Leong Chee Kin v Ideal Design Studio: Minority Shareholder Oppression & Business Diversion

In Leong Chee Kin v Ideal Design Studio Pte Ltd, the High Court of Singapore addressed a claim by minority shareholder Leong Chee Kin against Ideal Design Studio and its directors, Rosa Chew and Ong Choon Guan, for minority oppression under Section 216 of the Companies Act. Leong alleged oppression through his removal as director, exclusion from management, and diversion of Ideal Design Studio's business to other companies. The court dismissed the commission claim and found that while his removal as director and exclusion from management did not constitute oppression, the diversion of business did. The court ordered the defendants to purchase Leong's shares, valued as if the business diversion had not occurred. Both sides appealed the decision.

1. Case Overview

1.1 Court

High Court of Singapore

1.2 Outcome

Application for relief under Section 216 of the Companies Act granted on the basis that the defendants’ diversion of business away from Ideal Design Studio amounts to oppressive conduct.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Minority shareholder Leong Chee Kin sues Ideal Design Studio for oppression due to business diversion. The court found oppressive conduct and ordered a share buyout.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Leong Chee KinPlaintiffIndividualApplication for relief under Section 216 of the Companies Act grantedWon
Ideal Design Studio Pte LtdDefendantCorporationClaim for commission dismissedLost
Rosa Chew Fong ThengDefendantIndividualApplication for relief under Section 216 of the Companies Act grantedLost
Ong Choon GuanDefendantIndividualApplication for relief under Section 216 of the Companies Act grantedLost

3. Judges

Judge NameTitleDelivered Judgment
Vinodh CoomaraswamyJudgeYes

4. Counsels

Counsel NameOrganization
Aziz Tayabali SamiwallaAziz Tayabali & Associates
Ranjit SinghFrancis Khoo & Lim

4. Facts

  1. Leong Chee Kin was a minority shareholder and director of Ideal Design Studio Pte Ltd.
  2. Rosa Chew and Ong Choon Guan are the directors and majority shareholders of Ideal Design Studio.
  3. Leong was removed as a director in November 2008.
  4. Between January 2009 and November 2011, Rosa Chew and Ong Choon Guan incorporated five other companies with similar names.
  5. The five companies are Ideal Design Renovation Pte Ltd, Ideal Design Interior Pte Ltd, Ideal Design Creations Pte Ltd, Ideal Design Werkz Pte Ltd, and Ideal Design Home Pte Ltd.
  6. The defendants diverted business from Ideal Design Studio to these five other companies.
  7. Leong Chee Kin claimed unpaid commission from Ideal Design Studio.

5. Formal Citations

  1. Leong Chee Kin (on behalf of himself and as a minority shareholder of Ideal Design Studio Pte Ltd) v Ideal Design Studio Pte Ltd and others, Suit No 304 of 2012, [2017] SGHC 192

6. Timeline

DateEvent
Ideal Design Studio incorporated.
Leong Chee Kin became a shareholder and director of Ideal Design Studio.
Leong Chee Kin removed as a director of Ideal Design Studio.
Ideal Design Renovation Pte Ltd incorporated.
Leong Chee Kin discovered the existence of the five Ideal Design companies.
Ideal Design Home Pte Ltd incorporated.
Suit No 304 of 2012 filed in the High Court of Singapore.
Trial began.
Court dismissed the plaintiff’s claim against Ideal Design Studio for commission.
Court found that the plaintiff’s removal as a director and his exclusion from management does not amount to oppression.
Court accepted that the diversion of Ideal Design Studio’s business for the defendants’ sole benefit does amount to oppression within the meaning of s 216 of the Act.
Court ordered the defendants to purchase the plaintiff’s shareholding in Ideal Design Studio.
Judgment delivered.

7. Legal Issues

  1. Minority Shareholder Oppression
    • Outcome: The court found that the diversion of business from Ideal Design Studio to the other Ideal Design companies was oppressive within the meaning of s 216 of the Act. But removing the plaintiff as a director and excluding him from the management of Ideal Design Studio do not constitute oppression.
    • Category: Substantive
    • Sub-Issues:
      • Diversion of business
      • Exclusion from management
      • Removal as director
  2. Breach of Contract
    • Outcome: The court dismissed the plaintiff’s claim for commission against Ideal Design Studio.
    • Category: Substantive
    • Sub-Issues:
      • Claim for commission
  3. Reflective Loss Principle
    • Outcome: The court found that the reflective loss principle bars neither the plaintiff’s entitlement to relief under s 216 nor the nature of the relief which the plaintiff seeks.
    • Category: Substantive

