Power Knight Pte Ltd v Natural Fuel Pte Ltd

• Jurisdiction: Singapore
• Judgment Date: 10 March 2010
• Date: 10 March 2010
• Docket Number: Originating Summons No 111 of 2010
• Court: High Court (Singapore)

Power Knight Pte Ltd

Plaintiff

and

Natural Fuel Pte Ltd (in compulsory liquidation) and others

Defendant

[2010] SGHC 75

Judith Prakash J

Originating Summons No 111 of 2010

High Court

Credit and Security—Charges—Company granting registered fixed charge over real property to debenture-holder—Company entering compulsory liquidation—Company's liquidators claiming interest in real property for unsecured creditors—Whether secured assets available for distribution to unsecured creditors in winding up—Section 131 (1) Companies Act (Cap 50, 2006 Rev Ed)—

Insolvency Law—Winding up—Effect of petition—Company entering compulsory liquidation—Company's liquidators claiming interest in company's real property for unsecured creditors under statutory trust—Whether presentation of winding-up petition established statutory trust—Whether unsecured creditors had beneficial interests under statutory trust—

Land—Caveats—Company granting registered fixed charge over real property to debenture-holder—Company entering compulsory liquidation—Company's liquidators lodging caveats claiming interest in company's real property for unsecured creditors under statutory trust—Whether caveats should be removed—Sections 115 (1) and 127 (1) Land Titles Act (Cap 157, 2004 Rev Ed)

A company was granted an equitable lease by the Jurong Town Corporation over two plots of land on Jurong Island ("the Property"). The company executed a debenture which granted the debenture-holder a fixed charge over all the company's interests in any freehold or leasehold property or any other interest in real property. The debenture-holder registered the debenture in accordance with s 131 of the Companies Act (Cap 50, 2006 Rev Ed) but did not lodge a caveat under s 115 of the Land Titles Act (Cap 157, 2004 Rev Ed). An unsecured creditor of the company filed a winding-up petition, and subsequently a winding-up order was made against the company and liquidators were appointed. The liquidators lodged a caveat in respect of the property claiming an interest in the Property for and on behalf of the company's unsecured creditors, and caused the company to lodge a caveat claiming an interest in the Property as trustee of the interests in the land for the benefit of the unsecured creditors of the company under a statutory trust arising as a result of the winding-up application and/or winding-up order. The debenture-holder commenced the present application seeking a removal of the two caveats under s 127 of the Land Titles Act.

Held, granting the application:

(1) Assets encumbered by a valid security interest were not available for distribution among a company's unsecured creditors upon the winding up of the company: at [30], [38]and [40].

(2) On the authority of Ng Wei Teck Michael v Oversea-Chinese Banking Corp Ltd [1998] 1 SLR (R) 778 ("Michael Ng"), as from the presentation of a winding-up petition, a statutory trust came into existence and the unsecured creditors of a company were in the nature of a cestui que trust with beneficial interests in the company's unencumbered assets: at [30], [40], [43], [45], [53].

(3) The caveats lodged by the liquidators should therefore be removed, as the unsecured creditors of the company had no interest in the Property, the equitable leasehold interest in which had been validly charged to the debenture-holder, and the unsecured creditors consequently did not have "an interest in land" for the purposes of lodging a caveat under s 115 of the Land Titles Act: at [30], [40], [41] and [53].

[Observation: it was questionable whether the liquidators or the company had locus standi to lodge the caveats for the benefit of the unsecured creditors. Section 115 of the LTA stated that a caveat could be lodged by " [a]ny person claiming an interest in land", and it was not apparent what interest was being claimed by the liquidators or the company: at [18].]

Whether the debenture gave rise to a charge or mortgage depended on the intention of the parties as objectively ascertained, and as it was clear from the debenture that the parties intended that the debenture-holder should have all the remedies available to a mortgagee, the debenture-holder's security interest might be regarded as an equitable mortgage: at [22], [23] and [24].]

Michael Ng was inconsistent with the prevailing judicial and academic view that, notwithstanding that the making of a winding-up order against a company brought into existence a statutory trust, unsecured creditors of the company had no proprietary or beneficial interests in the company's property: [51] and [52].]

Anglo-Oriental Carpet Manufacturing Co,Re [1903] 1 Ch 914 (not folld)

Ayerst (Inspector of Taxes) v C & K (Construction) Ltd [1976] AC 167 (folld)

Buchler v Talbot [2004] 2 AC 298 (folld)

Calgary and Edmonton Land Co Ltd (in liquidation) , Re [1975] 1 WLR 355 (folld)

Cambridge Gas Transport Corp v Official Committee of Unsecured Creditors of Navigator Holdings plc [2007] 1 AC 508 (refd)

Caveat, Re A; ex parte The Canowie Pastoral Co Ltd [1931] SASR 502 (folld)

Commissioner of Stamp Duties (Queensland) v Hugh Duncan Livingston [1965] AC 694 (refd)

Commissioner of Taxation of the Commonwealth of Australia v Linter Textiles Australia Ltd (in liquidation) (2005) 220 CLR 592 (not folld)

