Quah Kay Tee v Ong & Co Pte Ltd

• Jurisdiction: Singapore
• Judge: Chao Hick Tin J
• Judgment Date: 12 November 1996
• Neutral Citation: [1996] SGCA 70
• Docket Number: Civil Appeal No 135 of 1995
• Date: 12 November 1996
• Published date: 19 September 2003
• Year: 1996
• Plaintiff Counsel: Samuel Chacko and Manjit Singh (Manjit Samuel and Partners)
• Citation: [1996] SGCA 70
• Defendant Counsel: Woo Bih Li and Ng Hweelon (Bih Li and Lee)
• Court: Court of Appeal (Singapore)
• Subject Matter: Insolvency Law,Voluntary transfer of shares,Shares,Requirement of 'predominant purpose' in conspiracy by lawful means,Whether share transaction avoided,Conspiracy,Administration of insolvent estates,Constructive fraud,Whether tort established on the facts,Lawful means and unlawful means,Donor deeply indebted at time of transfer,Tort,c 5 Statute of 13 Elizabethan (1571)

The facts

In this appeal the validity of the transfer of shares in a private company was in question. The salient facts leading to this appeal were as follows.

(a) Prior to 9 September 1992, the debtor, one Quah Wee Tiong (Wee Tiong), a stockbroker once employed by the respondents, owed the latter money amounting to $1,552,027.99 for share transactions. On 9 September 1992 in Suit No 1842/92 the respondents commenced an action against Wee Tiong for the recovery of the said sum.

(b) On 11 September 1992, the respondents obtained an order to arrest Wee Tiong in the action. The next day, the respondents unsuccessfully attempted to execute the arrest order and to serve the writ of summons on Wee Tiong at 8 Jubilee Road where he ordinarily resided with the appellant, his father. Wee Tiong was outside Singapore at that time.

(c) On 15 September 1992, the respondents obtained an interim injunction in the said action to restrain Wee Tiong from disposing or otherwise dealing with his assets. But the order remained at the time unserved personally on Wee Tiong. On the same day, the respondents` solicitors then, M/s Allen and Gledhill, wrote to M/s David Lim and Partners, who were then Wee Tiong`s solicitors in the sale of a property at 8A Duchess Park, Duchess Road, informing them of the order of interim injunction. M/s David Lim and Partners acknowledged M/s Allen and Gledhill`s letter the same day.

(d) Some time in September 1992, Wee Tiong was notified about the injunction by either his solicitors or his brother, Quah Wee Tong (`Wee Tong`) who was then working in M/s David Lim and Partners. Wee Tong admitted that, in September 1992, he gave advice to Wee Tiong about the injunction.

(e) Some time in December 1992, Wee Tiong returned to Singapore but the respondents were unaware of it. On 8 December 1992, Wee Tiong transferred 720 shares of Soon Aik (Pte) Ltd (Soon Aik) for a purported consideration of $10 to the appellant who is the patriarch of the family`s company.

(f) On 24 April 1993, the Sheriff, accompanied by the respondents` representative and their present solicitors` representative, went to 8 Jubilee Road and arrested Wee Tiong who was brought before the learned judicial commissioner to show cause. The arrest order was discharged after solicitors for both sides were heard. Wee Tiong, through his solicitors, then entered an appearance to the said action.

(g) On 26 July 1993, the respondents obtained judgment against Wee Tiong for the said sum of $1,552,027.99 and interest thereon at 6% pa from 9 September 1992 to 26 July 1993 and costs fixed at $1,500 against Wee Tiong in the said action.

(h) On 13 August 1993, the respondents` solicitor, together with the Sheriff proceeded to the registered office of Soon Aik to inspect the company`s Register of Members. But they were referred instead to Soon Aik`s auditors, Menon and Associates, because Soon Aik`s representative was unable to furnish the records. As it turned out, the respondents` attempt to seize Wee Tiong`s 720 shares in Soon Aik failed because they had already been transferred to the appellant.

(i) On 9 September 1993, the present action was commenced in the court below against the appellant for damages; or alternatively, for an order that the share transfer on 8 December 1992 be avoided and the 720 shares be registered in the respondents` name.

This appeal therefore arose out of the decision by the learned judicial commissioner below to grant the respondents interlocutory judgment against the appellant, with damages to be assessed by the Registrar of the Supreme Court.

The decision below

The appellant`s defence in the court below was that the 720 Soon Aik shares were transferred to him in consideration of a $40,000 loan which he had previously extended to his son, Wee Tiong. This loan was given some time in early 1992, well before the respondents commenced their action for the recovery of debts owed by Wee Tiong. However, the share transfer was only formalised on 8 December 1992.

