Eversendai Engineering Pte Ltd v Synergy Construction Pte Ltd (Ministry of Education, Third Party)

• Jurisdiction: Singapore
• Judge: Vincent Leow AR
• Judgment Date: 11 June 2004
• Neutral Citation: [2004] SGHC 129
• Court: High Court (Singapore)
• Published date: 29 April 2008
• Year: 2004
• Plaintiff Counsel: Brandon Choa (Acies Law Corporation)
• Defendant Counsel: Mentioning,Ray Shankar (Tan Kok Quan Partnership)
• Citation: [2004] SGHC 129

11 June 2004

Assistant Registrar Vincent Leow

Introduction

1 The instant application raised an interesting issue on the statutory protection accorded a company in voluntary winding-up after provisional liquidators have been appointed. This issue arose against the backdrop of a spate of garnishee and attachment proceedings against Synergy Construction Pte Ltd by a number of its sub-contractors who may have been spurred on by a misguided notion that they would in this manner be able to lawfully overcome the pari passu doctrine. This is not to cast any aspersion on those involved. One who has the misfortune to extend credit to a company which has run into financial difficulty has every right to seek to secure himself. The question is merely whether this is permissible under the statutory regime.

Background

2 The facts are simple. On 13 May 2004, Eversendai Engineering Pte Ltd (“Eversendai”), a sub-contractor, obtained judgment of about $350,000 against Synergy Construction Pte Ltd (“Synergy”), their main contractor. Pursuant to that judgment, on 24 May 2004, they applied to attach all monies due from the Ministry of Education (“attachees”) to Eversendai. This formed the instant application which came before me on 1 June 2004.

3 Prior to these events, the directors of Synergy had, on 4 May 2004, resolved that Synergy was by reason of its liabilities unable to continue its business. A declaration to this effect was filed with the Accounting and Corporate Regulatory Authority and with the Official Receiver on the same day. It is important to note that the declaration of solvency was not made. Concurrently, they appointed provisional liquidators. The shareholders’ meeting and creditors’ meeting were then called pursuant to s 291(b) of the Companies Act (“CA”) and both were fixed for 3 June 2004.

4 At the hearing, it was not disputed that the monies were due and owing. Instead, the question that arose for determination was whether the attachment order nisi should be made absolute given that the shareholders’ meeting had not taken place yet. The answer would depend on the protection that Synergy was entitled to – which, in turn, hinges on whether winding-up had commenced.

Has winding-up commenced?

5 The statutory protection imposed by the CA ring fences up the company once winding-up has commenced. It is thus pertinent to determine whether winding-up has commenced. In obtaining this answer, the starting point must be to look to the statutory framework as winding-up is solely a creature of statute. The relevant provisions on this entire area can be found in Division 3 of Part X of the CA.

6 The genesis of voluntary winding-up is s 290 CA which stipulates that:

(1) A company may be wound up voluntarily —

…

(b) if the company so resolves by special resolution.

7 This is followed by s 291 CA which reads:

(1) Where the directors of a company have made a statutory declaration in the prescribed form which has been lodged with the Official Receiver and have lodged a declaration in the prescribed form with the Registrar —

(a) that the company cannot by reason of its liabilities continue its business; and

(b) that meetings of the company and of its creditors have been summoned for a date within one month of the date of the declaration,

the directors shall forthwith appoint an approved liquidator to be the provisional liquidator.

…

(6) A voluntary winding-up shall commence —

(a) where a provisional liquidator has been appointed before the resolution for voluntary winding-up was passed, at the time when the declaration referred to in subsection (1) was lodged with the Registrar; and

(b) in any other case, at the time of the passing of the resolution for voluntary winding-up.

[Underlining mine]

8 It was not in dispute that this was a voluntary winding-up. Further, it was clear that the declaration referred to in s 291(1) CA was lodged and that a provisional liquidator appointed. Thus, on a prima facie reading, it would appear that the voluntary winding-up had commenced on 4 May 2004, that being the date that the declaration under s 291(1) CA was filed with the Registrar of Companies and Businesses (or the Accounting and Corporate Regulatory Authority as it is now known).

