Tan Chun Chuen v Beach Hotel Pte Ltd: Application for Derivative Action under Companies Act

Malcolm Tan Chun Chuen, claiming to be the beneficial owner of Beach Hotel Pte Ltd and Wine Bonanza Pte Ltd, applied to the General Division of the High Court of Singapore on 3 August 2022 for leave to commence a derivative action against Ronny Lee Tiang Luok and Loo Shi Guang Gabriel for alleged breaches of directors’ duties. The application was made under Section 216A of the Companies Act. Judicial Commissioner Goh Yihan dismissed the application, finding that the plaintiff did not fulfill the legal requirements under s 216A of the Companies Act.

1. Case Overview

1.1 Court

General Division of the High Court of the Republic of Singapore

1.2 Outcome

Application dismissed

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Plaintiff Malcolm Tan Chun Chuen's application for leave to commence a derivative action on behalf of Beach Hotel and Wine Bonanza was dismissed.

1.7 Decision Date

9 August 2022

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Malcolm Tan Chun Chuen	Plaintiff	Individual	Application dismissed	Lost	Mohammad Maiyaz Al Islam of Magna Law LLC
Beach Hotel Pte Ltd	Defendant	Corporation	Application dismissed	Won
Wine Bonanza Pte Ltd	Defendant	Corporation	Application dismissed	Won

3. Judges

Judge Name	Title	Delivered Judgment
Goh Yihan	Judicial Commissioner	Yes

4. Counsels

Counsel Name	Organization
Mohammad Maiyaz Al Islam	Magna Law LLC

4. Facts

Plaintiff claimed to be the beneficial owner of all issued shares in Beach Hotel Pte Ltd and Wine Bonanza Pte Ltd.
Plaintiff applied for leave to commence a derivative action against Ronny Lee Tiang Luok and Loo Shi Guang Gabriel.
Plaintiff alleged breaches of directors’ duties by Ronny and Gabriel.
Plaintiff served requisite notices to the directors of the defendants on 1 February 2021.
Plaintiff commenced the application almost a year after the notices were served.
Defendants did not respond to court papers or attend pre-trial conferences.
Plaintiff alleged Ronny misappropriated funds from both companies.
Plaintiff alleged Gabriel neglected to follow up on a Capability Development Grant for Beach Hotel Pte Ltd.
Plaintiff alleged Gabriel removed the Point of Sale Machine from Beach Hotel Pte Ltd's premises without approval.

5. Formal Citations

Tan Chun Chuen MalcolmvBeach Hotel Pte Ltd and another, Originating Summons No 96 of 2022, [2022] SGHC 187

6. Timeline

Date	Event
2016-12-01	Gabriel declared himself as trustee holding shares of Beach Hotel Pte Ltd for the plaintiff.
2017-07-01	Beach Hotel Pte Ltd awarded Capability Development Grant by Enterprise Singapore.
2017-11-17	Plaintiff's solicitors wrote to Gabriel and Ronny.
2021-02-01	Notices served to directors of defendants.
2022-01-26	Plaintiff filed affidavit.
2022-01-27	Application filed.
2022-03-03	Pre-trial conference held.
2022-03-08	Plaintiff's subsequent letters sent to defendants.
2022-03-11	Plaintiff's subsequent letters sent to defendants.
2022-03-17	Pre-trial conference held.
2022-03-29	Plaintiff's subsequent letters sent to defendants.
2022-04-05	Initial hearing of application.
2022-04-20	Plaintiff's subsequent letters sent to defendants.
2022-04-26	Plaintiff filed supplementary affidavit.
2022-04-28	Pre-trial conference held.
2022-08-03	Judgment date
2022-08-10	Date of decision

7. Legal Issues

Standing to bring a derivative action
- Outcome: The court held that the plaintiff had standing to bring the application in respect of the 1st defendant but not the 2nd defendant.
- Category: Procedural
- Sub-Issues:
  - Beneficial ownership of shares
  - Proper person to make an application
- Related Cases:
  - [2022] SGHC 75
  - [2019] SGHC 180
Notice requirement for derivative action
- Outcome: The court held that the plaintiff had satisfied the notice requirement under s 216A(3)(a) with respect to both defendants.
- Category: Procedural
- Sub-Issues:
  - Sufficiency of notice
  - Timeliness of notice
- Related Cases:
  - [2011] 3 SLR 980
Good faith requirement for derivative action
- Outcome: The court held that the plaintiff had not acted in good faith.
- Category: Substantive
- Sub-Issues:
  - Merits of the proposed action
  - Collateral purpose
- Related Cases:
  - [2019] SGHC 38
Interests of the company in bringing a derivative action
- Outcome: The court held that the plaintiff had not shown that it was prima facie in the interests of the company for the proposed action to be brought.
- Category: Substantive
- Sub-Issues:
  - Reasonable basis for the action
  - Practical and commercial interests of the company
- Related Cases:
  - [2013] 2 SLR 340
  - [2004] 3 SLR(R) 1
  - [2015] SGHC 145

8. Remedies Sought

Leave to commence a derivative action

9. Cause of Actions

Breach of Directors' Duties
Misappropriation of Funds

10. Practice Areas

Commercial Litigation
Corporate Law

11. Industries

Hospitality

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Mytsyk, Viktoriia v Med Travel Pte Ltd	High Court	Yes	[2022] SGHC 75	Singapore	Cited for the interpretation of the 'proper person' provision in s 216A(1)(c) of the Companies Act.
Ganesh Paulraj v A&T Offshore Pte Ltd	High Court	Yes	[2019] SGHC 180	Singapore	Cited to support the argument that a beneficial owner of shares has standing to bring a s 216A application.
Fong Wai Lyn Carolyn v Airtrust (Singapore) Pte Ltd	High Court	Yes	[2011] 3 SLR 980	Singapore	Cited for the principle that the notice requirement under s 216A(3)(a) is to give the company an opportunity to evaluate the complaint.
Re Northwest Forest Products Ltd	N/A	Yes	[1975] 4 WWR 724	N/A	Cited for the principle that the notice should state what the complainant wishes the directors to do and must sufficiently specify the cause of action and contains sufficient information to found an endorsement on a writ.
Ozak Seiko Co Ltd v Ozak Seiko (S) Pte Ltd	High Court	Yes	[2019] SGHC 34	Singapore	Cited for the principle that a letter might constitute valid notice if it complies with s 216A(3)(a) of the Companies Act in substance even though there is no express or implied reference to the notice requirement in the relevant provision.
Jian Li Investment Holdings Pte Ltd v Healthstats International Pte Ltd	High Court	Yes	[2019] SGHC 38	Singapore	Cited for the elements of the good faith requirement under s 216A(3)(b).
Foss v Harbottle	N/A	Yes	(1843) 2 Hare 461	N/A	Cited as the rule which s 216A was intended to alleviate.
Tremblett v SCB Fisheries Ltd	Newfoundland Supreme Court	Yes	(1993) 116 Nfld & PEIR 139	Canada	Cited for the principle that the extraordinary power to use corporate resources and to create a position of legal conflict between the corporation and others should be vested.
Teo Gek Luang v Ng Ai Tiong	High Court	Yes	[1998] 2 SLR(R) 426	Singapore	Cited for the principle that the complainant’s delay in making the application may not evidence a lack of good faith.
Ang Thiam Swee v Low Hian Chor	Court of Appeal	Yes	[2013] 2 SLR 340	Singapore	Cited for the principle that there must be a reasonable semblance of merit, and there is no need to show that the action is bound to succeed or likely to succeed.
Agus Irawan v Toh Teck Chye	High Court	Yes	[2002] 1 SLR(R) 471	Singapore	Cited for the principle that there must be a reasonable semblance of merit, and there is no need to show that the action is bound to succeed or likely to succeed.
Pang Yong Hock v PKS Contracts Services Pte Ltd	Court of Appeal	Yes	[2004] 3 SLR(R) 1	Singapore	Cited for the principle that the court may also go further to examine whether it would be in the practical and commercial interests of the company for the action to be brought.
Petroships Investment Pte Ltd v Wealthplus Pte Ltd	High Court	Yes	[2015] SGHC 145	Singapore	Cited for the principle that the test under s 216A(3)(c) comprises a consideration of whether the derivative action is in the practical and commercial interests of the company and of the alternative remedies available to the applicant.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Companies Act	Singapore
Section 216A of the Companies Act	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Statutory derivative action
Beneficial owner
Good faith
Companies Act
Directors' duties
Prima facie
Requisite notice
Standing
Collateral purpose
Capability Development Grant
Point of Sale Machine

15.2 Keywords

Derivative action
Companies Act
Beneficial owner
Directors' duties
Singapore
High Court

17. Areas of Law

Area Name	Relevance Score
Company Law	90
Statutory derivative action	80
Minority Oppression	70
Fiduciary Duties	60
Duty to Account	50
Commercial Disputes	30
Arbitration	20

16. Subjects

Company Law
Civil Procedure