The learned judicial commissioner found that, on the evidence, the appellant and Wee Tiong had committed a conspiracy to injure the respondents by putting the 720 shares of Soon Aik out of the latter`s reach. He also found that there was an intention to defraud the respondents under s 73B of the Conveyancing and Law of Property Act, thereby rendering the share transfer void. He therefore ordered that the appellant do pay the respondents damages for the conspiracy, in such amount as may be determined by the Registrar of the Supreme Court.

Issues in the appeal

The appellant raised the following issues in this appeal:

(a) whether on the evidence adduced, the respondents had proved that the appellant had conspired with Wee Tiong to injure their interests;

(b) whether the respondents had proved that the transfer of the 720 shares from Wee Tiong to the appellant was made with intent to defraud them and was accordingly void;

(c) whether the learned judicial commissioner had made the correct findings and inferences concerning the two main issues above.

(1) On the face of it this appeal turned only on questions of fact and on whether the respondents had discharged their burden of proof in the court below. But we took the view that there emerged in this case two other important issues which had to be considered. The first related to the question whether constructive fraud had any role to play in avoiding the share transfer. And the second concerned the question whether the tort of conspiracy was proved. We will revert to these matters later.

The appeal

The Elizabethan Statute

Applicability

The respondents contended that the share transfer was void because it was caught by the Statute of 13 Elizabethan (1571) c 5 intituled An Act Against Fraudulent Deeds, Gifts, Alienations, Etc (the Elizabethan Statute), a statute that was clearly made for the protection of creditors.

However, the learned judicial commissioner stated that the correct provision to apply was s 73B of the Conveyancing and Law of Property Act (Cap 61) (CLPA). His reasoning was as follows:

At this juncture, I wish to clarify that the Elizabethan Statute was replaced in the United Kingdom in a much `shortened` form as s 172(1), (2) and (3) of the Law of Property Act 1925. In Singapore, the Application of English Law Act (Cap 7A), amended the CLPA by identically replacing in a shortened form the Elizabethan Statute by adding s[para ]73B(1)-(3) to that Act which reads:

(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) ...

(3) ...

The plaintiffs had pleaded the Elizabethan Statute as governed by s 5 of the Civil Law Act (Cap 43) as they had commenced action on 9 November 1993. Counsel for the defence had made no issue on the lack of any amendment to the pleadings by the plaintiff to substitute the above s 73B for the Elizabethan Statute as the law is in pari materia and as s 73B refers in any case to the conveyance of property both before or after 12 November 1993, the operational date of the law.

The question was whether the Elizabethan Statute or s 73B CLPA were the governing statutory provisions. The wording of s 73B is derived from s 172 of the English Law of Property Act 1925. That section is similar in material respects to s 73B.

Section 172 was itself re-enacted from para 31 of Part II of Sch 3 to the Law of Property (Amendment) Act 1924, which did not independently come into operation. It was this 1924 Act which had substantially altered the prolix sections 2 and 6 of the Elizabethan Statute: see Lloyds Bank v Marcan [1973] 2 All ER 360, 367. Subsequently, the English Law of Property Act 1925 consolidated the said paragraph in the 1924 Act and reproduced it in s 172. Section 3 of the 1924 Act states that `[t]he amendments and provisions, for facilitating the consolidation of the statute law relating to conveyancing and property, contained in the Third Schedule to this Act, shall have effect.` Section 3 made it clear that the said paragraph in the 1924 Act was a consolidation with amendments. In the absence of any express words to the contrary the 1924 Act and the 1925 Act were intended to operate with prospective effect.

Accordingly, if the cause of action accrued before the commencement date of s 73B it would follow that the Elizabethan Statute would apply. By the same token, if the cause of action accrued after the commencement date of s 73B then s 73B would be the governing statutory provisions. Usually in such cases a debt had been incurred and it was followed subsequently by a conveyance made by a debtor with intent to defraud his creditor. However, there were cases before the consolidation and amendments in the 1924 Act which dealt with the unusual situation where a voluntary conveyance had taken place first followed by the incurring of a debt at a later date. For example, in Mackay v Douglas (1880-81) LR 16 Eq 106, the court held that a voluntary settlement, by which the settlor took the bulk of his property out of the reach of his creditors, shortly before engaging in trade of a hazardous character, was set aside in a suit on behalf of subsequent creditors whose debts only arose after the voluntary settlement. The draftsman of the 1924 Act had to cater for the scenario where there could be a conveyance followed by a debt arising say nine months later as in Mackay `s case. In our view, it was for this reason that the clause `every conveyance of property made whether before or after the commencement of this Act` was inserted in the 1924 Act. Accordingly, the respondents were right in pleading and relying on the Elizabethan Statute.

Fraudulent conveyances

In so far as relevant, the Elizabethan Statute, in its archaic language, states as follows:

For the avoiding and abolishing of feigned, covinous and fraudulent feoffments,

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