Rashmi Bothra v SuntecCity Thirty Pte Ltd

• Jurisdiction: Singapore
• Judge: Judith Prakash JCA,Belinda Ang Saw Ean JCA,Kannan Ramesh JAD
• Judgment Date: 08 November 2023
• Docket Number: Civil Appeal No 6 of 2023
• Court: Court of Appeal (Singapore)

Rashmi Bothra

and

SuntecCity Thirty Pte Ltd and others

[2023] SGCA 38

Judith Prakash JCA, Belinda Ang Saw Ean JCA and Kannan Ramesh JAD

Civil Appeal No 6 of 2023

Court of Appeal

Insolvency Law — Winding up — Appointment of liquidator — Private trustees in bankruptcy arguing that shares registered in shareholder's name was beneficially owned by bankrupt — Shareholder relying on declarations of trusts to show that she shared common intention with bankrupt that shares registered in her name would be beneficially owned by her — Declarations of trusts allegedly backdated — Whether liquidators had to determine beneficial ownership of shares in member's name — Whether liquidators had to investigate alleged backdating of declarations of trusts — Sections 123 and 152(4) Insolvency, Restructuring and Dissolution Act 2018 (2020 Rev Ed)

Insolvency Law — Winding up — Appointment of liquidator — Private trustees in bankruptcy of estate of bankrupt appointed as liquidators of company — Private trustees in bankruptcy not parties to proceedings below — Private trustees in bankruptcy arguing that shares registered in shareholder's name was beneficially owned by bankrupt — Whether private trustees in bankruptcy had standing to nominate liquidators — Whether bankrupt was contributory under Insolvency, Restructuring and Dissolution Act 2018 (2020 Rev Ed) — Whether bankrupt was creditor of company — Insolvency, Restructuring and Dissolution Act 2018 (2020 Rev Ed)

Held, allowing the appeal:

(1) The PTs did not have standing to nominate liquidators. A party who had standing to bring a winding-up application under s 125 of the IRDA had the right to nominate a liquidator. The question of standing to nominate was a separate question from the weight that should be attributed to a nomination. The latter did not arise in the present appeal: at [13] and [15].

(2) Section 124(1) of the IRDA listed the categories of persons or entities with standing to bring an application, of which the category “contributory” was relevant in CWU 234 in view of the PTs' assertion that Rajesh was the beneficial owner of Rashmi's Shares: at [16] to [18].

(3) Even assuming that Rajesh was the beneficial owner of Rashmi's Shares, he was not a “contributory” under s 124(1) of the IRDA. “Contributory” was defined in the IRDA as “every present and past member”. Rajesh was not a “member” of the Company. The “members” were Rashmi and Nimisha: at [19] to [21].

(4) As a contributory, Rashmi had the standing to bring an application to wind up the Company and to nominate liquidators. As Rajesh was not a member, the PTs as representatives of his estate in bankruptcy could not do more than he could and were not entitled to nominate: at [23].

(5) The reference in s 152(4) of the IRDA to “persons who are contributories by reason of being representatives of others” was to personal representatives of a contributory who had passed on or to trustees of a contributory who had become a bankrupt, such as the Official Receiver or a private trustee in bankruptcy as stated in s 123 of the IRDA. Only Rashmi's representatives in the applicable situation, and not the PTs, would qualify as she, and not Rajesh, was the member of the Company: at [27] and [29].

(6) The PTs' alternative argument that Rajesh had standing to nominate as a creditor under s 124(1)(c) of the IRDA on the basis of shareholder loans he allegedly made to the Company was not accepted. The issue of the shareholder loans was only raised after the Judge had delivered his decision on 19 January 2023. Nothing on the record supported the allegation that Rajesh made such loans: at [31] to [33].

(7) The Judge's reason for rejecting Rashmi's nominees applied equally to the PTs' nominees. Rashmi and the PTs were counterparties on the issue of ownership of Rashmi's Shares, making both their nominees unsuitable, assuming that it was relevant in the first place for the liquidators to examine the issue of the beneficial ownership of Rashmi's Shares. The relevant question was whether the PTs had an interest in the outcome of the determination of the issue making their nominees unsuitable for appointment, which they did as one of the parties asserting beneficial ownership over Rashmi's Shares: at [37].

(8) The liquidator's statutory duty was to settle the list of members, present and past, who were liable to contribute to the assets of the company. Therefore, whether Rashmi's Shares were beneficially hers or Rajesh's was not an issue that the liquidators had to determine. Instead, that was an issue between the PTs and Rashmi and should have been appropriately resolved in separate proceedings between them: at [38] and [39].

(9) As the liquidators did not have to investigate the beneficial ownership of Rashmi's Shares, the liquidators did not have to investigate the alleged backdating of the Declarations of Trusts. The evidence detailed by the PTs which suggested that Rashmi's Shares were not beneficially owned by her was therefore not relevant: at [41].

[Observation: The PTs' submission that Rajesh could lay claim to Rashmi's Shares as he was the ultimate beneficial owner of the shares in Fareast was not correct as a matter of law. The PTs' submission that this court should disregard the separate legal personality of Fareast and engage in insider reverse piercing was unsupported by legislation and contrary to the principle of company law that a company was a separate legal entity from its shareholders: at [56].]

