Lim Seng Wah v Han Meng Siew: Oppression of Minority Shareholders & Breach of Contract

In Lim Seng Wah and Heah Eng Lim v Han Meng Siew and Wang Lai Suan, the Singapore High Court addressed claims of minority shareholder oppression and breach of contract within Ensure Engineering Pte Ltd. Lim and Heah alleged that Han and Wang, as directors, improperly enriched themselves through excessive directors' fees and payments to a related entity, Singapore Vision Farm, while undervaluing dividends. The court found in favor of the plaintiffs, determining that Han and Wang had acted oppressively and in disregard of the plaintiffs' interests. The court ordered Han and Wang to purchase Kwok's shares in the Company at fair valuation.

1. Case Overview

1.1 Court

High Court of the Republic of Singapore

1.2 Outcome

Judgment for Plaintiffs

1.3 Case Type

Civil

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Singapore High Court judgment on oppression of minority shareholders and breach of contract. The court found in favor of the plaintiffs.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Lim Seng WahPlaintiffIndividualSuccessful in oppression claimPartial
Heah Eng LimPlaintiffIndividualSuccessful in oppression claimPartial
Han Meng SiewDefendantIndividualOrdered to purchase Kwok's sharesLost
Wang Lai SuanDefendantIndividualOrdered to purchase Kwok's sharesLost
Ensure Engineering Pte LtdDefendantCorporationNominal DefendantNeutral
Kwok Hong WaiPlaintiffIndividualSuccessful in oppression claimPartial

3. Judges

Judge NameTitleDelivered Judgment
Chua Lee MingJudicial CommissionerYes

4. Counsels

Counsel NameOrganization
Daniel SooDrew & Napier LLC
Jimmy YimDrew & Napier LLC
Andrew LeeDrew & Napier LLC
Ben ChiaDrew & Napier LLC
Lim Seng SiewOTP Law Corporation

4. Facts

  1. Lim, Heah, Han, and Ang started a company together in 1988.
  2. Han was appointed Managing Director on 1 November 1999.
  3. A shareholders’ agreement was signed in 2001 by Bernard, Lim, Heah, Han and the Company.
  4. Lim and Heah resigned from the Board on 13 September 2001.
  5. Han and Wang passed a directors’ resolution on 11 August 2004 to remove Ang, Bernard and Cheong as directors.
  6. In 2011, the Company sold its property for $5.6m, resulting in a capital gain of $4,034,745.
  7. Lim and Heah tried to exit the Company by offering their shares to the other shareholders in 2013.
  8. Han and Wang did not approve the transfers by Lim and Heah to Kwok.

5. Formal Citations

  1. Lim Seng Wah and another v Han Meng Siew and others, Suit No 796 of 2014, [2016] SGHC 177

6. Timeline

DateEvent
Action commenced by Lim and Heah against Han and Wang
Trial began
Trial continued
Trial continued
Han and Wang entered into a Shares Sale and Purchase Deed with Kwok
Transfers of shares by Lim and Heah to Kwok were registered
Kwok filed Summons No 1638 of 2016 to be joined as a plaintiff
Hearing for Kwok’s application and closing submissions
John Koh filed Summons No 2109 of 2016 to be joined as a party
Hearing for John Koh’s application
Judgment reserved

7. Legal Issues

  1. Oppression of Minority Shareholders
    • Outcome: The court found that Han and Wang conducted the affairs of the company in a manner that was oppressive and in blatant disregard of the interests of Lim and Heah.
    • Category: Substantive
    • Sub-Issues:
      • Excessive directors' fees
      • Underpayment of dividends
      • Conflict of interest
      • Disregard of shareholder rights
  2. Breach of Contract
    • Outcome: The court found that Han breached clauses 3.7 and 9 of the 2001 Agreement and that, by either expert’s computation, there has been substantial overpayment of directors’ fees and underpayment of dividends. However, the court declined to make the declaration sought.
    • Category: Substantive
    • Sub-Issues:
      • Repudiation of shareholders' agreement
      • Failure to distribute profits as agreed
  3. Locus Standi
    • Outcome: The court held that Lim and Heah lost their locus standi to continue with the s 216 Claim when they ceased to be registered as shareholders in the Company.
    • Category: Procedural
  4. Joinder of Plaintiff
    • Outcome: The court granted Kwok’s application to be joined as a plaintiff in this action.
    • Category: Procedural

8. Remedies Sought

  1. Declaration that Lim and Heah be discharged from the 2001 Agreement
  2. Orders that the defendants repay to the Company the overpayment of directors’ fees received by them
  3. Orders that the defendants be liable in damages for, make restitution of or account for the monies wrongfully paid by the Company to SVF

