Yeo Sing San v Sanmugam Murali: Derivative Action & Director's Duties

In Yeo Sing San v Sanmugam Murali, the High Court of Singapore heard an application by Plaintiff Yeo Sing San for leave to bring a derivative action on behalf of AYS Building Contractors Pte Ltd against Defendant Sanmugam Murali, alleging breaches of director's duties. The court granted the plaintiff leave to bring the derivative action, finding that the requirements under s 216A of the Companies Act were met, sufficient notice was given, the application was made in good faith, and the proposed action was prima facie in the interests of the company.

1. Case Overview

1.1 Court

High Court of the Republic of Singapore

1.2 Outcome

Leave to bring a derivative action granted to the plaintiff.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Derivative action by Yeo Sing San against Sanmugam Murali for breaches of director's duties. The court granted leave for the action.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Yeo Sing SanPlaintiffIndividualLeave to bring a derivative action grantedWon
Sanmugam MuraliDefendantIndividualLeave to bring a derivative action granted against the defendantLost
AYS Building Contractors Pte LtdDefendantCorporationDerivative action allowedNeutral

3. Judges

Judge NameTitleDelivered Judgment
Aedit AbdullahJudicial CommissionerYes

4. Counsels

Counsel NameOrganization
Alfred DodwellDodwell & Co LLC
Chong Jia HaoDodwell & Co LLC
Tay Chie ChiangDodwell & Co LLC
Sarbjit Singh ChopraSelvam LLC
Cheryl MonteiroSelvam LLC

4. Facts

  1. Plaintiff and first defendant are equal shareholders and directors of AYS Building Contractors Pte Ltd.
  2. AYS was incorporated in 2006 and involved in building and construction.
  3. Disagreement arose between the plaintiff and first defendant regarding the management of AYS.
  4. Notice was given to the directors regarding concerns about cash withdrawals, loans, and payments.
  5. Plaintiff commenced an application seeking leave to bring a derivative action against the first defendant.
  6. The plaintiff's expert indicated misstatements in the accounts requiring adjustments to AYS’s book value.
  7. There was about $1.3m that was unaccounted for.

5. Formal Citations

  1. Yeo Sing San v Sanmugam Murali and another, Originating Summons 40 of 2014, [2016] SGHC 14

6. Timeline

DateEvent
AYS Building Contractors Pte Ltd incorporated
Notice to directors given
Plaintiff commenced application for derivative action
Plaintiff appointed accountant to examine AYS’s finances
Hearing
Judgment issued

7. Legal Issues

  1. Breach of Director's Duties
    • Outcome: The court found that the allegations of breach of director's duties were legitimate and arguable.
    • Category: Substantive
    • Sub-Issues:
      • Misuse of company funds
      • Improper payments
      • Unauthorised loans
  2. Good Faith in Derivative Action
    • Outcome: The court found that the plaintiff acted in good faith in bringing the derivative action.
    • Category: Procedural
    • Sub-Issues:
      • Object of the proposed action
      • Connection to company's interests
      • Honest belief in good cause of action
  3. Settlement Privilege
    • Outcome: The court found that settlement privilege had not been waived in respect of the letter dated 26 November 2012.
    • Category: Procedural
    • Sub-Issues:
      • Waiver of privilege
      • Protected admission

8. Remedies Sought

  1. Leave to bring a derivative action
  2. Recovery of funds for AYS

9. Cause of Actions

  • Breach of Director's Duties

10. Practice Areas

  • Commercial Litigation
  • Corporate Law

11. Industries

  • Construction

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Ang Thiam Swee v Low Hian ChorCourt of AppealYes[2013] 2 SLR 340SingaporeCited for the principle that an obvious connection must exist between the plaintiff’s purpose and the interests of the company in a derivative action.
Wong Kai Wah v Wong Kai Yuan and anotherHigh CourtYes[2014] SGHC 147SingaporeCited for the principle that personal animosity is not sufficient to preclude a s 216A application.
Lim Tjoen Kong v A-B Chew Investments Pte LtdHigh CourtNo[1991] 2 SLR(R) 168SingaporeCited to distinguish the present case regarding waiver of settlement privilege.
Tembusu Growth Fund Ltd v Actatek, Inc and othersHigh CourtNo[2013] SGHCR 2SingaporeCited regarding the credibility of the first defendant's expert witness.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap 50, 2006 Rev Ed)Singapore
Evidence Act (Cap 97, 1997 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Derivative action
  • Director's duties
  • Good faith
  • Settlement privilege
  • Breach of fiduciary duty
  • Misuse of funds
  • Unauthorised loans
  • Improper payments
  • Companies Act
  • Shareholders
  • Accounting irregularities

15.2 Keywords

  • derivative action
  • director's duties
  • companies act
  • singapore
  • corporate governance
  • breach of duty

17. Areas of Law

Area NameRelevance Score
Derivative action95
Breach of director's duties90
Companies Act85
Director's Duties80
Company Law75
Corporate Litigation70
Business Litigation65
Commercial Disputes60
Duty to Account55
Civil Procedure40
Evidence Law35

16. Subjects

  • Corporate Governance
  • Company Law
  • Civil Litigation