Petroships v Wealthplus: Derivative Action, Minority Shareholder Rights, and Directors' Duties

In Petroships Investment Pte Ltd v Wealthplus Pte Ltd and others, the High Court of Singapore dismissed Petroships' application for leave to commence a statutory derivative action under s 216A of the Companies Act against Wealthplus' directors and its ultimate holding company, Koh Brothers Group Limited (KBGL), and related companies. Petroships, a minority shareholder in Wealthplus, sought to recover funds transferred to KBGL and compensation for the directors' alleged breaches of duty. The court, presided over by Vinodh Coomaraswamy J, found that Petroships was not acting in good faith, as its purpose was to advance its own private interests rather than those of Wealthplus. The court also noted that Wealthplus was in members’ voluntary liquidation, with its liquidators now controlling the power to pursue such actions, subject to court supervision.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Application dismissed with costs.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Petroships seeks leave for derivative action against Wealthplus directors for breach of duty and KBGL for asset transfers. Application dismissed due to bad faith.

1.7 Decision Date

28 May 2015

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
PETROSHIPS INVESTMENT PTE LTD	Applicant	Corporation	Application dismissed	Lost	Ho Mingjie Kevin of Braddell Brothers LLP Tan Kok Peng of Braddell Brothers LLP
WEALTHPLUS PTE LTD	Respondent	Corporation	Neutral	Neutral	Prakash P Mulani of M & A Law Corporation
KOH BROTHERS GROUP LIMITED	Respondent	Corporation	Won	Won	Khelvin Xu Cunhan of Rajah & Tann Singapore LLP Chandra Mohan Rethnam of Rajah & Tann Singapore LLP
MEGACITY INVESTMENT PTE LTD	Respondent	Corporation	Won	Won	Khelvin Xu Cunhan of Rajah & Tann Singapore LLP Chandra Mohan Rethnam of Rajah & Tann Singapore LLP

3. Judges

Judge Name	Title	Delivered Judgment
Vinodh Coomaraswamy	Judge	Yes

4. Counsels

Counsel Name	Organization
Ho Mingjie Kevin	Braddell Brothers LLP
Tan Kok Peng	Braddell Brothers LLP
Prakash P Mulani	M & A Law Corporation
Khelvin Xu Cunhan	Rajah & Tann Singapore LLP
Chandra Mohan Rethnam	Rajah & Tann Singapore LLP

4. Facts

Petroships is a 10% minority shareholder of Wealthplus.
KBGL is Wealthplus’ ultimate holding company, controlling 90% of Wealthplus.
Petroships sought leave to commence a derivative action against Wealthplus’ directors and KBGL group companies.
The derivative action aimed to recover sums transferred from Wealthplus to KBGL and compensation for directors’ alleged breaches of duty.
Wealthplus is in members’ voluntary liquidation.
Alan Chan, controlling Wealthplus, is a member of the Teochew community, as is Koh Tiat Meng.
Petroships commenced four unsuccessful suits against Megacity, Wealthplus and KBGL prior to this application.

5. Formal Citations

Petroships Investment Pte Ltd v Wealthplus Pte Ltd and others, Originating Summons No 766 of 2012, [2015] SGHC 145

