Ng Wei Teck Michael and Another v Oversea-Chinese Banking Corporation Ltd

• Jurisdiction: Singapore
• Judgment Date: 26 March 1998
• Date: 26 March 1998
• Docket Number: Civil Appeal No 141 of 1997
• Court: Court of Appeal (Singapore)

Ng Wei Teck Michael and others

Plaintiff

and

Oversea-Chinese Banking Corp Ltd

Defendant

[1998] SGCA 21

M Karthigesu JA

,

L P Thean JA

and

Chao Hick Tin J

Civil Appeal No 141 of 1997

Court of Appeal

Companies–Winding up–Non-registration of equitable mortgage–Bank enforced equitable mortgage by selling property–Winding-up order against company–Liquidator and unsecured creditor sought declaration against bank that mortgage void–Whether equitable mortgage void for want of registration–Section 131 Companies Act (Cap 50, 1994 Rev Ed)

In consideration for an extension of time to repay sums owing, a company deposited with the respondent bank the title deeds relating to the company's property and created an equitable mortgage in favour of the bank. The bank did not register the equitable mortgage with the Registry of Companies under s 131 of the Companies Act (Cap 50, 1994 Rev Ed). Soon thereafter, the bank took proceedings to enforce the equitable mortgage and obtained an order of court empowering the bank to sell the property. On 6 May 1994, the second appellants presented a winding-up petition against the company. The bank proceeded with the sale of the property and completed the sale on 13 April 1995. The winding-up order was made against the company on 5 May 1995 and the first appellants were appointed liquidators of the company. The first appellants as liquidators and the second appellants as unsecured creditors of the company commenced proceedings against the bank for, among other things, a declaration that the equitable mortgage was void for want of registration under s 131 of the Companies Act and an order that the bank pay over to the first appellants the proceeds of sale of the property.

The judge below held that s 131 (1) of the Companies Act did not come into operation until the first appellants were appointed liquidators by which time the equitable mortgage had been realised so that there was nothing for s 131 (1) to bite on. The judge also held that the second appellants, being only unsecured creditors, had no property right to or interest in the property and therefore did not qualify as a creditor for the purposes of s 131 (1) and had no locus standi in the proceedings. The appellants' application was accordingly dismissed and they appealed.

Held, allowing the appeal:

(1) Section 131 (1) of the Companies Act did not come into operation in favour of a liquidator as from the date of presentation of the winding-up petition. As against the liquidator it came into operation upon the appointment of the liquidator. As at that date, the equitable mortgage had been realised and thus was spent and s 131 (1) could not operate in their favour as there was nothing for it to bite on: at [19].

(2) On the presentation of a winding-up petition, a statutory scheme came into place to preserve the assets of the company for pari passu distribution among the unsecured creditors and the unsecured creditors were in the nature of a cestui que trust with beneficial interests extending to all the company's property, including the subject matter of the unregistered charge. An unsecured creditor thereupon acquired sufficient interest in the subject matter of the unregistered charge so as to qualify as a “creditor” for the purposes of s 131 (1): at [31].

(3) Section 131 (1) came into operation in favour of the second appellants as against unsecured creditors on the presentation of the winding-up petition. The equitable mortgage was void against the second appellants as from that date. The subsequent sale of the property by the bank was also void: at [37].

(4) When the property was sold, it was therefore a property belonging to the company at common law and free from the equitable mortgage. The company, through the second appellants, was perfectly entitled to trace the property into its product, that is, the proceeds of sale, and recover the proceeds from the bank: at [38].

Anglo-Oriental Carpet Manufacturing Company,In re [1903] 1 Ch 914 (refd)

Ashpurton Estates Ltd, In re [1983] Ch 110 (folld)

Ayala Holdings Ltd, Re [1993] BCLC 256 (distd)

City Securities Pte, Re [1990] 1 SLR (R) 413; [1990] SLR 468 (refd)

Dresdner Bank AG v Ho Mun-Tuke Don [1992] 3 SLR (R) 307; [1993] 1 SLR 114 (distd)

Ehrmann Brothers, Limited, In Re [1906] 2 Ch 697 (folld)

Energy & Resource Conservation Co Ltd (in liquidation) v Abigroup Contractors Pty Ltd (1997) 22 ACSR 721 (folld)

J & D Contracting Pty Ltd, Re [1970] QLR 101 (folld)

Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 (folld)

Molton Finance Ltd, In re [1968] Ch 325 (folld)

NV Slavenburg's Bank v Intercontinental Natural Resources Ltd [1980] 1 WLR 1076; [1980] 1 All ER 955 (distd)

