Ozak Seiko Co Ltd v Ozak Seiko (S) Pte Ltd: Derivative Action & Director's Duties
Ozak Seiko Co Ltd, represented by director Masakazu Ozaki, and Tan Hock Seng, the two feuding directors of Ozak Seiko (S) Pte Ltd, each filed derivative actions in the High Court of Singapore under section 216A of the Companies Act. Ozak sought leave to sue Tan for breach of director's duties, while Tan sought leave to defend against Ozak's action on behalf of the company. The court, presided over by Justice Tan Siong Thye, dismissed both applications, finding procedural defects and a lack of good faith in both actions. Ozak also sought a declaration that the Company’s appointment of PRP Law LLC was defective and void, which the court granted.
1. Case Overview
1.1 Court
High Court of the Republic of Singapore1.2 Outcome
Applications dismissed.
1.3 Case Type
Civil
1.4 Judgment Type
Ex Tempore Judgment
1.5 Jurisdiction
Singapore
1.6 Description
Derivative actions by feuding directors of Ozak Seiko (S) Pte Ltd regarding alleged breach of director's duties. Court dismisses both applications for leave.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Ozak Seiko Co Ltd | Plaintiff, Respondent | Corporation | Application dismissed | Lost | Yuen Djia Chiang Jonathan, Francis Chan Wei Wen |
| Ozak Seiko (S) Pte Ltd | Defendant, Respondent | Corporation | Neutral | Neutral | Pillai Pradeep G, Lin Shuling Joycelyn |
| Tan Hock Seng | Defendant, Applicant | Individual | Application dismissed | Lost | Nair Suresh Sukumaran, Tan Tse Hsien, Bryan (Chen Shixian), Bhatt Chantik Jayesh |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Tan Siong Thye | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Yuen Djia Chiang Jonathan | Rajah & Tann Singapore LLP |
| Francis Chan Wei Wen | Rajah & Tann Singapore LLP |
| Pillai Pradeep G | PRP Law LLC |
| Lin Shuling Joycelyn | PRP Law LLC |
| Nair Suresh Sukumaran | Nair & Co LLC |
| Tan Tse Hsien | Nair & Co LLC |
| Bryan (Chen Shixian) | Nair & Co LLC |
| Bhatt Chantik Jayesh | Nair & Co LLC |
4. Facts
- Ozak and Tan are the two directors and equal shareholders of Ozak Seiko (S) Pte Ltd.
- Ozak Seiko Co Ltd is a Japanese company founded by Ozaki.
- Tan incorporated Shafttech Pte Ltd, a company in competition with Ozak Seiko (S) Pte Ltd.
- Ozak alleges Tan used company resources for the benefit of Shafttech.
- Ozak Seiko (S) Pte Ltd became dormant after Ozak appointed a new distributor.
- Ozak and Tan are in disagreement, leading to derivative actions.
- Tan was appointed a director despite Ozak's knowledge of alleged wrongful acts.
5. Formal Citations
- Ozak Seiko Co Ltd v Ozak Seiko (S) Pte Ltd and another and other matters, , [2019] SGHC 34
6. Timeline
| Date | Event |
|---|---|
| Ozak Seiko Co Ltd founded by Ozaki in Japan. | |
| Ozak Seiko (S) Pte Ltd incorporated in Singapore. | |
| Tan Hock Seng incorporated Shafttech Pte Ltd. | |
| Tan Hock Seng obtained 50% of Ozak Seiko (S) Pte Ltd’s shares. | |
| Ozaki discovered Tan's involvement in Shafttech. | |
| Ozaki confronted Tan with a 'Correction Document'. | |
| Tan Hock Seng appointed as a director of Ozak Seiko (S) Pte Ltd. | |
| Ozak Seiko Co Ltd appointed WM Automation Pte Ltd as new distributor. | |
| Ozak Seiko (S) Pte Ltd ceased operations. | |
| Rajah & Tann Singapore LLP issued letter of demand. | |
| Ozak Seiko Co Ltd commenced OS 1027/2018. | |
| Nair & Co LLC sent letter to Rajah & Tann Singapore LLP regarding PRP Law LLC appointment. | |
| Director's resolution authorizing PRP Law LLC to represent the Company. | |
| PRP Law LLC's warrant to act dated. | |
| Ozaki had suspicions about the defective appointment. | |
| Tan's affidavit filed on behalf of the Company. | |
| Tan’s First Affidavit dated. | |
| Rajah & Tann Singapore LLP requested PRP Law LLC to withdraw. | |
| PRP Law LLC provided R&T with a director’s resolution and a warrant to act. | |
| Ozak instructed R&T to file SUM 187/2019. | |
| Tan’s Second Affidavit dated. | |
| Ozaki’s Fifth Affidavit under the cover of Chan Wei Wen Francis dated. | |
| Hearing date. | |
| Judgment date. |
7. Legal Issues
- Breach of Director's Duties
- Outcome: The court did not grant leave to pursue the action for breach of director's duties.
- Category: Substantive
- Sub-Issues:
- Conflict of interest
- Misuse of company resources
- Compliance with Section 216A(3)(a) of the Companies Act
- Outcome: The court found that both parties failed to comply with the notice requirements under s 216A(3)(a) of the Companies Act.
- Category: Procedural
- Sub-Issues:
- Adequacy of notice
- Timeliness of notice
- Good Faith in Derivative Action
- Outcome: The court found that neither party was acting in good faith in bringing their respective derivative actions.
- Category: Substantive
- Interpretation of Company's Articles of Association
- Outcome: The court held that Article 100 of the Company's Memorandum and Articles of Association does not provide a free-standing power which can be exercised by one director alone.
- Category: Substantive
- Sub-Issues:
- Unilateral action by director
- Quorum requirements
8. Remedies Sought
- Leave to commence derivative action
- Declaration that appointment of PRP Law LLC is defective and void
9. Cause of Actions
- Breach of Director's Duties
10. Practice Areas
- Commercial Litigation
- Corporate Law
11. Industries
- Wholesale
- Distribution
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Lee Seng Eder v Wee Kim Chwee and others | High Court | Yes | [2014] 2 SLR 56 | Singapore | Cited for the strict requirement of notice under s 216A(3)(a) of the Companies Act. |
| Tam Tak Chuen v Eden Aesthetics Pte Ltd and another (Khairul bin Abdul Rahman and another, non-parties) | High Court | Yes | [2010] 2 SLR 667 | Singapore | Cited for the principle that a nominal defendant company need not be legally represented in a leave application under s 216A of the Companies Act. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap. 50) | Singapore |
| Section 216A of the Companies Act (Cap. 50) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Derivative action
- Director's duties
- Section 216A Companies Act
- Good faith
- Prima facie interest of the company
- Notice requirement
- Conflict of interest
- Memorandum and Articles of Association
15.2 Keywords
- Derivative action
- Director's duties
- Companies Act
- Singapore
- Corporate governance
- Shareholder dispute
16. Subjects
- Company Law
- Corporate Governance
- Civil Procedure
17. Areas of Law
- Company Law
- Derivative Action
- Director's Duties