Lee Siew Ngug & Ors v Lee Brothers (Wee Kee) Pte Ltd & Anor [2015] SGHC 106

Under section 194 of the Companies Act (the “Act”), the court has the power to rectify the share register of a company if a name has been entered in the share register without sufficient cause. The court’s power to rectify the share register is, however, subject to a 30-year time limit. Under section 194(4) of the Act, the court is precluded from entertaining applications to rectify entries in the share register which are more than 30 years old.

In Lee Siew Ngug & Ors v Lee Brothers (Wee Kee) Pte Ltd & Anor, the Singapore High Court considered an application to remove a member from the share register which was brought more than 50 years after the member’s name was entered in the share register.

Facts

The parties in this dispute were all related to the late philanthropist Lee Wee Nam. The company which was the subject of the dispute was Lee Brothers (Wee Kee) Pte Ltd (“Lee Brothers”), which was founded by Lee Wee Nam and his brother, Lee Wee Kheng, in February 1950. Lee Brothers was the first defendant in this action. The second defendant in the action, Lee Hiok Kee Pte Ltd (“LHK”), was incorporated by Lee Wee Nam in March 1963. LHK has been a member of Lee Brothers since May 1963 and is the majority shareholder. The plaintiffs, who are grandsons of Lee Wee Nam, became shareholders of Lee Brothers in October 2012.

The plaintiffs accused LHK of abusing its position as majority shareholder by disregarding the wishes of the minority shareholders. The plaintiffs complained, amongst other things, that LHK had utilised its shareholding to retain control of the board of directors of Lee Brothers and to resist a proposal to wind up the company.

In May 2014, the plaintiffs commenced proceedings to remove LHK as a member of Lee Brothers on the ground that LHK was not qualified, under the provisions of the Memorandum of Association of Lee Brothers, to be a member of the company. Article 6 of the Memorandum of Association stipulated that only natural persons may be members of Lee Brothers. In making their application, the plaintiffs relied on the court’s inherent jurisdiction under Order 92 rule 4 of the Rules of Court.

The defendants applied to strike out the plaintiffs’ action on the basis that LHK had been registered as a member of Lee Brothers for more than 30 years and that accordingly, the plaintiffs were precluded by section 194(4) of the Act from applying to rectify the share register.

The plaintiffs argued that the time limit under section 194 of the Act was not applicable as the plaintiffs were seeking to invoke the court’s equitable power and jurisdiction to order rectification and were not relying on section 194 of the Act. The plaintiffs argued that the court’s equitable jurisdiction to rectify a share register runs parallel to the court’s power under section194 of the Act.

Court’s decision

In considering whether the time limit under section 194 of the Act was applicable, the court reviewed the legislative history of section 194 and noted that the rationale for the time limit was to reduce the record-keeping burden on companies, The court noted that it was a UK law review committee (the “Jenkins Committee”) that recommended imposing a time limit for applications to rectify the share register as this would allow companies to destroy original documents of title after the expiry of the time period. The court noted that this recommendation of the Jenkins Committee was taken up when Singapore first introduced the progenitor of section 194 of the Act.

The court held that the time limit under section 194 of the Act was applicable to the present case. Accordingly, as LHK had been a member of Lee Brothers for more than 50 years (since 1963), it was too late for the plaintiffs to seek the removal of LHK from the share register.

In reaching its decision, the court provided helpful guidance on the inter-relationship between existing statutory provisions and rules and the court’s inherent jurisdiction. The court explained that where there is an existing rule which already covers the situation, a party which urges the court to invoke its inherent jurisdiction or power to circumvent the rule has to show that there are exceptional circumstances for the court to invoke its inherent powers.

The court further held that, in the present case, there were no special circumstances which justified making an exception. The court noted that the plaintiffs knew, or should have known, that LHK was a member of Lee Brothers, and had been a member for a long time, when the plaintiffs became members themselves. The court also noted that even though the plaintiffs alleged minority oppression by LHK, they did not file any action in respect of the alleged oppression, but had instead attempted to remove LHK from the share register without having to allege or prove any wrongdoing.

As regards the Memorandum of Association, the court held that that the plaintiffs did not have any contractual right under the Memorandum of Association to remove LHK as a member of Lee Brothers because even though the Memorandum of Association can act as a contract between a company and its shareholders, the contract is still subject to the governing law. As such, Article 6 of the Memorandum of Association must be subject to the time limit under section 194(4) of the Act.

Comment

This case highlights one of the limitations to the court’s power to rectify share registers.

The case also serves as a useful reminder and illustration of how the court wields its inherent power and jurisdiction. The court highlighted that its inherent jurisdiction is not a tool of convenience to turn to whenever there is a problem to overcome. The inherent jurisdiction of the court should only be invoked sparingly to prevent injustice between the parties. The approach taken by the court in this case demonstrates that the court would be slow to invoke its inherent power or jurisdiction to circumvent an existing rule which already covers the situation.

Although the court’s decision in the present case relates to section 194 of the Act, the comments by the court on the exercise of its inherent power or jurisdiction are of general relevance