THE PROTECTION OF MINORITY SHAREHOLDERS

POLICY RATIONALE Why protect the minority?

[p.4 of Notes]
Rationale for majority rule Rationale for minority protection
- Choice minority choose to be minority
- Risk majority take more risk
- Efficiency cannot allow Co. to be deadlocked all the time
- Not all that much choice too minority in closely-held Co. cannot exit so easily
- Some risk is still risk
- Cannot allow unfettered tyranny of majority may destroy value of Co.
THE BALANCE:
prima facie legitimate and efficient majority rule, augmented by selective intervention by the courts to prevent unfair and inefficient prejudice against the
minority.
1. THE COMMON LAW DERIVATIVE ACTION (CLDA) and the rule in Foss v. Harbottle
1.1 The Rule in Foss v. Harbottle (the Rule)
[p.5-8 of Notes]
Although termed the rule in Foss, it actually comprises of two rules (as interpreted by Edwards v. Halliwell [1950, ECA]):
Proper Plaintiff Rule Majority Rule Principle
- When a wrong is committed against a Co. the proper plaintiff can
only be the Co. itself.

- Rationale: a Co. is a separate legal entity
- Effect for majority rule: Power is vested in majority bec. majority will
almost always have control over deciding whether the Co. shd sue.
- Where the wrong is committed against a members individual right, but it can
be ratified by a simple majority of the Cos members, no individual member is
allow to maintain an action. The Cos word is final cadit quaestio.

- Rationale: fruitless to allow individual to sue when wrong can be cured by
majority ratification
- Effect for majority rule: Minority cannot sue for mere irregularities
Cases Cases
Foss v Harbottle (1843): In law, the corporation, and the aggregate
members of the corporation, are not the same thing for purposes like
this.
MacDougall v Gardiner (1875): Chairman failed to call vote before adjourning a
general mtg minority member complained failed, bec. Chairman wouldve had
enough votes to command a majority and vote in favour of adjournment anyway.
The link btw the two rules:
- Emphasize the prima facie right of majority shareholders (MSH) to decide the Cos affairs, by severely limiting the ability of minority S/Hs to sue.
Benefits of Foss Costs of Foss
- Reduce wasteful litigation
- Prevent double recovery
- MSHs can cover up their wrongdoing harms value of the Co.
- Robs minority S/Hs of a remedy when there is clearly a wrong

1.2 Exceptions to the Rule the CLDA
[p.8 of Notes]
The Rule is a procedural rule bec. it deals with whether a member has standing to bring the action for the Co.
o For eg. if a Dir. misappropriates funds, the Co. has a substantive action for breach of fiduciary duty; regardless of whether it is the Co. or the member
suing on behalf of the Co.
Four exceptions to the Rule (discussed in Prudential Assurance v. Newman Industries Ltd [1982, ECA]):
(1) Member has a personal claim (2) Transaction requires special
majority to ratify
(3) Complaint is for Ultra vires or
illegal transactions
(4) Cases where it is a fraud on the
minority
- If A has cause of action A and B, he
may be barred from A but that does
not destroy (his personal) cause B.
- Majority rule principle in Foss
cannot apply bec. a simple
majority cannot ratify such acts
- Majority rule principle in Foss
cannot apply bec. an ultra vires
is incapable of ratification
- Wrongdoers are the very ones in
control of the Co.
- The only true exception to Foss

*N.B. (1) (3) are not really exceptions per se, because they bec. they are instances when the member has pre-existing personal rights to sue. In a sense, if you have
all these existing rights to sue, you ARE the proper plaintiff. Only (4) is a true exception to Foss.
Exception (1): Member has personal claim [p.9 of Notes]

(a) Express contracts (b) Statutory contract (s.39) (c) Statutory rights conferred expressly
by CA
1

(d) Common law
Eg. I have a contract to
supply goods to the Co.; the
fact tt I cannot sue the Co.
for a fiduciary breach
doesnt bar me suing for
breach on that contract.
- M&A serve as contract btw Co. and
individual member of Co.
Subject to 2 conditions:
(i) He must be enforcing the right qua
member
2
;
(ii) In case of procedural irregularity, there
must be substantial injustice (s.392)
- s.409A allows member to seek
injunction for alleged contravention
of CA
- s. 177 right to compel gen mtg
- s.181 right to appoint proxy
- s 189 right to inspect books of the
Co.
Case law has developed to recognize
certain rights as rights inseparable
from a members ownership of shares.
- A right to vote (Pender v.
Lushington)
- Right of a member-director not to
be wrongfully removed (Pullbrook
v. Richmond )
Restriction on Exception (1): No Reflective Loss principle
- A shareholder cannot make a claim for reflective loss even if the S/H Exceptions to the No Reflective Loss principle

1
The difference btw (b) and (c) is that the rights in (b) are accorded by way of the Articles (representing a contract) and (c) are those immutable rights conferred by statute.
2
Unless the wide-view of Salmon v. Axtens applies - This assumes that the in a capacity other than a member principle applies in Singaporewhich may not be the case. For a discussion of the applicability of
the in a capacity of than a member principle in Singapore, See Woon at para. 4.49.
has his own separate cause of action.
- If the S/H can be entirely compensated by a re-inflation of the Cos
value, he has no action.
- Justification: prevent double recovery
(Authoritative case: Johnson v. Gore Wood (HL); Singapore authority:
Townsing Henry George)
1) Co. has no cause of action
- bec. of wrongdoers actions eg. Co. rendered insolvent (Giles v. Rhind)
- bec. the jurisdiction tt the Co. is in has no proper remedy (Hengwell)

2) S/Hs loss is separate and distinct from the Cos
Exception (2): Transaction requires special majority to ratify [p.13 of
Notes]
Exception (3): Ultra vires transactions [p. 14 of Notes]

The reasoning is that if the breach consists of Dirs. not adhering to the
75% rule after breach is uncovered, the Dirs. need only a simple
majority to decide not to proceed with any action this effectively
circumvents the need for supermajority.
o Edwards v, Halliwell: [The] effect would be to allow a
company acting in breach of its articles to do de facto by
ordinary resolution that which according to its own
regulations could only be done by special resolution
Can Exception (2) and (1) be combined?
Such instances are treated as if they are personal rights of members.
But this Exception is of limited application bec. s.25 effectively abolishes the
doctrine of ultra vires.
However, the remaining limited powers of a member to deal with an ultra vires
act in s. 25 can still be enforced by a member in their own right (and, therefore,
remain an exception to the rule in Foss)
Under s. 25(2)(a)a member can restrain the company
Section 25(2)(b) allows a company or a member to use ultra vires acts to
support a claim against a director.
Thus, a minority member may claim oppression (s. 216),just
and equitable winding up (s. 254(1)(i)) or seek a derivative action
on behalf of a company for a breach of directors duties (s. 216A),
all of which may be supported by evidence of ultra vires acts.
Exception (4): Fraud on the Minority [p. 14 - 25 of Notes]

This IS the common law derivative action (CLDA).
o It is a derivative action because although it is pursued by a member of the company, the member is not suing to enforce their own personal rights,
but rather those of the company (i.e., the rights being enforced are derived from the company)
o A PROCEDURAL right bec. the Co. always had the right to sue but this exception allows a minority S/H to bypass the majority Dirs. and force the Co.
to mount the suit.
Purpose: to prevent wrongdoings by corporate controllers from going without redress.
Elements of the Test [p.15,16 of Notes]
I: Co. is prima facie entitled to the relief claimed
(similar to threshold test in s.216A derivative action)

