HC Surgical shareholder did not act in good faith in seeking to sue CEO: judge

[SINGAPORE] Serene Tiong lacked "good faith" when she applied to have HC Surgical Specialists (HCSS) sue its chief executive officer (CEO) over its purchase of a further stake in a private clinic.

The High Court, in explaining reasons why it dismissed Ms Tiong's application with costs, said she was "so motivated by vendetta, perceived or real, that judgment will be clouded by purely personal considerations".

Ms Tiong, whom HCSS surgeon Julian Ong had sued for defamation in a lawsuit that he later won on appeal, had sought the court's permission to sue, on behalf of the company, CEO Heah Sieu Min for alleged breach of director's duties relating to HCSS buying an additional 19 per cent stake in Dr Ong's clinic.

Ms Tiong bought 100 shares in the Catalist-listed HCSS on Sept 25, 2019 - one day before its annual general meeting (AGM) - with a view to attending the AGM and conveying concerns about the 19 per cent acquisition.

Justice Chua Lee Ming, in decision grounds issued on Monday, said Ms Tiong had argued that she was the "most eminently sensible person" to take the lead on the intended action against Dr Heah because she was well-acquainted with the facts at the genesis of the problem. "I disagreed," said the judge.

Her claim had been that a formal internal inquiry which Dr Heah did not commence would have established that the allegations in her complaint to the Singapore Medical Council against Dr Ong were true, and this would have impacted the company's decision to acquire the 19 per cent share in Dr Ong's company.

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Ms Tiong's complaint in 2018 against Dr Ong alleged that he and another medical specialist had colluded to have sex with vulnerable women patients.

Dr Ong sued her in 2018 for defamation after she circulated the complaint to other doctors. A district judge ruled in April this year that Ms Tiong was justified, but Dr Ong appealed to the High Court where he succeeded on Friday.

Ms Tiong was required under the Companies Act to obtain court approval to pursue the latest case.

Under the Companies Act, the court must be satisfied before granting permission for her to proceed, that she made the application in good faith and that it was in the company's interest to bring the action against Dr Heah.

Ms Tiong had given 14 days' notice as required to the company's directors of the action she intended.

HCSS is a medical services group engaged mainly in providing endoscopic procedures, including gastroscopies and colonoscopies and general surgery services, across a network of 18 clinics.

Ms Tiong, through her lawyers Ong Ying Ping and Kenneth Chua, alleged that Dr Heah breached his duties to act with reasonable diligence based on the Companies Act.

She argued that Dr Heah ought to have known that the allegations of misconduct in her complaint, if true, would have impacted the company's decision to acquire the further 19 per cent stake in Dr Ong's company.

HCSS, represented by Senior Counsel Tan Chee Meng, Paul Loy and Janie Hui, and Dr Heah, defended by lawyers Chua Sui Tong and Gan Jhia Huei, contested the claims.

In dismissing her claims with costs, Justice Chua said: "It seemed to me that the plaintiff's real grievance was that she disagreed with the board's assessment of the risks associated with the complaint.

"Obviously, the plaintiff's view was that the company should not have proceeded with the 19 per cent acquisition, and/or should not have paid S$3.795 million for it.

"However, it is not for the plaintiff or indeed, this court, to second-guess corporate decisions that are made by those in charge of a company who believe in good faith that the decisions are in the best interests of the company."

Ms Tiong is appealing against the judgment.

THE STRAITS TIMES