Azman bin Kamis v Saag Oilfield Engineering (S) Pte Ltd

• Jurisdiction: Singapore
• Judgment Date: 02 August 2011
• Date: 02 August 2011
• Docket Number: Suit No 183 of 2010 (Summons No 2768 of 2010)
• Court: High Court (Singapore)

Azman bin Kamis

Plaintiff

and

Saag Oilfield Engineering (S) Pte Ltd (formerly known as Derrick Services Singapore Pte Ltd) and another suit

Defendant

[2011] SGHC 181

Philip Pillai J

Suit No 183 of 2010 (Summons No 2768 of 2010)

High Court

Companies—Schemes of arrangement—Effect of scheme of arrangement after its termination—Employees suffering injuries before company entered into scheme of arrangement—Employees not participating in scheme of arrangement—Employees suing company after termination of scheme of arrangement—Whether employees barred or precluded from claiming against company—Section 210 (3) Companies Act (Cap 50, 2006 Rev Ed)

This decision concerned two separate suits against the same company (‘the Company’) . In both suits, the plaintiffs, who were employees of the Company, suffered injuries due to separate industrial accidents. Some time after the industrial accidents, the Company entered into a scheme of compromise and arrangement (‘the Scheme’) under s 210 of the Companies Act (Cap 50, 2006 Rev Ed) . The Company's liability to the plaintiffs remained covered by a valid insurance policy taken out by the Company then.

The plaintiff in the first suit, Azman bin Kamis (‘Azman’) , averred that he did not receive any notice of the Scheme and that he was unaware of the advertisement of the Scheme in the English newspapers. Azman did not submit a proof of debt by the cut-off date indicated in the Scheme or thereafter. He did not participate in the Scheme. After the Scheme had terminated upon the fulfilment of its terms, Azman commenced the first suit against the Company.

Unlike Azman, the plaintiff in the second suit, Shaik Abu Bakar bin Abdul Sukol (‘Shaik’) , received notice of the creditors' meeting. Shaik also received notification that the court had approved the Scheme and that he was to file a proof of debt. It appeared that Shaik had claimed against the Company under the ‘Workmen's Compensation Act’ (‘WCA’) and was issued a cheque by the Scheme's manager in ‘full and final settlement’ of his claim. Like Azman, Shaik did not submit any proof of debt by the cut-off date indicated in the Scheme. Shortly before the Scheme was discharged, Shaik gave notice to the Ministry of Manpower of his intention to proceed with a claim under common law and, accordingly, he withdrew his claim under the WCA. After the Scheme was discharged, Shaik commenced the second suit against the Company.

The parties in both suits posed a question of law to the court under O 14 r 12 of the Rules of Court (Cap 322, R 5, 2006 Rev Ed) to be determined on agreed facts. The question of law was whether the causes of action in the suits have been extinguished and/or barred and/or precluded from being maintained consequent to the Scheme which has been duly completed, performed and fulfilled according to its terms.

In relation to the second suit (ie, the suit brought by Shaik) , the court assumed, for the purpose of the question of law, that the part payment by the Scheme's manager did not amount to a compromise by agreement within or apart from the Scheme, between the Scheme's manager or the Company and Shaik of his claim under the WCA and his common law causes of action.

Held, answering the question of law that the causes of action of Azman and Shaik (subject to the assumption mentioned above) had not been extinguished and/or barred and/or precluded from being maintained consequent to the Scheme which had been successfully completed and terminated:

(1) A careful reading of s 210 of the Companies Act and the underlying legislative policy set out in the case law revealed nothing which supported the proposition that s 210 of the Companies Act by its terms conferred a statutory result that a scheme of compromise or arrangement extinguished an insured claim against a company, after the completion and termination of a scheme. Debts or claims could ordinarily only be compromised to the extent provided and performed by the company as set out in the scheme vis-à-vis each individual creditor or claimant: at [23].

(2) It would not serve any statutory purpose of s 210 (3) of the Companies Act, which was to facilitate rehabilitation of companies in financial difficulty, and neither was there any language in s 210 (3) of the Companies Act which provided any basis to conclude that a scheme might statutorily extinguish the insured claims of persons such as the plaintiffs, which had no real impact on the Company's assets or its rehabilitation, and who did not participate in the scheme in any way: at [31]and [38].

(3) The Scheme defined a scheme claim as a claim ‘for which the Company is or may be liable to that Scheme Creditor (whether contingently or otherwise) ’. As a matter of construction of the Scheme's definition clauses, the plaintiffs' insured claims for which the Company bore no substantive actual or contingent liability would not be claims for which the Company ‘is or may be liable ... (whether contingently or otherwise) ’: at [33].