II: The wrongdoers must have committed a fraud on the minority.
Three elements
3
:
(i) Wrongdoer obtains some sort of benefit

3
Leading texts suggest that there is a three-part test. But SGCA in Ting Sing Ning did not expressly state the no. of stages in the test, yet it endorsed a passage in Daniels v. Daniels which states such a test.
Nevertheless, in the later SGHC case of Sinwa, Ang J. acknowledges that three-part test may be good but law not settled. He opined an alternative singular test but that wasnt emphasized. May argue in exams tt
there is a singular test if client fails three-part test on the facts.
* Prof Puchniak considers this a redundant limb
becauseBut it was considered in detail and deemed
important in the dicta of Sinwa SS (HK) Co Ltd v. Morten
Innhaug [2010, SGHC].
(ii) Benefit obtained at the expense of the Co.
(iii) Wrongdoer used controlling power to prevent Co. from suing
II: Three-part test for proving fraud on the minority (FOTM)
(a) Wrongdoer benefit [p.17] (b) At the expense of Co. (c) Wrongdoer control [p.18-20]
- FOTM does not require prove of
actual fraud
- But must have proof that the
wrongdoer actually benefited
from the wrongdoing
- This req. effectively bars claims
of pure negligence (whr Dir.
was merely careless, unlikely to
show tt he obtained some
benefit).
- Daniels v. Daniels : sell Co. land
at undervalue Dir benefited
claim allowed.
- Pavlides v. Jensen : Dir. sold
mine at undervalue but he did
not benefit claim failed.
- This goes to whether the S/Hs could
have ratified the wrongdoers
breach.
- Where breach benefits the
wrongdoer at the expense of the
Co., ratification is not allowed (bec.
it effectively gives S/Hs license to
openly rob the Co.).
- Cooks v. Deeks completed
negotiation of deal Dirs diverted it
to themselves no ratification
allowed.
- c.f. Regal Hastings Lord Russell in
obiter considered tt Dirs. could have
ratified deal w S/Hs at gen mtg
derivative action barred.
- Arguably most crucial element it must be shown tt wrongdoers have the
ability to stifle claim.
- No need to show tt Pf had requested for action but was actually rejected.
a. The clearest case is of course when the wrongdoing Dir. actually
commands >50% votes; OR
b. Dir. doesnt actually have 50%, but it can be shown tt sufficient
Dirs. would have sided with him to form a majority, then he has
de facto control (eg. Ting Sing Ning sister (10%) + brother = 52%
Asian family values)
- But even if (a) or (b) is satisfied, if the majority of the minority would
oppose bringing the claim as well, then there is no wrongdoer control
(Smith v. Croft Wrongdoers (63%), Pf (14%) and remaining independent
S/Hs (21%) the 21% also chose not to mount action Pf failed)
But the independent S/Hs must be fully informed (Ting Sing Ning
wrongdoer and solicitors did not fully expln nature of allegations)
- What happens if both parties have exactly 50-50 shareholding? Then court
will look at whether wrongdoer had effective control (Sinwa)
Threshold requirement 1: Pf must come with clean
hands [p.21]
2: Available vs. better remedy
- In Exceptions (1) (3), the Pf has a pre-existing
right at law. But Exception 4 (or the CLDA) resides in
equity and so the Pf must come with clean hands.
Pf can be barred if:
- He/ she knows of wrongdoing and adopted it
(Nurcombe v. Nurcombe wife included husbands
misappropriated assets in matrimonial proceedings
(w knowledge of the wrongdoing) and then seeking
to sue on behalf of Co. failed bec. she sort of was
in pari delicto.)
- Delay in bringing the claim (Ting Sing Ning Ct
acknowledged there was considerable delay but Pf
not responsible for it claim allowed)
- Not in best interest of Co (Sinwa Pf only suing
- In Ting Sing Ning, SGCA held tt the mere availability of an alternative remedy would not defeat
claim, unless Df proves tt alternative remedy is a better remedy or the best solution.
- But later in Sinwa, Ang J. at SGHC chose to depart from this on the basis that the language used by
the SGCA was purely rhetorical.
o He considered that so long as the alternative was a real option, the Ct can strike down the
claim.
o Ang J. contends tt the traditional view of a CLDA was that it must be the last option and if the
SGCA wanted to depart from this position in Ting Sing Ning, it ought to have made its
intention clearer.
o Under Ang J.s test, the decision in Ting would have been the same bec. the alternative there
was not only not the better option, but not a viable option at all.
- Prof TCH in his commentary (2011) opines that the SGCAs view should be preferred. While it is
true tt the CLDA was an extraordinary remedy, the reason it had to be extraordinary was to
prevent abuse by minority S/Hs. But in reality, CLDAs are extremely rare bec. (1) minority S/Hs bear
to vent unhappiness and was not for the best
interest of the Co.)
the cost of it and (2) damages recovered only go to Co. Hence, no need to be as strict as Sinwa.
o But might it not be argued tt the reason for the strictness is not guard against minority abuse
but simply cessante ratione legis, cessat lex ipsa?
A Fifth Exception? the justice of the case formulation *p,20+
Biala Pty Ltd v Mallina Holdings Ltd (No 2) (1993, SC West Aus) considered that modern companies are more
complicated than the time when Foss v. Harbottle was decided, hence shd not limit remedy only to specific
boundaries Equity is concerned with substance and not form I consider it to be desirable to allow a minority
shareholder to bring a derivative claim where the justice of the case clearly demands that such a claim be
brought, irrespective of whether the claim falls within the confines of the established exceptions
Accepted?
- Not formally accepted nor rejected in
Singapore.
- Rejected by ECA in Prudential Assurance.

Procedure for bringing the CLDA:
(* N.B. This refers to procedure for application for leave to bring a CLDA)
No specific procedure in Rules of Court, but:
1. Pf must be a member of the Co.
He usually commences action on behalf of all shareholders less the alleged wrongdoers; Co. should be named as co-Dfs with the alleged wrongdoers
to ensure Co. is bound be decision
2. Pf should show that he/ she attempted to persuade the Co. to commence the action prior to mounting the CLDA
3. Issue of standing (whether there is fraud on the minority) should be addressed at the start of trial
(to avoid mistake as in Prudential Assurance)
4. When proving the alleged wrongdoing of the errant directors, need only prove on a prima facie basis and not on the usual balance of probabilities.
5. Although Pf bears his own cost, the Court has the discretion to award costs to Pf or make Co. bear the cost even if action is unsuccessful.

2. STATUTORY DERIVATIVE ACTION (SDA) s. 216A
[p.26 of Notes onwards]
The inadequate procedure and uncertain grounds for bringing a common law derivative action was widely seen as unsatisfactory
In November 1993, ss. 216A and 216B were enacted based on the Canadian model
Once again, this is a PROCEDURAL right to bypass controlling shareholders and mount suit in the Cos name (for CLDA, it is on behalf of the Co. but in the case it
will be the complainant-shareholders names).
Procedural bec. succeeding in the elements of s.216A does not prove wrongdoing on the Dirs part, it only proves that you have standing to go on and
seek to establish the Dirs wrongdoing (this would be the substantive part).
No Reflective Loss principle applies equally here.

Who may mount this action? - s.216A(1) Elements of the Test s.216(A)(3)
1) The Co. must be incorporated in Sgp, but not listed on the Sg Stock Exchange (ie. Sgp PRIVATE Co.) 1) Notice 14 days notice must be served
2) The complainant must be:
- a member of the Co.; or
- the Minister of Finance (in the case of a Declared Co. basically a Co. declared for investigation by the Minister
under Part IX of the CA); or
- any other person tt the court deems a proper person.

