Syed Ibrahim v Wavoo Abdusalam: Statutory Derivative Action for Breach of Directors' Duties
In Syed Ibrahim Shaik Mohideen v Wavoo Abdusalam Shahul Hameed and others, the Singapore High Court considered an application by Syed Ibrahim Shaik Mohideen, a director and shareholder of Suvai Foods Pte Ltd, for leave to bring a statutory derivative action against Wavoo Abdusalam Shahul Hameed and Abdul Latiff Hajara Marliya for alleged breaches of their directors’ duties. The court allowed the application in part, granting leave to bring a derivative action against Wavoo in respect of certain allegations, but not against Latiff.
1. Case Overview
1.1 Court
General Division of the High Court of the Republic of Singapore1.2 Outcome
Application allowed in part.
1.3 Case Type
Civil
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
Singapore High Court allows in part Syed Ibrahim's application for leave to bring a statutory derivative action against Wavoo Abdusalam for breaches of directors' duties.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Syed Ibrahim Shaik Mohideen | Plaintiff | Individual | Application allowed in part | Partial | Lim Jun Hao Alvin |
| Wavoo Abdusalam Shahul Hameed | Defendant | Individual | Derivative action allowed in part | Lost | Joseph Lopez, Tan Zhi Min Ashton, Kyle Yew Chang Mao, Chia Wei Chen Pearline |
| Abdul Latiff Hajara Marliya | Defendant | Individual | Application dismissed | Won | Joseph Lopez, Tan Zhi Min Ashton, Kyle Yew Chang Mao, Chia Wei Chen Pearline |
| Suvai Foods Pte Ltd | Defendant | Corporation | Neutral | Neutral |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Goh Yihan | Judicial Commissioner | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Lim Jun Hao Alvin | Withers KhattarWong LLP |
| Joseph Lopez | Joseph Lopez LLP |
| Tan Zhi Min Ashton | Joseph Lopez LLP |
| Kyle Yew Chang Mao | Joseph Lopez LLP |
| Chia Wei Chen Pearline | Joseph Lopez LLP |
4. Facts
- The plaintiff is a director and shareholder of the third defendant, Suvai Foods Pte Ltd.
- The plaintiff applied for leave to bring an action against the first and second defendants for alleged breaches of their directors’ duties.
- The Company is engaged in the business of manufacturing food products, in particular, fresh Indian food products.
- The plaintiff was removed as a director pursuant to a member’s resolution at the Annual General Meeting on 23 August 2021.
- Wavoo registered the Company's trademark in his own name without informing the plaintiff.
- Wavoo allegedly used the Company’s confidential recipes and funds to establish two foreign companies.
- Wavoo allegedly inflated the salaries of the Company’s employees and clawed back payments from them.
5. Formal Citations
- Syed Ibrahim Shaik Mohideen v Wavoo Abdusalam Shahul Hameed and others, Originating Summons No 779 of 2021, [2022] SGHC 307
6. Timeline
| Date | Event |
|---|---|
| Company incorporated by Wavoo and the plaintiff. | |
| Wavoo applied to register the trademark in his own name. | |
| Wavoo brought Maneesh to Hong Kong to establish Suvai Foods HK. | |
| Wavoo brought Maneesh to the UK to transfer recipes to Suvai UK. | |
| Latiff was appointed as a director of the Company. | |
| Wavoo caused the Company to make inflated salary payments. | |
| Series of correspondences between the parties began. | |
| Wavoo incorporated Suvai Global Foods Pte Ltd. | |
| Plaintiff issued first notice of intention to apply for leave. | |
| Plaintiff issued second notice of intention to apply for leave. | |
| Wavoo diverted the Company’s revenue to a new bank account. | |
| Plaintiff commenced application for leave to commence statutory derivative action. | |
| Plaintiff was removed as a director. | |
| Judgment reserved. | |
| Judgment issued. |
7. Legal Issues
- Standing to Bring Derivative Action
- Outcome: The court held that the plaintiff had the requisite standing to bring an application under s 216A despite being the majority shareholder.
- Category: Procedural
- Breach of Directors' Duties
- Outcome: The court found that the plaintiff demonstrated a reasonable belief in good causes of action in respect of Wavoo's dealings with the Company regarding the trademark, foreign companies, and inflated salaries.
- Category: Substantive
- Notice Requirement for Derivative Action
- Outcome: The court held that the plaintiff had given the requisite notice as required under s 216A(3)(a) of the Companies Act.
- Category: Procedural
- Good Faith Requirement for Derivative Action
- Outcome: The court found that the plaintiff had acted in good faith in bringing the present application in respect of the allegations identified.
- Category: Procedural
- Prima Facie Interests of the Company
- Outcome: The court found that it was prima facie in the interests of the Company for the action to be brought against Wavoo.
