Petroships Investment v. Wealthplus: Derivative Action, Liquidation, and Minority Shareholder Rights

Petroships Investment Pte Ltd, a minority shareholder in Wealthplus Pte Ltd, appealed against the decision of the High Court, which had dismissed its application for leave to commence a derivative action against the directors of Wealthplus, Koh Brothers Group Limited, and Megacity Investment Pte Ltd. The Court of Appeal, comprising Sundaresh Menon CJ, Chao Hick Tin JA, and Andrew Phang Boon Leong JA, dismissed the appeal, holding that Section 216A of the Companies Act is not applicable when the company concerned is already in liquidation. The court found it unnecessary to inquire into the application of Section 216A, as the provision was not applicable in the first place.

1. Case Overview

1.1 Court

Court of Appeal of the Republic of Singapore

1.2 Outcome

Appeal Dismissed

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Petroships Investment sought derivative action against Wealthplus directors. The court held that Section 216A of the Companies Act does not apply when a company is in liquidation.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
PETROSHIPS INVESTMENT PTE LTDAppellant, Applicant, PlaintiffCorporationAppeal DismissedLost
WEALTHPLUS PTE LTDRespondent, DefendantCorporationFavorable RulingWon
KOH BROTHERS GROUP LIMITEDRespondent, DefendantCorporationFavorable RulingWon
MEGACITY INVESTMENT PTE LTDRespondent, DefendantCorporationFavorable RulingWon

3. Judges

Judge NameTitleDelivered Judgment
Sundaresh MenonChief JusticeNo
Chao Hick TinJudge of AppealNo
Andrew Phang Boon LeongJudge of AppealYes

4. Counsels

Counsel NameOrganization
Ho Mingjie KevinBraddell Brothers LLP
Grace LokeBraddell Brothers LLP
Tan Kok PengBraddell Brothers LLP
Xiao HongyuBraddell Brothers LLP
Mulani Prakash PM & A Law Corporation
Carmen ChenM & A Law Corporation
Tan Ruo YuRajah & Tann Singapore LLP
Khelvin Xu CunhanRajah & Tann Singapore LLP
Rethnam Chandra MohanRajah & Tann Singapore LLP

4. Facts

  1. Petroships was a minority shareholder (10%) in Wealthplus.
  2. Wealthplus was placed in members’ voluntary liquidation.
  3. Petroships sought leave to commence a derivative action against Wealthplus' directors.
  4. The proposed derivative action related to four transactions that Petroships claimed were not in Wealthplus' interests.
  5. Wealthplus' directors failed to act on Petroships’ notice to explain the four transactions.
  6. Wealthplus was placed in liquidation a week after Petroships filed Originating Summons No 766 of 2012.
  7. The new liquidators adopted a neutral stance with regard to Petroships’ application in OS 766.

5. Formal Citations

  1. Petroships Investment Pte Ltd v Wealthplus Pte Ltd and others and another matter, Civil Appeal No 113 of 2014, [2016] SGCA 17

6. Timeline

DateEvent
Koh Brothers Group Limited listed
Koh Tiat Meng invited Alan Chan to invest in a project in China
Joint venture agreement signed between Petroships and Megacity
Wealthplus sold land use rights
Alan Chan resigned from Wealthplus directorship
Petroships sued Megacity
Petroships' suit against Megacity was struck out
Petroships sued Megacity and Wealthplus
Petroships' suit against Megacity and Wealthplus was struck out
Petroships sued Megacity and Wealthplus again
Petroships' suit against Megacity and Wealthplus was struck out
Alan Chan questioned four transactions in a letter to Koh Tiat Meng
Petroships sued Koh Bros Group
Wealthplus' annual general meeting took place
Petroships' suit against Koh Bros Group was struck out
Petroships' appeal to the High Court was dismissed
Petroships served notice on Wealthplus' directors
Petroships filed Originating Summons No 766 of 2012
Wealthplus was placed in members’ voluntary liquidation
Petroships drew the four transactions to the liquidators’ attention
Liquidators stated their intention to investigate Petroships’ allegations
Liquidators applied to the High Court for directions
Wealthplus resolved to accept the liquidators’ resignations and appoint new liquidators
Hearing date
Judgment date

7. Legal Issues

  1. Applicability of Section 216A of the Companies Act
    • Outcome: The court held that Section 216A of the Companies Act does not apply when a company is in liquidation.
    • Category: Substantive
    • Sub-Issues:
      • Availability of derivative action when company is in liquidation
      • Interpretation of statutory provisions
      • Shareholder's right to bring action on behalf of the company
  2. Good Faith Requirement for Derivative Actions
    • Outcome: The court did not rule on this issue as it found Section 216A to be inapplicable.
    • Category: Substantive
    • Sub-Issues:
      • Collateral purpose of the complainant
      • Dominant purpose test
      • Dishonesty of the complainant
  3. Prima Facie Interests of the Company
    • Outcome: The court did not rule on this issue as it found Section 216A to be inapplicable.
    • Category: Substantive
    • Sub-Issues:
      • Practical and commercial interests of the company
      • Availability of alternative remedies
      • Role of liquidators in protecting company interests