* Note tt a s.216A claim need not be used only at the start of a fresh suit, it can be used to intervene in an ongoing suit
of the Co. (s. 216A(2))
to the Dirs. of the Co. before filing of the
s.216A claim
2) Complainant is acting in good faith
clean hands and no unreasonable
delay
3) Prima facie in the interest of the Co.
reasonable basis for complaint
(1) Notice of 14 days (2) Good faith (3) In the interest of the Co.
- Purpose: give Co. chance to sue in its own
capacity if it wants to (rmb tt there is no FOTM
test in a SDA)
o No specific form of notice but sufficient info
shd be given for Co. to decide whether to
sue.
1. Req. of notice shd not be interpreted in an unduly
technical manner
Agus Irawan wheat rebate case pleading
amended AFTER notice was served to incl.
price rebates in addition to volume
rebates; Ct held tt amendment did not
change the fundamental claim for breach of
fiduciary duty notice was valid.
2. 14 days is max; no reason for Co. to have extra
time to consider/ investigate allegations
Tam Tak Chuen Eden health case Cos
objection tt there was insufficient time to
obtain legal advice invalid statute does not
allow time extensions.
3. S. 216A(4) req. of notice can be done away
with if it is shown that it is impracticable or
futile.
Impracticable in a case where serving notice
might destroy the entire case bec. Dirs may
destroy docs or drain the Co.
4

Fong Wai Lyn Carolyn Pf served notice after
- Equivalent to the CLDA requirement of clean
hands and no reasonable delay
- Burden of proof is on the Df to show the absence of
good faith
1. THE TEST: is whether the action is frivolous,
vexatious or devoid of absolutely any merit
(Richardson Greenshields [Ontario CA])
2. Also, the fact that there is spite and ill will btw the
parties will not, of itself, prove bad faith (dicta of
SGCA in Pang Yong Hock bec. hostility is very
common in such situations. Bad faith is only
inferred if vendetta was the main consideration
such tt the Pf mounts s.216A to harm the Co. out of
spite.)
a. Applied to facts in Tam Tak Chuen passed
main motivation financial, not personal

The good faith is actually quite easily satisfied. So long
as there are (1) legitimate issues raised and (2) Pf does
not conceal material facts or motivation.
Fong Wai Lyn Carolyn legitimate issues raised
claim allowed.
Agus Irawan wheat rebate case Pf did not
disclose tt rebates were diverted away from Co. to
companies owned by the Pf essentially no clean
hands - claim failed.
Urs Meisterhans v.GIP Pf did not disclose tt funds
A. Prima facie basis
Pf does not need to prove on balance of
probabilities as this is only application of
leave stage
Agus Irawan:
Only need to show a reasonable
semblance of merit; that the action has
a chance of success (not nec. that it is
likely to succeed)
Need not decide the disputed facts
Leave to cross-examine should be
sparingly granted
Agus Irawan failed bec. Pf actually enjoyed
the diverted rebates no way Ct could have
helped him; Teo Gek Luang failed bec. loans
had been approved by 75% of members.

B. In the interest of the Co.
o Broad commercial interests (and not
just monetary amt of claim) must be
considered (Pang Yong Hock) Co. may
want to preserve commercial r/s and
forbear to sue
o The mere existence of alternate
remedies does not bar this claim (per
Ting Sing Ning SGCA held tt Pang Yong
Hock does not stand for proposition tt

4
Cant Pf just get Anton Piller order or Mareva injunction and so no excuse not to give notice? Case-law has not suggested tt Pf has duty to obtain those injunctions. By and large, those injunctions are not easily
awarded and a mere application that fails would let the cat out of the bag to the Co. (esp since such injunctions are inter partes applications).
filing s. 216A Ct held tt claim not barred
bec. even after the late notice was given, the
Co. did nothing to show effort to investigate
the claims (Prakash J. held tt acts of Co. after
notice can be used to draw inferences)
hence even if notice had been validly given, it
would have been futile
5
.
diverted were actually going to Co. owned by Pf
no clean hands - claim failed.
* Pang Yong Hock claim failed partly bec. Ct felt tt
parties were using action only for their vendetta + it was
in the Cos interest to allow just and equitable winding
up instead.
mere existence of winding up as a
remedy would bar 216A claim)
o Ratification may be considered when
determining if claim is in interest of Co.
but Df has burden of proof to show tt
ratification was independent (s216B(1)
as read by MARGARET CHEW)
Statutory provisions of 216A and B Comparing 216A and CLDA

Sections Content
216(A)(1) Who may avail themselves of this remedy
216(A)(2) 216A may be used to intervene in existing action
216(A)(3) Elements to satisfy for granting of leave
216(A)(4) Req of leave may be dispensed with if not expedient
216(A)(5) Court may make ANY order
216(A)(6) If 216A is used to intervene in an existing action at Sub Cts,
app shd be made to District Ct

216B(1) Ratification can be considered but shd not of itself bar the
claim
216B(2) After leave is granted to commence a s.216A action, it cannot
be stayed or discontinued without the Cts approval
216B(3) Ct may order Co. to bear interim costs (but that cost may
revert to be borne by Pf later on, depending on outcome of
action)
Advantages of 216A over CLDA
1. Easier for Pf to succeed
- No requirement to establish fraud on the minority and in particular
wrongdoers control
- No need to show benefit to Dir. (ie. pure negligence claims allowed)
- Ratification may bar claim but burden is reversed and placed on Df
2. Easier for Pf to get Co. to bear costs
- Under CLDA, Ct may choose to make Co. bear costs but for 216A, Pf can
petition Ct to grant an order for costs
- Cts have power to make any order to facilitate action incl. order to
compel Dirs to provide certain documents for evidence
Disadvantages of 216A
*216A only available to non-listed Singapore companies! Foreign-incorporated
Co. must go through CLDA
1. Req. to prove in the interest of Co. is no walk in the park may be equally
difficult as wrongdoer control
2. CLDA not done away with confusion in the law in this area still remains





5
Prof Puchniak raises the qn of whether futile here refers to the rich body of case-law in US (esp in the State of Delaware) relating to futility of notice.
Another contention is that could it not be tt the Co. did not investigate bec. late notice meant that Co. could do nothing to prevent the Pf from proceeding with the s.216A action since papers have already been filed?
Quite curiously, the requirement of notice has been used to indicate what is akin to wrongdoer control in the Co.
3. OPPRESSION: s.216
This action differs significantly from the two derivative actions above because this action is substantive and personal. The S/H is not suing for the Cos loss but
alleging that he has been oppressed and has suffered a loss unique to himself.
The test for s. 216 that of commercial unfairness fully embodies the need to promote majority rule, but not without limits:
o Lim Swee Khiang v Borden Co (Pte) Ltd [2006, SGCA+: a minority shareholder participates in a corporate entity knowing that decisions are subject to majority
rule, [s 216 allows the courts] to examine the conduct of majority shareholders to determine whether they have departed from the proper standard of
commercial fairness and the standards of fair dealing and conditions of fair play
Who may mount this action? - ss.216 (1) and (7) When Four Becomes One:
Elements of the action s.216(1)
1. Member of the Co.
- Only those names tt appear on Cos register are allowed to sue.
- Can an equitable owner of shares sue for oppression?
o Technically, NO bec. the equitable owners name would not appear on the Co. register.
o However, English case law suggest tt the owner can direct his nominee/trustee to sue
or register as a member of the Co. and sue in his own name.
- If Pfs name is not on register but sues, Df cannot object if:
(a) Pfs very complaint is that he was unfairly removed from the Register (ie. that Df was
the reason his name is not on Register); or
(b) If mistake in Register is due to failure of those responsible for upkeep of the register.
2. Debenture holder of Co.
- Creditor of Co. holder has an interest over the stock/ asset of Co.
3. Minister
- In the case of a declared Co.
4. A person to whom shares are transmitted by operation of law
- Equitable owner of shares does not fall under this
- Usually refers to personal representative (in case of estate) or trustee (for bankruptcy).