Case(s) referred to

Fielding v Seery [2004] BCC 315 (refd)

Green v SCL Group Ltd [2019] All ER (D) 114 (refd)

Jhaveri Darsan Jitendra v Salgaocar Anil Vassudeva [2018] 5 SLR 689 (refd)

JWR Pte Ltd v Edmond Pereira Law Corp [2020] 2 SLR 744 (distd)

PricewaterhouseCoopers LLP v Celestial Nutrifoods Ltd [2015] 3 SLR 665 (refd)

Recovery Vehicle 1 Pte Ltd v Industries Chimiques Du Senegal [2021] 1 SLR 342 (refd)

Tan Cheng Bock v AG [2017] 2 SLR 850 (refd)

Vishva Apurva, The [1992] 1 SLR(R) 912; [1992] 2 SLR 175 (refd)

W&P Piling Pte Ltd, Liquidator of v Chew Yin What [2004] 3 SLR(R) 164; [2004] 3 SLR 164 (refd)

Facts

CA/CA 6/2023 (“CA 6”) concerned two applications, HC/CWU 234/2022 (“CWU 234”) and HC/CWU 244/2022 (“CWU 244”), brought to wind up the first respondent, SuntecCity Thirty Pte Ltd (the “Company”), under the just and equitable ground in s 125(1)(i) of the Insolvency, Restructuring and Dissolution Act 2018 (2020 Rev Ed) (the “IRDA”). The applicants in CWU 234 and CWU 244 were Rashmi Bothra (“Rashmi”) and Nimisha Pandey (“Nimisha”) respectively. Nimisha was not a party to CA 6, which was Rashmi's appeal against the judge's decision in CWU 234.

The Company was a special purpose vehicle incorporated for the sole purpose of purchasing and holding Rashmi and Nimisha's investment in several office units (collectively, the “Property”). Rashmi and Nimisha were the registered shareholders of the Company at all material times, each with 50% shareholding. The Property was subsequently sold by the Company for $38.75m. The net sale proceeds were transferred to Rashmi's solicitors to be held in escrow pending the resolution of Rashmi and Nimisha's dispute over the distribution of the net sale proceeds. In the event, Rashmi and Nimisha could not agree.

In view of the impasse, Rashmi filed CWU 234. Nimisha filed CWU 244 shortly thereafter. While Rashmi and Nimisha agreed that the Company was solvent, they alleged that with the sale of the Property, the Company's substratum had been fulfilled and it no longer had a business purpose. It should therefore be wound up on the just and equitable ground.

The judge (“Judge”) dismissed CWU 244 and made a winding-up order against the Company as regards CWU 234. However, he did not accept Rashmi's nominees for appointment as liquidators, instead appointing the nominees of the second and third respondents, Jason Aleksander Kardachi and Patrick Bance. The second and third respondents were the joint and several private trustees (the “PTs”) of the estate of Rajesh Bothra (“Rajesh”), Rashmi's husband, who had been adjudged a bankrupt. The PTs were not parties to CWU 234 and CWU 244. The PTs opposed CWU 234 and the appointment of Rashmi's nominees as liquidators. Nimisha opposed CWU 234 as well.

In CWU 234, the PTs alleged that the shares registered in Rashmi's name (“Rashmi's Shares”) were beneficially owned by Rajesh on the basis that he had funded 50% of the purchase price for the Property through Fareast Distribution and Logistics Pte Ltd (“Fareast”). Rajesh had incorporated Fareast and was its sole director and shareholder. Rashmi challenged this, asserting that she and Rajesh shared a common intention that Rashmi's Shares would be hers. Rashmi relied on four declarations of trusts which were allegedly executed by Rajesh and Ooi Ai Ling, Rajesh's personal assistant, in favour of Rashmi (the “Declarations of Trusts”). The PTs and Nimisha alleged that the Declarations of Trusts were backdated.

The PTs' claim to the beneficial ownership of Rashmi's Shares was key to their challenge against Rashmi's nominees. The PTs submitted that the net sale proceeds of the Property had to be distributed to the beneficial owner of Rashmi's Shares. As the liquidators had to determine the beneficial ownership of Rahmi's Shares and Rashmi also claimed beneficial ownership of them, Rashmi's nominees were unsuitable for appointment. The Judge accepted the PTs' submission.

Legislation referred to

Companies Act (Cap 50, 2006 Rev Ed) s 285

Companies Act 1967 (2020 Rev Ed) ss 4(1), 19(6), 19(6)(b), 19(6A), 19(6A)(b), 196A

Insolvency, Restructuring and Dissolution Act 2018 (2020 Rev Ed) ss 2(1), 121, 123, 124(1), 152(1), 152(4) (consd); ss 42–46, 124(1)(c), 124(1)(d), 125, 125(1)(i), 135, 139, 139(1), 152, 152(2), 244

Insolvency, Restructuring and Dissolution (Corporate Insolvency and Restructuring) Rules 2020 rr 113, 114, 115(2) (consd); rr 74, 74(1), 74(2)(a),...