(4) Even if insured claims were to be construed to be within the Scheme definitions, the Scheme document did not have overreaching effect after its conclusion and termination. Clause 5.4 of the Scheme stated that a scheme creditor who failed to submit a proof of debt before a cut-off date would not be entitled to payment of his claim and the Company would be completely and absolutely discharged from that scheme creditor's scheme claim. However, this clause did not have an independent life of its own but was subject to cl 2.1.1 which provided that the purposes of the Scheme were to procure, in consideration of the matters set out in the Scheme the discharge and release of all claims by scheme creditors relating to scheme claims against the Company. Clause 2.1.1 expressly contemplated that the Company had to provide some consideration to scheme creditors in exchange for which the claims as compromised would be discharged and released. Neither clause had the overreaching effect of enabling the company to have unilaterally extinguished debts or claims which were unproven and which did not participate in the scheme: at [34] and [37].

[Observation: The word ‘creditors’ was not defined in the Companies Act. Courts elsewhere had adopted different interpretations of the word. On one view, ‘creditors’ might refer to all persons who had claims which might be admitted to proof in the winding up of the company. Applying this view in the context of the relevant legislation in Singapore, unliquidated tort claimants such as the plaintiffs would not be ‘creditors’ within the meaning of s 210 (3) of the Companies Act. Another view is that ‘creditors’ for the purpose of schemes of arrangement extended beyond persons with claims provable in winding up. However, even if a broader view was adopted, it was not entirely clear whether a person with an unliquidated claim in tort was a creditor for the purpose of a scheme of arrangement. However, it was not necessary to reach a conclusion as to whether unliquidated tort claimants, in general, are ‘creditors’ within the meaning of s 210 (3) of the Companies Act: at [26] to [29].

An insured unliquidated tort claimant might opt in to participate in a scheme, receive compromised payments thereunder and be bound by the scheme. Other insured unliquidated tort claimants might elect to opt out of the scheme and commence court actions against the company between the period where the company had proposed a scheme and right up to the termination of the scheme. Claimants who opted out ran the risk, apart from limitation periods (see [15]) , of any moratorium that might arise either out of s 210 (10) of the Companies Act or from the terms of the scheme document: at [30].]

Glendale Land Development Ltd (No 2) , Re (1982) 1 ACLC 562 (refd)

Huon Valley Springs Pty Ltd (Receivers and Managers appointed) , Re (1986) 10 ACLR 883 (refd)

Oriental Insurance Co Ltd, The v Reliance National Asia Re Pte Ltd [2008] 3 SLR (R) 121; [2008] 3 SLR 121 (refd)

Pacrim Investments Pte Ltd v Tan Mui Keow Claire [2010] SGHC 134 (refd)

R L Child & Co Pty Ltd, Re (1986) 10 ACLR 673 (refd)

SEA Assets Ltd v Perusahaan Perseroan (Persero) PT Perusahaan Penerbangan Garuda Indonesia [2001] EWCA Civ 1696 (refd)

Smith v Carr (1993) 10 ACSR 427 (refd)

T & N Ltd, Re [2006] 1 WLR 1728 (refd)

Trocko v Renlita Products Pty Ltd; The Commonwealth Trading Bank and Shepherd (Claimants) (1973) 5 SASR 207 (refd)

Waymouth Guarantee and Discount Co, Re (1975) 10 SASR 407 (refd)

Ying Tai Plastic & Metal Manufacturing (S) Pte Ltd v Zahrin bin Rabu [1983-1984] SLR (R) 212; [1982-1983] SLR 117 (refd)

Bankruptcy Act (Cap 20, 2009 Rev Ed) s 87 (1)

Companies Act (Cap 50, 2006 Rev Ed) s 210 (3) (consd) ;ss 210, 210 (10) , 327 (2)

Rules of Court (Cap 322, R 5, 2006 Rev Ed) O 14 r 12

Ramasamy K Chettiar (Acies Law LLC) , Mohammed Nasser Ismail (Md Nasser Ismail & Co) for the plaintiff in Suit No 183 of 2010

Krishna Morthy (S K Kumar & Associates) for the plaintiff in Suit No 717 of 2009

Tito Isaac and Ho Seng Giap (Tito Isaac & Co LLP) , Hong Heng Leong (Ang&Partners) for the defendant in Suit No 183 of 2010 and the first defendant in Suit No 717 of 2009

K Anparasan and Grace Tan (Khattar Wong) for the second defendant in Suit No 717 of 2009.

Judgment reserved.

Philip Pillai J

Introduction

1 The parties in Suit No 183 of 2010 and Suit No 717 of 2009, posed a question of law under O 14 r 12 of the Rules of Court (Cap 322, R 5, 2006 Rev Ed) to be determined on the agreed facts set out below. The question of law, as amended by consent of the parties and with leave of the court, reads as follows:

Whether the Plaintiff's causes of action in Suit No 183 of 2010 [or Suit No 717 of 2009] against the Defendant [or the First Defendant, in the case of Suit No 717 of 2009] have been extinguished and/or barred and/or precluded from being maintained consequent to the Scheme of...