* s.216 ONLY applies to local companies and not foreign ones bec. company and not corporation is
used in the statute.
A read of s.216(1) will reveal four different
terminology:
i) oppressive iii) unfairly discriminates
ii) disregard of interest iv) otherwise prejudicial
The historical reason for this is tt when Canada and
Aus enacted this section, they did not want to be
bound by the baggage in Eng law that attached to the
word oppression.
(N.B. when we analyse Eng cases, only post-UK CA
1985 is relevant bec. tt is when they changed
terminology to unfair prejudice)
Regardless of the diff in terminology, there is only
ONE TEST in s.216 that of commercial unfairness.
SGCA said tt it is pointless to analyse the different
expressions; courts will simply intervene when [the
conduct] offends the standards of commercial
fairness and is deserving of intervention (Over &
Over)
Discretion vs. Certainty A two-step approach
ONeill v. Phillips [1999, HL] strike balance btw discretion and certainty
Parliamentary intent is to free the court and confer wide discretion to do what is just and equitable.
However, it does not meant tt courts can do whatever it pleases.
(1) M&As are still relevant bec. business ppl enter into Co. with legal advice as to their rights; but (2) companies being developed seamlessly from the law
of partnership, implies that there should be a degree of good faith.
Over & Over v. Bonvest Holdings Ltd [2010, SGCA] look both at legal rights and legitimate expectations
The willingness of the courts to overlook strict adherence to legal rights stems from the understanding that business people do not always put everything
down to pen and paper. Thus, the personal relationship must be taken into consideration.
The legitimate interest is something that arises out of a fundamental understanding btw the parties which formed the basis of their association but not put
into contractual form.
(1) Starting point: WRITTEN AGREEMENT
- R Saul D Harrison & sons Plc [1995, ECA] - Hoffman LJ.: Context of commercial
relationship, so starting point is the M&As which govern the contractual relationship.
o But an act which breaches the M&As may not be oppression. The law
permits ratification and this validates majority rule.
o Hence, the UK formulation is unfair prejudice bec. majority rule invariably
means that there would be some prejudice to the minority.
(2) Then: LEGITIMATE EXPECTATIONS
- But Ct may find unfair prejudice even without breach of Arts
- Acts can be unfair without being unlawful.
- The personal r/s of the S/Hs must be considered no one
test but the following factors are usually relevant:
a. Type of Co.
b. Degree to which the venture was purely commercial
Taking a closer look at LEGITIMATE EXPECTATIONS
Legitimate expectations based on INFORMAL UNDERSTANDINGS Legitimate expectations based on IMPLIED
UNDERSTANDING
1) Informal understandings are more likely to be upheld in QUASI PARTNERSHIP settings. Hence the
preliminary issue is always to decide whether there is a quasi partnership
6
. It will arise:
a. Where there is a personal relationship btw the S/Hs tt involve placing mutual confidence
b. An agreement that all or some of the S/Hs will participate in the business
c. A restriction on transfer of shares
7
.
2) Secondly, the understanding must have been EXPRESSLY COMMUNICATED to the other party. (*Thio
Keng Poon v. Thio Syn Pyn [2010, SGCA] Malaysian Dairies case)
o Unilateral understandings will not be upheld, no matter how genuine or reasonable they
were.
o A legitimate understanding must be one tt is btw all members.
Profs Puchniak and TCH criticise this decision on the basis that there can be informal shared but
unspoken understandings.
o Conceivable tt based on social and cultural norms, a founding patriarch would be entitled to
retain a management position after gifting shares to family, out of respect for the patriarch
even if such respect is not spoken of
8
.
3) If there is professional advice and parties carefully negotiated the terms of the Arts, it is unlikely to
Unlike informal understandings (which is based on
the relationship btw the S/Hs, implied
understandings are based on the nature of the
corporate structure.
These are understandings which are not in the
M&As and yet never been discussed btw the S/Hs.

1. Implied understanding tt Dirs are not to enrich
themselves at the expense of other members.
- Low Peng Boon pay low dividends to incr. Cos
profits bec MSDs salary computed based on
amt of profits.
- Re Gee Hoe Chan Trading Co Pte Ltd Refused
to declare dividends but MSDs paid themselves
generous salaries HC held it was inequitable
to adopt a policy tt benefited only the MSDs

6
per Over & Over. Rajah JA. Held tt in the first place, it is more likely that legitimate expectations based on informal understandings will arise in a quasi partnership. Furthermore, the law
must apply a stricter yardstick of scrutiny bec. minority S/Hs in such Co. are more vulnerable due to illiquidity of shares and how any promised understanding were merely informal.
7
The SGCA in Over & Over suggested tt this criterion is not impt. However, Dan Puchniak and TCH argue tt a restriction on transfer is still an important element in finding a quasi partnership
for three reasons: (1) conceptually, what distinguishes a Co. from a partnership is the freedom to transfer economic interest; hence if there is a restriction on transfer, then it will be more
partnership-like rather than Co.; (2) relationship-wise, a Co. with restriction on transfer will revolve arnd familiar faces, and it is thr that one is more likely to find r/s of mutual confidence;
(3) vulnerability-wise, a restriction on transfer is more likely to make a Pf a more vulnerable victim of oppression which is the basis for protecting the informal understandings of S/Hs there
in the first place. *Whatever the academics view is, note tt the law is likely to follow Over & Over.]
8
But Profs argue tt even if this understanding is accepted result might still have been the same bec. it is unlikely that such an unspoken understanding would amount to carte blanche for
patriarch to do whatever he likes and Pfs double claiming would have breached the understanding. *Whatever the academics view is, the orthodox view is that the understanding must be a
spoken one.]
base legitimate expectations on informal understandings
9
.
- Over & Over: failure of parties to record essential elements of their agreement led Ct to view
that it could only mean tt parties had based their r/s on mutual trust + good faith.
- RE a Company [1986, Chancery Div] parties had spelt out in detailed agreements all matters
which were to govern their R/S.
- ONeill *99, HL+ N cannot be given the shares bec. P and N had entered into negations on
professional advice and subject to an express condition that neither was bound until a formal
document was executed. To find otherwise would not be restraining [Ps] legal rights but
imposing upon [P] an obligation which he never agreed.
- Tan Choon Yong (2009, HCp [p.46 of Notes] Dfs induced Pf to join Co. as CEO on the promise tt
he would always remain on the Board he was removed Ct held tt he did suffer oppression.
Prof Puchniak + TCH raise the quare whether in a public Co. there can be a legitimate expectation
to never be removed as a Dir considering that s.152 states tt a public Co. can always remove a
Dir by simple majority regardless of M&A or personal agreements.
10

They also qn whether Tan Choon Yong this challenges Thio Keng Poon bec. the Co. in the former
was a private-turned-public Co. such tt there was no way the initial agreement was btw ALL
members after the Co. floated.
with hardly a benefit for minority S/Hs.

