Jian Li Investments v Healthstats: Derivative Action for Trade Secret Mismanagement
Jian Li Investments Holding Pte Ltd, Ting Choon Meng, and Chua Ngak Hwee applied for leave to commence a statutory derivative action against HealthSTATS International Pte Ltd, Lian Chin Chiang, and Chang Hon Yee in the High Court of the Republic of Singapore. The plaintiffs, minority shareholders, alleged that the defendant directors breached their fiduciary duties by failing to protect the company's trade secrets related to its BPro device. The court dismissed the application, finding that the plaintiffs were not acting in good faith and that the proposed action was not prima facie in the company's interest.
1. Case Overview
1.1 Court
High Court of the Republic of Singapore1.2 Outcome
Plaintiffs' application for leave to commence the derivative action is dismissed.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Minority shareholders seek derivative action against directors for allegedly mismanaging Healthstats' trade secrets. The application was dismissed for lack of good faith and merit.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Ting Choon Meng | Plaintiff | Individual | Application Dismissed | Lost | |
| Chua Ngak Hwee | Plaintiff | Individual | Application Dismissed | Lost | |
| Jian Li Investments Holding Pte Ltd | Plaintiff | Corporation | Application Dismissed | Lost | |
| HealthSTATS International Pte Ltd | Defendant | Corporation | Application Dismissed | Won | |
| Lian Chin Chiang | Defendant | Individual | Application Dismissed | Won | |
| Chang Hon Yee | Defendant | Individual | Application Dismissed | Won |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Ang Cheng Hock | Judicial Commissioner | Yes |
4. Counsels
4. Facts
- Healthstats manufactures the BPro device, a non-invasive blood pressure monitoring system.
- The software source code and algorithm of the BPro device are Healthstats' trade secrets.
- Dr. Ting and Mr. Chua, the founders of Healthstats, were removed as executives and directors.
- Tupai became the majority shareholder of Healthstats after a S$20m investment.
- A Memorandum of Understanding was signed between Healthstats and Planet Innovation for a strategic alliance.
- Dr. Ting and Mr. Chua alleged that the defendant directors planned to disclose Healthstats' trade secrets to Planet Innovation.
- Mr. Lian gave instructions for the copying of the Trade Secrets to the Hard Disk.
5. Formal Citations
- Jian Li Investments Holding Pte Ltd and othersvHealthstats International Pte Ltd and others, Originating Summons No 666 of 2018, [2019] SGHC 38
6. Timeline
| Date | Event |
|---|---|
| Healthstats incorporated | |
| Dr. Ting and Mr. Chua approached One Tree Partners Pte Ltd to discuss finding investors for Healthstats | |
| Representatives of One Tree Partners, Dr. Ting, Mr. Chua, and Mr. Marcus Chua visited Planet Innovation Pty Ltd in Australia | |
| OTP and Healthstats entered into an Investment Agreement | |
| Mr. Lian was appointed as Chief Executive Officer of Healthstats | |
| Memorandum of Understanding between Healthstats and Planet Innovation signed | |
| Mr. Chua informed Dr. Ting that he managed to get all the outgoing emails for all the emails from Healthstats | |
| Mr. Lian conveyed his intention to Mr. Tan that he wanted to step down as CEO of Healthstats | |
| Dr. Ting and Mr. Chua contacted Mr. Marcus Chua to obtain a complete copy of the MOU and any other agreements that Healthstats entered into with PI | |
| Mr. Tan signed a separation deed with Mr. Chang in Hong Kong | |
| Mr. Lian requested access to Healthstats’ R&D office | |
| Dr. Ting and Mr. Chua were suspended from their executive positions | |
| Trade Secrets copied to a hard disk | |
| Hard Disk brought back to the office | |
| Dr. Ting and Mr. Chua issued a letter to Healthstats seeking an explanation for their suspensions and a notice of intention to bring a derivative action | |
| Mr. Marcus Chua sent a text to Mr. Chua asking whether there was a reason why readings were taken in 15-minute intervals instead of shorter intervals | |
| Healthstats’ solicitors replied to the notice, detailing various reasons for Dr. Ting’s and Mr. Chua’s suspensions | |
| Mr. Lanyon and Mr. Gosling reached out to Dr. Ting to set up a candid discussion to explain PI's dealings with Healthstats | |
| Plaintiffs’ solicitors issued another notice under s 216A of the CA to Healthstats’ solicitors | |
| Dr. Ting and Mr. Chua were terminated from their executive positions at Healthstats | |
| Dr. Ting and Mr. Chua were removed as directors of Healthstats | |
| Plaintiffs filed this application for leave under s 216A of the CA | |
| Master Services Agreement executed by Healthstats and PI | |
| Mr. Chen wrote a letter to Dr. Ting and Mr. Chua | |
| Mr. Marcus Chua sent an email to Mr. Lian and Mr. Sidaway containing a deck of slides prepared by PI for Healthstats | |
| Mr. Vom's statutory declaration | |
| Statement of Work executed between Healthstats and PI | |
| Hearing date | |
| Hearing date | |
| Hearing date | |
| Judgment reserved |
7. Legal Issues
- Breach of Fiduciary Duty
- Outcome: The court found that the plaintiffs did not demonstrate that the directors breached their fiduciary duties.
- Category: Substantive
- Sub-Issues:
- Failure to protect trade secrets
- Conflict of interest
- Good Faith in Derivative Action
- Outcome: The court found that the plaintiffs were not acting in good faith due to collateral objectives and abuse of process.
- Category: Procedural
- Sub-Issues:
- Collateral purpose
- Abuse of process
- Lack of candor
- Interests of the Company
- Outcome: The court found that the proposed derivative action was not prima facie in the interests of the company.
