ERPIMA SA v Chee Yoh Chuang and Another

• Judgment Date: 13 May 1997
• Date: 13 May 1997
• Docket Number: Originating Summons No 815 of 1996
• Court: High Court (Singapore)

ERPIMA SA

Plaintiff

and

Chee Yoh Chuang and another

Defendant

[1997] SGHC 348

Lai Kew Chai J

Originating Summons No 815 of 1996

High Court

Companies–Receiver and manager–Judicial manager rejecting proof of debt–Conflicting affidavit evidence–Role of court hearing appeal–Regulations 79, 80 and 85 Companies Regulations (Cap 50, Rg 1, 1990 Rev Ed)

The plaintiff French company sought orders from the High Court: (a) that the decision of the defendant judicial managers to reject their proof of debt be reversed; (b) that the said proof of debt be admitted in full or in part; and (c) costs be paid by TAE, the company under judicial management.

Held, dismissing the application:

(1) A judicial manager was required under reg 79 of the Companies Regulations to “examine” every proof of debt and the grounds of the debt. He could require further evidence in support of it, and he was conferred power to administer oaths and take affidavits. He was also protected from having to pay any costs personally in relation to an appeal from his decision rejecting any proof wholly or in part. His attitude and approach must be entirely as if he were sitting in judgment like a judicial officer. He could not act unjudicially, capriciously or arbitrarily: at [4].

(2) The hearing in this case related to a proof of debt against a company under judicial management. In such a hearing, a claimant is not restricted to the material it had placed before the judicial manager. The court must approach the question de novo and determine the extent to which the claimants ought to be allowed to rank as a proving creditor. What mode of trial would be necessary for fairly disposing the issues in each appeal against a rejection of a proof of evidence would depend on the circumstances of a particular case. There was no rule of universal application that in the absence of any contrary sworn statement no cross-examination would be ordered. Cross-examination would be ordered where it was necessary for fairly disposing of the particular issue: at [6] and [7].

(3) The appropriate order was to dismiss the originating summons but order that the outcome of the proof of debt should abide by the final determination of the two suits in which all issues in controversy among the plaintiffs, TAE and the French company be dealt with comprehensively. The other alternative was to order cross-examination and discovery. This approach was unsuitable as matters involving TAE, which were linked in many ways to the transactions between the French company and the plaintiff, could not be dealt with: at [26].

Bank of Credit and Commerce International SA (No 6), Re [1994] 1 BCLC 450 (folld)

Company (No 004539 of 1993), Re A [1995] 1 BCLC 459 (refd)

Job Associates (Pte) Ltd, Re [1992] 1 SLR (R) 299; [1992] 2 SLR 430 (distd)

Kentwood Constructions Ltd, In re [1960] 1 WLR 646; [1960] 2 All ER 655 (folld)

Tanning Research Laboratories Inc v O'Brien (1989-1990) 169 CLR 332 (refd)

Companies Act (Cap 50, 1994 Rev Ed) s 227N

Companies Regulations (Cap 50, Rg 1, 1990 Rev Ed) regs 80, 85 (consd);reg 79

Arbitration (Foreign Awards and Agreements) Act 1974 (Cth)

C Arul, Lim Tanguy Yuteck and Cheryl-Ann Yeo (C Arul & Partners) for the plaintiff

Gan Kam Yuin (Bih Li & Lee) for the defendants.

Lai Kew Chai J

1 In this originating summons the plaintiffs, a company registered in France, sought orders from the High Court (a) that the decision of the defendants, the judicial managers of TAE Marble & Granite (S) Pte Ltd (hereinafter referred to as “the company”) to reject the plaintiffs' proof of debt dated 22 July 1996 for the total sum of $1,212,672.06 may be reversed; (b) that the said proof of debt may be ordered to be admitted in full or in part; and (c) that costs be paid by the company.

2 The matter first came up for hearing on 18 October 1996 when it was adjourned to enable the plaintiffs to file a further affidavit and for counsel, Mr C Arul, to appear on behalf of the plaintiffs. The originating summons was heard on 24 October 1996 at the conclusion of which I dismissed it with costs subject to the condition that the rejection of the proof of debt by the defendants as judicial managers shall abide by the final outcome of Suit Nos 717 of 1996 and 718 of 1996 which the plaintiffs had instituted against the company and a related company which was also under judicial management in respect of the said sum, which was the subject matter of the proof of debt. I further imposed the condition that the plaintiffs shall file their applications to obtain such leave as might be required to sanction the commencement and continuation of the two actions within three weeks from 24 October 1996, failing which the rejection of the proof of debts by the defendants as the judicial managers of the company shall stand. There is an appeal against my decision. I set out the circumstances and the reasons for my decisions.

The law

3 There are regulations which enable creditors of companies placed under judicial management, as in liquidation, to prove their claims and establish their status. The status of a creditor of a company under judicial management is important because, inter alia,he is entitled to attend a meeting of creditors to decide whether to approve the judicial manager's proposals: s 227N. In addition and obviously, once proved, a creditor is entitled to share pari passu in the pool of assets ultimately to be shared among creditors. It also follows that an admission of creditor to a debt increases the body of creditor pro tanto. On the other hand, a rejection of a proof of debt to a claimant amounts to a loss of a claim and a claimant with a genuine claim would be entitled to appeal. The plaintiffs in this case filed their proof of debt which was rejected by the judicial managers. No procedural issues are complained of in this case, unlike the case of Re Job Associates (Pte) Ltd (under judicial management) [1992] 1 SLR (R) 299 where there was a wrongful rejection of a proof of debt which was allegedly filed out of time. In the present case, liability under an agreement was challenged and secondly an overtopping claim was asserted even if liability had been undertaken under an agreement, which was denied. The plaintiffs' application is made under reg 80 of the Companies Regulations (Cap 50, Rg 1) which reads as follows:

If a creditor is dissatisfied with the decision of the judicial manager in respect of a proof, the Court may, on the application of the creditor, reverse or vary the decision; but subject to the power of the Court to extend the time, no application to reverse or vary the decision of the judicial manager in a judicial management by the Court rejecting a proof sent to him by a creditor, or person claiming to be a creditor, shall be entertained, unless notice of the application is given before the expiration of 21 days from the date of the service of the notice of rejection.

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