27 September 2018

Ho Yew Kong v Sakae Holdings Ltd [2018] SGCA 33

Section 216 of the Companies Act (“Section 216”) allows minority shareholders to bring an action in their own names to protect themselves from being unfairly prejudiced by dominant majority shareholders who subject them to commercially unfair treatment. Section 216A of the Companies Act (“Section 216A”) on the other hand allows minority shareholders to bring an action in the company’s name to redress wrongs done to the company where those in control of the company are causing harm to the company and cannot be counted on to take steps to protect the company’s interests. Which action should a shareholder take if the oppression features both personal wrongs against the shareholder as well as corporate wrongs against the company? This question was addressed by the Singapore Court of Appeal in Ho Yew Kong v Sakae Holdings Ltd.


Sakae Holdings Ltd (“Sakae”), Gryphon Real Estate Investment Corporation Pte Ltd (“GREIC”) and a joint venture company (“Company”) entered into a joint venture agreement under which the Company was intended to be the vehicle through which the parties would invest in units in a shopping mall, redevelop them, and sell them at a profit. Sakae was the minority shareholder in the Company, while GREIC was the majority shareholder. Sakae and its Chairman, Foo, left the management of the Company to Andy Ong, who was a director of GREIC.

Subsequently, Foo uncovered a number of arrangements entered into by the Company with entities that were related to Andy Ong pursuant to which a substantial amount of money was diverted away from the Company to those other entities.

Sakae commenced proceedings in the High Court, seeking relief under Section 216 against Andy Ong, two of his associates Ong Han Boon and Ho, and various entities owned and controlled by Andy Ong.

The High Court allowed Sakae’s oppression claim, finding that a number of transactions were indeed oppressive to Sakae. Andy Ong, Ong Han Boon and Ho were also found to have breached their fiduciary duties to the Company in respect of some or all of the transactions.

Decision of the Court of Appeal

On appeal, it was argued that Sakae was not entitled to relief under Section 216 on the basis that its oppression claims were based not on wrongs which it had suffered, but rather, on wrongs done to the Company. Ho also challenged the lower court’s finding that he was liable for oppression.

Personal wrongs against shareholders versus corporate wrongs against the company

The Court of Appeal noted that Section 216 should not be used to vindicate essentially corporate wrongs for two reasons. First, Section 216A already provides for the commencement of a statutory derivative action on behalf of the company to remedy such wrongs. Secondly, allowing an essentially corporate wrong to be pursued by way of an oppression action under Section 216 would be an abuse of process since it improperly circumvents the proper plaintiff rule, potentially resulting in the aggrieved shareholder recovering damages at the expense of other similarly affected shareholders, who could otherwise have also benefitted had the action been properly brought on behalf of the company under Section 216A. Yet, the Court of Appeal also recognised that the distinction between personal complaints of oppression and complaints of wrongs against a company was not always clear, and that the concept of commercial unfairness under Section 216 also appears to embrace wrongs done to the company.

Following a survey of decisions from jurisdictions in the Commonwealth, the Court of Appeal set out the following analytical framework to ascertain when and whether a claim that is being pursued under Section 216 amounts to an abuse of process:

  • Injury:
    • What is the real injury that the plaintiff seeks to vindicate?
    • Is that injury distinct from the injury to the company and does it amount to commercial unfairness against the plaintiff?
  • Remedy:
    • What is the essential remedy that is being sought and is it a remedy that meaningfully vindicates the real injury that the plaintiff has suffered?
    • Is it a remedy that can only be obtained under Section 216?

Applying the above framework to the facts at hand, the Court of Appeal found that Sakae’s oppression claims pertained to personal wrongs committed against it and were therefore properly pursued by way of an action under Section 216.

In respect of the injury, the Court of Appeal ruled that the real injury which Sakae sought to vindicate was the injury to its investment in the joint venture and the breach of its legitimate expectations as to how the Company’s affairs generally, and its financial investment in the Company specifically, would be managed. Apart from the fabrication of numerous sham documents, Andy Ong and Ong Han Boon were also found to have engaged in fraudulent schemes to mislead Sakae and Foo and conceal the true nature of the transactions from them. Further, their conduct constituted a wrong not just against the Company (the misappropriation of the Company’s assets at Andy Ong’s initiative), but also personally against Sakae. This was because Andy Ong, having been friends with Foo for over 20 years, had taken advantage of Foo’s trust in him, resulting in one group of shareholders benefitting at the expense of the other.

As regards the remedy, Sakae had sought either a winding up of the Company or a buyout of its shares in the Company. The Court of Appeal ruled that either remedy offered the only way in which Sakae could exit the joint venture with as little loss as possible and thereby meaningfully vindicate the real injury that it has suffered, namely, the misuse of its investment in the Company and the breach of its expectations as to how the Company would be managed. Further, these remedies were available only in an action under Section 216. Therefore, the Court of Appeal found that Sakae’s claims were properly pursued by way of an action under Section 216.

Ho’s liability under Section 216

The Court of Appeal found that Sakae’s oppression claims against Ho were not made out. In this regard, the Court of Appeal reasoned that a director’s breach of his duty of care, skill and diligence in monitoring the management of his company’s affairs would amount to oppression only if the negligent mismanagement was sufficiently serious. On the evidence, Ho’s conduct, in which he was merely negligent (as opposed to being dishonest) in failing to inquire about the terms of the impugned transactions, did not cross this threshold.


There may be instances where an alleged act of oppression features both personal wrongs against the shareholder and corporate wrongs against the company. A plaintiff who brings an oppression action under Section 216 instead of seeking leave to commence a statutory derivative action under Section 216A could well be found to be abusing the process. As such, the Court of Appeal’s analytical framework provides welcome clarity on the appropriate recourse for an aggrieved shareholder.


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