Long Say Ting Daniel v Merukh Nunik Elizabeth (personal representative of the estate of Merukh Jusuf, deceased) (Motor-Way Credit Pte Ltd, intervener) [2013] 1 SLR 1428; [2012] SGHC 250. Section 391 of the Companies Act does not apply to proceedings commenced by persons other than the company.
- The High Court in this case interpreted section 391 of the Companies Act, which sets out the Court’s power to grant relief from liability where, among others, a director believes that any claim will or might be made against him in respect of any negligence, default, breach of duty or breach of trust.
- Section 391 applies to officers of a company, persons employed by a company as auditors, experts within the meaning of the Companies Act, and persons who are receivers, receivers and managers or liquidators (section 391(3) of the Companies Act)]
- The Court had to determine whether section 391 of the Act only applies to proceedings commenced by the company, and not by any other persons. The Court held in the affirmative, i.e. that section 391 of the Act does not apply to proceedings commenced by persons other than the company (at [56]).
- Background: the estate of the plaintiff’s deceased co-director threatened to take legal action against the plaintiff (either by the Company or qua the estate as a third party) for breach of director duties in selling several properties belonging to the company.
- The Court held (at [66], [68]) on the facts that the plaintiff was entitled to relief under section 391 against proceedings by the Company only as he had not been deceitful or unreasonable. However, this was not applicable to potential proceedings by third parties.
- Significance: this decision makes clear that relief under section 391 of the Companies Act is a narrow one and does not protect the applicant from proceedings by third parties. It is however unclear what effect a judgment granting relief under section 391 would have on proceedings commenced by third parties. It is likely that a favourable judgment would at the very least dissuade third parties from commencing proceedings since the court would already have deemed the applicant to have been acting honestly and reasonably.
