Ng Bok Eng Holdings Pte Ltd and Another v Wong Ser Wan

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 28 April 2005
• Neutral Citation: [2005] SGCA 23
• Date: 28 April 2005
• Subject Matter: Section 73B Conveyancing and Law of Property Act (Cap 61, 1994 Rev Ed),Remedies,Whether respondent deprived of opportunity to put before trial court all evidence relevant to new point raised by appellant,Whether court having power to grant account of rental and profits,Wife seeking to annul transfers of assets by husband on ground transfers amounting to fraudulent conveyances under s 73B Conveyancing and Law of Property Act,Husband-respondent defaulting on maintenance payments to wife-appellant after divorce,Whether leave required to raise new argument not raised at trial,Whether account of rental and profits just and necessary,Conveyance,Transfer of assets annulled on ground transfers amounting to fraudulent conveyances under s 73B Conveyancing and Law of Property Act,Appeals,Land,Account,Leave,Equity,Whether conveyance made with intent to defraud creditors,Whether appellant allowed to canvass new point on appeal,Whether wife entitled to pursue action as creditor,Civil Procedure
• Docket Number: Civil Appeal No 87 of 2004
• Published date: 29 April 2005
• Defendant Counsel: K Shanmugam SC, Ang Cheng Hock and Tan Xeauwei (Allen and Gledhill)
• Court: Court of Appeal (Singapore)
• Plaintiff Counsel: Leslie Chew SC, Chan Kia Pheng and Shaun Koh (Khattar Wong and Partners)

28 April 2005 Judgment reserved.

Chao Hick Tin JA (delivering the judgment of the court):

1 This action was instituted by the respondent, a wife who has obtained a decree nisi for divorce, to annul, pursuant to s 73B of the Conveyancing and Law of Property Act (Cap 61, 1994 Rev Ed) (“the CLPA”), the sale and transfer by the husband of a certain property at 764 Mountbatten Road (“the Mountbatten property”) and some 60,000 shares in a family company to two related companies owned by members of his family. These two companies are the appellants herein. In the court below, Judith Prakash J granted the relief prayed for, including an order for account of rental and profits (see [2004] 4 SLR 365). We heard the appeal on 21 and 24 February 2005 and reserved judgment.

The background

2 The respondent, Mdm Wong Ser Wan (“Mdm Wong”), married Mr Ng Cheong Ling (“Mr Ng”) in January 1976. Mr Ng is one of the sons of Mr Ng Bok Beng (“NBB”), the founder of Ng Bok Eng Holdings Pte Ltd (“NBEH”), the first appellant herein. NBEH was set up by NBB more than 30 years ago. At the time, the shareholders of NBEH were Mr Ng and his parents and siblings. Its directors were NBB, Mr Ng and his older brother, Ng Cheong Bian (“NCB”). By the time of the trial, Mr Ng no longer held any shares in NBEH, having on 26 September 1998 transferred his entire shareholding therein, which stood at 60,000, to the second appellant, Bian Bee Company Pte Ltd (“BBC”). The shareholders of BBC were NBB and NCB.

3 Mr Ng and Mdm Wong have three children. By the first half of the 1990s, their marriage was considerably strained. In 1995, Mdm Wong applied for a summons in the Subordinate Courts against Mr Ng claiming for maintenance for herself and the children. In March 1996, upon Mr Ng promising to give her a monthly allowance of $12,000, Mdm Wong withdrew the summons. However, Mr Ng failed to keep to his promise. As a result, Mdm Wong took out a fresh maintenance summons in July 1996 which was heard in August 1996 and, by consent, a monthly maintenance of $15,000 was ordered.

4 In October 1996, Mdm Wong filed a petition for divorce on the ground of Mr Ng’s unreasonable behaviour involving an improper association with a named woman. Mr Ng cross-petitioned for divorce on the ground of unreasonable behaviour on the part of Mdm Wong.

5 In 1997, attempts were made to save the marriage and/or to reach a settlement. By December 1997, an agreement was reached and signed between the parties on financial matters (“the Financial Agreement”) under which Mr Ng agreed to:

(a) give certain immovable properties to Mdm Wong, including a property in Singapore;

(b) pay Mdm Wong two sums, one for $2.5m and the other for US$320,000. The US$320,000 was to be paid within seven banking days of the Agreement and $500,000 of the $2.5m within three months thereafter. As for the remainder of the $2.5m, $1m was to be paid by November 1998 and the last $1m by November 1999;

(c) continue to pay the consent maintenance of $15,000 per month;

(d) transfer certain shares to Mdm Wong by 15 February 1998.

Both parties also agreed to withdraw the various divorce proceedings taken by them in court, with Mr Ng to pay Mdm Wong her legal costs.

6 However, Mr Ng failed to fulfil the promises he made in the Financial Agreement as they fell due. Instead, on 12 June 1998, Mr Ng entered into an agreement to sell the Mountbatten property (estimated to be worth $8m) to NBEH for US$2m and this transaction was completed on 27 June 1998. In the meantime, on 25 June 1998, Mr Ng entered into another agreement to sell his 60,000 NBEH shares to BBC for US$1m and this sale was completed in September 1998. Hereinafter, the Mountbatten property and the 60,000 NBEH shares will be referred to collectively as “the two assets”.

