Wong Lee Vui v Li Qingyun: Derivative Action, Minority Shareholder Rights & Directors' Duties
In Wong Lee Vui Willie v Li Qingyun and Fen Sheng Construction Pte Ltd, before the High Court of Singapore on 2015-11-12, Plaintiff Wong Lee Vui sought leave under Section 216A of the Companies Act to commence a derivative action on behalf of Fen Sheng Construction Pte Ltd against Defendant Li Qingyun, alleging breaches of director's duties. The court, presided over by Aedit Abdullah JC, dismissed the application, finding that while the Plaintiff had met the formal requirements and demonstrated good faith, he failed to establish a prima facie case that the action was in the company's best interests. The court determined that the allegations raised only a suspicion of wrongdoing and that alternative mechanisms were more appropriate to resolve the parties' disputes.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Application dismissed.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Shareholder Wong Lee Vui sought leave to sue Li Qingyun for breach of director duties. The court dismissed the application, finding no prima facie case.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Wong Lee Vui @ Willie Wong Lee Vui | Plaintiff | Individual | Application dismissed | Lost | Goh Kim Thong Andrew, Lee Jia En Gloria |
| Li Qingyun | Defendant | Individual | Successful defense | Won | Lai Kwok Seng |
| Fen Sheng Construction Pte Ltd | Defendant | Corporation | Neutral | Neutral |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Aedit Abdullah | Judicial Commissioner | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Goh Kim Thong Andrew | Fortis Law Corporation |
| Lee Jia En Gloria | Fortis Law Corporation |
| Lai Kwok Seng | Lai Mun Onn & Co |
4. Facts
- Plaintiff and 1st Defendant were equal shareholders and joint signatories of the company's bank account.
- Plaintiff alleged the 1st Defendant hired more workers than needed and paid them above market rate.
- Plaintiff alleged the 1st Defendant made secret profits at the expense of the company.
- Plaintiff alleged the 1st Defendant mismanaged the Boat Quay Project, causing the company loss.
- The 1st Defendant contended the Plaintiff was in charge of day-to-day management of the company.
- The 1st Defendant denied any improper employment and stated the Plaintiff handled foreign worker matters.
- The 1st Defendant stated the Plaintiff was keen on the Boat Quay Project and managed the contract.
5. Formal Citations
- Wong Lee Vui Willie v Li Qingyun and another, Originating Summons No 254 of 2015 (Summons No 2996 of 2015), [2015] SGHC 297
6. Timeline
| Date | Event |
|---|---|
| Fen Sheng Construction Pte Ltd incorporated. | |
| Plaintiff's solicitors sent a letter to the 1st Defendant alleging interference with company management. | |
| Plaintiff's solicitors informed the company's board of directors of the intention to commence a derivative action. | |
| Plaintiff commenced Originating Summons No 254 of 2015 seeking leave to commence an action on behalf of the company. | |
| 1st Defendant filed affidavit. | |
| Judgment issued. |
7. Legal Issues
- Derivative Action
- Outcome: The court found that the plaintiff had met the formal requirements of Section 216A and had brought the application in good faith, but failed to show that it was prima facie in the interest of the company that the action be allowed to proceed.
- Category: Procedural
- Sub-Issues:
- Compliance with Section 216A of the Companies Act
- Good faith of the complainant
- Prima facie interests of the company
- Breach of Directors' Duties
- Outcome: The court found that the plaintiff's allegations of breach of directors' duties only raised a suspicion of untoward conduct and were not sufficient to establish a prima facie case.
- Category: Substantive
- Sub-Issues:
- Failure to act in good faith
- Failure to act for proper purposes
- Failure to exercise reasonable care, skill and diligence
8. Remedies Sought
- Leave to commence a derivative action on behalf of the company against the 1st Defendant
9. Cause of Actions
- Breach of Directors' Duties
10. Practice Areas
- Commercial Litigation
- Corporate Law
11. Industries
- Construction
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Pang Yong Hock and another v PKS Contracts Services Pte Ltd | Court of Appeal | Yes | [2004] 3 SLR(R) 1 | Singapore | Cited regarding good faith in derivative actions and the court's approach to granting leave. |
| Fong Wai Lyn Carolyn v Airtrust (Singapore) Pte Ltd and another | High Court | Yes | [2011] 3 SLR 980 | Singapore | Cited regarding good faith in derivative actions. |
| Ang Thiam Swee v Low Hian Chor | High Court | Yes | [2013] 2 SLR 340 | Singapore | Cited regarding the requirement of good faith and the need for a valid basis for the claim in derivative actions. |
| Foss v Harbottle | N/A | Yes | (1843) 2 Hare 462 | N/A | Cited for the proposition that the proper plaintiff for any wrong done to the company was the company itself. |
| Lee Seng Eder v Wee Kim Chwee and others | N/A | Yes | [2014] 2 SLR 56 | Singapore | Referred to Parliamentary debates underscoring the need for strict compliance with notice provisions. |
| Agus Irawan v Toh Teck Chye and others | N/A | Yes | [2002] 1 SLR(R) 471 | Singapore | Cited for the meaning of 'legitimate' and 'arguable' in the context of derivative actions. |
| Urs Meisterhans v GIP Pte Ltd | N/A | Yes | [2011] 1 SLR 552 | Singapore | Cited for the requirement of a reasonable basis for the complaint in derivative actions. |
| Richardson Greenshields of Canada Ltd v Kalmacoff | Ontario High Court | Yes | (1995) 123 DLR (4th) 628 | Canada | Cited for the cautious approach to be adopted in derivative actions. |
| Law Chin Eng and Another v Hiap Seng & Co Pte Ltd (Lau Chin Hu and others, applicants) | High Court | Yes | [2009] SGHC 223 | Singapore | Cited regarding the requirement that it be shown that the company would benefit from the proceedings. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
| Section 216A of the Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Derivative action
- Section 216A
- Directors' duties
- Good faith
- Prima facie
- Shareholders
- Foss v Harbottle
- Secret profits
- Mismanagement
- Boat Quay Project
15.2 Keywords
- Derivative action
- Shareholder dispute
- Directors' duties
- Companies Act
- Singapore
- Construction business
16. Subjects
- Company Law
- Shareholder Rights
- Directors' Duties
- Derivative Actions
17. Areas of Law
- Company Law
- Civil Procedure
- Directors' Duties
- Shareholder Rights