Chong Hon Kuan Ivan and Another v Levy Maurice and Others

Choo Han Teck J:

[1] This originating summons is an oppression of minority shareholders action taken out by the plaintiffs who are the minority shareholders in the company known as Publicis.Eureka Pte Ltd (the sixth defendant). The first and third defendants (the appellants in this case) are directors but not shareholders of the company. The fourth and fifth defendants are shareholders of the company. The action against the second defendant was discontinued. The present appeal before me concerns a straightforward and narrow point. The appellants applied to strike out the claim against them on the ground that it disclosed no cause of action, alternatively, that the claim was an abuse of the process of court.

[2] The reliefs sought by the plaintiffs in this action are, first, for a declaration that four written agreements (including a sale and purchase agreement) are binding on the defendants. It was not disputed that these agreements do not concern the first and third defendants or require them to perform or desist from performing any particular obligation. The allegation against them was based on the allegation that they exercised their voting powers as directors in such a way as to give rise to the oppressive conduct complained of. Secondly, the plaintiffs are seeking an order that the first plaintiff be reinstated as the managing director of the sixth defendant. Thirdly, that the first plaintiff be reinstated as a cheque signatory of the sixth defendant. Fourthly, that the fifth defendants agree to the appointment of a new auditor in place of Ernst & Young. Fifthly, for an account of profits and revenues of the fifth and sixth defendants and their associated companies.

[3] Mr Choh, counsel for the plaintiffs conceded that the reliefs claimed have no application to the first and third defendants but he contended that s 216 permits an action to be commenced in respect of oppressive acts of directors. In effect, he submits that the words of s 216(1) and (2) do give rise to a cause of action against a director who is not a shareholder. The relevant provisions read as follows:

[4] In the narrow sense, subsection (1)(a) does give the plaintiffs a right to sue arising from the conduct of ‘oppressive’ directors, but a right to commence an action is not necessarily the same as having a cause of action. A right to sue includes, by implication, a cause of action which, in most cases, envisage a specific claim against an identified party. In the respect of the broader meaning of a cause of action, that is, a right to bring an action, no one need be joined as a party since a specific claim might yet have been made against an identified party. A man who is injured in an motor vehicle accident has a cause of action (in the broad sense) in the tort of negligence. At that level, the defendant may not have been specifically identified save for the general description ‘the tortfeasor’, and the cause of action remains an abstract one. When the plaintiff’s claim becomes clearer and he is able to identify the person or persons against whom he wishes to claim, those persons become the likely parties to be joined as defendants since the plaintiff’s cause of action would be against them specifically. So, generally, there is no basis or rationale to add that person as a defendant against a person from whom no relief is being sought. It is true that in the present case, the first and third defendants have no obligation to discharge nor any act to desist from, and this appears to be so from the prayers of the originating summons themselves, and these defendants, therefore, are persons against whom no relief is being sought.

[5] Mr Mulani, counsel for the first and third defendants thus referred to Ng Sing King & Others v PSA International Pte Ltd [2003] SGHC 59 in support of his argument that the action against the first and third defendants ought accordingly be struck out. The third and fourth defendants in that case, were not members of the company. The question was whether any order against those two defendants would be enforced against them. One of the prayers included an order that the other defendants buy over all the plaintiffs’ shares in the company. An independent accountant was also to be appointed to determine the fair value of the plaintiffs’ shares in the company. But the court found that there was nothing required of the third and fourth defendants, and accordingly, took the view that it would be an abuse of the process of court to allow them to remain as parties on record. The court thus reversed the decision below and allowed their application to have their names struck out as defendants. Two of the proper defendants in that case were the wholly owned subsidiaries of the third and fourth defendants respectively. Justice Tay Yong Kwang in the Ng Sing King case was of the view that the corporate veil sufficiently shielded the parent companies from any liability. In such a case, Justice Tay held that to name them as defendants would therefore be an abuse of the court’s process. I agree with that view.

[7] Mr Mulani urged me to consider that, as in Re Little Olympian Each-Ways, no reliefs were being sought against the first and third defendants in the present case before me. What Lindsay J actually said there, was: