Perennial v Capitol: Winding Up Application Based on Just and Equitable Ground
Perennial (Capitol) Pte Ltd and New Capitol Pte Ltd, as appellants, sought to wind up Capitol Investment Holdings Pte Ltd, Capitol Hotel Management Pte Ltd, and Capitol Retail Management Pte Ltd on the just and equitable ground, due to a deadlock with Chesham Properties Pte Ltd. The Court of Appeal dismissed the appeals, holding that the existence of an exit mechanism in the articles of association (Art 22) negated the unfairness required to justify winding up under Section 254(1)(i) of the Companies Act, and that the principles in Ting Shwu Ping applied.
1. Case Overview
1.1 Court
Court of Appeal of the Republic of Singapore1.2 Outcome
Appeals dismissed.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Shareholders Perennial sought to wind up Capitol Investment Holdings due to a deadlock. The court dismissed the application, citing an existing exit mechanism.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Perennial (Capitol) Pte Ltd | Appellant, Plaintiff | Corporation | Appeal Dismissed | Lost | |
| New Capitol Pte Ltd | Appellant, Plaintiff | Corporation | Appeal Dismissed | Lost | |
| Capitol Investment Holdings Pte Ltd | Respondent, Defendant | Corporation | Winding up application dismissed | Won | |
| Capitol Hotel Management Pte Ltd | Respondent, Defendant | Corporation | Winding up application dismissed | Won | |
| Capitol Retail Management Pte Ltd | Respondent, Defendant | Corporation | Winding up application dismissed | Won | |
| Chesham Properties Pte Ltd | Other | Corporation | Winding up application dismissed | Won |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Sundaresh Menon | Chief Justice | No |
| Judith Prakash | Justice of the Court of Appeal | Yes |
| Steven Chong | Justice of the Court of Appeal | No |
4. Counsels
4. Facts
- Perennial and New Capitol sought to wind up three companies due to a deadlock with Chesham.
- The shareholders had a quasi-partnership relationship built on trust and confidence.
- There was a breakdown of trust and confidence between the shareholders.
- Article 22 of the articles of association provided a buy-out mechanism.
- The appellants argued that the exit mechanism was not intended to resolve deadlocks.
- The respondent companies were viable and a winding up could have disastrous results.
- The appellants filed winding-up applications in respect of the three respondent companies under s 254(1)(i) of the Companies Act.
5. Formal Citations
- Perennial (Capitol) Pte Ltd and another v Capitol Investment Holdings Pte Ltd and other appeals, Civil Appeals Nos 51–53 of 2017, [2018] SGCA 11
6. Timeline
| Date | Event |
|---|---|
| Urban Redevelopment Authority launched a tender for a lease of land at the junction of North Bridge Road and Stamford Road. | |
| Chesham Properties Pte Ltd incorporated. | |
| Top Property Investment Pte Ltd incorporated. | |
| Perennial (Capitol) Pte Ltd incorporated. | |
| Nine companies, including the three respondent companies, incorporated. | |
| Two bids submitted through the Nine Companies to the Urban Redevelopment Authority. | |
| One of the proposals won the tender. | |
| Top Property Investment Pte Ltd decided to leave the Capitol Project. | |
| Hotel Management Agreement executed. | |
| Appellants provided Chesham Properties Pte Ltd with drafts of the two Retail Property Management Agreements. | |
| Hotel received its Temporary Occupation Permit. | |
| Appellants filed winding-up applications in respect of the three respondent companies. | |
| Hearing before the Court of Appeal. | |
| Grounds of decision delivered by the Court of Appeal. |
7. Legal Issues
- Winding up on just and equitable grounds
- Outcome: The court held that the existence of an exit mechanism in the articles of association negated the unfairness required to justify winding up.
- Category: Substantive
- Sub-Issues:
- Deadlock between shareholders
- Inability to exit company
- Breakdown of trust and confidence
- Applicability of exit mechanism in articles of association
- Outcome: The court held that the exit mechanism in the articles of association was applicable and negated the need for winding up.
