LAGUNA NATIONAL GOLF AND COUNTRY CLUB LTD v LIM HOW TECK

Facts

Laguna National Golf and Country Club Ltd owned a golf club in the east of Singapore. In 1991 it issued 1,800 non-interest bearing unsecured notes of $120,000 each to finance the club; each member had to buy one. The notes were constituted by a trust deed with British and Malayan Trustees Limited as trustee and were due for redemption on 11 June 2021. In April 2016 the company sold the lease of the club land to a related company for $130,413,365 and then operated under a licence from that buyer.

On 10 June 2021 the company told the trustee it could not redeem the notes and would cease business. The trustee declared an event of default, which the company objected to. At a noteholders' meeting on 7 October 2021, a committee chaired by noteholder Mr Lim How Teck was appointed and special resolutions were tabled, but the trustee took the view they were not validly passed for want of quorum, because it counted notes held by the company itself as outstanding. Lim disagreed.

Lim, whose note had not been redeemed and whose statutory demand went unanswered, filed Companies Winding Up No 78 of 2022 to wind the company up. The company filed Originating Application No 96 of 2022 for a permanent anti-suit injunction. Both turned on cl 8.3 of the trust deed, a no-action clause allowing only the trustee to enforce noteholders' rights unless it failed to act after being directed by holders of at least one-fifth of the notes. No such direction had been given, though Lim had enough support to give one.

Issues

1. Whether the no-action clause stops applying where the trustee is conflicted or unjustifiably unwilling to act
2. Whether the trustee had shown unjustifiable unwillingness to take action against the company
3. Whether the trustee would be in a position of conflict if it pursued the winding up
4. Whether the company was entitled to an anti-suit injunction against Lim

Holding

Chua Lee Ming J held that cl 8.3 did not apply, so Lim had standing. As it was undisputed the company could not pay its debts, the court granted Lim's application and ordered the company wound up, appointing joint and several liquidators, with costs to Lim out of the company's assets. The company's application in OA 96 was dismissed, with costs to Lim fixed at $7,500 plus disbursements.

Reasoning

The judge accepted, and the company did not dispute, that a no-action clause assumes a trustee able to do its job, so it cannot apply where the trustee would be conflicted or has shown unjustifiable unwillingness to act.

The unwillingness argument was rejected. The trustee had confirmed it would act if directed under cl 8.2; Lim had simply not given that direction. A trustee could not refuse a reasonable indemnity without good reason, but that had not happened. Its reading of the quorum rule followed the trust deed's definition of outstanding notes and was not unreasonable, and a possibly wide indemnity request for the meeting did not show unwillingness, since the meeting went ahead anyway.

On conflict, the mere risk that some noteholders might sue the trustee did not, without more, conflict with its seeking a winding-up order. But once the company was wound up, the liquidators would likely look into the lease sale and the use of its proceeds, matters the trustee had discussed with the company's director and on which noteholders criticised its responses. The trustee might hold information useful to the liquidators but adverse to itself. The judge did not decide whether the trustee had in fact breached its duties; the potential for conflict was enough. Different noteholders preferring different courses did not by itself create a conflict.

Since cl 8.3 did not apply, the anti-suit injunction, which rested on the same clause, failed.

From the judgment