Media Development Authority of Singapore v Sculptor Finance (MD) Ireland Ltd

JurisdictionSingapore
CourtCourt of Three Judges (Singapore)
Judgment Date07 November 2013
Docket NumberCivil Appeal No 139 of 2012
Date07 November 2013

Court of Appeal

Sundaresh Menon CJ

,

V K Rajah JA

,

Judith Prakash J

Civil Appeal No 139 of 2012

Media Development Authority of Singapore
Plaintiff
and
Sculptor Finance (MD) Ireland Ltd
Defendant

Kenneth Lim Tao Chung, Goh Zhuo Neng and Cai Chengying (Allen & Gledhill LLP) for the appellant

Blossom Hing, Mohan Gopalan and Joanne He (Drew & Napier LLC) for therespondent.

Anglo-Oriental Carpet Manufacturing Co, Re [1903] 1 Ch 914 (refd)

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Commissioner of Taxation of the Commonwealth of Australia v Linter Textiles Australia Ltd (2005) 220 CLR 592 (refd)

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Ng Wei Teck Michael v Oversea-Chinese Banking Corp Ltd [1998] 1 SLR (R) 778; [1998] 2 SLR 1, CA (not folld)

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Telomatic Ltd, Re [1994] 1 BCLC 90 (folld)

Companies Act (Cap 50, 2006 Rev Ed) ss 131 (1) , 137 (consd) ;ss 272, 131 (3) , 132, 255, 291 (6)

Media Development Authority of Singapore Act (Cap 172, 2003 Rev Ed)

Companies Act 1900 (c 48) (UK) s 14 (1)

Companies Act 1985 (c 6) (UK) s 395

Credit and Security—Charges—Court's discretion to extend time for registration of charges—Whether court should refuse application to extend time for registration of charge where winding-up application had been filed against chargor—Section 137 Companies Act (Cap 50, 2006 Rev Ed)

Credit and Security—Charges—Non-registration of charges—Chargee applying for extension of time to register charges—Unsecured creditor filed winding-up application against chargor—Unsecured creditor opposing application to extend time for registration—Whether unsecured creditor had standing to oppose application for extension of time on ground that unregistered charges were void against it—Section 131 (1) Companies Act (Cap 50, 2006 Rev Ed)

RSM Group Pte Ltd (‘RGPL’) and RGM Media Singapore Pte Ltd (‘RMSPL’) were companies incorporated in Singapore. RMSPL was wholly owned by RGPL. RGPL was in turn wholly owned by One North Entertainment Limited (‘ONEL’), a company that used to be listed on the Australian Securities Exchange. The respondent (‘the Applicant’) and two other related investment funds (collectively, ‘the Sculptor Entities’) subscribed for bonds in ONEL, and RGPL and RMSPL granted charges (‘the Charges’) in the form of fixed and floating charges over the chargors' assets to the Applicant to secure the moneys owing to the Sculptor Entities. The Charges had to be registered by 2 September 2011 pursuant to s 131 (1) of the Companies Act (Cap 50, 2006 Rev Ed) (‘the Act’) but were not. The Applicant claimed that it did not have advice on Singapore law at that time and was not aware of the need for registration. It was only in May 2012 when it appointed solicitors in Singapore that the Applicant discovered that registration was required and that RGPL and RMSPL had not procured such registration. The Applicant then found out that the appellant (‘MDA’) had taken proceedings against RGPL and that ONEL had filed a judicial management application (‘the JM Application’) in respect of RGPL based on an unsatisfied statutory demand.

On 26 July 2012, the Applicant applied for an extension of time to register the Charges (‘the Application’). The Application was opposed by MDA. On 28 September 2012, the High Court granted ONEL leave to withdraw the JM Application. On the same day, MDA filed a winding-up application (‘the CWU’) against RGPL. On 5 October 2012, the Application was granted subject to two provisos, viz, (a) in the event that either RGPL or RMSPL was wound up subsequently, its liquidator would be at liberty to apply to set aside the court's orders within 12 weeks of his appointment or such extended period as the court may order and (b) the extension of time would be without prejudice to the rights of any person claiming any interest in the property charged pursuant to any of the Charges if such interest had been acquired before the time of registration of the relevant Charge (‘Preservation of Rights Proviso’). The court was satisfied that the Applicant's omission to register the Charges was due to inadvertence. It was also held, that it would be just and equitable to grant the Applicant relief. Although there was a real possibility that RGPL would be wound up, winding up was not inevitable or necessarily imminent, and the court held that the fact that liquidation was imminent did not preclude the granting of the Application.

