Chong Chin Fook v Solomon Alliance Management: Derivative Action & Shareholder Rights
In Chong Chin Fook v Solomon Alliance Management Pte Ltd, the High Court of Singapore addressed an application by Chong Chin Fook, a shareholder of Solomon Alliance Management Pte Ltd, to take over the conduct of a suit initiated by the company against Pang Chee Kuan, alleging wrongful diversion of business. The court, presided over by Aedit Abdullah JC, dismissed the application, finding that Chong Chin Fook did not demonstrate good faith and that allowing him to control the suit would not be in the company's best interests due to potential conflicts of interest. The court also considered a counterclaim brought by Pang against the company and Chong Chin Fook.
1. Case Overview
1.1 Court
High Court of the Republic of Singapore1.2 Outcome
Plaintiff's application dismissed, with costs awarded to the Defendants.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Shareholder Chong Chin Fook sought to take over a suit by Solomon Alliance Management. The court denied the application due to lack of good faith and potential conflict of interest.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Chong Chin Fook (Zhang Zhenfu) | Plaintiff | Individual | Application Dismissed | Lost | Kelvin Lee, Lim Seng Siew |
| Solomon Alliance Management Pte Ltd | Defendant | Corporation | Won | Won | Daniel Koh, Genevieve Wong |
| Goh Yam Sim | Defendant | Individual | Won | Won | June Lim, Choo Zheng Xi, Jason Lee |
| Lim Pei Ling June | Defendant | Individual | Won | Won | June Lim, Choo Zheng Xi, Jason Lee |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Aedit Abdullah | Judicial Commissioner | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Kelvin Lee | Wnlex LLC |
| Lim Seng Siew | OTP Law Corporation |
| Daniel Koh | Eldan Law LLP |
| Genevieve Wong | Eldan Law LLP |
| June Lim | Eden Law Corporation |
| Choo Zheng Xi | Peter Low LLC |
| Jason Lee | Peter Low LLC |
4. Facts
- Plaintiff sought to take over a suit launched by the Company against Pang.
- Plaintiff was a shareholder of the Company.
- Management issues arose within the Company, particularly among the Plaintiff, Pang and Helen.
- Plaintiff faced an EGM to be removed as a director.
- Plaintiff instructed solicitors to commence Suit 215 against Pang.
- Pang brought a counterclaim alleging defamation against the Company and the Plaintiff.
- The 2nd and 3rd Defendants obtained independent legal opinions advising to withdraw the suit.
5. Formal Citations
- Chong Chin Fook v Solomon Alliance Management Pte Ltd and others, HC/OS 804 of 2015, [2016] SGHC 24
6. Timeline
| Date | Event |
|---|---|
| Plaintiff instructed solicitors to commence Suit 215 of 2015 against Pang. | |
| Notices sent to the Company’s clients informing them of Pang’s suspension from the Company. | |
| Extraordinary General Meeting set for Plaintiff's removal as director. | |
| Annual General Meeting held to discuss whether to continue Suit 215. | |
| Plaintiff received an e-mail stating that the Company would look to him for costs should the suit fail. | |
| Plaintiff relied upon a letter dated 4 August 2015. | |
| Plaintiff launched a separate minority oppression suit, Suit 1023 of 2015. | |
| Hearing on 1, 9, 11 December 2015 | |
| Hearing on 2 February 2016 | |
| Judgment Date |
7. Legal Issues
- Derivative Action
- Outcome: The court held that the Plaintiff's application to take over the conduct of the suit was not made in good faith and was not in the best interests of the company.
- Category: Substantive
- Sub-Issues:
- Good faith of applicant
- Conflict of interest
- Interests of the company
- Related Cases:
- [2013] 2 SLR 340
- [2004] 3 SLR(R) 1
- [2014] AJ No 350
- [2009] NSWSC 350
- [2010] NSWCA 115
- [2008] NSWCA 52
- [2010] AJ No 622
- Good Faith
- Outcome: The court found that the Plaintiff was not acting in good faith due to a personal vendetta and clouding of judgment.
- Category: Substantive
- Related Cases:
- [2013] 2 SLR 340
- [2004] 3 SLR(R) 1
- Conflict of Interest
- Outcome: The court found that allowing the Plaintiff to take over the suit would create a conflict of interest, as the Company had a claim against the Plaintiff for contribution and/or indemnification.
- Category: Substantive
- Related Cases:
- [2014] AJ No 350
- [2009] NSWSC 350
- [2010] NSWCA 115
- [2008] NSWCA 52
- [2010] AJ No 622
8. Remedies Sought
- Leave to take over conduct of a pending suit
- Damages
9. Cause of Actions
- Breach of Agreement
- Defamation
10. Practice Areas
- Commercial Litigation
- Corporate Law
11. Industries
- Investment
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Ang Thiam Swee v Low Hian Chor | Court of Appeal | Yes | [2013] 2 SLR 340 | Singapore | Cited for the principle that personal animosity does not preclude good faith if the action benefits the company. |
| Pang Yong Hock v PKS Contracts Services Pte Ltd | Court of Appeal | Yes | [2004] 3 SLR(R) 1 | Singapore | Cited for the observation that hostility between parties in a s 216A case is normally insufficient to show a lack of good faith. |
| Porter v Anytime Custom Mechanical Ltd | Alberta Court | Yes | [2014] AJ No 350 | Canada | Cited as an example where the Alberta Court dismissed an application by a shareholder to have conduct of an action being defended by the company due to the possibility of conflict. |
| Transmetro Corp Ltd v Kol Tov Pty Ltd | New South Wales Supreme Court | Yes | [2009] NSWSC 350 | Australia | Cited as an example where the court considered conflict of interest as material in a s 216A-equivalent action. |
| McEvoy v Caplan | New South Wales Court of Appeal | Yes | [2010] NSWCA 115 | Australia | Cited as an example where the court considered conflict of interest as material in a s 216A-equivalent action. |
| Chahwan v Euphoric Pty Ltd | New South Wales Court of Appeal | Yes | [2008] NSWCA 52 | Australia | Cited as an example where the court considered conflict of interest as material in a s 216A-equivalent action. |
| Kovac v Opus Building Corp | Alberta Court of Queen’s Bench | Yes | [2010] AJ No 622 | Canada | Cited for the proposition that the risk of conflict should be addressed. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
| s 216A(3) of the Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Derivative action
- Shareholder rights
- Good faith
- Conflict of interest
- Minority oppression
- Diversion of business
- Personal vendetta
- EGM
- Indemnification
- Contribution
15.2 Keywords
- derivative action
- shareholder
- companies act
- good faith
- conflict of interest
- singapore
16. Subjects
- Company Law
- Shareholder Disputes
- Civil Litigation
17. Areas of Law
- Companies Law
- Shareholder Rights
- Civil Procedure