8. Remedies Sought

  1. Buyout of Shares
  2. Commission

9. Cause of Actions

  • Minority Oppression
  • Breach of Contract

10. Practice Areas

  • Commercial Litigation
  • Corporate Law

11. Industries

  • Interior Design

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Over & Over Ltd v Bonvests Holdings Ltd and anotherSingapore Court of AppealYes[2010] 2 SLR 776SingaporeCited to clarify that the limbs of s 216 are bound by the common thread of unfairness and that the touchstone for minority oppression is whether the conduct being complained of is commercially unfair.
Re Kong Thai Sawmill (Miri) Sdn BhdN/AYes[1978] 2 MLJ 227MalaysiaCited for the principle that commercial unfairness arises when there has been 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.
Re Saul D Harrison & Sons plcN/AYes[1995] 1 BCLC 14England and WalesCited for the contextual approach in ascertaining commercial unfairness and that the unfairness of a party’s conduct is to be assessed objectively against the backdrop of the parties’ relationship and from the perspective of a commercial relationship.
Lim Kok Wah and others v Lim Boh Yong and others and other mattersSingapore High CourtYes[2015] 5 SLR 307SingaporeCited to show that unlawful conduct that is of a technical nature is not necessarily commercially unfair and that whether an act is commercially unfair depends on the context in which the act took place.
Ebrahimi v Westbourne Galleries LtdHouse of LordsYes[1973] AC 360United KingdomCited for the principle that equitable considerations may be superimposed in situations where the company was formed on the basis of personal relationships involving mutual trust and confidence.
Lim Swee Khiang and another v Borden Co (Pte) Ltd and othersSingapore High CourtYes[2006] 4 SLR(R) 745SingaporeCited for the principle that in quasi-partnerships, the court will insist upon a high standard of corporate governance.
O’Neill and another v Phillips and othersN/AYes[1999] 2 All ER 961England and WalesCited for the principle that a legitimate expectation of inclusion in management requires an agreement between the parties by way of words or conduct which gives rise to an expectation that the plaintiff will be included in management.
Tullio Planeta v Maoro Andrea GSingapore High CourtYes[1994] 2 SLR(R) 501SingaporeCited for the proposition that exclusion from management can be the basis for oppression where there is an agreement to the contrary.
In re London School of Electronics LtdN/AYes[1986] Ch 211England and WalesCited for the principle that the majority’s conduct in diverting business away from a company in which a complainant has a minority shareholding, without adequate justification, constitutes unfair prejudice.
Intraco Ltd v Multi-Pak Singapore Pte LtdSingapore High CourtYes[1994] 3 SLR(R) 1064SingaporeCited for the test of whether an honest and intelligent person in the position of the directors could objectively and reasonably conclude that the impugned acts were in the interests of the company.
Spectramed Pte Ltd v Lek Puay Puay and others and another suitSingapore High CourtYes[2011] SGHC 43SingaporeCited for the proposition that the law does not condone a tit-for-tat approach to shareholder relations.
Foss v HarbottleN/AYes(1843) 2 Hare 461England and WalesCited for the rule that only a company can sue for losses that it has suffered, because a company is a legal entity distinct from its shareholders.
Ng Kek Wee v Sim City Technology LtdSingapore Court of AppealYes[2014] 4 SLR 723SingaporeCited for the principle that a person may not initiate an action to recover a loss which he has suffered by virtue of a diminution in the value of his shares in a company which merely reflects the company’s own loss.
Townsing Henry George v Jenton Overseas Investment Pte Ltd (in liquidation)Singapore Court of AppealYes[2007] 2 SLR(R) 597SingaporeCited for the principle that a person may not initiate an action to recover a loss which he has suffered by virtue of a diminution in the value of his shares in a company which merely reflects the company’s own loss.
Johnson v Gore Wood & Co (a firm)House of LordsYes[2002] 2 AC 1United KingdomCited for the principle that a person may not initiate an action to recover a loss which he has suffered by virtue of a diminution in the value of his shares in a company which merely reflects the company’s own loss.
Re Charnley Davies Ltd (No 2)N/AYes[1990] BCLC 760England and WalesCited for the importance of ascertaining the true nature of a complaint in determining whether an action is more appropriately brought for minority oppression or by way of a derivative action.
Charterbridge Corporation Ltd v Lloyds Bank Ltd and anotherN/AYes[1970] Ch 62England and WalesCited for the principle that controllers of a group of companies may consider the entire group’s best interests in making decisions, they are not entitled to sacrifice the interests of one company in the group.
Yeo Hung Khiang v Dickson Investment (Singapore) Pte Ltd and othersSingapore High CourtYes[1999] 1 SLR(R) 773SingaporeCited for the principle that the court is not bound by strict accounting principles and its role is to determine a price that is fair and just in the particular circumstances of the case.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap 50, 2006 Rev Ed)Singapore
Section 216 of the Companies Act (Cap 50, 2006 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Minority oppression
  • Business diversion
  • Fiduciary duty
  • Reflective loss
  • Quasi-partnership
  • Legitimate expectation
  • Commercial unfairness

15.2 Keywords

  • Minority shareholder
  • Oppression
  • Business diversion
  • Companies Act
  • Singapore
  • Ideal Design Studio

17. Areas of Law

Area NameRelevance Score
Minority Oppression95
Company Law75
Fiduciary Duties60
Commercial Disputes60
Breach of Contract50
Contract Law50

16. Subjects

  • Company Law
  • Corporate Governance
  • Shareholder Rights