7 There was disagreement as to the value of the Mountbatten property, with Mr Ng’s valuer putting it at $5,420,000, with a forced sale value of $3,795,000. Mdm Wong’s valuer estimated it at $8.2m. However, Mr Ng’s valuer’s valuation could not be accepted by the trial judge because the valuer had made an error in categorising the Mountbatten property as a conservation property when it was not. Moreover, even on Mr Ng’s valuer’s assessment, the market price was $5,420,000, well in excess of the US$2m (equivalent to $3.5m) paid by NBEH. As regards the price of US$1m for the 60,000 NBEH shares, the judge found it difficult to determine whether that price was substantially less than the market price as NBEH is a private company.

8 On the evidence, it is clear that there are different methods of valuation, eg, the dividend payment method and the asset value method. However, none of these are exact. More importantly, at the time the transfers were agreed to and effected, neither Mr Ng nor the appellants had any regard to the real values of the two assets. All Mr Ng wanted was to make the transfers look good and real.

9 In the first half of 1999, following Mr Ng’s failure to fulfil his promises under the Financial Agreement, further negotiations between the parties took place through their solicitors, culminating in the execution of a deed of separation on 8 July 1999. The deed of separation affirmed Mr Ng’s obligations under the Financial Agreement. Accordingly, on 9 July 1999, Mdm Wong withdrew her divorce petition filed in 1996.

10 In September and October 1999, Mdm Wong, being anxious to ascertain what Mr Ng was up to, took steps to secretly record some of Mr Ng’s conversations with a number of people. From these conversations, it was clear that Mr Ng had planned to put his assets out of her reach. On 9 October 1999, Mdm Wong filed a fresh divorce petition and in March 2000 obtained a Mareva injunction to restrain Mr Ng from dissipating his assets. Mdm Wong obtained a decree nisi for divorce on 1 August 2002. The decree nisi has yet to be made absolute.

11 In the meantime in a separate action, in Suit No 1396 of 2001, Mdm Wong also commenced a derivative action on behalf of Aromate Pte Ltd (“Aromate”) against Mr Ng for his breach of fiduciary duty as a director of Aromate and obtained judgment against him for $3.8m and costs. On Aromate’s petition, a bankruptcy order was made against Mr Ng on 11 October 2002. More will be said about Aromate later.

The decision below

12 Section 73B of the CLPA reads as follows:

73B.—(1) Except as provided in this section, every conveyance of property, made whether before or after 12th November 1993, with intent to defraud creditors, shall be voidable, at the instance of any person thereby prejudiced.

(2) This section does not affect the law relating to bankruptcy for the time being in force.

(3) This section does not extend to any estate or interest in property disposed of for valuable consideration and in good faith or upon good consideration and in good faith to any person not having, at the time of the disposition, notice of the intent to defraud creditors.

13 Prakash J held at [5] of her judgment that for a person to establish his claim for relief under the section, he must prove the following ingredients:

(a) that there has been a conveyance of property;

(b) that the conveyance was made with the intent of defrauding creditors; and

(c) that he is a person who was prejudiced by the conveyance of the property.

14 However, the trial judge also said that the transferee of a property would be able to resist the relief claimed by the plaintiff under s 73B if he could establish that he:

(a) acquired the property for valuable consideration and in good faith or for good consideration and in good faith; and

(b) did not have notice of the debtor’s intent to defraud his creditors.

15 Prakash J next held that there was no evidence to substantiate Mr Ng’s assertion that the Mountbatten property was a gift to him from his father, NBB. She further held that by virtue of the terms of the Financial Agreement, Mdm Wong was a creditor of Mr Ng who had acted dishonestly when he effected the transfers of the Mountbatten property and the 60,000 NBEH shares to the appellants, the object of which was to reduce the matrimonial assets to which Mdm Wong would be entitled. The judge noted that while the appellants, NBEH and BBC, did pay for the assets transferred, namely, US$2m and US$1m for the property and the shares respectively, no attempts were made to determine their real values. As Mr Ng was the controlling mind of both the appellants, the latter were affixed with the knowledge of Mr Ng’s intention to defraud Mdm Wong. Accordingly, the judge held that the appellants did not obtain the two assets in good faith.

Meaning and scope of section 73B of the CLPA

16 In Quah Kay Tee v Ong & Co Pte Ltd [1997] 1 SLR 390 (“Quah Kay Tee”) at [8] and [9], this court stated that s 73B of the CLPA was derived from s 172 of the English Law of Property Act 1925 (c 20), which in turn was based substantially on the Statute of Elizabeth 1571 (c 5) (“the Elizabethan Statute”), an Act against fraudulent deeds, gifts, alienations, etc. The court in Quak Kay Tee stated at [26] that the one great object of the Elizabethan Statute was to “prevent debtors from dealing with their property in any way to the prejudice of their creditors”. If the transfer was without any, or with only nominal, consideration, there would be a presumption of an intent to defraud on the part of the transferor.

17 In the nature of things, unless there is an admission, proof of an intent to defraud on the part of the transferor will invariably have to be inferred from all the circumstances. The position will be the same with regard to the question as to whether or not the transferee of the assets who has given valuable or good consideration has received the assets in good faith, without notice of the intent to defraud creditors on the part of the transferor. We agree with what Prakash J said as to the elements that need to be proved to set aside a transaction or to bring a transaction outside the ambit of s 73B (see...