2. Implied understanding tt in quasi-partnership, a
higher std of corporate governance is expected vis-
-vis the minority
- Lim Swee Khiang v. Borden Co (Pte) Ltd
controller owned shares in an overseas Co
owned by son tt was competing with this Co.
Ct held that it amounted to a conflict of interest
in equity.
* Can there be legitimate expectations in
a public Co.?
Unlikely, bec. of requirement tt
incorporation is based on personal
r/s
11

BUT, cases like Tan Choon Yong and
Ebrahimi [p.48 of Notes] did allow
finding of legitimate expectations
based on informal understanding in a
public Co.
Nevertheless, the rule of thumb is s.
216 is more for private/ closely-held
Co.
Must MSDs oppressive conduct constitute a
single or series of acts?
Limb (a) and (b) of s. 216 opens the door
both to cases of continuing and single acts
respectively
But, as noted by the SGCA in Over & Over,
most cases heard have been those
pertaining to oppression over a series of
acts.
(Eg. of singular act tt can constitute
oppression is like a singular dilution of
minoritys shares contrary to an informal
understanding)
Commercial unfairness is an objective standard
Objective standard, but the context is impt eg. competing
businessmen vs. members of family and other circumstances must
be considered (ONeil)
Re Saul D Harrison Not meaningful to use some amorphous
reasonable company fiction; Cts should state the factors tt the
law take into acct to determine what amounts to commercial
unfairness
An objective std means tt it does not matter that MSD had no
intention to oppress, or in fact he might have done if tor the
benefit of the Co. it may still amt to oppression under s. 216.
BUT, if facts reveal tt MSD did have improper motive, that may
well be a relevant consideration in going towards a finding of
oppression (Re a Company).

* MSDs can forestall/ strike out an action in s.216 by offering to purchase the Evidence of oppression in other Co. can be used as evidence in an action for

9
This shd not be viewed as an exception or limitation on its own, but rather that in such cases, it is difficult to find tt the Co. was based on a personal relationship grounded in mutual
confidence and so there is no quasi partnership in the first place.
10
My view: There is certainly support in like Re a Company tt an expectation to be employed as a director is a legitimate interest, but the dicta there clearly applied to private Co. and its
weight is not as clear when it comes to public Co. Perhaps the only way to explain Tan Choon Yong is tt it referred to an expectation to play a significant role in the management of the Co. in
a general sense and the Df Dirs actions cumulatively added to a breach of that expectation.
11
For more reasons, see p. 50 of Notes
minoritys shares.
If after proceedings have commenced, the majority S/Hs offer to buyout the
minority S/H, the Ct may decide to strike out the minoritys claim (2 reasons:
(1) freedom to leave so minority not vulnerable; (2) if action succeeds, Ct is
likely to order a buyout anw)
But offer must be a fair offer, ie.
1. Fair value w/o minority discount
2. Fair value to be determined by a competent and neutral expert
3. Both parties must have chance to argue why the price shd be higher or
lower AND both must have equal access to Co. info to make those args
4. If offer is made after an unreasonable delay after proceedings have
commenced, majority might would have to include in the offer a sum for
legal costs (ONeil)
oppression in the Pfs Co.
If Pf, as S/H of Co. A is suing for oppression, he may be allowed to adduce
evidence of MSD oppressive behaviour in Co. B, C, D etc. provided the affairs
of those Co. impact the affairs of Co. A
a) Usually only in those single economic unit scenarios of parent-subsidiary
or Co. with very similar shareholders.
b) Or where court has directed the lifting of the corporate veil (eg. fraud,
sham)
But the mere fact tt it is a parent-subsidiary r/s is not of itself sufficient; must
show how affairs in those Co. impact/ affect this Co.
This is actually a slight exception to the doctrine of separate legal personality
BUT the reason is so that the purpose and policy behind 216 is not defeated
bec. if u recall, s. 216 is not available to foreign corporations.
How to identify fact situations where possible actions for oppression may arise?
(1) Dominant members advancing their own
interests
(2) Abuse of voting powers (3) Exclusion from management
Majority often hold the Dir positions too.
They may do things tt are not in the best
interest of the Co (such as diverting corporate
assets). These may be a breach of fiduciary
duties BUT that is not of itself sufficient to be
oppression, unless they coincide with the
legitimate expectations of the members.
Lim Swee Khiang v. Borden MSDs with
conflict of interest shd have refrained from
voting sufficient to find oppression bec.
closely-held Co. held to higher std of
corporate governance.
Low Peng Boon v Low Janie MSD used Co.
funds to pay for personal travelling expenses.
c.f. Re Kong Thai Sawmill Used Co funds to
purchase motor yacht for personal use
extravagant but did not amt to oppression
bec. Pf had (1) gotten over 250% of dividends
over 4 years; (2) other minority S/Hs tt
werent related to the MSD also were not on
his side and (3) Pf had rejected a fair buyout
offer.
Generally, majority S/Hs
need only vote in their own
interests (unless it is for
modification of M&As).
But it may amount to
oppression if vote was for a
collateral purpose or
against the spirit of the
articles:
Re SQ Wong Holdings (Pte)
Ltd (p 55 of Notes) Dirs
deliberately refused to
make dividend payments
motive was to preserve
their dominance (bec.
some strange rule in Arts tt
if they did not issue
dividends, they retained
power to vote) held tt
this was not the purpose
behind granting Dirs the
discretion whether or not
to recommend a dividend.
Pf must establish a legitimate expectation tt he/she is to be included in
the management of the Co
Quite difficult in a public Co.
Tan Choon Yong v Goh Jon Keat legitimate expectation of
management in a public Co.
Thio Keng Poon v Thio Syn Pyn no legitimate expectation of
management bec. it was a mere one-sided expectation
Lim Swee Khiang v Borden Co (Pte) LtdIU S/Hs meeting proposed tt all
Dirs shd not hold executive positions Pf stripped of their executive role
- but later, nominees of the majority S/Hs were allowed to take on
executive directorships Ct held it was oppressive.
Ng Sing King v PSA International Pte Ltd no legitimate expectation of
always being in management bec. this was a S/H agreement concluded at
arms length
Kitnasamy v Nagatheran Pf had secured the main contract for which
the Co. was established in first place expended lots of effort and money
reasonable to expect tt his investment can only be protected if he were
a Dir. and had a say in mgment.