9. Cause of Actions

  • Oppression of Minority Shareholders
  • Breach of Contract

10. Practice Areas

  • Commercial Litigation
  • Corporate Law

11. Industries

  • Engineering

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Kitnasamy s/o Marudapan v Nagatheran s/o Manogar and anotherHigh CourtYes[2000] 1 SLR(R) 542SingaporeCited to establish that only a member or holder of debentures of a company is entitled to seek relief under section 216 of the Companies Act, but respondents may be estopped from asserting that the applicant is not a member in appropriate circumstances.
United Rural Enterprises Pty Ltd v Lopmand Pty Ltd and othersUnknownYes(2003) 47 ACSR 514AustraliaCited by Lim and Heah to support their submission that they continue to have the requisite standing to maintain the section 216 claim even though they are no longer shareholders in the Company.
Hollington on Shareholders’ RightsUnknownYesR Hollington QC, Hollington on Shareholders’ Rights (Sweet & Maxwell, 7th Ed, 2013)UnknownCited for the principle that a registered shareholder who has freely disposed of his shares will no longer have locus standi once he has ceased to be registered as a member.
Singapore Civil ProcedureUnknownYesSingapore Civil Procedure 2016 vol 1 (Foo Chee Hock JC gen ed) (Sweet & Maxwell, 2016)SingaporeCited for the principle that Kwok’s joinder as a plaintiff takes effect from the date that the amended writ is served on him and does not operate retrospectively so as to take effect at the commencement of the proceedings.
Re Spargos Mining NLSupreme Court of Western AustraliaYes(1990) 3 ACSR 1AustraliaCited by Kwok to support his submission that an applicant under section 216 can rely on conduct that took place before he became a shareholder.
Lloyd v Casey and othersUnknownYes[2002] 1 BCLC 454United KingdomCited for the principle that an applicant under section 459 of the Companies Act 1985 (c 6) (UK) could rely on conduct which took place before he became a registered shareholder.
Tyrion Holdings Ltd v ClaydonUnknownYes[2015] NZAR 698New ZealandCited as following the decision in Lloyd v Casey and others [2002] 1 BCLC 454, that an applicant under s 459 of the Companies Act 1985 (c 6) (UK) could rely on conduct which took place before he became a registered shareholder.
Re a Company (No 007281 of 1986)Companies CourtYes[1987] BCLC 593United KingdomCited by John Koh to support his submission that all shareholders of a company should be included as parties in an action under section 216.
Re BSB Holdings LtdUnknownYes[1993] BCLC 246United KingdomCited by John Koh to support his submission that all shareholders of a company should be included as parties in an action under section 216.
Chan Kern Miang v Kea Resources Pte LtdUnknownYes[1998] 2 SLR(R) 85SingaporeCited for the principle that whether a shareholder should be joined as a party was subject to the overriding consideration that his joinder must be “just and convenient”.
Frederick E Rose (London) Ld v William H Pim Jnr & Co LdUnknownYes[1953] 2 QB 450United KingdomCited for the principle that to succeed in the counterclaim for rectification, Han and Wang must prove that the parties were in complete agreement on the terms of the contract and that these terms were erroneously written down wrongly in the contract.
Cold Storage Holdings plc and others v Overseas Assurance Corp Ltd and anotherUnknownYes[1988] 1 SLR(R) 255SingaporeCited for the principle that the parties’ intention is to be ascertained objectively. A complete antecedent concluded contract is not required but an outward expression of accord is required.
Joscelyne v Nissen and AnotherUnknownYes[1970] 2 QB 86United KingdomCited for the principle that the parties’ intention is to be ascertained objectively. A complete antecedent concluded contract is not required but an outward expression of accord is required.
Over & Over Ltd v Bonvests Holdings Ltd and anotherCourt of AppealYes[2010] 2 SLR 776SingaporeCited for the principle that the common thread underlying the entire section 216 is that of unfairness. The common test is that of “a visible departure from the standards of fair dealing and a violation of the conditions of fair play which a shareholder is entitled to expect”.
Minority Shareholders’ Rights and RemediesUnknownYesMargaret Chew, Minority Shareholders’ Rights and Remedies (LexisNexis, 2nd Ed, 2007)UnknownCited for the principle that the common thread underlying the entire section 216 is that of unfairness. The common test is that of “a visible departure from the standards of fair dealing and a violation of the conditions of fair play which a shareholder is entitled to expect”.
Raffles Town Club Pte Ltd v Lim Eng Hock Peter and others and other appealsCourt of AppealYes[2013] 1 SLR 374SingaporeCited for the principle that directors of a company may not make use of their position to make a profit at the expense of the company as they owe a fiduciary duty to act in the interests of the company.
Ng Kek Wee v Sim City Technology LtdCourt of AppealYes[2014] 4 SLR 723SingaporeCited for the principle that the touchstone of control is not whether the plaintiffs are minority shareholders of the Company but whether they lack the power to stop the oppressive acts.
Tan Yong San v Neo Kok Eng and othersHigh CourtYes[2011] SGHC 30SingaporeCited for the principle that section 6 of the Limitation Act did not apply to a claim under section 216 since such a claim was statutory in nature and not founded on a contract, or tort, or any other limb under section 6 of the Limitation Act.
Corporate LawUnknownYesHans Tjio, Pearlie Koh & Lee Pey Woan, Corporate Law (Academy Publishing, 2015)UnknownCited for the principle that the text of section 216(1)(b) contemplates past acts and conduct. The mere fact that the alleged unfairness occurred in the past should not defeat an application under section 216.
Low Peng Boon v Low Janie and others and other appealsUnknownYes[1999] 1 SLR(R) 337SingaporeCited for the principle that the court hearing an section 216 application “has an unfettered discretion to make such order as it thinks appropriate” and is not constrained by the parties’ pleaded remedies.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap 50, 2006 Rev Ed)Singapore
Employment of Foreign Manpower Act (Cap 91A, 1997 Rev Ed)Singapore
Limitation Act (Cap 163, 1996 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Oppression
  • Minority Shareholders
  • Breach of Contract
  • Directors' Fees
  • Dividends
  • Shareholders' Agreement
  • Net Profits
  • Singapore Vision Farm
  • Locus Standi
  • Joinder

15.2 Keywords

  • Oppression
  • Minority Shareholders
  • Breach of Contract
  • Directors' Fees
  • Dividends
  • Shareholders' Agreement
  • Singapore

17. Areas of Law

Area NameRelevance Score
Minority Oppression90
Company Law85
Shareholders Agreement75
Contract Law70
Corporate Law65
Shareholder Disputes60
Breach of Contract60
Fiduciary Duty55
Director's Duties50
Commercial Disputes40

16. Subjects

  • Company Law
  • Contract Law
  • Shareholder Rights