Public Prosecutor v Chow Wai Lam

CourtDistrict Court (Singapore)
JudgeToh Yung Cheong
Judgment Date03 January 2006
Neutral Citation[2006] SGDC 1
Citation[2006] SGDC 1
Published date26 January 2006
Plaintiff CounselAaron Lee (Deputy Public Prosecutor)
Defendant CounselB Ganesh (Ganesha and Partners)
Subject MatterCompanies,Penalties,Officers,Removing property of company since or within two months before date of unsatisfied judgment obtained against company with intent to defraud creditors of company,Accused a director of company that had ceased operations,Company's creditors having unsatisfied judgments against company,Accused and accomplice's nominee director receiving directors' fees out of company funds,Accused using company funds to pay creditor when liability for such payment already novated to another company,Whether accused having intent to defraud creditors,Motive and intention distinguished,Whether accused intending to defraud creditors if secrecy or deception absent,Whether accused and accomplice involved in conspiracy to defraud creditors,Sentence,Section 406(c) Companies Act (Cap 50, 1994 Rev Ed); s 109 Penal Code (Cap 224, 1985 Rev Ed),Words and Phrases,"Intent to defraud creditors of company",Section 406(c) Companies Act (Cap 50, 1994 Rev Ed)

3 January 2006

Judgment reserved.

District Judge Toh Yung Cheong

1. The accused, Chow Wai Lam, was convicted after a trial on the following charges under s.406(c) of the Companies Act (Cap 50):

You, Chow Wai Lam, are charged that you, between 27 March 2004 and 27 July 2004, whilst being a director of Harvest CFS Pte Ltd (“the Company”), did engage with one Lim Ee Pheng in a conspiracy to do a certain thing, to wit, to defraud creditors of the Company, namely, DSS Containers Pte Ltd (“DSS”) and UBTS Pte Ltd (“UBTS”), by removing property of the Company within two months since and before unsatisfied judgments for the amounts of $146,063.48 and $314,721.82 were awarded in favour of DSS and UBTS against the Company respectively, and in pursuance of that conspiracy and in order for the doing of that thing, an act took place, to wit, $80,000 was declared and paid out by the Company as directors’ fees between May and June 2004 to yourself and one Tan Yan, which offence was committed in consequence of your abetment, and you have thereby committed an offence punishable under Section 406(c) of the Companies Act (Chapter 50) read with Section 109 of the Penal Code (Chapter 224).

You, Chow Wai Lam, are charged that you, on or about 8 July 2004, whilst being a director of Harvest CFS Pte Ltd (“the Company”), with intent to defraud the creditors of the Company, namely, DSS Containers Pte Ltd (“DSS”) and UBTS Pte Ltd (“UBTS”), did remove property of the Company, to wit, by withdrawing $2,010.95 in cash from the Company’s Development Bank of Singapore bank account (Account number 022-900349-0) within two months since and before unsatisfied judgments for the amounts of $146,063.48 and $314,721.82 were awarded in favour of DSS and UBTS against the Company respectively, and you have thereby committed an offence punishable under Section 406(c) of the Companies Act (Chapter 50)

2. The accused was tried together with Lim Ee Pheng (“LEP”). I also convicted LEP on the one charge he faced and he did not file an appeal against his conviction. As the accused has appealed against his conviction in respect of both charges and against sentence in respect of the first charge, I will now set out the reasons for my decision.

Background facts

Company background

3. The undisputed background facts of this case are set out in the Agreed Statement of Facts (exhibit “A”).

4. Harvest CFS Pte Ltd (“Harvest CFS”) was incorporated on 8 March 2003. Its principal activities include container services (excluding the rental of containers) and services related to the transportation of goods, and has a paid up capital of 150,000 shares at $1 each.

5. When Harvest CFS started operations, the accused was a shareholder and the general manager of the company. He was fired from the company on 14 September 2003 after a dispute with the two directors of the company, Loo Say Bock and Soh Chee Tiong.

6. On 9 October 2003, Loo and Soh both withdrew their directorships and sold their shares in the company to Tan Yan and Patrick Lim. The accused was brought back into the company and put in charge of operations. On 22 April 2004, Patrick Lim withdrew his directorship from Harvest CFS and was replaced by the accused.

7. By that time, Harvest CFS was facing mounting financial problems and ceased operations on 30 April 2004. Letters were sent out to Harvest CFS’ clients to inform them that they had shifted their warehouse due to an increasing clientele and that their name had been changed to Harvest Pacific Pte Ltd (“Harvest Pacific”). These letters were not sent to DSS and UBTS as they were creditors and not clients of the company.

8. However, Harvest Pacific was an entirely separate company which was incorporated on 7 April 2004 and had nothing to do with Harvest CFS. When Harvest Pacific was set up, its two directors were Lim Cheng Hwa and Owyang Yeow Boon.

The PSA agreement

9. Harvest CFS operated out of premises located at Keppel Distripark. They were granted a one year lease commencing from 1 April 2003 with an option to extend for another two years. On 9 June 2004, PW6 Alfred Cheong, a representative of PSA, the landlords, had a meeting with LEP and the accused. Alfred Cheong then prepared a 3 page document entitled “Settling of Outstanding Rental Arrears” (exhibit P9). The accused signed on every page and on the last page, the company stamp of Harvest Pacific was affixed.

