Tiong Sze Yin v HC Surgical Specialists: Statutory Derivative Action & Director's Duties
In Tiong Sze Yin v HC Surgical Specialists Ltd and Heah Sieu Min, the High Court of Singapore dismissed Ms. Tiong's application for leave to bring a statutory derivative action against Dr. Heah, an executive director of HC Surgical Specialists, concerning the company's acquisition of a 19% stake in Julian Ong Endoscopy & Surgery Pte Ltd. The court, presided over by Chua Lee Ming J, found that Ms. Tiong did not demonstrate good faith or that the action was prima facie in the company's interest, leading to the dismissal of the application with costs.
1. Case Overview
1.1 Court
High Court of the Republic of Singapore1.2 Outcome
Application dismissed with costs.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Serene Tiong's application for statutory derivative action against HC Surgical's director, Dr. Heah, was dismissed due to lack of good faith.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Serene Tiong Sze Yin | Plaintiff | Individual | Application dismissed | Lost | Ong Ying Ping, Kenneth Chua Kok Siong |
| HC Surgical Specialists Ltd | Defendant | Corporation | Costs awarded | Won | Tan Chee Meng, Paul Loy Chi Syann, Janie Hui |
| Heah Sieu Min | Defendant | Individual | Costs awarded | Won | Chua Sui Tong, Gan Jhia Huei |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Chua Lee Ming | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Ong Ying Ping | Ong Ying Ping Esq |
| Tan Chee Meng | WongPartnership LLP |
| Paul Loy Chi Syann | WongPartnership LLP |
| Janie Hui | WongPartnership LLP |
| Chua Sui Tong | Rev Law LLC |
| Gan Jhia Huei | Rev Law LLC |
| Kenneth Chua Kok Siong | Ong Ying Ping Esq |
4. Facts
- The plaintiff sought leave to bring an action against Dr. Heah for breach of director's duties.
- The alleged breach related to the Company's acquisition of a 19% stake in JOES.
- The plaintiff had a prior relationship and lawsuit with Dr. Ong, who operates JOES.
- Dr. Heah kept the Board updated about the Complaint against Dr Ong.
- The Board considered the 19% Acquisition to be commercially favorable.
- The Board decided to let the SMC’s investigation take its course.
- The Put Options provided sufficient safeguards against any adverse finding by the SMC.
5. Formal Citations
- Tiong Sze Yin Serene v HC Surgical Specialists Ltd and another, Originating Summons No 491 of 2020, [2020] SGHC 201
6. Timeline
| Date | Event |
|---|---|
| The Company acquired 51% of the shares in JOES from Dr Ong for $2,175,000. | |
| Dr Chan filed a police report against the plaintiff. | |
| The plaintiff lodged a complaint with the Singapore Medical Council against Dr Chan and Dr Ong. | |
| Dr Ong filed a claim against the plaintiff for defamation. | |
| Dr Heah proposed to the Board that the Company use part of the net proceeds from the investment by Vanda to acquire a further stake in JOES. | |
| The Company entered into an investment agreement with Vanda 1 Investments Pte Ltd. | |
| The Company purchased an additional 19% of the shares in JOES for $3,795,000. | |
| The Company announced the 19% Acquisition to SGX and issued a press release. | |
| The plaintiff called and spoke to the Company’s Chief Financial Officer, Ms Ong Soo Ling. | |
| The plaintiff bought 100 shares in the Company. | |
| The Company’s AGM was held. | |
| Dr Ong obtained a Protection Order under the Protection from Harassment Act. | |
| The police administered a warning to the plaintiff in lieu of prosecution for the offence of attempted extortion. | |
| The District Court dismissed the Defamation Action. | |
| The Straits Times reported the District Court’s decision. | |
| The Company issued a response to the Straits Times report. | |
| The Company announced that Dr Ong shall inform all patients of the matters alluded to in the Defamation Action prior to any consultation. | |
| The Company announced that it had mutually agreed with Vanda to the early redemption of the convertible bonds. | |
| Dr Ong’s accreditation and clinical privileges at Gleneagles, Mount Elizabeth, Mount Elizabeth Novena and Parkway East Hospitals had been suspended. | |
| The Company announced that Dr Ong’s accreditation and clinical privileges at Gleneagles, Mount Elizabeth, Mount Elizabeth Novena and Parkway East Hospitals had been suspended. | |
| The plaintiff’s solicitors wrote to the Company seeking certain information. | |
| Ms Ong referred the plaintiff’s solicitors to the Company’s announcements on SGXNet. | |
| The plaintiff’s solicitors wrote to the Company and asked if the Company was prepared to take action against Dr Heah. | |
| The Company’s solicitors responded, rejecting the plaintiff’s allegation that Dr Heah had acted in breach of his duty as a director. | |
| The plaintiff gave the Company 14 days’ notice of her intention to apply to Court under s 216A of the Companies Act. | |
| The plaintiff’s solicitors enclosed an amended draft statement of claim. | |
| The Company’s solicitors replied to the plaintiff’s solicitors. | |
| The plaintiff filed the present Originating Summons. | |
| The Straits Times reported that the plaintiff had commenced suit against Dr Chan. | |
| Judgment was delivered. |
7. Legal Issues
- Breach of Directors' Duties
- Outcome: The court found that the plaintiff did not establish a prima facie case that Dr. Heah breached his duties as a director.