9 The problem with this conclusion was that at the time of this application, the shareholders’ meeting had not been held yet. As such, it was still possible that the pre-condition to a voluntary winding-up of a special resolution as required by s 290(1)(b) CA may not be met (either because the meeting is never held or because of lack of sufficient support by the members). This becomes a concern because the wording of s 291(6) CA reads ‘before the resolution for voluntary winding-up was passed’ which being phrased in the past tense appears to require the resolution to have been passed. Given this possible conflict in the reading of the provision, the issue is thus whether the winding-up provisions only take effect after the resolution for voluntary winding-up has been passed, with its effect backdated to the date that the declaration was filed or whether the provisions take effect immediately upon the declaration being filed and provisional liquidator appointed.

10 No authorities directly on point were brought to my attention. However, some guidance may be gleaned from an examination of the statutory provisions dealing with the compulsory winding-up regime. Under that regime, s 255 CA deals with the commencement of winding up and it reads:

(1) Where before the presentation of the petition a resolution has been passed by the company for voluntary winding-up, the winding-up of the company shall be deemed to have commenced at the time of the passing of the resolution, and, unless the Court on proof of fraud or mistake thinks fit otherwise to direct, all proceedings taken in the voluntary winding-up shall be deemed to have been validly taken.

(2) In any other case the winding-up shall be deemed to have commenced at the time of the presentation of the petition for the winding-up.

[Underlining mine]

11 A similar issue arises as to whether winding-up has commenced in the window period between the presentation of the petition and the court hearing. I am not aware of any local decisions dealing with this, but this point has arisen for determination in other jurisdictions.

12 I turn first to the Malaysian case of Kredin Sdn Bhd v Development & Commercial Bank [1995] 3 MLJ 304 where Siti Norma Yaakob JCA in delivering the judgment of the Malaysian Court of Appeal stated in relation to their equivalent provisions that

[s 255] was enacted specially as a means to protect the creditors, particularly the unsecured creditors who must be treated equally when it comes to their executing their claims against the company in debt. That equality is maintained even during the interim period between the date of the presentation of the petition for winding-up up to the date when the order for winding-up is made. During that period, the law sees to it that the assets or effects of the company will not be dissipated to enrich one or more unsecured creditors at the expense of the other unsecured creditors. [Section 259] preserves the assets and effects of the company and it is to safeguard this underlying principle that there is this notion of a relation back that once a winding-up order is made, it relates back to the date of the presentation of the winding-up, ie the date when the winding-up is deemed to have commenced… The fact that no winding-up order will ultimately be made makes no difference to this finding, as [s 255] is not concerned whether a winding-up order will ultimately be ordered or not, but that in mandatory tones it provides protection to unsecured creditors once a winding-up is deemed to have commenced that is upon the presentation of the petition. Thus, to say that protection is only present as and when the winding-up order is eventually made is to go against the very intention of what Parliament has enacted. That protection arises once a winding-up commences and the date of the commencement is nothing more than a question of fact ascertained from the date of the presentation of the winding-up.

[Underlining mine]

13 This approach must be contrasted to the position taken in by the Supreme Court of New South Wales in Fleet Motor & General Insurance Co. (Aust.) Pty. Ltd. v Tickle [1984] 2 ACLC 282. There, McLelland J held that

Unless and until a winding-up order is made by the Court, there is no winding-up and a fortiori there is no commencement of any winding-up. In the period between commencement of proceedings for a winding-up order and the final disposition of those proceedings, all that can relevantly be said is that if a winding-up order is made in the proceedings, the winding-up pursuant to that order shall… be deemed to have commenced at the time of the filing of the application for the winding-up…

A compulsory winding-up does not in fact commence until the winding-up order is made by the court. Once the order is made, the winding-up is to be ‘deemed to have commenced’ at the earlier date. In this context the word ‘deemed’ is used to create a statutory fiction...

[Underlining mine]

14 Similarly, the English Courts in Re Miles Aircraft Ltd [1948] 1 All ER 225 has adopted a similar view. Vaisey J stated:

The difficulty in saying that there is a winding-up now in progress seems to me to be that, if the petition is ultimately dismissed or withdrawn, there never will have been a winding-up by the Court. All that we have now is a contingent future possible winding-up…

15 I am swayed to prefer the New Zealand and English position of requiring the winding-up order to be given first before the winding-up provisions bite. In my opinion, this position is preferred for two reasons: first a winding-up petition can be presented all too easily and to allow a resultant blanket rule against the disposition of property or attachments upon the mere...