DBS Bank Ltd v Tam Chee Chong and another (judicial managers of Jurong Hi-Tech Industries Pte Ltd (under judicial management))

CourtCourt of Appeal (Singapore)
JudgeChan Sek Keong CJ
Judgment Date16 September 2011
Neutral Citation[2011] SGCA 47
Citation[2011] SGCA 47
Docket NumberCivil Appeal No 230 of 2010
Hearing Date26 May 2011
Plaintiff CounselTan Chuan Thye, Kevin Kwek and Linda Esther Foo (Stamford Law Corporation)
Defendant CounselSarjit Singh Gill SC, Pradeep Pillai and Zhang Xiaowei (Shook Lin & Bok LLP)
Subject MatterInsolvency Law
Published date23 September 2011
Chan Sek Keong CJ (delivering the judgment of the court): Introduction

This is an appeal by DBS Bank Ltd (“DBS”) against the decision of the trial judge (“the Judge”) in setting aside a charge (“the Charge”) granted by Jurong Hi-Tech Industries Pte Ltd (under judicial management) (“JHTI”) over 74,411,620 shares in MAP Technology Holdings Limited (“MAP”) on the ground that the Charge was an unfair preference under s 227T of the Companies Act (Cap 50, 2006 Rev Ed) (“CA”), read with s 99 of the Bankruptcy Act (Cap 20, 2000 Rev Ed) (“BA”) (see Tam Chee Chong and another v DBS Bank Ltd [2011] 2 SLR 310 (“the GD”)).


The background facts in these proceedings are as follows. JHTI was a wholly-owned subsidiary of Jurong Technologies Industrial Corporation Ltd (under judicial management) (“JTIC”), a public company whose shares were listed on the Singapore Exchange (“SGX”). JHTI and JTIC (collectively, “the Companies”) were in the business of providing electronic manufacturing services (“EMS”). Most of their EMS operations were carried out by JHTI.

The Companies’ business operations were financed by DBS and a group of banks (“Creditor Banks”), which included ABN AMRO Bank NV (“ABN-AMRO”), Bank of Tokyo-Mitsubishi UFJ (“BTMU”), KBC Bank NV (“KBC”), Malayan Banking Berhad (“Maybank”), Oversea-Chinese Banking Corporation Ltd (“OCBC”), RHB Bank Berhad, Coöperatieve Centrale Raiffeisen-Boerenleenbank BA, trading as Rabobank International, Singapore Branch (“Rabobank”) and United Overseas Bank Ltd (“UOB”). All the bank facilities were unsecured. These facilities were granted by the Creditor Banks subject to negative pledges given by the Companies and agreements that the Creditor Banks would be entitled to pari passu distribution of the Companies’ assets in the event of the Companies’ insolvent liquidation.

In 2006, DBS offered banking facilities to the Companies, which accepted the offer subject to the same conditions as those applicable to the facilities granted by the other Creditor Banks. On 27 December 2006, DBS agreed to provide banking facilities to the Companies jointly and severally on this basis. By February 2008, DBS had become the Companies’ main banker in providing the following facilities of various types up to the limit of U$137m:1 Global Facilities of up to US$37m; Foreign Exchange Facility of up to US$20m; Interest Rate Swap Facility of up to US$50m; Term Loan Facility of up to US$20m; and Term Loan 2 Facility of up to US$10m.

When Ms Joyce Lin Li Fang (“Joyce” or “Ms Lin”), a founding member of JTIC and a director since 26 April 1986, and also a director of JHTI since 26 August 2003, was appointed Chairman of JTIC in March 2006, she began to be concerned with the level of the Companies’ debts to the Creditor Banks. Sometime in April or May 2008, Ms Lin made a presentation to DBS of the Companies’ financial position and told DBS that some of the Companies’ assets could be “monetised”, ie, sold, to reduce the Companies’ loans. These assets included the Companies’ EMS business, shares in MAP (“MAP shares”) and shares in Min Aik Technology Co Ltd (“Min Aik shares”). From September 2008 to November 2008, the other Creditor Banks, including Sumitomo Mitsui Banking Corporation, were also informed of the possible sale of these assets.

By 30 June 2008, the Companies’ total borrowings had reached the level of S$340m, of which about S$87m was owing to DBS, S$70m to UOB, S$60m to OCBC and the remainder to the other Creditor Banks. In July 2008, JHTI deposited with ABN-AMRO at its request 18.6m of the MAP shares which it (JHTI) held. They were subsequently released to JHTI for conversion into scripless shares. JHTI acquired more MAP shares, bringing its total investment to 74,411,620 MAP shares (slightly below 20% of the paid-up capital of MAP), ie, the total number of MAP shares over which the Charge was eventually granted (we will hereafter refer to the 74,411,620 MAP shares which were the subject of the Charge as “the MAP Shares”). Between August and October 2008, ABN-AMRO requested that the MAP Shares be put in a custodian account with it. The October 2008 request was made as a “non-negotiable condition” for ABN-AMRO to refrain from recalling its facilities. JHTI refused to do so for the reason that, as stated by Dr Chung Siang Joon (“Dr Chung”), JTIC’s executive director of finance, “this can trigger off and become a risk factor should the other [Creditor] Banks come to learn about it”2. He pleaded for support: “I do hope you can understand my difficulty and obligation to the other [Creditor] Banks”.

