Tan Kah Hock and Another v Chou Li Chen and Others

[1] This is an appeal against the order of the Assistant Registrar on 4 December 2007 in Summons No 4860 of 2007 in which he ordered, inter alia, that:

[2] The defendants’ original prayer in the summons was under Rules of Court (Cap 322, R5, 2006 Rev Ed) O 12 r 7(2), for a stay of all further proceedings in this suit until the final determination of proceedings in the Federal Court of Australia in WAD 180 of 2007. When it came up before the Assistant Registrar the defendants amended the prayer to the form of the order that was finally given.

[3] The plaintiffs and defendants are shareholders in a company incorporated in Western Samoa called Awap Sgt 26 Investment Limited (“the Company”). The plaintiffs, who are brothers, together hold 50% of the company’s shares and the other 50% is held by the defendants. The Company, which is registered in Australia as a foreign company under the Corporations Act 2001, owns a 20-storey office building in Perth, Western Australia (“the Property”).

[4] The plaintiffs’ claim in this suit concerns an alleged agreement (“the Agreement”) reached on 7 December 2006 in which the first defendant (“Chou”), on behalf of himself and the second and third defendants, agreed to sell their entire shareholdings in the Company to the first and second plaintiffs for the sum of $9 million and A$2.3 million. The plaintiffs pleaded that the defendants were in breach of this agreement and pray for an order of specific performance or damages in lieu thereof. The defendants’ position is that although the parties were in negotiation for sale, no final agreement had been reached.

[5] One of the matters pleaded by the plaintiffs concerned the sale on 10 April 2007 of all Chou’s shares in the Company to a company called CN 2000 Holdings Limited (“CN 2000”) in which he was a minority shareholder. The plaintiffs pleaded that this was a fictitious sale to a “related corporation”, to use Chou’s own description. The plaintiffs contend that this was done to circumvent enforcement of their rights under the Agreement. The plaintiffs further pleaded that Chou’s sale of his shares to CN 2000 was in breach of a shareholders’ agreement executed on 30 April 2006 (“the Shareholders’ Agreement”) by the first and second plaintiffs and Chou. Clause 9 of the Shareholders’ Agreement provides that a party may transfer his shares to a non-party only after giving the other parties the right of first refusal. Chou averred that, for a number of reasons, the Shareholders’ Agreement was null and void and of no effect. It is clear that from the plaintiffs’ point of view, in the event that they succeed in proving that Chou was in breach of the Agreement it might be necessary to prove breach of the Shareholders’ Agreement in order to obtain a rescission of the sale of Chou’s shares to CN 2000 in order to avail themselves of an order for specific performance.

[6] The plaintiffs filed the writ in this action on 26 April 2007. The defendants filed their Defence on 30 May 2007. This was followed by a number of interlocutories including an application by the defendants to strike out the action which was dismissed by the Assistant Registrar on 26 June 2007 and, on appeal, dismissed by the judge on 23 July 2007. Affidavits for discovery were exchanged in August and on 29 August 2007, the Deputy Registrar directed the parties to set down the suit by 21 November 2007.

[7] In the meantime, another battle was brewing between the parties in Perth, Western Australia. Deo Silver Pte Ltd (“Deo Silver”) is a Singapore incorporated company that is majority-owned by the plaintiffs who are its directors. On 18 September 2007 the plaintiffs, as first and second applicants, and Deo Silver as the third applicant, commenced suit no WAD 180 of 2007 in the Federal Court of Western Australia (“the Australian suit”). In that action the Company was named as the first respondent and Chou, the third respondent. The fourth respondent was CN 2000 and the second respondent was a Hong Kong company, CN (Hong Kong) Limited (“CNHK”). The applicants alleged that the second, third and fourth respondents, who were all directors or shareholders of the Company, had acted oppressively towards them as members of the Company. On this ground they sought relief under s 233(1)(d) of the Corporations Act 2001 for an order that Chou transfers to the plaintiffs all the shares in the Company that are owned by him or by companies controlled by him at the current market value. The applicants pleaded that the oppressive acts were as follows ([26] and [27] of the statement of claim):

[8] Paragraph 20 of the statement of claim, referred to in [27], provides as follows:

[9] The final three substantive paragraphs of the statement of claim plead as follows:

The matters pleaded in [28(f)] to [28(j)] are as follows:

[10] The pleadings complained of in the application before me, viz “references to the Shareholders’ Agreement, including but not limited to any breach of clause 9 of the Shareholders’ Agreement” are found in [21] to [24] of the statement of claim. There the applicants pleaded the execution of the Shareholders’ Agreement ([21]), set out some of its terms ([22]), pleaded that Chou had failed or refused to perform those terms ([23] and [24]). Paragraph 23 pertains to the failure to perform terms in the Shareholders’ Agreement calling for the appointment of a new accountant and a new secretary for the Company within a specific time and to appoint either the first or second applicant as a director. Those matters are not before the court in the present proceedings. Paragraph 24 is, and it pertains to the allegation that Chou had caused the transfer of his shares in the Company to CN 2000 without giving the first and second applicants (who are the plaintiffs before me) the first right of refusal as required under the Shareholders’ Agreement. In its remaining prayers, the applicants asked for a declaration that any transfer of shares from Chou to CN 2000 was invalid and to be set aside and further or in the alternative, an order for Chou to cause the appointment of the first applicant as a director of the Company.