In any Co, even if such a legitimate expectation is estb, Dirs may fairly
exclude him/her from management if there are good reasons to.
Re a Company considered in dicta tt it is reasonable tt in the case of a
irreconcilable breakdown for the minority to leave, if he is compensated
for the loss of employment.
(4) Serious mismanagement (5) No/ Low dividends (6) Loss of substratum
The tricky business is that mere mismanagement shd not
suffice to prove oppression bec. every investor takes the
risk tt management may not turn out to be top notch.
The mismanagement must usually be of such as degree as to
amount to breaches of duty of skill and care (Re Macro
held tt there was oppression bec. the same acts of
mismanagement were repeated over many yrs despite Pf
pointing them out)
Note tt the mere fact tt majority always disagrees with the
minority S/H is insufficient (Re Kong Thai Sawmill (Miri) Sdn
Bhd)
Courts must be careful to distinguish btw MSDs who had a
genuine belief in the success of their business but failed (Re
Tri-Circle Investment Pte Ltd) and those where the MSDs
deliberately wanted to cause business to fail (Lim Swee
Khiang failure to explain business decisions to minority
MSDs must be deemed to have intended the consequences
of their acts and omissions)
The starting position is that all S/Hs have no right to
expect dividends; it is a decision solely for the Dirs. to
make.
But courts generally willing to find tt there is a
legitimate expectation tt majority and minority get
roughly equal returns on their investment.
Two types of cases generally give rise to oppression:
(a) Only the MSDs are getting benefits (in the form
of directors fees) but the minority is not getting
any dividend (Re Gee Hoe Chan Trading Co Pte)
(b) There is a significant gap in the return-per-share
of the majoritys shares vis--vis the minoritys
shares.
It is probably not right to say tt the moment Dirs.
refuse a dividend and yet continue to receive
emoluments, they are acting unfairly. In Re Gee Hoe
Chan, it was done consistently and over a prolonged
period.
The fundamental basis/
business objective for which the
Co. was started is no longer
there.
Unlike the others which is
essentially a breach of promise
(express, informal or implied),
this is analogous to Frustration
(ONeil)
The basis is just as in frustration
non haec in foedera veni this
is not what I signed up for.
This is unfair bec. the minoritys
$$ are locked up in a Co. with
commercial objectives he did not
consider investing in (Over &
Over)
Remedies under s. 216(2)
The court may grant any order as the court thinks fit; but a list of what that includes is set out in 216(2)(a) (f)
(1) Buyout and Winding-up - 216(2)(d), (f) (2) Derivative action - 216(2)(c)
Court may order the majority to buy out the minoritys shares
Over & Over: buyout was ordered bec there was no residual goodwill left and it would not be right for the Pfs
shareholding to remain tied up with the Co. in a broken and bitter r/s.
Lim Swee Khiang v Borden Co (Pte) Ltd: buyout was ordered even though winding-up was prayed for.
Valuation of shares can be contentious due to two issues:
1. Fair value of shares it is NOT always the case tt courts order fair value. While clean hands is not reqd, the court
has discretion to reduce the valuation price if the Pfs own conduct partially justifies the prejudicial conduct (Over
& Over Pf had NO FAULT therefore fair value could be ordered)
2. Time of valuation general rule: at the point when buyout order is made. But this could be departed from when
the current value of shares is due to injection of fresh capital (Tullio v Maoro p64 of Notes)
3. Pre-judgement interest Court has no power to award pre-judgement interest (bec. tt is only reserved for
damages), but court can adjust the share valuation upwards to compensate the Pf for long and prolonged
proceedings (Yeo Hung Khiang p64 of Notes)

Buyout is generally preferred over a winding-up bec. it does not destroy the Co
However, in cases where there is serious mismanagement, the court may wish to order winding-up instead.
One of the remedies is tt the Ct can
actually give the Pf a free pass to
commence a derivative action
(including a s.216A SDA) without the
laborious process of establishing
standing again.
This is particularly advantageous for a
member of a listed Singapore
companies (who are precluded from
mounting a s.216A action).
However, the importance of this
remedy has diminished bec. of the case
of Kumagai where corporate damages
were directly awarded to the Co.
Another reason for preferring winding-up is when the majority has no $ to buyout the Pfs shares (Tan Choon
Yong: order for buyout, failing which the Co. would be wound-up.)
without the need for Pf to initiate a
separate derivative action.

Can the court order compensation to the COMPANY?
The orthodox view is tt s.216 is a personal action and remedies shd only pertain to the Pfs own losses.
Secondly, to do otherwise would be to allow litigants to circumvent the rule in Foss v. Harbottle and the carefully-carved-out exceptions to it.
HOWEVER, cases have held that you can order the Df to compensate the Co. even in a s.216 action.
a. *Kumagai (1995, SGCA) a request to make Df compensate Co. was not granted for lack of causation but Ct held tt in principle such an order was
possible bec. 216(2) states tt court can give any order remedying the matters complained of so the wide discretion conferred by Parliament should not be
restricted.
b. Low Peng Boon v. Low Janie order to compensate Co. actually given Df ordered to make restitution to Co. for unauthorised travel expenses
c. *Kung v. Kou (04, HK Ct of Final Appeal) [best case tt discusses this issue] while it is not impossible for Cts to give such an order, they would be rare and
exceptional shd only be granted when the order corresponds with the order to which the Co. would have been entitled had it pursued the action itself
this means tt at the pleading stage, it must be clear tt the amount of the Dfs liability can conveniently be dealt with in the s.216 action.
The reason for this bending of the rule in Foss is probably expedience and justice to ensure the Co. does not go unremedied.
4. JUST AND EQUITABLE WINDING-UP: s.254(1)(i)
Who may mount this action? s.253(1)(c) The Test
S.253(1) states that: (a) the Co itself; (b) a creditor; or (c) a contributory, may apply for winding up.
Contributory is defined under s.4(1) as:
i. Members; or
o Provided the shares were originally allotted; or held for a min period of six months at the date of
action; or person got shares from bankrupt or through an estate.
ii. Non-members
o So long as the person has an interest in the shares of the Co.
Action only applies to Singapore companies and not foreign ones company is used.
But technically a foreign incorporated Co. can apply to Sg court for winding-up but under s.351(1)(c)(iii)
instead [but no cases have tried this yet].
* Note tt the class of persons allowed to mount this action is probably the WIDEST.
Simply whether it is just and equitable
to wind up.






Relationship btw power to wind-up under
254 and 216(2)(f)
A successful oppression action may not
result in the court granting a winding-
up in fact, winding-up seen as a
remedy of last resort.
Under 254, there is NO NEED to show
oppression or commercial unfairness
particularly useful in a fault neutral
irretrievable breakdown of a quasi-
partnership.
Strategic considerations when choosing btw s.254 and s.216 action

Go for 216 Go for 254
Wide discretion of remedies even if Ct does not want to wind up, it will award
something.
Facts insufficient to show oppression.
Once you commence a 254 action, the application for winding-up must be advertised.
Go for 216 to avoid bad press.
Do this if your client is hell-bent on getting the Co. to wind up
if judge is really moved to intervene, his hands are tied and he
will order winding-up.^
If Co. is large and doing well as a going concern, go for 216 instead bec the court will
almost certainly never award winding-up.
Client is not a class of persons entitled to bring a a 216 action.
^ Note tt your client must be warned tt his claim under s. 254(1) may be struck out for being vexatious if:
(1) It is an attempt to harass the Co. (to improve ones bargaining position say, for a private buyout) Sim Yong Kim v. Evenstar Investments (Evenstar)
(2) It is viewed as trying to bypass the more appropriate and moderate remedies under s216 Summit Co (S) Pte Ltd v. Pacific Biosciences Pte Ltd (Summit)

