Maniach Pte Ltd v L Capital Jones Ltd [2016] SGHC 65 – SGHC holds that minority oppression claims are not arbitrable per se

Maniach Pte Ltd v L Capital Jones Ltd [2016] SGHC 65 – SGHC holds that minority oppression claims are not arbitrable per se

Significance: Singapore High Court (coram: Vinodh Coomaraswamy J) held that all statutory minority oppression claims, i.e. section 216 claims, regardless of the factual circumstances are not arbitrable as a matter of public policy.

The reasons given are:-

1. the minority oppression claim, being statutory in nature and being asserted in relation to the affairs of a creature of statute, ought to be supervised and determined by the court in all cases: [160];

2. (a) an arbitral tribunal is unable to grant a plaintiff in minority oppression proceedings the full panoply of relief available under s 216(2) of the Companies Act to remedy minority oppression; and (b) it is undesirable to compel the parties to fragment a minority oppression dispute between litigation and arbitration, whether that fragmentation arises because the arbitral tribunal cannot grant the full range of relief which the statute makes available to a successful plaintiff or because only some of the parties to the dispute are parties to the arbitration agreement. This follows Quentin Loh J’s reasoning in Silica: [161].

On part (a) of the 2nd reason above, Vinodh J opined that the statutory power to order a buy out on terms under s 216(2)(d) of the Companies Act is vested only in a judge, and even then only by s 216(2)(d) of the Companies Act and is alien to the common law and even to equity: [164]. Further, following Quentin Loh J in Silica in considering the scope of s 12(5) of the International Arbitration Act: (1) it clearly could not “be construed as conferring upon arbitral tribunals the power to grant all statute-based remedies or reliefs available to the High Court” and (2) that an arbitral tribunal “clearly cannot exercise the coercive powers of the courts or make awards in rem or bind third parties who are not parties to the arbitration agreement”: at [165].

On part (b) of the 2nd reason above, Vinodh J opined that if minority oppression claims are arbitrable, fragmentation along remedial lines and issues is inevitable: [169]-[170].

Case Update: Petroships Investment Pte Ltd v Wealthplus Pte Ltd [2016] SGCA 17 – shareholders’ derivative action not available when companies in liquidation

Petroships Investment Pte Ltd v Wealthplus Pte Ltd [2016] SGCA 17

Significance: Singapore Court of Appeal holds that shareholders’ derivative actions–whether statutory or common law actions–are not available as regards companies in liquidation.

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Article: Shareholders or members bringing a statutory derivative action on behalf of the company

What can a shareholder or company member do if the company has a claim against a third party but the directors of the company fail, neglect or refuse to commence action to pursue that claim? What if the claim is against the company’s directors for breach of directors’ or fiduciary duties? Or what if the directors are pursuing a legal action on behalf of the company which does more harm than good to the company?

The member can apply to the Singapore Court to commence, defend or discontinue an action on behalf of the company. Under Singapore law, such an action is known as a derivative action. It’s derivative because under common law principles, the claim strictly speaking belongs only to the company (this is the proper plaintiff rule). However, the common law and the Companies Act in Singapore provide for certain rules to allow a member to bring a derivative action on behalf of the company under Singapore law.

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Case Update: Ang Thiam Swee v Low Hian Chor [2013] SGCA 11

Ang Thiam Swee v Low Hian Chor [2013] SGCA 11commencement of statutory derivative action – good faith requirement.[1]

 

The Court of Appeal clarified and articulated several principles on the good faith requirement (under section 216A(3)(b) of the Companies Act) in respect of commencing statutory derivative actions under section 216A of the Companies Act.

 

The Court of Appeal clarified that while the motivations of the applicant should be assessed, it is not the motivations per se that constitute bad faith; instead, bad faith will only be established where the applicant’s motivations amounted to a personal purpose (where the applicant’s judgment becomes “clouded by purely personal considerations”) which indicated that the company’s interest would not be served: at [12]-[17].

 

There is no presumption that every party with a reasonable and legitimate claim was acting in good faith. Instead, the onus was upon the applicant to demonstrate that he was or may be genuinely aggrieved. (At [18]-[23]). (This overturned existing Singapore case law which stated that there was a presumption.)

 

Drawing from Canadian and Australian jurisprudence, the Court of Appeal applied a test for good faith which looked at (at [24]-[31]):

  • whether the applicant had an honest belief in the merits of the proposed derivative action; and
  • whether the applicant’s collateral purpose is sufficiently consistent with the purpose of doing justice to a company such that he is not abusing the statute, amounting to abuse of process, or abusing the company as a vehicle for his own personal interests.

 

Further, considerations of legal merit should not be factored into the assessment of good faith and may more appropriately be dealt with under s 216A(3)(c), which looked to the prima facie interests of the company (at [58]).

[1] See also Supreme Court Note- Ang Thiam Swee v Low Hian Chor [2013] SGCA 11 (s 216A of the Companies Act) Supreme Court Note, Supreme Court, Mar 2013 (1).