Grimmett, Andrew v HTL International Holdings Pte Ltd

• Jurisdiction: Singapore
• Judge: Aedit Abdullah J
• Judgment Date: 13 June 2022
• Docket Number: Companies Winding Up No 257 of 2021
• Court: High Court (Singapore)

Grimmett, Andrew and others

and

HTL International Holdings Pte Ltd (under judicial management) (Phua Yong Tat and others, non-parties)

[2022] SGHC 137

Aedit Abdullah J

Companies Winding Up No 257 of 2021

General Division of the High Court

Insolvency Law — Winding up — Grounds for petition — Judicial manager petitioning to wind up company that was rehabilitated to solvency — Risk of shareholder unwinding work done by judicial managers by commencing foreign proceedings — Whether judicial manager had standing to petition for winding up on just and equitable ground — Whether judicial manager should be allowed to rely on public interest grounds when petitioning for winding up — Section 125(1) Insolvency, Restructuring and Dissolution Act 2018 (Act 40 of 2018)

Insolvency Law — Winding up — Just and equitable ground — Loss of substratum — Investment holding company selling off all its underlying assets during judicial management — Shareholder having future commercial plans to run company as going concern — Whether empty shell company with only cash assets remaining should be wound up where shareholder had future plans — Section 125(1)(i) Insolvency, Restructuring and Dissolution Act 2018 (Act 40 of 2018)

Insolvency Law — Winding up — Suspending business for whole year — Company business being suspended while in judicial management — Shareholder having future commercial plans to run company as going concern — Whether there was intention to abandon business entirely — Whether company should be wound up for suspending business — Section 125(1)(c) Insolvency, Restructuring and Dissolution Act 2018 (Act 40 of 2018)

Held, dismissing the application:

(1) There was nothing inherent in the language of s 124(1)(h) of the IRDA which limited the grounds for winding up which might be relied upon by the judicial managers. Thus, a judicial manager had standing to petition to wind up a company on just and equitable grounds under s 125(1)(i) of the IRDA: at [38] and [41].

(2) However, the judicial managers did not have the standing to make public interest arguments within the just and equitable ground. By virtue of s 125(1)(g) of the IRDA, it was the Minister considering the report of the inspector appointed under the Companies Act (Cap 50, 2006 Rev Ed) who had been identified by Singapore's Parliament to be the guardian of the public interest. Public interest considerations were manifold and laden with polycentric considerations, and a petitioner other than the Minister might not be the best filter for what would be in the best interest of the public. Reserving the role of the pursuer of public interest to a holder of a high office, subject to public scrutiny, ensured propriety and presumably reduced substantially the possibility of an inappropriate application being made. Consequently, the judicial manager (or other categories of petitioners apart from the Minister for that matter) would not have the standing to make a winding-up petition on public interest grounds: at [49], [50], [51] and [54].

(3) A company's substratum was the main object which it was formed to achieve, and the court had to determine the real object for which the company was formed. In the present case, HTLI's constitution was drafted to include as many objects as possible and construing those objects would not be helpful, and hence, the other circumstances had to be examined to determine its substratum. Examining the circumstances, it was clear that HTLI's substratum was to function as an investment holding company as it was itself not a revenue-generating entity and the business was carried out by the subsidiaries: at [60] and [62].

(4) The phrase “loss of substratum” was misleading as it was not merely the falling away of the substratum that rendered it just and equitable for the company to be wound up, but rather, it was the unfairness in locking in shareholders into a business that they did not agree to. Unfairness was present where shareholders were forced to diversify into a different business that they did not agree to as the commercial risk would change. The previous case law usually involved shareholders who were opposed to each other on whether the business of the company should continue despite the failure of the company's object. In contrast, the present case involved a sole shareholder that was willing to continue operating HTLI as a going concern and it was the judicial managers who petitioned for winding up on this ground. Thus, the loss of substratum ground had no application here where the sole shareholder voluntarily accepted taking on a different business as there would be no unfairness: at [63], [64] and [69].

(5) A company would not be wound up on the basis that a prominent purpose for the company was incapable of being achieved if other objects of the company were still capable of being achieved. While HTLI would no longer operate as an investment holding company after the Share Sale, there was a legitimate purpose for the company to continue operating as a going concern and a sealed affidavit was provided to the court which contained these details. Further, a solvent company was to be liquidated primarily in the members' interest. HTLI had been rehabilitated to solvency and the wishes of the shareholder to continue running the company should be given weight such that compulsory winding up was not appropriate. The risk of the Shareholders trying to unwind the Share Sale to Golden Hill was a separate matter which could be more appropriately addressed by other means. This background should not be conflated: at [72] to [74] and [77].

(6) To establish the suspension of business ground, the court would enquire whether the business had been abandoned in its entirety, either wilfully or simply due to the inability to carry on trading for other reasons. However, a winding-up petition on this ground would generally be dismissed if the majority of shareholders were opposed to winding up and the company's inactivity could be explained. While HTLI no longer carried on any investment holding activities there was an intention to carry on business in some form and its commercial plans had been submitted to the court. Further, the inactivity of HTLI could be explained on the basis that it had been put under judicial management in the past few years. There was no intention to abandon the business entirely and winding up on the suspension of business ground would not be appropriate: at [81] to [83].