- Category: Substantive
- Sub-Issues:
- Interpretation of pre-emption clause
- Intention of shareholders regarding exit mechanism
- Fairness of valuation method
8. Remedies Sought
- Winding-up order
- Order for Chesham to buy out the appellants’ interests
- Order for the appellants to buy out Chesham’s interests
9. Cause of Actions
- Winding up on just and equitable grounds
10. Practice Areas
- Commercial Litigation
- Corporate Law
11. Industries
- Real Estate
- Hospitality
- Retail
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Ting Shwu Ping (administrator of the estate of Chng Koon Seng, deceased) v Scanone Pte Ltd and another appeal | Court of Appeal | Yes | [2017] 1 SLR 95 | Singapore | The principles established in this case are applicable in the context of a deadlock between equal shareholders of a company sought to be wound up. |
| Chow Kwok Chuen v Chow Kwok Chi and another | Court of Appeal | Yes | [2008] 4 SLR(R) 362 | Singapore | Cited for the principle that unfairness in situations of deadlock stems from the inability to exit an untenable relationship. |
| Perennial (Capitol) Pte Ltd and another v Capitol Investment Holdings Pte Ltd and other matters | High Court | Yes | [2017] SGHC 84 | Singapore | The High Court Judge's decision which was appealed against in this case. |
| Ebrahimi v Westbourne Galleries Ltd | House of Lords | Yes | [1973] AC 360 | England | Endorsed the approach taken by the House of Lords to the just and equitable winding-up jurisdiction. |
| In re Yenidje Tobacco Company, Ltd | English Court of Appeal | Yes | [1916] 2 Ch 426 | England | Reference to the decision of the English Court of Appeal regarding the concept of deadlock. |
| Chua Kien How v Goodwealth Trading Pte Ltd and another | Court of Appeal | Yes | [1992] 1 SLR(R) 870 | Singapore | Held that if the only two directors of a company cannot agree with each other, and neither can overrule the other, there is a deadlock. |
| Sim Yong Kim v Evenstar Investments Pte Ltd | Court of Appeal | Yes | [2006] 3 SLR(R) 827 | Singapore | Recognized that cases involving management deadlock or loss of mutual trust and confidence can be re-characterized as cases of unfairness. |
| O'Neill v Philips | N/A | Yes | [1999] 1 WLR 1092 | N/A | Cited in Evenstar for the principle that unfairness arises when one shareholder insists on the continuance of the association despite the stalemate. |
| Re a Company (No 007623 of 1984) | N/A | Yes | [1986] BCLC 362 | N/A | Discussed in Ting Shwu Ping regarding the approach to shareholder exit mechanisms. |
| Re a Company (No 004377 of 1986) | N/A | Yes | [1987] 1 WLR 102 | N/A | Discussed in Ting Shwu Ping regarding the approach to shareholder exit mechanisms. |
| Re a Company (No 006834 of 1988) ex parte Kremer | N/A | Yes | [1989] BCLC 365 | N/A | Discussed in Ting Shwu Ping regarding the approach to shareholder exit mechanisms. |
| Apcar v Aftab | N/A | Yes | [2003] BCC 510 | N/A | Argued by the appellants to support the point that one equal shareholder should not be forced to accept an offer to be bought out. |
| Asia Pacific Limited v ARC Capital LLC and Haida Investments Limited | Cayman Islands Court of Appeal | Yes | [2015] (1) CILR 299 | Cayman Islands | Argued by the appellants to support the point that one equal shareholder should not be forced to accept an offer to be bought out. |
| Harborne Road Nominees Ltd v Karvaski and another | N/A | Yes | [2012] 2 BCLC 420 | N/A | Argued by the appellants to support the point that one equal shareholder should not be forced to accept an offer to be bought out. |
| Re a Company (No 003096 of 1987) | N/A | Yes | (1988) 4 BCC 80 | N/A | Argued by the appellants to support the point that the crucial question is which side should go, and whether it is “plain and obvious” that the petitioners should go. |
| Re Nalpon Zero Geraldo Mario | N/A | Yes | [2013] 3 SLR 258 | Singapore | Cited for the definition of jurisdiction. |
| Lai Shit Har and another v Lau Yu Man | N/A | Yes | [2008] 4 SLR(R) 348 | Singapore | Cited for the principle that the court has a residual discretion to consider whether the company should be wound up. |
| BNP Paribas v Jurong Shipyard Pte Ltd | N/A | Yes | [2009] 2 SLR(R) 949 | Singapore | Cited for the principle that a winding-up application implies insolvency and could damage the company's creditworthiness. |
| In Re a Company (No 002567 of 1982) | N/A | Yes | [1983] 1 WLR 927 | N/A | Vinelott J dismissed a winding-up petition because the applicant had refused an offer from the other two shareholders in the company to buy the applicant’s shares at a fair price to be determined by an arbitrator or expert. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50) | Singapore |
| Section 254(1)(i) of the Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
| Sections 254(1)(i) and 254(2A) of the Companies Act (Cap 50) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Winding up
- Just and equitable ground
- Deadlock
- Exit mechanism
- Pre-emption clause
- Quasi-partnership
- Shareholder dispute
- Unfairness
- Article 22
- Companies Act
15.2 Keywords
- Winding up
- Just and equitable
- Shareholder deadlock
- Exit mechanism
- Singapore
- Companies Act
- Capitol Investment
- Perennial
- Chesham
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Winding Up | 95 |
| Insolvency Law | 90 |
| Company Law | 70 |
| Corporate Law | 60 |
| Civil Procedure | 30 |
16. Subjects
- Company Law
- Insolvency
- Shareholder Disputes