Liquidator of W&P Piling Pte Ltd v Chew Yin What and Others

• Jurisdiction: Singapore
• Judge: V K Rajah JC
• Judgment Date: 28 May 2004
• Neutral Citation: [2004] SGHC 108
• Date: 28 May 2004
• Subject Matter: When court will allow liquidator's application,Winding up,Whether liquidator should place reasons for application on record and on oath,Breadth of court's powers to order private examination,Application by liquidator for court to order private examination of parties pursuant to s 285 Companies Act,Liquidator,Section 285 Companies Act (Cap 50, 1994 Rev Ed),Whether application should be made ex parte or inter partes,Rule 49 Companies (Winding Up) Rules (Cap 50, R 1, 1990 Rev Ed),Insolvency Law
• Docket Number: Originating Summons No 115 of 2004
• Published date: 03 June 2004
• Defendant Counsel: Leslie Phua (Phua Wai Partnership),Chew Siang Tong (S T Chew and Partners),Tan Cheow Hin (CH Partners)
• Court: High Court (Singapore)
• Plaintiff Counsel: P Jeya Putra and Magdalene Chew (AsiaLegal LLC)

28 May 2004

V K Rajah JC:

1 A liquidator of a company is usually a foreigner to the company’s affairs. He is duty-bound to reconstruct the events that have led to the company’s demise. He is expected within a relatively short period to assess the steps to be taken in order to maximise returns to the company’s creditors and to review various aspects of the company’s management that may have had a bearing on the company’s demise. Officers of the company may have been guilty of misconduct or indiscretion. Quite possibly, even those who may have played no part in events leading to the demise may have reasons to obscure or ignore the facts as well as to minimise their involvement in the preceding events. The recurrent refrain from unco-operative directors is “I did not know”, “I was not told” or “I cannot remember”. Taking into account these difficulties and the need for expediency, the law has armed liquidators with a unique procedure to enable them to prise information pertaining to the company’s affairs. Section 285 of the Companies Act (Cap 50, 1994 Rev Ed) (“CA”) provides:

(1) The Court may summon before it any officer of the company or person known or suspected to have in his possession any property of the company or supposed to be indebted to the company, or any person whom the Court considers capable of giving information concerning the promotion, formation, trade dealings, affairs or property of the company.

(2) The Court may examine him on oath concerning the matters mentioned in subsection (1) either by word of mouth or on written interrogatories and may reduce his answers to writing and require him to sign them, and any writing so signed may be used in evidence in any legal proceedings against him.

(3) The Court may require him to produce any books and papers in his custody or power relating to the company, but where he claims any lien on books or papers the production shall be without prejudice to that lien, and the Court shall have jurisdiction to determine all questions relating to that lien.

(4) An examination under this section or section 286 may, if the Court so directs and subject to the Rules, be held before any District Judge named for the purpose by the Court, and the powers of the Court under this section and section 286 may be exercised by that Judge.

(5) If any person so summoned, after being tendered a reasonable sum for his expenses, refuses to come before the Court at the time appointed, not having a lawful excuse, made known to the Court at the time of its sitting and allowed by it, the Court may cause him to be apprehended and brought before the Court for examination.

2 This section is not peculiar to Singapore. Its progenitor has a distinguished English pedigree dating back to 1862. This section confers on the liquidator the extraordinary right to apply to court ex parte for leave to query persons on oath. The power has been described as one of an inquisitorial nature and, in a colourful turn of phrase, the equivalent statutory provision was characterised as a “Star Chamber clause” by Chitty J in Re Greys Brewery Company (1884) 25 Ch D 400 at 408. Case law suggests that the courts in various jurisdictions have shown a strong predilection towards accepting liquidators’ views and “great weight” is accorded to their status as officers of the court entrusted with the discharge of a public function.

3 There is no doubt that this extraordinary power, which can also be invoked in judicial management cases and similarly under the bankruptcy regime, serves an essential and important purpose. If used correctly, it generally but not invariably redresses disadvantages without creating advantages. However, if used incorrectly, it could be draconian in its application and crushing in its consequences. Unnecessary legal costs can also be incurred by all involved and the scarce funds of a company that has crossed the Styx may be severely depleted. Legal proceedings in the Singapore context are generally required to be conducted in the manner of an adversarial contest. The process of taking evidence on oath pursuant to an order made under s 285 of the CA, in some ways, approximates the taking of “depositions” in American proceedings save for the fact that the former is not a mutual exercise. The procedure is one of the very narrow areas where, for reasons of exigency and expediency, an aberration has been allowed into a fundamental tenet of an adversarial system. The court therefore plays an important and critical role in policing the exercise of this power. With this brief overview, I will now turn to the facts of this application.