- Category: Substantive
- Sub-Issues:
- Failure to exercise reasonable diligence
- Failure to act in the company's best interest
- Related Cases:
- [2013] 2 SLR 340
- Statutory Derivative Action
- Outcome: The court found that the plaintiff did not act in good faith and that the action was not prima facie in the company's interest, thus denying leave for the statutory derivative action.
- Category: Procedural
- Sub-Issues:
- Good faith of applicant
- Action in the company's interest
- Related Cases:
- [2013] 2 SLR 340
8. Remedies Sought
- Leave to bring a statutory derivative action
9. Cause of Actions
- Breach of Directors' Duties
10. Practice Areas
- Commercial Litigation
11. Industries
- Healthcare
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Ang Thiam Swee v Low Hian Chor | Court of Appeal | Yes | [2013] 2 SLR 340 | Singapore | Cited as authority for principles relating to the requirement under s 216A(3)(c) that the statutory derivative action must be prima facie in the interests of the Company and the requirement of good faith under s 216A(3)(b) of the Companies Act. |
| ECRC Land Pte Ltd v Ho Wing On Christopher | High Court | Yes | [2004] 1 SLR(R) 105 | Singapore | Cited for the principle that the court should be slow to interfere with commercial decisions taken by directors. |
| Intraco Ltd v Multi-Pak Singapore Pte Ltd | High Court | Yes | [1994] 3 SLR(R) 1064 | Singapore | Cited in ECRC Land Pte Ltd v Ho Wing On Christopher for the principle that the court should be slow to interfere with commercial decisions taken by directors. |
| Vita Health Laboratories Pte Ltd v Pang Seng Meng | High Court | Yes | [2004] 4 SLR(R) 162 | Singapore | Cited for the principle that undue legal interference will dampen, if not stifle, the appetite for commercial risk and entrepreneurship. |
| Pang Yong Hock v PKS Contracts Services Pte Ltd | High Court | Yes | [2004] 3 SLR(R) 1 | Singapore | Cited for the principle that the purpose of the statutory derivative action is to provide a procedure for the protection of genuinely aggrieved minority interests and for doing justice to a company. |
| Chong Chin Fook v Solomon Alliance Management Pte Ltd and others and another matter | Court of Appeal | Yes | [2017] 1 SLR 348 | Singapore | Cited for the principle that the mere presence of a collateral purpose would not preclude an application under s 216A if the applicant could demonstrate that his collateral purpose was sufficiently consistent with the purpose of doing justice to the Company. |
| Petroships Investment Pte Ltd v Wealthplus Pte Ltd | High Court | Yes | [2018] 3 SLR 687 | Singapore | Cited for the principle that the applicant bears the legal burden of satisfying the court on the balance of probabilities that it is acting in good faith. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
| s 216A(2) of the Companies Act | Singapore |
| s 216A(3) of the Companies Act | Singapore |
| s 157 of the Companies Act | Singapore |
| Protection from Harassment Act (Cap 256A, 2015 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Statutory derivative action
- Directors' duties
- Good faith
- Prima facie interest
- 19% Acquisition
- Put Options
- Profit Guarantees
- Board of Directors
- Companies Act
- JOES
15.2 Keywords
- derivative action
- directors duties
- company law
- singapore
- high court
- HC Surgical Specialists
- Heah Sieu Min
- Tiong Sze Yin
16. Subjects
- Company Law
- Directors' Duties
- Civil Procedure
17. Areas of Law
- Company Law
- Statutory Derivative Action
- Directors' Duties