Neo Corp Pte Ltd (under judicial management) v Neocorp Innovations Pte Ltd and Another Application

JurisdictionSingapore
CourtHigh Court (Singapore)
JudgeAndrew Phang Boon Leong JC
Judgment Date08 September 2005
Neutral Citation[2005] SGHC 167
Citation[2005] SGHC 167
Plaintiff CounselEdmund Kronenburg and Leong Kit Wan (Tan Peng Chin LLC)
Subject MatterWhether right of action residing in judicial manager to challenge transaction on ground of unfair preference or undervalue continues to reside in liquidator once company wound up,Company under judicial management subsequently wound up,Sections 227T, 329 Companies Act (Cap 50, 1994 Rev Ed),Companies,Winding up
Defendant CounselChan Kia Pheng and Shaun Koh Kang Ming (Khattar Wong)
Date08 September 2005
Docket NumberOriginating Summons No 1535 of 2004 (Summons in Chambers No 1761 of 2005) and
Published date23 September 2005

8 September 2005

Andrew Phang Boon Leong JC:

Introduction

1 The present case raises questions with respect to the legal relationship between two different regimes under the Companies Act (Cap 50, 1994 Rev Ed), albeit in a quite specific context. The two regimes pertain to judicial management and winding up, respectively. The focal question that is raised is this: Does a right of action residing in a judicial manager to challenge a transaction under s 227T of the Companies Act whilst the company concerned is under a judicial management order continue to reside in a liquidator if the same company is subsequently wound up?

2 To set the present proceedings in their context, it is best to describe the various hearings as well as decisions concerned.

3 The company concerned had in fact been under judicial management, the order for judicial management being made on 5 May 2004. Whilst under the judicial management regime, the then judicial managers of the company had applied under s 227T of the Companies Act by way of Originating Summons No 1535 of 2004 (“OS 1535/2004”) (on 26 November 2004) to set aside a floating charge created by the company in favour of the creditor on 24 November 2003, who is in fact the applicant in the present proceedings. More specifically, the judicial managers alleged (pursuant to s 227T) that the floating charge was both a transaction at an undervalue as well as an unfair preference.

4 Subsequently, however, a petition was presented to wind up the company (pursuant to Companies Winding Up No 2 of 2005 (“CWU 2/2005”)). It is pertinent to note that the judicial managers had not, however, seen their application under s 227T brought to fruition.

5 The petition for winding up was granted. One of the orders in the winding-up order dated 18 February 2005 authorised the liquidators to continue the application that had been commenced by the judicial managers under s 227T. It is pertinent to note, however, that no issues relating to this order were either raised or argued before the learned judge who granted the petition, Tay Yong Kwang J. I shall return to the significance of this point later.

6 Pursuant to the order mentioned in the preceding paragraph, the liquidators of the company then continued with the original application under s 227T to set aside the said floating charge by way of OS 1535/2004.

7 The events briefly described above constitute the backdrop against which the present proceedings were initiated by the creditor in whose favour the floating charge was created. The creditor, it should be noted, was not a party to or represented in the earlier winding-up proceedings.

8 The creditor in fact brought two related proceedings that are the subject matter of the present appeal.

9 The first (Summons in Chambers No 1741 of 2005 (“SIC 1741/2005”)) was for a declaration that the liquidators of the company could not be authorised to continue its action under OS 1535/2004 (see [6] above) and that the order in the winding-up petition be set aside to the extent that it authorised the liquidators of the company to continue the action just mentioned.

10 The second (Originating Summons No 1761 of 2005 (“OS 1761/2005”)) followed from the first in as much as the creditor applied for OS 1535/2004 (see [6] above) to be struck out.

11 I held in favour of the creditor in both the abovementioned proceedings. In effect, therefore, I had answered the key question set out at the outset of this judgment (in [1] above, in fact) in the negative. The company was dissatisfied with my decision and has appealed against it. I now deliver the detailed grounds for my decision.

The procedural objections

12 However, before proceeding further, I pause to consider the procedural objections raised by counsel for the company to both the applications by the creditor.

13 One objection was that both applications by the creditor did not state any grounds or basis and that, on this basis alone, the applications ought to be dismissed. Counsel for the company did not, however, pursue this point vigorously and, in my view, rightly so. Looking at both applications, it appeared to me that the grounds stated therein were clear, although counsel for the creditor would have to elaborate upon those grounds at the actual hearing before me – which is what they did.

14 Another objection raised by counsel for the company, particularly in so far as SIC 1741/2005 was concerned, was that the one particular order (authorising the liquidators to continue the application commenced by the judicial managers under s 227T (see [3] above)) could not be “attacked on its own” and that the entire order to wind up the company had to be looked at “as a whole”. Once again, counsel for the company did not pursue this particular objection vigorously. Be that as it may, in so far as this particular objection is concerned, a vital point ought to be noted at the outset. And it is this: The issues concerned are by no means easy ones and do require consideration. This will become amply clear in the paragraphs that follow.

