TANOTO SAU IAN v USP GROUP LIMITED

Facts

USP Group Limited is a company listed on the main board of the Singapore Stock Exchange. On 26 October 2022, Hinterland Energy Pte Ltd, Harmonic Brothers Pte Ltd, Hia Yi Heng and Lim Shi Wei (the Requisitionists), who beneficially owned about 11.01% of its shares through brokerage houses, sent a requisition notice under s 176(1) of the Companies Act 1967 for an extraordinary general meeting (EGM) to replace the board. Their names were not on the Register of Members; the brokerage houses' names were. The board declined to convene the meeting. The Requisitionists then obtained an order in HC/OA 894/2022 extending the validity of the notice, and a further extension in HC/SUM 676/2023, with the EGM set for 21 April 2023.

USP Group then filed HC/OA 218/2023 for declarations that the Requisitionists were not members under s 176(1) and that the notice was invalid. Separately, its chief executive and director, Tanoto Sau Ian, filed HC/OA 156/2023 seeking permission under s 216A to bring a derivative action in the company's name for an injunction stopping the Requisitionists from requisitioning an EGM, and an interim injunction against the scheduled meeting.

Issues

1. Whether the Requisitionists, as beneficial shareholders not on the register, were members entitled to requisition an EGM under s 176(1)
2. Whether USP Group was estopped from denying that the Requisitionists were members
3. Whether OA 218 was barred as an abuse of process under the extended doctrine of res judicata
4. Whether Tanoto should be granted permission to bring a derivative action for a permanent injunction against the Requisitionists

Holding

The High Court granted the declarations sought in OA 218 that the Requisitionists were not members under s 176(1) and that the requisition notice was invalid. It dismissed Tanoto's primary prayer in OA 156 for permission to bring a derivative action, made no order on the interim injunction as there was no longer an EGM to restrain, and gave the Requisitionists liberty to apply for orders to help them become members.

Reasoning

The court said it was compelled by the law to its conclusion on membership and would have preferred to let the company's democratic process run. A member of a public company is a person on the register, and under s 81SJ of the Securities and Futures Act 2001 only direct account holders with the CDP are deemed members, not sub-account holders like the Requisitionists. Singapore deliberately did not adopt the UK provisions letting indirect investors exercise requisition rights, and USP Group's constitution did not enable nominees to do so.

On estoppel, an estoppel cannot operate against a statutory rule that is imperative in nature. The limit of requisition rights to members affects the company and all its shareholders, not only the parties. Kitnasamy was distinguished because s 216 protects a personal right and the applicant there qualified as a member but for the company's default.

On res judicata, OA 218 was not a collateral attack on the extension order in OA 894, which concerned a different question. The membership issue had merit and some public interest, and the doctrine could not achieve what estoppel could not.

On OA 156, the court rejected a late attempt to narrow the prayer. There was no credible evidence of the claimed ongoing investigations into how the Requisitionists acquired their shares, so the action was not prima facie in the company's interests. Tanoto also lacked good faith: a permanent bar on ever requisitioning an EGM would undermine the company's democratic process and entrench the board. The court criticised USP Group for disregarding the OA 894 order.

From the judgment