Ousted founders of medical device company lose bid to sue firm's directors
Founders of medical device company Healthstats accused two directors of firm of failing to protect trade secrets
Two founders of a medical device company, who were ousted, tried to sue two directors of the firm, accusing them of failing to protect its trade secrets.
Healthstats founders, Dr Ting Choon Meng and Mr Chua Ngak Hwee, said they were removed so that the company's "crown jewels" - software source code for its key product - could be passed to a third party.
They said they wanted to bring a lawsuit on the company's behalf against directors Lian Chin Chiang and Chang Hon Yee for breaching their fiduciary duties.
But the High Court threw out their arguments, saying that there was a complete lack of evidence for their claims.
Judicial Commissioner Ang Cheng Hock found that Dr Ting and Mr Chua had taken the legal action not in good faith but in retaliation for being removed.
In his judgment, the judge noted the pair's removal did not sit well with them.
He cited vitriol directed by Dr Ting towards his former subordinates, such as likening the chief financial officer to a "dog (that) has recognised a new master".
Dr Ting was executive chairman while Mr Chua was chief technology officer of Healthstats, which has made losses since it was started in 2000.
Its main product was a wrist-worn blood pressure monitoring device, and the source code and algorithm were trade secrets.
In 2017, the pair sought new investors. Mr Chang and Mr Charles Chen invested $20 million in Healthstats through a vehicle and became majority shareholders.
Mr Chang, Mr Lian and Mr Tan Shern Liang were appointed as Healthstats directors. Mr Lian was made CEO of Healthstats.
Later, a memorandum of understanding between Healthstats and Australian biomedical product development company Planet Innovation (PI) was signed, to integrate the former's device with the latter's patient monitoring system.
In February last year, Mr Lian wanted to step down as CEO due to "irreconcilable differences" with Dr Ting, Mr Chua and Mr Tan.
But Mr Chang decided that Mr Tan should leave instead.
On March 1, Mr Tan resigned as director and Dr Ting and Mr Chua were suspended.
In front of employees, Mr Lian told an engineer to copy the source code into a hard disk. The hard disk was taken home by a manager but returned to the office six days later.
The reasons for the suspension included attempts by the founders to make "wrongful" payments to themselves totalling $1.6 million. Both were fired and removed as directors in May.
Represented by Mr Pradeep Pillai of PRP Law, the two sacked men alleged that Mr Lian copied the source code because he and Mr Chang intended to share it with PI.
But Mr Lian's lawyer, Mr Adrian Tan of TSMP Law Corporation, countered that there was nothing surreptitious about this. Mr Lian said he was making a backup copy so that Healthstats would not be "held ransom" by Dr Ting and Mr Chua.
The defendants' lawyers, which include Ms Blossom Hing of Drew & Napier and Ms Koh Swee Yen of WongPartnership, argued that the ousted pair were abusing the legal process to wrest back control over the firm.
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