Phang Choo Ong v Gilcom Investment Pte Ltd (LRG Investments Pte Ltd and another, non-parties)

• Judge: Chua Lee Ming JC
• Judgment Date: 17 May 2016
• Neutral Citation: [2016] SGHC 97
• Citation: [2016] SGHC 97
• Docket Number: Originating Summons No 763 of 2015
• Published date: 20 May 2016
• Hearing Date: 15 February 2016,12 November 2015
• Plaintiff Counsel: Sarbinder Singh (Kertar Law LLC)
• Date: 17 May 2016
• Defendant Counsel: David Chan, Tan Su Hui and Amelia Tan (Shook Lin & Bok LLP)
• Court: High Court (Singapore)
• Subject Matter: Winding up,Insolvency law

Chua Lee Ming JC: Introduction

The defendant, Gilcom Investment Pte Ltd (“Gilcom”), was ordered to be wound up on the ground that it was deemed to be unable to pay its debts after it failed to comply with a statutory demand for payment of a debt under a default judgment against the defendant.

The plaintiff, Mr Phang Choo Ong (“Phang”), the sole director and shareholder of Gilcom, applied for a stay of the winding up of Gilcom on the ground that Gilcom intended to apply to aside the default judgment. Phang alleged that the default judgment was irregular or, alternatively, that Gilcom had a defence on the merits. I dismissed the application on the ground that regardless of whether Gilcom had grounds to set aside the default judgment, it was insolvent anyway. Phang has appealed against my decision.

The facts

Gilcom is an investment holding company registered in Singapore. LRG Investments Pte Ltd (“LRG”) is its creditor and a non-party to this action, together with another creditor, MC Marine Services (“MCM”). Gilcom was wound up on LRG’s application.

Gilcom, LRG, and another company, AAFH Singapore Pte Ltd (“AAFH”), were parties to a Memorandum of Agreement dated 13 August 2014ⁱ (“the MOA”) relating to a property development project in Australia (“the Project”). Gilcom and AAFH were to arrange for an investment of US$100m (“the Investment Fund”) for LRG for the Project. Gilcom was the appointed agent and aggregator for an insurer, Allianz Insurance (“Allianz”), and AAFH was the financial representative and agent of LRG.

Under the MOA, LRG was to provide US$10m as the insurance premium for the purchase of an insurance bond. Of this, US$7m was to be paid by LRG and the remaining US$3m was to be deducted from the Investment Fund. LRG was required to pay the US$7m before disbursement of the Investment Fund. Pursuant to the terms of the MOA, LRG was to pay the US$7m to AAFH which would then issue a receipt to LRG; Gilcom was to issue a receipt to AAFH and LRG upon receiving the US$7m; and if the Investment Fund was not disbursed within the stipulated time frame of 70 to 90 banking days from AAFH’s receipt of the US$7m, Gilcom was to “arrange a full refund of sums paid by [AAFH] to [Gilcom] under this MOA” and AAFH was to “arrange a full refund of sums paid by [LRG] to [AAFH]”.

According to LRG, the US$7m was paid to Gilcom through AAFH in two tranches – on 10 July 2014 and 13 August 2014. It was not disputed that Gilcom received the US$7m. Pursuant to the MOA, the Investment Fund was to be disbursed to LRG by 18 December 2014. As no such disbursement was madeⁱⁱ, the US$7m became refundable to LRG, but no refund was given.

On 5 February 2015, LRG commenced Suit 121 of 2015 (“S 121/2015”) against Gilcom for repayment of the US$7m. The writ of summons was served on Gilcom at its registered address on 5 February 2015.ⁱⁱⁱ

LRG obtained judgment in default of Gilcom’s appearance on 2 March 2015.^iv It applied to wind up Gilcom on 21 April 2015 and the winding up order was granted on 29 May 2015.^v No representative of Gilcom attended the hearing of the winding up petition.

Following the grant of the winding up order, MCM filed a proof of debt of S$462,390 against Gilcom on 13 June 2015.^vi Its claim was based on an investment agreement which was similar to the MOA except that there was no middle party involved. Under that investment agreement, Gilcom had agreed to arrange an investment fund of US$5m for MCM and MCM paid US$300,000 to Gilcom for the purchase of an insurance bond. The investment fund had not materialised and Gilcom had become liable to refund the US$300,000 to MCM.^vii MCM’s claim of S$462,390 represented the sum of US$300,000 and accrued interest at the time the proof of debt was filed.

On 6 June 2015, Gilcom applied to set aside the default judgment, not knowing that the winding up order had already been made. Gilcom withdrew the application after its solicitors were informed by LRG’s solicitors on 8 June 2015 that the company had been wound up.^viii

Phang then filed the present application for a stay of the winding up order pursuant to s 279(1) of the Companies Act (Cap 50, 2006 Rev Ed). The avowed purpose of the application was to allow Gilcom to apply to court to set aside the default judgment in S 121/2015. LRG and MCM objected to the application and requested to be heard. Phang did not object to LRG and MCM being heard. The application for stay was contested only between Phang and LRG and MCM. Gilcom played no part in these proceedings. The liquidator indicated that he would abide by any order made by the court.^ix

Phang argued that Gilcom had good grounds to set aside the default judgment. First, he claimed that the default judgment was irregularly obtained because the writ had not been served at Gilcom’s registered address. Second, he claimed that Gilcom had a good defence to LRG’s claim because LRG had sued the wrong party. The gist of this defence was that Gilcom’s liability under the MOA was to refund the US$7m to AAFH – not LRG – and it was AAFH that was liable to refund the money to LRG.^x

The law

The court’s power to stay winding up proceedings is found in s 279(1) of the Companies Act, which provides as follows:

Power to stay winding up

279.—(1) At any time after an order for winding up has been made, the Court may, on the application of the liquidator or of any creditor or contributory and on proof to the satisfaction of the Court that all proceedings in relation to the winding up ought to be stayed, make an order staying the proceedings either altogether or for a limited time on such terms and conditions as the Court thinks fit.

Section 4 of the Companies Act defines a “contributory” as including “a holder of fully paid shares in the company”. Phang, as Gilcom’s sole shareholder, therefore had the requisite standing to apply for the stay.

Once a company has been wound up, the only way it can be put back into its former state is by way of a stay of the winding up proceedings. A stay halts the winding up proceedings and permits the officers of the company to continue in control from the date of its pronouncement: Interocean Holdings Group (BVI) Ltd v Zi-Techasia (Singapore) Pte Ltd [2014] 2...