From September 2008 onwards, the Companies encountered significant financial difficulties, due primarily to the global recession and credit crunch, which had resulted in reduced orders from their customers. During this period, the Companies’ trade creditors were chasing for payment of their debts, and so were all the Creditor Banks. The Companies could only make payments in the ordinary course of business from trade receivables or by drawing on credit lines. The Companies continued to promise the Creditor Banks that they would pay their loans and facilities from the proceeds of sale of the MAP Shares, their Min Aik shares and their EMS business. Although the Companies were defaulting in the payment of debts due to the Creditor Banks, they continued to roll over the debts. The Creditor Banks really had no choice but to wait for the Companies to sell their assets in order to pay their debts to the Creditor Banks.

On 14 October 2008, JTIC signed a non-binding term sheet with Global Emerging Markets (“GEM”) to sell part of JTIC’s EMS business (“the GEM Deal”). The announcement made by JTIC the next day on the SGX was as follows:3

The Board of Directors of [JTIC] wishes to announce that [JTIC] has received and signed a non-binding term sheet with [GEM] … pursuant to which GEM, together with various investors … have proposed the formation of a special purpose vehicle … to acquire a significant interest in selected electronic manufacturing services businesses and assets … for cash consideration.

Shareholders should note that the Proposed Disposal will be subject to, inter alia, the negotiation and execution of definitive agreements and the conduct of a due diligence ...

The Creditor Banks were informed that the GEM Deal could bring in as much as US$160m. Two officers from GEM had visited Singapore in October 2008 to evaluate the deal, and KPMG was to conduct the necessary due diligence in January 2009.

During this period, the Companies were in default in paying certain short-term loans given by DBS (ie, the short-term loans mentioned at [36] below), which continuously pressed for payment by the deadline of 14 November 2008 from the proceeds of sale of the MAP Shares, as Ms Lin had promised. On 13 November 2008, at a meeting with DBS, Ms Lin had signed a security document which created the Charge. This document (“the Security Memorandum”) was fully executed on 17 November 2008.

On 8 December 2008, JTIC made a public announcement that its audit committee had commenced an investigation into alleged irregularities in the administration of the receivables financing facilities extended by Rabobank and OCBC to the Companies. On 9 December 2008, KordaMentha Pte Ltd, JTIC’s financial advisers, called a meeting of all the Creditor Banks and informed them of JTIC’s outstanding debts. On 10 December 2008, DBS registered the particulars of the Charge with the Accounting and Corporate Regulatory Authority. By the end of December 2008, the Companies had received letters of demand from KBC (on 7 November 2008), Maybank (on 2 and 22 December 2008), ABN-AMRO (on 18 December 2008), OCBC (on 26 December 2008) and BTMU (on 29 December 2008). Additionally, the Companies had also received letters of demand from their trade creditors, some of whom had filed actions in court as early as 12 December 2008 to recover their debts.

On 20 February 2009, the Companies were placed under judicial management by the court on the application of some of the Creditor Banks.

On 22 June 2009, JHTI’s judicial managers (the respondents in the present appeal) commenced the proceedings against DBS in the court below to set aside the Charge on the basis that it constituted an unfair preference under s 227T of the CA. In a reserved judgment delivered on 18 November 2010 (ie, the GD), the Judge allowed the application, holding that: the Charge was an unfair preference under s 227T of the CA, read with s 99 of the BA; and JHTI was insolvent when it granted the Charge.

The sole issue in this appeal

In this appeal, DBS has not appealed against the Judge’s finding that JHTI was insolvent at the time it granted the Charge. Hence, the sole issue is whether the Judge’s decision that the Charge was an unfair preference under s 227T of the CA, read with s 99 of the BA, is correct.

Before we consider the Judge’s decision and the arguments of the parties in this appeal, it is convenient that we first discuss the principles of law on unfair preference applicable in Singapore.

The law on unfair preference in judicial management

The statutory provisions relating to unfair preferences are set out in s 227T and s 329 of the CA, which provide as follows:

Undue preference in case of judicial management 227T.—(1) Subject to this Act and such modifications as may be prescribed, a settlement, a conveyance or transfer of property, a charge on property, a payment made or an obligation incurred by a company which if it had been made or incurred by a natural person would in the event of his becoming a bankrupt be void as against the Official Assignee under section 98, 99 or 103 of the Bankruptcy Act (Cap. 20) (read with sections 100, 101 and 102 thereof) shall, in the event of the company being placed under judicial management, be void as against the judicial manager.


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  • Bankruptcy and insolvency
    • United Kingdom
    • Construction Law. Volume III - Third Edition
    • 13 Abril 2020
    ...to prefer the creditor, but whether the debtor’s decision was inluenced by a desire to prefer the creditor: DBS Bank Ltd v Tam Chee Chong [2011] SGCA 47 at [18]–[22]. See also Lopez v Harvey [2015] WASC 292; Hosking v Extend N Build Pty Ltd [2018] NSWCA 149 at [115], per Bathurst CJ; Stone ......

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