R v Registrar of Companies, ex parte Central Bank of India [1986] QB 1114 (folld)

Resinoid & Mica Products Ltd, In re [1983] Ch 132 (refd)

Row Dal Constructions Pty Ltd (in liquidation), Re [1966] VR 249 (folld)

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

Wallis & Simmonds (Builders) Ltd, In re [1974] 1 WLR 391 (folld)

Companies Act (Cap 50,1994 Rev Ed)s 131 (consd);ss 255,258, 259, 260,330, 331 (1),331 (2), 332,334

Leslie Chew and Lionel Tay (Khattar Wong & Partners) for the appellants

K Shanmugam and Maria Ho (Allen & Gledhill) for the respondents.

Judgment reserved.

L P Thean JA

(delivering the judgment of the court):

1 This is an appeal against the decision of the High Court dismissing the appellants' application for a declaration that the equitable mortgage created on 11 November 1993 by Thye Nam Loong (S) Pte Ltd (“the company”) on its property known as 16 Carpenter Street in favour of the respondents was void against the first appellants qua liquidators and the second appellants qua creditors of the company under s 131 of the Companies Act (Cap 50, 1994 Ed) and for an order that the respondents pay over to the first appellants the proceeds of sale of the property. [See Ng Wei Teck Michael v Oversea-Chinese Banking Corp Ltd [1997] 2 SLR (R) 374.]

Facts

2 The relevant facts that gave rise to the appeal are not in dispute and are as follows. The respondents are bankers and provided the company with overdraft and trust receipt facilities. As of 2 August 1993, the company owed the respondents the sums of S$16,682.69 and US$4,057,580.80 in respect of the overdraft and trust receipt facilities respectively. By a letter dated 2 August 1993 the respondents terminated these facilities and demanded payment of the sums owing plus interest within 14 days. The demand was not complied with.

3 On 17 August 1993, in consideration for an extension of time to repay the sums owing, the company agreed to deposit with the respondents the title deeds relating to their property, 16, Carpenter Street, Singapore (“the property”), with the intention of creating a mortgage thereon. In accordance with such agreement the title deeds relating to the property were duly deposited with the respondents on 11 November 1993, thereby creating an equitable mortgage thereon in favour of the respondents (“the equitable mortgage”). However, the respondents did not register the equitable mortgage with the Registry of Companies under s 131 of the Companies Act (Cap 50, 1994 Ed). On 25 March 1994, the respondents lodged a caveat in the Registry of Titles under the Land Titles Act claiming an interest in the property as an equitable mortgagee. Soon thereafter, the respondents took proceedings to enforce the equitable mortgage, and on 25 April 1994 obtained an order of court empowering the respondents as the mortgagees to sell the property with vacant possession. A copy of the order was served on the company on 6 May 1994.

4 On the same day, the second appellants presented a winding-up petition against the company, and following the filing of the petition, the abovenamed Michael Ng Wei Teck and Bobby Chin Yoke Choon were appointed receivers and managers over the assets of the company. The receivers and managers discovered that the equitable mortgage had not been registered under s 131 (1) of the Companies Act, and accordingly on 1 June 1994 their solicitors wrote to the solicitors for the respondents in the following terms:

We note that you act for OCBC who claim to be the equitable mortgagees of the above property owned by the company. We now understand that your clients have purported to exercise their rights as equitable mortgagees to sell the property and the auction sale of the property is scheduled to take place today at 2:30pm.

On behalf of our clients, we hereby put your clients on notice that both our clients take the position that the equitable mortgage upon which your clients purport to exercise their rights to sell the property is void for want of registration against creditors of the company pursuant to s 131 of the Companies Act.

The respondents nevertheless proceeded with the sale of the property to one Ng Gim Bee on 4 October 1994 for $1,975,000. The sale was completed and the transfer of the property was duly registered with the Registry of Titles on 13 April 1995.

5 For some reasons, which are not apparent, the winding-up proceedings remained pending for sometime, and it was only on 5 May 1995 that a winding-up order was made against the company and the first appellants were appointed liquidators of the company. On 7 January 1997, the first appellants as liquidators and the second appellants as unsecured creditors of the company commenced proceedings against the respondents for, among other things, a declaration that the equitable mortgage over the property was void for want of registration under s 131 of the Companies Act and an order that the respondents pay over to the first appellants the proceeds of sale of the property.

Decision below

6 The learned judge held that for s 131 (1) to apply, there must be a charge conferring a security interest over the company's assets, such a charge must not have been registered and there...