*In a nutshell, if the facts show a whiff of oppression, go for 216 instead.
How is the just and equitable test applied?
A two-step analysis:
1. Whether there is a disease that needs a cure?
2. Whether the cure is worse than the illness
(1) refers to whether there are any grounds to justify intervention (i) broken promises (here the legitimate expectations analysis features again); (ii)
disregard for minority S/Hs; (iii) loss of substratum.
(2) refers to whether the damage done by winding up may be greater than the harm it avoids hence large, (often public) going concerns are unlikely to be
wound-up.
The reasons for winding-up must also subsist at the time the order is made ie. if problems have been resolved in the interim, the Ct wont order winding-up.
Mere constant disagreement among members is insufficient, bec. S/Hs are expected to resolve their probs within the framework of the Arts (Chow Kwok Chuen)
Bec. just and equitable is so amorphous, must consider cases (below) where 254 actions have succeeded.
Irretrievable Breakdown Loss of Substratum Fraudulent Inception and
Purpose
Usually ordered where there is an irretrievable breakdown
and fault cannot be pinned on one party in a quasi-
partnership only.
Ng Sing King v. PSA Intl YES fiery meetings and no was
board meetings can be constructive rare case where
equitable winding-up ordered for a non-quasi-partnership +
S/H agreement negotiated at arms length.
Chow Kwok Chuen YES brothers always blocking one
another Co. has lost its leadership.
Summit NO breakdown was btw Pf and another Dir btw
Qn usually turns on whether the hiatus caused by the
bickering was fatal to the Co. ie. whether there is a
chance of the Co. picking itself up and become a viable
biz again.
Summit little interruption even after the Pfs firm
pulled out of the logistics business assertion tt failure
to transfer lines of pdt to Pf was loss of substratum was
unsubstantiated considering how the firm managed to
continue operating so smoothly.
Ng Sing King v. PSA Intl thr was loss of substratum bec.
Re Thomas Edward
Brinsmead & Sons (1897) -
Co was fraudulently set up
to pass off other pdts but
appeared to be for
manufacturing pianos
subscribers all wanted out
bec. they had been
defrauded. ECA said
CLEARLY this is a case
Pf and Df, they were still able to communicate.
Lawrence v LAwrich Motors (1948, S Africa) YES - Dir had
slept with wife of another Dir.
firm lost many contracts, was not granted patent and
does not even have a permanent staff unlikely to be
viable again.
where Co. must be wound
up.


------------------------------------------------------------------------------------------------ IMPT SINGAPORE DECISIONS -------------------------------------------------------------------------------------------

Ting Sing Ning v. Ting Chek Swee [2008, SGCA] Common law derivative action
Facts TSN (was Dir. and 10% S/H of H Ltd.) sued TCS (also Dir. of H Ltd) for breach of fiduciary duty.
Hs BoD refused to adopt the action + Hs independent S/Hs voted against the continuation of the action at an EGM.
s.216A SDA could not be brought bec. Co. was incorporated in HK.
TSN argued at trial tt there was a fraud on the minority bec. TCS had wrongdoer control (by way of TCS + his sister controlling a combined shareholding of 52%)
o SGHC rejected this bec. it could not be shown tt the sis would always vote in TCS side by virtue of their family relationship.
HELD SGCA reversed judgement found for TSN there was fraud on the minority bec. the sister would likely vote in favour of TCS.
Reasoning/
Impt analysis
On the likelihood that sis would vote for TCS
CA disagreed with trial judge tt close family ties were irrelevant; reasoned tt Asian family values tend to still be very clan-like and hence family ties may count for
something.
o But tt also did not mean tt family ties is conclusive of the direction tt a S/H would vote.
In this case, the fact tt sis was majority S/H in another Co. tt stood to benefit from TCS fraud + fact tt her shares in that other Co. was a gift from TCS mattered in finding
tt sis was more likely than not to vote in TCS favour.

On the fact tt independent shareholders had voted against the action too
Majority of the minority had voted against continuation of the action prima facie shows tt TCS does not have wrongdoer control
However, the allegations being levelled against TCS was never mentioned at the S/H meeting and TCS withheld obtaining copies of affidavits stating the nature of the
allegations so as to conceal these from the independent S/Hs (esp since the allegations were quite serious).
Hence, independent S/Hs had voted without knowing the nature of the allegations of fraud and this does not defeat the arg of wrongdoer control.

Must a S/H seeking to bring a derivative action seek to make the Board bring the action first?
At law, there is no requirement tt the S/H must bring to the Board the proposal that an action be brought against the errant Dirs.
Not in issue in this case bec. TSN did mention his complaints to the Board numerous times.

Availability of alternate remedies
TCS arg tt availability of alt remedies means tt courts shd not grant the derivative action. (1) H could be wound up bec. S/Hs had alr agreed to that and (2) TSN could
pursue an oppression action in the HK courts.
On (1), SGCA said tt Pang Yong Hock does not stand for the principle tt the availability of an alt remedy like winding-up should preclude allowing an action in derivative
action as well. In that case, the court was satisfied that the s.216A action was unmeritorious bec. the Pfs had failed to make out a prima facie case against the Dfs in the
first place plus the two sides were countersuing each other more equitable to just wind up.
On (2), TCS had not shown why suing in HK might be a better option. In fact, doing so would mean starting all over again, and resulting in even more delay to resolving
this saga.
Significance - Family ties
- Majority of the minority situation independence not enough; must be fully appraised of the allegations
- Availability of alternative remedies not a bar might have to show it is a better option

Sinwa (SS) Co Ltd v. Morten Innhaug [2010, SGHC] Common law derivative action
Facts S and M were 50-50 S/Hs in N Ltd a ship-owning Co. tt was incorporated overseas.
N granted a time charter to Company X and Co X reassigned it to Y Ltd, a Co. which M had control over.
M, acting as Dir. of N, accepted this reassignment - vessel then had some trouble and Y Ltd asked for lower price of charter hire N refused and Y stopped paying.
S alleged breach of fiduciary duties on Ms part (1) procuring the charter for his firm; (2) causing Y to withhold payments to N; and (3) preventing S from commencing
legal proceedings on behalf of N.
M counter-argued tt S did not bring this action in good faith instead, it was to force M to buyout Ss shares at a higher value.
HELD Judgment for M Ss application for derivative action was premature.
Reasoning/
Impt analysis
Elements of CLDA
(1) Co. prima facie entitled to the relief and (2) fraud on the minority + Ct still has discretion whether to grant CLDA

Prima facie entitled to relief
Purpose behind this rule is to prevent Pfs from easily circumventing the proper Pf esp if Pfs do so at little or no risk to themselves + saddle Co. with the costs of such
actions
Not in judgement: but academics would criticise tt it is not that common for derivative actions to happen bec. the Pf bears great financial risk in initiating such
actions.
Of course Pf only need prove the possibility of success on a prima facie basis.

Whether prima facie case of being entitled to relief was made out in this case
(1) procuring charter not breach of FD although it is a situation of possible conflict, M had disclosed it informally and indirectly (note tt this was probably a special case
bec there were only 2 S/Hs)
(2) M not collecting debts owed by Y Ct held tt under the charter agreement, Y did have a basis for asking lower charter hire.
(3) Pf had a legitimate claim against M for failing to support legal proceedings taken by N against another Co.

On whether M actually had wrongdoer control
Shareholding is most obvious way of determining wrongdoer control but it should not be the sole means.
Preferred the substance over form approach test is whether the wrongdoer was able to prevent an action being brought against him.
On this facts, whether M had control is unresolved bec. it could not be determined who had authority to decide whether Co. can sue.

Discretion of court
Even after (1) and (2) are established, the court still has discretion to decide whether to grant the CLDA bec. this is a remedy of equity
The discretion will largely be based on (a) whether the Pf has come with clean hands AND (b) whether Pf is starting this action bona fide (conjunctive).