The Charges were registered on 16 October 2012. On 23 October 2012, RGPL was ordered to be placed in liquidation.

On appeal, MDA argued that the High Court judge (‘the Judge’) erred in finding that the ground of inadvertence and/or the ‘just and equitable’ ground were satisfied. MDA also submitted that the Judge had made an inherently unworkable order because, on the presentation of the CWU, the unsecured creditors acquired rights pursuant to the imposition of a statutory trust, and the Charges were thus void against them. MDA maintained that it was a creditor of both RGPL and RSMPL and therefore entitled to oppose the application.

Held, dismissing the appeal:

(1) The power to grant an extension of time for the registration of charges was a discretionary one. The appellate court would interfere with the decision of the lower court only if it was shown that the exercise of discretion was based on a misunderstanding of the law or the evidence or based on a wrong principle: at [33] .

(2) Section 131 (1) of the Act invalidated an unregistered charge as against the liquidator and any creditor of the company. ‘Creditor’ in s 131 (1) meant a creditor who had acquired a proprietary right to or an interest in the subject matter of the unregistered charge. Prior to the onset of liquidation, a chargor could not object to the enforcement of an unregistered charge. Nor could the unsecured creditors complain because they had no proprietary interest in the company's assets: at [39] and [40] .

(3) It was only upon the making of the winding-up order (in a compulsory winding up) that the assets of the company were impressed with a statutory trust for the purpose of discharging the company's liabilities. In so far as Ng Wei Teck Michael v Oversea-Chinese Banking Corp Ltd[1998] 1 SLR (R) 778 stood for the proposition that a statutory trust was impressed on the assets of the company on the presentation of a winding-up application, this was incorrect: at [43] .

(4) An unsecured creditor could not claim the standing to avoid an unregistered charge by virtue of the statutory trust. The statutory trust did not confer beneficial or proprietary interests on the unsecured creditors on a winding-up application being made. MDA's argument that it acquired an interest in RGPL's assets which was protected by the Preservation of Rights proviso on the presentation of the CWU, and that the Judge made an inherently unworkable order was rejected. The Preservation of Rights Proviso did not protect an unsecured creditor in MDA's position at the time the CWU was presented: at [51] and [53] .

(5) The proper plaintiff to bring proceedings to avoid a charge for non-registration was the liquidator: at [54] .

(6) There was a division of judicial opinion as to whether the court should allow an application for an extension of time where winding up is imminent. Whichever approach was preferred by the court, what was clear was that the court's decision was a matter of discretion and not of law. The Judge took into account factors that he ought to take into account and by his order, struck a balance in protecting the interests of the Applicant, as well as the general body of creditors. There was no reason to interfere with his decision: at [58] and [59] .

Judith Prakash J

(delivering the grounds of decision of the court):

Introduction

1 This appeal was brought by Media Development Authority of Singapore (‘MDA’) against the decision of the High Court judge (‘the Judge’) in Originating Summons No 713 of 2012 (‘the Application’) to grant an extension of time to Sculptor Finance (MD) Ireland Ltd (‘the Applicant’) to register two charges under the Companies Act (Cap 50, 2006 Rev Ed) (‘the Act’). The Judge's decision is reported as Sculptor Finance (MD) Ireland Ltd v Media Development Authority of Singapore[2013] 2 SLR 311 (‘the GD’).

2 The said charges (‘the Charges’) had been granted to the Applicant by RSM Group Pte Ltd (‘RGPL’) and RGM Media Singapore Pte Ltd (‘RMSPL’) over their respective assets.

3 On 5 October 2012, the Judge allowed the Application. It is significant that the grant of extension of time was made subject to two provisos:

(a) First, in the event that either RGPL or RMSPL was wound up...

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