay Yun Chwan Henry and another, , [2014] 4 SLR 1149

6. Timeline

DateEvent
Deed of Settlement between Dr Tay and Ms Chan was signed.
Dr Tay and Ms Chan divorced.
Dr Tay commenced Originating Summons No 1080 of 2011.
Agreement for Amendment to the DOS and Settlement of Litigation between Dr Tay and Ms Chan was signed.
OS 1080/2011 was discontinued.
Dr Tay, Ms Chan and TYC entered into a deed of agreement.
Ms Chan invoked the Payment Clause to refuse to approve various payments by TYC.
Extraordinary general meeting of TYC was convened.
Subsequent EGMs held.
Originating Summons 895 of 2013 was filed.
Subsequent EGMs held.
TSMP applied to amend the Originating Summons.
Amended Originating Summons filed.
First consent order was granted.
Second consent order was granted.
Plaintiffs’ supplementary submissions dated.
The court granted the plaintiffs’ application in SUM 4612/2014 to enforce the order.
Judgment reserved.

7. Legal Issues

  1. Shareholder Reserve Powers
    • Outcome: The court clarified the circumstances under which shareholders can exercise management powers when the board is unable to act.
    • Category: Substantive
    • Sub-Issues:
      • Scope of reserve powers
      • Necessity for implication of reserve powers
      • Deadlock in board of directors
  2. Breach of Fiduciary Duty
    • Outcome: The court held that the claims of breach of fiduciary duty should be pursued through proceedings under s 216A of the Companies Act.
    • Category: Substantive
    • Sub-Issues:
      • Director's duty to act in the best interests of the company
      • Improper purpose
      • Capricious or arbitrary conduct
  3. Implied Terms in Contract
    • Outcome: The court held that there was no implied term in the Payment Clause.
    • Category: Substantive
    • Sub-Issues:
      • Necessity for implying a term
      • Efficacy of the contract without the implied term
      • Reasonableness of the implied term

8. Remedies Sought

  1. Declaration that TYC’s cheques signed by Dr Tay are valid.
  2. Specific performance of an implied term.
  3. Injunction pursuant to s 409A of the Companies Act.

9. Cause of Actions

  • Breach of Contract
  • Breach of Fiduciary Duty

10. Practice Areas

  • Commercial Litigation
  • Corporate Law

11. Industries

  • No industries specified

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
TYC Investment Pte Ltd and others v Tay Yun Chwan Henry and anotherHigh CourtYes[2014] 4 SLR 1149SingaporeRefers to the decision from which this appeal arose.
Sembcorp Marine Ltd v PPL Holdings Pte Ltd and another and another appealCourt of AppealYes[2013] 4 SLR 193SingaporeCited for the three-step framework for implying terms in a contract.
Automatic Self-Cleansing Filter Syndicate Company, Limited v CuninghameCourt of AppealYes[1906] 2 Ch 34England and WalesDiscusses the division of powers between shareholders and directors.
Marshall's Valve Gear Company, Limited v Manning, Wardle & Co, LimitedCourt of AppealYes[1909] 1 Ch 267England and WalesDiscusses the division of powers between shareholders and directors.
Quin & Axtens, Limited and Others v SalmonHouse of LordsYes[1909] AC 442United KingdomDiscusses the division of powers between shareholders and directors.
John Shaw and Sons (Salford), Limited v Peter Shaw and John ShawKing's Bench DivisionYes[1935] 2 KB 113England and WalesDiscusses the division of powers between shareholders and directors.
Bamford and Another v Bamford and OthersCourt of AppealYes[1969] 2 WLR 1107England and WalesDiscusses the division of powers between shareholders and directors.
Breckland Group Holdings Ltd v London & Suffolk Properties Ltd & OthersHigh CourtYes(1988) 4 BCC 542England and WalesDiscusses the division of powers between shareholders and directors.
Credit Development Pte Ltd v IMO Pte LtdHigh CourtYes[1993] 1 SLR(R) 68SingaporeDiscusses the division of powers between shareholders and directors.
Barron v PotterHigh CourtYes[1914] 1 Ch 895England and WalesConcerns the power to appoint additional directors.
Foster v FosterHigh CourtYes[1916] 1 Ch 532England and WalesConcerns the power to appoint a managing director.
Alexander Ward & Co Ltd and Another v Samyang Navigation Co LtdHouse of LordsYes[1975] 1 WLR 673United KingdomDiscusses the residual authority of shareholders in the absence of an effective board.
Massey & Anor v Wales & OrsNew South Wales Court of AppealYes[2003] NSWCA 212AustraliaDiscusses the interests of creditors in relation to the commencement of proceedings.
Kinsela & Anor v Russell Kinsela Pty Ltd (in liq)Supreme Court of New South WalesYes(1986) 10 ACLR 395AustraliaConcerns the ratification by shareholders of a breach of duty to the company.
Re Commonwealth Printing Press LtdHigh CourtYes[1974] HKCFI 59Hong KongDiscusses the power of shareholders to carry forward resolutions when directors fail to act.
In re Argentum Reductions (UK) LtdHigh CourtYes[1975] 1 WLR 186England and WalesDiscusses the power of the majority of shareholders to act on the company’s behalf when there is a deadlock among the directors.
Edwards and Another v Halliwell and OthersCourt of AppealYes[1950] 2 All ER 1064England and WalesDiscusses the purpose of the derivative action.
Teo Gek Luang v Ng Ai Tiong and othersHigh CourtYes[1998] 2 SLR(R) 426SingaporeDiscusses the intention of derivative actions to improve corporate governance.
Re Winpac Paper Products Pte LtdHigh CourtYes[2000] 1 SLR(R) 415SingaporeDiscusses the nature of relief sought in relation to a director's actions.
Brett Paul Hawksford and another v Michael Jeffrey Hawksford and othersSupreme Court of New South WalesYes[2005] NSWSC 463AustraliaDiscusses the consequences of a deadlock in a company set up with such a possibility.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap 50, 2006 Rev Ed)Singapore
Section 157A(1) of the Companies ActSingapore
Section 157 of the Companies ActSingapore
Section 409A of the Companies ActSingapore
Section 216A of the Companies ActSingapore
Section 39 of the Companies ActSingapore
Section 153 of the Companies ActSingapore

15. Key Terms and Keywords

15.1 Key Terms

  • Shareholder reserve powers
  • Board deadlock
  • Payment Clause
  • Governing Directors
  • TYC Deed
  • Extraordinary general meeting
  • Implied term
  • Fiduciary duty
  • Derivative action
  • Necessity

15.2 Keywords

  • Shareholder reserve powers
  • Director deadlock
  • Corporate governance
  • Singapore company law

17. Areas of Law

Area NameRelevance Score
Company Law85
Contract Law60
Fiduciary Duties50
Civil Procedure30
Arbitration10

16. Subjects

  • Corporate Law
  • Shareholder Rights
  • Director's Duties
  • Contract Interpretation