Altus Technologies Pte Ltd v Oversea-Chinese Banking Corporation Ltd

• Judgment Date: 10 July 2009
• Date: 10 July 2009
• Docket Number: Originating Summons No 436 of 2009
• Court: High Court (Singapore)

Altus Technologies Pte Ltd (under judicial management)

Plaintiff

and

Oversea-Chinese Banking Corp Ltd

Defendant

[2009] SGHC 159

Andrew Ang J

Originating Summons No 436 of 2009

High Court

Companies–Receiver and manager–Judicial management order–Effect of judicial management order on right of set-off–Whether creditor was entitled to exercise its contractual right of set-off vis-à-vis debt owed by debtor company placed under judicial management–Companies–Receiver and manager–Judicial management order–Whether court should exercise its discretion under s 227X (b) Companies Act (Cap 50, 2006 Rev Ed) to order application of s 327 (2) Companies Act read with s 88 Bankruptcy Act (Cap 20, 2000 Rev Ed) in the context of judicial management–Companies–Receiver and manager–Judicial management order–Whether exercise of right of set-off offended pari passu principle–Whether pari passu principle applied in the first place in the context of judicial management

The plaintiff company, involved in the business of the sputtering of targets for the electronics industry, was placed under judicial management on 13 February 2009. In the month before it was placed under judicial management and in the days shortly after, it had received, from its major customer, Samsung Corning Precision Glass Co Ltd (“Samsung Corning”), orders for the sputtering of various products pursuant to which it issued eight invoices totalling US$627,260. While the invoices clearly referred to the bank account maintained by the plaintiff's judicial manager, Samsung Corning made payment instead to the plaintiff's account with the defendant (“the OCBC account”) which the plaintiff had operated before it was placed under judicial management. Samsung Corning tried to cancel the payment order but the funds had already been credited into the OCBC account. The defendant refused to repay Samsung Corning the funds and took the position that it was entitled to exercise its contractual right of set-off vis-à-vis the plaintiff by retaining the moneys in the OCBC account.

The plaintiff thus filed this originating summons seeking: (a) a declaration that the defendant was not entitled to exercise its right of contractual set-off so as to retain the sum of US$627,260; (b) a further declaration that the defendant's exercise of its right of contractual set-off was a breach of Part VIIIA of the Companies Act (Cap 50, 2006 Rev Ed) (“Companies Act”); and (c) an order that the defendant account and pay to Samsung Corning all sums paid by the latter to the defendant under a mistake of fact.

Held, dismissing the application:

(1) While the plaintiff had locus standi in so far as the declaration was concerned with whether the defendant might exercise its right of set-off against the plaintiff by retaining the US$627,260, it had no locus standi to seek a declaration that the moneys were paid to the defendant by Samsung Corning under a mistake of fact. A plaintiff could not commence proceedings seeking a declaration that A owed money to B, when the plaintiff was neither A nor B. Also, the letter Samsung Corning had written to the plaintiff seeking assistance in the recovery of the moneys could not constitute good notice of an assignment to the plaintiff of Samsung Corning's right to sue the defendant so as to give the plaintiff locus standi: at [8].

(2) The plaintiff's argument that the defendant's exercise of its right of set-off violated Pt VIIIA of the Companies Act was misconceived. Section 88 of the Bankruptcy Act (Cap 20, 2000 Rev Ed) (“Bankruptcy Act”) made applicable by s 327 (1) of the Companies Act relied upon by the plaintiff applied in the context of winding-up and not in the context of judicial management: at [12].

(3) It was not proper to accede to the plaintiff's request for this court to exercise its discretion under s 227X (b) of the Companies Act to order the application of s 327 (2) of the same Act read with s 88 of the Bankruptcy Act to the judicial management of the plaintiff. The purpose of s 227X (b) was to enable the court to order the application of provisions relating to liquidation in the context of judicial management where the provisions would facilitate the general mission and purpose of judicial management. Acceding to the plaintiff's request so as to enable it to resist the defendant's exercise of its right of set-off would not accord with that purpose. In any event, the defendant was exercising a contractual right of set-off and not a statutory right of set-off with which s 88 of the Bankruptcy Act was concerned: at [13].

(4) It was established law that a creditor might exercise its contractual right of set-off against a company placed under judicial management. The exercise of such a right was not precluded by Pt VIIIA of the Companies Act. The plaintiff's argument that the exercise of such a right violated the pari passu principle also had to be rejected because...