6. Timeline

Date	Event
1997-01-01	KBGL obtained land use rights in Shantou, China.
1998-01-01	Alan Chan accepted Koh Tiat Meng’s invitation to invest in Shantou project.
1998-06-01	Petroships and Megacity signed a joint venture agreement.
1998-07-01	Megacity appointed Koh Teak Huat and Koh Keng Siang as directors of Wealthplus.
1998-07-01	Alan Chan appointed as a director of Wealthplus.
2006-01-01	Megacity proposed that Wealthplus sell the land-use rights.
2007-08-01	Wealthplus caused the three subsidiaries in China to be sold together with their land-use rights.
2008-01-01	Petroships began to agitate for its share of the profits of the investment.
2009-03-01	Petroships commenced first action against Megacity.
2009-08-01	Petroships’ first action was struck out.
2009-09-01	Alan Chan resigned as a director of Wealthplus.
2009-11-01	Wealthplus held its AGM for that year.
2010-01-01	Petroships commenced second action against Wealthplus and Megacity.
2010-09-01	Petroships’ second action was struck out.
2010-10-01	Petroships commenced third action against Wealthplus and Megacity.
2010-10-01	Wealthplus held its 2010 AGM.
2011-05-01	Petroships’ third action was struck out.
2011-08-01	Braddell Brothers LLP wrote to Koh Tiat Meng on behalf of Alan Chan.
2011-10-01	Petroships instructed Braddell Brothers LLP to write to KBGL on its behalf.
2011-11-01	Wealthplus’ 2011 AGM was held.
2011-11-01	Petroships commenced its fourth action against KBGL.
2012-03-01	Petroships’ fourth action was struck out.
2012-05-01	Petroships' appeal was dismissed.
2012-06-01	Petroships initiated procedure under s 216A, serving notice on Wealthplus’ directors.
2012-07-01	R&T responded to Petroships on behalf of Wealthplus’ directors.
2012-08-01	Petroships filed application under s 216A.
2012-08-01	Wealthplus convened an extraordinary general meeting to put Wealthplus in members’ voluntary liquidation.
2012-08-01	Yin Kum Choy and RS Ramasamy of Adept Public Accounting Corporation were appointed Wealthplus’ liquidators.
2012-10-01	Braddell Brothers LLP wrote on behalf of Petroships to the liquidators.
2012-11-01	Liquidators wrote to all three shareholders of Wealthplus.
2013-01-01	Liquidators applied to the High Court for directions.
2013-06-01	Megacity and KBCE requisitioned an extraordinary general meeting of Wealthplus’ members.
2013-08-01	Meeting resolved to accept the liquidators’ resignations and to appoint new liquidators.
2013-09-01	KBGL and Megacity became the second and third respondents respectively.
2013-10-01	Liquidators’ application for directions was withdrawn.
2015-05-29	High Court dismissed Petroships’ application with costs.

7. Legal Issues

Good Faith in Derivative Actions
- Outcome: The court found that Petroships was not acting in good faith because its purpose was to advance its own private interests rather than those of Wealthplus.
- Category: Substantive
- Sub-Issues:
  - Collateral purpose
  - Honest belief in cause of action
  - Abuse of process
Prima Facie Interests of the Company
- Outcome: The court found that it was not prima facie in the interests of Wealthplus for the derivative action to be brought, given that Wealthplus was now under the control of liquidators.
- Category: Substantive
- Sub-Issues:
  - Legitimate and arguable claim
  - Practical and commercial interests
  - Alternative remedies
Abuse of Process
- Outcome: The court found that the derivative action would not be an abuse of the process of the court under the procedural law.
- Category: Procedural
- Sub-Issues:
  - Circumvention of previous court orders
  - Vexatious litigation

8. Remedies Sought

Leave to bring a derivative action
Access to documents and accounts
Payment of costs incurred in pursuing the derivative actions

