CANSTONE MANAGEMENT LTD v ALLESTARI DEVELOPMENT PTE. LTD. & 6 Ors

Facts

Canstone Management Ltd owns 1.7% of the shares in Allestari Development Pte Ltd. The relative holdings of Allestari's two largest shareholders, Clarity and N Century, are being decided in HC/OC 798/2023, where on 25 November 2022 an interim injunction was granted on N Century's application restraining Clarity and the company from altering the composition of the board. Article 76A of Allestari's constitution gave Allway, the former majority shareholder until 2011, the right to appoint and remove three directors, who were Liu Xun, Guo Jian and Li Yi. Li Yi is also Canstone's president and ultimate beneficial owner.

Knowing of the injunction, Canstone brought Originating Application No 1153 of 2024 seeking declarations that terms should be implied into the constitution, including that the majority shareholder could appoint three directors and the next two largest one each, and orders that the shareholders take reasonable steps to remove the three Allway directors and refill the seats. N Century applied to strike it out. The assistant registrar struck out the application as a collateral attack on the injunction, and Canstone appealed in Registrar's Appeal No 13 of 2025.

Issues

1. Whether the application was an abuse of process given the interim injunction
2. Whether there was a live controversy that the declarations would resolve
3. Whether the terms Canstone sought to imply into the constitution were legally and factually sustainable
4. Whether the orders to remove and replace the directors had any basis

Holding

The High Court dismissed the appeal and upheld the striking out of the originating application against all defendants. It awarded N Century costs of $12,000 all-in, higher than the $10,000 all-in ordered below.

Reasoning

On abuse of process, the court agreed that Canstone should first have sought to vary the injunction or obtained leave, but it treated this as not the fundamental defect; had it stood alone, a stay might have been suitable.

On live controversy, declarations need a real dispute. It was undisputed that Allway appointed the three directors, and Canstone's counsel confirmed that Allway had not tried to exercise any appointment rights since ceasing to be a shareholder. Li Yi's own evidence was that he acted in Allestari's interests, which showed no controversy. Canstone, not being one of the three largest shareholders, also sought a term that would give it no rights.

On implied terms, the court applied Sembcorp Marine Ltd v PPL Holdings Pte Ltd and another and another appeal [2013] 4 SLR 193. There was no gap: the constitution's general articles and ss 149B and 152(9) of the Companies Act already let directors be appointed and removed by ordinary resolution. Article 76A plausibly gave rights personal to the named shareholders, and nothing suggested that in 2008 the shareholders would have agreed to Canstone's formula over any other. The prayer was in truth an attempt to have the court rewrite the constitution.

On the remaining prayers, a blanket rule that shareholders may never let third parties nominate directors was wrong; even the implied terms sought would not end existing appointments, so there was no basis to order removal; and an order to appoint under the general law would be otiose. The prayers implicated every shareholder, so the action was struck out as a whole.

From the judgment