[11] On behalf of the defendants, Mr Kwek submitted that there are two proceedings, in Singapore and Australia, in which essentially the same parties are litigating over similar issues. Mr Kwek contended that this is a case of lis alibi pendens and that I ought to uphold the order made by the Assistant Registrar and require the plaintiffs to elect to remove references to the Shareholders’ Agreement in one of those proceedings to remove the risk of conflicting findings in two jurisdictions and the inconvenience and expense of having to litigate the same issues twice. On behalf of the plaintiffs, Mr Lee argued that the mere fact that similar issues are being litigated in two courts in different jurisdictions will not move the court to make this order. The court will only do so only if this would be vexatious or oppressive on the defendants.

[12] Mr Kwek relied on the decision of Sir Nicholas Browne-Wilkinson V-C in Australian Commercial Research and Development Ltd v ANZ McCaughan Merchant Bank Ltd [1989] 3 All ER 65 (Australian Commercial Research). The headnote to this case states as follows:

[13] It can be seen that the situation in that case is a unique one and the decision of Sir Nicholas Browne-Wilkinson V-C was on the basis that Queensland was the appropriate forum. Accordingly he stayed the counterclaim and gave leave to the plaintiff to discontinue the claim. In the course of his judgment, the Vice-Chancellor cited the following passage from Dicey and Morris Conflict of Laws (11 edn, 1987) at 395:

[14] The present suit is very different from the factual situation in the Australian Commercial Research. First of all, the actions here and in Australia are quite different in nature although the background facts overlap. The present suit is for enforcement of the Agreement in which the defendants had undertaken to sell their shares in the Company to the plaintiffs, whereas the Australian suit is brought on the basis of oppressive conduct by the respondents in relation to the management of the Company.

[15] Secondly, the only similar issue in the two suits, here and in Australia, is the question of the subsistence of the Shareholders’ Agreement. There does not appear to be any controversy over what its terms are, if it subsists; those terms are set out in writing and the defendants have not in any affidavit denied the interpretation of cl 9 relating to first right of refusal.

[16] Thirdly, the question of the subsistence of the Shareholders’ Agreement is not the primary issue in either proceedings. The suit before me pertains to the enforcement, not of the Shareholders’ Agreement, but of the Agreement, in which the plaintiffs claim the defendants had undertaken to sell their entire shareholdings in the Company to them. The issue of the Shareholders’ Agreement is relevant only from the point of view of the relief of specific performance, because the shares are now held by CN 2000 due, the plaintiffs say, to a breach by Chou of his undertaking. If the Shareholders’ Agreement is not upheld by the court in Singapore, then this may limit the plaintiffs’ remedies to damages. But it does not affect the plaintiffs’ substantive claim which is based on breach of the Agreement. In the Australian suit, the primary issue is whether there was oppressive conduct on the part of the respondents. The applicants there had, in pleading that the respondents had engaged in oppressive conduct, limited this to the facts pleaded in [26] and [27], and also [20] on account of the particulars in [27]. None of these paragraphs pertain to the Shareholders’ Agreement which is pleaded in [21] to [24]. There the Shareholders’ Agreement appears to be pleaded so that the remedy of sale at market value may be available as a remedy. In the event that this is not possible, the alternative remedy of damages had been pleaded and is available to the applicants.

[17] In the latest edition of Dicey, Morris & Collins: The Conflict of Laws (14 edn, 2006) the editors state at [12-008], p 466:

[18] The cause of action in the Australian suit is only available to the plaintiffs in Australia as the Company falls within the jurisdiction of the Corporations Act 2001. It is not possible for the plaintiffs to commence that action in Singapore. The plaintiffs have commenced the present suit presumably because Chou is resident or has assets here and the second and third defendants are companies registered in Singapore. There are therefore advantages to the plaintiffs in prosecuting the present suit in Singapore whereas they are compelled to prosecute the oppression action in Australia. In both actions the plaintiffs have deemed it necessary to plead the facts pertaining to the Shareholders’ Agreement and in my view it is reasonable for them so to do. I am of the opinion that under these circumstances it is not appropriate for the court to exercise its discretion to require the plaintiffs to make the election that the defendants ask for. For these reasons I allowed the appeal and set aside the order below.