9. Cause of Actions

Breach of Directors' Duties
Recovery of Funds Transferred

10. Practice Areas

Commercial Litigation
Corporate Law
Insolvency Law

11. Industries

Construction

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Ang Thiam Swee v Low Hian Chor	Singapore Court of Appeal	Yes	[2013] 2 SLR 340	Singapore	Leading case on the test of good faith under s 216A(3)(b) of the Companies Act, outlining the factors to consider when assessing an applicant's good faith in seeking leave to bring a derivative action.
Agus Irawan v Toh Teck Cheng	High Court	No	[2002] 1 SLR(R) 471	Singapore	Discussed the burden of proof regarding good faith in derivative actions, although its approach was later clarified in Ang Thiam Swee.
Pang Yong Hock and another v PKS Contracts Services Pte Ltd	Singapore Court of Appeal	Yes	[2004] 3 SLR(R) 1	Singapore	Established that a court may infer good faith if the derivative action is a legitimate claim that the directors are unreasonably reluctant to pursue.
Swansson v R A Pratt Properties Pty Ltd	Supreme Court of New South Wales	Yes	(2002) 42 ACSR 313	Australia	Outlined the two Swansson factors for assessing good faith: whether the applicant honestly believes in a good cause of action and whether the action is for a collateral purpose amounting to abuse of process.
Chee Siok Chin and others v Minister for Home Affairs and another	Singapore Court of Appeal	No	[2006] 1 SLR(R) 582	Singapore	Identified categories of abuse of process of the court.
Henderson v Henderson	Not Available	No	Henderson v Henderson	Not Available	Discussed the doctrine of abuse of process.
Barrett v Duckett & Others	English Court of Appeal	Yes	[1995] BCC 362	England and Wales	Demonstrated that failure to name all implicated parties in a derivative action can indicate an ulterior purpose and lack of good faith.
Iesini v Westrip Holdings Ltd	Not Available	Yes	[2010] BCC 420	England and Wales	Addressed the issue of multiple purposes in derivative actions, stating that good faith exists if the dominant purpose is to benefit the company.
Goldsmith v Sperrings Ltd and others	Not Available	Yes	[1977] 1 WLR 478	England and Wales	Discussed considerations for derivative claims.
Coeur de Lion Investments Pty Ltd v Kelly and others	Not Available	Yes	(2013) 44 ACSR 43	Australia	Confirmed that good faith is a cumulative requirement and can prevent proceedings even with a serious question to be tried.
Fargro Ltd v Godfroy and others	Not Available	Yes	[1986] 1 WLR 1134	England and Wales	Observed that once a company goes into liquidation, the liquidator is the person in whom the right to control litigation is vested.
Cape Breton Co. v. Fenn	Not Available	Yes	(1881) 17 Ch.D. 198	England and Wales	Discussed the power of the court to authorize someone other than a shareholder or creditor to bring proceedings in the name of a company.
Chahwan v Euphoric Pte Ltd t/as Clay & Michel	New South Wales Court of Appeal	Yes	[2008] NSWCA 52	Australia	Emphasized that the onus is on the applicant to prove good faith and that seeking personal interests over the company's interests indicates a lack of good faith.

13. Applicable Rules

Rule Name
Rules of Court (Cap 322, R 5, 2006 Rev Ed) Order 38 r 2(2)
Rules of Court (Cap 322, R 5, 2006 Rev Ed) Order 28 r 4(3)
Rules of Court (Cap 322, R 5, 2006 Rev Ed) Order 28 r 4(4)

14. Applicable Statutes

Statute Name	Jurisdiction
Companies Act (Cap 50, 2006 Rev Ed) s 216A	Singapore
Companies Act s 294(2)	Singapore
Companies Act s 300	Singapore
Companies Act s 305(1)(b)	Singapore
Companies Act s 272(2)(a)	Singapore
Companies Act s 310	Singapore
Companies Act s 302	Singapore
Companies Act s 315	Singapore
Companies Act s 294(3)	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Derivative action
Minority shareholder
Directors' duties
Good faith
Abuse of process
Members’ voluntary liquidation
Collateral purpose
Land-use rights
Impairment of non-trade receivables
Director's remuneration

15.2 Keywords

derivative action
minority shareholder
directors' duties
good faith
liquidation
Singapore
Companies Act

17. Areas of Law

Area Name	Relevance Score
Minority Oppression	80
Company Law	75
Director's Liability	70
Corporate Litigation	65
Liquidation	60
Corporate Governance	55
Business Litigation	50
Civil Procedure	40
Contract Law	35
Arbitration	30

16. Subjects

Company Law
Civil Procedure
Insolvency Law
Corporate Governance