Perennial (Capitol) v Capitol Investment: Winding Up Based on 'Just and Equitable' Ground

Perennial (Capitol) Pte Ltd and New Capitol Pte Ltd (the plaintiffs) applied to the High Court of Singapore on January 20, 2017, to wind up Capitol Investment Holdings Pte Ltd, Capitol Hotel Management Pte Ltd, and Capitol Retail Management Pte Ltd (the defendants) on the 'just and equitable' ground, citing a breakdown of trust and confidence with Chesham Properties Pte Ltd. The court dismissed the applications, holding that an existing exit mechanism in the defendants' articles of association negated the alleged unfairness.

1. Case Overview

1.1 Court

High Court of the Republic of Singapore

1.2 Outcome

Applications dismissed with costs to Chesham.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Plaintiffs sought to wind up defendants due to a breakdown in trust. The court dismissed the application, citing an available exit mechanism.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Perennial (Capitol) Pte LtdPlaintiffCorporationClaim DismissedDismissed
New Capitol Pte LtdPlaintiffCorporationClaim DismissedDismissed
Capitol Investment Holdings Pte LtdDefendantCorporationJudgment for DefendantWon
Capitol Hotel Management Pte LtdDefendantCorporationJudgment for DefendantWon
Capitol Retail Management Pte LtdDefendantCorporationJudgment for DefendantWon
Chesham Properties Pte LtdOtherCorporationCosts AwardedWon

3. Judges

Judge NameTitleDelivered Judgment
Kannan RameshJudgeYes

4. Counsels

Counsel NameOrganization
Colin LiewTSMP Law Corporation
Reshma NairTSMP Law Corporation
Thio Shen YiTSMP Law Corporation
Nicholas NgoTSMP Law Corporation
Davinder SinghDrew & Napier LLC
Chen ChiDrew & Napier LLC
Pardeep Singh KhosaDrew & Napier LLC

4. Facts

  1. The plaintiffs and Chesham each held 50% of the shares in the defendant companies.
  2. The defendant companies were incorporated to hold the assets of the Capitol Project.
  3. The relationship between Mr. Pua and Mr. Kwee deteriorated, leading to a deadlock in the management of the defendant companies.
  4. The Retail Property Management Agreements remained unsigned due to disagreements between the plaintiffs and Chesham.
  5. Article 22 of the defendants’ articles of association provided an exit mechanism for shareholders.
  6. The plaintiffs applied to wind up the defendant companies on the 'just and equitable' ground.
  7. The plaintiffs sought a buy-out order under s 254(2A) of the Companies Act as an alternative to winding up.

5. Formal Citations

  1. Perennial (Capitol) Pte Ltd and another v Capitol Investment Holdings Pte Ltd and other matters, , [2017] SGHC 84
  2. Perennial (Capitol) Pte Ltd v Capitol Investment Holdings Pte Ltd, Companies Winding Up Originating Summons No 72 of 2016, Companies Winding Up Originating Summons No 72 of 2016
  3. Perennial (Capitol) Pte Ltd v Capitol Hotel Management Pte Ltd, Companies Winding Up Originating Summons No 73 of 2016, Companies Winding Up Originating Summons No 73 of 2016
  4. Perennial (Capitol) Pte Ltd v Capitol Retail Management Pte Ltd, Companies Winding Up Originating Summons No 74 of 2016, Companies Winding Up Originating Summons No 74 of 2016

6. Timeline

DateEvent
Urban Redevelopment Authority launched a tender for a 99-year lease of land.
Chesham was incorporated.
Top Property Investment Pte Ltd was incorporated.
Perennial (Capitol) Pte Ltd was incorporated.
Original Shareholders incorporated nine companies, including the three defendants.
Capitol Retail Trust and Capitol Hotel Trust were constituted.
Two bids were submitted through the incorporated companies to the Urban Redevelopment Authority.
The Urban Redevelopment Authority awarded the tender to the bidders of Scheme A.
Original Shareholders met to discuss how to take the Capitol Project forward.
Capitol Retail Management Pte Ltd, Capitol Hotel Management Pte Ltd and Capitol Residential Development Pte Ltd executed the joint development deed.
Top Property decided to leave the Capitol Project.
Sale and purchase agreement was executed.
Hotel Management Agreement and licence agreement were executed.
A working group was set up to negotiate the terms of the Retail Property Management Agreements.
Plaintiffs provided Chesham with drafts of the two Retail Property Management Agreements.
Plaintiffs provided Chesham with drafts of the two Retail Property Management Agreements.
Mr. Pua informed Mr. Kwee of the plaintiffs’ intended participation in a reverse takeover.
Chesham sent a draft joint venture agreement to Mr. Pua.
Chesham asked for the Retail Property Management Agreements to be executed contemporaneously with the joint venture agreement.
Plaintiffs requested that the Retail Property Management Agreements be finalised before resuming discussion about the joint venture agreement.
The New Build Retail Property Management Agreement was ready for execution.
The Capitol Project mall has been operating since March 2015.
Mr. Pua requested that the Retail Property Management Agreements be signed but Mr. Kwee refused.
The hotel received its Temporary Occupation Permit.
The Applications were filed.
Hearing date.
Applications dismissed with detailed oral grounds.
Full grounds of decision issued.