10. Alfred Cheong described exhibit P9 as a novation agreement whereby the existing tenancy agreement was novated from Harvest CFS to Harvest Pacific. According to paragraph 4 of P9, Harvest Pacific undertook all liability in respect of the arrears incurred by Harvest CFS and undertook to repay the outstanding arrears according to the instalment scheme described in the table at paragraph 4 of P9.

Judgment Creditors

11. DSS had previously been providing trucking services to Harvest CFS since April 2003. One of DSS’ directors, Loo, was formerly a director of Harvest CFS. DSS was awarded judgment against Harvest CFS on 27 May 2004 in the Subordinate Courts for an amount of $146,063.48 (excluding contractual interest and miscellaneous costs).

12. UBTS had previously been providing trucking services to Harvest CFS since October 2003. UBTS was awarded judgment against Harvest CFS on 24 August 2004 in the High Court for the amount of $314,721.82 (excluding contractual interest and miscellaneous costs). Of this amount, $254,083.67 was incurred between November 2003 and April 2004. The remainder of the debt actually represented services rendered by UBTS to Harvest Pacific but as the agreed statement of facts describe, UBTS continued to bill Harvest CFS since they did not know that Harvest CFS had ceased operations and that the business was moved to Harvest Pacific.

Prosecution’s evidence relating to the first charge: Withdrawal of $80,000

13. On 3 May 2004, the accused received a sum $20,000. On 10 June 2004, the accused received a further sum of $20,000. Similarly, Tan Yan, the other director of Harvest CFS also received $40,000 in two instalments, the first on 31 May 2004 and the second on 10 June 2004. All these monies came from the bank account of Harvest CFS. According to the defence, these payments represented director’s fees which were declared later on 30 June 2004.

14. On 30 June 2004, at Harvest CFS’ extraordinary general meeting, a resolution was passed, approving payment to the accused and Tan Yan the payment of directors’ fees for the financial period ending 30 June 2004. According to the resolution, the accused and Tan Yan were each to receive $40,000 as director’s fees. This was the first time director’s fees had been declared by Harvest CFS since its incorporation in March 2003.

Prosecution’s evidence relating to the second charge: Withdrawal of $55,000

15. On 6 July 2004, the net balance in Harvest CFS’ bank account was $2,468.82[note: 1]. On 7 July 2004, Harvest Pacific gave Harvest CFS $52,989.05 for the specific purpose of settling Harvest Pacific’s debts with UBTS. As a result, Harvest CFS’ bank account swelled to $55,457.87. On 8 July 2004, the accused withdrew a sum of $55,000 in cash from Harvest CFS’ bank account.

16. Harvest CFS paid PSA $36,685 on 30 July 2004 and $35,511 on 10 August 2004. According to the accused, the $55,000 he withdrew on 8 July 2004 was used on these 2 occasions.

Close of Prosecution’s case

17. The removal of the money from Harvest CFS was not disputed and I was of the view that there was sufficient evidence to support an inference of an intent to defraud. In the circumstances, bearing in mind the principles enunciated in the case of Haw Tua Tau v PP [1981] 2 MLJ 49 and reiterated in Ng Then Shuang v PP [1995] 2 SLR 36, I was satisfied that there was prima facie evidence which if accepted as accurate, would establish each essential element of the alleged offence. Accordingly, I called upon the accused and his co-accused to enter their defence.

Evidence of the co-accused Lim Ee Pheng (DW1)

18. The co-accused Lim Ee Pheng (“LEP”) was tried jointly with the accused. He faced only one charge in relation to the $80,000 of Directors’ fees and was not involved with the second charge.

19. LEP explained that before Harvest CFS was incorporated in March 2003, he was invited to join Harvest CFS as a director by one Mr Soh Chee Keong. The company was started by six persons. Soh Chee Keong, Loo Say Bok, Ang Eng Seng and the accused invested $30,000 each while Lim Beng Cheng and LEP invested $15,000 each.

20. The accused nominated his wife to be a director as he was already involved in the freight forwarding business and some of his competitors may be using Harvest CFS’ services.

21. On 12 September 2003, the six investors had a meeting and it was pointed out that the accused, Ang, and LEP’s nominee had not yet been made directors. Loo Say Bok promised to add these names later. During the meeting, a heated argument ensued between Loo Say Bok and the accused. Loo’s company, DSS, was providing trucking services to Harvest CFS and the accused claimed that DSS’ charges were too high. On 14 September 2003, Loo Say Bok asked the accused to leave the company.

22. Sometime in October 2003, Loo and Soh wanted to sell their stakes in Harvest CFS and approached LEP. On 9 October 2003, LEP and Patrick Lim bought over Loo and Soh’s shares for a total of $60,000. $40,000 came from LEP while the accused came up with $20,000 on behalf of Patrick Lim who was short of money at that time.

23. After 9 October 2003, Harvest CFS was managed primarily by the accused. Patrick Lim was also involved but he only came into the office once or twice a week because of his health problems. Patrick Lim has since passed away. Sometime in April 2004, the accused was officially made a director of Harvest CFS.

Director’s fees

24. According to LEP, at the end of April 2004, LEP and the accused had a discussion as to whether they were entitled to director’s fees. LEP told the accused to check with...

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