8. Remedies Sought

  1. Leave to Commence Derivative Action
  2. Recovery of Transferred Monies

9. Cause of Actions

  • Breach of Directors' Duties
  • Failure to Protect Company Interests

10. Practice Areas

  • Commercial Litigation
  • Corporate Law
  • Insolvency Law

11. Industries

  • No industries specified

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Petroships Investment Pte Ltd v Wealthplus Pte Ltd and othersHigh CourtYes[2015] SGHC 145SingaporeThe judgment against which the present appeal has been brought focused on whether or not the pre-requisites pursuant to s 216A of the Companies Act had been satisfied.
Iesini v Westrip Holdings LtdEnglish High CourtYes[2010] BCC 420EnglandReferred to regarding the test for good faith in derivative actions, specifically whether the shareholder's dominant purpose was to benefit the company.
Cinematic Finance Limited v Dominic Ryder and OthersEnglish High CourtYes[2010] EWHC 3387 (Ch)EnglandCited to support the proposition that a statutory remedy is unavailable in liquidation.
Chahwan v Euphoric Pty Ltd and anotherNew South Wales Court of AppealYes[2008] NSWCA 52AustraliaCited to support the proposition that a statutory remedy is unavailable in liquidation.
Fong Wai Lyn Carolyn v Airtrust (Singapore) Pte Ltd and anotherSingapore High CourtYes[2011] 3 SLR 980SingaporeCited for the notice requirement under s 216A(3)(a) of the Companies Act.
Foss v HarbottleUnknownYes(1843) 2 Hare 461EnglandCited as the foundational case establishing that a company should sue for wrongs done to it, with limited exceptions for shareholder action.
L&B Electric Ltd v OickleSupreme Court of Nova ScotiaYes(2005) NSSC 110CanadaDiscussed the genesis of Canada’s statutory derivative action and the criticisms of Foss v Harbottle.
Hedley v Albany Power Centre Ltd (in liq)High CourtYes[2005] 2 NZLR 196New ZealandCited for the principle that once a company is in liquidation, the court should not exercise its jurisdiction to allow a derivative action.
Fustar Chemicals Ltd (Hong Kong) v Liquidator of Fustar Chemicals Pte LtdCourt of AppealYes[2009] 4 SLR 458SingaporeCited for the principle that liquidators must maintain independence and act fairly.
Fargro v GodfroyEnglish High CourtYes[1986] 1 WLR 1134EnglandCited for the principle that a derivative claim cannot be brought by a minority shareholder of a company in liquidation.
Ferguson v WallbridgeJudicial Committee of the Privy CouncilYes[1935] 3 DLR 66British ColumbiaCited for the common law precedent that the right of a minority shareholder to maintain a representative action against the company and the majority shareholders ceased as soon as the company went into liquidation.
Re Country Traders Distributors Ltd and the Companies ActSupreme Court of New South Wales (Equity Division)Yes[1974] 2 NSWLR 135AustraliaCited for the principle that powers of the directors cease when the court orders the winding up of the company.
Ting Sing Ning v Ting Chek SweeCourt of AppealYes[2008] 1 SLR(R) 197SingaporeThe Court of Appeal refused to express its view on the question and left it open as to whether a shareholder may nevertheless choose to rely on the common law when section 216A is available.
Shield Development Co Ltd v Snyder and Western Mines LtdBritish Columbia Supreme CourtYes[1976] 3 WWR 44CanadaAcknowledged obiter dicta to the contrary in the British Columbia Supreme Court decision of Shield Development Co Ltd v Snyder and Western Mines Ltd [1976] 3 WWR 44 at 52, she observed thus (at p 323)

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap 50, 2006 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Derivative Action
  • Liquidation
  • Minority Shareholder
  • Good Faith
  • Companies Act
  • Members' Voluntary Liquidation
  • Wrongdoer Control
  • Liquidator
  • Foss v Harbottle
  • Section 216A

15.2 Keywords

  • Derivative action
  • liquidation
  • minority shareholder rights
  • Singapore
  • Companies Act

17. Areas of Law

Area NameRelevance Score
Winding Up90
Company Law90
Insolvency Law85
Derivative action75
Minority Oppression70
Civil Procedure40

16. Subjects

  • Company Law
  • Insolvency Law
  • Civil Procedure