Chee Yin Meh v Ong Kian Guan and others

• Jurisdiction: Singapore
• Judge: Kannan Ramesh JAD
• Judgment Date: 27 October 2023
• Neutral Citation: [2023] SGHC(A) 33
• Court: High Court Appellate Division (Singapore)
• Docket Number: Civil Appeal No 112 of 2022
• Hearing Date: 12 July 2023
• Citation: [2023] SGHC(A) 33
• Year: 2023
• Plaintiff Counsel: Goh Kok Leong, Fu Xiangming Max and Navin Kumar s/o Tamil Selvan (Ang & Partners)
• Defendant Counsel: Chan Chee Yin Andrew, Tay Yu Xi, Yeo Alexander Lawrence Han Tiong, Chew Jing Wei, Lee Suet Yean Cherlyn and Edwin Teong Ying Keat (Allen & Gledhill LLP)
• Subject Matter: Insolvency Law,Administration of insolvent estates,Avoidance of transactions,Transactions at an undervalue,Unfair preferences
• Published date: 27 October 2023

Andre Maniam J (delivering the grounds of decision of the court): Introduction

The appellant, Mdm Chee Yin Meh (“Mdm Chee”), was one of three defendants in a case brought by the trustees in bankruptcy of her husband, Mr Fan Kow Hin (“Mr Fan”). In the context of Mr Fan’s bankruptcy, the trustees challenged ten transactions that Mr Fan had entered into with one or more of the defendants.

The trial judge (the “Judge”) found in favour of the trustees in respect of eight of the ten transactions. The Judge made orders against Mdm Chee in respect of three transactions (the First, Sixth and Seventh Transactions), which she appealed against. The other two defendants – British Virgin Island companies One Organisation Limited (“OOL”) and Gateway Plus Limited (“Gateway Plus”) – did not appeal. The Judge’s decision in HC/S 1078/2017 (“Suit 1078”) is found in Chee Yin Meh v Sim Guan Seng and others [2023] 3 SLR 590 (the “Judgment”).

We heard Mdm Chee’s appeal, AD/CA 112/2022 (“AD 112”), on 12 July 2023 and dismissed it. We now provide our grounds of decision.

Background The agreements that Mdm Chee relied upon

In her pleadings, Mdm Chee advanced an entirely fictitious narrative, which she then abandoned. She pleaded reliance on: the Agreement for Securities Lending (the “SLA”); and the Shareholders Agreement for Minority Protection (the “SAMP”).

However, Mdm Chee admitted that she and Mr Fan had created and signed the SLA and SAMP only in September 2016 and not February 2010 and that they had falsely backdated the SLA and the SAMP to 28 February 2010.¹ Mdm Chee further admitted that she and Mr Fan had created and signed the notices and demands allegedly issued under the SLA and the SAMP only in September 2016 and that they had then falsely backdated these notices and demands to the dates which they bore between 2011 and 2015.²

These admissions of fraudulent conduct called into question the bona fides of Mdm Chee and Mr Fan. The Judge rightly found that their decision to concoct this fictitious series of events “was not simply a momentary lapse of judgment” and that “the deception was broad in scope and time”.³

Having abandoned her pleaded defence based on the SLA and the SAMP, Mdm Chee sought instead to rely on another agreement, the Points of Agreement for Securities Lending (“POASL”), but she never amended her pleadings to reflect this. Nevertheless, the Judge did not reject her reliance on the POASL on a point of pleading alone. Instead, he considered the POASL “as an indulgence to [Mdm Chee]”⁴ and found against her on the merits.

Mdm Chee also relied on another agreement – the International Healthway Corporation Limited Dividend Agreement (“IHC Dividend Agreement”). The Judge found against her on that too.⁵

We briefly review Mdm Chee’s position on the four agreements, and the Judge’s findings, to set the stage for our analysis in AD 112.

The SLA

The SLA was a purported conditional loan agreement signed by Mr Fan and by Mdm Chee in her capacity as a director of OOL. On the face of the SLA, the agreement appeared to be signed on 28 February 2010. However, Mdm Chee admitted that the SLA was null, void, and devoid of legal effect because it was created and signed in September 2016 and not 28 February 2010.⁶ Mdm Chee had relied on the SLA for the following stipulations: First, OOL agreed to lend to Mr Fan 401m shares of Healthway Medical Corporation Limited (“HMC”), a company that was listed on Catalist and that had Mr Fan as its Executive Chairman at the material time; those shares were valued at $63m. Second, both OOL and Mr Fan had the right to terminate the loan of the shares and unwind it at any time. Third, Mr Fan was obliged to transfer to OOL either 401m HMC shares or equivalent securities worth $63m within one business day of OOL’s demand to that effect if OOL were to terminate the loan.⁷

The SAMP

The SAMP was a purported shareholders agreement signed by Mr Fan and Mdm Chee in her personal capacity. On the face of the SAMP, the agreement appeared to be signed on 28 February 2010. However, as with the SLA, Mdm Chee accepted that the SAMP was null, void, and devoid of legal effect.⁸ She had relied on the SAMP for the following stipulations: First, the SAMP made an express connection to the SLA by reciting that Mr Fan and OOL were also entering into the SLA, under which OOL would lend Mr Fan the 401m HMC shares worth $63m. Second, the SAMP purported to give Mdm Chee an option to purchase all 58 of Mr Fan’s shares in OOL for $1 if OOL terminated the share loan in accordance with the SLA and Mr Fan breached his obligation to transfer 401m HMC shares or equivalent securities worth $63m to OOL within one business day of a demand to that effect. Third, the SAMP empowered Mdm Chee to exercise her option by giving notice in writing to Mr Fan setting a date for him to complete the sale and purchase of his 58 shares in OOL.⁹

