Tokuhon (Private) Limited v Seow Kang Hong and Others

[2] At the suggestion and prodding of Tokuhon Corporation of Japan, the plaintiffs were incorporated in 1962 after the patriarchs of the three companies decided to put together a joint outfit. It was agreed amongst the three families that each family was to be represented on the plaintiffs’ board by one director.

[3] For the period from 1989 to 1999, the directors of the plaintiffs were Dr Chang Jin Aye (‘Dr Chang’) from Nan Tat; Ooi Choon Sian (‘Ooi’) from Weng Seng Heng, his alternate being his brother Ng Choon Heng (‘Ng’); and Dr Seow Kang Hong (‘Dr Seow’) from Continental, his alternate being Dr Seow’s wife Mdm Wong Kah Joo (‘Mrs Seow’). Mrs Seow was appointed a director, her alternate being her husband, on 2 April 1998. This appointment continued until 28 May 1998 when both Dr Seow and Mrs Seow became directors in their own right without being alternate to each other. Dr and Mrs Seow were the first and second defendants to this action respectively.

[4] The distributorship agreement held by the plaintiffs was terminated by Tokuhon’s authorised representatives China Merchant Import and Export Co Ltd of Hong Kong (‘China Merchants’) on or about 15 May 2000. At the plaintiffs’ Annual General Meeting of 6 June 2000, Dr Seow was not re-elected to the board and as a result of his non-election, Mrs Seow resigned from the board on the same day. Dr and Mrs Seow eventually sold their shares to Dr Chang and Ng on or about 21 February 2001.

[5] The action by the plaintiffs against the first two defendants was for an alleged breach of fiduciary duties as directors. The plaintiffs alleged that it was through the acts of the first two defendants (viz, a series of letters written by Mrs Seow to China Merchants making false allegations about the company) that caused the loss of the distributorship agreement. Further, they alleged that the first two defendants had procured the said distributorship for themselves through the third defendants (a company incorporated by the first two defendants on 4 February 2000 with a view to sell cosmetics and beauty products initially) without disclosure to the plaintiffs.

[6] The defendants alleged that Dr Seow had no role in bringing about the termination of the plaintiffs’ Tokuhon distributorship. Further, they alleged that the loss of distributorship was not caused by the actions of Mrs Seow, but rather, by the actions of Dr Chang and Ng. They alleged that Dr Chang and Ng were themselves in breach of fiduciary duties as directors because they had, amongst other things, made trips to Japan to present sale and marketing strategies in an effort to wrestle the distributorship agreements for their respective companies. They also claimed that while the third defendants did enter into a distributorship agreement with China Merchants, they were not the beneficial owners of the third defendants.

[7] In the end, the plaintiffs failed before me as I held that the defendants could not be held responsible for the loss of the plaintiffs’ distributorship rights. The facts and my reasons for dismissing the plaintiffs’ claim are fully set out in a written judgment [2003] SGHC 65 delivered by me on 25 March 2003. The plaintiffs have since appealed against my decision and the appeal I am told is scheduled for hearing sometime in August this year.

[10] The current principles applicable to stay of execution pending appeal are set out by Staughton LJ in Linotype-Hell Finance Ltd v Baker [1992] 4 All ER 887 at 888 as follows:

[13] Returning to the application at hand, I must say that when the parties appeared before me on 16 April 2003, the concern articulated by plaintiffs’ counsel was only in relation to the winding-up proceedings. This had since become a non-issue since counsel representing the defendants made it presently known to the court that stay in respect of the winding-up proceedings would no longer be resisted by them. However, the plaintiffs were not content with what they had obtained so far. They seemed to have shifted the gear to a higher ratio. They were plumbing for a blanket stay and attempted to argue that even the other forms of execution, such as a writ of seizure and sale against the plaintiffs’ properties might cause the mortgagees of the plaintiffs to recall the entire loan which they are not able to satisfy immediately and the result would be a liquidation of the plaintiffs in an indirect way.

[14] In my view, an all-embracing stay would be inappropriate in the circumstances of the present case. Whilst I could appreciate the plaintiffs’ concern on the implications of the winding-up proceedings, the same cannot hold true for the other forms of execution. The plaintiffs cannot have it both ways. If they could marshal their resources to engage counsel of the ilk who were present before me to argue this application, it should not be too difficult for them to channel part of it to address a very legitimate concern of the defendants that at the end of the day they might not even recoup the amount expended by them to defend their cause. In my determination, a blanket stay, as is being pressed for the plaintiffs would indeed result in the defendants being deprived of whatever that is available currently before others could lay their claims to them.

[15] Having considered the views expressed in Linotype-Hell Finance and the approach taken in the United Malayan Banking Corporation Ltd case, I concluded that a total stay would be entirely inappropriate as it would cause considerable prejudice to the defendants. In the premises, I revoked the order made by me on 16 April 2003 and in its place made the following orders:

Order accordingly.