- Category: Procedural
8. Remedies Sought
- Leave to bring a derivative action in the name of the Company
- Costs of the derivative action to be paid by the funds of the Company
9. Cause of Actions
- Breach of Directors' Duties
- Breach of Trust
10. Practice Areas
- Commercial Litigation
- Corporate Law
11. Industries
- Food Manufacturing
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Tan Chun Chuen Malcolm v Beach Hotel Pte Ltd | High Court | Yes | [2022] SGHC 187 | Singapore | Cited for the legal requirements that the plaintiff must satisfy to bring an application under s 216A of the Companies Act. |
| Ang Thiam Swee v Low Hian Chor | Court of Appeal | Yes | [2013] 2 SLR 340 | Singapore | Cited regarding the good faith requirement under s 216A(3)(b) of the Companies Act. |
| Pang Yong Hock and another v PKS Contracts Services Pte Ltd | Court of Appeal | Yes | [2004] 3 SLR(R) 1 | Singapore | Cited for the purpose of the s 216A derivative action and the protection of genuinely aggrieved minority interests. |
| Agus Irawan v Toh Teck Chye and others | High Court | Yes | [2002] 1 SLR(R) 471 | Singapore | Cited to support that the meaning of a proper person to make an application under s 216A(1)(c) is not closed and can include an individual director. |
| Jian Li Investments Holding Pte Ltd and others v Healthstats International Pte Ltd and others | High Court | Yes | [2019] 4 SLR 825 | Singapore | Cited to support that former directors of the company can have standing to seek leave to bring a derivative action against the current directors. |
| Mohd Shuaib Ishak v Celcom (M) Bhd | High Court | Yes | [2008] 5 MLJ 857 | Malaysia | Cited to support the scenario where a shareholder could still claim loss qua shareholder (at the point of wrongdoing) in the action brought in the company’s name. |
| Urs Meisterhans v GIP Pte Ltd | High Court | Yes | [2011] 1 SLR 552 | Singapore | Cited to support that a director would come under the catch-all provision of a proper person under s 216A(1)(c). |
| Regal (Hastings) Ltd v Guilliver | House of Lords | Yes | [1967] 2 AC 134 | United Kingdom | Cited for the strict rule that a director will not be allowed to retain profits unless the Company had been fully informed and consented to the director’s profit. |
| Higgins, Danial Patrick v Mulacek, Philippe Emanuel and others and another suit | High Court | Yes | [2016] 5 SLR 848 | Singapore | Cited for the no-profit rule aimed at protecting the integrity of the fiduciary relationship from being tainted by the prospect of a conflict of interest. |
| Teo Gek Luang v Ng Ai Tiong and others | High Court | Yes | [1998] 2 SLR(R) 426 | Singapore | Cited to support that the mere presence of a personal grievance, resentment, and hostility between factions does not invalidate the present action. |
| Ma Wai Fong Kathryn v Trillion Investment Pte Ltd and others | High Court | Yes | [2020] 5 SLR 1374 | Singapore | Cited to support that the existence of a collateral purpose was not, in and of itself, a reason to find that the application for leave was not brought in good faith. |
| Chng Kheng Chye v Kaefer Prostar Pte Ltd and another | High Court | Yes | [2020] SGHC 180 | Singapore | Cited regarding the court's inference of a lack of good faith due to the bare allegations being brought by the complainant. |
| Petroships Investment Pte Ltd v Wealthplus Pte Ltd and others | High Court | Yes | [2015] SGHC 145 | Singapore | Cited to explain the overlap between the inquiry into an applicant’s good faith and the inquiry into whether the derivative action appears to be prima facie in the interests of the company. |
| Law Chin Eng and Another v Hiap Seng & Co Pte Ltd (Lau Chin Hu and others, applicants) | High Court | Yes | [2009] SGHC 223 | Singapore | Cited to support that when leave is sought to pursue an action for the recovery of company assets which have been improperly siphoned off, it would generally be relatively easy to show that the company will stand to gain substantially in money or money’s worth. |
| Lee Seng Eder v Wee Kim Chwee and others | High Court | Yes | [2014] 2 SLR 56 | Singapore | Cited as an example of a case where the relief obtained would not be worth the costs of the action. |
| Hiap Seng & Co Pte Ltd v Lau Chin Hu and others | High Court | Yes | [2011] SGHC 143 | Singapore | Cited to support that a court is entitled to restrict its leave to be granted only to allegations which have satisfied the requirements of s 216A. |
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, 2006 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Statutory derivative action
- Directors' duties
- Good faith
- Prima facie interests
- Standing
- Notice requirement
- Breach of trust
- Confidential recipes
- Inflated salaries
15.2 Keywords
- Statutory derivative action
- Directors' duties
- Companies Act
- Singapore
- Corporate law
- Breach of duty
16. Subjects
- Company Law
- Corporate Governance
- Civil Procedure
17. Areas of Law
- Company Law
- Statutory Derivative Action
- Directors' Duties