What is the difference between personal and corporate wrongs?

06 July 2018

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

 

In the very recent judgment of the Singaporean Court of Appeal (“SGCA”) in  Ho Yew Kong v Sakae Holdings Ltd [2018] SGCA 33, the Court tackled the thorny issue of the relationship between “oppression actions” brought by a member of a company in his personal capacity (similar to unfair prejudice petitions in Hong Kong) and derivative actions brought by a member of a company in the name of the company. The same issue had been considered by our Court of Final Appeal in Re Chime Corp Ltd (2004) 7 HKCFAR 546, a decision which was discussed in Sakae Holdings.

The SGCA confirmed the distinction between personal wrongs, which should be redressed through oppression actions, and corporate wrongs, which should be vindicated in derivative actions ([93]). Although the court may grant relief to a company even in the former type of action, an oppression action should generally not be permitted in the case of a corporate wrong ([119]). This is largely in line with the approach in Hong Kong as stated in cases such as Re Chime Corp Ltd  [2004] 7 HKCFAR 546 and AR Evans v Novel [2012] 4 HKLRD 511 As the SGCA observed, the difficult exercise in any given case was to ascertain whether a claim is based on a personal wrong or a corporate wrong where it contained features of both types of wrongs ([93]).

In Re Chime Corp Ltd, Lord Scott of Foscote NPJ reasoned that the distinction was between cases where the nature of the complaint was misconduct (to the prejudice of the company) and cases where the nature of the complaint was mismanagement (to the prejudice of the shareholder) ([48]).

Noting criticisms of this distinction as being artificial, unrealistic and uncertain ([101]), the SGCA set out its own analytical framework at [116] to ascertain whether a claim pursued as an oppression action was an abuse of process as follows:

       (a)           Injury

                  (i)     What is the real injury that the plaintiff seeks to vindicate?

                  (ii)     Is that injury distinct from the injury to the company and does it amount to commercial unfairness against

                            the plaintiff?

 

        (b)          Remedy

                  (i)    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?

                 (ii)     Is it a remedy that can only be obtained under s.216 [i.e. the oppression action]?

 

While the distinction between a personal wrong and a corporate wrong will not always be clear, as the SGCA itself recognised at [115], this test takes into account both the essential remedy sought by the plaintiff and the real injury the plaintiff seeks to vindicate as opposed to resorting to the vague distinction between misconduct and mismanagement. It remains to be seen whether the Hong Kong courts will take into account the approach of the SGCA in Sakae Holdings in future cases concerning the interaction between unfair prejudice petitions and derivative actions.

José-Antonio Maurellet, S.C. and Jasmine Cheung authored this Case Report

 

 

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