The POASL

The POASL was disclosed by Mdm Chee for the first time in April 2019, just before her admission that the SLA and SAMP were null, void, and devoid of legal effect by way of particulars of pleadings supplied in July 2019.¹⁰

The POASL was signed by Mr Fan and Mdm Chee and bore OOL’s company stamp. Like the SLA and SAMP, it bore the date 28 February 2010 on its face. The POASL also contained language which reflected the substance of all six of the key terms of the SLA and SAMP as mentioned at [10]–[11] above.¹¹

Mdm Chee claimed that the POASL was the actual written agreement setting out the key terms of the arrangement.¹² She disclosed a second set of notices and demands purportedly sent between 2011 and 2015 pursuant to the POASL.¹³ If the POASL and the notices and demands sent pursuant to it were genuine, the question may be asked why Mdm Chee and Mr Fan would fabricate the SLA and SAMP, and the notices and demands sent pursuant to those agreements.

In the event, the Judge found that the POASL was a sham document that was falsely backdated.¹⁴

The IHC Dividend Agreement

Apart from the SLA, the SAMP and the POASL, Mdm Chee also sought to rely on the IHC Dividend Agreement – a purported trust arrangement between OOL and Mr Fan. Mdm Chee described the IHC Dividend Agreement in the following terms: When IHC was listed in July 2013, one of its substantial shareholders HMC distributed a special dividend of 82.29 IHC shares in specie from HMC’s shareholding in IHC for every 1,000 shares held by a shareholder of HMC. At that time, OOL had already transferred 401m HMC shares to Mr Fan between July 2009 and June 2011. As such, Mr Fan became entitled to and did receive some 33.03m IHC shares by way of an in specie dividend from HMC. In July 2013, Mdm Chee, in her capacity as OOL’s agent, orally agreed with Mr Fan that he would hold these 33.03m IHC shares on trust for OOL.

The Judge found that there was never an agreement to this effect. He reasoned, inter alia, that if the 33.03m IHC shares worth $15.8m were beneficially owned by OOL, that should have been reflected in OOL’s balance sheet as at 4 November 2013.¹⁵ However, these 33.03m IHC shares were omitted entirely from OOL’s balance sheet.

Findings The First Transaction

The First Transaction was Mr Fan’s transfer of 58 shares he held in OOL to Mdm Chee for the consideration of $1.¹⁶

Mr Fan was allotted 58 shares in OOL in March 2007, and Mdm Chee owned the remaining 42 shares.¹⁷ In Suit 1078, Mdm Chee’s case was that she was entitled to Mr Fan’s 58 shares because he had breached his obligations under the POASL to transfer to OOL 401m HMC shares or equivalent securities worth $63m.¹⁸ The trustees’ case was that the POASL was a sham agreement and that Mr Fan transferred his 58 shares in OOL to Mdm Chee for nominal consideration in order to put those assets out of the reach of his creditors.¹⁹

The Judge agreed with the trustees and found that Mr Fan’s transfer of his 58 shares in OOL for nominal consideration was a fraudulent conveyance and a transaction at undervalue.²⁰ In reaching this conclusion, the Judge made the following nine findings: First, the POASL was a sham document that was falsely backdated.²¹ Second, the consideration which Mdm Chee paid Mr Fan amounted to $1.²² Third, given that the SLA, the SAMP and the POASL were all found to be devoid of legal effect, Mr Fan was under no obligation whatsoever to transfer the 58 OOL shares to Mdm Chee.²³ Fourth, Mr Fan transferred the 58 OOL shares to Mdm Chee less than a month before he applied for bankruptcy.²⁴ Fifth, the conveyance took place pursuant to Mr Fan’s and Mdm Chee’s common fraudulent intention.²⁵ Sixth, the disposal of 58 OOL Shares for a consideration of $1 was a transaction at an undervalue as the 58 OOL Shares had real economic value.²⁶ Seventh, the IHC Dividend Agreement never existed.²⁷ Eighth, Mdm Chee’s allegation that Mr Fan held 29 of his 58 shares in OOL on trust for Mdm Chee was a pure afterthought and should be rejected.²⁸ Ninth, Mr Fan was insolvent by the time of the transfer.²⁹

Of these nine findings, in AD 112 Mdm Chee only disputed one: she maintained that the POASL was authentic – it was not created years later and falsely backdated.³⁰ Even if she succeeded on that, however, the remaining findings would still support the Judge’s decision on the First Transaction – in particular, his finding that the POASL was a sham agreement.³¹ These unchallenged findings were fatal to her appeal on the First Transaction.

For completeness, we also rejected Mdm Chee’s contention that the POASL was authentic, and not falsely backdated. We did so for three main reasons.

First, Mdm Chee failed to deal with any of the Judge’s factual findings in relation to the POASL. The Judge set out five reasons for his conclusions on the POASL (at [69]–[82] of the Judgment) and we summarise them briefly below: First, Mr Fan’s and Mdm Chee’s admitted propensity for...