Factual matrix

4 The subject company, W&P Piling Pte Ltd, was placed under compulsory liquidation on 16 May 2003. The applicant is the sole liquidator of the company. The total value in respect of proofs of debt filed against the company as of the date of the subject application amounts to $14,540,985. This is clearly not an insubstantial amount. There are also a number of unsecured creditors. The company currently only has realisable assets in the region of $1m.

5 The company, as its name suggests, was involved in the building industry. Its parent company and main shareholder was another construction company, Wee Poh Construction Co (Pte) Ltd (“the parent company”). The parent company had already been placed under a scheme of arrangement pursuant to s 120 of the CA when this application was initiated.

6 The first and second respondents were directors of the company until 12 April 2003 when they abruptly resigned. The first respondent was both director and chairman of the company since it was incorporated in 1996. The second respondent was appointed after the first respondent and did not hold any executive position in the company. He was also a director of four other companies in the Wee Poh group. Upon their resignation, Thamaseelvam s/o Poovenespran and Neo Ah Hwee (“the new directors”) were appointed as directors. The new directors do not appear to have had any appreciable involvement in the company or the parent company prior to their appointment.

7 The third respondent is a professional engineer and was in the employment of Wee Poh Holding Ltd (“the holding company”), the ultimate holding company of the Wee Poh group. He had been nominated to the company’s board by the holding company. His contract of employment with the holding company was terminated on 1 November 2003. On 11 December 2003, he commenced proceedings against the holding company for alleged breach of his service contract. It is common ground that he did not participate in any management or executive decisions relating to the company. His direct responsibilities solely related to technical issues that arose in the course of the company’s day-to-day operations.

8 Following his appointment, the applicant sought and received the assistance of the new directors in the preparation of and the filing of the company’s statement of affairs. This is a requirement imposed by s 270 of the CA on all companies that have been compulsorily wound up. He makes no complaint about the conduct of the new directors in these proceedings. It soon became apparent to the applicant that certain assets of the company could not be accounted for. The disappearance of these assets occurred well before the appointment of the new directors. These assets appeared ex facie from the company’s books to have been mysteriously “written off” or “fully depreciated” between 30 June 2002 and 30 April 2003. Some of these assets were substantial, with a book value amounting to several hundreds of thousands of dollars.

9 The applicant felt he was duty-bound to get to the bottom of the matter. He wrote to all the previous directors of the company including the respondents to seek their assistance. He received varying degrees of co-operation from the previous directors. Armed with the information he had received from some of them, he decided to focus his attention on the respondents, writing to them on several occasions between 4 July 2003 and 10 November 2003 to ask for information relating to these assets. The second respondent failed to respond to the queries altogether. The third respondent contacted the applicant’s office soon after he received the applicant’s initial letter. He explained, both in writing and orally, that his involvement in the company’s affairs, if any, was peripheral. He could not even begin to attempt to answer the queries posed. The first respondent only responded on 27 December 2003, claiming to be completely unaware of any material information or knowledge relating to queries raised in connection with the missing assets. The information sought could not therefore be provided. The applicant immediately requested that he reconsider his position.

10 On 31 December 2003, before any further response was received, the applicant sent to the respondents further questionnaires detailing, with particularity, the information and documents he sought. They were requested to respond within 14 days. He proposed also to meet them, following their responses, to further discuss the issues. The first respondent then requested an extension of time to 20 January 2004. The applicant granted this, once again renewing his request for a meeting to resolve “the outstanding matters in the liquidation”. The first respondent responded curtly seeking yet another extension of one month to respond on the ground that he was busy with other projects. He submitted the address of the parent company as his contact address. The applicant, sensing that he was being given the runaround by the respondents, was by now reaching the end of his tether. He promptly replied insisting that the deadline he had set be punctiliously respected. The parties had reached an impasse.

11 Shortly after this exchange of correspondence, the applicant filed an application on 29 January 2004 to examine the respondents viva voce, in relation to the “missing assets”...