[Editor’s Note: On 9 September 2020 2:15pm, we removed Joel Sng from this article as it was brought to our attention that though honestbee had sent him a letter of demand, he was not sued by them.]
Many businesses start out with the best of intentions: a group of like-minded friends keen on turning an idea into a successful enterprise.
Along the way, parties may not see eye to eye and the relationship sours.
Some of these spats include disputes over differences in business direction, allegations of misappropriation of company funds and disagreements over how to resolve disputes.
Lawsuits are becoming so prevalent these days and even founders have been sued by their own companies.
Company founders can be sued individually by investors or shareholders who can prove that the founder is guilty of any personal wrongdoing.
We take a look at Singapore companies that have sued their very own founders.
Karine Cheong of Klarity
In 2017, the founder of Singapore’s first halal-certified skincare brand called Klarity was sued by shareholders for damages incurred from acting against the interests of the company and breaching her duties to the company.
Four minority shareholders sued Karine Estelle Cheong on behalf of the company. They engaged a forensic accountant who estimated that her breaches resulted in losses of nearly S$2.2 million.
They alleged that Karine used another company called Secretive, which she solely owns, to sell Klarity products and pocket the profits.
However, Karine, who also has an expert witness lined up, argued that no loss was caused and that she should pay only nominal damages of S$1.
In court papers she filed, she contended that her sole efforts and hard work — such as taking part in a beauty pageant to promote the brand — resulted in the growing popularity of the brand.
She was the second runner-up in Mrs Singapore World 2015/2016 pageant.
In court papers filed by the investors, they said they found out in May 2016 that the “Klarity” trademark was registered under J Consultancy (later renamed Kreate Global), which is solely owned by Karine.
They said they also found out that she operated a competing business by using Secretive to sell Klarity products and to enter into distribution agreements in overseas markets.
As a result, the investors sued Karine, J Consultancy and Secretive in 2017.
Karine alleged that she had disclosed her interest in her two companies to the minority shareholders before they invested.
She tendered her resignation as director in September 2015, after her proposal for more funding to launch new products was rejected but said that the minority shareholders failed to appoint a replacement.
The company is dormant and no longer operating.
Manoj Murjani of TWG Tea
In 2017, the co-founder and former CEO of luxury tea brand TWG Tea was sued by the company over the ownership of the domain name, twgtea.com
The lawsuit was brought by current CEO Taha Bouqdib and his wife Maranda Barnes against Manoj Murjani. They had argued that Manoj was holding the domain name on trust for the company.
In an internal e-mail in 2009, Manoj had referred to twgtea.com as “our domain” and in 2010, he signed a letter declaring that the domain name would “always remain” the property of the company.
Manoj was ordered by the High Court to hand over the Internet domain name twgtea.com to the company.
Taha, who was in the tea business, and his wife, were persuaded by Manoj in 2007 to move from France to Singapore to build the TWG Tea brand.
On 3 August 2007, Manoj had registered twgtea.com during a meeting to discuss the venture.
Murjani had alleged that he owned the domain name, which was registered before TWG Tea was set up.
He sought compensation from the company for using the domain name as well as damages for being excluded from mention as a co-founder on the company’s website and in various articles.
However, the court dismissed the countersuit against TWG Tea, current CEO Taha and his wife Maranda.
“Jackpot Auntie” Choo Hong Eng
Choo Hong Eng had made headlines in 2011 when Marina Bay Sands (MBS) Casino initially declined to pay her the S$410,000 she won on its slot machines.
Claiming that the machine had been faulty, MBS Casino had instead offered her a car worth S$250,000.
MBS relented later on and gave Choo the winnings. She donated them to charity, including the Singapore Buddhist Federation and the National Kidney Foundation.
She made it to the news again in 2017 when the company she helped to start sued her for more than S$200,000.
Choo, a shareholder and director of F&B chain Kwan Inn Vegetarian Cuisine, was accused of contract breaches, not fulfilling her director role and defamation.
She contested the claims by Kwan Inn and counter-sued the company to account for all monies paid by her on the firm’s behalf and pay any sums due to her, as well as asking the court to void the documents signed in 2016.
These documents pertain to the sale of a 50 per cent stake in Kwan Inn, which Choo and a partner originally owned, to food and beverage firm Jus Delish Group in 2016.
Under the sale terms, Choo was hired as brand ambassador for Kwan Inn at S$8,000 a month, and had to close down the Kwan Inn (Geylang East) Vegetarian Food stall she owned and was running, upon securing a catering licence for the company by 28 December 2016.
Kwan Inn had been footing for the Geylang East stall’s overheads since July 2016, and collecting its revenues until 16 April 2017.
It alleged that it discovered Choo had been ordering excess stocks which could not be accounted for. She had also put S$25,786 on the stall’s tab over a period of just 13 days.
She also continued to work despite instructions to stop work for two days to allow for the annual stock taking.
The company had terminated her on 19 April but she refused to vacate the stall or hand over all sales revenue to the company and continued to run the stall for her own benefit.
Kwan Inn alleged that it had lost S$200,000 in estimated revenue from the stall from April to May.
They applied for a court injunction earlier to stop Choo from entering the Geylang premises and to hand over all sales revenue since 16 April.
In defence, Choo argued that the documents she signed were different from the terms that were verbally agreed on earlier.
She alleged that the deal was supposed to let her run the Geylang stall without interference from the company and the company was supposed to bear the running costs.
She claimed that she was not literate in English, and that the contents in the documents were not explained to her.
Dr Goh Seng Heng of PPP Laser Clinic
In February 2016, local aesthetic clinic PPP Laser Clinic filed a lawsuit against its founder Dr Goh Seng Heng, his daughter Dr Michelle Goh and a company named QuikGlow.
Quikglow is an outfit that father and daughter had set up in March 2013.
Goh had stepped down from the company he founded saying that “under the leadership of the new investors, the company has lost its way and in my opinion, is now driven by the wrong values”.
The elder Goh had launched the PPP brand with his daughter in 2011 after she had an idea to bring such services to the heartlands. Others later invested in the business.
In 2015, Dr Goh, who with Michelle hold a 13.31 per cent stake in Aesthetic Medical Partners — the parent company of Aesthetic Medical Holdings, which operates the PPP chain — sued seven shareholders who held 63.47 per cent of the company.
He alleged that they reneged on their promise to give him their voting rights.
The company then counter-sued the duo for breach of fiduciary and contractual, alleging that Quikglow provides services similar to PPP’s.
The firm also succeeded in applying for a Mareva injunction to freeze the assets of the three defendants as well as an injunction to stop them from joining Quikglow and engaging in the same or similar business.
The father-daughter duo also received a court injunction barring them from poaching PPP staff, revealing or using confidential information acquired during their time at PPP.
It also ordered them to disclose the names of all the employees or contractors whom the two have directly or indirectly “solicited or enticed”.
The court has also ordered from entering the premises of PPP companies.
Singapore Courts Will Encourage Mediation
A legal battle can be lengthy, expensive and create bad publicity, but some of these disputes may be avoided or resolved out of court.
Either option would save on legal fees, and a voluntary settlement also reduces uncertainty.
Singapore courts will encourage you to consider mediation instead. Refusing it could have an impact on costs to be awarded, as determined by the judge.
Judges also tend to favour awarding monetary compensation over a transfer of assets.
That said, a judge may order an asset to be transferred if it isn’t easily replaceable by cash, such as stocks in a private company may fall under this category.
Featured Image Credit: TWG Tea / forums.vrzone.com / whitekarats.wordpress.com / Quiklaser