(7) Instead of winding up, the real complaint in the present case was the need to protect the corporate restructuring by the judicial managers so that it was not nullified by the commencement of proceedings by the Shareholders in China to unwind the Share Sale. An extension of judicial management by six months was granted instead to allow the judicial manager to make the appropriate application to protect that rescue: at [91], [93], [96] and [100].

Case(s) referred to

Ah Yee Contractors (Pte) Ltd, Re [1987] SLR(R) 396; [1987] SLR 383 (refd)

Alpha Club (UK) Ltd, Re [2002] 2 BCLC 612 (refd)

Blériot Manufacturing Aircraft Co (Ltd), Re (1916) 32 TLR 253 (refd)

BNP Paribas v Jurong Shipyard Pte Ltd [2009] 2 SLR(R) 949; [2009] 2 SLR 949 (refd)

Chong Kok Ming v Richinn Technology Pte Ltd [2020] SGHC 224 (refd)

Chow Kwok Chuen v Chow Kwok Chi [2008] 4 SLR(R) 362; [2008] 4 SLR 362 (refd)

Chua Kien How v Goodwealth Trading Pte Ltd [1992] 1 SLR(R) 870; [1992] 2 SLR 296 (refd)

Company No 007923 of 1994, Re A [1995] 1 WLR 953 (refd)

Delco Participation BV v Green Elite Ltd BVI HCMAP 2017/0018 (refd)

Deputy Commissioner of Taxation (Cth) v Casualife Furniture International Pty Ltd [2004] VSC 157 (refd)

Foo Peow Yong Douglas v ERC Prime II Pte Ltd [2017] SGHC 299 (refd)

Foo Peow Yong Douglas v ERC Prime II Pte Ltd [2018] 2 SLR 1337, CA (refd)

Golden Chemical Products Ltd, Re [1976] Ch 300; [1976] 3 WLR 1 (refd)

Goodwealth Trading Pte Ltd, Re [1990] 2 SLR(R) 691; [1990] SLR 1239 (folld)

Highfield Commodities Ltd, Re [1985] 1 WLR 149 (refd)

HTL International Holdings Pte Ltd, Re [2021] 5 SLR 586 (refd)

Iniaga Building Supplies (S) Pte Ltd, Re [1994] 2 SLR(R) 416; [1994] 3 SLR 359 (refd)

JSSP Holdings Pty Ltd, Re [2021] VSC 33 (refd)

Lai Shit Har v Lau Yu Man [2008] 4 SLR(R) 348; [2008] 4 SLR 348 (refd)

Lau Yu Man v Wellmix Organics (International) Pte Ltd [2007] SGHC 96 (refd)

Lubin, Rosen and Associated Ltd, Re [1975] 1 WLR 122 (refd)

Ma Wai Fong Kathryn v Trillion Investment Pte Ltd [2019] 1 SLR 1046 (refd)

Madrid and Valencia Railway Co, Re (1850) 19 LJ Ch 260 (refd)

Metropolitan Railway Warehousing Co Ltd, Re (1867) 36 LJ Ch 827 (refd)

Middlesborough Assembly Rooms Co, Re (1880) 14 Ch D 104 (refd)

Millennium Advanced Technology Ltd, Re [2004] 1 WLR 2177 (refd)

O'Neill v Phillips [1999] 1 WLR 1092 (refd)

Perennial (Capitol) Pte Ltd v Capitol Investment Holdings Pte Ltd [2018] 1 SLR 763 (refd)

Perfectair Holdings Ltd, Re [1990] BCLC 423 (refd)

Petroships Investment Pte Ltd v Wealthplus Pte Ltd [2018] 3 SLR 687 (refd)

Phua Kiah Mai v The Kheng Chiu Tin Hou Kong and Burial Ground [2022] SGHC 36 (refd)

Seah Chee Wan v Connectus Group Pte Ltd [2019] SGHC 228 (refd)

Secretary of State for Trade and Industry v Bell Davies Trading Ltd [2005] 1 BCLC 516 (refd)

Sim Yong Kim v Evenstar Investments Pte Ltd [2006] 3 SLR(R) 827; [2006] 3 SLR 827 (refd)

Tomlin Patent Horse Shoe Co Ltd, Re (1886) 55 LT 314 (refd)

Yihua Lifestyle Technology Co, Ltd v HTL International Holdings Pte Ltd [2021] 2 SLR 1141 (refd)

Facts

HTL International Holdings Pte Ltd (under judicial management) (“HTLI”) was an investment holding company with no substantive business of its own, other than to hold shares in revenue-generating subsidiaries which formed the core of the business. The sole shareholder of HTLI was Ideal Homes International Ltd (“Ideal Homes”), which in turn, was the wholly-owned subsidiary of Yihua...