David Lloyd & Co, Re (1877) 6 Ch D 339 (folld)

Golden Village Multiplex Pte Ltd v Marina Centre Holdings Pte Ltd [2002] 1 SLR (R) 169; [2002] 1 SLR 333 (folld)

Low Gim Har v Low Gim Siah [1992] 1 SLR (R) 970; [1992] 2 SLR 593 (refd)

McPhail v Doulton [1971] AC 424 (refd)

Mitchell v Carter [1997] 1 BCLC 681 (folld)

Ng Wei Teck Michael v Oversea-Chinese Banking Corp Ltd [1998] 1 SLR (R) 778; [1998] 2 SLR 1 (distd)

Pyle Works (No 1) , Re (1890) LR 44 Ch D 534 (folld)

Regent's Canal Ironworks Co, Re; ex parte Grissell (1875) 3 Ch D 411 (folld)

Roberts Petroleum Ltd v Bernard Kenny Ltd [1983] 2 AC 192 (folld)

Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584 (folld)

Wight v Eckhardt Marine GmbH [2004] 1 AC 147 (refd)

Yagerphone Ltd, Re [1935] Ch 392 (not folld)

Companies Act (Cap 50,2006 Rev Ed) s 131 (1) (consd) ;ss 131,131 (3) (e) ,328 (1) ,328 (5)

Land Titles Act (Cap 157,2004 Rev Ed) s 115 (1) (consd) ;ss 48,49, 115, 127,127 (1)

Companies Act 2006 (c 46) (UK) s 1282

Finance Act 1954 (c 44) (UK)

Manoj Sandrasegara, Tan Mei Yen and Mohamed Nawaz Kamil (Drew & Napier LLC) for the plaintiff

;

Lee Eng Beng SC, Low Poh Ling and Ang Siok Hoon (Rajah & Tann LLP) for the defendants.

Judgment reserved.

Judith Prakash J

:

Introduction

1 This is an application by the plaintiff, Power Knight Pte Ltd ("Power Knight"), pursuant to s 127 of the Land Titles Act (Cap 157, 2004 Rev Ed) ("the LTA") seeking, inter alia, the removal of two caveats lodged by the defendants.

Background

2 The background to this application is not in dispute.

3 The first defendant, Natural Fuel Pte Ltd ("the Company"), is a private limited company whose principal business activities include the sale of solid, liquid and gaseous fuels, and the manufacture of petrochemical products.

4 On or around 15 April 2008, the Company entered into two Building Agreements with the Jurong Town Corporation ("JTC") in respect of two plots of land on Jurong Island, namely Private Lots A2173900 and A2173901 (collectively, "the Property"). Pursuant to the Building Agreements, the Company would be granted 30-year leases over the Property by JTC once certain conditions were satisfied. In the interim, the Company was given a licence "as if a lease had actually been granted" to build and operate, inter alia, an integrated production facility (consisting of a biodiesel production plant and a glycerine production plant) on the Property. To date, JTC has not granted a formal lease over the Property to the Company.

5 By a convertible loan facility dated 24 April 2008, Power Knight granted a loan of US$20m to Natural Fuel Limited, the Company's Australian holding company, the proceeds of which were in turn advanced to the Company for the construction and maintenance of the production facility.

6 As security for the loan to Natural Fuel Limited, the Company executed a Debenture dated 13 May 2008 which granted Power Knight,inter alia, a fixed charge over all the Company's interests in "any freehold or leasehold property or any other interest in real property including fixtures".

7 On 9 June 2008, the Debenture was duly registered in accordance with s 131 of the Companies Act (Cap 50, 2006 Rev Ed) ("the CA"). However, for reasons best known to it, Power Knight did not contemporaneously lodge a caveat in respect of the Debenture at the Registry of Titles which it could have done pursuant to s 115 of the LTA to notify third parties of its interest in the Property.

8 In early 2009, Natural Fuel Ltd faced financial difficulties, and was placed under voluntary administration in Australia on 9 April 2009. On 11 September 2009, Power Knight appointed M/s Chee Yoh Chuang and Lim Lee Meng as receivers and managers of the company, but discharged them on 30 September 2009, appointing M/s Ewe Pang Kooi and Farooq Ahmad Mann in their stead.

9 Meanwhile, on 28 September 2009, Rotary Engineering Limited, an unsecured creditor of the Company, filed a winding-up application (Companies Winding Up No 134 of 2009) against the Company. A winding-up order was made by the High Court against the Company on 23 October 2009, and the second and third defendants, M/s Tam Chee Chong and Lim Loo Khoon ("the Liquidators"), were appointed the joint and several liquidators of the Company.

10 On 5 November 2009, the Liquidators lodged Caveat No IB/592668D ("the Liquidators' Caveat") in respect of the Property, claiming:

... an interest in the land, for and on behalf of the unsecured creditors, of the Caveatee [the Company], who are collectively vested with all the beneficial interests in the land.

11 On 10 November 2009, the Liquidators, on...