The Role of a Company in Shareholders’ Disputes
By Edwin Sim
When corporate officers dispute in court, the company itself is regularly involved as a co-party. Conventional wisdom often treats the company as a mere “nominal party”—simply a spectator that sits quietly on paper while the parties are in dispute. However, treating the company as a passive bystander can be a costly oversight when the litigation directly impacts its corporate operations. In the judgment of Shiju Varghese Joyce & another v Kidney Therapeutics Centre Pte Ltd and anor [2026] SGHC 81, the company, Kidney Therapeutics Centre Pte Ltd (“KTC”), successfully demonstrated that a company not only has the right to actively protect its commercial interests through independent counsel, but can also recover its legal costs when it conducts itself reasonably throughout the proceedings.
Summary
The written judgment was delivered by the Honourable Justice Sushil Nair. Subsequent costs orders were made after. Covenant Chambers LLC had represented KTC, the 1st Defendant. KTC was the company over which the Claimants and 2nd Defendant had a dispute. There were allegations of breach of an agreement, misrepresentation and minority oppression between the Claimants and 2nd Defendant. As against KTC, there were reliefs that were sought which included an audit of KTC’s accounts with a view to profit-sharing and dividends, damages amounting to accrued income due to premature termination of the Claimants’ employment and an order for KTC to be wound up. During the course of the action, there were also interlocutory proceedings that involved KTC such as discovery applications. KTC was awarded costs after the Claimants’ applications were dismissed.
The “Nominal” Defendant Argument
In their Closing Submissions after trial, the Claimants alleged that KTC allowed its resources to be used by the 2nd Defendant for his own personal interests and to oppress the Claimants. They alleged that KTC’s solicitors were a “second set of counsel” for the 2nd Defendant and not for KTC’s benefit.
On the facts of this case, the High Court dismissed the Claimants’ claims in their entirety. In delivering its decision on costs separately, the Court did not accept the Claimants’ submissions that there should be no order as to costs in respect of KTC. KTC was held not to be a nominal defendant as the Claimants did seek reliefs against KTC. The Court also held that there was also no principle that debars a nominal defendant from recovering its legal costs on that ground alone (Kotagaralahalli Peddappaiah Nagarajah v Moussa Salem and others [2023] SGHC 68 at [157]). Significantly, the Court did not agree with the Claimants’ submissions that “the 1st Defendant (KTC) had effectively been used by the 2nd Defendant to advance the latter’s personal interests in [the] proceedings”. The Court was of the view that KTC, on a whole, acted reasonably and sensibly in the course of the proceedings, and KTC was consequently entitled to recover a reasonable and proportionate amount for costs that it had incurred in the suit.
Key Takeaways for Companies Involved in Litigation
The case shone the spotlight on the company’s (and in turn, its counsel’s) conduct throughout the entire proceedings. As is the case in almost all shareholders’ disputes, the company is added as a party to the suit. This would bind the company to any decisions made by the Court that affect the company in its corporate and commercial capacity, such as transferring shares to the rightful owners, taking an account of profits or damages, and reinstating individuals to their previous positions within the company.
Should the company always be seen as a “nominal” party? When the company complies with court directions and orders (for instance, in discovery applications), should it not be allowed reasonable costs incurred in doing so? Rightfully, the Court had, in earlier discovery applications, awarded KTC costs when the applications were unsuccessful.
The cases also do support the view that if the company, rightfully, participates in the trial, that reasonable costs that are incurred, ought to be allowed if the claimants are unsuccessful. It may well be even in a case where the claimants are successful, the company would still be allowed reasonable costs for complying with the court’s consequential orders and directions. Clearly every case turns on its own facts, so whether the company ought to be allowed costs would be on a case-to-case basis.
Case law also supports the view that the company should not be prevented from being represented by independent counsel as the company may require legal advice on its interests as a whole and about any submissions to court on any consequential orders that have to be sought during the course of the proceedings and after judgment.
However, the onus is on the company to justify its actions and manner in which it conducts itself throughout the proceedings. In the present case, KTC focused its case on addressing only the employment issues as this related directly to KTC’s corporate character and affected its commercial character (see Hawkes v Cuddy [2007] EWHC 1789 (Ch)).
Conclusion
Ultimately, the Court agreed with KTC’s submission that the discretion to award costs must be fact-centric, and not based on a perceived label of whether a party is “nominal”.
For companies unexpectedly caught in the crossfire of founder disputes, the Court will observe the conduct of the company carefully throughout the course of the proceedings.
(As at the time of this article, the Claimants have filed an appeal.)
Edwin Sim and Joshua Ho from Covenant Chambers LLC successfully acted for the 1st Defendant in this case. For questions on this article or on Shareholders and Partnerships disputes, please feel free to contact them by email.
Edwin Sim
Director
Joshua Ho
Counsel
