Hin Leong Trading (Pte) Ltd v Rajah & Tann Singapore LLP

• Judge: Sundaresh Menon CJ,Andrew Phang Boon Leong JCA,Judith Prakash JCA,Belinda Ang Saw Ean JAD,Chao Hick Tin SJ
• Judgment Date: 04 April 2022
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeals Nos 202 and 203 of 2020

Hin Leong Trading (Pte) Ltd (in liquidation)

and

Rajah & Tann Singapore LLP and another appeal

[2022] SGCA 28

Sundaresh Menon CJ, Andrew Phang Boon Leong JCA, Judith Prakash JCA, Belinda Ang Saw Ean JAD and Chao Hick Tin SJ

Civil Appeals Nos 202 and 203 of 2020

Court of Appeal

Companies — Directors — Powers — Directors causing commencement of injunction applications in name of companies after said companies placed under interim judicial management — Whether directors possessed residual powers of management to commence applications on behalf of companies — Sections 157A, 227B and 227G Companies Act (Cap 50, 2006 Rev Ed)

Held, dismissing the appeal:

(1) Striking out was clearly warranted where there was an absence of legal standing owing to a lack of authority, because such proceedings ought not, and indeed could not validly have been brought at all. The sole point of contention was therefore whether the Lims were legally entitled to commence the Injunction Applications in the names of the appellants. This in turn entailed ascertaining the exact scope of a director's powers, residual or otherwise, upon the appointment of insolvency officeholders such as IJMs, JMs and liquidators: at [15].

(2) The court orders appointing the IJMs over the appellants were phrased in similar terms and conferred upon the IJMs the general powers and entitlements of a JM under the Companies Act (Cap 50, 2006 Rev Ed) (the “Act”). The latter in turn included the exclusive power to bring or defend any action or other legal proceedings in the name and on behalf of the appellants, pursuant to ss 227G(2)–227G(4) read with the Eleventh Schedule of the Act. The contention by the Lims that they had power as directors of the appellants to commence and maintain the Injunction Applications, notwithstanding the lack of any sanction by the IJMs or the JMs, was a non-starter as long as the appellants were under judicial management. The position was also similar in the context of an order placing a company in liquidation and the consequent appointment of liquidators: at [19] to [26].

(3) The Lims's argument that residual powers continued to be vested in them as directors of the appellants, which allowed them to procure the commencement of the Injunction Applications, was rejected. The English and Malaysian authorities pointed to by the appellants merely stood for the proposition that following the making of an order appointing an IJM, JM, provisional liquidator or liquidator, the directors only retained such “residual powers” which the insolvency office-bearer did not or could not assume under the applicable legislation or order of court. Furthermore, such residual powers as the directors might have to challenge a judicial management order should only be available when the original application had been made by a creditor. Bearing in mind that a judicial management order could only be made at the instance of the company itself acting in accordance with the resolutions of the board or the shareholders or upon the application of a creditor, it would be incongruous to allow the directors power to challenge their own actions or those of the shareholders: at [55] and [56].

(4) The cases established that upon a court order placing a company under judicial management or liquidation, with insolvency representatives being appointed concomitantly over the company, a company's directors retained residual powers in the limited situation where a company sought to appeal against or otherwise challenge the very order appointing the JMs or liquidators, and had to therefore act through its directors. This residual power was necessarily of a narrow scope, to be invoked in very specific situations. The present case did not come within this exception: the Injunction Applications did not challenge the juridical basis of the IJMs', JMs' and liquidators' powers. The Injunction Applications were accordingly correctly struck out: at [62] to [64].

(5) It would be just for the Lims to bear the costs of the appeals personally. The Injunction Applications ought not to have been brought in the names of the appellants in the first place. The Lims had a close connection to the Injunction Applications and the appeals, and there was a direct nexus between their commencement of the Injunction Applications in the names of the appellants and the incurring of costs by the respondent, which had to resist the applications: at [65] to [69].

Case(s) referred to

Andronics Communications Ltd v AIB Group (UK) [2020] NIQB 64 (refd)

Ayerst v C & K (Constructions) Ltd [1976] AC 167 (refd)

Brinds Ltd v Offshore Oil NL (No 2) [1985] 10 ACLR 242 (refd)

Chee Siok Chin v Minister for Home Affairs [2006] 1 SLR(R) 582; [2006] 1 SLR 582 (refd)

Closegate Hotel Development (Durham) Ltd v Mclean [2014] Bus LR 405 (refd)

Company, Re A [1987] 3 BCC 124 (refd)

DB Trustees (Hong Kong) Ltd v Consult Asia Pte Ltd [2010] 3 SLR 542 (refd)

Gabriel Peter & Partners v Wee Chong Jin [1997] 3 SLR(R) 649; [1998] 1 SLR 374 (refd)

Genesis Technologies International (S) Pte Ltd, Re [1994] 2 SLR(R) 298; [1994] 3 SLR 390 (refd)

IM Skaugen SE, Re [2019] 3 SLR 979 (refd)

KS Energy Ltd, Re [2020] 5 SLR 1435 (refd)