- Category: Substantive
- Sub-Issues:
- Benefit to the company
- Legitimate and arguable claim
8. Remedies Sought
- Leave to commence a statutory derivative action
- Access to Healthstats' premises and records
- Interim injunction
9. Cause of Actions
- Breach of Fiduciary Duty
10. Practice Areas
- Commercial Litigation
- Corporate Law
- Intellectual Property Litigation
11. Industries
- Healthcare
- Medical Devices
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Ang Thiam Swee v Low Hian Chor | Singapore Court of Appeal | Yes | [2013] 2 SLR 340 | Singapore | Cited for the principle that there is no presumption of good faith and the onus is on the applicant to establish that he is acting in good faith in a derivative action. |
| Maher v Honeysett and Maher Electrical Contractors | New South Wales Supreme Court | Yes | [2005] NSWSC 859 | Australia | Cited for the two main facets to the good faith requirement in derivative actions. |
| Pang Yong Hock and another v PKS Contracts Services Pte Ltd | Singapore Court of Appeal | Yes | [2004] 3 SLR(R) 1 | Singapore | Cited for the principle that an applicant may be found to be lacking in good faith if it can be demonstrated that he is bringing the derivative action for a collateral purpose. |
| Wong Kai Wah v Wong Kai Yuan and another | Singapore High Court | Yes | [2014] SGHC 147 | Singapore | Cited for the principle that an applicant's good faith will be in doubt if he appears set on damaging the company out of sheer spite or for the benefit of a competitor. |
| Fong Wai Lyn Carolyn v Airtrust (Singapore) Pte Ltd | Singapore High Court | Yes | [2011] 3 SLR 980 | Singapore | Cited for the principle that any lack of good faith must relate to the commencement of the derivative action and not all past conduct of the applicant in general. |
| IGM Resources Corp v 979708 Alberta Ltd | Alberta Court of Queen's Bench | Yes | [2004] AJ No 1462 | Canada | Cited for the principle that any lack of good faith must relate to the commencement of the derivative action and not all past conduct of the applicant in general. |
| Agus Irawan v Toh Teck Chye | Singapore High Court | Yes | [2002] 1 SLR(R) 471 | Singapore | Cited for the principle that the failure to be fully candid before the court would indicate a lack of good faith. |
| Urs Meisterhans v GIP Pte Ltd | Singapore High Court | Yes | [2011] 1 SLR 552 | Singapore | Cited for the principle that in order to satisfy the requirement that the proposed derivative action be prima facie in the interests of the company, the applicant must show that the claim is legitimate and arguable. |
| Law Chin Eng and another v Hiap Seng & Co Pte Ltd (Lau Chin Hu and others, applicants) | Singapore High Court | Yes | [2009] SGHC 223 | Singapore | Cited for the principle that at the leave stage, only affidavit evidence is before the court and the court should not be drawn into an adjudication on the disputes of facts. |
| Teo Gek Luang v Ng Ai Tiong and others | Singapore High Court | Yes | [1998] 2 SLR(R) 426 | Singapore | Cited for the principle that the threshold for the applicant to meet is low and only the most obviously unmeritorious claims are excluded. |
| Wong Lee Vui Willie v Li Qingyun and another | Singapore High Court | Yes | [2016] 1 SLR 696 | Singapore | Cited for the principle that the court should be mindful that the applicant may not, in the nature of things, have access to all the information. |
| Yeo Sing San v Sanmugam Murali and another | Singapore High Court | Yes | [2016] SGHC 14 | Singapore | Cited for the principle that the threshold for the applicant to meet is low and only the most obviously unmeritorious claims are excluded. |
| Petroships Investment Pte Ltd v Wealthplus Pte Ltd and others | Singapore High Court | Yes | [2015] SGHC 145 | Singapore | Cited for the principle that the threshold for the applicant to meet is low and only the most obviously unmeritorious claims are excluded. |
| Tan Yok Koon v Tan Choo Suan and another and other appeals | Singapore Court of Appeal | Yes | [2017] 1 SLR 654 | Singapore | Cited for the principle that fiduciary obligations take colour from the relationship between the parties. |
| Lew Kiat Beng v Hiap Seng & Co Pte Ltd and another appeal | Singapore Court of Appeal | Yes | [2012] 1 SLR 488 | Singapore | Cited for the principle that the power to give directions under s 216A(5) of the CA for the inspection of documents is only enlivened if leave is granted. |
| Chong Chin Fook v Solomon Alliance Management Ltd and others and another matter | Singapore Court of Appeal | Yes | [2017] 1 SLR 348 | Singapore | Cited for the principle that the power to give directions under s 216A(5) of the CA for the inspection of documents is only enlivened if leave is granted. |
| Swansson v R A Pratt Properties Pty Ltd | Australian Court | Yes | (2002) 42 ACSR 313 | Australia | Cited for the principle that a history of grievances against the majority shareholders or the board would make it easier to characterise the derivative action as having been brought for no other purpose other than the satisfaction of the applicant’s private vendetta |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
| s 216A of the Companies Act | Singapore |
| s 216A(3)(b) of the Companies Act | Singapore |
| s 216A(3)(c) of the Companies Act | Singapore |
| s 216A(5) of the Companies Act | Singapore |
| s 409A(1) of the Companies Act | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Trade Secrets
- BPro device
- Statutory derivative action
- Fiduciary duty
- Good faith
- Real Time Strategic Alliance
- API Strategic Alliance
- Investment Agreement
- Memorandum of Understanding
- Planet Innovation
- Tupai
- Collateral purpose
15.2 Keywords
- derivative action
- trade secrets
- fiduciary duty
- minority shareholders
- Healthstats
- Planet Innovation
- Companies Act
- good faith
17. Areas of Law
16. Subjects
- Company Law
- Corporate Governance
- Intellectual Property
- Derivative Actions