15 Another no less vital point follows from this, although this was (again) not canvassed as such by counsel for the company. The various difficulties were, most unfortunately, not drawn to Tay J’s attention during the presentation of the petition for the winding up of the company. Indeed, the issues themselves had not been raised at all. They concerned, in fact, very specific issues which (in turn) raised, as we shall see, a not uncontroversial point of law that directly concerned the creditor in the present proceedings. As (if not more) importantly, the creditor itself was not a party to the winding-up proceedings (see also [7] above) and there was no evidence before me to show that the application to preserve the action was served on it. There is therefore no issue of res judicata. To all intents and purposes, the winding-up proceedings constituted a routine application by the then judicial managers (and, as a result of the petition, liquidators). Not surprisingly, the issues raised in the present proceedings had slipped under the proverbial “radar screen”, not least because they had not been “launched” in the first instance. Hence, Tay J did not in fact have the opportunity to consider the issues in the first place. This bears not only repeating but, in my view, ought to be underscored. The correct question, in my view, is whether or not Tay J would have granted the order in question had he been addressed by the relevant parties on the salient legal issues that were proffered in the instant proceedings that were commenced precisely for the purpose of raising what are difficult and significant legal issues. And it is to those issues that my attention must now turn as it is my duty to declare what the law is in so far as these issues are concerned. It bears repeating that what is raised, in the present proceedings, by the creditor’s/applicant’s attack on the specific order concerned is a discrete point of law that was not canvassed by the relevant parties in the actual proceedings to wind up the company and which it would be in the interest of justice to rule on in this particular case.

16 In the circumstances, I did not find any merit in the procedural objections raised by counsel for the company. I therefore proceed to consider the substantive issues raised by the parties. These centre, in the main, on two specific provisions of the Companies Act and it would therefore be apposite to set out the text of those provisions first.

The relevant statutory provisions

17 The relevant statutory provisions with respect to judicial management and winding up, respectively, give us more than a clue as to why the appellant is so concerned with the precise legal issue in these proceedings. The provisions themselves are, respectively, ss 227T and 329 of the Companies Act.

18 Section 227T, which as alluded to above deals with the right of the judicial manager to challenge a charge given to a creditor as an unfair preference, reads as follows:

(1) Subject to this Act and such modifications as may be prescribed, a settlement, a conveyance or transfer of property, a charge on property, a payment made or an obligation incurred by a company which if it had been made or incurred by a natural person would in the event of his becoming a bankrupt be void as against the Official Assignee under section 98, 99 or 103 of the Bankruptcy Act 1995 (read with sections 100, 101 and 102 thereof) shall, in the event of the company being placed under judicial management, be void as against the judicial manager.

(2) For the purposes of subsection (1), the date that corresponds with the date of the petition in bankruptcy in the case of a natural person and the date on which a person is adjudged bankrupt is the date on which a petition for a judicial management order is made.

19 On the other hand, s 329 deals with the same legal right of challenge in the liquidator in the context of winding up. Not surprisingly, the rationale and even language utilised in s 329 is very similar to that to be found in s 227T, and reads as follows:

(1) Subject to this Act and such modifications as may be prescribed, any transfer, mortgage, delivery of goods, payment, execution or other act relating to property made or done by or against a company which, had it been made or done by or against an individual, would in his bankruptcy be void or voidable under section 98, 99 or 103 of the Bankruptcy Act 1995 (read with sections 100, 101 and 102 thereof) shall in the event of the company being wound up be void or voidable in like manner.

(2) For the purposes of this section, the date which corresponds with the date of presentation of the bankruptcy petition in the case of an individual shall be —

(a) in the case of a winding up by the Court —

(i) the date of the presentation of the petition; or

(ii) where before the presentation of the petition a resolution has been passed by the company for voluntary...

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6 cases
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    ...powers under that provision (see Neo Corp Pte Ltd (under judicial management) v Neocorp Innovations Pte Ltd and another application [2005] 4 SLR(R) 681). On this basis, the order authorising the liquidators to continue with the action commenced by the judicial managers was set aside. Before......
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    ...EWPCC 17 (refd) Microsoft Corp v PC Club Australia Pty Ltd (2006) 67 IPR 262 (refd) Neo Corp Pte Ltd v Neocorp Innovations Pte Ltd [2005] 4 SLR(R) 681; [2005] 4 SLR 681, HC (folld) Neo Corp Pte Ltd v Neocorp Innovations Pte Ltd [2006] 2 SLR(R) 717; [2006] 2 SLR 717, CA (refd) Odex Pte Ltd v......
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2 books & journal articles
  • Insolvency Law
    • Singapore
    • Singapore Academy of Law Annual Review Nbr. 2005, December 2005
    • 1 December 2005
    ...pasu principle and the importation of liquidation provisions in judicial management) and Neo Corp Pte Ltd v Neocorp Innovations Pte Ltd[2005] 4 SLR 681 (the right of liquidators to continue with an unfair preference action commenced by judicial managers). Liquidation Bona fide dispute or co......
  • Insolvency Law
    • Singapore
    • Singapore Academy of Law Annual Review Nbr. 2006, December 2006
    • 1 December 2006
    ...Court of Appeal affirmed the decision of Andrew Phang Boon Leong JC (as he then was) in Neo Corp Pte Ltd v Neocorp Innovations Pte Ltd[2005] 4 SLR 681 (see (2005) 6 SAL Ann Rev 279 at paras 14.97—14.109). It may be recalled that the appellant company, while under judicial management, had co......

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