Lehman Bros Europe Ltd (No 9), Re [2018] Bus LR 439 (refd)

Lim Oon Kuin v Rajah & Tann Singapore LLP [2022] SGCA 29 (refd)

Newhart Developments Ltd v Co-operative Commercial Bank Ltd [1978] QB 814 (refd)

O'Connell Manthe & Partners v Vryheid Minerale (Edms) Bpk 1979 (1) SA 553 (T) (refd)

Oriental Inland Steam Co, Re; Ex parte Scinde Railway Co (1874) 9 Ch App 557 (refd)

Pacific Andes Resources Development Ltd, Re [2018] 5 SLR 125 (refd)

Petroships Investment Pte Ltd v Wealthplus Pte Ltd [2016] 2 SLR 1022 (refd)

Shanks v Central Regional Council [1987] SLT 410 (refd)

SIC College of Business and Technology Pte Ltd v Yeo Poh Siah [2016] 2 SLR 118 (refd)

Sri Hartamas Development Sdn Bhd v MBF Finance Bhd [1991] 3 MLJ 325 (refd)

Stephen, Petitioner [2012] BCC 537 (refd)

Sun Electric Power Pte Ltd v RCMA Asia Pte Ltd [2021] 2 SLR 478 (refd)

Swedex Windows & Doors Ltd, Re [2010] IEHC 237 (refd)

Taman Sungai Dua Development Sdn Bhd v Goh Boon Kim [1997] 2 MLJ 526 (refd)

Tan Sri Dato' Hj Lamin bin Hj Mohd Yunus v Bursa Malaysia Securities Bhd [2012] 7 MLJ 85 (refd)

Union Accident Insurance Co Ltd, Re [1972] 1 WLR 640 (refd)

United Investment and Finance Ltd v Tee Chin Yong [1965–1967] SLR(R) 349; [1965–1968] SLR 494 (refd)

Facts

The first and second appellants were placed under interim judicial management on 27 April and 12 May 2020 respectively, with interim judicial managers (“IJMs”) appointed over the companies. After their appointment, the IJMs of both appellants retained the legal services of the respondent law firm. At the material time, Mr Lim Chee Meng and Ms Lim Huey Ching (collectively, the “Lims”) were directors of the appellants. In July 2020, the Lims caused the commencement of applications to injunct (the “Injunction Applications”) the respondent from advising and acting for the appellants in applications for judicial management orders made by the latter, as well as the IJMs and judicial managers (“JMs”) of the appellants if they were appointed. Despite the appointment of the IJMs over the appellants, the Lims did not seek their approval in relation to the filing of the Injunction Applications, or the consent of the JMs to proceed with them following the subsequent court orders placing the appellants under judicial management. The respondent filed applications (the “Striking-Out Applications”) on 5 October 2020, seeking to strike out the Injunction Applications in their entirety. The Lims and their father, Mr Lim Oon Kuin, responded by commencing applications to join themselves (the “Joinder Applications”) as parties to the Injunction Applications in their personal capacities. The first and second appellants were subsequently placed in compulsory liquidation on 8 March and 16 August 2021 respectively, with the JMs appointed as the liquidators.

The judge (“Judge”) heard the Joinder Applications and the Striking-Out Applications together. He dismissed the former but allowed the latter. In respect of the latter, he considered that neither of the Lims possessed managerial powers qua directors to commence the Injunction Applications in the names of the appellants. They consequently had no standing and the Injunction Applications were taken out without due authority. In making this finding, the Judge rejected the Lims's argument that notwithstanding the appellants having been placed under interim judicial management, the Lims continued to possess residual powers of management as directors under common law that empowered them to commence the Injunction Applications in the names of the appellants. The appellants appealed against the Judge's decision.

Legislation referred to

Companies Act (Cap 50, 2006 Rev Ed) ss 157A, 227B(10)(b), 227G(2), 227G(3), 227G(4), Eleventh Schedule (consd); ss 227B(3)(c), 227B(5)(b)

Insolvency, Restructuring and Dissolution Act 2018 (Act 40 of 2018) ss 92, 92(1), 92(4)

Rules of Court (2014 Rev Ed) O 18 r 19(1)(a), O 18 r 19(1)(b), O 18 r 19(1)(d), O 59 r 2(2), O 92 r 4

Insolvency Act 1986 (c 45) (UK) Schedule B1 para 64

Christopher Anand s/o Daniel, Harjean Kaur, Yeo Yi Ling EileenandKeith Valentine Lee Jia Jin(Advocatus Law LLP) for the appellant in CA 202/2020;

Ong Ziying Clement, Suresh s/o Damodara, Chua Jun Yi Leonard, Ning JieandLim Dao Yuan Keith (Damodara Ong LLC) for the appellant in CA 203/2020;

Toby Thomas Landau QC (instructed) and Liew Wey-Ren Colin (Colin Liew LLC) for the respondent in CA 202/2020 and CA 203/2020.

4 April 2022

Judgment reserved.

Judith Prakash JCA (delivering the judgment of the court):

Introduction

1 The directors of a company instruct a law firm to act on the company's behalf. Consequently, the law...