MARTEN JOSEPH MATTHEW & Anor v AIQ PTE LTD (IN LIQUIDATION) & 6 Ors

Facts

Mr Marten Joseph Matthew (Joe) and Thames Global Enterprises Ltd (Thames), a British Virgin Islands company to which Joe transferred his shares in AIQ Pte Ltd on 14 December 2017, brought Suit No 939 of 2018. AIQ, a start-up developing visual recognition software, and its co-working subsidiary The Carrot Patch Pte Ltd (TCP) were nominal defendants and are now in liquidation. The other defendants were Goh Soo Siah (GSS), the other major shareholder, and four AIQ directors: his son Leslie, his nephew Marcus, Loo Kian Wai and Jeffrey Seah.

Joe and GSS had funded the loss-making company, for a time in a 2:1 ratio, until they fell out over funding and shareholdings. With AIQ unable to pay its January 2018 salaries, the board launched a rights issue at $0.28 a share; only GSS subscribed, taking his stake to 50.04% while Joe's holding stayed at 27.42%. Joe was not re-elected as an AIQ director at an EGM on 28 May 2018, a special audit then criticised transactions from his time in charge, and he was later removed from TCP's board. After GSS's statutory demands went unpaid, both companies were wound up on 5 June 2020, AIQ having earlier assigned its charged patents to GSS. The plaintiffs alleged minority oppression under s 216 of the Companies Act and conspiracy by unlawful and lawful means.

Issues

1. Whether Joe or Thames had standing to bring an oppression claim under s 216 concerning AIQ
2. Whether the alleged understanding and agreement between Joe and GSS existed and whether GSS was a shadow director
3. Whether the rights issue, Joe's removal, the special audit, the resistance to his claims and the winding up were commercially unfair
4. Whether the defendants conspired to injure the plaintiffs by unlawful or lawful means

Holding

Mavis Chionh Sze Chyi J dismissed the plaintiffs' oppression and conspiracy claims in their entirety. Costs followed the event: the plaintiffs were ordered to pay GSS $360,000 and the four directors $460,000, in each case excluding disbursements.

Reasoning

Only a registered member may sue under s 216. Joe had ceased to be one by transferring his shares to Thames of his own accord, and the narrow estoppel exception, which applies where the defendants' own unconscionable conduct kept a claimant off the register, did not help him. The court accepted in principle that a nominee holding shares on bare trust may rely on the beneficial owner's interests, but the plaintiffs did not prove Thames was such a nominee: records showed another company owned Thames, and Joe had described it as his children's trust. As virtually every complaint concerned Joe's own rights, the AIQ claim failed at the threshold.

In the alternative, the court found that the pleaded understanding and agreement never existed. The plaintiffs' account of its terms and formation kept shifting, nothing was written down even in a later share transfer deed, GSS then held less than 5% and would not have accepted an open-ended duty to fund two-thirds, and Joe never invoked the agreement when GSS proposed a 1:2.42 ratio. GSS was not a shadow director because there was no discernible pattern of the directors following his instructions; they often resisted his proposals.

The rights issue had a genuine commercial purpose: AIQ held $4,636.81 on 9 February 2018, could not pay staff and had no other funding, and Joe accepted he could have subscribed. Joe knew AIQ's money was funding TCP, which was always meant to be AIQ's wholly owned subsidiary. Access to records was a director's right, outside the rule that oppression must affect a claimant as a member. Joe's removal, the special audit and the resistance to his salary and loan claims were justified by unresolved audit queries on transactions from his time in charge and by findings that his employment documents were created after their stated dates. The companies were wound up for genuine unpaid debts, and any loss from the winding up or the patent assignment, which merely enforced GSS's security, was AIQ's loss and barred by the reflective loss principle.

The conspiracy claims rested on the same eleven acts. A breach of a company's constitution could in principle be an unlawful act, but there was no combination among the defendants and no intention, let alone a predominant purpose, to injure Joe. GSS's hostile emails were not shown to have been endorsed by the directors, and the directors who resisted Joe's claims acted in good faith within their office and were protected by the principle in Said v Butt.

From the judgment