7. Legal Issues

  1. Winding up on the 'just and equitable' ground
    • Outcome: The court found that while there was a breakdown of trust and confidence and a deadlock, the existence of an exit mechanism in the company's articles of association negated the unfairness that would justify a winding-up order.
    • Category: Substantive
    • Sub-Issues:
      • Breakdown of mutual trust and confidence
      • Deadlock in management
  2. Availability of buy-out order under s 254(2A) of the Companies Act
    • Outcome: The court held that a buy-out order was not appropriate because the plaintiffs had not demonstrated that a winding-up order was justified in the first place, given the existence of an exit mechanism.
    • Category: Substantive
  3. Relevance of exit mechanism in company's articles of association
    • Outcome: The court held that the existence of an exit mechanism in the company's articles of association negated the unfairness that would justify a winding-up order.
    • Category: Substantive

8. Remedies Sought

  1. Winding-up order
  2. Buy-out order

9. Cause of Actions

  • Winding up on the 'just and equitable' ground

10. Practice Areas

  • Commercial Litigation
  • Insolvency

11. Industries

  • Real Estate
  • Hospitality
  • Retail

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Sim Yong Kim v Evenstar Investments Pte LtdCourt of AppealYes[2006] 3 SLR(R) 827SingaporeCited for the principle that section 254(1)(i) of the Companies Act does not apply to a case where the loss of trust and confidence in the other members is self-induced.
Ting Shwu Ping (Administrator of the estate of Chng Koon Seng, deceased) v Scanone Pte Ltd and another appealCourt of AppealYes[2017] 1 SLR 95SingaporeCited for the principle that where an exit mechanism is available, the applicant would be unable to establish the unfairness required for the court to exercise its “just and equitable” jurisdiction.
Ebrahimi v Westbourne Galleries LtdHouse of LordsYes[1973] AC 360United KingdomCited for the characteristics of a quasi-partnership.
Lim Ah Sia v Tiong Tuang Yeong and othersHigh CourtYes[2014] 4 SLR 140SingaporeCited for the characteristics of a quasi-partnership.
Re a Company (No 007623 of 1984)High CourtYes[1986] BCLC 362United KingdomCited for the principle that a petitioner can only complain of unfairly prejudicial conduct if the majority is unwilling to pay the certified price but nonetheless insists on a rights issue or refuses to pay dividend or pension.
Re a Company (No 004377 of 1986)High CourtYes[1987] 1 WLR 102United KingdomCited for the principle that the petitioner would not ordinarily be entitled to complain of unfair conduct if he had made no attempt to use the machinery for exit provided in the articles.
Re a Company (No 006834 of 1988) ex parte KremerHigh CourtYes[1989] BCLC 365United KingdomCited for the principle that any unfairness would disappear if the minority shareholder were offered a fair price for his shares.
Chow Kwok Chuen v Chow Kwok Chi and anotherCourt of AppealYes[2008] 4 SLR(R) 362SingaporeCited for the principle that in situations of deadlock, the unfairness which justifies a “just and equitable” winding up consists in the applicant being ‘locked’ into an association which is no longer capable of functioning as intended.
O’Neill v PhillipsHouse of LordsYes[1999] 1 WLR 1092United KingdomCited for the principle that the unfairness may arise not from what the parties have positively agreed but from a majority using its legal powers to maintain the association in circumstances to which the minority can reasonably say it did not agree.
Lyle & Scott v Scott’s TrusteesHouse of LordsYes[1959] 1 AC 763United KingdomCited for its analysis of the phrase “desirous of transferring”.
Re a Company (No 003096 of 1987)CourtYes(1988) BCC 80United KingdomCited in support of the argument that the question of who should be bought out was germane to the court’s decision in a winding-up application.
Talwerdi v Infonet Technology CorpBritish Columbia Supreme CourtYes[2001] BCSC 1304CanadaCited for the principle that the principles in Ebrahimi attempt to provide relief to a shareholder who has no legal means of extracting his or her interest from the company, not to offer the most lucrative recovery possible.
Re RJ Jowsey Mining Co LtdOntario Court of AppealYes[1969] 2 OR 549CanadaCited for the principle that the corresponding Canadian legislative provision does not enable the court to give “an entirely independent remedy that will operate outside a prospective winding-up”.
Re Hillcrest Housing LtdCourtYes(1992) 94 DLR (4th) 165CanadaCited for the principle that the Canadian equivalent of s 257(1) of our CA confers a court hearing a winding-up application with the jurisdiction to make “an order in furtherance of or otherwise in connection with a … winding-up order”.
Vallée v PickardCourtYes[2007] OJ No 110CanadaCited as an example of a case in which sealed bids had been ordered.
Mostyn v SchmiingBritish Columbia Supreme CourtYes[2011] BCSC 275CanadaCited as an example of a case in which sealed bids had been ordered.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap 50, 2006 Rev Ed) s 254(1)(i)Singapore
Companies Act (Cap 50, 2006 Rev Ed) s 254(2A)Singapore
Companies Act s 257(1)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Winding up
  • Just and equitable
  • Exit mechanism
  • Deadlock
  • Quasi-partnership
  • Buy-out order
  • Retail Property Management Agreements
  • Joint Venture Agreement
  • Articles of association

15.2 Keywords

  • Winding up
  • Just and equitable
  • Exit mechanism
  • Deadlock
  • Companies Act
  • Singapore
  • Capitol Project

17. Areas of Law

Area NameRelevance Score
Winding Up95
Insolvency Law70
Company Law60
Corporate Law40
Commercial Disputes30

16. Subjects

  • Company Law
  • Insolvency Law
  • Winding Up
  • Commercial Dispute