Availability of alternate remedies
Foundation of derivative action is that without such remedy, justice will not be done. Hence, it shd only be granted when absolutely necessary bec. it stands as a
derogation from the proper plaintiff rule.
Re-interpreted Ting Sing Ning by saying tt language making reference to best solution or better remedy was purely rhetorical. In that case, the suggestion to sue in
HK for oppression was not only not a better option, it wasnt even a viable option bec. Pf was not even alleging oppression + considerable delay.
Andrew Ang J. held tt theres no req tt the alternative remedy is a better remedy, it only need be a real option. this was the orthodox view and if SGCA wanted to
depart from it, it would have made it clear tt it was departing.
On the present facts, there was the option of arbitration to decide how to interpret one of the clauses of the S/H agreement.

On Pfs bona fides
Ct found tt Pf had not laid all its cards on the table. Ct also found the Pfs main allegations were all very strange and without force.
On that basis, Ang J. concluded tt Pf had not disclosed its real motive for bringing a derivative action, and appeared to be throwing everything but the kitchen sink at
the Df.
Here, we can see the big difference btw 216A (tt places burden of disproving good faith on the Df) and CLDA where Pf has to disclose his real motive.
Significance - Qns Ting Sing Ning on the availability of alternate remedies.

Pang Yong Hock v PKS [2004, SGCA] s 216A SDA
Facts Co had 4 S/Hs - Two factions of 2 S/Hs each. All 4 were Dirs. No deadlock bec Board had a fifth Dir who was loyal to faction A
Faction B suspected Faction A of abusing their Dirs powers wanted to commence a DA against Faction A.
Served notice under s. 216A Co did not take action (naturally, since Faction A commanded 3/5 of Boards votes) Faction B commenced s 216A action.
HELD s 216A application dismissed a s254 winding up was more appropriate.
Reasoning/
Impt analysis
Three elements of SDA
1. Notice
Notice served no issue in this case.
2. Pf comes in good faith
Burden: It is on the Df to show absence of good faith on the Pfs part
Insufficient to show lack of good faith
o Delay in suing
o Less than happy circumstances
o Fact tt there were disputes
Factors tt show lack of good faith:
o Pf shown to have a vendetta
o Action commenced for purely personal reasons
o Set on destroying the Cos image this also affects Stage 3 (below)
On the facts, Pf deemed to have come in good faith.
3. Action would be in the interest of Co.
2 issues:
Does Co stand to gain substantially? +
o Co may have legitimate reasons from forbearing to sue bad publicity
Is there a meritorious claim?
o Proven on a prima facie basis
On the facts, claim was not in the interest of Co bec:
1) There was no merit auditors report had no uncovered any wrongdoing on Faction As part (if at all, all the Dirs were liable)
2) Not in interest CA felt tt to give Faction B license to sue necessarily means giving Faction A license to sue as well would only prolong e conflict
s 254 winding up awarded instead Barrett v Duckett followed.
Significance - Shows how to apply the factors for each element of the test.


Over & Over Ltd v Bonvest Holdings Ltd [2010, SGCA] s 216A SDA
Facts Two companies O&O and UFL (both private Cos) came together to form a joint venture (R Ltd) to run hotel in 30:70 shareholding.
Discussions all undocumented
After 10 yrs, O&O alleged tt family behind UFL (the majority) were diverting the hotels service contracts to Cos controlled by their family.
The majority wanted its other Co BHL (a public listed Co) to buy over UFLs stake in R Ltd. O&O consented, largely because it didnt have a choice.
Majority then forced O&O to take up rights issue and threatened to dilute their shareholding if they refused.
HELD Majority (family behind UFL and BHL) had acted oppressively ordered buyout of O&Os stake.
Reasoning/
Impt analysis
On legitimate expectations
- It is common for business people to have legitimate expectations btw them that is not documented or couched precisely
- In particular, it is trite law that conduct can be unfair without even being unlawful.
On the relationship in the present case
- Two closely connected families Ct placed a lot of weight on the fact tt a no of impt business discussions were not penned down
- Started as a close association in the beginning the fact tt it later soured does not change the initial r/s
Single act vs course of conduct
- Oppression due to a sustained course of conduct is more common, but a single act can be construed as oppression
- But that single act would have to be extremely serious eg. dilution of minoritys shares or very serious misappropriation.
Alleged acts of oppression
1) Diverting contracts away without consulting Board of R
- Contracts diverted were for the strategic interest of R but tt does not mean such behaviour was not to be taken into consideration in assessing holistically the
entire attitude of the majority
2) Leaving O&O with Hobsons choice wrt BHL taking over UFLs stake
- Did amt to oppression
- Even though O&O grudgingly accepted the change in partner (from UFL to BHL), this did not bar e claim bec they accepted as they had no real choice.
- Further, although BHL and UFL were controlled by same family, BHL was public listed, which radically changed the nature o the business partnership = loss of
substratum
3) Compelling O&O to take up the rights issue
- Ct found tt this single act alone could have amounted to oppression
- Majority had issued shares for purposes other than raising capital breach of fiduciary duties - aq deduced this bec there was lack of urgency for new funds but the
Rights Issue was done very hastily.
- Minority suffered a loss unique to themselves bec they had to get financing to take up the Rights Issue.
Significance - Breach of fiduciary duties can amt to personal loss as well
- Loss of substratum can incl change of the nature of business

Sim Yong Kim v Evenstar Investments Pte Ltd [2006, SGCA] s 254 Winding Up
Facts Two brothers incorporated a Co Evenstar just to hold their shareholding in other companies.
S claimed tt M promised him he would be allowed to withdraw from the Co. at any time subj to M having first right of refusal over Ss stake
S also alleged there was a change in the nature of the business bec. M started using Evenstar to hold shares in other investments as well.
When time came for S to leave, M offered him a very unreasonable price for the shares
HELD Majority (family behind UFL and BHL) had acted oppressively ordered buyout of O&Os stake.
Reasoning/
Impt analysis
No loss of substratum
- S had acquiesced to M using Evenstar to hold shares in other investments hence S could not allege loss of substratum

Sheraton Towers case
No breakdown in mutual trust
- S did not play any role in management so S could not be said to be critical of Ms management methods. Rather S was upset bec M would not buy him out.
On the first right of refusal
- Qn before the CA was what exactly was Ms assurance? S said at trial tt M wanted a first right of refusal. This meant tt M had no obligation to buy S out.
- However, CA found tt what S meant was tt M promised to buy S out, just tt S was imprecise when he used the term first right of refusal.
- Hence, M did breach Ss legitimate expectations when he refused to buy S out at a reasonable price.
On the relationship btw s216 and s54
- Distinct but greatly overlapping the two remedies have different bases for application.
o In a sense s254 is wider. but the touchstone of s 254 is unfairness as well.
o BUT, when s254 is triggered bec of alleged oppression, the degree of oppression should be the same as in s216, but not necessary tt it be higher.
- In dicta, CA said tt when Co is a going concern, Ct will usually view any petition for winding up as a measure of spite, rather than exit strategy.
Should winding up be ordered in this case?
- Ct felt tt Ms going back on his word did amount to unfairness. But would winding up be justified bec all that S wants is to exit and M may still want to run Evenstar?
o Instead of awarding an outright winding up, Ct turned to s257 make any interim orders it deems fit.
o Effectively, Ct ordered (1) winding up to be stayed for 30 days; (2) and in the meantime, S and M negotiate a possible buyout. If negotiations fail, Co will be
wound up.
o This ability to modify the winding up application made it no different from a share buyout.
Significance - Overlap btw 216 and 254 very great esp since Ct can use 257 to restructure the winding up to make it look like a buyout.
- Co having no real business, it was not difficult to wind it up.
- Diff btw a first right of refusal and an assurance to buy the minority out when latter wanted to exit.